HC Deb 25 February 1988 vol 128 cc456-73

4.8 pm

The Secretary of State for Energy (Mr. Cecil Parkinson)

With permission, Mr. Speaker, I should like to make a statement about the future of the electricity supply industry in England and Wales.

In our manifesto, we promised to bring forward proposals to privatise the industry. Our purpose is to give the customer and the employees a better deal and a direct stake in the industry. I believe that the industry will achieve more if it is moved into the private sector, freed from Government interference, and made accountable to its customers and shareholders, including its employee shareholders.

In framing my proposals, I have adopted six principles. Decisions about the supply of electricity should be driven by the needs of customers. Competition is the best guarantee of the customers' interests. Regulation should be designed to promote competition, oversee prices and protect the customers' interests in areas where natural monopoly will remain. Security and safety of supply must be maintained. Customers should be given new rights, not just safeguards. All who work in the industry should be offered a direct stake in their future, new career opportunities and the freedom to manage their commercial affairs without interference from Government.

There is substantial room for competition in the electricity industry. The distribution and transmission of electricity are largely natural monopolies, in which it would not be economic to duplicate resources, but there is no natural monopoly in electricity generation, which accounts for some three quarters of the costs of electricity. Only if competition is introduced will there be real incentives for generators to build power stations efficiently, to have their stations available and to fuel and run them efficiently.

There are three conditions which must be met if competition in generation is to develop. First, the effective monopoly enjoyed by the Central Electricity Generating Board will have to be ended It will not be sufficient to leave the CEGB in its dominant position and rely on the growth of competition from Scotland, France and private generators. Second, ownership and control of the national grid will have to be transferred to the distribution side of the industry. However well regulated, the CEGB would have little incentive to allow competing generators fair access to a grid that it owned and controlled. Private generating companies would have little incentive to enter the market and compete. Finally, the CEGB's obligation to provide bulk supplies of electricity will have to be ended, as it obliges the CEGB to take all the key decisions on power supply.

I therefore propose to introduce legislation at the earliest opportunity to provide powers to restructure and privatise the industry. Those powers will be used to reorganise the CEGB into three new companies. The first will be a new generating company, owning some 30 per cent. of the CEGB's existing capacity, all of it non-nuclear. The second will comprise the remainder of the CEGB's generating capacity, both fossil-fueled and nuclear. The third will be a national grid company, whose ownership will be transferred to the 12 existing area boards. The area boards will in turn be converted into 12 distribution companies, preserving their strong regional identity. The Government will consult the industry about the implications of privatisation for the employees and the continuing functions of the Electricity Council, but the council itself will be abolished when the new structure is put in place. When they have been established, the shares in the 12 distribution companies and two generating companies will be sold to the public and employees.

In future, the distribution companies will be able to look to private generators, Scotland, France, the two large generating companies or their own generation to meet demand. The new structure will introduce competition, which will be the best guarantee of the customer's interests, but the legislation will also provide safeguards and new rights. It will create new opportunities for employees.

First, it will establish regulatory arrangements to promote competition, to provide incentives for efficiency and to oversee electricity prices to the consumer.

Secondly, a number of measures will be taken to ensure the security of supply. Because there are not alternatives to electricity in many of its uses, security of supply is of great importance. The legislation will therefore place a clear obligation to supply on the 12 distribution companies, which will ensure that they contract for sufficient capacity, but security of supply is not simply a question of having sufficient capacity. Power has to be transmitted through the national grid and the grid controllers have a central role in planning and directing the use of power stations so as to prevent the failure of the system and to minimise cost. Our proposals will ensure that the national grid company, owned by the distribution companies, retains that central role. The integrity of the grid and the operation of power stations in merit order will be preserved.

The other principal condition for maintaining secure supply is to ensure that electricity is generated from the diversity of fuels. It would be irresponsible to rely on fossil fuels to meet all our electricity generating requirements. The legislation will therefore provide for a clear obligation to be placed on the distribution companies to contract for a specified proportion of non-fossil-fuelled generating capacity.

