Electricity Industry

Opposition Day – in the House of Commons at 4:05 pm on 20th February 1990.

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Photo of Frank Dobson Frank Dobson Shadow Secretary of State for Energy and Climate Change 4:14 pm, 20th February 1990

I beg to move, That this House deplores the Government's obsession with electricity privatisation which is pushing up electricity prices and undermining Britain's commitment to reducing acid rain. The electricity industry has not yet been privatised, but electricity prices are already being pushed up unnecessarily, to add to the industry's assets. The Government's commitment to combat acid rain is in danger of being set aside in an effort to reduce the industry's liabilities. That is being done to suit the City, which wants to take over the assets of the electricity industry but not to take on any of its liabilities. We can be fairly sure that the needs of the City will be given priority because the present Secretary of State has only one task: to sell off the electricity industry before the next general election, whatever the cost to the consumer, the balance of payments, the prospects for British industry or the damage to the environment.

We know from answers to parliamentary questions that the Secretary of State is buying advice on electricity privatisation from no fewer than 47 different companies, at an estimated cost to the taxpayer of nearly £37 million. Those companies include no fewer than 13 firms of estate agents and 10 firms of accountants. There are marketing advisers, people who are described as head hunters and even salary advisers. There is even a firm called Anderson, Mori and Rabinowitz, which is improbably described as a firm of Japanese lawyers.

Not one firm on that list of 47 is advising the Secretary of State on the interests of the consumer. Furthermore, not one of those 47 firms is advising the Secretary of State on the environmental aspects of privatisation. Nothing could more clearly show what the Government's priorities are.

That is why the Secretary of State announced last Monday what might be described as the third leg of the Tory inflationary spring treble. Domestic consumers will have to pay more for their electricity, just as their poll tax falls due and their housing costs increase. It is almost as though the Chancellor of the Exchequer had asked each Cabinet Minister to make a special contribution to inflation, since I have not even mentioned the fares increases or the increased water charges that will also be due.

The electricity price increase, of £30 to £40 for domestic consumers, is quite unnecessary and was imposed by the Government. It does not result from rising costs. During the last three years, the generating boards' fuel costs have fallen by 7 per cent., but the average price charged for electricity has increased by 13 per cent. and the generating boards' profits have increased by 90 per cent. Under the new coal contract, rightly imposed by the Secretary of State, fuel costs to the generating companies are to fall further, as British Coal is obliged to absorb most of the cost of inflation.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedfordshire North

Is the hon. Gentleman aware that, during the last five years, the cost of electricity to domestic consumers has fallen in real terms and that the cost of electricity to industrial consumers has fallen by 10 per cent.? However, when the last Labour Government were in power, the price to domestic consumers went up significantly in real terms over five years.

Photo of Frank Dobson Frank Dobson Shadow Secretary of State for Energy and Climate Change

The hon. Gentleman is what might be described as an old stager in our debates on energy. The general circumstances surrounding energy prices world wide are different from what they were 10 to 15 years ago.

Last year, the electricity industry as a whole made a profit of £777 million. Within that sum, the London board made a profit of £72 million, Southern board £65 million, Eastern board £70 million, East Midlands £50 million and Yorkshire £49 million. Only two of the remaining boards made a profit of less than £29 million last year.

The industry is doing so well that last November, the chief executive of National Power, Mr. John Baker, said that there was a good chance that domestic electricity consumers would get through 1990 with no price rises. But Mr. Baker had not reckoned with the Secretary of State. The right hon. Gentleman was so keen to push up prices to domestic consumers that he did not even wait to find out what costs the area boards would incur under privatisation.

When my office rang every board last week, they said that they did not know quite what their price increases would be, because they still did not know from the generating companies or the grid company what prices they would be charged for electricity or for the transmission of electricity. All they knew was that the Secretary of State had said that they could put prices up by a bit more than the rate of inflation and they certainly intended doing that. They all promised to ring back when they knew anything more, but none of them rang back. It is quite clear that the increase is unnecessary and unwanted. It was invented in Whitehall as a response to pressures from the City.

The Secretary of State said last Monday that the price increases that he has imposed will not be much of an increase in real terms. An increase of £30 or £40 may not be very real to him or to his well-heeled City advisers or even to the Prime Minister—despite the extra costs of her electric bath treatment—but a £30 to £40 increase will be real enough to pensioners, to families whose child benefit has been frozen, and to millions of others, coming as it does on top of mortgage interest rate increases, rent increases, the poll tax and fare increases, not to mention those newly privatised water charges.

It is all unnecessary; it is just intended to help the Secretary of State sell off the electricity industry. That decision makes it clear that the Secretary of State could sacrifice anything on the altar of privatisation. We cannot really blame him for that; it is his job.

Not only the consumers have been given low priority. We now hear stories—leaks from the generating companies and from the Department of Trade and Industry and counter-leaks from the Department of the Environment—that the Secretary of State is prepared to jettison the fight against acid rain if that will help keep the ship of privatisation afloat. Before we consider what is happening now, it is necessary to look at what has happened over the last decade.

By the end of the 1970s, it was generally accepted that emissions of sulphur dioxide from power station chimneys helped cause acid rain. In Europe, particularly in West Germany—the only other country in Europe with a large modern coal industry—they started to set standards to reduce those SO2emissions. The West Germans eventually set about installing flue gas desulphurisation equipment on all their modern coal-fired power stations—a total of 33,000 MW. That has put them at least a decade ahead of Britain.

In Britain, we behaved like the environmental chancers that the Government are. Nothing has yet been done, despite pressure from Greenpeace, Friends of the Earth, scientists and the general public. In 1984 and again in 1985, the Cabinet rejected proposals for action. Finally, in 1986 the Prime Minister announced that Britain would install FGD equipment on 6,000 MW of generating plant. But nothing was done. To this day, not a single major power station in Britain has been fitted with FGD equipment.

Not only did Britain do nothing, but our Government tried to prevent the setting of European standards, and succeeded in delaying and watering down those standards. All that was done in what has become Britain's role of tail-end Maggie—whingeing and whining that Britain knows best, and in any case it would all be very difficult and expensive.

In 1988, the British Government had to accept target emission reductions of 20 per cent., by 1993, 40 per cent. by 1998 and 60 per cent. by 2003. Those are among the lowest standards in Europe and were accepted by our European partners only because British Ministers argued that the medium-sulphur British coal industry needed to be protected and that flue gas desulphurisation equipment would take a long time to install. On the basis of those statements and arguments, honestly made, our European partners agreed to that reduction in standard. To move away from the introduction of FGD equipment will mean that our European partners could rightly demand, immediately, higher standards than the ones we have adopted.

Photo of Tommy Graham Tommy Graham , Renfrew West and Inverclyde

Is my hon. Friend aware that one of the largest employers in Scotland and in Renfrewshire is Babcocks, which has been encouraged to develop power stations which would eventually reduce acid rain? The news he has mentioned. will be a catastrophic blow to constituents in Renfrewshire, who will probably face further job losses. It seems that every announcement by the Government creates further and deeper unemployment in Scotland.

Photo of Frank Dobson Frank Dobson Shadow Secretary of State for Energy and Climate Change

My hon. Friend is perfectly right and I shall move on to the industrial consequences of the Government's short-sighted policy in a moment.

Eventually, Britain had a programme to install FGD equipment on 12,000 MW of generating capacity. That policy was confirmed as recently as mid-December by an Environment Minister and it was estimated to cost £2 billion. The programme was to start with the installation of FGD equipment at the 4,000 MW Drax power station, which would by itself meet the 20 per cent. target reduction for 1993.

Last November, at the United Nations, the Prime Minister made a speech which The London Standard moderately described in a memorable headline as "Maggie's plan to save the world". It reported that she had proclaimed: We already have a £2 billion programme of improvements to reduce acid rain emissions from our power stations. It now appears that that is no longer true. It seems that the Prime Minister has given up her plans to save the world. She appears to have found a higher calling; she wants the electricity industry sold off before the next general election.

Presumably the 47 expensive advisers have told the right hon. Lady that a £2 billion programme to clean up the environment is the sort of spending that the City does not like, at least not if it is done by an organisation that it wants to buy on the cheap.

The installation of FGD equipment at Drax will now not be sufficiently far forward to meet even the 20 per cent. target reduction set for 1993, so the generating companies are asking the Government if they can burn low-sulphur coal to make up some of the difference, the oil refineries and industrial users are being asked to make even bigger reductions in their emissions to make up for the shortfall. They are advising everyone that they do not think they will be able to make up that shortfall. The generating companies have said that they would like to be able to import low-sulphur coal instead of installing FGD towards the later and higher targets.

Photo of Mr Peter Rost Mr Peter Rost , Erewash

Will the hon. Gentleman explain what his policy really is? On the one hand he wants British coal to continue to be burnt, and he wants it to be burnt cleanly. On the other, apparently he does not want anybody to pay the price for that clean-up by way of higher prices for electricity. What is he really asking for?

Photo of Frank Dobson Frank Dobson Shadow Secretary of State for Energy and Climate Change

Labour policy is that FGD equipment should have been installed in the 1980s, that it should be installed now, and that the generating companies should get on with the job and thereby meet Britain's international obligations. We believe that the people of Britain would be prepared to pay the price for cleaning up the environment. The Torys' friends in the City are not prepared to pay that price. Although FGD is expensive and takes a time to install, it has the merit that it removes 90 per cent. of sulphur dioxide from chimney emissions.

Photo of Kim Howells Kim Howells , Pontypridd

Is it not a fact that electricity revenues increased by £1 billion in 1988–89 and that at least part of the price of the installation of the systems about which my hon. Friend is talking could have come from those revenues?

Photo of Frank Dobson Frank Dobson Shadow Secretary of State for Energy and Climate Change

My hon. Friend and I think along the same lines; he has anticipated what I intended to say, and I shall come to that point shortly.

The present proposals to substitute low-sulphur coal for the medium-sulphur deep-mined British coal that is currently burned in British power stations will, at best, cut sulphur dioxide emissions by half, because low-sulphur coal contains about half as much sulphur as the average British deep-mined coal. There is no question of using no-sulphur coal, because there is no such thing. Enormous quantities of low-sulphur coal will be required to achieve a reduction similar to that which would be achieved by installing FGD on 12,000 MW of plant, as promised by the Prime Minister in New York.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedfordshire North

The hon. Gentleman must make up his mind. To deal with the relatively high content of sulphur in British coal, we either spend a couple of billion pounds installing new plant or we import coal from Colombia and other countries in South America. He is against the importation of such coal, but wants immediate expenditure on capital equipment. Which way is he going? He must make up his mind.

Photo of Frank Dobson Frank Dobson Shadow Secretary of State for Energy and Climate Change

I am entirely lost by the hon. Gentleman's intervention. I have made it quite clear that capital expenditure should be made, and where the money should come from. I simply do not know why the hon. Gentleman is rabbiting on.

Until now, low-sulphur coal has been given low priority by this short-sighted Government. When they took office, there were 57 collieries in the low-sulphur coalfields of Kent, Wales and Scotland. All the Kent mines have now closed. The number of Welsh mines has been reduced from 37 to six, the number of Scottish mines from 16 to one, and Monkton hall is in mothballs. As a result, British low-sulphur coal capacity has been reduced to a third of its level when the Government took office. If the Secretary of State wants low-sulphur coal, I challenge him to say, either now or in his speech, whether he will insist that Monkton hall be reopened immediately and that the threat of closure be lifted from the remaining six collieries in south Wales. If he will not, it will mean that he prefers foreign coal to British coal.

The Government have encouraged more opencast mining and propose to give it another boost under the Coal Industry Bill, which is currently being considered in the other place. Besides all the environmental problems that result from opencasting, coal from opencast mines in Britain, with the exception of Scotland, has another major disadvantage—a higher sulphur content than deep-mined coal. In both respects, the Government's policy has made it more difficult for Britain to mine the low-sulphur coal that it needs. Therefore, most low-sulphur coal will have to be imported.

That poses other problems. I hardly need remind the House that last year Britain had a record trade deficit of £20,000 million. In cash terms, our trade in gas, oil and coal did little better than break even, and in tonnage terms we had an overall fuel deficit of 14 million tonnes, including 12 million tonnes of coal imports. To meet the 1998 target set by our European partners may require a further 30 million tonnes of low-sulphur coal imports, and 50 million tonnes may be necessary to meet the 2003 target.

As my hon. Friend the Member for Renfrew, West and Inverclyde (Mr. Graham) said, that is not the only trade disadvantage that would result from abandoning the FGD programme, because it would also harm British boiler manufacturers, who were hoping for contracts to install the FGD equipment. They have put much money and effort into preparing for that work. Had this short-sighted Government got on with desulphurisation in the 1980s, like West Germany, British companies such as Babcock Power and Northern Engineering Industries would be well placed to compete for contracts to clean up the dreadful chimney emissions in eastern Europe.

However, the latest news means that those companies are likely to be told by the people in eastern Europe to whom they are trying to sell their skills, "Why should we give contracts to you? You have not even done that work in Britain. You have no experience and you cannot compare with the achievements of Deutsche Babcock." That is another example of the Government's lack of concern for British industry.

Why is FGD to be abandoned or severely cut back? After all, it would best counter acid rain, best help British manufacturing industry, best secure the long-term future of the coal industry and best help the balance of payments. The answer is that the flue gas desulphurisation programme is threatened because it would cost money.

No one should be fooled by the claims that the electricity companies cannot afford it. As my hon. Friend the Member for Pontypridd (Dr. Howells) said, the electricity companies are rolling in money. Last year alone, they repaid £1,779 million to the Government, they self-financed investment of £1,492 million and they still made a profit of £777 million. More than £4,000 million was slushing around in their accounts in one year. If they have a £4,000 million surplus in just one year, they must be able to find £2 billion over the next six or seven years for this vital environmental programme.

Photo of Dr Michael Clark Dr Michael Clark , Rochford

The hon. Gentleman makes much play of the fact that the electricity industry has made a profit of £770 million. Is he aware of the value of the investment in the electricity industry? Does he not agree that, were the same amount of money to be put into the Post Office, the electricity industry would earn more than it does by the supply of electricity?

Photo of Frank Dobson Frank Dobson Shadow Secretary of State for Energy and Climate Change

It appears that the Chairman of the Select Committee on Energy wants to get rid of the electricity industry and to put the money in the Post Office instead. I must remind him of another point. According to the annual reports of the various electricity boards in England, Wales and Scotland, to which the Secretary of State referred me when I asked him about the value of assets, the total net value of assets is £35,000 million, which the British people have invested. We now understand that the Secretary of State will sell them off to his mates in the City for less than £10 billion. There will be a lot of our money swilling around in the hands of people in the City.

