Electricity Privatisation (Nuclear Power)

– in the House of Commons at 4:21 pm on 24th July 1989.

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Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere 4:21 pm, 24th July 1989

With permission, Mr. Speaker, I should like to make a statement about electricity privatisation and nuclear power.

As a result of our preparations for privatisation, it has recently become clear that the cost of reprocessing and waste treatment of spent Magnox nuclear fuel will be a great deal higher than has been charged in electricity prices and provided for in the accounts of the Central Electricity Generating Board and the South of Scotland electricity board. The Magnox stations are drawing to the end of their lives. One is already closed, and most of the others are due to close within the next few years. Most of these costs therefore relate to the past, to electricity already generated and paid for. Future customers will be bearing the full cost of the electricity they consume. It would not be right to burden them also with costs arising from the past.

It is important that the energies of the companies should be directed towards ensuring that their existing stations are run efficiently and at lowest cost. National Power will, subject to planning and other consents, also be building new pressurised water reactors. In order to enable the nuclear generating companies to focus their attention on the future, the Government have decided that it would be appropriate to relieve the new companies of dealing with these substantial problems of the past.

The Government have considered carefully how best to implement this decision. It has been decided that both the assets and liabilities relating to the Magnox stations belonging to the CEGB and the SSEB should remain under Government control.

The advanced gas-cooled reactor stations will be assigned to National Power and the Scottish Nuclear Company, and will be privatised. These stations have many years of operation ahead. The operating performance of these stations has shown marked improvement, and this can be expected to continue in the future. Therefore, we have good reason to believe that the AGRs will have a long and successful future in the private sector. National Power will continue to construct Sizewell B and, subject to obtaining the necessary planning approvals and satisfactory contractual arrangements, intends to construct and operate three more PWRs.

No changes to the Electricity Bill are needed to bring the Government's decisions into effect. The Government shall be laying a draft order before Parliament during the autumn to increase the limit on the amounts payable under schedule 12 from the interim level of £1,000 million to £2,500 million.

This order will be subject to affirmative resolution and will give the House a full opportunity to debate our detailed proposals. The order will enable grants to be paid to National Power and to the Scottish Nuclear Company for unforeseen costs, as previously explained to the House. These powers will also be used to ensure that the Magnox stations can continue to be operated and their liabilities to be met.

I am most concerned to ensure that nothing is done to jeopardise the future of the employees concerned. Their pension rights, their ability to benefit from the flotations, and their career prospects will be protected. To this end I shall discuss the implementation of the proposal with all the parties concerned, including the trade unions.

We shall ensure that the necessary resources are available to maintain the present high standards of safety and environmental protection. We shall not take any steps that are not approved by the nuclear installations inspect orate.

Preparation for privatisation has brought new information to light. The costs for the Magnox stations, which have now become clearer, would present major financial problems for the two nuclear companies. They can be paid for only by the customer or the taxpayer. The Government do not believe that this legacy of the past should be borne by customers in the future. The Government have therefore moved rapidly to deal with the issue.

It is right to separate the problems of the past from the prospects for the future. The nuclear generators will be able to concentrate their efforts on building a new generation of PWR stations and further improving the performance of the AGRs. On the basis of the presently planned life, the last Magnox station will have closed by the year 2002. Thereafter, commercial nuclear power generation will be wholly in the private sector. That is where it should be, and where it will flourish.

Photo of Tony Blair Tony Blair , Sedgefield

Well, Mr. Speaker—here we have it. After months in Committee, three days on Report, weeks in the other place and the Prime Minister's statement on 5 July, all the time told that the nuclear stations would all be sold, we are now informed, on the last day of the last stage of the last group of final amendments to the Bill, that the sale of the Magnox stations is to be ignominiously pulled—renationalised before they are even privatised. Are not the right hon. Gentleman's proposals for privatisation now a humiliating farce? If the lunchtime reports are correct and the right hon. Gentleman is departing to other pastures, this must be the most expensive exercise in political history of clearing one's desk.

Am I right in following through what this means—the Magnox stations will remain in public ownership so that the full costs of decommissioning, disposing and reprocessing of waste will fall on the taxpayer? Will the right hon. Gentleman confirm that the latest estimates show that those costs may be £500 million a station—a total of £4·5 billion or perhaps even more?

