Electricity (Privatisation)

– in the House of Commons at 4:57 pm on 7th March 1988.

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Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

I beg to move, That this House, recognising the importance of introducing competition into the electricity supply industry, the advantages of new rights for customers, and the benefits of privatisation, approves the proposals set out in the Government's White Papers on the privatisation of the electricity supply industry in England and Wales, and Scotland, Cm. 322 and 327.

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

I have selected the amendment in the name of the Leader of the Opposition. In view of the late start to this debate, may I appeal for brief speeches, both from the Front Benches and the Back Benches.

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

The motion refers to Scotland as well as to England and Wales. I shall cover Scotland in part of my speech, but in the main I shall concentrate on my responsibilities, which are for England and Wales. My right hon. and learned Friend the Secretary of State for Scotland will deal with Scotland in detail if he is fortunate enough to catch your eye, Mr. Speaker.

I am glad that the House has this early opportunity to debate our proposals. The subject is important and the issues are complex. It is obviously right for the House to comment now that we have taken our decisions on the structure of the industry, but there is much detailed work to be done before legislation can be introduced. The debate will set the scene for our consultations with the industry. In our legislation we can then build on what is said by the House and the industry. The Select Committee report will be an important part of that process. In bringing forward our proposals, we have already consulted widely. We have listened to many people and many views. We shall continue to consult as we develop the detailed legislation. The day after I had made my statement to the House, a copy of the White Paper was delivered to every employee in the industry—all 131,000 of them. We intended that each employee should have a chance to read the proposals, as they will greatly affect his or her future.

I ask the House to approve the White Papers for three reasons. First, our proposals will mean a better deal for the customer; secondly, they will provide wider opportunities and new freedoms for employees; and, thirdly, they will be of real benefit to the economy.

Our proposals are radical in their objectives, but they are also evolutionary. We are not in the business of transforming the electricity industry over night. That would not be possible or desirable. We have at least two years from now to put in place the new structure, and it will preserve what is best about the industry. The new structure will be just the start. It will create a framework in which a modern, competitive industry will develop. It will create a customer-led industry, with the 15 distribution companies free to find the cheapest sources of power for their 22 million customers. A new industry will evolve and will be shaped by the needs of its customers.

Since my statement last week there has been much ill-informed comment from Opposition Members, who talk about a continuing monopoly, rising prices and a bleak future for British coal. One thing is clear about these myths. They are the Labour party's vision of the future; they are certainly not ours. They describe a future for the industry under state control, not the prospects after privatisation. The facts are that our proposals will introduce competition into the generation of electricity, give new rights to customers, regulate the monopolies that remain, protect the rights of the employees and allow management to use its initiative.

I have always made it clear that we cannot have two competing light switches on the wall, or two sets of wires in the streets. However, it is nonsense to suggest that there cannot be competition to supply the cheapest electricity into those wires. The fact that there is only one shop in the village does not mean that there has to be only one supplier to that shop. We do not need a monopoly in the power stations just because there is only one set of wires to the customer. Opposition Members do not agree with that. They say, "Pile monopoly on monopoly." That is characteristic of the Labour party, and characteristically nonsensical. At the Conservative party conference last year I pointed out that nine months after the hon. Member for Kingston upon Hull, East (Mr. Prescott) took on his present responsibilities he suddenly started to become aware of a few of the problems. It came to him as a great enlightenment that there would be a monopoly in distribution. If he did not know that, he should have given up his job months ago, yet he portrayed it as something that had only recently been discovered.

Photo of Mr Eric Heffer Mr Eric Heffer , Liverpool, Walton

The Secretary of State has just said that there will be only one supplier because one cannot have two wires coming into a house. That means that there will be a monopoly supplier for each area. At the moment the people are getting a good deal. Why do we need a change? The change is being made purely for doctrinaire reasons and has nothing to do with the needs of the people.

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

Not for the first time this afternoon, the hon. Gentleman is wrong. As I shall explain, there is a natural monopoly in distribution, and no one has over denied that, but 80 per cent. of the costs of electricity come from generation, and there is nothing natural about a monopoly in generation.

As I was saying, Opposition Members' arguments on this matter are characteristically nonsensical and, when one considers the costs, irresponsible. Last year the Central Electricity Generating Board handed a bill for roughly £7,000 million to its 12 customers, the area boards. That made up about three-quarters of the bill that the area boards passed on to their 22 million customers. Several times that figure of £7 billion could be spent on building the new power stations needed by the end of the century. We have to introduce competition into the power stations to keep the costs clown. Parliament agreed that when it passed the Energy Act 1983, which was meant to encourage competition in generation. It has not worked, because it left the CEGB in control as the dominant monopoly supplier. Our proposals will work because that monopoly will be ended. Companies can compete to build and operate power stations more efficiently.

The distribution companies will be the key to change. With a turnover of between £500 million and £1,500 million each last year, they will be among the largest private sector companies in their region. They will have a strong local identity and a real incentive to strike the best deal for their customers. Our proposals will give them the freedom to use that initiative. They will become a force for development in their local economies. They will become real independent companies looking after local interests, not just the distributors of the CEGB's electricity.

Because the CEGB's monopoly will be ended, and because its obligation to supply will be removed, the distribution companies will no longer be obliged to take all their electricity from one supplier. Because the companies will own the grid, they will be able to bring new suppliers on to the system. They will be able to buy in the cheapest electricity and will have plenty of choice. The customer cannot have more than one switch, but the distribution companies can and will have more than one supplier. They will be able to contract for local sources of power supply into their own distribution networks. They will be able to contract from Scotland or France, from the two large generating companies or from the new private generators. A framework will have been created in which a modern competitive industry can develop. Already a number of private sector concerns have expressed interest in generating electricity. The area boards are interested in developing their own local generation. The industry already recognises the need to strengthen the link with Scotland.

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford

The Secretary of State referred to Labour party fears about the effect that privatisation might have on the coal mining industry. Does he not realise that he could allay the fears by instructing both the coal industry and the electricity industry to enter into a formal binding contract on supplies to the electricity industry before privatisation takes place?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

The Government did not impose the present arrangement on the industry. The CEGB and the National Coal Board entered into it because they believed that it was in their mutual interests. I have no doubt, as I hope to explain later, that a substantial part of the remaining huge demand for coal will continue to be met from the British industry, subject to certain qualifications.

I was talking about strengthening the link with Scotland. The Scottish industry will be a real force in the English market. It has a large surplus of modern and efficient power stations. The Scottish boards will be important competitors in supplying the 12 distribution companies and the generators south of the border, who will also be able to compete in Scotland. My right hon. and learned Friend the Secretary of State for Scotland will wind up the debate and answer points on his proposals for the Scottish industry. These were clearly set out in his White Paper. They recognise the different circumstances in Scotland. The industry has, for some time, been structured differently in Scotland, and the structure will remain different. The competition between the industry north and south of the border can only benefit the customer.

Photo of Mr George Foulkes Mr George Foulkes , Carrick, Cumnock and Doon Valley

The Secretary of State will be aware that, in preparation for privatisation, a big struggle is taking place between the South of Scotland electricity board and British Coal in Scotland. So far, the Secretary of State for Scotland has refused to intervene. Because of the huge investment of taxpayers' money in British Coal in Scotland, because of the importance of security of coal supplies, and because of his responsibility for employment and industry in Scotland, the Secretary of State for Energy has a locus in this matter. Therefore, will he encourage his right hon. and learned Friend the Secretary of State for Scotland to intervene and take some action, and at the very least knock the heads of the two parties together and get them round a table so that they can come to some kind of agreement before the coal industry in Scotland is decimated?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

Both my right hon. and learned Friend and I have made it clear that we would like to see agreement between the SSEB and British Coal, but we cannot force that agreement on them. The chairman of the SSEB has another important statutory duty, and that is to supply electricity at the most competitive price. Therefore, we want to see these two industries get together and work out a deal. This is not a by-product or a part of privatisation. The chairman of the SSEB believes that he is fulfilling his statutory duties, and we can only make sure that a modern coal industry is available. We can encourage the parties, but, at the end of the day, this must be a commercial arrangement between them.

Photo of Mr Alexander Eadie Mr Alexander Eadie , Midlothian

In reply to my hon. Friend the Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) the right hon. Gentleman made great play of the statutory duties of the SSEB. Has he read the agreement on those duties? I counsel him to do so, because he will see from it that the Secretary of State for Scotland has the power to direct and to intervene if he deems it to be in the national interest. I submit that a Scottish deep-mined coal industry is in the national interest.

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

I am sure that my right hon. and learned Friend has heard everything that has been said, and I am sure also that he will deal with this subject. It is important to us all, but I recognise that it is particularly important to Scotland, and it is appropriate that my right hon. and learned Friend should deal with it.

I have heard Opposition Members say that there cannot he competition because there will be regulation. Again, there is confusion. There will be competition in the power stations. Regulation will ensure that the benefits of that competition are passed on to the customer in electricity prices. There will be a clear and effective regulatory system, and the White Paper sets out the principles on which it will be based. The emphasis will be on regulating the prices charged by the distribution companies. This will prevent monopoly profits being taken by any part of the industry. The initial contract put in place for the supplies from existing power stations will also have to be regulated. Detailed proposals can be put to the House only after consultations with the industry. The Government's principal aim is clear, and that will be to promote competition.

The regulatory system will reinforce the distribution companies' incentives to seek the cheapest supplies, but we shall also put competitive pressures on the distribution companies themselves. Neighbouring companies will be free to compete for large customers on their borders, and large customers will be free to buy electricity direct from the generators. The regulatory system will ensure that they can use the grid and distribution systems to do that. It will improve the existing provisions on common carriage in the Energy Act 1983. It will ensure that distribution companies do not develop local monopolies in generating electricity themselves. It will prevent them subsidising their high street shops with income from electricity sales.

Photo of Mr Tam Dalyell Mr Tam Dalyell , Linlithgow

A number of us were the guests of the CEGB in the control room in Southwark. What does the Secretary of State say to controllers, such as Edgar McCarthy, who say that if, for example, in the Sundon incident in 1986, they had not had the authority to exercise control, the whole of London would have been in great difficulty within two minutes? The technical arguments of Mr. McCarthy and his colleagues weighed heavily with some of us. What is the Secretary of State's reply to that?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

I noted that the hon. Gentleman asked this question earlier. We believe that the grid control will have the same ability to deal with emergencies under our arrangements as it does under the present ones. At present those arrangements depend upon common ownership, and we believe, on the basis of the contracts struck between the parties, that exactly the same reaction will be possible in a similar emergency.

Let me take it a stage further. In the recent hurricane, although the CEGB suffered some damage, by 11 o'clock that morning it was able to offer supplies to all the regions. The real problems were incurred by the area boards, and they had to sort out the massive job of restoring the low voltage distribution system. They did it extremely well, cooperating with one another and swapping personnel and equipment. That was a good example of how a diverse industry—not an integrated one; once again the hon. Member for Linlithgow (Mr. Dalyell) misses the point—with 12 separate companies can work together for the common good.

Photo of Dr Michael Clark Dr Michael Clark , Rochford

Will there not be the same continuity of supply whether the information for the merit order comes from internal information, in-house within a massive CEGB, or externally, from several generators, all of whom are supplying useful information to help sustain contracts and get contracts the next time they are for offer?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

As I said earlier, the emergency arrangements will work just as well under this system as they have done in the past.

Photo of Mr Peter Hardy Mr Peter Hardy , Wentworth

Will the right hon. Gentleman give way?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

This must he the last time for some time.

Photo of Mr Peter Hardy Mr Peter Hardy , Wentworth

The Secretary of State overlooks the fact that the various bodies will be commercial undertakings devoted to profit. After the hurricane, constituents from my area went to the south of England where they gave assistance to ensure that electricity supplies were restored as rapidly as possible. In many cases they were restored in a matter of hours. Does the Secretary of State seriously believe that commercial companies will rush to aid one another, thereby diminishing their profits?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

That is just a measure of the hon. Gentleman's basic prejudice against the private enterprise on which this country depends for its prosperity.

Competition in generation will provide the best protection for the consumer, because it will put pressure on three quarters of the cost of electricity. Price regulation of the 12 distribution companies will put pressure on the remainder. Customers will not just benefit from competition and regulation. They will be given new rights, too.

Guaranteed levels of service will be set by the regulator, in consultation with the industry. For example, the distribution companies could be required to meet all agreed appointments, to provide new supplies within a reasonable period, to replace meters by an agreed deadline, and so on. When they fail to meet these levels of service, the customer will receive compensation. Where the industry has a monopoly, the consumer will have a right of redress. This will be a novel feature of our privatisation of electricity. We are determined to ensure that the customer benefits from privatisation, not just in price, but in quality of service.

I believe that this scheme will be welcomed by the industry. It builds on a scheme that was introduced by the East Midlands electricity board. It will not just help customers. It will give management useful information on failures of service and an incentive to make improvements. It will be feasible and it will be effective.

Arrangements will also be made to represent consumer interests in the new structure of the industry. The advantages of the existing consumer and consultative councils will be preserved. Employees will also benefit. They will have the right to acquire a direct stake in the industry. There will be attractive provisions to help them to acquire shares. Their national negotiating and consultation machinery will be unaffected by the legislation. Their pension rights will be safeguarded.

Most important, the new structure of the industry will provide more diverse career opportunities. More companies will enter the market, and they will be looking for people with experience. There will be fair competition for the highest positions in the industry. Boards will no longer be chosen by Ministers. They will be filled by those with ability from within the industry, and with a minority of non-executives.

The majority of the employees work for the area boards, which are enthusiastic about the new structure. They are confident that it will provide real benefits for their customers. The chairman of the Electricity Council, the head of the industry, supports our proposals. So, too, does the Electricity Consumers Council. If the Labour party is concerned about the customer, it should listen to those who deal with the industry's customers and to those who represent them. It should not just listen, as it always does, to the producer.

I do not expect the CEGB to welcome the reorganisation. Proposals for change are often taken as criticism, but that is not the case here. The Government have the highest regard for the CEGB and its employees. We are confident that the CEGB will make a success of the new structure. It builds on its strengths. It will preserve the integrity of the grid and the operation of the power stations in merit order. It will preserve the CEGB's nuclear resources intact, ensuring continuity and high standards in managing the nuclear programme. As competition develops, there will be a developing market for the skills of those who know about electricity generation. Those are the facts about privatisation.

I should now like to deal with a few of the myths that the hon. Member for Kingston upon Hull, East seems to spend most of his time pursuing. The first of these myths is that privatisation will increase prices. That is not the case. My proposals will introduce competition, which will put pressure on costs. The Opposition seem to think that competition is impossible. They argue that the customer is best served by a monopoly. I find that surprising. It is not what their spokesman said last October, when he claimed to understand the theory that a monopoly was more inefficient, takes more profit and exploits by charging higher prices. He also said: The industry is also not consumer-sensitive. That followed his statement that The concentration of power in one huge corporation is a questionable aspect."—[Official Report, 21 October 1987; Vol. 120, c. 816.] The hon. Gentleman now appears to remember that his party has always believed in nationalised monopolies. He has therefore changed his ground.

The industry is facing a substantial investment programme. For years it has had surplus capacity. It has not had to order power stations. Those days are over. Demand is growing. More than 70 per cent. of the CEGB's plant is 15 years old, or more. The CEGB forecasts the need for 13 GW of new capacity by the end of the century — equivalent to about 10 large power stations. Inevitably, that will have an impact on prices. That is why it is important to introduce competition into the industry.

We need competition to make sure that the stations are built efficiently, to time and to cost. If the hon. Member for Kingston upon Hull, East is really concerned about prices, he should argue for competition, which is what I think he believes in, rather than monopolies, for which the unions tell him he must argue.

Another myth about privatisation is that the Government have abandoned the coal industry. That is nonsense. Last year the CEGB spent almost £3,500 million on coal. It bought about 75 million tonnes of coal from British Coal and accounted for three quarters of British Coal's sales to the United Kingdom market. Coal is the major source of fuel for our power stations and will remain so for years to come. About 60 per cent.of our electricity last year came from just a dozen coal-fired power stations. In total, about three quarters of our electricity comes from coal. The existence of those stations provides a solid guarantee of a market for coal.

The Government's commitment to the future of British Coal is not in doubt. More than £6 billion has been invested by the taxpayer since we took office, and about £2 million of taxpayers' money each working day is still being invested to make British Coal a modern industry. Those plans stretch through for the next three years.

The miners can help to make it a modern, competitive industry. They know that strikes and stoppages cost jobs. My hon. Friend the Under-Secretary of State for Energy said earlier that the loss from the recent overtime ban was about £100 million, the same as the likely investment in Margam—a brand new pit offering 800 new jobs. If British Coal can invest in new pits and adopt modern working practices, it can become a competitive supplier.

The Labour party talks continuously as though British Coal is a no-hope industry. It makes it sound as though the House is being invited to breathe life into a corpse—a most unrewarding occupation. We do not accept that view of British Coal. We believe that if the Labour party worked with us, by encouraging modern working practices to go with modern investment, British Coal would have a secure future. I have listened to what Mr. Scargill had to say this morning, and I have to tell the House that I believe he has learnt nothing from his recent experiences and that he has nothing that he really wishes to talk to British Coal about. What he looks forward to is finding yet another excuse for holding yet another ballot about more industrial action. It makes one wonder whether, with friends like Mr. Scargill, the coal industry needs any enemies.

Photo of Alex Salmond Alex Salmond Deputy Leader, Scottish National Party

If the Secretary of State is so concerned about the future of British Coal, why is he not prepared to provide a guaranteed market for coal in the same way as he is prepared to provide a guaranteed market to the nuclear industry?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

A proportion of our electricity will be supplied from nuclear power stations, but I have just told the House that three and a half times that amount will continue to be supplied by the coal industry. Three quarters of our electricity will come from coal-fired power stations, way into the future. The amount of electricity supplied by nuclear power stations will remain fairly constant. Whether it is British coal that is used is in the hands of the British miner and British Coal. It is not in the hands of the Government. We are doing our bit, and it is about time that Opposition Members did theirs.

The Opposition have also complained about our policy on nuclear power, but our proposals are an insurance policy for the customer. There are no alternatives to electricity in many of its uses, so security of supply is important. If the Opposition were really concerned about customers, they would realise the folly of relying only on finite fossil fuel resources to generate all our electricity. It takes a long time to build power stations. We cannot wait until the next jump in fossil fuel prices and then decide to build nuclear power stations or large-scale projects for the use of renewable resources. We need diversity if we are to have a secure energy supply.

Our commitment to nuclear power is only one part of that strategy. The obligation that will be placed on the distribution companies is not to ensure that the nuclear proportion grows—that will be up to the market. It is simply to ensure that nuclear or other non-fossil fuels continue to form part of a balanced portfolio. That proportion will be roughly equal to present levels, and the nuclear programme will itself be subject to new competitive pressures.

Photo of Mr Rhodri Morgan Mr Rhodri Morgan , Cardiff West

Why cannot nuclear power stand on its own two feet?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

The hon. Member for Cardiff, West (Mr. Morgan) asks why nuclear power cannot stand on its own two feet. It is doing so. It is British Coal that has not stood on its own two feet for years. Earlier this afternoon my hon. Friend the Parliamentary Under-Secretary mentioned the figure of £916 million in deficit grant in a single year. There is a big market for coal, but we need other fuels as well. All sensible people who think about energy recognise that. The 18 per cent. of our electricity that comes from nuclear power now should he maintained at about that level in the future. That is no threat to coal. It offers security of supply, as I have said over and over again.

The Opposition may claim that the privatised industry will cut corners on safety and environment, but there can be no question of that. Whether the industry is in the public or the private sector, it will still have to meet the same safety and environmental standards. I am sure that the hon. Member for Kingston upon Hull, East has not forgotten that Chernobyl was a state-owned power station. Private ownership will not lower the standards that the industry has to meet.

Opposition Members will go on believing in their myths, because they still believe that public ownership is necessary to provide a public service. However, 3 million new shareholders and more than 1 million new freeholders say that they are wrong. I expect many more new shareholders when the industry is privatised, and I expect many of them to be members of trade unions. The industry will then be properly accountable to the public. I expect more of the employees to take up shares. They will then have a real stake in their performance and in the future of their companies. The industry will be free to raise finance in the private sector, and its investment plans will be subject to commercial tests.

Public ownership means state control. It means monopoly. Privatisation will be of benefit by itself, and this will be the biggest privatisation of them all. In England and Wales it will create 15 new private sector companies, with more than 130,000 employees and a combined income of more than £10,000 million. In Scotland, it will create two new companies, with more than 15,000 employees, and an income of 1,200 million. There will be competition and choice. There will be a new force for deployment in the regions. There will be new, wider share ownership. There will be individual initiative, where there was state-controlled monopoly. There will be new rights for customers. There will be new opportunities for employees. There will be a better deal for the taxpayer, and for Britain.

Photo of John Prescott John Prescott Shadow Secretary of State, Shadow Secretary of State for Energy 5:33 pm, 7th March 1988

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof: 'rejects the White Papers Cm. 322 and 327 which seek, in the name of a doctrinaire concept of competition, to dismantle a successful publicly-owned and integrated system of electricity supply which has produced a reliable and efficient supply of electricity at a price amongst the lowest of any developed economy; which will create a series of lightly regulated private monopolies and a less secure system, producing high profits for shareholders and high prices for consumers; which will have detrimental consequences for employment in the coal, power plant and other dependent industries; and which ignore the crucial strategic importance of a long-term integrated energy policy, aimed at sensible utilisation of the country's various indigenous fuel resources.'. The Secretary of State's speech really proved the first criticism that I made of the White Paper—that it was a triumph of ideology over common sense. It was thin on detail, and it told us little about how the right hon. Gentleman's proposals were to be achieved. The White Paper is a statement of intent, a fraudulent prospectus high on promises and low on detail. It is a statement of blind faith that competition equals efficiency and is always beneficial to the consumer, which a good deal of evidence shows not to be so.

This is an unjustifiable, reckless experiment with a very successful public utility. It makes no attempt, as the White Paper makes no attempt, to justify the Government's aim to break up the electricity supply industry, and to replace the present certainty of supply with greater instability and uncertainty in this most important provision.

The White Paper is full of contradictions. For instance, it suggests that it is possible to abolish the present structure, but retain the advantages that that structure has provided over the past 30 years. The Secretary of State has made clear, in both his speech and the White Paper, that the electricity supply industry has a successful record; he has not gone on to explain why he believes that it has failed the country. That should be the first step in any White Paper.

The White Paper is bereft of detail. It smacks of haste and a lack of thought. I do not know whether the Secretary of State has chosen to read the report of the Plowden committee on the electricity supply industry in 1976. He nods; he will therefore know the difference between the quality and quantity of the analysis engaged in by the Plowden committee, and that of the shabby report that he has presented to the House. The Plowden report at least attempted to examine the different options that are available if the electricity supply industry is to he broken up. The Secretary of State has said that Plowden got it wrong, but at least it is possible to look at the reasons that he gave in the report's recommendations.

The White Paper contains no such substance or detail. It presents no alternative strategies. It is not a real White Paper; it is purely the kind of propaganda that we have learnt to expect from the present Government, masked as a White Paper. It has no contribution to make on the important and radical change that is being proposed—for I fully agree that it is a radical change. That is why it is all the more important that the Government try to justify giving up what we know to be a successful way of supplying electricity.

Photo of John Redwood John Redwood , Wokingham

If the CEGB and the current industry are so successful, why are they being so slow to bring forward combined heat and power, combined cycle gas turbines and reuse of redundant power stations, which could be so much better at generating cheap power at little fossil fuel cost? Does the hon. Gentleman agree that the private sector might do that job rather better?

Photo of John Prescott John Prescott Shadow Secretary of State, Shadow Secretary of State for Energy

The hon. Gentleman has proved that he should wait to hear my criticism before he rises to speak. I shall come to that point later in my speech. I appreciate that he may not know what I am going to say.

The Secretary of State has referred to a point that I made in my speech on the Public Utility Transfers and Water Charges Bill. I made it clear then that ours is the most integrated and secure electricity supply industry in any developed economy. It has not only achieved but exceeded all the profit targets that Parliament gave it. It has trebled its productivity in 30 years and, in the last 50 years, has increased prices by a factor of nine—a sixth of the increase in fuel costs and half that in the cost of living. Can any other private or public industry claim that record? I shall sit down if any hon. Member can cite one.

Photo of John Redwood John Redwood , Wokingham

The private sector computer industry could more than match that record.

Photo of John Prescott John Prescott Shadow Secretary of State, Shadow Secretary of State for Energy

That is only over a period of five, six or 10 years during which it has been in existence. I am talking about 50 years of success by a public industry.

The fairest thing would be to compare the industry with other electricity supply industries in the rest of the world. An analysis has been done by the Electricity Council, which shows that on prices alone Britain is producing one of the cheapest forms of electricity when compared with the 20 developed countries in the OECD. That is a considerable record.

In the Sunday press, the Secretary of State is quoted as saying that his plans for electricity will cut bills. It does not say that in the article. Is the Secretary of State predicting that his plans will improve the record of the industry? Will they do better than make us the sixth cheapest electricity supplier in the OECD? Will he do better than that? Will he cut the bills?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

I am grateful to the hon. Gentleman for proving that even after our price increases British electricity will remain competitive. He has spent the past few months saying that that is not the case.

Photo of John Prescott John Prescott Shadow Secretary of State, Shadow Secretary of State for Energy

I shall deal with the price increases shortly. However, will the Secretary of State predict that the prices will come down as a result of the changes announced in the White Paper?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

I spent quite a bit of time in my speech pointing out that competition will put pressure on costs, which will force prices down. Therefore, prices will be lower in the private sector than in the public sector.

Photo of John Prescott John Prescott Shadow Secretary of State, Shadow Secretary of State for Energy

That is another example of a statement of faith. We are asking the electorate to accept the Secretary of State's belief that competitive forces will do better than the proven record of the past 30 years which, as I have said, has made us the sixth cheapest electricity supplier in the OECD.

We should bear in mind that the industry has carried the burden of the Treasury putting its hand in the till over the past few years. The Treasury has taken £2 billion from the industry in the external financing limits. It has now calculated that it will take another £1 billion in next year's accounts. Therefore, £3 billion will have been taken since the Tories took office, and that will have been financed out of the present price structure. The industry has had considerable money taken away from it by the Tory Government, but still it has a considerable price record.

I pray in aid the work of the Monopolies and Mergers Commission, which was set up by the Government. It looked into the operation of the electricity industry and examined transmission and generation. It has made legitimate criticisms, but, in the main, it said that the industry had operated in the best interests of the country. That is a good argument to put for the retention of a publicly owned electricity supply industry.