We must accept that a great deal of negotiating is going on. For all I know, all the rumours may have been put out by the electricity industry because it wants to make it appear that it is skint and needs money. Perhaps it will agree to introduce FGD into its power stations, in accordance with the Prime Minister's promise, providing it receives a green dowry from the taxpayer as a sweetener at the time of privatisation. Such a sweetener is not necessary, and should not be given.

Let me make it clear today that the next Labour Government will require the generating companies to meet the European targets—and to meet them by the installation of FGD equipment. Let me also make it clear that we believe that it would not be fair for any excess installation costs which result from the delay now being sought by the companies to fall on consumers. Those extra costs will not result from anything that consumers have done, so any future requests from the companies to pass on such extra costs to consumers will get an unsympathetic reaction from the next Labour Government.

Flue gas desulphurisation equipment can be installed in the sure and certain knowledge that it will work. Once such equipment has been installed, operators have the flexibility to respond to changing circumstances without raising sulphur dioxide emissions. That does not apply to a policy that relies on low-sulphur coal. That is a high-risk policy. For a start, there are severe doubts about Britain's ability to obtain secure supplies of the vast quantities of low-sulphur coal that would be required. Even if they were obtainable, at a reasonable price, the low-sulphur option would be vulnerable to such factors as an unexpected increase in demand for electricity, or the lack of availability of nuclear power from Britain, or even nuclear power imported from France.

Photo of Mr John Hannam Mr John Hannam , Exeter

There is an important point about the operation. Is it not a fact that the desulphurisation process on coal with a high sulphur content results in an increase in the amount of CO2 going into the atmosphere, thereby increasing the other major problem of the greenhouse effect, whereas using coal with a low-sulphur content, from whatever source, does not involve that process and therefore does not create the increased CO2 effect, which is one of the major problems which the world has to face?

Photo of Frank Dobson Frank Dobson Shadow Secretary of State for Energy and Climate Change

The differences between the two, as the hon. Gentleman knows, are not that large. We have given a clear undertaking to our European partners to reduce acid rain. We should get on with that, rather than pretend that we are making a shabby compromise for the sake of the greenhouse effect. It has nothing to do with the greenhouse effect; the Government are concerned instead about the counting-house effect in the City.

The low-sulphur option, if pursued, would lead to massive closures of collieries, which could never be reopened. If collieries are closed in part of a shipyard, it would probably be impossible to sink a safe shaft thereafter.

To augment low-sulphur coal by burning natural gas, as some people suggest, would be typical of the Government's wasteful and short-sighted energy policies. It would do even more harm to the coal industry and to the balance of payments. It would also rapidly deplete our natural gas reserves, which should be put to better uses than generating electricity, as laid down in an EC directive.

Not to go ahead with FGD would mean placing less reliance on the most efficient stations on the system. Equally at risk would be those collieries and coalfields which supply such power stations. The British collieries which supply the stations to be converted to low-sulphur coal would also be at risk. The Nottinghamshire coalfield would be most vulnerable, in view of the proposals for coal import facilities on the Humber, and for gas-fired power stations also on the Humber. The low-sulphur-coal approach, according to estimates given to me, could reduce the Nottingham coalfield to just three pits by the end of the decade.

The Secretary of State has been praised for progressing his privatisation programme and for untangling the knotted nonsense that he inherited from his predecessor. I concede that, from that narrow point of view, he deserves credit for the progress which he has made towards the goal of privatisation set for him by the Prime Minister. But I should remind him that there are more important things in the world than pleasing the Prime Minister. That may be an unusual concept for members of the Cabinet, but it is nevertheless true.

I remind the Secretary of State of his own experiences. After the House voted to televise its proceedings, the Prime Minister wanted the right hon. Gentleman, as Leader of the House, to do what he could to delay and obstruct the coming of the cameras. After a time, perhaps as a result of my advice, the Secretary of State rightly decided that it would be better to go down in history as the man who got the cameras in rather than the man who did the Prime Minister's bidding. He showed considerable ingenuity in coming up with a formula for televising the House which was acceptable to nearly everyone. He showed even more courage in telling the Prime Minister that she would have to go along with it.

The Secretary of State should show those characteristics again. He should take the Prime Minister aside and tell her that the fight against inflation and the battle against acid rain cannot be reconciled with Cecil's potty scheme for electricity privatisation. He should tell her to give priority to the consumers and to the environment. He should tell her to choose between pleasing her friends in the City and breaking her public promise at the United Nations.

The privatisation of electricity is already proving expensive to consumers, damaging to the environment, harmful to the balance of payments, crippling to British manufacturers and inflationary. It is time for the Government to think again. Above all, the Secretary of State should not agree to the backsliders' charter on acid rain proposed by the generating companies and his city advisers. Our country and our European neighbours deserve better. The advisers should turn their attention from trying to fiddle the figures to thinking of something more important.

For the last decade, Britain has been the dirty old man of Europe. It is time to look ahead. We should make sure that we lead the way in the international effort to make the new Europe a better and cleaner place, to ensure that, by 2000, the skies are clear, the trees are growing again and the lakes and rivers are restored to their original purity. That is what our people are looking for in the 1990s. They will not forgive those who put privatisation before those hopes and aspirations.

Photo of Mr John Wakeham Mr John Wakeham , Colchester South and Maldon 4:45 pm, 20th February 1990

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof: 'recognises the significant progress made by this Government in preparing the electricity supply industry for privatisation; welcomes the introduction into the industry for the first time of real, visible and effective competition which will turn the industry from a producer centred monopoly into a truly consumer oriented industry; welcomes the downward pressure that this will put on customers' electricity bills and the upward pressure on standards of service; welcomes this Government's intention to see a radical restructuring and strengthening of pollution control through the Environmental Protection Bill; and welcomes this Government's commitment to complying with the requirements of the European Community's Large Combustion Directive.'. I do not know what I have done to deserve praise from the hon. Member for Holborn and St. Pancras (Mr. Dobson), even in such an oblique way. After all, for three years I spent my time trying to nurse him as shadow Leader of the House by feeding him titbits to try to get him to ask sensible questions, but he rarely did so. I suspect that he was trying to establish a passage of time between his obvious and complete lack of grasp of accountancy principles or economics—I do not know whether that accounted for his demise from his employment with the Central Electricity Generating Board or whether it was election to the House——

Photo of Mr John Wakeham Mr John Wakeham , Colchester South and Maldon

He got a better job—as a Member of Parliament, no doubt—so that was that.

As for the hon. Gentleman's comments on the televising of the House, he knows that, after the decision of the House, I paused to consider what to do; I think that I paused for about 20 minutes before I went on television and announced that I had accepted the decision of the House. He knows full well that I worked very hard indeed to try to implement that decision, with his co-operation.

Having got over the shock of praise from the hon. Gentleman, I welcome the further opportunity so soon after last week's statement to bring the House up to date with our continuing progress and to put on record the performance of the electricity industry under this Government.

In just six weeks' time, Britain's electricity industry will undergo a dramatic transformation. From the end of March—when 16 new companies will be created—the old electricity supply industry will disappear. In its place, we will establish a competitive market in power. For the first time ever, there will be genuine competition in electricity supply.

The vesting day for the new companies will mark one of the last hurdles for this, the most complex privatisation ever undertaken. From there, the Government will move ahead and complete the privatisation of the industry in the lifetime of this Parliament, just as they have pledged all along. Then, for the first time, workers in the electricity industry and consumers of electricity alike will have the chance to invest in 14 of the 16 new private companies we will be creating, and to take part in the world's biggest and most exciting privatisation.

The motion tabled by the Opposition talks about electricity prices. These are, of course, a matter for the industry and it has yet to announce its proposals for the coming year. I indicated to the House just over a week ago that I saw no reason why there should be any increase in the average price of electricity this year. I am now able to inform the House of my latest thinking. I repeat that it will be for the industry to announce its proposals on prices. These will, of course, vary between the boards, depending on their individual circumstances, as they have always done. The likelihood now is that the average price increase overall for electricity consumers in April should be below the current rate of inflation.

In fact, many industrial customers—those who consume more than 1 MW—will for the first time be negotiating prices in a truly competitive market, and will benefit from price reductions. Where they are not able to do so—perhaps because they need time to negotiate—we have sought an undertaking from the industry that it will use its best endeavours to offer a one-year real price freeze. Overall, I anticipate a significant reduction in the average price paid by customers who consume more than 1 MW.

Photo of Mr John Wakeham Mr John Wakeham , Colchester South and Maldon

I shall give way in a moment, but I want to finish dealing with prices.

Customers who take below 1 MW will benefit from regulation and the change to the price control that I announced last week, As I said then, I see no reason why the average price to these customers should rise by much more than the current rate of inflation this year. The price control should prevent any further increases before the end of March.

Photo of Mr Peter Hardy Mr Peter Hardy , Wentworth

Does the Secretary of State recognise that, as a result of the enormous and unnecessary increases in electricity prices in 1988–89, were it not for privatisation, the electricity industry could easily be in a position to reduce prices, rather than simply freeze them?

Photo of Mr John Wakeham Mr John Wakeham , Colchester South and Maldon

I shall address that very point in the latter part of my speech.

I was frankly amazed at the sheer cheek of the motion tabled by the Opposition. The Labour party knows a thing or two about electricity price rises, because it was under the Labour Government that prices rose.

Photo of Mr John Wakeham Mr John Wakeham , Colchester South and Maldon

Indeed, a former Labour Cabinet Minister stated: The last Labour Government, of which I was a member … caused a massive increase in electricity charges".—[Official Report, 13 December 1983; Vol. 143, c. 813.] The size of the increase was staggering. During the last five years of the Labour Government, with inflation raging out of control, domestic prices increased, in current terms, at a rate equivalent to 2 per cent. every six weeks, or a staggering 155 per cent. over the five-year period.

If we look at domestic prices under the last five years of this Government on the same basis, we see that they increased by some 21 per cent. Under Labour, they would have increased at a rate equivalent to that percentage each year.

The picture is clear. Where Labour puts prices up, the Conservatives bring them down. I simply cannot comprehend the Opposition's allegations that preparation for privatisation has put up prices when it is clearly not the case.

Photo of Mr John Wakeham Mr John Wakeham , Colchester South and Maldon

I wish to finish this point. I shall give way in a moment. I may clarify some of the points that the hon. Gentleman wishes to raise.

The simple truth, demonstrated by the Opposition motion, is that the Labour party is confused. As usual, Labour Members want it both ways. They oppose the tough line that we have taken with the coal industry, which has resulted in the stabilisation of prices. They oppose the necessity of raising the return on the assets employed in the electricity supply industry, although the return has still not reached the 5 per cent. that they themselves set when they were in power.

The fact is that prices would not be any lower if electricity remained in the public sector, and for many consumers they would be a good deal higher. The reality is that the pressures on the electricity supply industry will all be to hold or reduce prices as competition develops. That will be good news for the consumer.

Photo of Mr Alexander Eadie Mr Alexander Eadie , Midlothian

Using the right hon. Gentleman's phrase, does he agree that there is an element of bare effrontery when he draws a distinction between the period of Labour Government and that of the Conservative Government? Does he not realise that there was an oil crisis then and that billions of pounds were being passed across the exchanges for oil? Incidentally, if we pursued his policy, we would pass billions of pounds across the exchanges. Does he not realise how many billions of pounds his Government have had as a consequence of North sea oil? It is bare effrontery for the right hon. Gentleman to quote those statistics to the House.

Photo of Mr John Wakeham Mr John Wakeham , Colchester South and Maldon

If the hon. Gentleman likes, I will quote the figures by direct comparison, taking out the inflation factor, which was substantial and caused partly by price rises and partly by oil prices. During the last years of the Labour Government, industrial electricity prices increased by 6 per cent. in real terms and domestic prices increased by 9 per cent. in real terms. In the last five years of this Government, industrial prices fell by 10 per cent. and domestic prices by 8 per cent. in real terms. Industrial prices are lower than they have been since 1973. That is a perfectly good answer to the hon. Gentleman.

Photo of Mr John Wakeham Mr John Wakeham , Colchester South and Maldon

No. I must get on a little. I will give way in a minute.

The Opposition are also on shaky ground if they accuse—[Interruption.] Perhaps the hon Member for Dunfermline, West (Mr. Douglas) will keep calm for a moment. The Opposition want to raise prices. They do not like it when someone tells them the facts.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline West

I am intrigued by the Secretary of State's analysis. I have listened patiently to him. In December 1973, OPEC quadrupled oil prices. In the mid-1970s we were contemplating a $35 to $40 barrel in money terms. We now have a $19 barrel. World oil prices and, indeed, world energy prices have fallen in real terms. The Secretary of State knows that, and he should not try to take credit for it.

Photo of Mr John Wakeham Mr John Wakeham , Colchester South and Maldon

I was simply stating the facts because the Opposition referred to the price of oil. The important point, which the Opposition cannot wriggle away from, is that, under their policy of seeking a 5 per cent. return on assets, prices today would be higher under a Labour Government than they are under the Conservative Government.

The Opposition are also on shaky ground if they accuse the Government of weakening the protection of the environment. It was this Government who signed the EC large combustion plants directive in 1988. It is this Government who are intent on a radical restructuring and strengthening of pollution control through the Environmental Protection Bill. It is this Government who are in the forefront of international efforts to see that the greenhouse effect is taken seriously.

Photo of John Home Robertson John Home Robertson , East Lothian

The Secretary of State should save himself some time and give way now.

Photo of Mr John Wakeham Mr John Wakeham , Colchester South and Maldon

In June 1988, the Government and the Governments of the other EC member states reached agreement on the terms of the large combustion plants directive. Under this directive the United Kingdom will reduce the level of airborne sulphur dioxide emitted by existing large combustion plants—such as coal-fired power stations. For the United Kingdom, the objective is a 60 per cent. reduction in our sulphur dioxide emissions, based on 1980 levels, by the year 2003, with intermediate reductions of 20 per cent. by 1993 and 40 per cent. by 1998.

The Government have also undertaken to reduce the United Kingdom's emissions of nitrogen oxides—another pollutant implicated in the formation of acid rain—by 30 per cent. on 1980 levels by 1998.

The essence of the directive is a commitment by member states to reduce their emissions of acid gases. It is not a commitment to any specific form of abatement technique.

The retrofitting of power stations with flue gas desulphurisation equipment is an important means of reducing emissions of sulphur dioxide. Contracts have been placed for the retrofitting of the 4 GW Drax power station. But there are other means, too. For example, greater use of natural gas in power stations would not only reduce emissions of sulphur dioxide, but would help control our emissions of carbon dioxide. That could prove of greater value as part of the strategy to combat global warming.

I assure the House that the privatisation of the electricity industry will not affect United Kindom compliance with the terms of the directive. The Environmental Protection Bill will provide the Secretary of State for the Environment and Her Majesty's inspectorate of pollution with adequate powers to ensure compliance with the directive.