The legislation will also incorporate an electricity supply code, consolidating and updating the legislation that currently governs the supply of electricity, and dates back to the last century. Above all, we shall maintain present standards of safety throughout the industry.

Finally, the legislation will establish new rights for the consumer. Even after privatisation, the local distribution companies will remain natural monopolies. Although their prices will be regulated, I do not believe that this will be sufficient. The consumer will therefore be given the right to financial compensation, if the distribution companies fail to provide a guaranteed level of service. They will also be required to provide a range of performance indicators of standards of service, which will be published.

Competition and other measures that I have described will benefit the consumer, but the employees will also benefit and that is just as important. The new structure of the industry will provide wider career opportunities for employees and there will be attractive provisions to ensure that they can acquire shares. Existing pension obligations will be safeguarded. The legislation will make no changes to the industry's negotiating and consultation machinery.

Because of the importance of these proposals, I am today publishing them in the form of a White Paper and copies are now available in the Library and in the Vote Office.

The electricity industry has much to be proud of, but I believe that it can achieve more. My proposals will create a modern competitive industry, owned by the public and responsive to the needs of customers and employees.

Mr. John Prescott (Kingston upon Hull, East)

I think that the House will at last welcome a statement from the Government on the privatisation of electricity and the publication of the White Paper which we have been calling for. The Secretary of State has presented a highly technical matter to us and we shall need to give proper thought to it. A week on Monday, we shall have the opportunity to debate the issue and to make our points after consideration.

We have heard for a considerable time all the controversy about the Government's proposals. The Secretary of State has confirmed again today that consumers' interests and needs will be guaranteed by competition, but, at the same time, we have heard that he will protect monopolies. It is not a question of private competition; it is a question of monopolies, oligopolies and regulated control and has absolutely nothing to do with competition. Any close reading of the White Paper would certainly show that. If that is contested, the Secretary of State, in both his statement and the White Paper, talks of "natural monopolies". [Interruption.] If Conservative Members do not understand what that means for the exploitation of the consumer, they do not understand the theory of their own competition philosophy.

Does the Secretary of State accept that the White Paper takes the organisation of the electricity supply industry back 50 years? Does he accept that the integration of the system has produced its efficiency and cheaper prices? Does he accept that the dismantling of the electricity supply industry is against the world trend and represents a triumph of ideology over common sense? Why does he dismantle the electricity supply industry that has ensured adequate investment, a reliable, national grid and electricity prices that are presently among the lowest in the world and produced by a public utility?

Has the Secretary of State read the 1981 report of the Monopolies and Mergers Commission, established by this Government, on the generation of electricity and its 1987 report on bulk transmission of electricity? Is he aware that both reports concluded that, although criticisms could be made, the public utility had not operated against the public interest? That is the judgment of the Monopolies and Mergers Commission which was set up by the Government.

Does the Secretary of State accept the recent Electricity Council report, which shows that, on the latest figures for electricity prices, Britain is the sixth cheapest of the 20 major economies in the world—cheap to the consumer and cheap to industry? [Interruption.] That was produced by the Electricity Council, a fact which may cause some humour on the Government Benches. What guarantee can the Secretary of State give that privatisation will produce cheaper prices than those produced by the public utility?

Does the Secretary of State accept that the electricity price increases due in April have been rejected as unjustified by the CBI, the Electricity Consumers Council and any other consumer body? Indeed, his own White Paper says nothing about electricity prices. Has he read the independent report by Oxford Economic Research Associates, commissioned by the CBI, which rejects the notion that a 15 per cent. increase over two years is necessary to finance his £40 billion investment programme? Will he accept that the increase amounts to nothing more than a privatisation tax designed to fatten the industry prior to privatisation, and to be paid by the consumer?