Of course, there are criticisms of the industry. The Labour party does not stand for the status quo. We want a change and we want improvements. However, we believe that a public sector electricity industry does the job far better than the private sector could, and the record shows that. I shall list some of the criticisms. The generation side of the industry is too powerful. I have suspicions of power when it is concentrated in that form, whether in public or private ownership. The industry has been obsessed with nuclear power and has had too little to do with combined heat and power schemes. It is not sensitive enough to consumer demands and it needs tighter control in the construction of nuclear plants—which, by the way, is done by the private sector—and in its demand forecasts.

The industry has shown insufficient consideration for conservation and the environment. Nevertheless, it is still one of the most successful electricity supply industries of the developed economies. It has a proven record as a public industry and utility. That is why I restate the Labour party's commitment to retaining such an industry in public control and ownership. It has been of direct benefit to the country, to consumers and to industry. It is worthy of the title of a successful publicly-owned industry.

Our criticism of the White Paper is that it has a confused logic and blind faith. That is shown in the six principles set out on the first page. It says: Competition is the best guarantee of the consumers' interests. That is precisely what the Secretary of State keeps saying.

The right hon. Gentleman made it clear at Question Time today that when he says "consumer" we should read "distribution boards." The distribution boards will receive the advantages of the reduced costs, in which he so blindly believes. How can the Secretary of State be sure that the distribution boards will pass on those advantages—if they take place—to the consumer? It will not be by the operation of supply and demand, but by a regulator; somebody who will intervene in the market. The Secretary of State has discovered that it will be a monopoly, and I am glad that he has discovered that. I happen to believe that this monopoly has worked in our interest by producing electricity more cheaply. That is contained in the report of the Monopolies and Mergers Commission. The assumption must not be that monopoly industries cannot achieve economies of scale. One of the advantages is that current prices have been achieved through economies of scale. That is one of the comparisons between the private and public sectors. One must ask whether it is necessary to have that sort of structure in order to achieve those benefits.

It is clear that we are talking about regulation. The Secretary of State seems to be suggesting that by breaking up the CEGB into a big part and a little part—70 per cent. and 30 per cent.—with some piddling little bits on the side, the two parts will be competitive. There are many examples of two or three big companies getting together with all the characteristics of a monopoly. They agree prices. Why does the Secretary of State think that there would be competition? He said that it will be because of contracts between them. All the evidence we have seen from abroad shows that contracts are usually negotiated over long periods of time. Nobody will invest in generation unless a contract is guaranteed. All private and public utilities in the United States want guarantees of long-term supply. It is called a market condition of supply.

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

The hon. Gentleman has been carved up by the Leader and deputy leader of the Opposition. Therefore, I can well understand why the hon. Gentleman firmly believes in collusive duopolies. However, we will not have a collusive duopoly in the electricity industry.

Photo of John Prescott John Prescott Shadow Secretary of State, Shadow Secretary of State for Energy

The Secretary of State has a justifiable reputation for cheap and nasty comments. I wish he would address himself to the argument. I may have it wrong; he may have it wrong. We are debating the White Paper and a difference of view about the operation of an industry and the experience we have seen in other parts of the world. The Secretary of State has totally failed to take that experience into account in the White Paper. Before arriving at his conclusions, he should have seen how privatised electricity industries operate in other parts of the world. If he had done that he might not have had to say, as he did at the beginning of his speech, that a lot more detail has to be faced yet and that there is a lot more to he worked out. Apparently, the Secretary of State arrives at his conclusions without thinking of the details and without looking at other experiences.

Photo of John Prescott John Prescott Shadow Secretary of State, Shadow Secretary of State for Energy

Sit down. The Secretary of State faced the same problem. We have to achieve a balance as to how many people we allow to intervene. Many people want to contribute to the debate. We were asked by Mr. Speaker to try to cut the length of speeches. That is the problem.

Consumers of the regional distribution boards will not have two switches. As the Secretary of State said, they are natural monopolies. He said in the White Paper that the privatised electricity industry will be a consumer-driven organisation. Presumably, the consumer cannot choose between different switches in order to make a choice between electricity hoard A and electricity board B. Therefore, the consumer has to depend on the distributors, in one form or another, passing on any advantage that the Secretary of State's competitive model—that is what he calls it — has achieved. Any advantages in generation will be passed on to the distributors.

How can we be sure that those advantages will be passed on? The Secretary of State said that it would be done by the regulator. Presumably, many of the distribution companies will begin their own generation. Why should they not begin to emulate what has happened in Scotland where they are both generators and distributors? Will they not then become regional monopolies of generation and distribution? The Secretary of State is shaking his head. It does not mention that in the White Paper. Perhaps that is something else that he is thinking about, but about which he has not told us. That shows the difference between the Plowden approach and the shabby White Paper of the Secretary of State.

We are talking about the possibility of the market producing a regional monopoly in generation and distribution. Presumably, even if the regulator wants to intervene, he will have to take account of the fact that the regional boards may have diversified into other investment interests. Those boards will not necessarily remain involved in the production of electricity. The market logic is to diversify. How will the regulator begin to find out how to deal with the cross-subsidisation in a joint company? There is no mention of that in the White Paper. There may be gold-plating of the assets, as happens in America, instead of the advantage being passed on to the consumer. There may he an answer to these points, but they were not even addressed as a problem by the Secretary of State. The board would be the link between the saving on the generator and the consumer, yet the distributor, in desiring to maximise profit, could do all sorts of other things in the private market system. The regulator would have no control over that. There are many questions involved, including the problem of cross-subsidisation.

The White Paper states that the obligation to supply is to be given to 12 distribution companies. We have an excellent integrated national grid, as the Secretary of State has said, and no one disputes it. Spain is the only country whose national grid is owned by the distributors, and no one is experimenting with that way forward. Because power stations in Britain are owned by the generators, they can be directed, in order of merit, to come on line. The proposal is that contracts will be negotiated and within the terms of those contracts the generators can be brought on line.

In view of the dispute on COAC contracts in Scotland, would anyone believe that was one way of bringing greater security into a grid contract system? What happens if there is an emergency resulting in a blackout and some generators do not comply with their contracts? That happened in a blackout in New York because the contractors supplying the power did not co-operate. Presumably, if that happens here, it will be a point of issue between the generating board or company and the network. That will become sub judice, so hon. Members will not be able to discuss it. What a prospect to face! We have an integrated national network based on merit and efficiency but now contracts are to be introduced. Even if people believe that the new system is good, they must accept that it introduces uncertainty into a system in which certainty is needed. Under the present publicly-owned system, certainty is guaranteed. Competition by contract will bring about greater uncertainty on essential conditions of the market.

The Secretary of State has said in his statements that it will cost quite a lot to break the national grid away from the generators. The people who now operate it say that it will cost £1 billion. I do not know what the costs are, although they have been highlighted in a number of board statements. Presumably, the Secretary of State has accepted that it will cost something, but he says that it will be balanced against the savings which will he made in the industry. We know that it will certainly have a cost in money and uncertainty.

There was no mention in the White Paper or in the statements of the Secretary of State of the savings likely to come from the new system. The logic of the argument is that we cannot tell what those savings are because the market economy determines them. That is supply and demand. The Secretary of State assumes that savings arc guaranteed. I do not accept that or believe that there is a great deal of evidence to support it. There will be greater uncertainty.

Who will manage all the areas and make the system better? How will the Government ensure that the public interest is observed? Apparently the answer is to have some form of regulator. We know that a regulator is required in all privatised systems in order to intervene, but this approach has not been successful in some industries and countries. There are doubts about the system, with its many side effects, in America. There is no one who would argue that the examples of regulators for British Gas and British Telecom are good examples — indeed, the Secretary of State distances himself from that method and calls for a more powerful form of regulation. I should be interested to hear the right hon. Gentleman's comments on that. The Secretary of State will face considerable difficulties, as we know from experiences abroad and from British Gas and British Telecom.

I had hoped that the Secretary of State would tell us about the extra powers for the regulator. I believe that, even with a publicly-owned facility, there is a role for the regulator to act on the consumer's behalf, to intervene and call on people to justify their actions. That is nothing to do with ownership as such. It is about accountability in one form or another. Although I pay credit to the excellent work of the Select Committee on Energy, its efforts are not sufficient to provide the necessary accountability in the day-to-day running of an industry. In its report on the gas industry, the Energy Committee said that it did not accept the formula for the price controls imposed by the regulator in the gas industry. It appears that the Committee was right. Anyone can read of the factors. The Secretary of State has ignored the fact that the Committee asked for a White Paper, but one that would tell us how the energy market would be dealt with in regulations before any further privatisation. The Committee wanted to know how the regulator would operate. The Secretary of State has totally ignored that request. There is no mention of it in the White Paper. He ignored that justifiable recommendation by a Committee, the observations of which in these matters have been far more useful than the Government's.

The regulator's role is a problem, and I draw in support of that comment a statement from a meeting on 29 February of the Bow Group energy committee, which the Parliamentary Under-Secretary of State for Energy attended. After the White Paper was published, the hon. Gentleman reported that he was concerned about the safety of nuclear installations, about consumers having to fund the massive industrial investment through price rises, about the effects on the coal industry and about whether private sector competition would be encouraged to enter the market. I liked his statement that he was concerned about how the new regulators can sort this out". The hon. Gentleman asked for comments to be sent to him, since he has to publish a paper on the subject.

Photo of Mr Peter Rost Mr Peter Rost , Erewash

Will the hon. Gentleman give way?

Photo of John Prescott John Prescott Shadow Secretary of State, Shadow Secretary of State for Energy

I shall give way to the hon. Gentleman, because he was present at that meeting

Photo of Mr Peter Rost Mr Peter Rost , Erewash

In fact, I chaired that meeting. I am not clear where those supposed minutes came from. They certainly have not been approved by me yet and, from what I have heard of the hon. Gentleman's presentation of them, that is a gross misrepresentation of what took place.

Photo of John Prescott John Prescott Shadow Secretary of State, Shadow Secretary of State for Energy

I shall accept from the hon. Member who chaired the meeting of the Bow Group energy committee that this is a gross misrepresentation of what went on. There is nothing in the statements of the Secretary of State or the answers of the Under-Secretary of State during Question Time that gives us an inkling that they understand what a regulator has to do. If my information from the meeting is wrong, I shall give the Secretary of State and the Under-Secretary of State a chance to show that they know precisely how the regulator will work in respect of the critical matters of price and control.

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

I made it clear in my speech that we were debating the structure. I then said that there was an enormous amount of detailed work to do. I said that we looked forward to the views of the Select Committee on Energy. There is no secret about this matter. I have discussed it with the unions and the management. I explained the outline of our regulation policy in the White Paper and in my remarks today. There is much detailed work to be done now that the structure is out in the open.

Photo of John Prescott John Prescott Shadow Secretary of State, Shadow Secretary of State for Energy

That rather confirms my view about the operation of the regulator. That aspect is critical to the question whether the Government can get the kind of competitive industry about which the Secretary of State talks. This system has not worked before for British Gas and British Telecom. It is not working successfully in America. The Secretary of State is merely confirming the report of the Bow Group energy committee—that if anyone has any ideas, they should be sent to him and his Minister. At least that point must be correct, because the right hon. Gentleman has confirmed it. This confirms that the Secretary of State speaks about the ideology but does not know how it is to be achieved. That is all that the White Paper has presented to us.

Photo of Mr Rhodri Morgan Mr Rhodri Morgan , Cardiff West

This is not so much a White Paper as a suggestions box in which everyone may put ideas.

Photo of John Prescott John Prescott Shadow Secretary of State, Shadow Secretary of State for Energy

That is a very good point. It is a pity that the Government did not have the suggestion box out before. They could have taken account of the sound advice that was available before they reached these conclusions. But I do not think that that has anything to do with it. The Secretary of State told the Tory party conference that this is what the people would get. The members at that conference gave him a cheer, and it was a triumph again for him. Frankly, I presume that we are faced with the consequences. We all know the importance of this change. The Prime Minister came in at statement time to hold the hand of the Secretary of State. She must be convinced that the right hon. Gentleman is OK, as he is on his own tonight.

It is a bit rich for the Secretary of State to say that he wants to privatise the industry to stop Government interference because they are for ever pinching money from the electricity supply industry to fund their financial programmes — £3 billion during the past four to six years. The Secretary of State has said, "Please protect me from putting my hand in the till." If that is why we have this White Paper, it is not a justifiable reason.

The Secretary of State also referred to his opposition to Government interference. But he is imposing a 15 per cent. price increase on the industry against all the judgments about whether such an increase is necessary. He has also referred to regulated profits, and whether they will be fair, and to future investment programmes. The Secretary of State did not say anything about the golden share. We heard in the statement a fortnight ago that there will be a golden share in the industry. If there is, I hope that it will be more effective than that of Britoil's which the Secretary of State admitted did not work. The Secretary of State is interfering in nuclear power. He has agreed that strategically we want a nuclear industry and that the electricity supply industry will be forced to buy some nuclear supply. That is considerable Government interference. It is agreed that the Government constantly interfere in oil taxation policies and in cheap gas imports from Norway. Therefore, to assume that there is no Government interference, whether the industry is in the old or new form, is nonsense.

The only rule of the market will be for the coal industry, which will have to face massive imports and which will be encouraged to do that. Indeed, we can see what is happening in Scotland at present. That is the only area in which the Secretary of State says that we can make savings of about £500 million—[Interruption.] No, I acquit the Secretary of State of that; he does not give us such details. The industry has assessed that it can save £500 million or £700 million costs. What will be the effect on the balance of payments and on prices? Is the future of the coal industry to be determined on the short-run effects of international coal prices? That seems to be the coal industry's future. That will have an effect on many thousands of miners, on pit closures, and on the railways and shipping industries. It has been estimated that it will affect about 100,000 jobs.

I wish that the Secretary of State had given us an indication of what he thinks the effects will be on jobs, instead of lecturing us about how to work harder, especially those in the mining industry, which produces the cheapest deep mine coal in Europe, when he knows that its record in the past few years has shown a considerable changeabout—[Interruption.] For whatever reason, the changeabout has been considerable. We cannot assume that it is just the status quo because there have been considerable changes.

The Secretary of State should he telling us what the coal industry's future is—there must be a future for the coal industry — instead of saying that its future will be determined by price, the results of that, limitations on the balance of payments and imports. Why does the Secretary of State not say, "I am going to ensure a future for nuclear power, so I shall ensure one for coal; I shall develop a plan for coal just as I have for nuclear"? That is precisely what he is doing, but for one reason or another—for the Government's own political prejudices—he wants to sort out the miners, and that will have consequences for their jobs and major costs to the community and the taxpayer.

If the Secretary of State reads his White Paper, he will see that most of the benefits that he claims will be the result of the structural changes could come about whether the industry is owned publicly or privately. The grid could be separated under public ownership. The CEGB could be broken up into the forms that the Secretary of State is talking about with the industry still in public ownership. There could be the competitive yardstick that the Secretary of State says replaces competition; there could be consumer benefits and regulated powers — all under public ownership. More powers could be given to the regulators in line with the Monopolies and Mergers Commission—again, under public ownership.

The reality is that the only difference under the changes in the White Paper is that the Goverment need to sell the industry to get the money. That is an ideological requirement, which has nothing to do with efficiency or the consumer. It is about maximising money for the Treasury so that it can utilise it for tax cuts. If one considers the fattening-up prices—the 15 per cent. price increase — which the CBI has rejected in its Oxford report — [Interruption.] When the Secretary of State argues the case of short-run costs and long-run costs, he should look in detail—

Photo of John Prescott John Prescott Shadow Secretary of State, Shadow Secretary of State for Energy

No; I do not have the time.

The Secretary of State should look in detail at the report. As an accountant, he will see that it makes clear that that price increase is not necessary to justify investment or to increase the rate of return—it increases the value of the assets. By running off capital debts so that the industry is free from capital debt by the end of the decade, the Secretary of State is guaranteeing the maximisation of resources and prices for the selling off of the electricity industry. This is what it is all about — maximising the price to the Government.

When the Secretary of State, at Question Time, said, "The hon. Gentleman" — that is, myself—"apparently realises that money goes to the Treasury and therefore to the benefit of the taxpayers," he missed out two essential points. First, money may go to the Treasury, but, if it is used for tax cuts, it is hardly of benefit to all the people of this country. Secondly, all the people will pay that price because they all pay for electricity. The consumer will pay a privatisation tax for a benefit that will be given to the City, the Treasury and the 3 million shareholders he hopes will invest in the industry. However, there are already over 40 million shareholders in the industry at present, when it is in public ownership, and they are concerned to maintain cheap electricity supplies.

We are faced with an electricity supply industry that, when privatised, requires higher profits and higher finances to attract investment and equity. It is a price far higher than the public sector has to provide because a low-risk industry can provide all the investment and produce lower prices at about half the level of the rate of return, which apparently is 2·5 per cent. at present. The only reason that we are increasing that rate of return—it is why a Labour Government recommended it and increased the rate of return—is primarily to get money for long-term investment. However, as has been pointed out, the Electricity Council, in its report for the industry, says tat all the extra prices that came from those changes in the Labour Government's White Paper are already embodied in the price structure, and investment requirements up to the year 2000, under the Electricity Council, have been catered for.

Therefore, the only reason for these resources is to provide cash for the Treasury. All the organisational changes that the Secretary of State talks about— the benefits to the consumer and the competition that is to come from a regulated monopoly system—are a sham. There is no advantage to the consumer. This measure will not introduce competition into the industry in the form in which the Secretary of State desires it. It will result in greater uncertainty of supply, less integration, higher prices, higher profits, and higher unemployment. The public sector has done far better than that. We shall ensure that the industry is returned to public control if the Secretary of State is successful in privatising it.

Photo of Mr Alick Buchanan-Smith Mr Alick Buchanan-Smith , Kincardine and Deeside 6:06 pm, 7th March 1988

The hon. Member for Kingston upon Hull, East (Mr. Prescott) accused my right hon. Friend the Secretary of State of indulging in rhetoric, but having listened to the hon. Gentleman I should say that I have rarely listened to so much empty rhetoric as in the past half hour. It was rhetoric without content. I might have a little more respect for the hon. Gentleman if he had addressed the right questions. My right hon. Friend never criticised the record or achievements of the CEGB. What he is seeking to do, and what all of us are seeking to do, is to make the industry even more successful in the future than it has been in the past.

It is a bit rich for the hon. Gentleman to accuse the Conservative party and a Conservative Chancellor of the Exchequer of taking money out of the industry in higher prices. Does he not remember that probably the most predatory Chancellor of the Exchequer in regard to the energy industry was his right hon. Friend the Member for Leeds, East (Mr. Healey), because when he was Chancellor of the Exchequer we saw one of the biggest energy price rises at any one time? The hon. Gentleman would have done better to do his research a little more thoroughly than to come up with such arguments.

I strongly support the privatisation of the electricity industry, specifically on the grounds that the hon. Member for Kingston upon Hull, East rejected—the grounds of interference by Government. I served for four years in the Department of Energy. Before entering that Department, which was my first departmental experience of a nationalised industry, I would not have believed the degree of interference with the industry, not only through the Department itself, but through the Treasury and its oversight. Sometimes it made me wonder how anybody with any commercial ability would ever want to serve in high executive office in such industries, given the degree of interference that he would experience.

Having said that I support the privatisation of this important industry, I believe it is critical that we get the privatisation process right. This is important for the Government's policies as a whole—for the policies that we have carried through already, and for the future. It is no use simply legislating now and regretting later if the practicalities of the privatisation do not work out in the way in which many of us would like.

I am glad to note that my right hon. and learned Friend the Secretary of State for Scotland is present. I believe that the structure plan that he has proposed for Scotland is good. It makes sense and it is extremely welcome to my area and the area served by the North of Scotland hydroelectric board. I hope that the discussions on items still to be decided upon will be carried through vigorously. There is still work to be done on the exchange of generating capacity. Will there be an exchange of territory to try to get a better balance between the two boards? Assurances are also necessary with regard to how — as a result of contracts or otherwise — we will maximise export opportunities for Scottish-generated electricity south of the border.

Photo of Mr Alick Buchanan-Smith Mr Alick Buchanan-Smith , Kincardine and Deeside

I shall not give way, because I wish to be brief as many hon. Members wish to speak.

As a result of examining the issues involved, I am well aware of the difficult questions that my right hon. Friend has had to address with regard to England and Wales. I understand that my right hon. Friend must comply with a fairly tight flotation timetable. Given the split that he is seeking within the CEGB, and between the CEGB and the grid, I wonder whether there will be sufficient time for the track record of the new companies to be established to meet the flotation timetable, which I believe my right hon. Friend has set for this Parliament. If the timetable extends beyond this Parliament, I hope that my right hon. Friend will inform us of that when he replies.

I have reservations about the merits of the split of the CEGB and about ownership of the grid. My right hon. Friend was right to pay a lot of attention to the need for competition, but the House must ask whether the competition that is to be introduced will be real or illusory. We must be certain about that. I believe that the only true competition is from Scotland, from France and from other energies, especially gas. My right hon. Friend has acknowledged that.

I acknowledge and understand the political attraction of breaking up the CEGB. However, I believe that it is questionable whether there can be real competition in the generating sector of the industry. For there to be competition there must be surplus capacity. Without that, I do not believe that competition can exist. My right hon. Friend has acknowledged that at present there is no surplus capacity within the CEGB. I believe that there will be no true competition until the least efficient capacity has been phased out and new investment has taken place.

I cannot quite understand, nor has my right hon. Friend explained, how the proposed split at 70:30 has been arrived at. I believe that as a result of such a split certain economies of scale and the attendant benefits to the consumer will be lost. I also question whether the 70 per cent. share left with the CEGB will be big enough to attract the investment that is needed, especially for nuclear power and for the new conventional capacity required. I believe that there is an alternative to that split. My right hon. Friend has said that the evolutionary process is the right one, and I believe that there is a certain evolutionary process that would enable competition to build the new, necessary generation capacity. Such competition could be introduced on the basis of giving opportunity to those who can build new statons most economically and, equally, by encouraging better access to the grid.

I do not undertstand what is achieved by the grid structure proposed by my right hon. Friend. We must realise that, basically, the grid is a utility. Simply to split it does not necessarily achieve the sorts of things that my right hon. Friend has claimed. We must also realise that the grid is not just about transferring megawatts from one part of the country to another. The transmission system is basically unstable because of the nature of electricity, that is, alternating current and voltage. The transmission system is not simply a matter of transferring power. Voltage and frequency must also be kept within acceptable limits to ensure the continued integrity of the supply. Therefore, the system is much more difficult and complex than the simple operation of a merit order system as proposed by my right hon. Friend.

I am concerned that, under the structure proposed by my right hon. Friend, there could be conflicts, inefficiency and also, of critical importance, instability of supply. I agree that there must be access to the grid, but I believe that it is unnecessary to separate the grid from the generating end of the industry to achieve that access. I believe that my right hon. Friend may pay too high a price to achieve it. Access to the grid can be better insured through the use of the regulator, or as a result of the shared ownership of the grid under integrated managment from the generating side. That alternative commends itself to me.

I know that many hon. Members wish to participate in this debate, and the final subject to which I wish to address my remarks is coal. I believe that coal is of equal importance to this debate. A week ago, when my right hon. Friend made his statement on privatisation, my hon. Friend the Member for Sherwood (Mr. Stewart) asked about coal, and I believe that its importance is highlighted by the current dispute in Scotland.

In the White Paper my right hon. Friend has singled out nuclear power as requiring special circumstances and considerations. I do not understand why coal has not been singled out to receive similar attention. My right hon. Friend paid tribute to the need for the security of supply and the variety of supply, the merits of which are underlined in the White Paper, particularly in paragraph 46. He was correct to underline those considerations.

We had an analogous situation — not an exact parallel—with the privatisation of British Gas and the import and export of gas. Hon. Members who served on the Committee on that Bill will remember that the Government, as a result of pressure, gave undertakings about the considerations that they would apply to the import and export of gas because it was a natural resource that required such special consideration.

I accept that British Coal must be competitive against imported coal, but the enormous progress that has been made by British Coal must also be considered. In Scotland I am concerned by the somewhat hysterical, emotional outbursts from one individual head of a nationalised board. In such instances, I wonder whether the long-term considerations are taken into account. I believe that it is dangerous to set short-term profit against long-term stability and predictability.

Some facts must be borne in mind. About 4 per cent. of the total steam coal production in the world is seaborne. If the CEGB or its successor enters the world market, it may destabilise that market, which is relatively small in relation to its requirements. Equally, prices on the world market are highly volatile and they follow oil prices.

Photo of Mr Alick Buchanan-Smith Mr Alick Buchanan-Smith , Kincardine and Deeside

I would rather not give way at this stage.

The spot availability of coal is uncertain. Examples of that are the current shipping problems from China and the problems in Colombia, one of the major sources in the world market, which appears to have oversold.

The most important matter from the national point of view is that once a deep mine is closed it will not reopen. That worries me, because we risk the loss of an indigenous energy source and, in the longer term, the higher cost in foreign exchange of having to import coal.

I ask my right hon. Friend the Secretary of State to reconsider this before he brings legislation before the House. I was encouraged by the statements that emanated from the Scottish Office at the weekend to believe that more interest is being taken by Ministers in the present position, and I hope that recognition will be given to the longer term as well. I wish my right hon. and learned Friend the Secretary of State for Scotland well in trying to preserve the position in Scotland, and I hope we can ensure that our indigenous energy resources play a proper and full role in the future.

Mr. Bruce Milian:

The right hon. Member for Kincardine and Deeside (Mr. Buchanan-Smith) started by giving a general welcome to the Government's proposals, but it was a pretty tepid welcome by the end of his speech. Almost everything that he said contained either explicit or implicit criticism of the Government's proposals. The Opposition welcome his remarks about the future and importance of the coal industry, especially in relation to the present crisis in Scotland.

I shall relate my remarks exclusively to Scotland. Last week, the Secretary of State for Energy gave no convincing argument for upsetting the present arrangements and introducing privatisation, but we were at least promised two companies in Scotland. In view of the behaviour of the South of Scotland electricity board during the past few weeks, I am happy that there will be more than one company in Scotland. I would not trust the present SSEB and its leadership with anything.

But we have heard no details. There will be adjustments in generating capacity between the northern and southern companies. The right hon. Member for Kincardine and Deeside mentioned adjustments of geographical areas. That was not discussed in the White Paper, and we do not know whether it will form part of the Government's proposals. There was an odd proposal for the joint ownership of the nuclear industry in Scotland, but the implications of passing the nuclear industry into private hands have not been properly explained by the Government. Indeed, it may pass into foreign ownership, because we have heard nothing about the protection of the national interest.