Is not the question, what has the taxpayer got in return for that deal? Am I not right in saying that, not only will the nuclear tax still remain to pay for the new stations, costing consumers billions of pounds, but the nuclear quota will remain, distorting the market and squeezing out competition? Worse, does not what has been announced today mean that the public sector liability for decommissioning those stations transferred to the private sector will not just remain in full, but will be increased two and a half times? Has there ever been a more disastrous deal for the British taxpayer?

The only explanation we are given is that the public have used the stations and thus should pay for them. If that was the criterion, what of the new stations and those with many years of life left in them in which the public have heavily invested and of which they are now to be deprived? If the Secretary of State says that the public sector must pay for the stations it has used, why should it not also use those for which it has paid? Is not the true motivation for this quite transparent—that the right hon. Gentleman will sacrifice anything, including normal commercial prudence, the interests of the taxpayer and the consumer and the future energy needs of this country, provided that, above all else, he can sell his privatisation to the City?

Does not one large obstacle remain, however? Has not the right hon. Gentleman always made it clear, most especially last March in front of the Select Committee on Energy, that the critical element in the entire structure of the privatisation, with its monopoly area boards, monopoly grid and duopoly of generators, was dictated by the worry about what he called the marketability of nuclear power in the Magnox stations? Has not the right hon. Gentleman now removed not merely a substantial part of the electricity industry's assets from the privatisation, but the entire justification for the form that the privatisation has taken? Would not the right course now be not to try shoring up that crumbling monument to incompetence, but to abandon it here, now and for good?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

I congratulate the hon. Gentleman on a fine display of rhetoric, but I wish to point out one or two matters. He made it sound as though this were the first time that any Government had proposed that public money be written off. I remind him that £20 billion of taxpayers' money has been written off since the nationalisation of the coal industry, and that only earlier this afternoon his hon. Friends were urging me to write off billions more. Let there be no more of this nonsense about it being the first time that any Government have come forward with restructuring proposals.

I wish to make one point quite clear. The Magnoxes, virtually to a station, were commissioned and built during the lifetimes of Labour Governments. Far from causing the problem, privatisation has, for the first time, brought the costs into the open. We are making arrangements to deal with the problem, not creating the problem.

I confirm that the AGR and PWR stations, which will be transferred, will bear their own costs, will provide for their own decommissioning and will provide for their own waste management. The difference is that, in most cases, those stations have decades of life ahead of them, while the Magnoxes are all coming to the end of their useful lives.

As we explained in Committee, under schedule 12 to the Electricity Bill, the only money that will be paid to the privatised nuclear stations will be for unforeseeable costs arising from changes in Government policy. Other costs will have to be met by the customer, collected through prices and provided over the lifetime of the stations.

The Magnox stations were never the vital part of our privatisation plans; they are the past. We did not devise a structure around a set of power stations of which most will be closed by 1995 and only one, Wylfa, will be operational in the next century to the year 2002. Those stations were not a major part of our proposals and not part of the future. Today we are clearing up costs incurred in the past.

Photo of Mr David Howell Mr David Howell , Guildford

Despite the fulminations of the hon. Member for Sedgefield (Mr. Blair), who clearly would like to keep everything under strict bureaucratic control, are not my right hon. Friend's proposals a sensible and realistic way of dealing with a legacy of the past, and in line with what some of us wanted from the outset? Does my right hon. Friend agree that, far from damaging the future of either the nuclear or the privatised industry, they clear the way for much better prospects for competitive nuclear power? Will he confirm that the fact that not only National Power but PowerGen may consider building a dedicated PWR nuclear power station is evidence that it is an increasingly competitive and promising area?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

My right hon. Friend is right. We are talking about clearing up the costs of technology that was initially developed at the behest of Labour and Conservative Governments more than 30 years ago, which is a very expensive exercise. The future of the nuclear industry is in the hands of the PWRs, which operate successfully worldwide. There are very successful private sector operators of PWRs in France and Germany, and there is Duke Power of the United States of America. PWRs are a proven technology capable of producing electricity economically. My right hon. Friend is right to say that we are clearing up the past and opening the way to the future.

Photo of Malcolm Bruce Malcolm Bruce , Gordon

Will the Secretary of State admit that the reason why he came to the House with his statement is that his friends in the City told him that he cannot sell the Magnox sector? If omitting it from privatisation is such a good idea, why did he not incorporate it in the Electricity Bill, as others suggested at the outset?