What steps will the Secretary of State take to prevent the newly privatised electricity supply industry proposed in the White Paper from colluding on prices and quality of service? Is not the Secretary of State attempting to construct a wholly inappropriate model of competition in an industry where competition has had no place and never had, publicly or privately here or abroad? Does he accept that even in the United States there is not a minuscule of competition? Will we not have a rerun of the British Airways-BCal scenario where in the end the larger company buys out the smaller company? Is it not just monopoly first by collusion and then takeover?

What steps does the Secretary of State intend to take to ensure that British generating capacity is not taken over by foreign owners? Will he consider having a golden share, for whatever that is worth after Britoil, to protect the British capacity to generate electricity? Can he assure us with total confidence that Lord Marshall is wrong to say that the separation of the grid from transmission will risk the security of supply, or will the Secretary of State be known as the first Minister for blackouts?

Will the Secretary of State also ensure that the principle of obligation to supply to which he referred, which is now to be placed on the distribution companies, will guarantee maximum co-operation from private companies in the generation of power under any circumstances, and particularly in emergencies?

In view of the Government's active intention to encourage coal imports in a newly privatised industry, can the Secretary of State tell us what effect that will have on the British industry? Will it not mean an estimated import of 30 million tonnes of coal and add £1 billion to the balance of trade deficit, which already stands at a record level of £14 billion? Will job losses be as high as the 75,000 estimated by the Coalfield Communities Campaign? [HON. MEMBERS: "Too long."] The Secretary of State took well over 10 minutes to read his statement on the White Paper. I must protest at the barracking of the yobboes on the Government side. I look to you, Mr. Speaker, to give me support.

Mr. Speaker

Order. If the hon. Gentleman wants my support, he shall have it.

Mr. Prescott

If the Secretary of State believes in the power of the market, why does he intend to import nuclear generation into the newly privatised industry? The Secretary of State, who believes in market forces, intends to force private distribution companies to take a share of nuclear energy, yet when it comes to the coal industry he says that market forces will prevail and coal will be bought from the cheapest source of supply. Why is the rule different for nuclear energy when the Government believe so strongly in the market solution? This is intervention by the Government, which is totally inconsistent.

Why is privatisation going ahead when the Secretary of State has singularly failed to present the House with any evidence to counter the charge that it will lead to higher prices, job losses and poorer service to the consumer? Is this the price to be paid for future tax cuts?

In conclusion—

Hon. Members

Hear, hear.

Mr. Speaker

Order. We have a heavy day in front of us. The hon. Gentleman should now conclude.

Mr. Prescott

Has the Secretary of State read the report of the Gas Consumers Council which shows that, after the privatisation of gas, disconnections last year rose by 35 per cent.? Can he give the House a guarantee that a similar fate will not face consumers in a privatised electricity industry, with consequences for those who may suffer cold-related illnesses, including hypothermia, and who suffer fuel poverty? After all, 30,000 people die each year from cold-related illnesses. When will the Secretary of state produce a long-term energy policy which is capable of meeting the long-term needs of the nation and using the energy resources which are available in a sensible and coherent way?

The Secretary of State, who defends his policy in the name of the consumer, must note that only five paragraphs out of 65 in the White Paper say anything about the consumer. This is not a policy about energy. It is not a policy for the benefit of the consumer or even for the benefit of those employed in the industry. It is solely a policy to maximise the price of selling off Treasury and energy assets to finance tax cuts.

Mr. Parkinson

I am afraid that is not nearly as difficult as the hon. Gentleman would wish it to be. I accept that it is a long White Paper and that the hon. Gentleman has not had it long. When he reads it more carefully, he will find the answers to quite a few of his questions set out in clear detail.

I shall go through some of the points which he raised. He said that I say in the White Paper that distribution is a natural monopoly; that is true. But I also say that nearly 80 per cent. of the costs of electricity arise from generation, and that is not a natural monopoly. The object is to seek to introduce competition into generation and, at the same time, to make sure that the distributors do not abuse their monopoly power, that they are properly regulated and that customers have a choice and also have rights which are enshrined in law.

The hon. Gentleman also said that what is proposed is against the world trend. The plain fact is that there is no world model for electricity supply and generation. The model which we have put before the House, which we believe will work well, is now being widely discussed by far-sighted people in the American supply industry.