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

May I take the Secretary of State back to his argument on the virtues of competition? I read his speech in Aberdeen last Friday. How will the cross-border competition work? In particular, how can we export Scottish electricity generated by coal at 4p per unit or by advanced gas reactor at, perhaps, 8p per unit when there are proposals to build 3,000 MW of gas-powered electricity stations in the north-east of England which will produce electricity at 2p per unit? Is not that a recipe for one-way competition? The competition will not be from north to south. From a Scottish perspective, can the Secretary of State really argue that it is a good deal to allow gas from Aberdeen to be sent to the north-east of England to out-compete the Scottish electricity industry and Scottish industry as a whole?

Photo of Mr John Wakeham Mr John Wakeham , Colchester South and Maldon

I am glad that the whole of Scotland is not as pessimistic about the fortunes of the Scottish economy as the hon. Gentleman. When I was in Scotland, I talked to a number of people involved in the electricity supply industry there, who believe that they can compete—[Interruption.] The hon. Gentleman quotes a lot of figures. It is not for me to discuss the details of contracts to which I am not party. I am convinced that Scotland has the ability to compete; that Scotland will compete on electricity and be very welcome in our system, in which it will play its part.

Photo of Mr John Wakeham Mr John Wakeham , Colchester South and Maldon

The hon. Gentleman asked me a question to which, in my view, I have given him the answer.

I always take a lively interest in the pronouncements of the hon. Member for Holborn and St. Pancras and his colleagues. Both he and his hon. Friend the Member for Dagenham (Mr. Gould) have come up with some interesting new policies on the environment recently.

The hon. Member for Holborn and St. Pancras wants to introduce a new merit order based on environmental friendliness—by which, we must assume, he means nuclear first and coal last. The hon. Member for Dagenham—taking time off from the roof tax—has said that Labour would stabilise carbon dioxide emissions within five years and then embark on a major programme of reductions.

It seems to me that both hon. Members have committed themselves to policies without working out what impact they would have on our economy—and more specifically on the coal industry. The combination of those policies could have a devastating impact on the industry and on the workers in the industry that many Opposition Members represent. Perhaps the hon. Members have not done their homework, or perhaps they should think a little more before committing themselves to such policies, but until they come clean we can only assume one thing—that a Labour Government would be disastrous for the coal industry.

Photo of Frank Dobson Frank Dobson Shadow Secretary of State for Energy and Climate Change

I assume that the Secretary of State is referring to a speech that I made in Wakefield on 21 November. It would have been better if he had told the House that I did not announce the merit order as part of Labour's policy. I said——

Photo of Andrew Mitchell Andrew Mitchell , Gedling

The hon. Gentleman is recanting.

Photo of Frank Dobson Frank Dobson Shadow Secretary of State for Energy and Climate Change

No, I am not recanting at all. I said, "I don't pretend to have all the answers"—[HON. MEMBERS: "Oh."]—unlike Conservative Members who always have all the answers. I said that I was seeking advice about one idea that which force the generators to take the environment seriously. If the Secretary of State—and, presumably, those who helped him draft his speech and who are now sitting in the Box—had looked carefully at my speech, they would not have seen any suggestion that there should be comparisons between gas, electricity and coal because we are looking at the comparative merits of one gas-fired method against another and of one coal-fired method against another. I hope that the Secretary of State will stop this canard, which he has run out half a dozen times already.

Photo of Mr John Wakeham Mr John Wakeham , Colchester South and Maldon

I am grateful to the hon. Gentleman. Indeed, I am glad that an element of bipartisanship has broken out. We can agree that the hon. Gentleman does not know all the answers. However, more seriously—some important issues are involved—I give the hon. Gentleman this undertaking. If he has any plans about how he would like the merit order to be altered from the point of view of the environment, and if he will send his proposals to me, I will ensure that they are considered by the experts in the Department and I will give the hon. Gentleman a perfectly adequate answer. I mean that seriously. I am happy to cast a slide rule or two over the hon. Gentleman's proposals.

Photo of John Home Robertson John Home Robertson , East Lothian

When the Secretary of State has the slide rule out, and since his experts are to assess the environmental impact of different types of power, will he take this opportunity to say something about the circumstances in which the offshore wave power programme was rubbished by people in his Department, we assume, back in 1982? Is he prepared to make a further statement now on whether that programme will be started again?

Photo of Mr John Wakeham Mr John Wakeham , Colchester South and Maldon

I came to the Department on 27 July 1990—[Interruption.]—no, 1989, and I have not briefed myself on what happened in 1982. However, if the hon. Gentleman would like to write to me about it, I shall be happy to look into the matter.

Even before it is accomplished, privatisation has had the effect of stimulating new thinking about methods of electricity generation in this country. The scope and incentives for combined heat and power, for the burning of gas and for renewable energy sources have become much clearer. All these are to be welcomed on environmental grounds. As I said on 12 February, around 300 projects have been put to the area boards in response to our policy of encouraging the development of commercial renewable energy sources.

There has been some ill-founded comment that we have overlooked the interests of independent generators in framing our privatisation proposals. This is not the case. The promotion of competition in generation remains a key objective.

As far as the existing generators are concerned, there are about 100 projects selling to area boards under the terms of the Energy Act 1983. My predecessor announced a year ago that we had agreed five-year transitional arrangements with the area board chairmen to ensure that the changes that we are bringing about do not materially affect the working of those independent power contracts that had been agreed against the backdrop of the Energy Act 1983. The object of the transitional arrangements is to ensure that the generators are no worse off in revenue income terms than at present.

Nevertheless, not all generators currently selling under 1983 Act terms could have been covered by these arrangements, since some 40 of those projects predate the 1983 Act. I have been considering this further and am pleased to say that my proposal is to extend the transitional arrangements to all existing independent generators, regardless of when the plant investment was made.

The successor companies of the area boards will, therefore, make available 1983 Energy Act terms to all existing generators who wish them, for a period of five years after vesting. I believe that that will give all independent generators now on the system an oportunity to come to terms with the new market environment that we are now creating.

As for new entrants, there is a substantial interest among the independent sector in entering the generating market. Lakeland Power and NORWEB, of course, led the way last October with the signature of a long-term power sales contract from the Roosecote station in Cumbria. I am glad to say that this particular project is progressing well. As we speak, the staton is undergoing conversion to burn gas and it is hoped that Lakeland will be supplying power by the winter of 1991.

I hope and believe that more will follow. We know of around 20 other major generation projects in prospect and negotiations between the companies concerned are actively under way. I hope that the emerging final details of the new regime will assist in bringing such negotiations to successful conclusions. The hon. Member for Holborn and St. Pancras talked a great deal about the Government's record and policies——

Photo of Mr John Wakeham Mr John Wakeham , Colchester South and Maldon

Well, I do not think that the hon. Member for Holborn and St. Pancras can object to me commenting as such, because he said very little about his party's record and policies. Perhaps he is a little embarrassed to talk about them. But if he will not, I shall. I shall set the record straight—and the record is clear. Labour is the party of electricity price rises. The Conservatives are the party of electricity price reductions. Labour in government did nothing to clean up the environment. The Conservatives in government are taking the lead throughout the world in tackling environmental problems. Labour believes the answer to everything is renationalisation. The Conservatives believe in free enterprise——

Photo of Frank Dobson Frank Dobson Shadow Secretary of State for Energy and Climate Change

While the right hon. Gentleman is talking about policy, does he recognise that on 13 December 1989 an Environment Minister said in a written answer that meeting the anti-acid rain commitment will involve a range of measures by United Kingdom industry, including retrofitting at least 12,000 MW of electricity generating capacity with flue gas desulphurisation equipment."—[Official Report, 13 December 1989; Vol. 163, c. 717.] Is that still the Government's policy, or has the Secretary of State just changed it?

Photo of Mr John Wakeham Mr John Wakeham , Colchester South and Maldon

We shall meet that directive in the most sensible and practical manner. Global warming and carbon dioxide are important factors, and we have given a clear undertaking to meet the directive.

The contrast between the two parties could not be starker. Where Labour failed, this Government have a proud record and sound policies. I commend them to the House.

Photo of Mr Peter Hardy Mr Peter Hardy , Wentworth 5:09 pm, 20th February 1990

I am delighted to follow the preposterous speech of the Secretary of State. We can only assume that he is looking for an early ministerial reshuffle, as it is obvious that he does not want to be in charge of the electricity industry as it goes towards privatisation.

It is true that energy prices rose in the 1970s following the Yom Kippur war, when fuels costs quadrupled. After 1980, however, the reason for high electricity prices was the industrial devastation that had reduced demand and left the industry with a substantial surplus of generating capacity. That problem should have been resolved, but we now face massive price increases for no good reason.

I was present when the Secretary of State's predecessor came to the House to say that electricity prices had to rise by 15 per cent. in 1988 and by up to 7 per cent. in 1989 to pay for capital investment. Hon. Members who were present then will recall that. We pointed out that the Central Electricity Generating Board had already budgeted for adequate capital investment without price increases and, during the passage of the Electricity Bill in Committee, we established that electricity prices had gone up for no good reason, as the board's capital expenditure programme had been met from its budgeted sums before those price increases. Those increases have put a heavy burden on domestic and industrial consumers.

In the past two years, the Government have been fortunate, as the winters have been relatively mild. Had that not been so, there would have been a scandalous number of hypothermia cases and similar conditions. What the Secretary of State has said today brings no comfort to the domestic consumer. He has promised that prices will not rise above the level of inflation, but inflation may well reach 8 per cent. this year and any price increase will be a significant burden on those already paying too much for their electricity.

Whatever the Government may say, the share of income devoted to electricity and fuel costs by the poorest 4 million people in our country is already excessive. They cannot afford to buy electricity shares or water shares. The private water companies recently demonstrated what privatisation means. They are now telling the fire authorities that they have no obligation to provide free water for fighting a fire. Before long, the private electricity generators will say that they have no obligation to provide heat and warmth for the poorest of our country.

It is bad enough for the Government to impose hardship upon the poor, but, while maintaining their arm's length relationship with industry, they should remember that they have an obligation to supervise the British economy. On Saturday, I spent the evening talking to employees of the steel industry who are members of the Iron and Steel Trades Confederation, the ISTC. They are anxious not only about their jobs, but about rapid developments that will take place in the months ahead. Their anxiety is shared throughout the steel industry and the chairman of United Engineering Steels, Mr. Pennington, wrote to me recently to express his anxiety. I am sure that the Minister is aware of that anxiety.

The signs are that we are heading for an industrial recession. Between December 1988 and December 1989, steel production fell from 363,000 tonnes to 343,000 tonnes; between November 1988 and November 1989, steel production fell from 360,000 tonnes to 330,000 tonnes. Those falls are significant and serious, as the steel industry is typical of a number of high-technology, high-energy-using industries. Those industries know that, if we enter a tighter, more competitive international market, our competitors will behave with a great deal more intelligence than the Government have displayed since 1979.

As competition increases and tightens, our competitors in France, Germany and elsewhere will recognise that intelligent support from the state and intervention by the Government will be helpful in maintaining their share of international trade. Our Government should remember that, for companies such as Rotherham Engineering Steels Ltd., the price of power may account for more than 20 per cent. of production costs. The Government will not provide such support, but how will we generate the import revenue to pay for the enormous importation of low-sulphur coal, as envisaged by the Government?

The Government have wiped out the British low-sulphur coal industry, and they intend to rely upon imports. In the 1990s, it is inevitable that the premium enjoyed by that coal will increase. Within the decade, I estimate that it will cost £50 a tonne. Because of the Prime Minister's betrayal of her commitment to serve the cause of decency in the environment, we shall be forced to buy low-sulphur coal from abroad, and that will mean the equivalent of a balance of payments demand of £3,000 million.

Photo of Mr Peter Hardy Mr Peter Hardy , Wentworth

I would rather not, as I promised to make a short speech—perhaps to enable the hon. Gentleman to make his own.

The Prime Minister and her Government have betrayed the commitments to the environment that she gave several times 18 months ago. This most recent betrayal comes as no surprise; we have seen it all before. As a result of the failure of the Government's energy policy, British industry and exporting companies such as Rotherham Engineering Steels Ltd. may face a serious competitive disadvantage. That will affect the national economy and the employment potential that industry should command.

This should not be a matter for party games; what is at stake is too serious. The Government's handling of the energy economy will endanger the well-being of the country, pose a threat to our exporting industries and cause hardship to the poorest sections of our community, who are already suffering a great deal. The Government's failure poses a danger to the health of the nation as they cling to the idea that the leukaemia-friendly nuclear industry is helpful to the environment. The facts are far too serious to allow the Government to continue with their preposterous approach.

Photo of Dr Michael Clark Dr Michael Clark , Rochford 5:17 pm, 20th February 1990

When my right hon. Friend the Member for Hertsmere (Mr. Parkinson) announced his plans for the privatisation of electricity, he made the wise decision to split the generating board in two. He also made the important decision that the distribution companies could generate electricity and that other companies should he able to generate electricity by the use of private capital. One part of that privatisation plan was not how I would have wished, however—that relating to nuclear power.

We could have privatised the electricity industry as a whole, but we excluded the nuclear part and kept it as a separate public company. The third report of the Select Committee on Energy for 1987–88 said in paragraph 147: independent witnesses were unanimous that, because of commerical discount rates, and the price of coal, unsupported, private companies were most unlikely to build nuclear power plants. In a speech in this House on 12 December 1988, I and my hon. Friend the Member for Bedfordshire, North (Sir T. Skeet), who has now left the Chamber, spoke of the wisdom of having a separate publicly owned nuclear company. I said that there was a right and an obligation to buy non-fossil electricity, but asked where the obligation was to build nuclear power stations or generating sets based on renewable sources. It seemed to be a one-sided relationship, with an obligation to buy but no obligation to build.

At that time—admittedly, I am going back more than 12 months—there were arguments for a separate public company for nuclear power stations, so that the generation of nuclear electricity would he guaranteed. There was also an argument for a separate company to prevent the nuclear component from eroding the selling price of National Power and PowerGen—particularly National Power. There was also an argument that we should retain a centre of nuclear excellence in terms both of operating nuclear power stations and of research and development. There was, and still is, a case to have a separate nuclear company so that there would be public confidence in nuclear energy, especially with regard to safety.

Above all, the main point made in that debate was that it was essential to keep nuclear generation separate from other forms of generation, so as to prevent the true costs of the nuclear industry from being concealed. They were the costs of capital, fuel, waste disposal and decommissioning. It seems that, due to the accoustics and the speed of sound in this Chamber, it takes about 12 months for noises from Back Benches to travel the 10 or 15 ft to the Front Benches.

I am delighted that my right hon. Friend the Secretary of State has taken the bold decision to put nuclear generation into a separate company—Nuclear Electric. The fact that the decision has been taken a little later than one would wish does not change the fact that it was a bold, wise and correct decision, and I congratulate him on it.