The Secretary of State attempted to turn the attack from the hon. Member for Sedgefield (Mr. Blair), but does he not admit that the scale of the write-off of taxpayers' money associated with the flotation of the electricity industry exceeds the worst excesses of Socialism that the right hon. Gentleman is so keen to fulminate against? The sum is £8 billion to date, and there is an open blank cheque from the consumer for the decommissioning of Magnox power stations.

Will the Secretary of State admit that his statement vindicates those right hon. and hon. Members who condemn the expansion of nuclear power and opposed Sellafield and THORP reprocessing facilities in particular—alas supported now by both the Labour and the Conservative parties—and accept that the privatisation is wholly flawed? Should not the right hon. Gentleman abandon it, and acknowledge that his announcement today is an indication that he has no interest in the environment but is interested only in maximising the industry's share price? The only thing that is green about Conservative Members is the colour of their wellies.

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

The hon. Gentleman's last remark and the reaction of the House to it summed up the level of his contribution. Privatisation is exposing the industry's existing costs, it is not the cause of them, and we are making arrangements to deal with them. The country has taken electricity from the stations concerned for more than 30 years, and they have an average of six years of life left. We are making arrangements to clear up the past and to open up a secure future for the industry.

Photo of Mr Ian Lloyd Mr Ian Lloyd , Havant

First, I may express my hope that if the news we are likely to hear today is true, this is the last occasion on which my right hon. Friend the Secretary of State will have to rest on the energy bed of Procrustes.

My right hon. Friend's statement is as welcome as it was inevitable. I wish to put to my right hon. Friend four related questions. [HON. MEMBERS: "Four?"] Yes. First, my right hon. Friend said that the electricity from the Magnox stations has been generated and paid for. The fact is that the electricity has been generated but not paid for. Therefore, as my right hon. Friend said, the choice is between the taxpayer and the consumer, and he has chosen the latter.

Secondly, how will the Government ensure that there will be fair competition between the electricity that will be produced in the Magnox sector for at least a further six years and that of the rest of the private sector, including the other nuclear stations? Thirdly, how will the very large sum—it remains a matter of dispute as to whether it is the £4·4 billion suggested by British Nuclear Fuels plc or some lesser or larger sum—be distributed between Magnox, PWRs and AGRs and, broadly speaking, the reprocessing sector?

Finally, my right hon. Friend expressed confidence that after 2002 all nuclear power will be in the private sector, "where it will flourish." I share his hope but not his expectation. Does his expectation imply that, in his judgment, by 2002 the full environmental costs of fossil fuel power generation are likely to tip the balance in favour of nuclear power?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

In the past, customers paid what was regarded at the time as a fair price for electricity, but it is clear that they underpaid. We had to decide whether in future customers should pay a fair price for nuclear electricity and, at the same time, pay the price for previous under-charging. We came to the conclusion that that would not be reasonable.

Electricity produced by Magnox stations will be paid for through the fossil fuel levy. The arrangements for that are set out in the Bill. In future, the area boards will sign up for nuclear electricity from Magnox stations, which will still be in the public sector as long as they continue to produce electricity.

AGRs have enough life ahead of them for proper provision to be made now in the price that they charge, through the fossil fuel levy, for their future decommissioning and reprocessing costs. That will be built into the price that they charge. They have enough life left for them to recover the full costs.

As I said in reply to a previous question, in other countries, PWRs are operated by private sector companies. They are privately financed, and successfully produce competitively priced electricity.

I found it interesting at Question Time that some hon. Members asked why Britain produces more carbon dioxide than France. The French produce 70 per cent. of their electricity from nuclear stations: that is why France contributes less carbon dioxide and less to the greenhouse effect. Hon. Members who argued against nuclear power were at the same time pointing to the French performance, which is based on nuclear power.

Photo of Mr Tony Benn Mr Tony Benn , Chesterfield

Is the Secretary of State aware that what he has done today is to confirm what many people have long suspected—that nuclear power in Britain is not, and never has been, economic in any sense of the term? The Government have closed many pits, however, and have thrown many miners out of work on the ground that the pits were uneconomic.