The hon. Gentleman asked whether the industry will be efficient. We believe that it will be more efficient. We will build on the basis that is there. The main point of the White Paper, which he must recognise, is that at present the industry is totally producer-dominated. Electricity is produced by a single supplier and the customer has no choice but to accept whatever cost that supplier hands over. We are putting the customer in the driving seat. We are tilting the balance of the industry so that it will not in future be producer-dominated but will be dominated by the needs of the consumer. [AN HON. MEMBER: "Will it be cheaper?"] Yes, in due course it will be cheaper because competition will exert downward pressure on costs. It will not happen overnight. [Interruption.] In that case, we will do even better. All the signs are that competition will produce pressure on costs. At present, 80 per cent. of the costs are pushed over on a cost-plus basis to the customer. That will not be the case in future.

The hon. Gentleman asked about price increases. He quoted the CBI approvingly. I hope he reads that paper carefully. When he has, I cannot imagine that he will find a thing in it with which he will agree. Electricity represents 2 per cent. of industry's costs. For the first time since April 1985, we are proposing an increase of 8 per cent. That means an increase of less than one sixth of 1 per cent. over three-years.

Mr. Nigel Spearing (Newham, South)

Not for the big users.

Mr. Parkinson

There are some heavy users, and they are at a disadvantage. However, we have made arrangements to try to help them with their problems. One of the factors that hinder us is that we cannot offer undue preference to any one customer. Under our new structure, heavy users will be able to contract with generators and use the grid as a common carrier, and the problems that the hon. Gentleman and the CBI are moaning about will be dealt with.

The hon. Gentleman talks about collusion. Again, he says that there will be only two generators. There will not. Scotland already has the capacity to support more than 2 GW south of the border, and that capacity could grow. The inter-connector needs strengthening, but effectively we already have three generators. We have the cross-Channel link, and we have two or three private generators feeding into the system. There will be many more in the future. The area boards will have the right to generate, and most are already making plans either to purchase direct or to install capacity of their own.

The hon. Gentleman asked about a golden share. We shall make arrangements to ensure that the industries remain independent. [Interruption.] There are other ways which are very effective, and they will be adopted. [HON. MEMBERS: "Britoil?"] Yes, Britoil has shown that there are weaknesses in that arrangement, but there are other versions that can be put in place just as easily.

The hon. Gentleman talked about the obligation to supply being transferred to the distributors. I do not think that he understands the significance of that. I have already pointed out that at present the industry is completely dominated by the costs of one monopoly supplier, and the distributors have no choice but to accept that cost. In future, they will be able to shop around for capacity and to strike bargains.

The hon. Gentleman talked about coal imports. Coal imports are possible now. They do not take place, because of the long-term agreement between the CEGB and British Coal. If British Coal remains a reliable, competitive supplier, it will continue to supply the industry's substantial needs, but we shall not make it a supplier of obligation. We shall ensure that it remains the supplier of choice, on the basis of its performance. That is why the Government are making available £2 million a day of the taxpayers' money so that Britain has a modern, competitive coal industry.

If the hon. Gentleman really cares about the future of coal, I advise him to talk to the unions in the industry and explain to them the need for flexible, modern working to go with the flexible, modern investment. [Interruption.] I am just about to explain.

The hon. Gentleman asked about nuclear power. We believe that diversity of supply is essential for security of supply.

Mr. Rhodri Morgan (Cardiff, West)

Why cannot the same apply to coal?

Mr. Parkinson

The hon. Gentleman asks why we cannot have coal use to produce electricity. But we shall: coal will remain a substantial supplier to the industry. It will still be overwhelmingly the biggest single source of power. That will be built into the system. [Interruption.]

Mr. Speaker

Order. There is no point in the hon. Member for Cardiff, West (Mr. Morgan) asking questions from a sedentary position. If he is patient, he may have a chance to ask them on his feet.