I add to the congratulations offered by the hon. Member for Holborn and St. Pancras (Mr. Dobson), and congratulate my right hon. Friend and his colleagues on the magnificent job that they are doing in completing the privatisation programme in the scheduled time. The vesting date will be 31 March. There is little doubt that my right hon. Friend is the right man for the right job at the right time.

Photo of Dr Michael Clark Dr Michael Clark , Rochford

I am talking about my right hon. Friend the Secretary of State, whom I congratulate on the work that he is doing at present. He is creating competition that will result in downward pressure on prices. Through competition, he will also encourage upward pressure on standard of service, which will benefit everyone using electricity.

We have heard much this afternoon about acid rain, which is principally caused by burning coal and producing sulphur dioxide. There are other forms of pollution, including that caused by carbon dioxide, which causes the so-called greenhouse effect. Carbon dioxide comes from burning not only coal, but all fossil fuels. It seems that, whether we are talking about acid rain or the greenhouse effect, it is either burning fossil fuel or, more specifically in terms of acid rain, burning coal, that is the problem. The difference between the two is that we can scrub out sulphur dioxide and prevent acid rain, as has been said, but we cannot do much now, if anything, to remove carbon dioxide, which causes the greenhouse effect. The only way we can do so is to think of other forms of electricity generation, whether renewables or nuclear.

There is a principle—it is presently being embodied in legislation—that the polluter pays. With the privatisation of electricity, I am certain that that principle will continue. The price of electricity must reflect the price of removing such things as sulphur dioxide and preventing acid rain. If we were not careful and did not have privatisation, we would be in a cost-plus position, where the cost of the measures would be passed straight to the consumer by the generator. With privatisation and the competition that will ensue, the cost of removing pollution will be kept to a minimum and will result in a downward trend, not an ever-spiralling upward one.

In the long term, there is little doubt that the nuclear programme and renewables are the solution to removing acid rain. However, we must concede—our Select Committee report showed this—that it is unlikely that the nuclear industry can make much of a contribution during the next 10 or 20 years. Therefore, we should perhaps look towards renewables.

In his statement on 12 February, my right hon. Friend the Secretary of State for Energy commented on the fact that the non-fossil fuel obligation would also encourage the development of commercial renewable energy sources. He reminded us this afternoon that about 300 projects have been proposed to the area boards in response to that policy. We await with considerable interest the second order, that he will introduce, which relates specifically to renewables. We look forward to learning about the success of many of those 300 projects.

Let us also hope that some of the money that is now being saved from nuclear research and development can be directed towards renewables. A little pump priming—if I may be excused the pun—in the renewable direction will have a great deal of benefit. Nuclear research is expensive, and it would not require more than a small percentage of that money to be diverted to renewables to have a significant impact on the number of renewable sources, their viability and their commercial success.

I still believe that, in the long term, the nuclear industry gives us the best options for constant availability of energy. In due course, as fossil fuels rise in price due to their scarcity, nuclear electricity will have advantageous prices and will be pollution-free.

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

I am surprised by the hon. Gentleman's last remarks. As Chairman of the Select Committee on Energy, he knows full well that, while we have been taking expert evidence on this subject recently, no one has been able to give the exact cost of nuclear energy in the future, including decommissioning.

Photo of Dr Michael Clark Dr Michael Clark , Rochford

I grant that it is difficult to know what the cost of nuclear energy will be in future. However, it is also difficult to know what coal, gas, or oil will cost. One fact we do know is that coal, gas and oil are declining in world reserves, whereas the amount of uranium is largely untouched. Basic cost graphs will show that the cost of fossil fuel will increase as it becomes scarce, and the cost of nuclear energy will either remain stable or decrease as technology improves. We know that there is plenty of uranium to fuel the stations.

When the nuclear industry recovers from its temporary setback and starts rebuilding stations, I am certain that they will be in the private sector, as they are in America. There is no reason why they should not be in the private sector here in due course, although it is not appropriate at present, for the reasons that I gave earlier.

I am disappointed that the review of the nuclear industry has been delayed until 1994. That will probably mean that there can be no new nuclear power stations before then. I wonder what will happen to fill the gap left by the cancellation of the three pressurised water reactors that are no longer to be built.

The work on finding sites for nuclear waste must continue regardless of the nuclear review. We have to be sure that we have the advanced technology for disposing of nuclear waste by 1994, when there will be another boost in the build of nuclear power stations. The nuclear industry will then be able to keep prices down, without the pollution which results from the burning of fossil fuels.

Several Hon. Members:

rose——

Photo of Mr Harold Walker Mr Harold Walker , Doncaster Central

Order. If hon. Members limit their speeches to 10 minutes, all those who wish to speak will be able to do so.

Photo of Malcolm Bruce Malcolm Bruce Shadow Spokesperson (Scotland) 5:29 pm, 20th February 1990

It is amazing to hear the complacent way in which the Government defend the privatisation of the electricity industry, given the shambolic way in which it has been conducted over the past year or two. The Government have turned cartwheels; advice from Opposition Members and others outside the House, once treated with contempt and rubbished, has proved to be correct and has ultimately been accepted, but only after confidence in the Government's handling of the matter has been shattered. But that only came about because the City was not prepared to buy the package that was originally proposed. I agree with the hon. Member for Rochford (Dr. Clark) that, in the circumstances, the Secretary of State has made the best of a bad job, but I am sure that he and his predecessor are not the closest of friends as a result.

I am not convinced that the electricity industry has been privatised with the interests of the consumer in mind, with the objective of keeping down electricity prices or with the objective of dealing with the environmental problems associated with electricity generation. It has been done with the voter in mind, as a means to buy votes. However, the Government's economic policies are now in such a mess that it is difficult to see how they can issue such a bribe without aggravating the problems that they have created.

The nuclear power industry has proved most embarrassing to the Government. We were first told that nuclear power was the cheapest form of electricity, even though for years it has been apparent to anybody who looked at it closely that that was not the case, and that it was expensive. At least privatisation flushed that fact out so effectively that the Government were forced to pull it from the sale, as I and others warned at the outset they would have to do, because it would not be a saleable proposition.

Not only is the nuclear industry uneconomic, but it cannot be claimed to have all the benefits that the hon. Member for Rochford described. Safety problems occur far too frequently for us to be complacent about existing nuclear power stations. Only last week there was an incident at Hinkley Point. The industry maintains that there was no significant problem, but it was only a matter of luck that there were no serious consequences. The incident was certainly outside the budgeted safety provisions. In other words, it should not have happened. In addition, there are the problems of leukaemia clusters and the genetic transfer of leukaemia at Sellafield.

That raises serious questions about whether the THORP project is the money spinner that the Government suggest. At the end of the day, that will prove to be a major cost and environmental liability. The project should never have been embarked upon. The idea that it will win us large quantities of foreign exchange in the short term is likely to be outweighed by the difficulties of maintaining the safety of that plant and dealing with the large volumes of radioactive waste that will be produced as a by-product.

The nuclear industry has no useful contribution to make in the foreseeable future, and it should be phased out during the next 15 to 20 years. That will require a radical reassessment of what our electricity supply industry should look like in 15, 20 or 25 years' time.

I agree with the Secretary of State that the Labour party's motion is a little cheeky. It is certainly bald, and it says little if anything about the Labour party's alternative. It is extremely negative in its approach. One of the Labour party's problems is that, fundamentally, it likes the electricity supply industry the way it was—a huge, centralised monolithic structure.

Photo of Malcolm Bruce Malcolm Bruce Shadow Spokesperson (Scotland)

No, I am trying to be brief.

To make the point more forcefully, during the Lib-Lab agreement, the Labour Government's objective was a single electricity company for the United Kingdom. It was one of the small negative benefits of that period that the Liberals in government refused to accede to that objective, and we were right to ensure that the regional structure was maintained. It is necessary to ensure that the industry has some transparency and comparability.

There is room for competition within the supply industry. That has never been a problem for me or for my party, but I am not convinced that the structure that has been created is likely to be the definitive answer. Restructuring will inevitably take place over the years. I am not wholly convinced that there will be a proliferation of new small suppliers, but that is the direction in which the electricity supply industry should move in the next few years, so that we have much greater variety, scale and size of generation.

Another mistake in the way in which the industry has been structured and has instinctively operated over the past 10 or 15 years is that, when demand has risen, the response has been to build a series of new giant power stations. That era should be behind us. That is one of the better reasons why the PWRs should be cancelled: not just because they are nuclear stations but because they are of a scale and type that is not relevant to the future structure of the industry.

We want smaller-scale generating capacity, which can be much more efficient because it can use combined heat and power systems and district heating systems and in other ways operate at a level of efficiency which will reduce environmental pressures as well as fuel requirements.

Environmental pressures must be addressed from the outset. The Government should be setting targets not only for the reduction of acid rain but for the reduction of carbon dioxide emissions. That can be done only if one sets out the objectives for three to five years ahead and then works out how they can be achieved. The Minister says that the Government aim to achieve a 60 per cent. reduction in acid rain by 2003. The EC wishes to achieve that by 1995, so the Government are clearly not moving as fast as they should be.

The practicalities of reducing carbon dioxide emissions are not too acute in the short term. I had the privilege and pleasure of opening a sheltered housing complex in my constituency last week. It was built by Gordon district council and is claimed to be the most energy-efficient housing complex in operation in the United Kingdom. For £30,000, a substantial reduction in heating costs has been achieved. The project cost £1·44 million and the 32 units cost £1 per week for all heat and light, using condensing boilers, triple glazing, high insulation and low-energy lighting.

It is also estimated that carbon dioxide emissions from that building have been reduced by 50 per cent., compared to what would have been the case if that £30,000 investment had not been made. Building standards and an energy audit for the introduction of such new systems in a variety of buildings could quickly reduce fuel consumption and carbon dioxide output. Radical measures of that kind are needed if the environmental pressures created by the electricity supply industry are to be reduced.

The Government told the United Nations that they believed that it was possible to reduce the demand for electricity by 60 per cent. within the next few years—that is, a 60 per cent. increase in efficiency. However, in written answers that I have received even in the last few weeks, the Government insist that they believe only a 20 per cent., saving is achievable. How do the Government explain that differential? What is being done to achieve even a 20 per cent. saving?

One must ask also what is being done about renewable sources of energy. After conservation has been exploited—that must be the priority—alternative energy resources must be dramatically expanded. Scotland has the best wind profile in Europe, yet that resource is not being developed at anything like the rate necessary. In fact, one company involved dropped out of the market because the pace of development did not allow it to survive.

We should be setting ourselves the clear objectives of reducing carbon dioxide emissions by 30 per cent. over the next 15 years, introducing a system of emission control licences to reduce the amount of carbon dioxide and of other greenhouse gases released by energy generation, developing renewable energy resources on a much greater scale, and changing the nature of the coal industry to ensure that we do not continue losing low-sulphur reserves, as we have done over the past year or two. We should also phase out the nuclear power industry by 2020, if not before.

All that is achievable and would bring the substantial benefits of savings to the consumer, reductions in electricity costs, reductions in fuel poverty, and reductions in the impact of the adverse effects of electricity generation on the environment.

Photo of Mr John Hannam Mr John Hannam , Exeter 5:41 pm, 20th February 1990

I welcome the privatisation of the electricity supply industry and congratulate my right hon. Friend the Secretary of State on the effective grasp of the reorganisation that he has shown. In 1979, I and the late Jocelyn Cadbury, both working in the energy group, first drew up a report suggesting splitting the electricity industry into eight coterminous generating and distribution companies, as the first step to achieving a competitive situation. At that time, many technical objections were made, which outweighed the advantages. A decade later, the dream that I and the late Jocelyn Cadbury had or a more flexible and more competitive system is coming to fruition.

We are about to embark on a new era in electricity generation now that the old Central Electricity Generating Board monopoly is to be broken. With the emergence of two new private companies, National Power and PowerGen, together with the newly emerging independent generating companies such as Lakeland Power Ltd.—which has reached agreement to sell the output of its 225 MW power station in Cumbria to NORWEB—we can see all the pressures of competition being brought to bear on prices. I am confident that, within a few years, all the exaggerated fears of the Labour party that electricity prices will rise by 25 per cent. will be proved groundless—just as they were in the case of other major privatisations.

The Government can be proud of the success of their privatisation programme. Twenty-nine major former state sector companies have been privatised since 1980. Almost 45 per cent. of the former state sector and nearly 800,000 jobs are in private hands and are prospering accordingly. That has resulted in a trebling in the number of United Kingdom shareholders to more than 9 million. Ninety-nine per cent. of British Gas employees bought shares, and it would be a salutary lesson for Labour to poll all those employees, asking whether they really want to go backwards and see the renationalisation of the gas industry. Domestic gas prices fell by 16 per cent. in real terms in the five years from 1984 to 1989, and British Telecom charges have fallen by 5 per cent. in real terms since November 1986.

The statement by my right hon. Friend the Secretary of State last week that average electricity prices will increase below inflation is good news for everyone. It means, of course, that once again, Labour has got it all wrong, with its scaremongering forecasts of huge price increases.

Photo of Frank Dobson Frank Dobson Shadow Secretary of State for Energy and Climate Change

Will the hon. Gentleman allow me to intervene?

Photo of Mr John Hannam Mr John Hannam , Exeter

Because of the time limitation, I cannot give way to the hon. Gentleman—but I can prove if necessary that such a forecast was made by two Labour Members.

History has shown that there were massive price increases under Labour Governments. Between May 1974 and May 1979, domestic electricity prices increased 9 per cent. in real terms, compared with an 8 per cent. fall between 1985 and the present under a Conservative Government. Under Labour, industrial electricity prices rose 6 per cent. in real terms, but have dropped 10 per cent.. under a Conservative Government. As the right hon. Member for Plymouth, Devonport (Dr. Owen) said: The last Labour Government, of which I was a member—I take my share of collective responsibility for this—caused a massive increase in electricity charges."—[Official Report, 13 December 1988; Vol. 143, c. 813.] I have no doubt that the diversity of supply that the Electricity Act promises will materialise.

Photo of Mr John Hannam Mr John Hannam , Exeter

In view of the comments of Mr. Deputy Speaker, who asked right hon. and hon. Members to curtail their speeches, I think that I had better carry on.

I mentioned Lakeland Power's 225 MW station, and there is also the ICI-National Power-Enron proposal for a £1 billion gas-fired power station using combined heat and power, which would generate 1,500 MW. Thames Power has plans for a series of five or six generating plants, including a huge 1,000 MW station at Barking, which would supply nearly one quarter of London electricity board's peak demand. South-Eastern electricity board, London Underground Ltd., British Coal and Whitchurch hospital in Cardiff all have schemes that would produce downward pressure on prices and much greater efficiency in energy production.