Is he also aware that, in the United States, where pressurised water reactors are in private hands, not one has been ordered for 10 years? There is no reason to believe that they will be any different in their economic operations from the Magnox and AGR stations. Is the Secretary of State also aware that, by retaining the costs of Magnox stations in the public sector, he is deliberately giving an enormous subsidy to shareholders who intend to buy parts of the electricity industry? Finally, how could he say that he had no idea of the cost of nuclear power until he tried to sell it off? I think it is virtually a resignation speech when a Minister says that he did not know what he was doing until he tried to sell off an industry and the figures came to light.

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

I am an admirer of some aspects of the right hon. Gentleman, but for sheer, brass-necked effrontery, that intervention takes some beating. If I closed every pit remaining in Britain, I could not match the right hon. Gentleman's record as a closer of pits, because he closed more than any previous Secretary of State. He was also an enthusiastic supporter of nuclear stations while he held the job that I now hold. I think that I am right in saying that he ordered AGRs and approved of that technology. Therefore, having been a party to creating the problem that I am now dealing with, for him to come over at his sanctimonious worst is almost beneath contempt.

Photo of Mr Christopher Butler Mr Christopher Butler , Warrington South

What will be the effect on the price of electricity of this announcement about Magnox stations? Will it be higher or lower as a result? Will there be doubt about the decommissioning costs of other reactors as a result of the exposure of privatisation?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

The price of electricity will not be affected by today's announcement; it will be affected by the proper charging of costs in the future. We have made, and will make, arrangements to charge properly for the cost of electricity produced by nuclear power stations. I have said over and over again in Committee that we are creating a totally transparent system. The days of pushing it under the carpet, which was the hallmark of the right hon. Member for Chesterfield (Mr. Benn), have gone. The cost of nuclear electricity will be revealed, known and declared and it will have to be defended, and I am quite happy to do that.

As I have already said, almost all the present generation of stations have a long life ahead of them. During that life, knowing what is now known, we can make provision to meet the costs of decommissioning and waste management.

Photo of Mr James Molyneaux Mr James Molyneaux , Lagan Valley

In his statement, the Secretary of State said: This order … will give the House a full opportunity to debate our … proposals. Will the right hon. Gentleman and his colleagues on the Front Bench ensure that that full opportunity is somewhat greater than the 90 minutes accorded to Northern Ireland business, even though it is primary legislation?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

That is obviously a matter for the business managers. The right hon. Gentleman makes a serious point. The Government will be only to happy to have a full debate on this subject.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedfordshire North

Since I moved in Committee, and on Report, amendments to do exactly this, may I congratulate my right hon. Friend the Secretary of State on having moved along these lines? Does he realise that it is likely to be a loss-making enterprise, unless he is prepared to add to it a mix of profitable assets, which should include the AGRs and PWRs that are being built?

If it has a mix of assets, the enterprise will be able to compete with National Power and PowerGen in the future. Will he still have time to consider that possibility?

An Hon. Member:

He should live so long.

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

I think I am going to live longer than that. My hon. Friend has consistently argued this case, and I recognise that. We believe that it is necessary to clear up the past nuclear power stations. If they had a longer life ahead of them, we could make arrangements to recoup those costs, but, as I have explained, it would net be reasonable to impose on today's customers the underpricing that went on for a long time. We believe that the nuclear past should stay where it is and that the nuclear future should move into the private sector.

Photo of Mr Alexander Eadie Mr Alexander Eadie , Midlothian

May I press the right hon. Gentleman, with reference to the question about how long we will have to debate this issue, to tell us whether he is speaking on behalf of the Government when he says that there will be a full day's debate on this proposition? I am sure that he will know that Sir Winston Churchill said, 80 or 90 years ago, that the Tory party was the party of big business and vested interests. Does not the announcement that he has made today show that he has capitulated to the City, and that it is the taxpayer who will have to pay the bill'?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

The question about a full day's debate is a matter for the business managers, but there is a strong case for it, and I hope that there will be no attempt to restrict debate to an hour and a half. I will press that point on the business managers.

We are not selling out to big business. We recognise that there has been serious under-provision, during the past 30 years, for costs that will be incurred in the future. I do not see how our action will benefit the City, or how it could be fair to impose on an industry costs for stations that will virtually not be operating under the control of the businesses involved. The stations are coming to the end of their useful lives. They were commissioned in the public sector, and they will end their days there.