Mr. Parkinson

We believe that it is in the national interest to have diversity, and nuclear power is part of that diversity. That was part of our election manifesto. It has been a declared policy of the Government, and remains so. One of the reasons for which we need diversity of supply is the abuse of monopoly power that certain elements of the coal industry have demonstrated that they enjoy using.

I was asked about disconnections. There is no reason why disconnections should increase under a privatised industry, and we shall make arrangements to ensure that the code of conduct remains in place and is observed.

Several Hon. Members


Mr. Speaker

Order. I am bound to have regard to the subsequent business for today, which is an important debate on Northern Ireland. I shall allow questions on the statement until 5.15 pm, and then we really must move on. I shall bear in mind that the hon. Members whom I call today will not stand quite such a good chance in the debate on Monday.

Mr. David Howell (Guildford)

Does my right hon. Friend accept that the additional competition that he proposes, and the creation of numerous new sources of electricity supply, is very welcome and will greatly assist the consumer — a point that the hon. Member for Kingston upon Hull, East (Mr. Prescott) seemed to ignore completely in his interminable harangue?

As the Government propose that the entire nuclear programme should now go into the private sector, and as the nuclear costs will be protected by the requirement of the distribution company to buy nuclear, and that will therefore be passed on to the consumer, will my right hon. Friend reassure us that the nuclear building programme will be rigorously overhauled, tightly controlled and made suitable for the needs of the 1990s—and, in particular, suitable for a world in which oil and coal prices will remain very low?

Mr. Parkinson

I know my right hon. Friend's views about nuclear generation. We believe that a generation of pressurised water reactors—the same technology, with a repeat build, six being built one after the other—will offer a sensible, secure way of meeting the nuclear obligation.

Of course, as a result of the customer's obligation to buy electricity from nuclear generation, the nuclear industry will be in a privileged position, and that aspect will have to be regulated very carefully.

Mr. Stanley Orme (Salford, East)

Why is the Secretary of State treating the nuclear industry differently from the coal industry? Why has he given a guarantee for nuclear power and British generation, but gives no guarantee that the British coal industry will be protected?

We see what is happening in Scotland. This could sound the death knell for the British coal industry unless there is a guarantee in the White Paper and in Government policy.

Mr. Parkinson

The right hon. Gentleman is being extremely defeatist. Since 1979, the Government have made an investment of nearly £6 billion in the coal industry: £2 million a day is being invested. The industry is responding. It is becoming more competitive. I believe that it is capable of facing up to the competition, and that it does not need the protection that the right hon. Gentleman demands.

It is a very negative approach to the industry to say that it has no future unless it is entirely protected. It must make good use of the investment. It must have modern working practices to go with the modern machinery, and its future will then be secure. That is in the hands of those who work in the industry.

Sir Ian Lloyd (Havant)

My right hon. Friend will be aware that the Select Committee on Energy has begun a major and comprehensive inquiry — belatedly, through no fault of its own. He will also be aware that the inquiry has already disclosed not only that this is a matter of immense complexity, but that there are profound disagreements on the structure, consequences and objectives of privatisation.

As the inquiry is unlikely to be completed until June, may I ask my right hon. Friend for an assurance that the proposals will not be regarded as having been set in concrete, but that the evidence and conclusions that the Select Committee may reach will be taken into careful consideration?

Mr. Parkinson

Of course we shall take the Select Committee's conclusions into consideration. However, these are Government proposals enshrined in a White Paper, and I have made it clear that we intend to bring forward legislation as soon as possible. Between now and the introduction of the Bill, an immense amount of detailed decision-making must be done. We believe that the Select Committee can make a real contribution to that decision-making, but the central structure is that which the Government have proposed to the House, and on which they intend to legislate.