By seeking out the cheapest source of supply, the 12 area supply companies will promote competition among the generators, with the national grid acting as the market. They will be able to generate electricity themselves or to purchase it from new independent generators. The requirement to purchase a percentage of their needs from non-fossil fuel sources will help to ensure security of supply and encourage the development of renewable sources of power. I wish that the non-fossil fuel percentage could somehow have been extended to include combined heat and power, which must be more greatly encouraged as one of the most energy-efficient means of generating and using electricity.

I support the decision to separate the nuclear power element of the industry at this stage. It is vital to keep nuclear capacity, not only for security of supply but on environmental grounds and a longer-term supply basis. Within a few years, fossil fuel prices will without a doubt begin to rise again and nuclear power will become price-competitive in the United Kingdom—as it is in France, Japan and West Germany. Alternative renewable resources of non-fossil fuel generation will also play an increasingly important part in our energy equation.

The Government are right to help research into, and evaluation of, various forms of electricity generation. Although I should not like to put my money on any particular schemes at this stage, because we have seen their order of priority chop and change over the years, I believe that the Mersey tidal barrage will succeed, as will wind farms on our windier islands. I note the remark of the hon. Member for Gordon (Mr. Bruce), that Scotland presents special opportunities in that context. The landfill gas schemes that are proliferating are also likely to succeed.

The impending privatisation of the electricity industry has given a huge boost to the development of such projects—so much so that 300 schemes have been submitted to area boards for consideration under the non-fossil fuel obligation. Important to us all is the effect of energy production and use upon our environment. A great deal more has to be done in respect of cleaner production and energy efficiency. As I pointed out in an earlier intervention, a process that removes a pollutant such as sulphur dioxide or the lead from petrol can increase the amount of carbon-dioxide going into the atmosphere. That problem will not go away, as has been made clear in all our discussions with environmental organisations.

We need imaginative new initiatives throughout the whole area of energy efficiency, if we are to properly protect our environment, as the hon. Member for Gordon said. All the present evaluations show that the best opportunities for environmental benefit probably lie with transport, through increasing car engine efficiency and through new attitudes to travel systems.

In recent discussions with Friends of the Earth, it was pointed out that our present policy of creating industrial estates and new factories far away from the houses in which the employees live creates huge transport problems. It results in vast commuter traffic and use of cars. As many of the new industrial plants are quiet and clean and use new technology, perhaps our planners ought to consider whether we should go back to integrating some of the plants and industries with the housing for the people who will work in them, and so help to produce an answer to one of our environmental problems.

We now spend six times the amount that we spent in 1979 on energy efficiency. The Electricity Act places a duty on the Secretary of State and on the Director General of Electricity Supply to promote energy efficiency and economy by suppliers, and to promote the efficient use of the electricity which they supply.

However, the energy efficiency of British buildings is not satisfactory compared with that in other European countries. The programme of energy saving in the early 1980s produced a significant upturn in the awareness of the importance of energy efficiency among industrialists, business men and domestic householders. Now is the time to regenerate—if I may be allowed to use that phrase—full awareness of energy saving and the benefits to the consumer and for future generations. Energy audits, insulation, double-glazing, building design and electronic controls—those are a whole range of actions and options that need to be encouraged, and I know that my right hon. Friend the Secretary of State will pursue them vigorously together with Ministers in other Departments.

The Opposition motion has effectively been torpedoed by my right hon. Friend's announcement of a lower-than-inflation price structure. I ask the House to support the Government amendment.

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford 5:51 pm, 20th February 1990

My hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) referred to the fact that the Government are buying advice from 47 companies. If the Government were sincere in their beliefs about the work and the worth of the Energy Select Committee and other Select Committees, there would have been no need for them to spend that sort of money.

I thought that I saw four members of the Select Committee here today. That pleased me, although I think that the Chairman has now left the Chamber, as has the hon. Member for Erewash (Mr. Rost). All four were party to the Energy Select Committee's third report of 6 July 1988. I may be wrong about the hon. Member for Cambridgeshire, North-East (Mr. Moss), but I think they all were a party to it.

The Government never wanted that report to be published. Hon. Members may recollect that, on one particular morning, the Select Committee was to discuss the possibility of taking evidence and producing such a report, and because of pressure from the Whips, Conservative Members were supposed to object to such an investigation. Unfortunately, for some reason, some Conservative Members failed to turn up to the Committee, and the Opposition Members—we do not usually split on political lines—were then in the majority. That is why that report saw the light of day.

That was an excellent report, in which the Committee advised the Government—who were hell-bent on shoving forward their privatisation programme, and had produced a White Paper with very little consultation on electricity privatization—that they were in danger of producing spatchcock legislation [Interruption.] The Committee suggested that the Government might be well advised to defer the implementaton of the legislation until they had had sufficient time to consider it.

The hon. Member for Cambridgeshire, North-East wanted to know what spatchcock legislation means. I am prepared for that one. I have been asked that question many times, and I have failed to answer it, but now I have found the answer. I understand that a spatchcock is a cock bird, a bird unplucked or unhung, and not ready for cooking. I think that that explains the word, and the motives behind the Select Committee's decision. The Committee saw the dangers of that hasty legislation.

I believe that the Select Committee has been proved right. They produced a report after seeking much expert evidence. I would have thought that the Government would have been wise to consider that report, but no, they did not. The Select Committee said in its third report; 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. In recent times, as the present Chairman knows well, we have taken much expert evidence in Committee on the cost of nuclear power. Why did the electricity supply industry and Lord Marshall get their sums wrong? Why has the country been told for many years that the comparison of costs between coal and nuclear showed that nuclear was always much cheaper? That was never true; it was probably hidden from the public and from the Government—in fairness to them.

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

Yes, for a time. But it was certainly hidden from the country.

The Secretary of State has not altered one word in his speech about the nuclear sector, part of which will be generating electricity in Britain. The big question mark over electricity prices is, how much will it cost, bearing in mind the proportion of 25 per cent. generation by non-fossil fuel? We are aware that there will be a colossal cost, and no one knows the real cost of decommissioning. Somewhere down the line someone will have to foot that bill, but who? It will not be the private sector. Nuclear power generation has been pulled out of the sale because it would not be attractive to the private sector. I appreciate that there have to be alternative sources of energy, but I do not believe that effort and money should be put into the nuclear industry.

When we talk about costs, we immediately think of financial costs, but of leukaemia clusters and other things there are greater costs. Evidence is now coming to light in some areas of nuclear activity. Nobody knows the extent of the problem. It has been denied for many years, but now people are beginning to wonder. What a cost we may have to be prepared to pay for the nuclear generation of electricity. What a social cost, and what misery we may cause families.

There is also a risk of major accidents. I believe that the reason for pushing nuclear energy as an alternative supply is purely dogma. It is to whip the miners, who have never been forgiven and never will be while the Government are in power. The Government will live to regret the day that they ran down the coal-mining industry to the extent they have. Once mining cannot meet the demands of the next generation of industry in this country, we shall have to pay through the nose for coal—whether it is desulphurised or not. That is purely a result of dogma. I hope that the Government will think again, and will do what they can to provide some nuclear power costing.

No less a person than Lord Marshall, on whose guidance the Government have relied for many years, told the Select Committee only last week or the week before that he agreed with the view in its report that the Government had produced spatchcock legislation, and Conservative Members know full well that that view is correct. He also said—in his final question to the Committee's Chairman, I believe—that, after 25 years of advising Government, he had failed. I believe that he is now a very disillusioned nuclear scientist, as are many of his friends.

If costing is to be fair and properly controlled, there can be no place for nuclear power generation.

6 pm

Photo of Malcolm Moss Malcolm Moss , North East Cambridgeshire

I should have thought that it was obvious that, on an Opposition day, the Opposition—in this case, the Labour party—should choose a subject on which they had a good record when in office, and on which their spokespersons were renowned for the accuracy of both their research and their pronouncements. Labour's record on both electricity prices and care for the environment is woefully arid pathetically weak. Far from being a shining beacon of achievement and endeavour, it is hardly measurable in megawatts. Candle power would be more appropriate: even in that context, however, it is short on the light of inspiration and long on the wax of fudge and obfuscation.

Let us look first at Labour's record on prices. Between 1974 ad 1979, domestic electricity prices rose by 9 per cent. in real terms. Under the present Government, between 1985 and 1990, they fell by 8 per cent. in real terms. Opposition Members may not like the figures, but they represent the truth. Under Labour, industrial prices rose by 6 per cent. in real terms; they have fallen by 10 per cent. under the present Government. [HON. MEMBERS: "That was 10 years ago."]

I hear Opposition Members protest that their record was established 10 years ago. Has anything changed? Have they learnt anything? Is their understanding of the electricity supply industry any more intelligible, and are their predictions any more accurate?

In December 1988, the hon. Member for Sedgefield (Mr. Blair) forecast a 25 per cent. rise in electricity bills as a result of privatisation. Misleadingly, he lumped together the 1988 rise, the forecast rise for 1989 and the fossil fuel levy, which was already an integral part of electricity bills. Earlier in the debate, the Secretary of State announced that this year the average price for all consumers would increase only in line with inflation. The hon. Member for Sedgefield was some 17 percentage points out: I wonder whether that is why he has moved to employment. As recently as last September, the hon. Member for Cardiff, West (Mr. Morgan) said that industrial customers faced rises of between 15 and 25 per cent. in April, but it was announced today that the Government had obtained an undertaking from the industry to offer a real-terms price freeze, at least to the larger industrial users.

Under privatisation, downward pressures will be exerted on prices as a result of competition between generators. Prices will also be strongly regulated through the control of transmission and distribution pass-on costs and the firm and rigid implementation of the pricing formula, RPI minus X plus Y. The fossil fuel levy—which has just been set at 10·6 per cent. of the final sales to be borne by all customers—does not represent an additional cost, because the nuclear costs are already included in electricity bills. As recently as November last year, the hon. Member for Holborn and St. Pancras (Mr. Dobson) predicted that the levy was likely to be about 15 per cent.

Privatisation has brought about an entirely new competitive structure for the industry. At over 10 MW, customers will be entitled to contract supply; at under 10 MW, they will be entitled to a tariff supply from the public electricity suppliers. At over 1 MW, customers are free to obtain supplies from any supplier, and from March 1994 those at over 100 KW will have that option. In March 1998, all customers will be free to seek alternative supplies. That will achieve a well-ordered phasing in of total competition, stabilising the market. PowerGen will testify to the fact that the present position is uniquely competitive.

Labour's energy policy is entirely irresponsible. If Labour had its way, electricity supplies would depend entirely on the coal industry, and we would be in hock to the National Union of Mineworkers. Not only do Labour Members ignore the need for security and diversity of supply; they have shot themselves in the foot in the second part of the motion, which refers to the environment. I note that the motion, rather than dealing with the environment as a whole—as did the original version—confines itself to acid rain. Where is Labour's consideration of the problems of carbon dioxide and the greenhouse effect?

Any future Labour Government who failed to protect the country from the whims of the NUM or the OPEC cartel would be guilty not of selling off the family silver, but of giving it away under duress. Where is Labour's consistency? When in office, the party backed nuclear power. Labour Members were responsible for the disastrous AGR programme; they started the PWR programme, and now they cannot ditch it fast enough. With what would they replace it? Why, with carbondioxide-producing coal-fired power stations, of course.

The United States Environmental Protection Agency has estimated that between 60 and 65 per cent. of the greenhouse gases are produced through energy use, and that half the global warming effect is produced by carbon dioxide. In this country, 80 per cent. of carbon dioxide comes from the burning of fossil fuels—oil, gas and coal. About 36 per cent. of our carbon dioxide emissions is caused by electricity generation, and another 11·6 per cent. by solid fuel.

Labour's plan to replace nuclear power with fossil fuel would increase carbon dioxide output by about 53 million tonnes per annum—25 per cent. above the current levels. What hope is there of reaching the Toronto target of a 20 per cent. reduction by the year 2005? Each PWR saves 6 million tonnes of carbon dioxide each year. Surely it is somewhat premature, and a little irresponsible, to rule out entirely the future of PWRs in this country and in the wider European dimension?

Photo of Malcolm Moss Malcolm Moss , North East Cambridgeshire

I must press on: other hon. Members wish to speak.

The most significant change in the electricity supply industry is the Government's non-fossil fuel obligation. In 1990–98, 8,000 MW of nuclear power is to be contracted under the levy. Renewables have also been given a major boost: some 300 new projects have been submitted to the area boards, including one in the Wash, near my constituency—an offshore wind generating farm.

The response from the renewables, and from industries seeking to build renewable generating capacity, has been so overwhelming that the Government intend to give the area boards two more months in which to negotiate with prospective operators before laying a second non-fossil fuel obligation order relating specifically to renewables. Only under privatisation has the importance of renewables come to the fore: it has been the key to unlock their potential.

I cannot allow the debate to end without some reference to energy efficiency. The Government's proposals in the Electricity Act break new ground. The Act places a duty on the Secretary of State and the Director General of Electricity Supply to promote energy efficiency on the part of suppliers, and also efficient use of the electricity that they supply.

Spending on energy efficiency is now six times as large as it was some 10 years ago. Since 1983, the Energy Efficiency Office has helped to achieve annual energy savings worth over £500 million. There has been a dramatic improvement in the United Kingdom's energy ratio. Consumption of electricity has remained unchanged since 1979, but in the meantime the gross domestic product has risen by over 20 per cent.

The Labour party is committed to renationalising the electricity supply industry. Not a word, however, has so far been said about how it intends to do that. Will it have a CEGB mark 2, with all its attendant cost-plus accounting procedures, with a bulk supply tariff imposed from above by the monopoly supplier, and no questions asked? Will the Labour party buy back the shares of millions of investors? If so, what price will it pay for the shares? It is the same old package of political interference, customer irrelevance and large subsidies from the taxpayer.

Nothing positive has been said by the Opposition in the debate. They have given no details of what they plan to do. They have offered nothing new or beneficial regarding electricity prices. They have offered nothing that is either viable or workable that would help to improve the environment. As we have come to know, they never did and they never will.

Photo of Mr Alexander Eadie Mr Alexander Eadie , Midlothian 6:10 pm, 20th February 1990

As the debate progresses, we can see that nothing but lies, damned lies, are provided as information by Conservative party headquarters. I was surprised when the Secretary of State referred to the Opposition's barefaced effrontery, yet he ignored entirely what happened between 1974 and 1979. My hon. Friend the Member for Dunfermline, West (Mr. Douglas) drew his attention to the political and economic climate at that time. Oil cost $40 a barrel. Its price increased three times, just like that. The country had to pay over £5 billion across the exchanges for oil. No previous Government enjoyed the bounty that this Government have enjoyed of £70 billion to £80 billion in North sea oil revenues. However, the Secretary of State had the barefaced effrontery to compare the economic climate then with the one that we have now.

What worries me even more about the Secretary of State's speech is that it seems that there is to be no energy policy, either for price or for production. I referred to the problems surrounding energy costs across the exchanges. My hon. Friend the Member for Wentworth (Mr. Hardy) referred to the fact that the Government's energy policy would lead to the contraction of the coal industry, thus committing the nation to a £3 billion deficit across the exchanges. The Opposition believe that such a policy is illogical.