Photo of Mr Peter Rost Mr Peter Rost , Erewash

What is my right hon. Friend's best estimate of the cost of nuclear electricity in pence per kilowatt hour? When does he expect an announcement to be made about the ring-fenced price?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

The negotiations between BNFL and the generators about future prices are still in progress. The information will be available when we return after the summer recess and present full and detailed proposals.

Photo of Mr Peter Hardy Mr Peter Hardy , Wentworth

The Secretary of State suggested that, when the generating industry was originally structured, it was necessary to provide National Power with 70 per cent. and PowerGen with 30 per cent., so that National Power could accommodate all the existing nuclear undertakings. Does this substantial change mean that the right hon. Gentleman will be revising the very structure of the generating industry?

Does the right hon. Gentleman accept that great pleasure will be felt by investors in the privatised industry, not least the substantial proportion living abroad? The foreigners will share the loot, but the burdens and liabilities will be borne exclusively in Britain.

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

As I told the House, we are creating an electricity industry which we hope will continue well into the next century. We are building a structure that will have a very long life. We are talking about clearing up the costs of stations, most of which will be closed by the middle of the next decade, and only two of which will be operational after 1995. It is quite wrong to say that the whole structure of the industry was developed to accommodate them. We are discussing how to clear up the past and liberate the industry so that it can develop nuclear power in the future.

Photo of Mr Michael Stern Mr Michael Stern , Bristol North West

I thank my right hon. Friend for the fact that, despite this afternoon's announcement, my constituents who work at Oldbury and Berkeley will be entitled to share in the benefits of privatisation. Does he not agree that it is a bit rich for the Opposition to criticise him this afternoon for leaving the costs of decommissioning with the public sector when that has been their policy throughout?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

I made it clear in my statement that we would take part in active discussions with the trade unions and management to ensure that career prospects, pensions and the opportunity of a stake in the privatised industry would be available to those who work in the Magnox sector. My hon. Friend is absolutely right: we are making arrangements to deal with existing costs. We are not inventing costs, or creating them; we are arranging to clear up the costs of a group of power stations most of whose useful lives are well behind them.

Photo of Mr Jack Thompson Mr Jack Thompson , Wansbeck

I am sure that the Secretary of State has felt no pleasure in making this statement to the House. This information should have been given to him many months ago, before the Bill came to the House, by the CEGB or his own Department. Is there not a case for heads to roll? Does he accept that if the information had been available some months ago, the tenor of our debate on the Bill would have been different?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

The fact of the matter is that only when we set about the process of privatisation were those facts forced out. They have become available in detail literally only in the last few weeks, and we have been working to produce the information and make it available. I could not have come to the House any earlier than I have.

As I pointed out in my opening remarks, everything that we are proposing is possible under the Bill: we do not need to change it. I felt, however, that the House should have specific information as soon as I was in a position to give it, and that is why I am here.

Photo of David Tredinnick David Tredinnick , Bosworth

Is it not a fact that, but for the privatisation process, the real costs of decommissioning Magnox would not have come to light? Is that not another illustration of the benefits of privatisation?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

It is absoutely true that, if we had not decided to privatise the industry, ways would have been found of losing the costs through the bulk supply tariff, and they would never have been revealed to the public. The privatisation process has exposed the costs, and will force the industry to make better arrangements in the future.

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

Is there any limit to the amount that the Government are prepared to spend to keep the nuclear show on the road? Can the Secretary of State estimate to, say, the nearest billion pounds the likely final expenditure on the nuclear slush fund of schedule 12?

As the right hon. Gentleman knows, the electricity companies are coping with the rapidly escalating costs of non-Magnox decommissioning by discounting expenditures far into the future. If one of those private companies were to go out of business before the expenditures became due, who would pick up the tab?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

The hon. Gentleman asked about the size of what he calls the slush fund. May I point out that, at worst, it would be just over a third of the amount that we have written off in coal since it was nationalised? Considerable sums have been written off, and—as I told the hon. Gentleman earlier this afternoon—I am being pressed by Members with mining interests to write off billions this year. The idea that there is something novel about Governments' discovering under-provisions and making arrangements to deal with them is entirely wrong.

Photo of Mr Ian Bruce Mr Ian Bruce , South Dorset

Does my right hon. Friend agree that Gridco is currently having some difficulties in organising how electricity will be priced? Can he tell us a little more about how electricity that is effectively produced from Government assets will be fed into the free market?