Mr. Peter Hardy (Wentworth)

Would the Secretary of State be entirely happy if his assessments of energy prices as a result of the impending increase were subject to the scathing and searching criticism that they seem to deserve? Does he accept that his statement seemed to contain a recognition of the impressive achievement of the publicly owned electricity supply industry throughout the post-war period, meeting national needs and growing demand? Does not his suggestion that there should be an element of compensation for failure to supply seem to illustrate that, despite the ebullience of the White Paper, the Government are now beginning to have some doubts and some feeling that caution is necessary?

Mr. Parkinson

No, Sir — quite the reverse. The proposals which we are making and which will be enshrined in the legislation have been developed in part by the East Midlands electricity board and are being tried in the area already. We think that the idea is a good one, should be enshrined in legislation and should be made available to all customers of the electricity supply industry, and that is what we are doing. So it is not any sign of lack of confidence; it is adopting a practical experience which the industry has just gone through.

Dr. Michael Clark (Rochford)

I congratulate my right hon. Friend on his statement. Is he aware that it will be welcomed by Government Members, the vast majority of people in the electricity supply industry and, of course, consumers of electricity? Will he assure the House that the nuclear generation of electricity will continue to flourish, and that it will not be cosseted or allowed to benefit from cross-subsidisation, but rather will be exposed to the full rigours of competition, which will be to its long-term advantage?

Mr. Parkinson

I thank my hon. Friend for his remarks. It is a fact that the structure which I have proposed today is supported by all the area boards and by the Electricity Council. We have yet to hear the reaction of the CEGB. [Interruption.] Just in case the hon. Gentleman sneers, two thirds of the people in the industry work in the area boards.

The Government have committed themselves to a nuclear programme because they believe, as I said earlier, that nuclear power provides an essential component of the diversity of supply that is the basis of our security. I believe that it is possible and will be possible for it to be provided on an economic basis.

It is an extremely complex subject, because we are talking about the costs of power stations which will be built within the next 10 years and will still be operating 40 years from now. Nuclear power offers a certainty about cost and a certainty about supply, so it is very hard to have a debate based purely on the economics.

Dr. David Owen (Plymouth, Devonport)

Since this is the first privatisation of a public monopoly that really does improve competition and provide customer choice and some sensible consumer rights, would it not be more logical for the Government not to impose any further electricity price rises but to wait until market forces operate on the industry? Similarly, would it not be more logical for the Government not to commission any further nuclear plants until the nuclear generating industry is subjected to objective through-costing under the same market principles?

Mr. Parkinson

I thank the right hon. Gentleman for his recognition that we are creating a structure which will offer the prospects of competition and a better deal for the customer. He asked about prices. The level of return achieved by the industry at present is too low. It is about 2.45 per cent., which is less than one half of the rate of return that the Labour Government of which he was a member decided was necessary. We are proposing, over two years and after a period of no increases at all, to move the rate of return nearer to the rate of return that is acceptable. We need to do that to create an income base which will support the borrowing and the funding of the huge programme on which we are about to embark; £45 billion will need to be invested between now and the year 2000 either by private generators or by the successor companies to the CEGB if this country is to have a secure electricity supply. These price increases are necessary to build up an income base that will fund that investment.

Mr. Norman Tebbit (Chingford)

Is my right hon. Friend aware that his statement is very welcome? Perhaps no part of it is more welcome than his announcement that in effect the old principle of no undue preference in supply will disappear—

Mr. Dennis Skinner (Bolsover)

Gissa job.

Mr. Speaker

Order. Mr. Tebbit. [Interruption.] The right hon. Gentleman has as much right as anybody else.

Mr. Tebbit

—in order that proper bargaining can take place between major users and suppliers? Is he also aware that perhaps the most encouraging feature of the discussion following his statement today is the announce-ment from the Opposition Front Bench that the Labour party is now committed to consumerism and competition in the energy industry? Has my right hon. Friend heard whether that is going to apply to Labour policy on coal?

Mr. Parkinson

What we have heard from the Labour party today is a reaffirmation of its members' belief in competition and the customer and the demand that he should not be allowed to have any choice at all, which is typical of the Socialists that they are. I agree with my right hon. Friend that major users need access to power at competitive prices and that the present legislative structure makes that very difficult. In future, major users will have the right to enter into contracts, to use the grid as a common carrier and to make arrangements to meet their own special needs.