The Secretary of State does not appear to understand the political consequences of the Government's pricing and energy production policy. He said that there would be a further massive contraction of the coal industry: that pits which produce low-sulphur coal will inevitably have to close. It would be economic lunacy to adopt an energy policy that led to the loss of our indigenous supply.

Scotland well illustrates the lunacy of the Government's energy policy. A few weeks ago I was asked to meet local authorities and British Coal to discuss the serious position in Scotland, where the coal industry has been decimated. In a political sense, the Conservative party in Scotland will not thank the Secretary of State for Energy. Its standing in the opinion polls in Scotland is about 16 per cent. If his policies are pursued, the consequences for the Conservative party in Scotland will be dire.

At that meeting, we discussed Longannet colliery and two other pits that are mothballed. The Frances pit is mothballed, although it produces 45 million tonnes of the best coal in Europe, since its sulphur content is very low. The other pit that is mothballed is Monkton hall, which is in my constituency. It will remain mothballed for two years, according to the agreement that was reached. However, I have little confidence, after the Secretary of State for Energy's speech, that the pit will be reopened after two years. He referred to the conversion of coal-fired power stations to gas. How much that will cost I do not know, but the Secretary of State said that when he was in Scotland he was impressed by the fact that all those to whom he spoke in the electricity industry were optimistic about the future.

Scotland has three power stations with a capacity of 13,500 MW, of which 3,500 MW is produced by coal. Scotland produces 90 per cent. more energy than it needs. We require an outlet for that capacity. The Secretary of State for Energy did not provide us with much hope. Ministers told us that they intended to strengthen the interconnector so that some of the additional capacity could be exported. That capacity—13,500 MW—has already been paid for. It is already available. The interconnector could take the output of between 1·5 million and 2 million tonnes of coal, but nothing is going through the interconnector. Scottish industry is locked into legal battles in the courts.

The question is whether the South of Scotland electricity board should take more coal-fired energy. The people at Longannet are worried about what is to happen; so are the people at Monkton hall and Frances. Ministers have said that the intention is to strengthen the interconnector, but that would cost about £80 million and take three or four years.

I am glad that the Minister of State, Scottish Office, is sitting on the Treasury Bench, since he waxed eloquent over the fact that all that needs to be done is to strengthen the interconnector. However, even though I met the local authorities and the Coal Board, the reality is that nothing is being done about the interconnector. Having listened to the Secretary of State for Energy, I have very little confidence that anything will happen.

I believe that the Government have decided further to contract the coal industry. If they have decided not to go ahead with low-sulphur coal at Monktonhall, not to get an agreement at Longannet, not to strengthen the interconnector, which can export 1·5 million to 2 million tonnes of coal output, I am afraid not only for the miners, but for the Conservative party in Scotland. I hope that the Government will take to heart what I have said because it has political consequences for them.

Photo of Kim Howells Kim Howells , Pontypridd 6:20 pm, 20th February 1990

I am sure that the Minister will correct me if I am wrong, but I believe that the Secretary of State for Energy has blown some of his circuits as he has discovered the anomalies in the privatisation machine which his predecessor, the current Secretary of State for Transport, left him. One major anomaly is the big fix, which means that he attempted to get rid of a great monopoly generator and supplier of electricity and replaced it with a duopoly, the two companies of which have been allowed to carve up the most lucrative markets.

It is a tribute to the present Secretary of State's political nous that he recognised that the big fix was likely to crank up electricity prices and wind down public support for the Government. He has opened up the supply sector to a wider range of generators, and I welcome that, although the range is still far too restricted, and planned additional generators are still too thin on the ground.

I should like to quote Doug Rodger, a representative of the Chemical Industries Association. I am sure that the Minister will know that that organisation represents. intensive users of electricity. He said that large industrial consumers would be much happier with a longer transitional period than is currently being offered on pricing. They are not convinced that new generators will be entering the market to provide the promised competition.

Mr. Rodger expressed the hope that the new mechanism would be open to scope and flexibility when all the details became clear. Government sources, however, indicate that licence prices and the operation of the price control formula are likely to be reviewed as late as 1995, which they believe is too late for heavy industrial customers if the terms prove inflexible before then.

How would it be possible to assure people such as Doug Rodger that they will not be priced out of an increasingly competitive market after 1992? Not by searching the world for parcels of relatively cheap low-sulphur coal. Low-sulphur coal is rapidly becoming a premium fuel, with premium prices attached, and major customers such as the United States, Germany, Denmark and Britain are seeking increasing amounts of the stuff. Nor will prices be reduced by relying on increased imports of French nuclear-generated electricity, as my hon. Friend the Member for Wentworth (Mr. Hardy) said.

Apparently, the electricity which comes to Britain via the cross-Channel interconnector has been the target of a number of our newly privatised area distribution boards. I was informed yesterday by a very distinguished and authoritative source that Electricite de France has lately received a number of distinguished British visitors. A delegation from one of our southern English area electricity boards visited Paris. I am told that they enjoyed a marvellous lunch in the Eiffel tower and they asked Electricité de France whether they could purchase some of its surplus electricity. "Of course," said EDF—I shall not put on my Clouseau accent—"How much are you prepared to offer us for it?" The delegation replied, "We will offer you what the CEGB offered you for it." There was a French shrug, they smiled and said, "We will think about it."

A week or so later, a delegation from another southern English area electricity board arrived, who again enjoyed a splendid lunch up there in the Eiffel tower and afterwards asked EDF, "Would it be possible for us to purchase some of your marvellous, cheap electricity?" "Certainly," said EDF, "But how much are you prepared to offer us for it? We have already had one offer from a neighbouring area electricity board." The delegation replied, "We will offer you 10 per cent. more than they offered." No doubt Electricité de France ordered another glass of Medoc and said, "We shall think about it. We have some other visitors arriving."

The following week, a delegation for another electricity board—I shall not be too specific; I am aware that I have a mortgage to pay—arrived in Paris, enjoyed another marvellous lunch in the Eiffel Tower and said, "We should like to buy some of your electricity." "Certainly," said EDF, "How much are you prepared to offer us?" "We will offer you 10 per cent. more than that outfit from southern England offered you," was the reply. That is no way to secure cheap supplies of electricity to guarantee the future of British industry.

Photo of Mr Alexander Eadie Mr Alexander Eadie , Midlothian

They will get it as long as there is not a drought.

Photo of Kim Howells Kim Howells , Pontypridd

Exactly.

My very bitter but distinguished source informed me that it was fine to buy French electricity, as long as the CEGB remained a monopoly purchaser. He said, "We could screw them rotten," as far as the price was concerned. But we no longer have such a monopoly. We will find it increasingly difficult as a nation—borrowing my distinguished source's phrase—to screw any nation or transnational corporation that possesses the fuel that we decide we need. That includes Colombian coal, South African coal, middle eastern oil and French nuclear-generated electricity. We will have to pay the going rate for any electricity we purchase in future and for any other fuel that we may need to generate electricity.

I do not believe that we should reduce ourselves to a nation that travels around the garage forecourts of the world looking for cheap bags of coal or cheap cans of oil in the hope that we will be able to muddle through, as we have so often in so many crucial and strategic sectors. We have to make the most of our abundant natural resources. We have had it easy until now. I am not defending the strategies of the past, whether they have been implemented by Labour or Conservative Governments.

We have had disastrous fuel policies in the past and we have landed ourselves with a dirty, stinking, unimaginative generating industry which was frequently determined by monopoly characteristics and not by the needs of consumers and which favoured the building of huge power stations and corporations to supply those power stations—whether it was undemocratic British Coal or secretive British Petroleum. We need a complete and imaginative review of the way in which we generate electricity in Britain. We should not begin that review by making our nation a hostage to fortune.

Photo of Mr Peter Rost Mr Peter Rost , Erewash 6:30 pm, 20th February 1990

I am anxious, in the brief time available to me, to explain that, as a student of energy policy for 20 years—I readily declare my interest as an energy consultant—I have seldom heard so much inconsistency and hypocrisy from the Opposition Front Bench. Labour Back Benchers have been somewhat less inconsistent.

All the energy policies that Opposition Members have been advocating for the last 20 years are now happening as a result of electricity privatisation, yet they do not have the courage to admit it. All that they have been campaigning for—greater energy efficiency, a chance for renewable energy to come into play, greater environmental control, combined heat and power, less pollution and greater competition in affecting prices, enabling industry to shop around—is happening as a result of privatisation, yet they oppose it.

Opposition Members have mostly been opposed to the nuclear industry. The electricity privatisation proposals have, for the first time, exposed the real cost of nuclear, an aspect which Opposition Members have been raising for many years. They, and some of us, have been campaigning on behalf of new coal technologies—fluidised bed technology and so on—which the CEGB continually refuse to consider.

All that is now happening because of electricity privatisation, yet Opposition Members are opposed to it. I have never heard so much inconsistency and hypocrisy as I have heard from Opposition spokesmen today, yet everything they want is happening.

Photo of Mr Peter Rost Mr Peter Rost , Erewash

All the policies that Opposition Members have been advocating over the years are now coming to fruition as a result of the Government's proposals to privatise electricity, yet they are still opposed to privatisation. I wish that the occupants of the Opposition Front Bench would have the guts to say why they are opposed to electricity privatisation, when they must know that we are at last beginning to realise all the objectives of energy policy for which they, and many of my hon. Friends, have been campaigning over the years.

Photo of Kevin Barron Kevin Barron Shadow Spokesperson (Energy and Climate Change) 6:32 pm, 20th February 1990

I recall the hon. Member for Erewash (Mr. Rost) arguing in the House not long ago about the need for a combined heat and power policy. He wanted it written, as a policy, into the Electricity Act 1989. He knows, as vice-president of the Combined Heat and Power Association, that those attempts failed both here and in the other place. How can he say that electricity privatisation is providing a helping hand to the nation, in view of his previous utterances about combined heat and power?

The House should be grateful to the Opposition for providing this opportunity to discuss the position of the electricity supply industry. I regret that the Secretary of State is not in his place, because I want to congratulate the Government on their sense of humour in writing into their amendment the way in which, in their view, we should recognise the significant progress made by this Government in preparing the electricity supply industry for privatisation". It is clear from what we have heard—perhaps I should say, from what we have not heard—from the Secretary of State today that we are witnessing another chapter in the shambles of the saga of privatisation that has continued for the last 12 months.

The first element of shambles was the removal of the magnox stations from the flotation. On 27 September last year, the Secretary of State said in a radio interview that the Government believed that the AGRs and PWRs should be part of National Power. It was not long before he changed his mind and removed them from the sell-off.

There then followed a series of changes that will prevent, rather than encourage, competition. The hon. Member for Cambridgeshire, North-East (Mr. Moss) talked about competition, but accepted that we would have to wait until 1998 before that competition was introduced. That represents a considerable time scale in the energy industry, and in electricity in particular.

In addition to the eight-year protection period for distribution companies, we had the introduction of the price mechanism. In Committee on the Electricity Bill, the hon. Member for Canterbury (Mr. Brazier) spoke about the poor pricing system, and said that it would resemble bidding on the stock exchange for electricity. We fear that the sort of competition that Conservative Members speak of in relation to electricity cannot exist.

There followed the moratorium on direct contracts and the continuation of cross-subsidisation. All that has not been sorted out from the point of view of heavy industry. Many other matters remain to be settled, despite the statements in December 1987 about the way in which the Government would privatise the electricity supply industry and introduce competition.

My hon. Friend the Member for Wentworth (Mr. Hardy) spoke eloquently about electricity prices. In 1988, electricity prices went up by 9 per cent., at a time when there was no need for an increase, certainly not from the point of view of the industry. They went up by 5 per cent. in 1989, again for no real reason; massive profits were being made by the generating and supply companies.

The Secretary of State said that a further rise was on the way. I am not clear whether he meant to say that it would be below the rate of inflation. If we interpret that as meaning another increase of 7 per cent., then that, too, is totally unnecessary at a time when the industry is making massive profits as a result of the investment that has been made in it over the years.

The hon. Member for Cambridgeshire, North-East spoke about my hon. Friend the Member for Sedgefield (Mr. Blair) referring to a price rise of 25 per cent. It is all very well for the Government to talk in their amendment about the downward pressure that this will put on customers' electricity bills", but how can such a downward pressure exist when increases of that magnitude are occurring?

Privatisation is not about reducing prices: it is about raising them, before and after the sale of the industry—before the sale, to fatten up the industry and, after the sale, to meet the demands for higher profits. I regret that the hon. Member for Rochford (Dr. Clark) is not in his place, because he likened the rate of return for the CEGB, as it was, to the profits of the then Post Office. It is clear that, if the sort of investment that is being made in the electricity industry had been made in the Post Office, a higher rate of return would have been required.

The London business school conducted a study into the subject of rates of return and the drive to maximise them. That study concluded that prices in the electricity industry could rise by as much as 33 per cent. by 1995, after privatisation. It also suggested that, if the industry stayed in the public sector, with its present rate of return, prices could fall by 12 per cent. That is the crux of our argument.

It was all very well for the Secretary of State to argue in terms of a target of 5 per cent. based on the last Labour Government's White Paper on energy policy, but he did not finish the story by saying what National Power and PowerGen believe should be their rate of return when the industry has been sold off. We are well aware why he did not do that, for he would have been predicting the sort of electricity price increases that were postulated by the survey conducted by the London business school. We need regulations to ensure that, if the sale goes ahead—I am by no means sure that the industry will be floated in the way that the Government believe—the consumers are protected.

We are faced with a threat not only to cancel the Government's programme to deal with the problem of acid rain, but it is being suggested that the programme is not of any great worth. In 1986, the CEGB first announced a 6,000 MW FGD programme. In November 1987, the Government signed the EC large combustion plant directive, which increased the FGD programme to the CEGB's estimate of about 12,000 MW.

It took until February 1989 for the CEGB to give the go-ahead for the retrofit at Drax. It now looks as though that will complete only half its first stage, even though estimates suggest that changed circumstances have increased the amount of coal burn that must be retrofitted to achieve the limits laid down in the EEC directive. Indeed, the estimates have increased the figure to about 20,000 MW because of the changes that have been made.

Conservative Members have been trying to raise the flag in favour of the PWR. But the cancellation of the three PWRs has meant our having to retrofit a large amount of coal burn than would have been the case between 1986 and 1988.

On 17 May last year, the CEGB issued a press release proclaiming the successor company's commitment to the environment. It gave a pledge that all existing major coal fired stations will be fitted with special burners to reduce nitrogen oxide emissions and many will be fitted with sulphur removal plants. What has happened since last May? Why does the Secretary of State refuse to reaffirm that commitment?