Having removed the difficulty of Magnox, do we really require the non-fossil fuel levy to exist for the other stations that will be run by National Power? Will my right hon. Friend also tell us how the stations owned by the Atomic Energy Authority—in particular, my own station at Winfrith—will figure in the new organisation?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

What I said in my statement was that the future costs of nuclear electricity would be clearly shown, and would be collected from all users of the system through the fossil fuel levy. That is what it is there for—to ensure that the cost of nuclear is borne by all the industry's customers, and not just by the domestic sector, as has been in danger of happening in the past. The costs of future, properly priced nuclear electricity will be collected through the fossil fuel levy and spread among all the customers of the industry.

Photo of Mr Giles Radice Mr Giles Radice Chair, Treasury & Civil Service Sub-Committee

Does the Secretary of State accept that withdrawing such a large part of the nuclear industry from the Bill at this late stage not only represents a stunning personal reverse for him but undermines what little public confidence remains in his electricity privatisation scheme?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

I do not think that that is the case at all. I think that the fact that the Government have recognised the problem, revealed it and explained how they will deal with it will do nothing to destroy the credibility of the industry.

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

Is not the statement a serious indictment of the way in which the electricity supply industry has been managed by successive Governments in the past? Is it not now clear that the Central Electricity Generating Board has completely failed to provide adequately for the costs of decommissioning, that as a result its accounts in successive years must have been seriously misleading, and that consequently electricity consumers have paid too little for their electricity? Do not all those factors underline the inadequacy of nationalisation?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

My hon. Friend is right. One would never guess from listening to the Opposition that they were defending the system that created the problem which we are tackling.

Photo of Frank Cook Frank Cook , Stockton North

I thank the Secretary of State for confirming everything that I have ever said about his grasp of his subject. He seeks to justify the withdrawal of the Magnox stations from his window display by citing the length of time left in their working life, saying that it is not fair to hand them over. Will the same criteria be applied to fossil-fuel-burning stations that have a limited remaining life? Is it not the case that, when the right hon. Gentleman claimed a number of times at the Dispatch Box that nuclear-generated electricity was the cheapest available electricity, he had been misled, and therefore had misled the House? The right hon. Gentleman has already admitted that he does not yet have the AGR and PWR costings. If we could not believe him when he was wrong before, how does he expect the House to believe him now?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

To the best of my recollection, I have never heard the hon. Gentleman open his mouth in an energy debate in which I have taken part. I invite him to go through Hansard and find in any debate in which I have taken part any claim by me that nuclear electricity was the cheapest. I have always defended nuclear electricity on the ground of diversity of supply being the basis of security. I have never claimed that it was the cheapest. I have made it clear that I wanted to expose—and under our system we would—the true cost of nuclear electricity.

The hon. Gentleman has asked me about the costs of fossil-fuel electricity. We have written off or made deficit grants of about £1 billion to the coal industry in each of the past 10 years. The CEGB reckons that it has been paying between £500 million and £1 billion over the odds for the coal that it has been burning. We have effectively had a coal tax of between £1·5 billion and £2 billion a year every year for the past 10 years.

Photo of Mr Tony Marlow Mr Tony Marlow , Northampton North

If large potential liabilities attach to Magnox reactors, and if the taxpayer is going to pick up the tab, will not the taxpayer get an equal or equivalent amount of additional money at the time of privatisation? Although the subject of accountancy might be a little difficult for the Opposition to understand, I wonder whether my right hon. Friend could arrange for courses in arithmetic so that at least they could work out that taking one from one leaves no difference?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

From our first debate on this subject, the Opposition have failed to recognise that it is the City, the shareholders, who pay and the Government, the taxpayers, who receive. As a result of not loading the industry, the taxpayer will receive a better price, so the taxpayer will benefit from the realism that we are introducing into this discussion.

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

Is the Secretary of State aware that, although he may tell the House that he was not aware of the costs of nuclear electricity until his statement, he was questioned on that fact 18 months ago by the Energy Select Committee? In paragraphs 147 and 148 of its report, the Select Committee said: First, we are worried about the costs of nuclear power … Secondly, if there are to be additional costs from nuclear power, we are concerned about where they will fall. Is the right hon. Gentleman aware that, as recently as last week, the chairman of the United Kingdom Atomic Energy Authority told the Select Committee that it was not possible to estimate the true costs of decommissioning the power stations? Where will the tab for decommissioning fall? Is it not simply political dogma for the Government to insist on 20 per cent. nuclear power, whatever the cost, so as to enable them to run down the coal industry?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

We are not making arrangements to run down the coal industry. For about the past 15 years, 20 per cent. of our electricity has come from nuclear power. The other 80 per cent. has been available to the coal industry, which has supplied a great deal of it. When we have privatised the industry, 80 per cent. of the market will not be supplied by nuclear. I hope that a great deal of it will be supplied by British Coal.