We have heard completely unconvincing arguments about competition, and the new concept in Scotland of competition by comparison. The ordinary domestic consumer in Glasgow can compare the accounts of the two companies to see which is more efficient, but he will still have to take his electricity from the southern company because of where he lives. What will be the good of his having all that information—which, incidentally, he can obtain now?

Private generation in Scotland would be a non-starter because we have such an excess capacity. The argument that the major industrial users can choose between the two competing companies does not bear serious examination. In Scotland, we shall have an arrangement different from that south of the border. We shall have two private monopolies set up with little regard for the public interest and an undefined role for the regulator on prices and other matters.

The present problem of excess capacity in Scotland will be worsened when Torness comes on stream later this year. In 1978, when I was Secretary of State for Scotland, I gave permission in principle for the building of Torness, although the decision to go ahead with the construction was not made until April 1980 by the former Secretary of State for Scotland, now the Secretary of State for Defence. At that time, there was a good case for deferring its construction for several years, but I shall not make too much of that point, because I have always supported nuclear power as part of our generating capacity. Now that I am outside Government, I shall not change the views that I held then, although there are now more public worries about the nuclear generating industry, in the light of Chernobyl and other incidents.

The problem of excess generating capacity in a publicly owned system, with the possibility of selling excess capacity to England, is entirely different from the problems that will arise under these proposals, when we shall have to sell electricity not to the CEGB but to a distribution company south of the border. That will be much more complicated, and I believe that it forms part of the background to the recent extraordinary behaviour of the SSEB. When the industry is privately owned, it will be landed with the problem of excess generating capacity, which is not a problem now, given the fact that there is no excess capacity in England and Wales.

This afternoon, the Secretary of State for Energy had the impertinence to say that it was a myth that the privatisation proposals pose any dangers to the Scottish coal industry. In view of the present crisis in the industry, he would be lynched if he made such a statement at a public meeting in Scotland. Here we have two nationalised industries in a public dispute that has gone to the courts. The SSEB denies that it has received a tender offer from British Coal at the price which British Coal says it has tendered. British Coal accuses the SSEB of telling lies. Last week, Lord Prosser, granting an interdict to British Coal in relation to coal supplies for Longannet and Cockenzie, said that if the SSEB went ahead with its present intention to buy all its coal from abroad, it would be catastrophic and irreversible for the Scottish coal industry.

The chairman of the SSEB, Mr. Donald Miller, says that he will abide by the court decision—that is very generous of him—but that he will evade it as much as he can. Despite what the court has said, he will buy no more coal from British Coal. If necessary, he will use Kincardine power station to its full capacity, burning foreign coal. He will use the maximum amount of oil generating capacity. Indeed, he will do anything rather than use the produce of the Scottish coal industry.

The head of a nationalised industry in Scotland is behaving outrageously, and the Secretary of State for Scotland has stood by and done nothing about it. In this case, standing by is an act of deliberate treachery to the Scottish coal industry. We learn from statements made on Sunday that the Secretary of State is now worried about the matter. When he made his statement in the House last week, and during Scottish Question Time, he was pressed many times to take action to bring the two parties together, find out what was happening and do something to resolve their differences.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline West

The Secretary of State for Scotland should wipe the smile off his face.

Photo of Mr Bruce Millan Mr Bruce Millan , Glasgow Govan

As my hon. Friend says, the Secretary of State is smiling.

There have been problems before between the SSEB and the coal industry. Difficulties arose in 1977 and the then Labour Government intervened. I was personally involved in negotiations with the SSEB and the National Coal Board in Scotland. The problem was resolved, and long-term agreements resulted from our negotiations and discussions. The contrast between those events and those that are taking place now is that the Secretary of State is standing back and saying that he cannot intervene in a commercial agreement between two nationalised boards. He has done nothing. He has made many excuses for doing nothing, and now we are told in a Scottish Office statement—we are supposed to admire him for this—that he is concerned about the demise of the Scottish coal industry. He has behaved abominably, and he should be ashamed of himself.

It is a lie to suggest that these issues have nothing to do with privatisation, that they would have arisen anyway. This is all to do with privatisation. The SSEB is adopting a tough attitude because it is anticipating privatisation under the Government's proposals. It is a scandal and an outrage that this should have been allowed to happen in Scotland. It is a foretaste of what we shall have in Scotland and the rest of the United Kingdom under the Government's privatisation proposals, and it is one of the reasons why we shall be voting against them tonight.

Photo of Mr John Hannam Mr John Hannam , Exeter 6:33 pm, 7th March 1988

First, I wish to congratulate my right hon. Friend the Secretary of State and the Department of Energy on producing a White Paper that is clear and understandable, and on getting absolutely right the proposals that are set out within it. Having been involved in energy matters since the early 1970s, I know of the problems that faced my right hon. Friend when he began to study the means of arriving at the declared 1987 general election commitment of a privatised electricity industry.

It is easy to say that we should privatise the industry and introduce competition but not so easy to implement that policy. My right hon. deserves admiration for producing the programme that is set out in the White Paper. It was obvious from the start that the various vested interests — the unions, the CEGB and the Electricity Council—would all have an axe to grind and would be advancing different arguments. It was important to find a method that achieved three basic objectives: first, to create competition; secondly, to protect consumer interests; thirdly, to maintain security and safety of supply.

For many years, the industry has been a huge monopoly involved in the generation and distribution of electricity with the national grid linking the Central Electricity Generating Board and the area boards. I have always believed that transmission and distribution form a natural monopoly because of the impracticability of laying competing cables under the streets of our cities and towns. The generation of electricity is not a natural monopoly. As it represents over 80 per cent. of the costs of electricity to consumers, it was vital to try to find ways of bringing true competition into this massive industry.

With the grid as the common carrier, it should always be possible to generate power in any one place in the United Kingdom and to sell it in any other place. It is obvious that the further that electricity is transmitted the greater the loss and the greater the cost. The 1983 legislation was intended to create opportunities for independent generators to supply through the grid. With the CEGB's restrictive policies of buying-in rates and conditions, and with it being limited by existing statutory tariff and supply requirements, very little progress has been made.

Alternative forms of energy have never been given a real chance. Major industries such as chemicals and oil refining, which already generate for their own needs, should be able to dispose of surpluses to neighbouring industries or towns. I welcome the decision to separate the grid and to put it truly into our distribution system with availability to it being open to a wide and new range of small and large generators of electricity.

The argument advanced that the use of the grid as a merit order system will offer better safeguards for the consumer is, I believe, wrong. There is no money or financial risk involved, and therefore no real competition. We find ourselves now with a system that is dependent on huge and expensive power stations that are buying high-cost fuel and using it less efficiently than anywhere else in Europe. These large stations sell only 31 per cent. of the energy that they burn. They waste the other 69 per cent. and deposit huge amounts of pollution throughout the countryside both here and abroad. The energy that is thrown away from our power stations is greater than the whole output of British Gas. The energy that is wasted would heat every home in Britain.

The cost emphasis on large power stations has meant that combined heat and power has not been developed in Britain, unlike other countries. Our most efficient station just about reaches 38 per cent. efficiency, whereas in Holland, Germany, Denmark, Sweden and Finland there are hundreds of stations reaching 80 per cent. efficiency through CHP and heating over 160 towns. Although we had 150 potential CHP schemes projected in about 50 towns, none was really promoted by the CEGB and we now have a bare five city schemes that are struggling for survival. There were more than 20 in 1981.

In the process of rigid large power station ordering, the wide variety of small and more flexible power generators were squeezed out. Since 1971, 146 power stations have been closed by the CEGB. Their size ranged from 30 MW to 400 MW. Their total capacity was about 20,000 MW, nearly double the replacement programme that we are talking about now. These power stations were replaced by the still uncompleted and not terribly successful AGR programme.

I am not saying that the CEGB has been grossly inefficient and has failed the country. It is the monopolistic structure that has failed the country, by not allowing greater diversity of supply. I believe that, given the constraints that are inherent in a huge nationalised industry, which itself is bound by the huge nationalised coal industry, the CEGB has performed well. To give credit where it is due, it has recently shown a more flexible approach to private generators. It is strange that this has happened shortly before privatisation. The House will recall all the new telephones that appeared shortly before British Telecom was privatised. Unfortunately, we did not create enough competition in that privatisation, and we failed similarly with the privatisation of British Gas. I am pleased to say that in the White Paper we are creating real generating competition, and that is certain to be good for the consumer.

Electricity energy is fast becoming an international commodity like oil and gas. The European electricity grid is developing fast as French nuclear surpluses build up. The Nordic grid has proved to be an efficient trading system, and now Britain will be providing competitive electricity. First, there will be a power pool for generating utilities — two Scottish, two English and 12 area companies. Secondly, there will be the entry of a host of industrial and CHP schemes, renovated coal stations, gas-turbine combined cycle generators, fluidised bed schemes and tidal, wind and other alternatives. Thirdly, we shall have competition from abroad.

I have mentioned the diverse methods that are available for the generation of electricity, and I must raise an important query for my right hon. Friend the Secretary of State to consider that is related to the unfair local rating discrimination that is applied to independent electricity producers. I met some of these producers last week arid I was given details of the various methods of producing cheap electricity that are now being submitted to area boards. Successful waste tip generators are in operation and they could provide substantial amounts of generated electricity for nearby towns. A Meriden firm has completed trials at a landfill site where a waste turbine that is fuelled by waste tip gas is capable of producing 3·7 MW of electricity, which would be enough for 5,000 homes, or a town the size of Warwick.

However, the CEGB as a national industry has a special formula rating which does not apply to private generators, with the result that they face rate bills three times as high as those of the rival CEGB stations. These producers urge that, after privatisation, power stations should be rated on the same basis as any other buildings or manufacturers. There should be parity across the generating industry, from Sizewell B at the top down to the 250 KW wind and water generators. I ask my right hon. Friend to take that on board, as it is vital that there sould be no impediments to the smaller alternative electricity producers.

My hon. Friend the Member for Erewash (Mr. Rost) and I have urged for years that this country could produce its electricity far more efficiently and cheaply if we had a system that encouraged a greater diversity of power generation. He and I have been involved in launching various small local CHP schemes in which the diesel or gas-powered engine provides heat and electricity for the hotel, leisure centre, swimming pool or factory, and sell the surplus back to the local grid. They operate at more than 90 per cent. energy efficiency.

On a larger scale, firms such as Hawker Siddeley are building, and can build within 18 months, 300 MW generators, producing much cheaper energy than the huge stations that we are used to. Coal, gas, diesel, wind and wave could all contribute to our future needs and help reduce our dependence on large stations.

We now face increases in electricity prices, which are needed not, as the Opposition say, to fatten the calf for privatisation, but to provide the capital for the generating investment that will be needed in the coming decade to replace older stations that are now coming to the end of their working lives; it will also be needed because of the increased capacity in our expanding economy. Whether that capacity comes from large stations or from a wide range of small and large generators, it will still have to be found. After a decade and a half of no ordering of new power stations, it was obvious that a higher return was needed to finance this building programme.

I should have preferred — I argued this at the time with my right hon. Friend—a three-year phasing in of the higher prices, especially as in the south-west we face a 12 per cent. hike of prices in April. That appears to be due to a larger than average reduction in prices in 1986–87 in the south-west, but even after the forthcoming increase we shall still be at a lower real price level than in 1985. Nevertheless, that sort of increase is a blow to an area with lower than average incomes and with more elderly people than elsewhere. I hope that the electricity board can be persuaded to achieve its target return on capital more equitably.

I raise now another problem with which I think my right hon. Friend should deal. Last year, during the Sizewell B pressurised water reactor debates, a general commitment was given for the inclusion of at least two coal-fired stations to be built in the forthcoming programme. West Burton, Fawley and possibly Kingsnorth were those mentioned. These are key orders for our construction companies. While I accept that they must be subjected to all the usual planning procedures, I must point out that companies such as Babcocks and NEI are anxiously awaiting confirmation of orders so that their already depleted work forces can be retained.

Given that there are three or four years before the privatisation of the generating companies, what will happen to those orders in the meantime? I hope that the CEGB will be empowered to proceed as planned with its applications for PWRs at Sizewell and Hinkley Point and also for the two coal-fired stations, provided that it is assured of their place in our new competitive industry—

Photo of Mr John Hannam Mr John Hannam , Exeter

The hon. Gentleman will forgive me if I continue, as many hon. Members wish to speak.

I ask my right hon. Friend to give details about the position of these orders during the pre-privatisation period. That is necessary to remove the uncertainties which have once again fallen on these large construction firms.

If we look ahead to this time next century, we shall find that the world has come to depend upon safe, nonpolluting nuclear power for its electricity. Fossil fuels will be running out, oil will be replaced by coal as the main industrial feedstock and natural gas will have been replaced by coal gas. Coal will have become too valuable and expensive a commodity to burn wastefully in electricity generation. We have large coal reserves — enough to last into the 22nd century, but that coal will be increasingly expensive and difficult to extract, and the trend in output will continue downwards in the short term.

At the beginning of this century, United Kingdom coal output was 287 million tonnes and we reached a post-war peak of 226 million tonnes in 1952. We are now down to 100 million tonnes, large amounts of which are still wholly uncompetitive with world supplies. We are now a net importer of coal, as compared with pre-1914, when we exported more than one third of our coal output. Since then, rising costs and declining coal markets have put double pressure on the industry. Output could be increased again to meet future rising demand, but only when that demand outstrips the cheaper coal from countries such as the United States, Colombia, South Africa, Australia and Poland.

In the meantime, coal must compete in a fiercely competitive market, as we can see in the current debate in Scotland, where the SSEB is trying to force a more competitive price from British Coal. That has already happened in the CEGB, and it is inevitable, privatisation or no. It is inevitable that British Coal will have to continue on its declared path of reducing production costs and closing uneconomic pits. It is heartening that the miners recognise these facts of life—hence their ending of the overtime ban and their spreading acceptance of flexible working hours over six days.

In the longer term, it is to nuclear power that the world will turn, and it is right that the Government are keeping the nuclear option open in the White Paper. Contrary to the views of many, I do not wholly accept that nuclear generation represents some sort of market fudge in the division into the 70 per cent. "Big G" company. I welcome the use of the term "non-fossil fuel generating" because that implies that nuclear power will have to compete with all other alternative systems, such as tidal barrages, wind power, and so on.

It may be a surprise to learn that only three OECD countries have state-owned electricity supply organisations with a monopoly in nuclear power production—Italy, France and the United Kingdom. In the other countries of Europe in which nuclear power has been developed, power stations are owned and operated by a mix of private, private-industrial-municipal groups and the state. In Finland and Sweden, state-owned and private companies own and operate nuclear power stations. In Switzerland, where 40 per cent. of electricity is nuclear, the five operating stations are owned by partnerships in which local electricity supply companies, Swiss Federal Railways and a variety of industrial companies participate.

There are plenty of precedents for privately owned operated nuclear plant. It is the safety and regulatory framework which is important, and ours, which is the best in the world, would apply in any event. Our capital markets are perfectly capable of making a financial risk judgment on price and return, and the Channel tunnel, which is equal to four new Sizewell PWRs, is a good example of what they can do.

I am confident that in this new competitive world of generation, nuclear power will play its full role as a baseload supplier of about 15 or 20 per cent. of our output. With the opening up to private generators, electricity prices will come down as those of gas and oil rise.

I welcome the freedom being given to the new distribution companies to seek competitive electricity contracts as well as to generate themselves. Obviously the detail of the new regulatory system will be all-important, so that all these interests can be interwoven with those of the consumer. The employees in the industry, of whom the bulk are on the distribution rather than the generating side, will benefit from direct share ownership and better career opportunities. Even those well-known employees at the top of the various industries will have no difficulty in accepting the challenges of heading up the companies, which will all rank in the top lists of world industries. The 70 per cent. "Big G" company will be the third largest generating company in the world — I understand — so perhaps Lord Marshall can continue his excellent work in the electricity supply industry heading that company.

I welcome the White Paper and congratulate my right hon. Friend on his skilful and imaginative proposals, and I look forward with great enthusiasm to the new era of electricity supply.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Energy) 6:49 pm, 7th March 1988

When the Secretary of State presented his White Paper, he suggested that it would be of great benefit to the customer and a massive step forward for the industry as a whole. He hails the virtues of privatisation and says it will mean that the customer comes first, that benefits are enhanced, opportunities more exploited and the industry made more vital and dynamic. Given that kind of build-up, it seems legitimate to look at the specifics and start to question how those things will happen area by area, stage by stage.

Above all, the Government harp on privatisation. They say that it will increase competition and that benefits will result from that competition. However, 70 per cent. is surely still a monopoly by any schoolchild's textbook of economics. The power of monopoly will still be there in that child of the Central Electricity Generating Board. The White Paper states: All who work in the industry should be offered … the freedom to manage their commercial affairs without interference from Government. If the Government really believe that, they should open up the industry not in a 70:30 split, but by creating many different generators who could be in continuing competition. That would give small-scale producers some kind of opportunity.

For example, if we in Cornwall were to have a 50MW power station, how would it be possible in realistic terms for it to compete on an even keel with 70 per cent. or even 30 per cent. held by the CEGB? Will the small-scale producer who invests in CHP or renewables benefit? I doubt whether such small producers will ever get a look in, because the base load will already be fully catered for and the non-fossil fuel element, about which the Government boast, will already be provided. There will not he the opportunities that the Government predict.

Will the Secretary of State demonstrate his commitment to competition by decreasing the prohibitive rates currently imposed on the small private generator? I suspect it is more likely that he will extend the rates burden to the son and daughter of the CEGB, and yet another price increase will face the consumer. What will be the nature of the contracts between the generators and the suppliers? The 70 per cent. and 30 per cent. son and daughter of the CEGB will demand long-term contracts to allow for forward planning and to ensure a return on investment.

What other producer is likely to benefit from such arrangements? Small competitive producers will be offered only the possibly remote prize of going into the grid when there is a shortfall. The base load will be supplied by the nuclear generators and the big brothers that the Government are creating in the industry. Until we have assurances on those matters there is no doubt that competition cannot be the benefit to be derived from this White Paper. Even if competition were to exist, we can query whether it will have cost benefits. Even if there is competition it can only be on the basis of an increase in capacity. The Electrical Power Engineers' Association says: For there to be real competition there will have to be significant excess capacity. This will have to be rather greater than the 22% spare capacity now built into the system … this will he a straightforward cost burden to the system which the consumer will have to bear. If it is not competition, perhaps the employees will benefit. We were also told that by the Government. However, the overwhelming response so far from the employees is that they will not benefit. Even the employees of British Coal do not look to benefit from these proposals.

My hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) said last week that the coal industry has improved its efficiency. People in his constituency want to know why the Government intend to subsidise the nuclear industry when they are not prepared to so the same for the coal industry. If the Secretary of State intends to continue with his scheme of placing the obligation on the distribution boards to supply a minimum level of non-fossil fuel electricity, will he now make a commitment that there will be no stipulation for a certain amount of nuclear generation? Will the Minister stand by what the Secretary of State appeared to say earlier—that there will be an obligation to provide by way of nuclear power the 18 per cent. of generation that is currently provided? Is that the position, or will it be genuine, free competition in the non-fossil fuel sector? If the Secretary of State will not give that commitment, it is quite clear that the Government's policies of attempting to combine the nuclear industry with a competitive industry have completely failed. That cannot happen and we can see that in the way that the White Paper has been created.

The creation of that 70 per cent. big brother of the CEGB owes its existence entirely to the Government's recognition that the nuclear industry cannot stand on its own feet and can only exist as long as it is feather-bedded by a large industrial monopoly of the sort that the Government are planning to create. The Electrical Power Engineers' Association is not against nuclear power. It says: The now widely held view of all informed opinion, which we share, is that private generators will not wish to take on the hassle of new nuclear power generation when coupled with the very high initial capital cost and the long pay back period involved. There are many worrying questions even beyond looking to the benefits of the privatisation of nuclear power, and they remain unanswered. Who will take responsibility for the decommissioning of these power stations? Last week it was announced that the CEGB had pulled out of its multi-million pound research programme into decommissioning nuclear reactors. It is quite clear that the CEGB does not reckon that its successors will have to take on those costs. Who will take the responsibility for that research which is so necessary for public safety?

Another unanswered question is about insurance in the nuclear industry. There is no reference in the White Paper about where that would come from. In the United States no one will provide insurance for the nuclear industry. Will the Government put in the money? If they do, that will it be another hidden subsidy for the nuclear industry, even though the Government will not help the coal industry. Is that another hidden subsidy, or is there something else about which the Government have not told us?

Will the environment benefit from the White Paper proposals? Is there anything there that we can latch on to in the White Paper that the Secretary of State so eagerly presented? It is almost unbelievable that throughout the White Paper the Secretary of State makes no reference to that. That area is crucial to the workings of the electricity supply industry and of the Department of Energy. The electricity supply industry is responsible for over half the acid emissions in the United Kingdom and the majority of nuclear waste, and it produces about 16 million tonnes of fly ash per year, much of which is dumped. By ensuring that there is no protection for our coal industry, the Government take the risk that Britain will import substantial quantities of shallow-mined and surface-mined coal with a much higher sulphur content than the coal that we currently burn in our power stations.

We all know the cost to the environment of acid rain. It is appalling that the Secretary of State should tell us nothing about what will happen in future. Who will be responsible? Will the Government or the industry be responsible? Who will pay for desulphurisation equipment? If smaller coal-fired power stations are reopened or started up as a result of new competition in the industry, will they be obliged to fit desulphurisation controls in their power stations when they are opened? What are the effects on the environment of the White Paper? Nothing in the White Paper gives us the answer to that and we can only go on the Government's record, which has been wholly inadequate in the past. They are now ducking the issue even more.

Perhaps, if there is no benefit there, we can look to energy efficiency benefits. The Government have often boasted about that, and they came up with Monergy. That was a failure because we used more power in Monergy year than we used the year before. In spite of various recommendations that energy efficiency would massively decrease the need for new power stations, the Secretary of State has nothing to say about that in the White Paper. Hon. Members need not take my word for it. They can look at what the executive vice-president of the world's largest integrated private sector utility, Pacific Gas and Electric, had to say on the subject. They will see in that the benefit of a Government who were more adequately committed to efficiency. He said: Conservation programmes are considerably less expensive than the cost of adding new capacity, and are clearly less risky from an investment perspective. It would cost about £20 billion to build 10 Sizewell B nuclear power stations. However, it is estimated that an investment of only £8 billion or £9 billion would achieve potential energy savings equal to that figure. Of course, a private generator has absolutely no interest in energy conservation. Private generators are interested in selling more and more energy. Indeed, they are interested in less energy conservation. Will the Government maintain their commitment to energy conservation? What obligations will be placed on the industry? Indeed, it has been rumoured that the Department of Energy may cease to exist. That possibility was floated in the Watt report recommendations. If that is the case, who will take the obligations on board?

Similar criticisms can be made about research and development. Anyone who was present last week during the debate on the problems in British science will be aware of the difficulties facing this country over research and development. I have already said that the CEGB has withdrawn its research and decommissioning. Private generators are unlikely to make similar research efforts because they cannot afford to do that. After all, as the Secretary of State continues to tell us, they are subject to competition and the pressures of a competitive industry. They are hardly likely to invest the same level of resources.

Private generators will have to be backed if research is to continue. Perhaps that will be another form of subsidy. Will there be basic Government funding from the Department of Education and Science? Natural Environment Research Council budgets are already being pushed to the nuclear side and are being lost to other areas. Will research and development be left to private companies? Will there be a levy on private companies, as exists in America, to fund a research programme? The White Paper contains no answers to those questions. All that we can be certain of is that, without precise answers to those questions, a private, competitive industry is likely to do less than is done at the moment.

Photo of Mr Norman Hogg Mr Norman Hogg , Cumbernauld and Kilsyth

Is the hon. Gentleman aware that the North of Scotland hydroelectric board supplies 2·5 per cent. of the nation's consumers, covers 25 per cent. of the land mass and returns five Social and Liberal Democrat Members of Parliament? What are his party's views on the proposals for the North of Scotland hydro-electric board?

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Energy)

I was just about to consider Scotland in my remarks. Obviously, Scotland is a very different area and perhaps there will be special benefits for Scotland which the rest of us will not experience. As I represent a constituency at the other end of the country, I am not sure whether I believe that that is a good idea. After all, there is a separate White Paper on the matter, and I am sure the hon. Member for Cumbernauld and Kilsyth (Mr. Hogg) will join me in regretting the fact that we have not had the opportunity of a separate debate on the subject of Scottish privatisation. However, looking at the Conservative Benches, I can understand why we have not had a separate debate.

Photo of Mr Neil Hamilton Mr Neil Hamilton , Tatton

Will the hon. Gentleman give way?

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Energy)

I will not give way, because I want to make some more points.

The absurdity of competition by comparison highlights the lack of logic or reason for this privatisation. The Secretary of State admits that Scotland has an efficient, well managed and successful electricity industry, and he can produce no real argument for privatisation. He is bowing to the Prime Minister's ideology and the Chancellor of the Exchequer's purse strings. The Scottish consumer will simply make a contribution to future tax cuts.

We are not considering a Scottish solution. Far from it. There are no safeguards that the Scottish industry will remain in Scottish hands. Nothing of that kind has been presented. There is no recognition of the hydro-electric board's unique social commitment. The proposals are a catalyst and will threaten thousands of jobs in Scotland. I believe that the hydro-electric board represents a model that the Government should consider. There is no need for privatisation — we can argue whether that is really needed. The hydro-electric board's example may be applied to other areas of rural need, and my constituency is such an area.

Doubtless the SSEB's decision to put its coal supplies out to tender is a direct consequence of the need to reduce costs and increase profitability as a result of the Government's aim to privatise the industry. Building the Torness nuclear power station meant a £2 billion debt and £240 million of the SSEB's £286 million profits last year went on interest payments. Some 3,000 jobs and the livelihoods of whole communities are threatened by the Government's twin pursuits of uneconomic nuclear power and privatisation. If the Government are looking for savings in those directions, they need not have chosen privatisation. They could have stated openly that they were interested in savings in the state-controlled industry as it exists at the moment.

The Government claim that consumers will benefit directly. The Secretary of States constant references to the customer are as conspicuous as the absence in the White Paper of any reference to the environmental impact or conservation. It is equally hard to believe that the consumer will benefit directly from the proposed privatisation. With the exception of large customers on the boundaries between one distribution board company and another, the customer will have no choice over the personal supply of electricity.