Short-term economic gain has led to the reduction of the FGD programme. Originally, the contract was for six burners at Drax, but I understand that that may have been reduced to two.

The Secretary of State said that he would give my hon. Friend the Member for Holborn and St. Pancras an undertaking, but how much faith can we have in undertakings given by Secretaries of State for Energy? The previous Secretary of State for Energy, the right hon. Member for Hertsmere (Mr. Parkinson), said in a debate on the coal industry: I am able to confirm today that we have asked the privatised generators to continue to plan on the basis of installing 12,000 MW of FGD capacity during the 1990s … If we were to revert to low-sulphur coal, we would have to import massive quantities from overseas. The fitting of Drax and other stations with FGD equipment will ensure that there is a substantial market for British Coal".—[Official Report, 26 June 1989; Vol. 155, c. 764–65.] Everyone knows what has happened between May and today. The Government have decided to sell to those who want to make profits from electricity privatisation. They are prepared to sell out not only the consumer but the environment.

The Minister must know that we have insufficient capacity to import the amount of low-sulphur coal necessary to meet the low-sulphur directive. Twelve large coal-fired power stations retrofitted with FGD would be necessary to meet the new estimate of 20,000 MW. Plant will be replaced, but it will not be enough drastically to limit SO, emissions. We shall have to consider small types of plant that can burn efficiently using circulating fluidised bed combustion.

The hon. Member for Erewash said that we are now seeing freedom in electricity generation and the development of clean-coal technology, but that flies in the face of what has happened since I have been a Member. Labour Members, with the support of some Conservative Members, have argued time and again for the Government to match the amount being spent on developing clean-coal technology at Grimethorpe.

Photo of Mr Peter Rost Mr Peter Rost , Erewash

The hon. Gentleman has criticised me, but, like the hon. Member for Holborn and St. Pancras (Mr. Dobson), he keeps referring to the high profits made by the CEGB. Is he aware that, if it had correctly costed nuclear power, it would now be showing not a profit but a loss? It has fudged the figures. If its costings had been done on a commercial basis, it would have shown a loss.

Photo of Kevin Barron Kevin Barron Shadow Spokesperson (Energy and Climate Change)

The CEGB has been making a profit. I accept that there have been fudges.

Photo of Kevin Barron Kevin Barron Shadow Spokesperson (Energy and Climate Change)

As my hon. Friend says, its costs may have been fiddled, but that does not explain why the Government have decided to ring-fence the expensive nuclear power industry and guarantee it a generating base for the foreseeable future, leaving other more profitable means of electricity generation to fight with foreign coal in the market.

In 1988–89, the revenue of the electricity industry increased by £1,000 million. It made profits of £777 million, paid back £1,779 million to the Government and made capital investment of £1,492 million. On my reckoning, that means that £4,000 million was available to it in that year. The Secretary of State smiles; no doubt many people in the City will smile when they realise that that will soon be up for auction.

A retrofitting programme will have to go ahead. Even if the Government abandon it for short-term economic gain, it will have to come some time. It will offer Britain several major benefits. It will create and maintain jobs in the beleaguered power engineering industry, which, despite having the technology and expertise, has been starved of orders over the past decade. It will ensure markets for coal that is mined in Britain, thereby maintaining jobs in an industry that has been cut to the bone and keeping reserves accessible for the future.

Despite all that the Secretary of State said about the British coal industry and how well it has done over the past five years, the Government cancelling the FGD programme is a stab in the back for everyone who works in the industry, from the smallest coal mine to Hobart house. If manufacturing industry had done half as well as the coal industry in Britain over the past five years, we would not be in the economic mess we are in at present.

The retrofitting of FGD will contribute to relieving pressure on the balance of payments by eliminating the need for imported coal. Our energy deficit last year, in this energy-rich country, was £567 million. Are the Government seriously suggesting that we should import tens of millions of tonnes of low-sulphur coal? If they are, what will be its cost, not to generators but to the country?

The retrofitting programme will ensure that we are capable of meeting our commitments to the international environment. As my hon. Friend the Member for Holborn and St. Pancras said, we lag many years behind other industrial nations in our attitude to and action on sulphur emissions. The retrofitting programme will reduce sulphur emissions. It must go ahead, and at some stage it will go ahead. It cannot be avoided by the Government trying to ease the flotation of the electricity industry to ensure that they have a better chance at the next election. The Government are doing a disservice to consumers who will have to pay more and, more so, to the international environment, to which Minister after Minister says that the Government are committed.

Photo of Tony Baldry Tony Baldry Parliamentary Under-Secretary (Department of Energy) 6:47 pm, 20th February 1990

The Government welcome this opportunity, provided by the Opposition, to trumpet the continuing success of our energy policies, the continuing progress of our policies to improve the environment and the continuing success of our policies on privatisation.

The debate has been all too short, but some telling contributions were made by my hon. Friends the Members for Rochford (Dr. Clark), for Exeter (Mr. Hannam), for Cambridgeshire, North-East (Mr. Moss) and for Erewash (Mr. Rost).

My hon. Friend the Member for Rochford, who is the well-regarded Chairman of the Select Committee on Energy, made some telling comments. I thank him for his clear support for the straightforward and sensible decision on nuclear power, made by my right hon. Friend the Secretary of State. He rightly said that progress to the full privatisation of the electricity industry is well on course.

My hon. Friend the Member for Exeter, who has long made a leading contribution to the development of energy policy, rightly highlighted the contribution that competition will make to continuing downward pressure on electricity prices. He rightly drew attention to the number of new independent generators who are eager to enter this new marketplace. He rightly recognised the energy efficiency and environmental benefits of combined heat and power.

My hon. Friend the Member for Cambridgeshire, North-East, who is a keen member of the Select Committee on Energy, is correct to draw attention to the failure of the Labour party's energy policies when it was last in government, and to the wildness and inaccuracy of its predictions on electricity prices and energy policies since it has been in opposition. He is right to reiterate that we are establishing a competitive electricity market—a market in power—which will ensure that for the first time, there will be genuine competition in electricity supply.

Photo of Kevin Barron Kevin Barron Shadow Spokesperson (Energy and Climate Change)

Can the Minister tell us what the Government's estimates are on the rate of return of the newly privatised generators?

Photo of Tony Baldry Tony Baldry Parliamentary Under-Secretary (Department of Energy)

I shall say something on the rate of return shortly. My hon. Friend the Member for Erewash, who is also a keen member of the Select Committee on Energy, succinctly and effectively made clear the benefits that privatisation will bring to the consumer and to the environment.

Despite the best efforts and the good humour of the hon. Members for Wentworth (Mr. Hardy), for Gordon (Mr. Bruce), for Pontefract and Castleford (Mr. Lofthouse), for Midlothian (Mr. Eadie) and for Pontypridd (Dr. Howells), the debate has demonstrated beyond doubt that the Opposition have lost the argument and have got it wrong. They are wrong on electricity prices, on protecting the environment and on privatisation. Clearly, their motion is wholly misconceived. In the words of the hon. Member for Pontefract and Castleford, they have "spatchcocked" themselves.

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

Does the Minister agree that his hon. Friends who are members of the Select Committee also got it wrong in their report?

Photo of Tony Baldry Tony Baldry Parliamentary Under-Secretary (Department of Energy)

I always have great regard for the reports of Select Committees. However, the hon. Gentleman would be surprised if the Government of the day agreed with every word of every Select Committee. I have great respect for my hon. Friends who are members of the Select Committee. Nothing will detract from the fact that the hon. Gentleman and his hon. Friends have spatchcocked this debate.

The position on electricity prices could not be more straightforward. In the past five years of this Government, we have seen industrial prices decrease by some 10 per cent. in real terms. Indeed, industrial prices in real terms have been on a downward path since 1982 and are now at their lowest level since 1973. Industrial electricity prices are lower in the United Kingdom than in leading industrial nations such as Japan and Germany, and are comparable with those in the United States.

There has been some comment in the debate about the position of intensive users. International tariff comparisons for very intensive customers are notoriously difficult owing to the large number of special deals, the relatively few companies prepared to reveal the real price that they pay for electricity and the unwillingness of some countries to declare the state aids that they are giving their electricity industries.

In future, users over 1 MW will be able to negotiate prices in a competitive market. Those businesses are used to purchasing commodities competitively in the marketplace. Electricity will be no different and we expect many of them to benefit from price reductions. However, because it may take them time to negotiate longer-term arrangements, we have asked the electricity industry to ensure that larger customers—customers over 1 MW—are offered a real price freeze for one year if they cannot negotiate reductions.

In the past five years of this Government, we have seen domestic prices decrease by some 8 per cent. in real terms. Indeed, in real terms, domestic prices have been on a downward path since 1982. We see no reason why domestic prices should increase by much more than the rate of inflation this year and the price control formula should ensure that the price does not rise in real terms for the next three years.

As my right hon. Friend the Secretary of State made clear in opening the debate, we expect the average price increase overall for electricity consumers in April to be significantly below the current rate of inflation.

I want to make it clear to the Opposition, as they do not appear to recognise it when considering rates of return, that the returns earned by the electricity industry at current price levels are not excessive. Over the three years from 1985–86 to 1987–88, the returns earned were only 2·75 per cent., which was well below the average for the private sector. That was also below the greater return of 5 per cent. for the public sector set by the previous Labour Government.

The position is equally straightforward on the environment. The Government will ensure compliance with the EC large combustion plant directive.

Photo of Kevin Barron Kevin Barron Shadow Spokesperson (Energy and Climate Change)

I asked a specific question in my speech and in an intervention. What is the Government's estimate of the rate of return of the new generators when they are privatised? It is an important question when one considers the amendment, which refers to electricity prices.

Photo of Tony Baldry Tony Baldry Parliamentary Under-Secretary (Department of Energy)

I urge the hon. Gentleman to curb his enthusiasm and to look forward with anticipation to the: publication of the prospectuses for the generators. To return to my earlier point, the hon. Gentleman complains about the rate of return, although the rates of return earned by the electricity industry are not excessive at current price levels and are well below the rate of return of 5 per cent. that the previous Labour Government set.

The Government intend to ensure compliance with the EC large combustion plant directive. I must make it clear what that directive involves, because some Opposition Members, including the hon. Member for Gordon, seem confused. It was suggested that the European Community wanted a reduction of 60 per cent. in sulphur dioxide emissions by 1995. That is not the case. The directive sets limits for 1993, 1998 and 2003 for emissions from existing plants. For the United Kingdom, those are as stated by my right hon. Friend: a 20 per cent. reduction by 1993, a 40 per cent. reduction by 1998 and a 60 per cent. reduction by 2003, all compared with 1980 emissions. We are determined to meet those targets and to ensure compliance with the directive.

The Environmental Protection Bill, now before the House, will provide the Department of the Environment and Her Majesty's inspectorate of pollution with the power to ensure compliance with the directive. We are determined that the directive will be implemented in full. The retrofitting of the 4 GW Drax power station with flue gas desulphurisation is already in hand at an estimated cost of well over £500 million and further retrofits are in prospect. The successor companies to the Central Electricity Generating BoardNational Power and PowerGen—will complete a programme of fitting low-nitrogen oxide burners to all 12 major coal-fired stations. The capital cost of FGD will be taken into account in setting the capital structure of the generators.

It is clearly important that the international community should move to stabilise carbon and other greenhouse gas emissions at the earliest possible moment.

The United Kingdom is playing a leading role in the international work on climate change. Privatisation will help. Competition and market forces will encourage more efficient, cleaner and more diverse forms of electricity generation such as combined heat and power, and combined cycle gas turbines.

At present all of us still waste far too much energy. Energy efficiency—a fuel of the future—will clearly be greatly enhanced by the rise of competition and market forces. In short, competition will have increased the efficiency with which energy is used, while our legislation contains a totally new duty for public electricity suppliers to meet set standards of performance in promoting energy efficiency.

Perhaps the Opposition's confusion, as evidenced in both the motion and their comments in the debate tonight, is a result of the fact that they still do not appreciate the contribution that privatisation can make to our economy. We have a firm belief that competition in free markets is preferable to state-controlled industrial strategies, that the promotion of enterprise is preferable to bureaucratic interference and that there should always be a business philosophy designed to meet the needs of customers and consumers, rather than the convenience of producers. In electricity, privatisation will lead to an increase in efficiency by introducing more competition, so that decisions are shaped by market forces rather than being taken by Government Departments.

Perhaps the Opposition confusion is that they still do not appreciate that we are determined to have the most competitive electricity industry in the world. Perhaps they do not understand that a radical new structure is now in place, which introduces fundamental changes in the way in which electricity itself will be traded—through a pool or spot market in which the price will be determined during every half hour of trading by the balance between supply and demand—a very competitive marketplace.

So let me make it clear. Electricity privatisation is well on course. Sixteen new and exciting companies are being created and people, including employees, will be able to invest in 14 of them. I have no doubt that in due course large numbers of those working in the electricity industry will wish to become shareholders in their industry.

There will be a completely new operating regime, with genuine competition being introduced. That competition will lead to greater energy efficiency and protection for the environment. In addition, we are determined to continue to play a leading role in tackling global warming. Competition will ensure downward pressure on prices. So our policies are good news for the customer, the consumer, industry and the environment.

The Opposition motion is misconceived and misconstrued. I urge the House to reject it and to support the Government amendment.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 207, Noes 289.