Photo of Michael Jack Michael Jack , Fylde

Will my right hon. Friend confirm that the nation has a particular debt to pay to the nuclear industry, for it was nuclear electricity that kept the power flowing during the last miners' strike? Will he confirm also that the public will be reassured by his announcement that these early decommissionings of Magnox stations will be properly financed and supervised?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

My hon. Friend is right. We are openly acknowledging costs that have been incurred over the past 30 years and have been under-provided for. Those costs are now being revealed, and we are making arrangements to meet them. That is the sum total of the effect of my announcement.

Photo of Mr Bruce Grocott Mr Bruce Grocott , The Wrekin

Is the Secretary of State aware that, probably unwittingly, he has performed a service to the House, in that he has spelt out with a clarity that is unmatched by any of his right hon. Friends the complete absence of principle behind the Government's privatisation policy? It is based upon the political expediency of rewarding his friends in the City arid of providing that the tab for anything that is unprofitable is picked up by the taxpayer. If there is any other basis for the distinction that the right hon. Gentleman has enunciated today, will he please do the House the service of spelling it out?

Mr. Parkison:

I have already answered that question. At the moment, all the assets and all the liabilities are in the public sector. If we maintain some of the liabilities in the public sector, we will get a better price for the taxpayer for what we sell. Therefore, the taxpayer both receives the benefit of the sale and bears some of the liabilities.

Photo of Mr Bill O'Brien Mr Bill O'Brien , Normanton

The right hon. Gentleman has revealed how misguided he is about the privatisation of electricity. Is he aware that, for years, the decommissioning of these old power stations has been debated by the Energy Select Committee and the House? To tell the House that he has just realised the problems is totally misleading and unfair to the House. Do we take it that this afternoon the Secretary of State has revealed a forerunner to what we will have with water privatisation—the antiquated sewage works and the old reservoirs will be taken out of the sale? Is that the way that the Government are going on privatisation?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

I have already answered that question at least five times, but because the hon. Gentleman insists, I am happy to make the point again. The Government, on behalf of the taxpayer, are selling and will receive the proceeds of the sale. The Government will also retain some of the liabilities. One must be set against the other. I believe that we have put the position clearly in front of the House. I have always argued the case for nuclear on the ground of diversity leading to security, never on the basis of price.

Photo of Ian McCartney Ian McCartney , Makerfield

What we are seeing is Meltdown Man—the first nuclear meltdown in Britain. The Secretary of State has come to the House to admit that, unless he gets this proposition through, the City will not purchase the privatisation shares. What he has not said is that he is creating a third generating company. We require information about who will be responsible for the generating company and who is negotiating about the six years of average production. I assume that the right hon. Gentleman will not close all the Magnox stations on vesting day, so someone will purchase their capacity from the company. Who will be responsible for that? Who will be the chairperson who will carry out the negotiations, or is that another fix that was not sorted out before the right hon. Gentleman came to the House with his astonishing statement?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

I made it clear in my statement that we shall come to the House with detailed proposals. We shall have discussions with trade unions and management, as I am sure that the hon. Gentleman would expect us to have. I have already committed the Government to making sure that the career prospects, pensions and security of those who work in Magnoxes will be maintained. We shall come to the House with detailed proposals on that and we shall attach them to the debate in the autumn.

Photo of Dr Alan Williams Dr Alan Williams , Carmarthen

Is not this statement humiliating for the Government, particularly for the Secretary of State on the last day of his job? He is ending with a miserable climb-down. Is it not the case that the City of London has looked long and hard at nuclear power and seen an uneconomic industry which has always been uneconomic and has problems with waste and decommissioning? Is not the truth that it is just as unhappy about AGRs and PWRs as it is about Magnoxes? Is it not the case that we should not privatise nuclear power or the electricity industry?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

I do not understand the thought processes that conclude that what I have announced today is some sort of advertisement for nationalisation, under which these problems developed. It is privatisation that is making this Government the first Government to face up to the real costs and to make arrangements to meet them. It is nationalisation that enabled these stations to be developed and operated as they are. I cannot see anything in what the hon. Gentleman says that is an advertisement for nationalisation.