The Secretary of State has rightly said again and again that electricity supply is a natural monopoly. Will the Secretary of State explain how the individual consumer can make a choice anywhere along the line? Of course he cannot. He has to say that choice will be found through the boards. If the distribution companies are to be forced to choose a minimum level of nuclear power, will the costs incurred in the safe disposal of waste and decommissioning force uneconomic price rises on customers? The total decommissioning costs of more than £2 billion represent an enormous liability for the private sector, yet those costs are essential for public safety.

We have been promised new rights for the customer. Yet those rights could be incorporated by a Government who believe in making the state sector more responsive to the consumer. We advocated all those new rights when Ofgas and Oftel were created and the Government miserably failed to implement them then.

According to a Financial Times editorial: The nature of the regulatory system is the biggest question left unanswered by yesterday's White Paper. Privatisation is supposed to bring the promise of lower prices, but the only tangible impact that we have seen so far from the proposals is a sharp rise in prices—15 per cent. over the next two years. Tariffs are increasing by an average of 9 per cent. in April and 6 per cent. next year. The Government's oft-repeated comments state that the average return is 10 per cent., not 5 per cent., and we may yet see larger increases once the boards enter private hands.

The Financial Times editorial also stated: A new entrant building a coal-fired power station will have costs far higher than the average costs of the two CEGB successor companies with their mix of old and new stations. There is no hope for real competition, for an industry more responsive to the consumer, or that the White Paper will produce any of the glorious promises that the Secretary of State has claimed for it. There will be massive upheaval in the industry, a less efficient system to the detriment of the old and the cold and those who have to pay electricity bills. There will be no benefits of true competition because the White Paper contains no proposals for that. It is high time that the Secretary of State and his colleagues rethought their proposals.

Photo of Mr Harold Walker Mr Harold Walker , Doncaster Central

I remind the House of the need for brief speeches.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedfordshire North 7:07 pm, 7th March 1988

There are three reasons why I intend to support the Government tonight: privatisation will lead to a commercial approach; it will lead the industry to access to the market; and it will involve freedom from political intervention. Those points far outweigh anything else I might say. However, I have some reservations.

The merit order system ensures that, whenever the level of demand for electricity rises, it will be met by a combination of generating plants with the lowest total costs. Technically, that requires a close relationship to be maintained between the transmission and production of electricity. That may be complex and the directions arbitrary. That process is now to be split. How will generators respond to a national emergency if they have no statutory obligations to supply? There are powerful arguments for the retention of an integrated power generation and transmission system. After all, the present system evolved as it did following the Weir committee report in 1925, which led to a nationally co-ordinated system in 1947.

Vertical integration has been secured for all the distributors, so why has it not been secured for the CEGB? That must be recognised as an anomaly. The distributors have the right to produce and the right to distribute, while the CEGB has the right to produce but has limited marketing power, and no power over the transmission system. With public utilities, it is not so much corn petition that counts—one only has to consider the situation in the United States — as collaboration, with cross-links between all the companies concerned in a very complex chain. In the United Kingdom, that will require a dispensation under the Restrictive Trade Practices Act 1976. That will have to be provided by parallel legislation, if not by a clause in the Bill that emerges from the proposals.

If the distribution companies own the grid and produce their own electricity, what is to prevent them from ensuring preference for their own generating capacity or so maintaining costs of local generation by cross-subsidisation? It will be more difficult to maintain a merit order system with a fragmented industry. Will the voice of the grid triumvirate be heard in the provinces? To ensure a better balance, it would surely be preferable to permit the grid to be owned by an independent agency. An independent agency would not be controlled by anybody and would therefore not be obligated to anybody. It would perform its task as it saw fit. Alternatively, would it not be preferable to vest the equity of the transmission company 40 per cent. in the CEGB, 40 per cent. in the distribution companies and 20 per cent. in the other participants? When we discussed the Bill dealing with the privatisation of the gas industry, I tabled an amendment providing for an independent transmission company to cover major trunk pipelines. The Government rejected that suggestion, although it would have been very much better had the amendment been accepted. I now recommend exactly the same arrangement for the electricity industry to enable the CEGB to have an interest and to maintain equilibrium.

I further recommend to the Secretary of State for Scotland that the transmission agency cover the 400 and 275 kV lines. The area boards now control 132, 66 and 33 kV lines respectively. Would it not be more prudent to extend the grid to cover the whole system? There would be considerable advantage in that.

I do not see how the interconnectors with Scotland and France can operate if the distribution companies desire to satisfy part of their paragraph 49 commitment by drawing nuclear electricity from France. Will the grid be subject to an overriding strategic guidance when economic logic is likely to supersede the requirements of the coal industry?

First, the selection of cheaper French nuclear electricity through further cables to France might be economically advantageous. The use of natural gas from the continental shelf on coastal sites with the use of gas turbines might also be attractive, and with the price of oil dropping to $14 a barrel, oil-fired power stations may be at a great advantage in relation to coal-fired power stations. Will the regulator provide a golden card, indicating a strategically important concept laid down by the Government?

I have referred to the reserve capacity of the electricity supply industry which is normally supplied by the CEGB. I dare say that that will now be handed down to all producers of electricity. There will be checks and balances but competition in the market place is unlikely to be the crucial factor. The regulator will himself determine the level of prices.

The hon. Member for Truro (Mr. Taylor) referred to nuclear research — a complicated matter, with which I shall deal in a moment. First, I refer to the coal industry. Coal and electricity should have been considered together, because the industries are interdependent. I should not be at all surprised if British Coal entered the production of electricity, supplying its own coal. That is certainly one reason for treating them as one industry.

The problems of the electricity industry, however, will continue if the Government's policy is to ban coal imports and if that ban is likely to remain. I suspect that the newly founded allowance for imports will be confined to textbook instructions and will be permitted only for minor tonnages required for smaller generators. There may be significant changes in 1992, when all the barriers come down within the Community.

Let me make some suggestions. We could follow the West German example. West Germany has a mix of imports and indigenous coal; the obligation is placed upon the burner of the coal to utilise both indigenous production and a proportion from abroad if he desires it. If the French and Germans can import coal, there is no reason why we should not. There is also the possibility of a reduction in coal production in the United Kingdom of between 80 million and 90 million tonnes. Furthermore, there may be a shift in emphasis away from deep-mined coal to opencast coal, in the range of between 12 and 20 million tonnes. That is another possibility that the industry should face.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedfordshire North

I see the hon. Gentleman springing up, but I shall not give way.

The leasing of selected coal mines to named generators might also be considered, although the ownership of facilities would remain with British Coal. In determining prices for the consumer, more is likely to be gained by the industry and the public through a rational import policy on coal at international rates and the retention of comparable rates of fuel oil tax than through competition.

Finally, I refer to nuclear electricity. I have a feeling that the arrangements could lead to a scaling down of nuclear power projects in England, although not in Scotland. The historical approach has not been of advantage. Over the past eight years, there have been very few orders. The chief executive of the British Oxygen Company said: We see a real danger that fragmentation will mark the demise of Britain's nuclear programme. We believe this programme is essential for strategic diversity of fuel sources and will for all plausible levels of fossil fuel prices over the life of the plant prove to be commercially correct. The CEGB has about 3,460 MW of Magnox power, most of which is to be retired by the end of the 1990s. The advanced gas-cooled reactor programme is 4,720 MW. That is considerable, but, in turn, it will have to be retired later. Unless we have new buildings and the engineering facilities of the CEGB are maintained at the scale that has been achieved, it will be extremely difficult for a nuclear programme to continue in the United Kingdom.

The nuclear research and development programme is already in jeopardy. I noticed in The Independent of 3 March a report saying that the research programme for decommissioning has been abandoned. I have also noticed that the CEGB has abruptly withdrawn from building an £18 million new laboratory for microscopic examination of material bombarded by radiation. Why could these programmes not have been continued? Would this proposal have been an incentive for the CEGB to go ahead with its projects, or would it regard itself, because it is to be cut in size, as not having the same incentive to go ahead with its obligations, bearing in mind that its statutory commitment to supply has been taken away?

The paragraph 49 statutory obligation imposed on distribution companies is avoidable. They will have to take nuclear power, but they can take it from Scotland, where there is a heavy preponderance of nuclear power, or from France. They could get together and have a second cable from the continent to draw this power, or they could take it by other means.

The hon. Member for Truro mentioned compensation for nuclear acidents. We have learnt, through questions today, that this is covered by a convention, of which the total liability is £20 million. Then it is over to the taxpayer if any further sums have to be paid. I remind my right hon. Friend the Secretary of State of Chernobyl. The compensation for that great state calamity in 1986 has worked out at £7·56 billion, and that is beyond the capacity of either a large company or a minor country to bear. There is no cash fund to make provision for decommissioning, so there will be a charge on Her Majesty's Government.

With those reservations, I support what has been proposed. It is important that I should make those reservations, while I intend to support the Government, hoping that they will bear in mind the points that I and others have made, and will decide to make modifications. I know that they cannot chop and change too much at this stage, but it is important to keep the grid as one unit, and keep it independent or divided between the CEGB and the distribution organisations. It should be either completely independent or they should all have a share in it. If that happened, it would be more satisfactory as a commercial operation than under the suggested arrangements.

Photo of Mr Peter Hardy Mr Peter Hardy , Wentworth 7:23 pm, 7th March 1988

The hon. Member for Bedfordshire, North (Sir T. Skeet) is an experienced Member, and many of us will have observed that he is attempting to ensure that the Government do not put him on the Standing Committee. If, by some mischance, he is there, we shall table amendments which no doubt will secure his support. We shall have opportunities to follow some of the points that he has made, so I shall not attempt to do that now. I shall try to make a short speech, as we have already had far too many long ones.

A number of serious points need to be made, of which Chernobyl is one. It was foolish of the Secretary of State to embark on that, as the principle that he seemed to be enshrining is that nuclear power is all right provided that it is privately owned. One has only to think of what nuclear power would be like in Papa Doc's Haiti or Idi Amin's Uganda to realise that the arguments should be a little more mature and sophisticated.

I sometimes distanced myself from some of the arguments used in criticising nuclear power. There are powerful arguments, and they should be used powerfully and maturely, rather than emotionally. There are both emotional and mature arguments against a system that protects nuclear power while allowing even the most shortsighted operation to bring in imported coal and destroy the mining industry. The Government are destroying that industry, despite enormous public investment in it, and despite all the records being set. This is happening for shortsighted reasons, so that some people can please the Government and secure a decent job in the privatised electricity industry, just as people sought to placate the Government to secure a decent job when the gas industry was privatised.

Lip-service has been paid to the quality and the record of achievement in the electricity supply industry. I hope that Government Members, particularly those from the remote rural areas, recognise that Britain was lit and powered by the electricity industry because it was in public ownership because no private interest would have gone into the thinly populated glens of Scotland or the valleys of the south-west of England. I see that the hon. Member for Truro (Mr. Taylor) has now gone, having inflicted a long speech on us, and there is now not one representative of the alliance parties in the Chamber. We are not unused to seeing that practice.

The record of achievement was made possible by a large public enterprise, and it is now being imperilled. It may not have dawned on some of my hon. Friends that the Government's smokescreen has so far been effective. Why, do my hon. Friends imagine, are there to be 12 separate distribution boards? Why is the CEGB to be split on a 70:30 basis? It is simply because the Government know full well, in the light of the BP fiasco, that they would have the devil's own job to sell off, as a single company, the electricity supply industry, with about £55 billion of net asset value. It is not being sold as one company because the Government would have difficulty in launching it in that way. It is being sold as 12 area boards, and the Government hope to be able to drum up such regional loyalty as will enable them to sell the company for the sum that they have in mind.

I have an idea of the sum that the Government have in mind. If they offer the electricity boards for much more than £22 billion, I shall be surprised. That represents the share in the asset value applied in other privatisations. However, the immensity of this privatisation means that they will be prepared to accept a smaller sum as a proportion of the value of the company that they are selling.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline West

On a point of order, Mr. Deputy Speaker. I apologise to my hon. Friend for interrupting him. However, the House should notice the discourtesty of the two Secretaries of State, who are not attending this debate. Furthermore, it is disgraceful that there is not one Minister from the Department of Energy to hear this important debate.

Photo of Mr Harold Walker Mr Harold Walker , Doncaster Central

That is not a matter for the Chair.

Photo of Mr Peter Hardy Mr Peter Hardy , Wentworth

I shall not follow my hon. Friend's point, although I am delighted that he made it, even though it may make my speech look slightly longer than I had planned.

Privatisation will disfigure the industry. It has a good record of achievement and service—the sort of service that I noticed when I visited High Marnham power station not long ago. These people are being sold down the river. I understand that one of the things of which the Government are afraid is that people who work in the electricity supply industry are in a much more powerful position than the Government would like them to believe.

The Secretary of State has promised that there will be no redundancies. He does not want reference to be made to the Henney report, but when the Minister winds up the debate I hope that he will refer to it and say whether the manning figures that are contained in that report will affect the size of the labour force in the privatised electricity supply industry. The Government want the people who are working in the electricity supply industry to be lulled into a sense of complacency, so I do not believe that Ministers and Conservative Members will mention the Henney report. If Conservative Members were to refer to it, the Government Whips might frown in their direction.

The Secretary of State said today that workers in the industry will enjoy exactly the same conditions and pension rights as they now enjoy. That was said about British Steel, but when British Steel workers in my constituency were subjected to privatisation not long ago, at the River Don works — or at the very profitable special steels section of British Steel, which became United Engineering Steels—they round that their conditions of employment and pension rights were not maintained. Those who have been involved in earlier privatisations have not necessarily enjoyed the same conditions and pension rights as they enjoyed in the nationalised industry.

The Government know that if the electricity supply workers were to sabotage their foolish and entirely partisan approach they could threaten the size and the value of the privatisation. The Government also know that since most of the public sector has already been sold off they will have to depend on the £20 billion, £21 billion or £22 billion that they will receive from the sale. When that has gone, the Government will be scratching around perhaps selling off parish clocks.

The Government will not worry unduly about annoying their Back Benchers, most of whom are eager to join in the sale of foreign coal to this country. There are Conservative Members who are involved commercially in that kind of venture. There is a fairly powerful lobby for opencast mining. The hon. Member for Bedfordshire, North told us that he would like there to be much more opencast mining.

In my area pits have been closed, which means that our country's industrial heritage is to be destroyed so that Conservative Members can make a profit. That is what they are after. They are not concerned with rewarding the workers or serving the people. They are not concerned about ensuring that there is a guaranteed supply of coal. They want to ensure that some people make a profit. It would be regrettable if the body that illuminated and powered Britain in a way that commands public respect and esteem should be sold off to allow some hon. Members and their foreign friends to make a great deal of money.

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford

Is my hon. Friend aware that at a meeting last week, chaired by hon. Member for Bedfordshire, North (Sir T. Skeet), British Coal said that opencast mining could be down to about 7 million tonnes by 1992 unless the planning regulations were relaxed? Does he agree that relaxing the planning regulations for opencast mining would have a disastrous effect on the countryside?

Photo of Mr Peter Hardy Mr Peter Hardy , Wentworth

It would have a disastrous effect on the quality of life in areas such as that which I am proud to represent. Furthermore, if the planning regulations were to be relaxed the clamour for opencast mining would grow from the business interests that are represented by Conservative Members. The Government are not concerned about the workers or the national interest. They are not concerned about ensuring that British industry enjoys energy at competitive prices. Their only concern is to ensure that they have enough money to bribe voters and to reward some of their friends, no matter what their nationality.

Photo of Mr Anthony Speller Mr Anthony Speller , North Devon 7:34 pm, 7th March 1988

On behalf of all those who support alternative energy, I warmly welcome the White Paper. Paragraph 32 says: The new structure … will give the distribution companies:The incentive to promote competition in generation.The ability to connect competing generators to the system.A wide choice of generators. The CEGB has given little assistance to alternative energy sources, and until recently that was true of every Government, whatsoever their colour. It is excellent news for those who believe that alternative energy resources—the winds, the waves, solar power and the geothermal "hot rocks" — can come economically to the market place. The hon. Member for Wentworth (Mr. Hardy) complained bitterly about the Government caring only for profit. There is nothing wrong with a profitable enterprise, especially if it is a clean, profitable enterprise.

Two great industries in this country are in dire danger. One is represented more by the Opposition — the coal industry — while the other, agriculture, is represented more by the Government. Both suffer from the same danger. People say that coal can be bought more cheaply elsewhere or that food can be bought more cheaply elsewhere. However, if we follow that line watch how prices rocket up when our own indigenous industries have been destroyed.

We must support our coal industry. It is agreed by all that 75 to 80 per cent. of our future energy supplies will come from the coal industry. It would be unwise to allow all our pits to close, not because there was no coal there or because there were no men to dig the coal but on some short-term whim.

As for alternative energy sources, until now almost all research and development money has been devoted to nuclear research. I am not anti-nuclear as such, but why must all the research money be spent on something that will be of no actual value to us, or to our children or probably our grandchildren? We should conduct research into all forms of energy. It is madness not to conduct research into resources that do not pollute and that are infinitely renewable. If only for that reason, I give a warm welcome to the White Paper.

Recently I have visited Norway and seen wonderful work being done there through the use of tidal power. But here the Norwegians are using British-based technology. Australia and New Zealand both have hydro-electric and solar power schemes. Again, they are doing wonderful work, but it was often pioneered in this country. Many of the wind generators that are used in California were manufactured in this country. At long last the White Paper refers to the generation of power allowing use of alternative energy sources. I do not deride coal or nuclear power, but the CEGB has been unwilling to accept energy from small generating plants, and the price paid has been derisory. Her Majesty's Government give no encouragement to installing a generating plant for one's own home, imposing rates on these home improvements. Even now there are no direct connections to the grid in parts of Exmoor, but at last the time is coming when some heed will be paid to alternative energy sources in areas like my constituency.

If privatisation allows economic non-pollutant, renewable fuel to be supplied to the grid, that will not require billions of pounds' worth of investment and that will be to the benefit of this country. One of the greatest things about alternative sources of energy is that they are clean and renewable. There is no pollution and there is certainly no problem about decommissioning. One just turns the thing off. There would be no spoil heaps, and no nuclear waste dumps. All that is necessary is to harness those elements of the world that have been with us since the world began, and will be with us long after nuclear power is dead and gone—and, I suspect, long after all the fossil fuels have gone.

At long last, this White Paper pushes open a door that has been firmly closed under the monopoly control of generation in this country. That must be a good thing. Whatever our feeling about the preferred kind of generation, we must have choice. With our ability to invent and to improvise, we have everything to gain from going out into the world and saying, "Let us build it for you." There are firms like the Howden Group working on wind power, and many big contracters working on wave energy. We can produce it. The ridiculous thing is that we have been producing it around the world, but have not been allowed to do so here.

On behalf of all the alternative, renewable energies, I welcome this White Paper, and give it my full support.

Photo of Chris Mullin Chris Mullin , Sunderland South 7:40 pm, 7th March 1988

The White Paper represents the latest stage in a programme of looting of public assets in which the proceeds are being used to purchase the support of the public through tax cuts without regard to the national interest. It must be folly for a nation sitting on 200 years of coal to go for an energy policy based on coal imports. It is a further example of the merciless application of market forces without regard for the disastrous economic and social consequences.

The CEGB, in its comments on the White Paper, has been a little restrained, but its advice was rejected. It refers coyly to the present plans as not having been attempted anywhere else in the world. That is putting rather generously what the CEGB must really be feeling. It says: Fragmentation of ownership of existing power stations would increase the cost of electricity"— that contrasts with what the Secretary of State and others have told us — and adds, in my view understating the position, that privatisation will throw up some major challenges and problems". I should like briefly to examine some of those problems. One is the problem of where the investment is to come from. I do not believe that private capital will be willing to invest on the necessary scale. One consistent theme of our financial institutions, and, indeed, of our industrial history, has been the reluctance—nay, the downright refusal—of those who control finance to invest it in socially useful activity, and I shall be very surprised if they are forthcoming with the money in this instance. The other consistent thread has been the remorseless pursuit of the short term, whether it be office blocks, oil paintings or gold candlesticks. Whatever may be said about the electricity industry, there is nothing short term about it, and I do not believe that it will prove of interest to those who control investment funds.

I wonder, in passing, whether the day will come when we have to bail out one or two of these companies that obtain franchises. I note that when it comes to nuclear power not even the Government have confidence in market forces. They have made some special arrangements, because they know as well as everyone else that if market forces were ever let loose on nuclear power it would sink like a stone. That contrasts with their attitude to coal, where market forces have been invited to do their worst.

Another problem that will undoubtedly arise is the effect on the balance of trade. We are now suffering from one of the most adverse trade balances in manufacturing industry that we have ever experienced. Yet we are proposing to spend millions of pounds, perhaps hundreds of millions, of foreign exchange on importing coal and French electricity. I wonder where that will end, particularly as in due course we shall have to go back to the world market to purchase oil.

There is also the problem—other hon. Members have referred to it, so I shall not dwell on it — of foreign investors: what we might call the Kuwaiti factor. Will we wake up one morning and find that our electricity industry has been taken over by some foreign Government or multinational?

What primarily concerns me, as I am sure hon. Members will understand, is the impact on the people of Sunderland, a town which I, among others, have the honour to represent. Paragraph 33 of the White Paper says: in future, generating companies will be free to purchase coal and other fuels from the most competitive sources. Those words spell doom for thousands in my constituency, not only in mining, but in related industries. Sunderland has male unemployment of well over 20 per cent. Hon. Members may have read in the past few days that the Government are planning to pull the plug on the other big industry, shipbuilding. Three days later, here we are discussing pulling the plug on a large part of the coal industry.

About 2,000 miners work at the Wearmouth pit in Sunderland. They are working 14 miles under the sea in very difficult conditions. Many other miners work at neighbouring pits in Herrington, Eppleton and Westoe. Many, if not all, can in due course expect to find themselves with their livelihood threatened, and with no serious visible alternative available. They are continually exhorted to work harder and to adopt flexible rostering and longer shifts. They have co-operated in great measure, and the result has been a large increase in productivity. But they are not daft. They know as well as anyone that if there is no market, more productivity leads to the dole queue.

In addition, there has been a huge public investment. Mining coal 14 miles under the sea requires such investment. As the right hon. Member for Kincardine and Deeside (Mr. Buchanan-Smith) said, deep mines, once closed, cannot be opened again. They certainly cannot be reopened 14 miles under the sea. As recently as January this year, there was an announcement of new investment of £25 million in local pits. Is all that to be wasted?

The market is already being undermined, deliberately and systematically, by coal imports, which have increased by leaps and bounds. Some is even coming into the port of Sunderland. Everyone knows the phrase about bringing coals to Newcastle, but it is just as ludicrous to bring coals to Sunderland. About 250,000 tonnes were brought into our town last year—a town where, as I have said, many thousands of people work in the mines.

It is now proposed to remove the biggest single market for British coal, with coal from China, the Soviet Union and perhaps—no one really knows—from South Africa and Colombia, and to bring in opencast coal, with which no deep mine can possibly compete. A new coal-fired power station is being built at Fawley, near Southampton. What is the point of building a coal-fired power station near Southampton? It cannot be because it is close to the coalfields. It must be for some other reason. Could it possibly be because Southampton has a deep port that can take imported coal in ships up to 150,000 tonnes deadweight? If that is not a cynical exercise, I do not know what is.

Finally, let me mention an aspect which, I believe, has already been touched upon, and which will affect thousands of my constituents. If this privatisation has anything in common with previous ones, it will lead to many more disconnections. There will be an increase in the ruthlessness with which poor people who cannot afford to pay their bills find themselves cut off.

There is an element of revenge in all this. It is targeted against the coal industry. I do not think that anybody is under any illusion about that. It is all being done without regard to the social or economic consequences. My hon. Friend the Member for Wentworth (Mr. Hardy) asked what will happen when there is nothing left to sell. That is a question that I have often asked myself. One thing of which the Government cannot be accused is not thinking long term. However, I have never heard any Minister explain to us in serious detail what will happen when everything has been sold off.

My hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott), our Front-Bench spokesman, said—I saw the Secretary of State agree with him — that £1 billion has been taken out of the electricity industry by the Treasury and that a further £1 billion is likely to be taken out. Presumably, that money helps fund the Health Service and education. What happens when that revenue is no longer available? I should like to hear, now or at some other time, a Conservative Member address those questions. What is the Government's long-term plan? Is it that they think they will not be in office when the time comes to clear up the mess? Is it that they think that they will be in the Bahamas or the south of France, or is there some plan of which we have not yet been told?

Photo of Dr Michael Clark Dr Michael Clark , Rochford 7:50 pm, 7th March 1988

I should like to say to my right hon. Friend the Secretary of State, in his absence, that I welcome the proposals in the White Paper. Most people have spoken about generation but I should like to speak about the area boards. Currently, there are 12 area boards and they have the interface with the customer. Between them they have 22 million customers. Each one of these boards is, more or less, the size of a foreign electrical utility. Therefore, they are sizeable entities in their own right. My right hon. Friend the Secretary of State said in the White Paper that he will ensure that there are 12 area boards for distribution when the electricity supply industry is privatised. I support that proposal.

We know that the supply of electricity into the home is a natural monopoly. That has been agreed by my right hon. Friend the Secretary of State and by Opposition Members. However, it is strange that the Opposition, who are against breaking up the monopoly of the CEGB, criticise the fact that we have to concede that the two wires into a home are a natural monopoly. It seems that the Opposition would like that to be broken up into competitive suppliers, even though they do not want the CEGB broken up. That seems rather ironic.

If the 12 area boards remain, we can have control of prices and service by comparison between the boards across the country. Is 12 the correct number of area hoards? If we had more than 12, there would be far too many and they would be too small. However, if we had fewer than 12 boards, they would be too large and there would be a massive amount of disruption in terms of assets and people employed within the area boards. Therefore, no number is absolutely right. Perhaps nine area boards would be right or perhaps 15. However, since we have 12, it seems appropriate to stick with that in order to minimise disruption.

It may be that my right hon. Friend the Secretary of State will propose to float all 12 area boards in one company and break the shares down at a later date. I hope that he will not do that. I hope that he will sell each board separately so that it can be judged on its merits in the market. I hope that service will be taken into account. It is just as important to set up a structure that enables us to compare the service given by each area board as it is to set up a structure that enables us to compare the price charged by each board. Service is as important as price in the electricity supply industry. If we jeopardise service by trying to obtain minimum prices, we shall not be assisting the consumers.