Division No. 85][7 pm
AYES
Abbott, Ms DianeDavies, Rt Hon Denzil (Llanelli)
Adams, Allen (Paisley N)Davies, Ron (Caerphilly)
Allen, GrahamDavis, Terry (B'ham Hodge H'l)
Anderson, DonaldDewar, Donald
Archer, Rt Hon PeterDixon, Don
Ashley, Rt Hon JackDobson, Frank
Ashton, JoeDoran, Frank
Banks, Tony (Newham NW)Douglas, Dick
Barnes, Harry (Derbyshire NE)Duffy, A. E. P.
Barron, KevinDunwoody, Hon Mrs Gwyneth
Battle, JohnEadie, Alexander
Beckett, MargaretEastham, Ken
Beggs, RoyEvans, John (St Helens N)
Beith, A. J.Ewing, Harry (Falkirk E)
Bell, StuartEwing, Mrs Margaret (Moray)
Benn, Rt Hon TonyFatchett, Derek
Bennett, A. F. (D'nt'n & R'dish)Faulds, Andrew
Bermingham, GeraldFearn, Ronald
Bidwell, SydneyFields, Terry (L'pool B G'n)
Blunkett, DavidFisher, Mark
Boateng, PaulFlannery, Martin
Boyes, RolandFlynn, Paul
Bradley, KeithFoot, Rt Hon Michael
Bray, Dr JeremyForsythe, Clifford (Antrim S)
Brown, Nicholas (Newcastle E)Foster, Derek
Brown, Ron (Edinburgh Leith)Fraser, John
Bruce, Malcolm (Gordon)Fyfe, Maria
Buchan, NormanGarrett, John (Norwich South)
Buckley, George J.Garrett, Ted (Wallsend)
Caborn, RichardGeorge, Bruce
Callaghan, JimGolding, Mrs Llin
Campbell, Menzies (Fife NE)Gordon, Mildred
Campbell, Ron (Blyth Valley)Gould, Bryan
Campbell-Savours, D. N.Graham, Thomas
Canavan, DennisGriffiths, Win (Bridgend)
Clark, Dr David (S Shields)Hardy, Peter
Clarke, Tom (Monklands W)Harman, Ms Harriet
Clay, BobHaynes, Frank
Clelland, DavidHealey, Rt Hon Denis
Clwyd, Mrs AnnHeffer, Eric S.
Cohen, HarryHenderson, Doug
Cook, Robin (Livingston)Hinchliffe, David
Corbett, RobinHoey, Ms Kate (Vauxhall)
Cox, TomHogg, N. (C'nauld & Kilsyth)
Cryer, BobHome Robertson, John
Cummings, JohnHood, Jimmy
Cunlitfe, LawrenceHowarth, George (Knowsley N)
Cunningham, Dr JohnHowells, Geraint
Dalyell, TarnHowells, Dr. Kim (Pontypridd)
Hughes, John (Coventry NE)Pike, Peter L.
Hughes, Robert (Aberdeen N)Powell, Ray (Ogmore)
Hughes, Roy (Newport E)Primarolo, Dawn
Hughes, Simon (Southwark)Quin, Ms Joyce
Illsley, EricRadice, Giles
Ingram, AdamRandall, Stuart
Janner, GrevilleRees, Rt Hon Merlyn
Johnston, Sir RussellRichardson, Jo
Jones, Barry (Alyn & Deeside)Robertson, George
Jones, leuan (Ynys Môn)Robinson, Geoffrey
Jones, Martyn (Clwyd S W)Rogers, Allan
Kennedy, CharlesRooker, Jeff
Kinnock, Rt Hon NeilRoss, Ernie (Dundee W)
Kirkwood, ArchyRoss, William (Londonderry E)
Lamond, JamesRowlands, Ted
Leighton, RonRuddock, Joan
Lestor, Joan (Eccles)Salmond, Alex
Lewis, TerrySedgemore, Brian
Livsey, RichardSheerman, Barry
Lloyd, Tony (Stretford)Sheldon, Rt Hon Robert
Lofthouse, GeoffreyShore, Rt Hon Peter
McAvoy, ThomasShort, Clare
Macdonald, Calum A.Skinner, Dennis
McKay, Allen (Barnsley West)Smith, Andrew (Oxford E)
McLeish, HenrySmith, C. (Isl'ton & F'bury)
Maclennan, RobertSmith, Rt Hon J. (Monk'ds E)
McNamara, KevinSmith, J. P. (Vale of Glam)
McWilliam, JohnSmyth, Rev Martin (Belfast S)
Madden, MaxSpearing, Nigel
Mahon, Mrs AliceSteel, Rt Hon Sir David
Marek, Dr JohnSteinberg, Gerry
Marshall, David (Shettleston)Stott, Roger
Marshall, Jim (Leicester S)Taylor, Mrs Ann (Dewsbury)
Martin, Michael J. (Springburn)Taylor, Matthew (Truro)
Martlew, EricThomas, Dr Dafydd Elis
Maxton, JohnThompson, Jack (Wansbeck)
Meacher, MichaelTurner, Dennis
Meale, AlanVaz, Keith
Michael, AlunWallace, James
Michie, Bill (Sheffield Heeley)Walley, Joan
Michie, Mrs Ray (Arg'l & Bute)Wardell, Gareth (Gower)
Mitchell, Austin (G't Grimsby)Wareing, Robert N.
Molyneaux, Rt Hon JamesWelsh, Andrew (Angus E)
Moonie, Dr LewisWelsh, Michael (Doncaster N)
Morgan, RhodriWigley, Dafydd
Morley, ElliotWilliams, Rt Hon Alan
Morris, Rt Hon A. (W'shawe)Williams, Alan W. (Carm'then)
Morris, Rt Hon J. (Aberavon)Wilson, Brian
Mullin, ChrisWinnick, David
Murphy, PaulWise, Mrs Audrey
Nellist, DaveWorthington, Tony
Oakes, Rt Hon GordonYoung, David (Bolton SE)
O'Brien, William
O'Neill, MartinTellers for the Ayes:
Orme, Rt Hon StanleyMr. John McFall and Mr. Jimmy Dunnachie.
Patchett, Terry
Pendry, Tom
NOES
Adley, RobertBlaker, Rt Hon Sir Peter
Aitken, JonathanBody, Sir Richard
Alison, Rt Hon MichaelBonsor, Sir Nicholas
Amess, DavidBoscawen, Hon Robert
Amos, AlanBoswell, Tim
Arbuthnot, JamesBottomley, Peter
Arnold, Jacques (Gravesham)Bottomley, Mrs Virginia
Arnold, Tom (Hazel Grove)Bowden, A (Brighton K'pto'n)
Ashby, DavidBowden, Gerald (Dulwich)
Atkins, RobertBowis, John
Baker, Rt Hon K. (Mole Valley)Brandon-Bravo, Martin
Baker, Nicholas (Dorset N)Brazier, Julian
Baldry, TonyBright, Graham
Banks, Robert (Harrogate)Brown, Michael (Brigg & Cl't's)
Batiste, SpencerBrowne, John (Winchester)
Beaumont-Dark, AnthonyBruce, Ian (Dorset South)
Bellingham, HenryBuck, Sir Antony
Bendall, VivianBudgen, Nicholas
Bennett, Nicholas (Pembroke)Butcher, John
Benyon, W.Carlisle, Kenneth (Lincoln)
Bevan, David GilroyCarrington, Matthew
Cash, WilliamHunt, Sir John (Ravensbourne)
Churchill, MrIrvine, Michael
Clark, Dr Michael (Rochford)Irving, Sir Charles
Clark, Sir W. (Croydon S)Jack, Michael
Clarke, Rt Hon K. (Rushcliffe)Janman, Tim
Colvin, MichaelJessel, Toby
Coombs, Anthony (Wyre F'rest)Johnson Smith, Sir Geoffrey
Coombs, Simon (Swindon)Jones, Robert B (Herts W)
Cope, Rt Hon JohnJopling, Rt Hon Michael
Cormack, PatrickKellett-Bowman, Dame Elaine
Couchman, JamesKey, Robert
Davies, Q. (Stamf'd & Spald'g)Kilfedder, James
Davis, David (Boothferry)King, Roger (B'ham N'thfield)
Day, StephenKirkhope, Timothy
Dicks, TerryKnapman, Roger
Douglas-Hamilton, Lord JamesKnight, Greg (Derby North)
Dunn, BobKnight, Dame Jill (Edgbaston)
Durant, TonyKnowles, Michael
Dykes, HughKnox, David
Eggar, TimLamont, Rt Hon Norman
Emery, Sir PeterLatham, Michael
Evans, David (Welwyn Hatf'd)Lawrence, Ivan
Evennett, DavidLawson, Rt Hon Nigel
Fallon, MichaelLee, John (Pendle)
Favell, TonyLennox-Boyd, Hon Mark
Fenner, Dame PeggyLester, Jim (Broxtowe)
Finsberg, Sir GeoffreyLightbown, David
Fishburn, John DudleyLilley, Peter
Fookes, Dame JanetLloyd, Sir Ian (Havant)
Forman, NigelLloyd, Peter (Fareham)
Forsyth, Michael (Stirling)Lord, Michael
Fowler, Rt Hon Sir NormanLuce, Rt Hon Richard
Fox, Sir MarcusMcCrindle, Robert
Franks, CecilMacfarlane, Sir Neil
Freeman, RogerMacKay, Andrew (E Berkshire)
Gale, RogerMaclean, David
Gardiner, GeorgeMcLoughlin, Patrick
Garel-Jones, TristanMcNair-Wilson, Sir Michael
Gill, ChristopherMcNair-Wilson, Sir Patrick
Gilmour, Rt Hon Sir IanMadel, David
Glyn, Dr Sir AlanMajor, Rt Hon John
Goodhart, Sir PhilipMalins, Humfrey
Goodlad, AlastairMaples, John
Goodson-Wickes, Dr CharlesMarland, Paul
Gorman, Mrs TeresaMarlow, Tony
Gorst, JohnMarshall, John (Hendon S)
Gow, IanMartin, David (Portsmouth S)
Greenway, Harry (Ealing N)Mayhew, Rt Hon Sir Patrick
Greenway, John (Ryedale)Mellor, David
Gregory, ConalMeyer, Sir Anthony
Griffiths, Sir Eldon (Bury St E')Miller, Sir Hal
Griffiths, Peter (Portsmouth N)Mills, lain
Grist, IanMiscampbell, Norman
Ground, PatrickMitchell, Andrew (Gedling)
Gummer, Rt Hon John SelwynMitchell, Sir David
Hague, WilliamMoate, Roger
Hamilton, Hon Archie (Epsom)Monro, Sir Hector
Hamilton, Neil (Tatton)Montgomery, Sir Fergus
Hanley, JeremyMoore, Rt Hon John
Hannam, JohnMorris, M (N'hampton S)
Hargreaves, A. (B'ham H'll Gr')Morrison, Sir Charles
Hargreaves, Ken (Hyndburn)Morrison, Rt Hon P (Chester)
Harris, DavidMoss, Malcolm
Haselhurst, AlanMoynihan, Hon Colin
Hayes, JerryMudd, David
Hayhoe, Rt Hon Sir BarneyNeale, Gerrard
Hayward, RobertNeedham, Richard
Heathcoat-Amory, DavidNelson, Anthony
Heseltine, Rt Hon MichaelNeubert, Michael
Hicks, Mrs Maureen (Wolv' NE)Newton, Rt Hon Tony
Hicks, Robert (Cornwall SE)Nicholls, Patrick
Higgins, Rt Hon Terence L.Nicholson, David (Taunton)
Hill, JamesNicholson, Emma (Devon West)
Hogg, Hon Douglas (Gr'th'm)Norris, Steve
Howard, Rt Hon MichaelOnslow, Rt Hon Cranley
Howarth, G. (Cannock & B'wd)Oppenheim, Phillip
Howe, Rt Hon Sir GeoffreyPage, Richard
Howell, Rt Hon David (G'dford)Paice, James
Howell, Ralph (North Norfolk)Pattie, Rt Hon Sir Geoffrey
Hughes, Robert G. (Harrow W)Pawsey, James
Peacock, Mrs ElizabethStewart, Andy (Sherwood)
Porter, David (Waveney)Stradling Thomas, Sir John
Portillo, MichaelSummerson, Hugo
Powell, William (Corby)Tapsell, Sir Peter
Price, Sir DavidTaylor, John M (Solihull)
Raison, Rt Hon TimothyTaylor, Teddy (S'end E)
Rathbone, TimTebbit, Rt Hon Norman
Redwood, JohnTemple-Morris, Peter
Renton, Rt Hon TimThatcher, Rt Hon Margaret
Rhodes James, RobertThompson, D. (Calder Valley)
Ridley, Rt Hon NicholasThompson, Patrick (Norwich N)
Ridsdale, Sir JulianThornton, Malcolm
Rifkind, Rt Hon MalcolmThurnham, Peter
Roberts, Wyn (Conwy)Tracey, Richard
Roe, Mrs MarionTredinnick, David
Rossi, Sir HughTrippier, David
Rost, PeterTrotter, Neville
Rowe, AndrewTwinn, Dr Ian
Rumbold, Mrs AngelaVaughan, Sir Gerard
Ryder, RichardViggers, Peter
Sackville, Hon TomWaddington, Rt Hon David
Sainsbury, Hon TimWakeham, Rt Hon John
Sayeed, JonathanWaldegrave, Rt Hon William
Shaw, David (Dover)Walden, George
Shaw, Sir Giles (Pudsey)Walker, Bill (T'side North)
Shaw, Sir Michael (Scarb')Waller, Gary
Shephard, Mrs G. (Norfolk SW)Walters, Sir Dennis
Shepherd, Colin (Hereford)Ward, John
Shepherd, Richard (Aldridge)Wardle, Charles (Bexhill)
Shersby, MichaelWatts, John
Sims, RogerWells, Bowen
Skeet, Sir TrevorWheeler, Sir John
Smith, Sir Dudley (Warwick)Whitney, Ray
Smith, Tim (Beaconsfield)Widdecombe, Ann
Soames, Hon NicholasWiggin, Jerry
Speed, KeithWinterton, Mrs Ann
Speller, TonyWinterton, Nicholas
Spicer, Sir Jim (Dorset W)Wolfson, Mark
Spicer, Michael (S Worcs)Wood, Timothy
Squire, RobinWoodcock, Dr. Mike
Stanbrook, IvorYoung, Sir George (Acton)
Stanley, Rt Hon Sir John
Steen, AnthonyTellers for the Noes:
Stern, MichaelMr. Stephen Dorrell and Mr. Sydney Chapman.
Stevens, Lewis
Stewart, Allan (Eastwood)

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 30 (Questions on amendments), and agreed to.

MR. DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved,That this House recognises the significant progress made by this Government in preparing the electricity supply industry for privatisation; welcomes the introduction into the industry for the first time of real, visible and effective competition which will turn the industry from a producer centred monopoly into a truly consumer oriented industry; welcomes the downward pressure that this will put on customers' electricity bills and the upward pressure on standards of service; welcomes this Government's intention to see a radical restructuring and strengthening of pollution control through the Environmental Protection Bill; and welcomes this Government's commitment to complying with the requirements of the Economic Community's Large Combustion Directive.

Photo of Keith Vaz Keith Vaz , Leicester East

On a point of order, Mr. Deputy Speaker. I have been informed that a bomb exploded in Leicester this afternoon. An Army bomb was strapped to the back of a Sherpa vehicle, driven by an Army officer. Apparently it fell off the back of the lorry and caused an explosion that resulted in injury and damage to property. Clearly, this is a serious matter, which raises questions of why that particular vehicle carrying such a device was travelling through the centre of a major city in Britain. Have you had any intimation from the Secretary of State for Defence or the Leader of the House that a statement is to be made either tonight or tomorrow about that important issue?

Photo of Mr Paul Dean Mr Paul Dean , Woodspring

I am sure that the whole House is sorry to hear about that incident and the injuries that have been caused. I have had no such request.No doubt the hon. Gentleman will wish to pursue the matter and seek other opportunities to do so.

Photo of Keith Vaz Keith Vaz , Leicester East

Further to that point of order, Mr. Deputy Speaker. I am grateful for what you have said. Can you press the Secretary of State for Defence to make a statement tomorrow about this issue?

Photo of Mr Paul Dean Mr Paul Dean , Woodspring

That is a matter for the hon. Gentleman, not the Chair.