Photo of Paul Flynn Paul Flynn , Newport West

In his panic statement, the Secretary of State said that Magnoxes would be part of our past. Does he agree that they will be very much present in our future? There are six Magnox stations within a 25-mile radius of my constituency, the two at Berkeley are being stripped down now, but it will take 12 years to remove the fiercely radioactive material, and the rest will stand there for at least a century. Does the Secretary of State agree that the cost and anxiety of nuclear power will be with us for many years and will be a burden on our grandchildren's grandchildren? Will he tell us today what that cost will be? In effect, the Secretary of State is making a gift to those who will buy the shares in the new industry but placing a burden on taxpayers that will be centuries long.

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

There is no source of energy that does not involve long-term clear-up costs. Is the hon. Gentleman prepared to estimate the cost of the damage to the climate, the contribution to the greenhouse effect, subsidence, lives lost and slag heaps that come from burning coal? Is he prepared to work out how many generations will pay those costs? Does he recognise that the cost of removing platforms from the North sea will be at least £10 billion and that that, too, will have to be paid for? To pretend that coal does not involve clear-up costs is to mislead oneself.

Photo of Donald Dewar Donald Dewar , Glasgow Garscadden

Will the Secretary of State accept that today's announcement will be seen in Scotland as an astonishing story of confusion and muddle? Is it not now clear that the chairman of the South of Scotland electricity board was right to claim at Torness in December 1988 that his board, when privatised under the Government's plans, would be wholly unsellable? Both the Minister of State and the Secretary of State denied that, but we now know that the taxpayer will simply be asked to take over the costs of decommissioning Hunterston A, which may amount to £500 million, in order to float the privatisation programme, which would otherwise sink without trace.

I accept that the Secretary of State may not be able to give details of his scheme for the Magnox stations, but surely he could give us an outline of it. Will there be a separate state-owned generating company to see them through the remainder of their life? Will there be a separate company to decommission Hunterston A, or will it be handed over to a privatised generating company in England or to the successor board in Scotland?

Is not the clear implication of what the right hon. Gentleman is saying that the boards have failed until now to face up to the realities of BNFL reprocessing and decommissioning costs? If in future the privatised companies face up to the "real costs", the implication is that there will be a specific fund for that purpose financed by the consumer to meet those costs. Will that not mean significantly higher electricity costs? That is the inescapable conclusion of the Secretary of State's arguments.

Finally, does the right hon. Gentleman accept that he has admitted failure and, worse still, shown a wrong-headed determination to proceed with a discredited and unwarranted privatisation exercise, irrespective of the cost?

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

The hon. Gentleman's argument is not supported by his example of Hunterston A, which will never produce a single unit of electricity for a privatised company. It will be closed at least a year before the company is floated. He is saying that we should load a new company with costs from power stations that have never contributed a single unit of electricity to it. I hope that he is beginning to realise the scale of the problems with which we are dealing.

The hon. Gentleman asked about the successor vehicle for holding the Magnoxes. We are having discussions with the nuclear installations inspectorate because it is important that the inspectorate is prepared to license that vehicle. We shall come to the House with full details of our proposals, and we shall be happy to debate them then.

Our proposals are forcing costs out—[HON. MEMBERS: "Up."] No. They are forcing costs out. They will force people to recognise what the prices are and to realise that the costs can no longer be lost in the bulk supply tariff. I should have thought that the hon. Gentleman would welcome that transparency. The result of privatisation is that prices will be what they will be. [Laughter.]

Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertsmere

Privatisation does not create the costs; it simply reveals them. To claim that, because we now know the costs, they have been caused by the action that makes us aware of them is extraordinary logic.

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

Application under Standing Order No. 20.—Mr. Benn.

Photo of Mr Harry Ewing Mr Harry Ewing , Falkirk East

On a point of order, Mr. Speaker.

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

No. The hon. Member knows that I will take it later.

Photo of Mr Harry Ewing Mr Harry Ewing , Falkirk East

You would be better to take it now, Mr. Speaker.