Before the White Paper was published, a debate obviously took place as to how many area boards there should be and whether they should be merged. I dare say that during that debate people said that some of the area boards are not viable, some had boundaries that were unfair or inefficient, some had insufficient assets to make them capable of floating as separate companies and some had returns on the capital employed that would make them difficult to sell. It is true that the returns on capital employed vary from 3 per cent. to 4·75 per cent. That is a large variation in percentage terms.

Of course, the area boards will be sold not on the basis of return on assets employed but on the yield on the buying price. If an area board is not producing as good a return on assets as would be liked, the selling price of the board will be lower, and thus the yield could be made to be the same as the yield on other area boards that may be doing better due to features such as geographical size, population density or the amount of industry or number of consumers in its marketing area. There will be problems with selling the boards separately, but I believe that the problems should be overcome rather than brushed aside or pushed under the carpet through merger.

The electricity board in my constituency is the Eastern electricity board. It happens to be the biggest, and perhaps it benefits to some extent by its size. However, it is only marginally the biggest, and it is a credit to the Eastern electricity board that on "added operating costs per customer" it is the lowest. It has the lowest "administration cost per customer" and it has the second highest "net return on capital employed". However, it does not necessarily follow that the biggest area board will have the best figures. The South Eastern electricity board is only the eighth biggest. However, its results are almost as good as those of the Eastern electricity board. The London electricity board, the seventh biggest, has poor results in terms of cost control, although it does not do too badly in terms of profits on assets employed.

I hope that those factors will be taken into account and that the area boards will be encouraged to emulate the best rather than to merge away their difficulties by forming liaisons with other boards.

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford

Like myself, the hon. Gentleman is a member of the Select Committee on Energy, which is at present taking evidence on the privatisation of the electricity industry. What influence does the hon. Gentleman think the Select Committee report has on the debate? Does he not think that the debate is useless in advance of the report from the Select Committee? Does he not find it embarrassing to put his views tonight when we are privileged to have such expertise at our disposal and so many eminent people giving evidence? We are only in the early days. Does he not think that the debate is premature, or are the Government cocking a snook at the Select Committee procedure?

Photo of Dr Michael Clark Dr Michael Clark , Rochford

The hon. Member for Pontefract and Castleford (Mr. Lofthouse) knows my view on that. He was present in the Committee when I voted against the proposal that the Select Committee should look into ways in which the electricity industry should be privatised. I did that because I felt that it would be far better for the White Paper to be prepared and for the Select Committee to look into the White Paper proposals. I understand the hon. Gentleman's point, but he will not be surprised at my answer because I voted that way two or three months ago and I am being consistent with that vote.

There is a need for technical co-operation and for the area boards to have a co-ordinated research effort so that the technical features of electricity supply in this country will move forward in unison. There will also be a need for co-ordination on safety standards, and all boards should work to the same high standards. Therefore, it could be proposed that there should be an industry establishment, similar to the Motor Industry Research Association or the Paper Industry Research Association — MIRA and PIRA. It could be known as the Electricity Industry Research Association. There could be a role in that for the rump of the Electricity Council that will be left after privatisation. The expertise in that council could be used to co-ordinate research, technical effort and safety standards.

Will the 12 district boards have any bargaining strength against the mammoth generators? The answer is yes, because there will be several generators—"Big G" and "Little G", France and Scotland and the private generators. The area boards will negotiate on behalf of the customers and will have direct access to the customers. If the area boards decide to generate themselves, as I hope they will—it will mean more power to their elbow—they will have more strength, even if they generate only 10 to 15 per cent. of their needs. I should have thought that the hon. Member for Kingston upon Hull, East (Mr. Prescott) would agree that, if they generate 10 to 15 per cent. of their needs, while being capable of increasing generation to 20 or 25 per cent. if "Big G" or Little G" does not give them the right price, that would be to their advantage. I hope that the majority of the area boards will consider generating, because that is another way of ensuring that they get the best possible prices and thereby serve their consumers.

If the area boards are to generate, they will need proper access to the grid. I hope that, when my right hon. Friend the Secretary of State publishes the terms of access, he will ensure that all area boards and private generators can get ready access to the grid and that there are not terms that make it difficult for small firms to have an input. I hope that the small boards will he encouraged in as many ways as possible to generate electricity, by entering consortia with other area boards or by entering consortia with private capital. I concede that I would not want the area boards to enter into consortia with "Big G" or "Little G", because that would be a return to monopoly.

The smaller boards could give careful thought to small-scale generation of about 300 MW and then transmit straight into their 132 kV transmission lines without having to go into the national grid. My right hon. Friend the Secretary of State says in his White Paper that there will be regulation for the distributing boards. I hope that, when he brings about this regulation, he will ensure that there are clauses to make sure that there are comparisons between the 12 area boards on such aspects as controllable and fixed costs, administration costs—bearing in mind differing population densities and geographical areas—and the relationship of manpower efficiency and the effective use of the assets employed. I hope also that there is a comparison of that all-important item, service.

One aspect at present of area boards which will remain as it is unless there is a change through this legislation is the electricity showroom. The service in many showrooms is poor. The prices of many goods are high, and I often wonder why people buy from them. Many of my friends and I who visit showrooms do so to find out what goods are available from a wide range, and then buy more cheaply elsewhere. One must wonder, even though those prices are high, whether the goods are subsidised.

Whether they are subsidised now or not, we must worry about the possibility of cross-subsidisation under privatisation. It would be wrong for the white goods in electricity showrooms to be cross-subsidised by the sale of electricity. I invite my right hon. and learned Friend the Secretary of State for Scotland to say what regulations he will introduce to ensure that the costs and accounts of showrooms are transparent, so that we can be certain that there is no such cross-subsidisation. With 12 area boards, it is essential that they do not become monopolistic in supplying electrical goods and that, if they supply them, they do so at proper commercial prices.

My points are all for the consumer's benefit. The legislation and the White Paper are of benefit to the consumer. I hope, therefore, that my right hon. Friend the Secretary of State for Energy will take my points into account, bearing in mind that we have the same objectives.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline West 8:04 pm, 7th March 1988

I have made the point before about the great disrespect to the House caused by the fact that neither of the Secretaries of State responsible for the White Paper — the Secretaries of State for Energy and for Scotland—has seen fit for the past hour to be present in the House. Conservative Members should note the disrespect paid to the whole House by that action. I have been a Member since 1970, with a break between 1974 and 1979. I have always believed in trying to apply the force of argument and to influence the Government of the day by argument. If the people responsible for the greatest piece of privatisation ever, as the Secretary of State for Energy said, do not see fit to attend these debates, how can hon. Members have any faith — it is now a diminishing faith — that our arguments will have any influence on the process of legislation or on Government policy?

I shall not talk about the White Paper for England and Wales, but just comment tangentially on the opening remarks of the Secretary of State for Energy. I challenge the two underlings on the Government Front Bench, supposedly representing Scottish Departments—the hon. Members for Stirling (Mr. Forsyth) and for Galloway arid Upper Nithsdale (Mr. Lang)— because, to the best of my knowledge, they did not hear the speech made by the Secretary of State in opening the debate. I shall give way if they can name one argument deployed by the right hon. Gentleman in support of his policy for England and Wales that applied to Scotland.

The Secretary of State for Energy introduced a phrase which applies to Scotland—"collusive duopoly". That high-flown phrase describes what the two Scottish boards will do if the ideas and concepts in the White Paper for Scotland are carried into practice. There will be no competition in Scotland because the two boards are being joined to form some form of company which will jointly own the nuclear supply. When Torness comes on stream, that nuclear supply will be a growing part of the Scottish total supply but will be a preponderant part of the base supply. I estimate that it will account for 60 per cent. of the base load.

Where is the competition in Scotland? The Minister has the opportunity to tell Scottish consumers from where the competition will come. He may have to have recourse to the Government's great flowery phrase "competition by comparison." Comparison with what? Will it mean comparing the North board's output and supply with those of the South board? How will that be done? The two will be joined in this nuclear holding organisation which both will own, although we are not sure in what proportions. We are told that in Scotland there must be some geographical changes—we are not sure which—and some changes in the apportionment of power supplies between the two new companies. This is a hotchpotch.

Part of the industry is of great concern to me. I represent the largest coal-fired power station in Europe — Longannet, and, along the road from it, the Kincardine power station. Earlier today, in answer to an energy question we heard that the Coal Board had invested £60 million in the Castlebridge operation. In terms of production, that £60 million could go nowhere else than Longannet power station. If we pursue what is happening in Scotland now, is it the Government's intention to write off that investment? That is a fair question. Because of the so-called "arm's length" approach, is it the Government's intention to wipe off that capacity and investment for which the consumers will get a zero return?

Those are fair questions and we in Scotland expect answers from the Secretary of State. I am not very hopeful that we will get them but we expect answers from him this evening because we have been told through the press—I believe the Scottish press now and again — that the Secretary of State will answer those questions when he replies to the debate tonight.

Let us consider what has happended to the coal burned from Scottish mines since 1979. In 1979–80, there were 7·58 million tonnes; in 1986–87 that amount had been reduced to 4·5 million tonnes. I submit that all that had been done on an extremely efficient basis. I plead in aid the last report and accounts that are available from the South of Scotland electricity board. Page 8 stated: This took into account the need to ensure the longer-term prospects for the Scottish coal mining industry, which will continue to supply the board with a major part of their fuel requirements. That was what Mr. Donald Miller said in the last balance sheet. In attracting new industry to Scotland the Government praise the new pulp and paper mill at Irvine. I refer again to the report and accounts, which stated: The board acknowledge the part played by British Coal and the private mines industry in helping to control costs and thus ensure that adequate and secure supplies of electricity will be available to the mill at competitive cost. That was a year ago. What has altered Donald Miller's mind? In a word, "privatisation". I do not like criticising someone who cannot reply on the Floor of the House, but if Mr. Miller wants to reply outside, I will repeat this outside. I believe that he has been bought and sold for the expectation of a job in the private enterprise company that will come into being. There is no other explanation.

I shall conclude, because I know that many hon. Members want to participate in the debate. We plead that the two Government Departments—the Scottish Office and the Department of Energy—should get together to solve this problem. It is not good enough for the Secretary of State for Scotland to sit back and say that he has nothing to do with it. I do not necessarily ask Conservative Members to accept my argument, but they should read the editorial of Saturday's edition of The Scotsman. It is not a Labour paper and is not necessarily friendly to Labour's outlook. However, it stated: Though the reasons for Mr. Miller's extraordinary behaviour are, on the information available, difficult to discern there can be small doubt that he is acting with the knowledge, if not the sanction, of the Scottish Office. Conservative Members, and Ministers, should either contradict and refute that tonight or substantiate it. I believe that Donald Miller would not be acting in that way if he did not have the support of the Scottish Office. That Scottish Office support means the destruction of capital assets that the public have paid for. It means the destruction of 4,000, and more, jobs in Scotland. If hon. Members want to support the Government's policy, they should come to Oakley tomorrow night, to a miners' meeting there, and say that they are the custodians of the Scottish economy. I know what answer they will get from that meeting. The Scottish Office has tried to manipulate the press. It has media and photo-calls every week. Ministers should come to Oakley tomorrow night for a photo-call. I know what they would get if they came.

If Conservative Members had any guts, they would intervene to save jobs. We are arguing not about an old declining industry; we are arguing on the basis of a case that was stated a year ago in a balance sheet. We are arguing on behalf of men who have moved out of pits such as Comrie, Bogside and Seafield into a complex that they thought would give them secure employment for a long time. Scottish Office Ministers cannot and will not intervene, so let them bear the repercussions in Scotland.

I know where I shall be if one lump of foreign coal is burnt in a power station in Scotland. If that happens, every man, woman and child in Scotland should be in uproar against it. Responsibility for that will not rest with the Opposition. It will be because the Scottish Office and Ministers refused to listen to the righteous cries and the clarion call from all the people of Scotland.

Photo of Mr Michael Woodcock Mr Michael Woodcock , Ellesmere Port and Neston 8:16 pm, 7th March 1988

I join those who have congratulated my right hon. Friend the Secretary of State on his ambitious and far-reaching proposals, which will change the industry from being producer-orientated to consumer-driven and ensure a better deal for the consumer. I congratulate him on ensuring that as far as possible competition will be the guiding force of the new industry. I congratulate him also on ensuring diversity of fuels. How prudent he is in ensuring that never again will electricity supplies in this country be threatened by militancy in the coalfields; nor will we be at the mercy of OPEC.

While welcoming the proposals warmly, like many other hon. Members I want to offer some thoughts on the effects of the privatisation of electricity on the coal and nuclear industries. We have heard a great deal from Opposition Members about the so-called threats to the coal industry. Those threats apparently stem from British Coal having to compete on the same terms as many of our other industries. I have listened to those arguments and advise my right hon. Friend that he will do well to ignore them because they are ill-founded and unrealistic. For far too long the taxpayer has paid the price of outdated working practices and inept management in the coal industry. For too long the taxpayer has poured money into the industry at the rate of £2 million per day, and has guaranteed markets for British Coal in the mistaken belief that that will bring forward a more realistic approach to working practices in the industry. However, we have seen a monopoly power abused for economic and political ends. The privatisation of electricity will perhaps do more good in bringing home economic realities to the mining industry than anything hitherto, and it should be welcomed for that.

I have quite a lot of sympathy for the domestic and industrial consumers of coal and for those who service and market the coal. The Opposition have shown a great deal of concern for those who work in the industry, but little for domestic consumers, who are probably paying £10 to £15 per tonne more than they need to for their supplies of coal. Domestic consumers pay excessive prices for electricity because of the costs of British Coal. Consumers suffer from the non-availability of some domestic grades of fuel.

Similarly, I have sympathy for industrial consumers who pay too high a price for electricity, partly because of the cost of British coal and partly because the coal lobby in this country has prevented the development of our nuclear industry to its full potential. I also have sympathy for coal traders who, shackled by a producer-dominated industry, are forced to turn more and more, against their will, to imported coal because British Coal cannot come up with the goods in terms of price and availability.

Last week I was in Scotland, and I also listened to representatives from the Scottish coal trade. Understandably, there is great concern about the current disagreement over the supply of British coal for power generation. However, until there is a more realistic approach to working practices within the coal industry it is difficult to have sympathy for the Scottish miners. Nevertheless, I am concerned about the effects on coal merchants and consumers of pit closures in Scotland. It is clear that, unless the major user of coal in Scotland and the major producer of coal in Scotland can agree, the inevitable consequence will be the diminished availability of competitively priced domestic coal.

The question that we have heard repeated so many times is, "Will British Coal be able to meet the threat of the privatised electricity industry?" Another question that we must consider is whether British Coal will be able to continue to supply the domestic market. While the coal industry remains nationalised, without the stimulus of domestic competition, without sensible working practices and without concern for the market and the consumer, it is unlikely to be able to meet that threat or to supply the domestic market fully.

There is one logical conclusion. If the privatisation of electricity is likely to benefit the consumer and the employee as I believe it will, I believe also that the ability of the coal industry to respond to competition in the electricity industry, and through that to continue to meet the demand for domestic fuel, will be enhanced if it is transferred to the private sector. In due time I urge my right hon. Friend to consider the privatisation of the coal industry. That privatisation would offer the best future for the industry's employees and the best future for the domestic and industrial consumers of coal. It would also offer the best deal for the consumer of electricity.

It is right that the Government are seeking to ensure a balance in fuel supply. It is also right that the nuclear industry should have a definite place in the generation of electricity. However, it is sad that our nuclear industry is not more highly developed. We did lead, and should still be leading, the world in nuclear technology. The reason why we are not doing so is largely that the coal lobby is far too powerful. Therefore, I welcome the Government's commitment to the future of the nuclear industry.

There is a need for those who take investment decisions in the electricity industry to take a long-term view as well as ensuring that the industry does not suffer from any unfair dumping—to a limited extent it is suffering from that practice at the moment. There is also a need for the Government to help in attacking protectionism within the nuclear industry worldwide. Nevertheless, in the long term the best interests of the nuclear industry will be served by free and fair competition with other fuels.

Last week, when my right hon. Friend made his statement about the privatisation of electricity, the hon. Member for Workington (Mr. Campbell-Savours)—he is not in the Chamber at present—sought an assurance about the continuing public ownership of British Nuclear Fuels plc. Presumably the implication of the question is that BNFL should remain within the public sector. However, the interests of BNFL would be best served in the private sector. As the Government move nuclear generation into the private sector, I urge that they should also consider selling the Government's stake in BNFL, itself a generator and alternative supplier of nuclear power. I believe that such a move would be greatly welcomed by the work force and by the management within that industry.

My comments in no way detract from my general support for the Government's proposals. Those proposals are good for the domestic and industrial consumer of coal, good for consumers of electricity and good for the employees. My plea is that those proposals are taken even further by implementing similar principles within the coal and nuclear industries.

Photo of Dr Alan Williams Dr Alan Williams , Carmarthen 8:24 pm, 7th March 1988

I disagree with the hon. Member for Ellesmere Port and Neston (Mr. Woodcock) more than any other speaker in this debate. Britain produces the cheapest coal in Europe. The hon. Gentleman spoke about free and fair competition within the nuclear industry, but the White Paper is all about feather-bedding that industry and exposing the coal industry to the vagaries of the world market. The price of coal in that market can go up just as fast as it has come down in the past two years.

In common with others of my hon. Friends, the theme of my speech is Government standards. The nuclear industry is treated in a highly-protected fashion, but the policy for the coal industry is short-term. The White Paper states that there will be a minimum requirement for non-fossil fuel electricity. I agree with some Conservative Members about renewable sources of energy, but, unfortunately, the White Paper will make no difference to those sources. The White Paper is a straightforward case of coal or nuclear power. The Government expect 25 per cent. of electricity to be generated from nuclear power, regardless of the cost.

Over the decades nuclear power has proved to be far more expensive than coal. A privatised electricity industry would never build nuclear power stations. There is no economic case for the Sizewell PWR — it has been destroyed. However, the Government do not appear to have conceded the economic cost of nuclear power and they have made it a requirement of privatisation.

I am concerned about what privatisation will mean for safety standards within the nuclear industry. This weekend was the anniversary of the Herald of Free Enterprise ferry disaster. That disaster, and the subsequent inquiries, showed how the company had cut corners. Of course, the courts found the company not guilty — "They would, wouldn't they?" The courts blamed the captain and other individuals and put the disaster down to human error. However, profit was the dominating factor in the company's operations. The company sought to cut corners, and I believe that the same would apply in a privatised nuclear power station. If fuel rods started to leak, as they do—burst cans, and so on—would they be taken out immediately as is now the requirement? I fear that they would be allowed to stay in place for a few more weeks, as a result the coolant streams would become radioactive, and they would be pumped out into the atmosphere.

How will staffing affect safety requirements? There are dozens of reactor incidents almost every year. At the moment, such an incident would cause a nuclear power station to be shut down. Obviously when the industry is privatised and profit is all-important, such a shutdown would be the last resort because a few weeks of lost operation would mean the loss of many millions of pounds. I fear that safety standards will be compromised throughout.

The Government want a lot of nuclear power to be generated in the future. Earlier, one hon. Member said that, by the next century, we would be all-nuclear, but I believe that he is wrong. If that were to be the case, we would be dependent on plutonium in the next century. The logic of some Conservatives' argument is that, eventually, we would be exporting plutonium to Japan, France, Germany, Idi Amin and Colonel Gaddafi. What would that mean in terms of nuclear proliferation?

Very conveniently, during the past few months the Government have decided that nuclear power stations will not be decommissioned. Trawsfynydd, Hinkley Point and Bradwell will be allowed to remain as they are for the next 100 years. They will be nuclear graveyards. We shall have to protect them and provide high security, not just so that children cannot get into them but because they could become terrorist targets. There is the sinister prospect, in 10 or 20 years' time, of a terrorist car bomb exploding outside one of those disused power stations. The fact that we do not know how to decommission nuclear power stations is another argument against this unsafe source of energy. But the Government insist on going ahead. It is a case of compromising safety and the economics of nuclear power going out of the window.

In sharp contrast is what is likely to happen to coal. The Government are willing for British coal, which is the cheapest deep-mined coal in the world, to compete against coal from South Africa, Colombia and Australia. We know why South African and Colombia coal is cheap—non-existent or repressed trade unions and child labour—but such morality does not apply to the Government. Provided that the price is right, they will ask no questions.

The world coal market is a very unsafe market on which to depend for our future energy supply. World trade in coal accounts for only 4 per cent. of world coal consumption, so very little coal is traded. If, in five years' time, when many of the pits are closed, oil prices start to climb again as oil becomes scarce, coal prices will follow rapidly and we shall become dependent upon imports. Another problem with Government policy is the short-termism which threatens the future of the industry. If we were planning now for the year 2000—that is what the Japanese do — we would want British coal to be the basis of our electricity production, because it is economic compared with other coal produced in the world.

We heard a great deal from the Secretary of State for Energy in opening this debate and in the statement on the White Paper about competition in generation. He accepts that there is no competition in distribution and that that is a natural monopoly, but he tries to argue that there is competition in generation. We know that that is nonsense. In generation, the 70 per cent. company and the 30 per cent. company will share the market. They will not build surplus power stations to introduce competition because power stations are far too expensive. They will spend £1 billion on the construction of a power station only if they are guaranteed a market.

I believe that the privatisation will be a flop anyway. The stock market collapse last October means that people will not have the same taste for privatisation, and we should not forget the BP fiasco. The distribution companies may be saleable because they will be able to name their price for electricity. The 30 per cent. company, "Little G", may be saleable because it does not have the handicap of nuclear power, but the 70 per cent. company, "Big G", is saddled with the albatross of nuclear power. Let us consider what it will inherit: first, the clapped-out Magnox reactors, which no one in his right mind would want; secondly, the advanced gas-cooled reactors, which were a bigger economic disaster than Concorde; and, thirdly, the pressurised water reactor programme with which the Government insist on lumbering the industry.

My feeling is that the "Big G" will not take off and that the proposed privatisation could be the biggest flop of all. It is not in the national interest, nor is it in the consumers' interest. The Government will be able to make the proposal saleable by fattening up the industry before privatisation, but that will lead to a terrible 15 per cent. increase in electricity prices. The proposed legislation is immoral and dangerous and would go against the national interest.

Photo of Malcolm Moss Malcolm Moss , North East Cambridgeshire 8:40 pm, 7th March 1988

My right hon. Friend the Secretary of State outlined as strongly as possible in his opening remarks that decisions about the supply of electricity should be driven by the needs of customers. We have not heard much from Opposition Members about the needs of customers.

I took the trouble to read some of the submissions made by consumer councils on privatisation. The National Consumer Council put forward seven conditions for what it considered to be an ideal solution and structure for maximising competition and simplifying regulation: first, there should be a split into three major operating activities—local distribution, bulk transmission and generation; secondly, there should be more than one major distribution company; thirdly, there should be more than one major generating company, fourthly, there should be one bulk transmission company; fifthly, the generating market should be open and there should be nondiscriminatory access to consumers for all participants. Every one of those submissions has been incorporated in the proposals outlined in the White Paper. We have not yet agreed with the sixth and seventh submissions in terms of priorities, but the first five major priorities of the consumer councils have been fulfilled.

The Electricity Consumers Council has said that the present structure of the electricity supply industry is unsatisfactory. The CEGB not only has a monopoly over generation but also over decision-making in a sector which affects and/or accounts for 80 per cent. of electricity prices. It continued: The main advantage from privatisation is that unhelpful Government intrusion into the industry should cease. In the council's view, it is essential that management is strengthened. The public's expectations of a privatised industry are increased and accountability to shareholders is a very different regime — and one completely misunderstood by Opposition Members—from accountability to Government.

Anyone would think that Opposition Members were spokespersons for the CEGB. They tell us how wonderful it has been over the past 40 years, but the electricity supply industry did not grow up as one unit, despite the claims of Labour Members and the CEGB. Before nationalisation the grid served independent generating enterprises, and served them well. Compared with overseas industries, the CEGB's capital costs have been unduly high. Its forecasting has been woefully inadequate. Its coordinating role, by which it sets such store, is really unnecessary, hearing in mind what is taking place in the rest of Europe and America. The CEGB's argument that competition raises prices and that monopolies lower them is a view that is no longer shared in the Kremlin, let alone on the Opposition Benches. It was the CEGB's monopolist symbiosis that laid the basis for the NUM monopoly. National security of supply requires the breaking up of this cosy and convenient relationship.

The issue of security of supply has been raised during this debate. Under normal demand patterns there is no real problem in producing contracts between the grid and the generators, but questions have been asked about the new privatised enterprise coping with abnormal conditions. It is said that if the grid-generation system cannot he optimised it could lead to increased costs and a reduction in security of supply. But the grid must take on the financial risks of operation and we must introduce an arbitration mechanism to settle disputes about compensation. There is no reason why we should not have a consumer compensation or protection fund.

Much has been said about economies of scale, and the merit order system has been portrayed as the saviour of the present security of supply. The variable costs of generation will determine that merit order. The technical criteria for merit order could be replaced with some form of a financial order. Least-cost plant, yes, but also least-cost mix of plant which will come in time. There is no apparent reason why contracts between the grid and generators cannot accommodate price competition in both the areas that I have outlined. That would result in both merit order working and price pressure to optimise the mix of power station types.

The Opposition and the CEGB say that there is a danger of losing security of supply in a fragmented structure of generation. The CEGB has said that the fragmentation will cost about £1 billion a year—about a 10 per cent. increase in costs—but I see nothing in the CEGB's case to justify that figure; nor have we any evidence in the debate to show where those figures come from.

The Energy Act 1983 has patently failed to encourage any competition in electricity generation. It is still only one quarter of 1 per cent. On present trends there is no evidence that the potential identified by Sir Frank Layfield in the Sizewell inquiry—the equivalent of five Sizewells by the year 2000—is anywhere near to being achieved. There are two reasons for failure. The CEGB is asked tor a 3 per cent. return on its assets, but the independent producers need a return of at least 10 to 15 per cent. The Act made the electricity boards the judge and jury in setting prices for their competitors. That price decreased further this year, and it is still between 20 per cent. and 38 per cent. less than the price at which the boards sold their electricity.

The 1987 price reduction resulted from making a major change in the bulk supply tariff. Since 1983 the CEGB has twice raised the fixed charge proportion of its hulk supply tariff. The hoards do not include that proportion in the price that they pay to independent producers. This has meant a decrease of about 25 per cent. in the price paid to independent producers.

In April last year, when the CEGB announced a new structure in its 1987–88 review, the Department of Energy suggested that the Electricity Council should commission a report on those charges, and it called in Price Waterhouse. The report was published at the end of 1987, but it has not yet seen the light of day. In the Select Committee hearings the chairman of the Electricity Council refused to make it available. Perhaps it has not come to light because it suggested that the pricing structure to the independent producers was contrary to the 1983 Act.

Photo of Mr Peter Rost Mr Peter Rost , Erewash

My hon. Friend should know that today the Electricity Council has made available a summary report to the Select Committee on Energy, but it was given to us in confidence. Although I have read it and would love to talk about it, I am under an obligation of confidentiality.

Photo of Malcolm Moss Malcolm Moss , North East Cambridgeshire

I think that my argument is still valid that the report being under wraps since the end of 1987 suggests that it goes against the interests of the independent producers.

In December the CEGB announced further changes in its bulk supply tariff for 1988–89, and, although it restored some of the cuts that it had announced before, no consultation was entered into consultation which is required by statute—with either the Electricity Council, the Electricity Consumers Council or the Department of Energy. Why, at the end of 1987, was there a sudden change of heart as the privatisation proposals began to be firmed up? By shielding its full cost structure from the competition the CEGB is insulating itself from the full discipline of market forces, to the disadvantage of consumers.

For area boards to be saleable they need to have long-term contracts. The 70 per cent. CEGB and its 30 per cent. competitor will have the advantage of operational generating plant, and if they are allowed to establish bulk supply tariff agreements with high fixed cost elements in the immediate period after privatisation this will keep out independents for a long time to come. Therefore, it is vital that a regulatory authority is brought into being before privatisation to oversee pricing and terms of trade in electricity.

Rates have already been mentioned in the debate. The rates for independent producers are up to 40 times as high as those for the CEGB. In 1986 the Government promised to bring the rating of independents in line with that of the CEGB. This is long overdue and vital for real and fair competition in future.

I turn next to conservation, which was mentioned by the hon. Member for Truro (Mr. Taylor). In the present nationalised monopoly there has been a conflict between the coal industry, which has wanted more coal mines, and the CEGB, which has wanted more generating plant, and the campaign to save on energy costs. Under the Government's Monergy campaign, a target of 20 per cent. savings was set. Only 2 to 4 per cent. has been achieved so far, so there is a great deal to do. The target saving of £7 billion is equivalent to six Sizewell B plants. We need to press forward with these conservation measures.

Once the distribution companies are able to purchase electricity free from the CEGB's monopoly they may change their attitude to measuring success in terms not of how much electricity they can sell but how they can serve the best interests of their customers. They could enter into advice on energy savings, insulation schemes and cheaper long-term tariffs, and enter into contract energy management schemes to reduce wastage and share resulting benefits.

Finally, I turn to the recent report on energy conservation in the north-west region, which the March Consultation Group brought out at the end of 1987. Much has been said about imminent prices increases in electricity for industrial users, but the Opposition do not take into account findings that are set out in reports such as that produced by the March Consultation Group. It states that in the industrial and commercial sector there is scope to save 15 per cent. of final energy demand from measures that would use existing technology, with paybacks in two years or less. This is worth £250 million a year to the northwest regional economy. It would provide a welcome boost to profits and to employment. Secondly, it concluded that in many instances top management was not convinced that energy efficiency was worth while. Either energy costs are not a major area of concern for them—and that would drive a coach and horses through the argument advanced by Opposition Members—or the case for investment has been badly presented.

The electricity supply industry, unlike most other industries, but like many other utilities, is faced with a situation where all its shareholders will be its customers. These people will have a focal point. There will be an occasion at which they will be able to make known their views, and that is the annual general meeting. Shareholders will, as a result, have higher than normal expectation of performance. Profit at the expense of service will not be acceptable in future.

Photo of Alex Salmond Alex Salmond Deputy Leader, Scottish National Party 8:49 pm, 7th March 1988

I want to address some of the arguments put forward in the reasoned amendment tabled in the names of my hon. Friends and myself. Of the two amendments on the Order Paper this is the one that addresses not only the principles involved in electricity privatisation but the distinct and individual issues raised by privatisation in Wales and England on the one hand and Scotland on the other.

First, I shall discuss privatisation in England and Wales. The great challenge facing anyone proposing such a foolhardy policy would have been to find a structure which, by introducing competition, would have outweighed the technical disadvantages and extra cost of breaking up the CEGB's hold on generation and transmission. Those costs were estimated by the CEGB as being about £1 billion, or 10 per cent. on electricity prices. Has the Secretary of State found such a competitive structure? The answer is an unambiguous no. He has entirely given up trying to introduce competition for distribution. He said on 25 February: The distribution and transmission of electricity are largely natural monopolies.—[Official Report, 25 February 1988; Vol. 128, c. 454.] The right hon. Gentleman said something similar when opening the debate this evening.

What about generation? The Secretary of State for Energy betrays a complete lack of understanding of the central difficulty in introducing a competitive structure into electricity generation in England and Wales, where there is undercapacity in the system. One cannot have effective competition in a structure in which there is undercapacity. If there is undercapacity, any generator, "Big G," "Little G" or one of the PGs, can generate safe in the knowledge that its electricity will be used, and that it can price it, regardless of generation costs, at the cost of the marginal producer of electricity.

This basic problem of introducing competition into generation has been well aired in the evidence before the Select Committee on Energy. It is a great pity that the Secretary of State for Energy did not allow that evidence to run its full course before producing his White Paper. He was faced with a choice — to produce a technically efficient structure with no competition or a pseudo-competitive structure that was technically inefficient. He chose the second, the chic solution. That is hardly surprising — he could hardly have done anything else. Having told the Conservative party conference that he was going to introduce the privatisation of electricity, he could hardly have gone back to a future conference and announced that he was not going forward with that policy. But if the problem had been looked at with an unjaundiced eye, the inescapable conclusion would have been that the industry in England and Wales belonged to the public sector because no effective competition could be introduced.

If the Secretary of State for Energy produced a botched job for the electricity privatisation for England and Wales, it was as nothing compared with the pig's breakfast produced by the Secretary of State for Scotland. He is dealing with, arguably, the most efficient electricity generation industry in western Europe. It is significant that, in the illustrations and comparisons produced by the Central Electricity Generating Board before the Select Committee on Energy, the only international comparison with which it did not compare favourably was the Scottish example.

The one failing of the Scottish system has been the incredible build-up of over-capacity — 6,000 MWs of demand at peak load but with generating capacity, after Torness, of about double that. When Torness comes on stream, 60 per cent. of Scottish electricity generation could be met by nuclear baseload—a ridiculous percentage in a country with such diversified potential from oil, gas, hydropower and wind and wave renewables.

Photo of Mr Rhodri Morgan Mr Rhodri Morgan , Cardiff West

I believe that that gives the lie to the justification given by the Secretary of State for the 15 per cent. price rises in England and Wales compared with the much smaller rise in Scotland. The justification given for increasing electricity prices by 9 per cent. this year and 6 per cent. next year in England and Wales is to increase the rate of return above the 2·75 per cent. — or to take money off the electricity consumer in order to buy nuclear power stations that he does not want, which is even worse. The idea is to increase the rate of return. It should apply more strongly than in Scotland, where prices will rise by only 2 per cent.

Photo of Alex Salmond Alex Salmond Deputy Leader, Scottish National Party

The hon. Gentleman is right in that many and various reasons will he given in electricity price rises over the next few years if these proposals go through.

The weakness in the Scottish system has been the buildup of over-capacity. There is nothing endemic to a publicly controlled system which produces over-capacity. The build-up has been because of specific and foolish decisions made by successive Governments.

There are five major failings in the White Paper proposals for electricity privatisation in Scotland. It was an enormous job to boil down, given the incredible lack of specific proposals in the White Paper, to only five major problems. The first major failing is that, having arrived at the privatisation of the Scottish electricity industry, with its enormously valuable assets, where should the proceeds go? Paragraph 42 of the Scottish White Paper says: all of Scotland's electricity consumers have contributed to these assets". Instead of going on to make the obvious point that all Scotlands electricity consumers should therefore benefit from the sale of these assets if privatisation goes ahead by having the benefits distributed by way of a free share issue, the White Paper arrives at the incredible conclusion that somehow Hydro board investors are desperately anxious to obtain a share of the nuclear capacity of the SSEB, which is to be jointly owned. If Scotland's electricity consumers have paid, through their bills, for the build-up of this capacity, why are they not receiving the benefit from the sell-off? Why is the Treasury receiving the benefit? Why are Scottish customers being mugged by the Treasury?

Consumers will also he mugged by the privatisated boards; this represents the second problem. The Hydro board already concedes that, in the private sector, it will see a doubling of the effective rate of return from 5 per cent. to 10 per cent. in real terms. That can only come from the bills of the Scottish electricity consumer who, after paying to build up the assets of the Scottish electricity consumer, who, after paying to build up the assets of the Scottish electricity system, will now have to pay dear for the prices charged in the private sector.

The third major weakness is that the Secretary of State made no commitment last Wednesday to the ownership structure of the Scottish electricity system, in marked contrast to the Secretary of State for Energy who, on 25 February, was able to say that something more effective than a golden share would be introduced to the system to ensure that the various elements of English and Welsh privatisation remained autonomous. No such guarantee was given by the Secretary of State for Scotland. Why the difference? Perhaps it is a case of the ringmaster, in the form of the Secretary of State for Energy, and the performing horse, in the form of the Secretary of State for Scotland.

The fourth major disadvantage is that there is no attempt to introduce competition into the Scottish electricity system. The only competitive element in the Scottish proposals is not to introduce competition in Scotland but to introduce it in England and Wales. The rejigging of assets in the Scottish system is designed in such a way that the two Scottish boards will compete to sell electricity in cut-throat competition to the English distribution boards. They will not face a market from individual distribution boards. We already know that from evidence given to the Select Committee. The English distribution boards will combine to make the Scottish boards sell to the grid, and the Scottish boards will face a monopsony buyer.

Photo of Malcolm Rifkind Malcolm Rifkind Secretary of State for Scottish Office

The hon. Gentleman's argument is somewhat confusing. Could he say whether it is his view and the view of his party that if privatisation takes place there should be a single Scottish company rather than the two companies that the Government propose?

Photo of Alex Salmond Alex Salmond Deputy Leader, Scottish National Party

The Secretary of State should have contained himself. I was coming to the fifth failing in his proposals. The competition introduced into the Scottish system will not be for the benefit of the Scottish consumer, but to benefit competition in the English and Welsh systems. That is the sole element of competition in the Secretary of State's proposals. Failing No. 5 deals specifically with the point that the Secretary of State makes. If he had bothered to read the reasoned amendment tabled by myself and my colleagues he would have seen the answer to his question.

We welcome the fact that the Hydro board will remain independent. However, what kind of Hydro board will it be if it is stripped of its social clause and the obligation to perform for the economic welfare of the Highlands and Islands and the rural areas of Scotland? The only guarantee that Hydro board consumers are being given is that there will not be differential tariffs and prices. What about reconnections and repairs to lines in the rural areas? Will the rural areas eventually face the same problems that they already face from British Gas, which treats them quite disgracefully? What guarantees will Hydro board consumers have in the private sector and what guarantee will they have that the Hydro board will remain independent?

My final point underlines the central difficulty in these proposals. It is about whether these privatised boards will operate in the public interest. Just now we have in Scotland a working example in the dispute between the SSEB and British Coal that illustrates these problems. We can explore the policy issues involved in the current dispute. The Government position was expressed on 15 February by the Minister of State for Energy. It was repeated today and it is that the impasse has nothing to do with … privatisation —[Official Report, 15 February 1988; Vol. 127, c. 694.] I have here a letter written by Donald Miller, the chairman of the South of Scotland electricity board. It is a letter to British Coal and is dated 6 January. In the letter, he makes a point about why he is rejecting British Coal's price offer. The letter says: One difficulty that I find in reconciling your statement, that you expect to match world long term coal prices … from the Scottish coalfield by the time we are privatised in some two years or so, with your refusal to make any significant move towards these prices at the present time. I am sure that you will appreciate that, to have any credibility with investors, we must be able to demonstrate these cost trends in a convincing way and that can only be done with a significant price movement in the 1988/89 financial year. It is quite clear from that letter that the nub of the disagreement, the reason for the impasse, is that the SSEB is looking towards privatisation. In the face of the evidence contained in that letter, would the Secretary of State like to repeat his claim that the impasse, the breakdown in relationships, has nothing whatever to do with his policy of privatisation? Let him get to his feet and say how he can deny the evidence of that letter. On the one hand, the SSEB is scared stiff of privatisation and is looking to its role in the private sector. On the other hand, British Coal, as was made clear in the evidence to the Select Committee on Energy, is looking over its shoulder to see what will happen with the CEGB if British Coal concedes anything to the SSEB.

It is inescapably clear that the Government's policy of privatisation has produced the present chaos in the Scottish industry and is threatening the entire future of deep-mined coal in Scotland. I will not accept a tentative intervention by the Secretary of State for Scotland. If he is to do his job at all, he will need to make a definite and full intervention in order to knock heads together and save the Scottish coalfield.

This is an example of a privatisation which is without principle. It is deficient in theory and will be disastrous in practice. In England, Wales and Scotland we have utilities that by international comparison, by "emulation" and by "yardstick competition" are the best in the world. They are the birthright of us all and should not be sent into the private sector.

Photo of Mr Peter Rost Mr Peter Rost , Erewash 9:03 pm, 7th March 1988

In welcoming the White Paper I want to confine my remarks to dealing with the main and persistent criticism by the Opposition. They say that there will not be any competition in generation and that, even if there is, it is unlikely to benefit the consumer. I have news for the Opposition and for the critics of our privatisation programme. Competition is already happening.

Photo of Mr Peter Rost Mr Peter Rost , Erewash

If the hon. Gentleman will contain himself I shall tell him. Offers from private generators are already coming forward to the area boards. Contracts are already being negotiated at prices per unit of electricity that are lower than the prices that the area boards presently pay to the CEGB. There is evidence not only that competition is coming forward, but that the prices at which electricity is offered to the boards are lower than the boards pay at the moment.

Competition is building up from many sources, and hon. Members have referred to some of those already. New capacity is coming from independent producers, some of whom are buying old power stations which the CEGB no longer wants. They are refurbishing those power stations and using coal as fuel. Major companies are also producing new capacity. For example, Hawker Siddeley has been waiting to market its combined-cycle technology in this country, but the CEGB was not interested. Therefore, Hawker Siddeley had to rely on the export market. The company will now have an opportunity to prove that it can generate cheaper electricity by its method than the CEGB can produce in its traditional large power stations.

Opposition Members have consistently tried to remind us this evening that British Coal is down and out or about to go under. However, British Coal has announced that it intends to enter the business of electricity production to prove its fluidised bed technology, in which the nationalised electricity monopoly was not interested. That technology is well established in other countries which are in competition with us. Of course, it is our technology, but it has not been established in this country because the monopoly ignored it.

My hon. Friend the Member for Devon, North (Mr. Speller) spoke elaborately about the opportunities that would arise for renewables if they can compete. They will be able to plug into the grid because it will be open. Combined heat and power production is being developed and much more will be developed. I understand that the Department of Energy is undertaking a study that is likely to reveal that the equivalent electricity production of three major power stations is waiting to be used from stand-by generators in hospitals, Government offices and even in this place. Those generators simply need a little conversion so that heat can be used and they will also produce surplus electricity far cheaper than the construction of a 1,000 MW power station.

Probably the most important source of new and cheaper electricity is industry itself. Industry will generate more of its own electricity. British industry is bottom of the European league for industry generating its own power. No wonder the Confederation of British Industry whinges about high energy prices. It has not had the opportunity to generate its own electricity in the way that German industry and industry elsewhere generates its own energy.

Photo of Mr Peter Rost Mr Peter Rost , Erewash

I hope that the hon. Gentleman will forgive me, but I have only a few minutes left.

Industry in other countries generates far more of its own energy. I have seen an interesting memoranda from ICI which proves this point. At the moment ICI uses about 650 MW of electricity. It produces half itself in cooperation producing processed heat and electricity. It must import the other half — in fact, about 350 MW are imported. It has carried out feasibility studies on its plants, which show that it could have converted them to cogeneration and produced cheaper processed heat and electricity if it had been offered a fair price for the export of that electricity. It would have done that if the nationalised monopoly had not abused its powers by not offering a fair price for the surplus. The ICI study showed that it is likely to turn its present level of imports into exports of about 700 MW. In other words, one company could swing from being a major electricity importer to being a major electricity exporter. That electricity could be offered at a lower price than area boards now pay for electricity from the national grid.

Photo of John Redwood John Redwood , Wokingham

Does my hon. Friend agree that the Government should also take an interest in the terms and conditions of the sale of redundant power stations as there have been problems over the speed and conditions of sale and many more power stations could be used profitably?

Photo of Mr Peter Rost Mr Peter Rost , Erewash

My hon. Friend is absolutely right.

There are one or two other ways in which privatisation will allow the private sector to prove that it can generate electricity more cheaply. One of them is the use of municipal refuse as a fuel. We are bottom of the European league in using our refuse. We still dump it in holes.

Photo of Mr Peter Rost Mr Peter Rost , Erewash

I wish the hon. Gentleman would belt up so that we can get on with the debate.

We are bottom of the league in using our municipal refuse. We prefer to dump it in holes rather than put it into power stations, produce electricity and heat cities with it. A very good scheme in Edmonton uses some of London's refuse to produce electricity. There is also a very good scheme in Nottingham to produce district heating and electricity. However, we have not tapped the huge potential that exists for producing cheaper electricity and heating, simply because the nationalised industry—the CEGB—has not wanted to develop the technology.

As my hon. Friend the Member for Exeter (Mr. Hannam) said, there is enormous potential for producing far more cheap electricity by developing city district heating. Electricity from city district heating is a byproduct and is therefore much cheaper. The reason why Denmark, Sweden and Finland have the cheapest electricity in Europe—it is much cheaper than ours—is that much of their electricity is a by-product of heating. They have combined heat and power city district heating. Thanks to the enterprise of a private consortium and the East Midlands electricity hoard, a scheme is under way in Leicester. A similar scheme in Sheffield is supported by the Yorkshire board and the Eastern area board is also likely to develop schemes. Each of the schemes will produce only 100 or 200 MW of electricity but, as a by-product, that electricity will be very cheap—certainly cheaper than the electricity that the boards buy from the grid at present. If we develop more city district heating, we shall top up our electricity capacity as well as getting rid of our fuel poverty.

Other hon. Members may wish to contribute, and I therefore conclude by reminding the House that evidence is now coming forward to show that electricity can be produced more cheaply from all sorts of sources. We are now to give ourselves the opportunity to prove that by allowing competition. Because the area boards will now have the opportunity to shop around for their power supplies, instead of having to buy from one captive supplier, the CEGB, all sorts of exciting things will happen. Undoubtedly, the competition that will result will lead to a surge of new capacity, to lower-priced electricity and to a better deal for the consumer.

Photo of Graham Allen Graham Allen , Nottingham North 9:13 pm, 7th March 1988

I agree with one thing that the Secretary of State has said today—that his announcement will be widely welcomed, and it will. In Poland, General Jaruzelski cracked open a bottle of vodka to celebrate when he realised that he would be able to export yet more coal to this country. No doubt, the Broederbond and president Botha started to jump up and down when they realised that the coal produced on slave labour wages in South Africa will soon have a market in this country. The child exploiters in South America will also he happy about the announcement made by the Secretary of State. I am sure that the Secretary of State can suggest even more people who will be delighted about this announcement, including those who run the French nuclear industry. Those nuclear power stations on the other side of the Channel sit like a row of Roman candles waiting for 5 November.

This announcement will be welcomed worldwide. The only place it will not be welcomed is in this country, and particularly in Scotland, which is acting as a guinea pig for something that will happen to the rest of us soon after. Not only is the Government's proposal morally wrong, but it does not work in terms of their own economics. No risk-taking or entrepreneurial thrust is necessary to make a success of this. It has been gifted. Our electricity industry is being handed over to friends of the Tories without the necessity for those people to take risks.

The Opposition's responsibility is to make sure that our people realise that they will be paying for privatisation. The taxpayers and all people who pay electricity bills have paid for previous investment. That investment is now to be confiscated for the Tories and their friends in the City. We shall pay further because tax revenue, which used to be relatively easy to come by, will no longer be milked from the CEGB. That revenue will have to come from other sources.

A 15 per cent. increase in the price of electricity is in the pipeline, and people will have to pay that as well. There will be the usual debt write-off that we see before any privatisation to make sure that people are prepared to take on the new company. People will have to pay further so that the Tories can make a better job of floating this company than they have with others for which the price has been so low that a massive killing has been made by the City rather than by the taxpayer and the Treasury.

Every way we look at it, taxpayers and individuals will pay. I hope that the Secretary of State will come clean and say how much money the Government will be asking for the electricity industry when they put it on the market. Perhaps he will again leave it to his permanent secretary to explain the matter to the Public Accounts Committee, where he will certainly be cross-examined when this matter comes before it.

Furthermore, there are balance of payments implications. If we import cheap coal, another £1 billion will be added to the £14 billion deficit that we are now running. The heaviest price will be paid by those who make a direct living from the coalfields, not least those in Nottinghamshire. Again, I ask for an absolute guarantee that the planned coal-fired power stations will go ahead. That must include the West Burton coal-fired station.

The economic theory that all this demand can be met from the international coal market flies out of the window, because stock market prices will be changed as soon as demand from this side of the water increases. The major problem will be that the social effects of this proposal will be met by miners, by their families and by people who depend upon the mining industry. Privatisation has come about partly because of the Government's obsession with the mining industry and in particular with breaking the National Union of Mineworkers.

The Secretary of State said that one of the reasons for diversity of supply is the abuse of monopoly power that certain elements of the coal industry have demonstrated that they enjoy using. Those are the politics of personality. Arthur Scargill is the butt of this privatisation proposal. It is not governed by economic or social sense; it is merely a desire to get back at the miners and break their power.

That is evident from the leaked Cabinet minutes of 1979. The long-term planning of this Government is a lesson for my right hon. and hon. Friends when we are returned to power.

The Opposition need to say to the people of Britain that they will have to pay for the City's bonanza, but that we shall return the industry to public ownership, though not in the old form and not with the old faces, as when we first nationalised the coal industry. Nevertheless, the Opposition will ensure that the people of this country are never again robbed of assets that are theirs.

Photo of Donald Dewar Donald Dewar , Glasgow Garscadden 9:20 pm, 7th March 1988

When the Secretary of State for Scotland introduced his White Paper on privatisation he proclaimed that the electricity industry was efficient, well managed and successful. I do not dissent from that statement, but the question arises as to why we are about to plunge it into a period of unprecedented uncertainty because of the Government's crazy scheme. I can think of a number of reasons, none of which is entirely honourable.

There is the possibility of political calculation—the rather insulting suggestion that anybody who owns shares automatically votes Tory. There is also the cash temptation. It has been said that £27 billion may be raised by the sale of these assets. However, the nation will be flogging off its future to finance tax cuts. There is also the argument that the sale will earn brownie points for the Secretary of State for Scotland who has been trying of late—with some success, I am afraid—to live down his past. None of these arguments holds water in terms of the industry, the consumer and the national interest.

The Opposition are opposed to privatisation. There is no case for replacing a public utility with private monopolies. The Secretary of State for Energy told us in his statement that it is unacceptable to create a single monopoly, but I do not follow the logic of the argument that it is all right to create two monopolies that are harnessed in tandem. We in Scotland do not even have the split between generation and distribution that perhaps gives a figment of respectability to the competition argument south of the border. In Scotland, not even that argument, for what it is worth, stands up. Each board in Scotland will be a monopoly for the vast majority of consumers in its area. To talk about competition by comparison is a mockery. The argument was greeted with derision in the House and in the country; nobody takes it seriously.

The consumer is entitled to be very sceptical about this scheme, which appears to be founded on the market principle. It hands over a basic utility to profit-driven companies whose legal duty is to maximise the return on their capital for their shareholders. Then, desperately, the Government try to regulate the process and prevent companies from acting according to the logic of the scheme. It is an unhappy marriage; it is not in the public interest; and I do not believe that it will work.

There is a cautionary tale to which I shall draw the attention of the Secretary of State for Energy. An analysis of gas disconnections was carried out recently by the Gas Consumers Council. I do not have time to go into it at great length, but the simple tale is that disconnections of gas consumers increased by 35 per cent. in the first nine months of 1987. It reminds us that there is very little room for social conscience when a company with commercial priorities looks at bad debt control and the need to encourage its cash flow.

People are entitled to say that they do not want the same painful experience with electricity. It is because we are conscious of that fact that I have a great deal of sympathy for and will support the proposal that we should retain the traditions of the hydro-electric board and, if necessary, on the basis of a separate and distinct company. I want to stress that our opposition to the whole scheme is total, and that we are merely commenting on what seems the best way of minimising the damage that will result from a very bad option.

Even if the hydro-electric board survives, it is important that it survives in a workable framework. The Opposition are not yet convinced that all the details have been worked out in a way that establishes the practicality test. After all, we heard talk about population transfers in the Secretary of State's statement, and there is also talk of the possibility of plants being transferred. There is a rumour, for example, that Kincardine will go, to the North board to give it some share of the coalburn—although that seems almost a fanciful suggestion, in view of the scenario now developing in Scotland.

We must also consider the question of the joint nuclear capacity. We do not know whether this will he a wholly-owned company, shared by the two boards. We know, however, that the Secretary of State, for reasons that are not yet clear, has decided to go to considerable lengths to avoid what has happened in England, where, on the generating side, there is a "green option". Of course, at present there is a pooling of costs between the SSEB and the hydro-electric board on roughly a 25:75 per cent. basis. That kind of co-operation can work well in the public sector, but in my judgment—which I am sure is widely shared — there will be problems when the commercial interests of two separate companies begin to diverge.

For instance, there are the decommissioning costs and the problem of the accumulated capital debts—over £2·5 billion between the two companies. We shall want to hear what the Secretary of State proposes in that regard. There is also the potential problem, probably towards the end of the century, of new plant. There may be disagreement, for instance, about whether it uses PWR or AGR. The elements of conflict when there are different priorities, different needs and two independent commercial companies are self-evident.

The solution begins to look curiouser and curiouser. It is a mish-mash of prejudice and expediency, and I do not believe that it is good for anyone. It is interesting to note that even the Government, looking at what they are creating, have begun to have doubts about the market theory. We know that the Secretary of State has decided that there should be special protection for the nuclear industry south of the border. That, I should have thought, is an implicit recognition that commercial judgment might well kill the nuclear dream if given an unfettered opportunity. But, although the dangers are now all too evident, there has been no such consideration for the coal industry in Scotland.

The Scottish coalfield is fighting for its very life, but decisions are now being taken that threaten thousands of jobs and the future of entire communities. The substitution of imported coal has far-reaching implications for national policy, and for security of supply in the electricity industry. It is extraordinary that the Scottish Office has remained a passive spectator as the drama has unfolded.

Judging by press speculation, heavily trailed over the weekend, the Secretary of State for Scotland is to break his silence in a few minutes' time. The Secretary of State smiles. I hope that my optimism is not unfounded. The reports speak of the Minister's grave concern and of his reluctance to go down in history as the man who supervised the demise of the coal industry in Scotland. The Secretary of State, it is said, is intervening to urge the parties to get round the negotiating table and thrash out a solution. We shall know in a minute or two exactly what the right hon. and learned Gentleman is going to propose. I must tell him that any sign of conscience in Dover house is welcome, but pious hopes of resumed negotiations are not enough.

It is clear that, sadly, there has been a total breakdown of trust between British Coal and the SSEB. The SSEB has abided by the letter of the Court of Session judgment and the interdict, but it seems to have set out to breach it in spirit. The board will not buy foreign coal for Cockenzie and Longannet, but neither will it burn Scottish coal. The trick seems to be to substitute oil and to use coal imports in other plants such as Kincardine. As reported in the daily press, Lord Prosser has talked in his judgment of the catastrophic and irreversible effects of buying foreign coal, but the SSEB is clearly not paying any attention to that. In those circumstances the Secretary of State for Scotland must do more than eloquently mouth expressions of concern.

The key issue is the SSEB's claim that imported foreign coal will result in savings of £50 million or a 5 per cent. cut in electricity tariffs. It is a calculation that British Coal regards as incredible, in the full meaning of the word. It is something that simply cannot be believed. The Scottish Office has a duty to examine and evaluate those competing claims.

We know that the price of coal has come down by 25 per cent. in real terms since 1985. We know that a deal has been offered through to the year 2000 which will mean further cuts in prices over the next one or two years. I am told that the cuts will be 5 or 6 per cent. in cash terms and close on 10 per cent. in real terms. We recognise that there are enormous arguments about security of supply and the likely impact of shopping around for temporary advantage in the spot market to find the cheapest form of coal. Spot markets, by definition, can come under pressure and price rises will appear with demand. Recent history is littered with miscalculations and misjudgments by management about energy prices. Calculations of temporary advantage are no sure or sensible foundation for long-term strategy.

If the SSEB's figures do not stand up to careful and impartial scrutiny by the Scottish Office, the case for saving Scottish coal is immeasurably strengthened. If the Secretary of State evaluates the figures and finds that there are savings of the sort about which the SSEB has spoken, presumably he will be able to give us assurances that the equivalent of the 5 per cent. saving in tariff will be passed on in price cuts to the consumers. If he accepts the figures, he owes us that at least.

The important thing is that the impression left with us by the Minister of State at our recent meeting was that the Scottish Office was a spectator and was not involving itself in the argument. It is essential that we get from the Secretary of State a retreat from that hands-off position and an agreement that he will at least look at the figures and decide what is in the public interest.

I understand that the Secretary of State for Scotland said on Radio Forth this morning that he could not interfere with the price to be paid for coal.

Photo of Donald Dewar Donald Dewar , Glasgow Garscadden

1 will not give way. Some Conservative Members might have a valuable contribution to make to the debate.

As I have said, the Secretary of State argued on Radio Forth that he could not interfere with the price to be paid for coal. He suggested that the Government have no more right to oblige the SSEB to buy Scottish coal than they have to force individuals to buy a British car if it is more expensive than one made abroad. It is quite wrong to liken a private citizen's right to consumer choice when buying one unit in a mass market with a Government decision, or non-decision, that may decide the fate of a strategic industry.

Unless moderated, the SSEB's policy will, in effect, sack 3,500 Coal Board employees at a cost of nearly £60 million in redundancy payments. In effect, it will write off the £60 million spent in the past two or three years at Castlebridge, which was referred to by my hon. Friend the Member for Dunfermline, West (Mr. Douglas). It will write off the £60 million development planned for Bilston Glen and, despite what the Secretary of State for Energy said in his opening remarks, it will greatly restrict the activities of private sector contractors in opencast mining. My hon. Friend the Member for East Lothian (Mr. Home Robertson) knows that from his constituency experience. The stakes are high and the Secretary of State cannot walk away from his responsibilities.

In 1987 the SSEB, in reply to the Monopolies and Mergers Commission report, argued that the purchase of foreign coal was not in the interests of its consumers. I have its reply with me. It said: Although the Board will continue to monitor the price of imported coal it is not considered to be in the long term interests of the Board's customers to import foreign coals in present circumstances. That was only one year ago. The single decisive change is the advance of privatisation, which inevitably invites the board to put profit before public interest. The Secretary of State and his policy are responsible for that position.

On 25 February, the Secretary of State for Energy told the House that a principal condition for maintaining security of supply in the electricity supply industry was use of a diversity of fuels to generate electricity. He gave an assurance that coal will still be the biggest single source of power south of the border. He boasted—that is not too strong a word—that this safeguard was "built into the system". If that is so, why should the Scottish Office allow the coal industry in Scotland to be murdered? Do not the same sensible priorities apply? The Secretary of State will not be forgiven if he ducks his self-evident responsibilities. His policies have done much to create the present problem. His duty is to act now before imminent catastrophe becomes reality and social and economic damage are made irreversible.

It is ludicrous to pretend that these events are unconnected with privatisation. The South of Scotland electricity board has a profit margin that is eaten by interest charges. It has a substantial debt as a result of building Torness. If it is to be successfully fattened for the market, the kind of policies which we are now seeing are, no doubt, thought to be essential, but they are not in the public interest.

The right hon. Member for Kincardine and Deeside (Mr. Buchanan-Smith), in what was in many ways a courageous and persuasive speech, talked about the "hysterical and emotional" approach—I think that those were his words, although I did not write them down exactly — in relation to the policies of the South of Scotland electricity board. I beg to differ. I wish that I could agree, but I do not think that they are hysterical and emotional. They are probably totally defensible if the chairman of a public board decides to act as the chief executive of a private company with the new priorities—profit oriented and profit driven — which are then involved. Because that will happen increasingly, the story of Scottish coal over the past few months is a cauutionary one, a tale for our times, and a powerful case against the White Paper and all that it stands for.

There are many unanswered questions. I do not apologise to the House for the amount of time that I have spent on talking about the coal crisis because it is central to the concerns of all of us in Scotland. There are many unanswered questions. Doubtful half-truths litter the Government's case. I mention only two. One is the problem of nuclear safety. Of course I understand the case that the Government argue — that the Nuclear Installations Inspectorate will still be in place—but we must think about the public reaction. Even those who are totally committed to the proliferating family of PWRs must be concerned about the public's deep anxiety over nuclear safety and what is likely to happen if it becomes the charge of a group of directors of private companies who have forgotten the priorities that I have discussed. It is fundamentally misconceived to move in that direction, and that is a major argument against the proposals.

There is also the point, which was made most recently by the hon. Member for Banff and Buchan (Mr. Salmond), about the independence of these companies, and again I think especially in Scottish terms. The Secretary of State for Scotland shook his head vigorously when that point was made. It is true, and there is no denying it, that the independence will be hard to defend when privatisation comes. I am not clear how we can withstand a determined predator, what guarantees can be given and what those guarantees would be worth after the Britoil fiasco. On 25 February, the Secretary of State for Energy said: Yes, Britoil has shown that there are weaknesses in that arrangement"— the golden share— but there are other versions that can be put in place just as easily."—[Official Report, 25 February 1988; Vol. 128, c. 459.] I hope that the Secretary of State will give us an insight into what those other arrangements that can be put in place just as easily are likely to be. I hope that he will fill the startling void to which the hon. Member for Banff and Buchan referred. There is no assurance from the Secretary of State for Scotland of action in this way.

This is a fundamental debate, and I return to the point made by the right hon. Member for Kincardine and Deeside. He complained about political interference and said that he was surprised that senior executives in the electricity industry put up with it. I suppose that they are one group that is likely to benefit from the Government's plans. Indeed, I do not think that there is any doubt about it. However, they are a narrow group and do not command my sympathy.

The important thing—the right hon. Gentleman drew attention to this by implication — is that Government after Government have accepted that there is a public interest in the supply of energy and in the fuels that our generating capacity burns. Whether by the gas levy—a tax to depress the demand for that particular form of heating — or the regulatory machinery built into this White Paper, successive Governments have accepted the need for security of supply on a broad base of fuel consumption, which is an essential prerequisite of that security of supply.

There is growing resentment and fury, mixed at times with dismay and despair, about the way in which the coal industry in Scotland has been dealt with and the likely hazards and dangers that lie ahead because of privatisation. Those points were made by my right hon. Friend the Member for Glasgow, Govan (Mr. Millan) and by my hon. Friend the Member for Dunfermline, West. There is an edge of anger to our rejection because this is not an academic matter. This is not a parliamentary or economic equivalent of war games at staff college; this is for real. This is about jobs and people, and the fate of communities. They should not be sacrificed to what I fear is no more than the dogma of this Government.

Photo of Malcolm Rifkind Malcolm Rifkind Secretary of State for Scottish Office 9:40 pm, 7th March 1988

This debate, as was perhaps inevitable in any debate on privatisation, has been conducted at two levels: at the level of principle — about the principle of privatisation — and at the level of the detailed and technical questions as they relate to the electricity industry.

So far as the principle is concerned, we have heard the traditional view from the Labour party, that industries—especially the great industries of this country—should be controlled by the state and that ultimately it is the Government who can best take the decisions on fundamental questions of investment and other matters that are relevant to the industries. Clearly, the Government's view—it has been the Government's view for many years—is that while Governments of whatever political complexion may be good at governing, they are rarely good at running industry. It is infinitely to the national interest, and to the interest of the general public as consumers, that an industry should he run and administered by those within the industry itself.

We have been asked to state what benefits will flow from privatisation. The first point that I should make to the hon. Members for Glasgow, Garscadden (Mr. Dewar)—it has been made by some of my hon. Friends already during the debate; indeed, my right hon. Friend the Member for Kincardine and Deeside (Mr. Buchanan-Smith) began his speech with this—is that inevitably any industry controlled by Government is subject to interference from Government. We know that the electricity industry, whether under this Government or the previous Labour Government, has had its major investment decisions changed on the basis of the general economic strategy of the Government of the day. Each year when public expenditure is being surveyed and when the public sector borrowing requirement is being considered, the Chief Secretary of the day, whether Labour or Conservative, takes a detailed interest in matters that properly should be the affair of the industry.

I advise the hon. Member for Garscadden and his hon. Friends that it must be in the interest of the electricity industry, north and south of the border, that the crucial decisions affecting its investment and other such matters should be determined by the industry itself. If that is true of manufacturing industry and the rest of British industry, there is no good reason why it should not be true of the electricity industry as well.

Photo of Malcolm Rifkind Malcolm Rifkind Secretary of State for Scottish Office

No, I shall not give way.

The second point that I should make to the hon. Member for Garscadden is that he and his hon. Friends have sought to make a mockery of the arguments used about competition. I must advise those hon. Members that they start from a false premise, so it is not surprising that they reach a wrong conclusion. They start from the false premise that the Government are somehow maintaining that it is possible to achieve classical standards of competition in the electricity industry. The Government have never maintained that. Indeed, my right hon. Friend the Secretary of State for Energy made it clear that, in transmission and distribution, we are dealing with natural monopolies.

Opposition Members fail to understand the real world because they seem to argue that, because it is not possible to achieve perfect competition, we should therefore make no attempt to introduce into the electricity industry such competition as is possible and attainable. [Interruption.] My hon. Friend pointed out that—[Interruption.]

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. The House heard the hon. Member for Glasgow, Garscadden (Mr. Dewar) in silence. I ask the House to give a fair hearing to the Secretary of State.

Photo of Malcolm Rifkind Malcolm Rifkind Secretary of State for Scottish Office

My hon. Friends the Members for Bedfordshire, North (Sir T. Skeet) and for Erewash (Mr. Rost) mentioned the extent to which we are already seeing the benefits of the Government's privatisation policy with regard to the sale of electricity to other areas of the country. When they said that, the hon. Member for Cunninghame, South (Mr. Lambie) said, "What about Scotland?" Such sales are relevant to Scotland because, only last week, BNFL reached an agreement with the Chapelcross power station in the constituency of my hon. Friend the Member for Dumfries (Sir H. Monro). In the past, that station supplied the SSEB, but it no longer has the same need for that power. Therefore, in future, that power will be sold to the North West authority in England. That is an excellent example of how the export of Scottish power to those parts of England that need it is in the interest of the consumer, the public and the industry.

It is significant that if I give a specific, concrete example to Opposition Members, they do not like it because it conflicts with their prejudices. [Interruption.]

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. It is intolerable that the Secretary of State is being shouted down in this fashion.

Photo of Mr Harry Ewing Mr Harry Ewing , Falkirk East

On a point of order Mr. Speaker. [Interruption.]

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. I cannot even hear the point of order.

Photo of Mr Harry Ewing Mr Harry Ewing , Falkirk East

The important point is that 4,000 mining jobs and another 10,000 ancillary jobs are at stake in Scotland, The Secretary of State for Scotland is simply refusing to acknowledge that some 14,000 jobs are at stake and is refusing to answer that charge.

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

I ask the House to give the Secretary of State the opportunity to do so.

Photo of Malcolm Rifkind Malcolm Rifkind Secretary of State for Scottish Office

I shall come to that matter, but I shall come to it in my time and not in the hon. Gentleman's time.

The hon. Member for Garscadden, in his usual indirect way, complimented the Government on one decision. He and his hon. Friends have made it clear that if privatisation is to take place, they applaud the Government's proposal that, in Scotland, there should be two separate boards and that a single company representing the electricity industry in Scotland should riot be created. We are delighted that, in addition to that support, the hon. Member for Garscadden and his hon. Friends have made it clear that when shares in the electricity industry are offered to the public in Scotland they will respond well. I thank the hon. Member for Garscadden for making that point.

Photo of Malcolm Rifkind Malcolm Rifkind Secretary of State for Scottish Office

Well, the hon. Gentleman may say that, but I had the benefit of listening to him when he was interviewed on Radio Scotland on Friday morning. [Interruption.] I could not believe my ears and so, to be certain, I got a transcript of what he said. When the hon. Member for Garscadden was asked about the privatisation, he replied: Well, I think initially a lot of Scots will buy and if we're going down the privatisation road, then clearly I would prefer to see a widely spread share ownership very strongly based in Scotland". Well, better a sinner that repenteth. I thank the hon. Gentleman for the endorsement that he has given.

Let us now consider the other matter which dominated the speech of the hon. Member for Garscadden, and which is, I accept, a matter of genuine concern in Scotland and throughout the country. First, let me deal with the question whether the current dispute between the SSEB and British Coal is a consequence of the Government's privatisation proposals. They hon. Gentleman and the House will be aware that the SSEB is under a statutory obligation to ensure the lowest tariffs for its consumers. It would have to face that responsibility even if the Government had no proposals for privatisation. The SSEB maintains that it must pay much more for the coal that it acquires from British Coal than it would for coal that it could obtain on the world market. Labour Members will appreciate that that creates problems that cannot be summed up in the somewhat emotional response that we have heard from some quarters.

The outcome of the dispute will determine the price of electricity that will have to be paid by Scottish consumers, including Scottish industry, during the next few years. The current gap between the price of British Coal's product and the prices obtainable on the world market is said to represent at least 4 per cent. on electricity tariffs. Scottish industry needs to pay as little as possible for its electricity if it is to enjoy growth, export potential and a continuing reduction in unemployment.

Of course, I acknowledge that there are implications for the deep pits and the jobs that they provide in the Scottish coalfield. Those pits are important, although they do not represent the entire coal industry in Scotland, as is often suggested. Half the coal mined in Scotland is opencast, and there has been a major expansion of opencast coal production during the past 10 years.

In recent days, the SSEB and British Coal have expressed a willingness to resume negotiations to try to bridge their remaining differences. I encourage them to do so. Agreement is less likely to be reached if either side refuses to show any flexibility. However, if the SSEB and British Coal approach the matters in a genuine constructive desire to reach agreement, there is no reason to believe that agreement will not be achieved. The next stage is for the SSEB and British Coal to get round the table again and explore how much or how little they must move to realise a satisfactory outcome. I trust that they will do so.

Photo of Donald Dewar Donald Dewar , Glasgow Garscadden

The Secretary of State appears to be saying that he hopes that negotiations will reach a successful conclusion, but that he will do nothing to achieve that result. Is he simply watching again from the sidelines? If so, is that not a shameless abdication of his responsibility?

Photo of Malcolm Rifkind Malcolm Rifkind Secretary of State for Scottish Office

If the hon. Gentleman is suggesting that the Government of the day should determine the price that an electricity board pays for the coal that it receives from British Coal, I must tell him that that standard is not applied in any other feature of our industrial structure; nor is it an approach that makes any sense.

Photo of Alex Salmond Alex Salmond Deputy Leader, Scottish National Party

Given the contents of the letter from Donald Miller to British Coal rejecting its offer on the basis of credibility with his investors, does the Secretary of State seriously maintain that the breakdown between the SSEB and British Coal has nothing to do with the Government's privatisation policy?

Photo of Malcolm Rifkind Malcolm Rifkind Secretary of State for Scottish Office

The difference of view between the two boards is that, for understandable reasons, the SSEB wants to pay as little as possible and, for equally understandable reasons, British Coal wants to charge as much as possible for the coal that it supplies. If the boards would approach these matters constructively, there is no reason why agreement could not be reached.

Photo of Mr Bruce Millan Mr Bruce Millan , Glasgow Govan

The Opposition want to know what the Secretary of State is going to do about it. So far, he has done nothing and he has told us nothing this evening. We know that the SSEB is already placing orders for foreign coal. What is the Secretary of State going to do about the collapse of the Scottish coal mining industry?

Photo of Malcolm Rifkind Malcolm Rifkind Secretary of State for Scottish Office

The right hon. Gentleman appears to be more concerned about the deep pits in Scotland than he is about the health of the steel industry in Scotland. [Interruption] As he rightly knows—

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. If the Secretary of State does not give way, the hon. Gentleman must resume his seat.

Photo of Malcolm Rifkind Malcolm Rifkind Secretary of State for Scottish Office

The right hon. Member for Glasgow, Govan (Mr. Millan) knows—[Interruption.] Opposition Members do not like to listen. Barracking does not impress the people of Scotland any more than people in other parts of the United Kingdom. [Interruption.]

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. These are important matters of great concern to the country and the Secretary of State must have a chance to respond to the debate.

Photo of Malcolm Rifkind Malcolm Rifkind Secretary of State for Scottish Office

I shall try to answer the questions that have been asked if I am enabled to do so.

The right hon. Member for Govan knows that Ravenscraig is the largest individual purchaser of electricity from the SSEB. Is he seriously suggesting that the Government should intervene to ensure that Ravenscraig and other industrial users of Scottish electricity should pay more than can be properly negotiated between the SSEB and British Coal? We have a responsibility to the whole of Scottish industry, and we intend to adhere to it.

Photo of Donald Dewar Donald Dewar , Glasgow Garscadden

I want to understand the Secretary of State's position. Anyone who has had contact with either side in the dispute knows that the chances of a settlement seem now to be remote. Is the right hon. and learned Gentleman saying that, even if his hopes are unfounded and no settlement is coming, he will see the pits close, the loss of about 4,000 jobs and all the social dislocation and problems to which that will give rise, and ignore his clear statutory responsibility under the 1979 legislation?

Photo of Malcolm Rifkind Malcolm Rifkind Secretary of State for Scottish Office

I repeat that, if there is flexibility on the part of both British Coal and the SSEB, I have every reason to believe that an agreement can be reached. If the hon. Gentleman and his hon. Friends spent as much of their time impressing upon the SSEB and British Coal the need for flexibility in the manner that I have just done, they would be making a constructive contribution.

This debate—[Interruption.]

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. The Secretary of State must be given a fair hearing.

Photo of Malcolm Rifkind Malcolm Rifkind Secretary of State for Scottish Office

This debate about the privatisation of the electricity industry has arisen because the Government firmly believe that throughout the United Kingdom there are enormous benefits to be achieved for the consumer, for industry and for all those who depend upon electricity for their prosperity. It is—[Interruption.]

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. It is intolerable for the Secretary of State[Interruption] Order!

Photo of Malcolm Rifkind Malcolm Rifkind Secretary of State for Scottish Office

I am well aware that the Opposition have a deep-seated hostility to any attempt to return the electricity industry to the British public. I am well aware also—[Interruption.] We see now a substitute for reason on the part of the Opposition. They resort to barracking —[Interruption]

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. This is not the way to behave in the House of Commons.

Photo of Malcolm Rifkind Malcolm Rifkind Secretary of State for Scottish Office

It is the only way that they know how to behave, Mr. Speaker.

Photo of Mr Harry Ewing Mr Harry Ewing , Falkirk East

On a point of order, Mr. Speaker. It is understandable that you, Mr. Speaker, and the Secretary of State for Scotland — it is especially understandable that you should be in this state of mind, Mr. Speaker, because your job is reasonably secure—should be calm, but it would not be understandable if about 50,000—[Interruption.] The Secretary of State is deliberately betraying—[Interruption.]

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. This is a place in which we all give each other a fair hearing.

Photo of Malcolm Rifkind Malcolm Rifkind Secretary of State for Scottish Office

It is on this basis that I invite the House to give its verdict on the principle of privatisation and on the benefits of what we are doing for the Scottish people and the people of the United Kingdom as a whole.

Question put, That the amendment be made:—

The House divided: Ayes 219, Noes 329.

Division 203][10.00 pm
Abbott, Ms DianeFearn, Ronald
Adams, Allen (Paisley N)Field, Frank (Birkenhead)
Allen, GrahamFields, Terry (L'pool B G'n)
Anderson, DonaldFisher, Mark
Archer, Rt Hon PeterFlannery, Martin
Armstrong, HilaryFlynn, Paul
Ashdown, PaddyFoot, Rt Hon Michael
Ashley, Rt Hon JackFoster, Derek
Banks, Tony (Newham NW)Foulkes, George
Barnes, Harry (Derbyshire NE)Fyfe, Maria
Battle, JohnGalbraith, Sam
Beckett, MargaretGalloway, George
Benn, Rt Hon TonyGarrett, John (Norwich South)
Bennett, A. F. (D'nt'n & R'dish)Garrett, Ted (Wallsend)
Bermingham, GeraldGeorge, Bruce
Bidwell, SydneyGodman, Dr Norman A.
Blair, TonyGolding, Mrs Llin
Blunkett, DavidGordon, Mildred
Boateng, PaulGraham, Thomas
Boyes. RolandGriffiths, Nigel (Edinburgh S)
Bradley, KeithGriffiths, Win (Bridgend)
Bray, Dr JeremyGrocott, Bruce
Brown, Gordon (D'mline E)Hardy, Peter
Brown, Nicholas (Newcastle E)Harman, Ms Harriet
Brown, Ron (Edinburgh Leith)Hattersley, Rt Hon Roy
Buchan, NormanHealey, Rt Hon Denis
Buckley, George J.Heffer, Eric S.
Caborn, RichardHenderson, Doug
Campbell, Menzies (Fife NE)Hinchliffe, David
Campbell, Ron (Blyth Valley)Hogg, N. (C'nauld & Kilsyth)
Campbell-Savours, D. N.Holland, Stuart
Clark, Dr David (S Shields)Home Robertson, John
Clarke, Tom (Monklands W)Hood, Jimmy
Clay, BobHowarth, George (Knowsley N)
Clelland, DavidHowell, Rt Hon D. (S'heath)
Clwyd, Mrs AnnHughes, John (Coventry NE)
Cohen, HarryHughes, Robert (Aberdeen N)
Coleman, DonaldHughes, Roy (Newport E)
Cook, Frank (Stockton N)Hughes, Sean (Knowsley S)
Cook, Robin (Livingston)Illsley, Eric
Corbett, RobinIngram, Adam
Corbyn, JeremyJanner, Greville
Cousins, JimJohn, Brynmor
Cox, TomJones, Barry (Alyn & Deeside)
Cryer, BobJones, Ieuan (Ynys Môn)
Cummings, JohnJones, Martyn (Clwyd S W)
Cunningham, Dr JohnKennedy, Charles
Dalyell, TamKilfedder, James
Darling, AlistairKinnock, Rt Hon Neil
Davies, Rt Hon Denzil (Llanelli)Lambie, David
Davies, Ron (Caerphilly)Lamond, James
Davis, Terry (B'ham Hodge H'l)Leadbitter, Ted
Dewar, DonaldLeighton, Ron
Dixon, DonLestor, Joan (Eccles)
Dobson, FrankLewis, Terry
Doran, FrankLitherland, Robert
Douglas, DickLivingstone, Ken
Duffy, A. E. P.Livsey, Richard
Dunnachie, JimmyLofthouse, Geoffrey
Eadie, AlexanderLoyden, Eddie
Eastham, KenMcAllion, John
Evans, John (St Helens N)McAvoy, Thomas
Ewing, Harry (Falkirk E)McCartney, Ian
Ewing, Mrs Margaret (Moray)McCusker, Harold
Fatchett, DerekMacdonald, Calum A.
Faulds, AndrewMcFall, John
McGrady, EddieRobertson, George
McKelvey, WilliamRobinson, Geoffrey
McLeish, HenryRogers, Allan
McNamara, KevinRooker, Jeff
McTaggart, BobRoss, Ernie (Dundee W)
McWilliam, JohnRuddock, Joan
Madden, MaxSalmond, Alex
Mahon, Mrs AliceSedgemore, Brian
Mallon, SeamusSheerman, Barry
Marek, Dr JohnSheldon, Rt Hon Robert
Marshall, Jim (Leicester S)Short, Clare
Martin, Michael J. (Springburn)Skinner, Dennis
Martlew, EricSmith, Andrew (Oxford E)
Maxton, JohnSmith, Rt Hon J. (Monk'ds E)
Meacher, MichaelSnape, Peter
Meale, AlanSpearing, Nigel
Michael, AlunSteinberg, Gerry
Michie, Bill (Sheffield Heeley)Stott, Roger
Michie, Mrs Ray (Arg'l & Bute)Strang, Gavin
Milian, Rt Hon BruceStraw, Jack
Mitchell, Austin (G't Grimsby)Taylor, Mrs Ann (Dewsbury)
Moonie, Dr LewisTaylor, Matthew (Truro)
Morgan, RhodriThomas, Dr Dafydd Elis
Morley, ElliottThompson, Jack (Wansbeck)
Morris, Rt Hon J. (Aberavon)Turner, Dennis
Mowlam, MarjorieVaz, Keith
Mullin, ChrisWall, Pat
Murphy, PaulWallace, James
Nellist, DaveWalley, Joan
Oakes, Rt Hon GordonWardell, Gareth (Gower)
O'Brien, WilliamWareing, Robert N.
O'Neill, MartinWelsh, Andrew (Angus E)
Parry, RobertWelsh, Michael (Doncaster N)
Patchett, TerryWigley, Dafydd
Pendry, TomWilliams, Rt Hon Alan
Pike, Peter L.Williams, Alan W. (Carm'then)
Powell, Ray (Ogmore)Wilson, Brian
Prescott, JohnWise, Mrs Audrey
Quin, Ms JoyceWorthington, Tony
Radice, GilesWray, Jimmy
Randall, StuartYoung, David (Bolton SE)
Redmond, Martin
Rees, Rt Hon MerlynTellers for the Ayes:
Reid, Dr JohnMr. Frank Haynes and
Richardson, JoMr. Allen McKay
Roberts, Allan (Bootle)
Adley, RobertBowden, A (Brighton K'pto'n)
Aitken, JonathanBowden, Gerald (Dulwich)
Alexander, RichardBowis, John
Alison, Rt Hon MichaelBoyson, Rt Hon Dr Sir Rhodes
Allason, RupertBraine, Rt Hon Sir Bernard
Amery, Rt Hon JulianBrandon-Bravo, Martin
Amess, DavidBrazier, Julian
Amos, AlanBright, Graham
Arbuthnot, JamesBrooke, Rt Hon Peter
Arnold, Jacques (Gravesham)Brown, Michael (Brigg & Cl't's)
Arnold, Tom (Hazel Grove)Bruce, Ian (Dorset South)
Ashby, DavidBuchanan-Smith, Rt Hon Alick
Aspinwall, JackBuck, Sir Antony
Atkins, RobertBudgen, Nicholas
Baker, Rt Hon K. (Mole Valley)Burns, Simon
Baker, Nicholas (Dorset N)Burt, Alistair
Baldry, TonyButcher, John
Banks, Robert (Harrogate)Butler, Chris
Barnes, Mrs Rosie (Greenwich)Butterfill, John
Batiste, SpencerCarlisle, John, (Luton N)
Beaumont-Dark, AnthonyCarlisle, Kenneth (Lincoln)
Bellingham, HenryCarrington, Matthew
Bendall, VivianCarttiss, Michael
Bennett, Nicholas (Pembroke)Cartwright, John
Benyon, W.Cash, William
Biffen, Rt Hon JohnChalker, Rt Hon Mrs Lynda
Blackburn, Dr John G.Channon, Rt Hon Paul
Blaker, Rt Hon Sir PeterChapman, Sydney
Bonsor, Sir NicholasChope, Christopher
Boswell, TimChurchill, Mr
Bottomley, PeterClark, Hon Alan (Plym'th S'n)
Bottomley, Mrs VirginiaClark, Dr Michael (Rochford)
Clark, Sir W. (Croydon S)Hogg, Hon Douglas (Gr'th'm)
Colvin, MichaelHolt, Richard
Conway, DerekHordern, Sir Peter
Coombs, Anthony (Wyre F'rest)Howard, Michael
Coombs, Simon (Swindon)Howarth, Alan (Strat'd-on-A)
Cope, JohnHowarth, G. (Cannock & B'wd)
Cormack, PatrickHowe, Rt Hon Sir Geoffrey
Couchman, JamesHowell, Ralph (North Norfolk)
Cran, JamesHughes, Robert G. (Harrow W)
Critchley, JulianHunt, David (Wirral W)
Currie, Mrs EdwinaHunt, John (Ravensbourne)
Davies, Q. (Stamf'd & Spald'g)Hunter, Andrew
Davis, David (Boothferry)Hurd, Rt Hon Douglas
Day, StephenIrvine, Michael
Devlin, TimIrving, Charles
Dickens, GeoffreyJack, Michael
Dorrell, StephenJackson, Robert
Douglas-Hamilton, Lord JamesJanman, Tim
Dover, DenJessel, Toby
Dunn, BobJohnson Smith, Sir Geoffrey
Durant, TonyJones, Gwilym (Cardiff N)
Eggar, TimJones, Robert B (Herts W)
Evans, David (Welwyn Hatf'd)Kellett-Bowman, Dame Elaine
Evennett, DavidKey, Robert
Fairbairn, NicholasKing, Roger (B'ham N'thfield)
Fallon, MichaelKirkhope, Timothy
Farr, Sir JohnKnapman, Roger
Favell, TonyKnight, Greg (Derby North)
Fenner, Dame PeggyKnight, Dame Jill (Edgbaston)
Field, Barry (Isle of Wight)Knowles, Michael
Finsberg, Sir GeoffreyKnox, David
Fookes, Miss JanetLamont, Rt Hon Norman
Forman, NigelLang, Ian
Forsyth, Michael (Stirling)Latham, Michael
Forth, EricLawson, Rt Hon Nigel
Fowler, Rt Hon NormanLee, John (Pendle)
Fox, Sir MarcusLeigh, Edward (Gainsbor'gh)
Franks, CecilLennox-Boyd, Hon Mark
Freeman, RogerLightbown, David
French, DouglasLilley, Peter
Gale, RogerLloyd, Sir Ian (Havant)
Gardiner, GeorgeLord, Michael
Garel-Jones, TristanLuce, Rt Hon Richard
Gill, ChristopherLyell, Sir Nicholas
Gilmour, Rt Hon Sir IanMcCrindle, Robert
Glyn, Dr AlanMacfarlane, Sir Neil
Goodhart, Sir PhilipMacKay, Andrew (E Berkshire)
Goodlad, AlastairMaclean, David
Goodson-Wickes, Dr CharlesMcLoughlin, Patrick
Gorman, Mrs TeresaMcNair-Wilson, M. (Newbury)
Gorst, JohnMcNair-Wilson, P. (New Forest)
Gow, IanMajor, Rt Hon John
Gower, Sir RaymondMalins, Humfrey
Greenway, Harry (Ealing N)Mans, Keith
Greenway, John (Ryedale)Marland, Paul
Gregory, ConalMarlow, Tony
Griffiths, Sir Eldon (Bury St E')Marshall, John (Hendon S)
Griffiths, Peter (Portsmouth N)Marshall, Michael (Arundel)
Grist, IanMartin, David (Portsmouth S)
Ground, PatrickMates, Michael
Grylls, MichaelMaude, Hon Francis
Hamilton, Hon Archie (Epsom)Mawhinney, Dr Brian
Hamilton, Neil (Tatton)Mayhew, Rt Hon Sir Patrick
Hanley, JeremyMellor, David
Hannam, JohnMiller, Hal
Hargreaves, A. (B'ham H'll Gr')Mills, Iain
Hargreaves, Ken (Hyndburn)Miscampbell, Norman
Harris, DavidMitchell, Andrew (Gedling)
Haselhurst, AlanMoate, Roger
Hawkins, ChristopherMonro, Sir Hector
Hayes, JerryMontgomery, Sir Fergus
Hayhoe, Rt Hon Sir BarneyMoore, Rt Hon John
Hayward, RobertMorris, M (N'hampton S)
Heathcoat-Amory, DavidMorrison, Hon Sir Charles
Heddle, JohnMoss, Malcolm
Heseltine, Rt Hon MichaelMoynihan, Hon Colin
Hicks, Mrs Maureen (Wolv' NE)Neale, Gerrard
Hicks, Robert (Cornwall SE)Neubert, Michael
Higgins, Rt Hon Terence L.Newton, Rt Hon Tony
Hill, JamesNicholls, Patrick
Nicholson, David (Taunton)Stanbrook, Ivor
Nicholson, Emma (Devon West)Steen, Anthony
Onslow, Rt Hon CranleyStern, Michael
Oppenheim, PhillipStevens, Lewis
Owen, Rt Hon Dr DavidStewart, Allan (Eastwood)
Page, RichardStewart, Andy (Sherwood)
Paice, JamesStewart, Ian (Hertfordshire N)
Parkinson, Rt Hon CecilStokes, John
Patnick, IrvineStradling Thomas, Sir John
Patten, Chris (Bath)Sumberg, David
Patten, John (Oxford W)Summerson, Hugo
Pattie, Rt Hon Sir GeoffreyTapsell, Sir Peter
Pawsey, JamesTaylor, John M (Solihull)
Peacock, Mrs ElizabethTebbit, Rt Hon Norman
Porter, David (Waveney)Thatcher, Rt Hon Margaret
Portillo, MichaelThompson, D. (Calder Valley)
Price, Sir DavidThompson, Patrick (Norwich N)
Raffan, KeithThorne, Neil
Raison, Rt Hon TimothyThornton, Malcolm
Rathbone, TimThurnham, Peter
Redwood, JohnTownend, John (Bridlington)
Renton, TimTownsend, Cyril D. (B'heath)
Rhodes James, RobertTracey, Richard
Rhys Williams, Sir BrandonTredinnick, David
Riddick, GrahamTrippier, David
Ridley, Rt Hon NicholasVaughan, Sir Gerard
Ridsdale, Sir JulianViggers, Peter
Rifkind, Rt Hon MalcolmWaddington, Rt Hon David
Roberts, Wyn (Conwy)Wakeham, Rt Hon John
Roe, Mrs MarionWalker, Bill (T'side North)
Rossi, Sir HughWalker, Rt Hon P. (W'cester)
Rost, PeterWaller, Gary
Rowe, AndrewWalters, Dennis
Rumbold, Mrs AngelaWard, John
Ryder, RichardWardle, Charles (Bexhill)
Sackville, Hon TomWells, Bowen
Sainsbury, Hon TimWheeler, John
Sayeed, JonathanWhitney, Ray
Scott, NicholasWiddecombe, Ann
Shaw, David (Dover)Wiggin, Jerry
Shaw, Sir Giles (Pudsey)Wilkinson, John
Shaw, Sir Michael (Scarb')Wilshire, David
Shelton, William (Streatham)Winterton, Mrs Ann
Shephard, Mrs G. (Norfolk SW)Winterton, Nicholas
Shepherd, Colin (Hereford)Wolfson, Mark
Shepherd, Richard (Aldridge)Wood, Timothy
Shersby, MichaelWoodcock, Mike
Sims, RogerYeo, Tim
Skeet, Sir TrevorYoung, Sir George (Acton)
Smith, Sir Dudley (Warwick)Younger, Rt Hon George
Soames, Hon Nicholas
Speed, KeithTellers for the Noes:
Spicer, Sir Jim (Dorset W)Mr. Robert Boscawen and
Spicer, Michael (S Worcs)Mr. Peter Lloyd.
Squire, Robin

Question accordingly negatived.

Main Question put:

The House divided: Ayes 326, Noes 218.

Division No. 204][10.17 pm
Adley, RobertBanks, Robert (Harrogate)
Aitken, JonathanBatiste, Spencer
Alexander, RichardBeaumont-Dark, Anthony
Alison, Rt Hon MichaelBellingham, Henry
Allason, RupertBendall, Vivian
Amery, Rt Hon JulianBennett, Nicholas (Pembroke)
Amess, DavidBenyon, W.
Amos, AlanBiffen, Rt Hon John
Arbuthnot, JamesBlackburn, Dr John G.
Arnold, Jacques (Gravesham)Blaker, Rt Hon Sir Peter
Arnold, Tom (Hazel Grove)Bonsor, Sir Nicholas
Ashby, DavidBoswell, Tim
Aspinwall, JackBottomley, Peter
Atkins, RobertBottomley, Mrs Virginia
Baker, Rt Hon K. (Mole Valley)Bowden, A (Brighton K'pto'n)
Baker, Nicholas (Dorset N)Bowden, Gerald (Dulwich)
Baldry, TonyBowis, John
Boyson, Rt Hon Dr Sir RhodesGreenway, Harry (Ealing N)
Braine, Rt Hon Sir BernardGreenway, John (Ryedale)
Brandon-Bravo, MartinGregory, Conal
Brazier, JulianGriffiths, Sir Eldon (Bury St E')
Bright, GrahamGriffiths, Peter (Portsmouth N)
Brooke, Rt Hon PeterGrist, Ian
Brown, Michael (Brigg & Cl't's)Ground, Patrick
Bruce, Ian (Dorset South)Grylls, Michael
Buchanan-Smith, Rt Hon AlickHamilton, Hon Archie (Epsom)
Buck, Sir AntonyHamilton, Neil (Tatton)
Budgen, NicholasHanley, Jeremy
Burns, SimonHannam, John
Burt, AlistairHargreaves, A. (B'ham H'll Gr')
Butcher, JohnHargreaves, Ken (Hyndburn)
Butler, ChrisHarris, David
Butterfill, JohnHaselhurst, Alan
Carlisle, John, (Luton N)Hawkins, Christopher
Carlisle, Kenneth (Lincoln)Hayes, Jerry
Carrington, MatthewHayhoe, Rt Hon Sir Barney
Carttiss, MichaelHayward, Robert
Cash, WilliamHeathcoat-Amory, David
Chalker, Rt Hon Mrs LyndaHeddle, John
Channon, Rt Hon PaulHeseltine, Rt Hon Michael
Chapman, SydneyHicks, Mrs Maureen (Wolv' NE)
Chope, ChristopherHicks, Robert (Cornwall SE)
Churchill, MrHiggins, Rt Hon Terence L.
Clark, Hon Alan (Plym'th S'n)Hill, James
Clark, Dr Michael (Rochford)Hogg, Hon Douglas (Gr'th'm)
Clark, Sir W. (Croydon S)Holt, Richard
Clarke, Rt Hon K. (Rushcliffe)Hordern, Sir Peter
Colvin, MichaelHoward, Michael
Conway, DerekHowarth, Alan (Strat'd-on-A)
Coombs, Anthony (Wyre F'rest)Howarth, G. (Cannock & B'wd)
Coombs, Simon (Swindon)Howe, Rt Hon Sir Geoffrey
Cope, JohnHowell, Ralph (North Norfolk)
Couchman, JamesHughes, Robert G. (Harrow W)
Cran, JamesHunt, David (Wirral W)
Critchley, JulianHunt, John (Ravensbourne)
Currie, Mrs EdwinaHunter, Andrew
Davies, Q. (Staml'd & Spald'g)Hurd, Rt Hon Douglas
Davis, David (Boothferry)Irvine, Michael
Day, StephenIrving, Charles
Devlin, TimJack, Michael
Dickens, GeoffreyJackson, Robert
Dorrell, StephenJanman, Tim
Douglas-Hamilton, Lord JamesJessel, Toby
Dover, DenJohnson Smith, Sir Geoffrey
Dunn, BobJones, Gwilym (Cardiff N)
Durant, TonyJones, Robert B (Herts W)
Eggar, TimKellett-Bowman, Dame Elaine
Evans, David (Welwyn Hatf'd)Key, Robert
Evennett, DavidKing, Roger (B'ham N'thfield)
Fairbairn, NicholasKirkhope, Timothy
Fallon, MichaelKnapman, Roger
Farr, Sir JohnKnight, Greg (Derby North)
Favell, TonyKnight, Dame Jill (Edgbaston)
Fenner, Dame PeggyKnowles, Michael
Field, Barry (Isle of Wight)Knox, David
Finsberg, Sir GeoffreyLamont, Rt Hon Norman
Fookes, Miss JanetLang, Ian
Forman, NigelLatham, Michael
Forsyth, Michael (Stirling)Lawson, Rt Hon Nigel
Forth, EricLee, John (Pendle)
Fowler, Rt Hon NormanLeigh, Edward (Gainsbor'gh)
Fox, Sir MarcusLennox-Boyd, Hon Mark
Franks, CecilLightbown, David
Freeman, RogerLloyd, Sir Ian (Havant)
French, DouglasLloyd, Peter (Fareham)
Gale, RogerLord, Michael
Gardiner, GeorgeLuce, Rt Hon Richard
Gill, ChristopherLyell, Sir Nicholas
Gilmour, Rt Hon Sir IanMcCrindle, Robert
Glyn, Dr AlanMacfarlane, Sir Neil
Goodhart, Sir PhilipMacKay, Andrew (E Berkshire)
Goodlad, AlastairMaclean, David
Goodson-Wickes, Dr CharlesMcLoughlin, Patrick
Gorman, Mrs TeresaMcNair-Wilson, M. (Newbury)
Gorst, JohnMcNair-Wilson, P. (New Forest)
Gow, IanMajor, Rt Hon John
Gower, Sir RaymondMalins, Humfrey
Mans, KeithShelton, William (Streatham)
Marland, PaulShephard, Mrs G. (Norfolk SW)
Marlow, TonyShepherd, Colin (Hereford)
Marshall, John (Hendon S)Shepherd, Richard (Aldridge)
Marshall, Michael (Arundel)Shersby, Michael
Martin, David (Portsmouth S)Sims, Roger
Mates, MichaelSkeet, Sir Trevor
Maude, Hon FrancisSmith, Sir Dudley (Warwick)
Mawhinney, Dr BrianSoames, Hon Nicholas
Mayhew, Rt Hon Sir PatrickSpeed, Keith
Mellor, DavidSpicer, Sir Jim (Dorset W)
Miller, HalSpicer, Michael (S Worcs)
Mills, IainSquire, Robin
Miscampbell, NormanStanbrook, Ivor
Mitchell, Andrew (Gedling)Steen, Anthony
Moate, RogerStern, Michael
Monro, Sir HectorStevens, Lewis
Montgomery, Sir FergusStewart, Allan (Eastwood)
Moore, Rt Hon JohnStewart, Andy (Sherwood)
Morris, M (N'hampton S)Stewart, Ian (Hertfordshire N)
Morrison, Hon Sir CharlesStokes, John
Moss, MalcolmStradling Thomas, Sir John
Moynihan, Hon ColinSumberg, David
Neale, GerrardSummerson, Hugo
Neubert, MichaelTapsell, Sir Peter
Newton, Rt Hon TonyTaylor, John M (Solihull)
Nicholls, PatrickTebbit, Rt Hon Norman
Nicholson, David (Taunton)Thatcher, Rt Hon Margaret
Nicholson, Emma (Devon West)Thompson, D. (Calder Valley)
Onslow, Rt Hon CranleyThompson, Patrick (Norwich N)
Oppenheim, PhillipThorne, Neil
Page, RichardThornton, Malcolm
Paice, JamesThurnham, Peter
Parkinson, Rt Hon CecilTownend, John (Bridlington)
Patnick, IrvineTownsend, Cyril D. (B'heath)
Patten, Chris (Bath)Tracey, Richard
Patten, John (Oxford W)Tredinnick, David
Pattie, Rt Hon Sir GeoffreyTrippier, David
Pawsey, JamesVaughan, Sir Gerard
Peacock, Mrs ElizabethViggers, Peter
Porter, David (Waveney)Waddington, Rt Hon David
Portillo, MichaelWakeham, Rt Hon John
Price, Sir DavidWaldegrave, Hon William
Raffan, KeithWalker, Bill (T'side North)
Raison, Rt Hon TimothyWalker, Rt Hon P. (W'cester)
Rathbone, TimWaller, Gary
Redwood, JohnWalters, Dennis
Renton, TimWard, John
Rhodes James, RobertWardle, Charles (Bexhill)
Rhys Williams, Sir BrandonWells, Bowen
Riddick, GrahamWheeler, John
Ridley, Rt Hon NicholasWhitney, Ray
Ridsdale, Sir JulianWiddecombe, Ann
Rifkind, Rt Hon MalcolmWiggin, Jerry
Roberts, Wyn (Conwy)Wilkinson, John
Roe, Mrs MarionWilshire, David
Rossi, Sir HughWinterton, Mrs Ann
Rost, PeterWinterton, Nicholas
Rowe, AndrewWolfson, Mark
Rumbold, Mrs AngelaWood, Timothy
Ryder, RichardWoodcock, Mike
Sackville, Hon TomYeo, Tim
Sainsbury, Hon TimYoung, Sir George (Acton)
Sayeed, JonathanYounger, Rt Hon George
Scott, Nicholas
Shaw, David (Dover)Tellers for the Ayes:
Shaw, Sir Giles (Pudsey)Mr. Robert Boscawen and
Shaw, Sir Michael (Scarb')Mr. Tristan Garel-Jones.
Abbott, Ms DianeBattle, John
Adams, Allen (Paisley N)Beckett, Margaret
Allen, GrahamBenn, Rt Hon Tony
Anderson, DonaldBennett, A. F. (D'nt'n & R'dish)
Archer, Rt Hon PeterBermingham, Gerald
Armstrong, HilaryBidwell, Sydney
Ashdown, PaddyBlair, Tony
Ashley, Rt Hon JackBlunkett, David
Banks, Tony (Newham NW)Boateng, Paul
Barnes, Harry (Derbyshire NE)Boyes, Roland
Bradley, KeithGalbraith, Sam
Bray, Dr JeremyGalloway, George
Brown, Gordon (D'mline E)Garrett, John (Norwich South)
Brown, Nicholas (Newcastle E)George, Bruce
Brown, Ron (Edinburgh Leith)Godman, Dr Norman A.
Buchan, NormanGolding, Mrs Llin
Buckley, George J.Gordon, Mildred
Caborn, RichardGraham, Thomas
Campbell, Menzies (Fife NE)Griffiths, Nigel (Edinburgh S)
Campbell, Ron (Blyth Valley)Griffiths, Win (Bridgend)
Campbell-Savours, D. N.Grocott, Bruce
Clark, Dr David (S Shields)Hardy, Peter
Clarke, Tom (Monklands W)Harman, Ms Harriet
Clay, BobHattersley, Rt Hon Roy
Clelland, DavidHealey, Rt Hon Denis
Clwyd, Mrs AnnHeffer, Eric S.
Cohen, HarryHenderson, Doug
Coleman, DonaldHinchliffe, David
Cook, Frank (Stockton N)Hogg, N. (C'nauld & Kilsyth)
Cook, Robin (Livingston)Holland, Stuart
Corbett, RobinHome Robertson, John
Corbyn, JeremyHood, Jimmy
Cousins, JimHowarth, George (Knowsley N)
Cox, TomHowell, Rt Hon D. (S'heath)
Cryer, BobHughes, John (Coventry NE)
Cummings, JohnHughes, Robert (Aberdeen N)
Cunningham, Dr JohnHughes, Roy (Newport E)
Dalyell, TamHughes, Sean (Knowsley S)
Darling, AlistairHughes, Simon (Southwark)
Davies, Rt Hon Denzil (Llanelli)Illsley, Eric
Davies, Ron (Caerphilly)Ingram, Adam
Davis, Terry (B'ham Hodge H'l)Janner, Greville
Dewar, DonaldJohn, Brynmor
Dixon, DonJones, Barry (Alyn & Deeside)
Dobson, FrankJones, Ieuan (Ynys Môn)
Doran, FrankJones, Martyn (Clwyd S W)
Douglas, DickKennedy, Charles
Duffy, A. E. P.Kilfedder, James
Dunnachie, JimmyKinnock, Rt Hon Neil
Eadie, AlexanderLambie, David
Eastham, KenLamond, James
Evans, John (St Helens N)Leadbitter, Ted
Ewing, Harry (Falkirk E)Leighton, Ron
Ewing, Mrs Margaret (Moray)Lestor, Joan (Eccles)
Fatchett, DerekLewis, Terry
Faulds, AndrewLitherland, Robert
Fearn, RonaldLivingstone, Ken
Field, Frank (Birkenhead)Livsey, Richard
Fields, Terry (L'pool B G'n)Lofthouse, Geoffrey
Fisher, MarkLoyden, Eddie
Flannery, MartinMcAllion, John
Flynn, PaulMcAvoy, Thomas
Foot, Rt Hon MichaelMcCartney, Ian
Foster, DerekMcCusker, Harold
Foulkes, GeorgeMacdonald, Calum A.
Fyfe, MariaMcFall, John
McGrady, EddieRobertson, George
McKelvey, WilliamRobinson, Geoffrey
McLeish, HenryRogers, Allan
McNamara, KevinRooker, Jeff
McTaggart, BobRoss, Ernie (Dundee W)
McWilliam, JohnRuddock, Joan
Madden, MaxSalmond, Alex
Mahon, Mrs AliceSedgemore, Brian
Mallon, SeamusSheerman, Barry
Marek, Dr JohnSheldon, Rt Hon Robert
Marshall, Jim (Leicester S)Short, Clare
Martin, Michael J. (Springburn)Skinner, Dennis
Martlew, EricSmith, Andrew (Oxford E)
Maxton, JohnSmith, Rt Hon J. (Monk'ds E)
Meacher, MichaelSnape, Peter
Meale, AlanSpearing, Nigel
Michael, AlunSteinberg, Gerry
Michie, Bill (Sheffield Heeley)Stott, Roger
Michie, Mrs Ray (Arg'l & Bute)Strang, Gavin
Millan, Rt Hon BruceStraw, Jack
Mitchell, Austin (G't Grimsby)Taylor, Mrs Ann (Dewsbury)
Moonie, Dr LewisTaylor, Matthew (Truro)
Morgan, RhodriThomas, Dr Dafydd Elis
Morley, ElliottThompson, Jack (Wansbeck)
Morris, Rt Hon J. (Aberavon)Turner, Dennis
Mowlam, MarjorieVaz, Keith
Mullin, ChrisWall, Pat
Murphy, PaulWallace, James
Nellist, DaveWalley, Joan
Oakes, Rt Hon GordonWardell, Gareth (Gower)
O'Brien, WilliamWareing, Robert N.
O'Neill, MartinWelsh, Andrew (Angus E)
Parry, RobertWelsh, Michael (Doncaster N)
Patchett, TerryWigley, Dafydd
Pendry, TomWilliams, Rt Hon Alan
Pike, Peter L.Williams, Alan W. (Carm'then)
Powell, Ray (Ogmore)Wise, Mrs Audrey
Prescott, JohnWorthington, Tony
Quin, Ms JoyceWray, Jimmy
Randall, StuartYoung, David (Bolton SE)
Redmond, Martin
Rees, Rt Hon MerlynTellers for the Noes:
Reid, Dr JohnMr. Frank Haynes and
Richardson, JoMr. Allen McKay.
Roberts, Allan (Bootle)

Question accordingly agreed to.

Resolved,That this House, recognising the importance of introducing competition into the electricity supply industry, the advantages of new rights for customers, and the benefits of privatization, approves the proposals set out in the Government's White Paper on the privatisation of the electricity suppy industry in England and Wales, and Scotland, Cm. 322 and 327.