Mr. Geoffrey Lofthouse (Pontefract and Castleford)

Is the Secretary of State aware that his announcement this afternoon is the death knell of the mining industry? It is fairly obvious that he has no intention of making any alternative arrangements regarding the understanding between British Coal and the CEGB and that, at present low world prices, British Coal will not be able to compete. That being the case, British Coal and many thousands more miners' jobs will go to the wall. This could well be deliberate Government policy.

Mr. Parkinson

It is not Government policy. Government policy is to make investments in the industry which will ensure that it is modern and competitive, and to encourage those who run it to adapt their working methods to match the modern machinery. There is no question of the CEGB being able to buy 70 million tonnes of coal at the marginal world price of coal, because the world market in coal is too small. So the hon. Gentleman is inventing a frightening spectre, which is unnecessary. If the miners in his constituency work hard with the modern machinery and use it well, they will be able to compete and they will have the opportunity to supply. There is no reason why a privatised industry should turn its back on a supplier on its doorstep that offers reliable supplies at competitive prices, but that means an end to strikes, working to rule, total waste of time and industrial conflict. Those are the things that are really posing a threat to the future of the coal industry.

Mr. Michael Morris (Northampton, South)

Is my right hon. Friend aware that the broad thrust of his statement today will be greatly welcomed? But there is one area of considerable concern that reflects on heavy users of electricity. It is not adequate for my right hon. Friend to use phrases such as "try to help" or "leave it to local negotiation". The core of British industry, the heavy users, need special help and special deals. Will he ensure that, now that we have the opportunity of new legislation, they will be protected?

Mr. Parkinson

That is precisely the point that I was making. Because of our rules about undue preference, although we do make arrangements that help the heavy users, there is a limit to what can be done. In future, heavy users will have the opportunity to contract direct with suppliers and to use the grid as a common carrier. I believe that our proposals offer a real opportunity of dealing with that very difficult problem.

Mr. Alfred Morris (Manchester, Wythenshawe)

Why, before making his statement today, did the Secretary of State so studiedly refuse to offer any kind of meaningful consultation to the industry's management, the trade unions and the consumer councils on what he is proposing? Will it not look like rank hypocrisy to talk of his concern for the consumer when he refused even to consult the consumer councils?

Mr. Parkinson

Since last June, I have consulted extremely widely with all sides of the industry and have had discussions with academics, economists, unions, management and consumers—with all people who have an opinion about the structure of the industry. It is simply not true that there has been no consultation. However, I have not been able to accept the views of some of the people whom I have consulted. Their definition of consultation is that I should change all my opinions and accept theirs. There have been many discussions, but I cannot accommodate everyone. Some of those who have not been accommodated are now saying that they have not been consulted. That simply is not true.

Sir David Price (Eastleigh)

Is my right hon. Friend aware that his decision to retain the integrity of the national grid as a common carrier is welcome and realistic, as all our major power stations have been located on the basis of environmental and supply considerations, and not on the basis of where the greatest demand has been?

Mr. Parkinson

My hon. Friend is right in saying that the integrity and the operation of the grid are vital parts of our system. Our proposals make arrangements to maintain all the benefits of that. I am grateful to my right hon. Friend for pointing out to the House the importance of the grid.

Mr. D. N. Campbell-Savours (Workington)

How will the price of nuclear-generated electricity be fixed? Can I have an assurance that it will not necessarily follow the price of coal, because of the long-term implications of investment in nuclear plant? Secondly, can I have an assurance that today's announcement will not in any way influence the future of British Nuclear Fuels plc as a publicly owned company?

Mr. Parkinson

I am sorry, but I did not hear the second half of the hon. Gentleman's question.

Mr. Campbell-Savours

It was a request for an assurance on the future of British Nuclear Fuels plc as a publicly owned company.

Mr. Parkinson

My statement today contained a very strong reaffirmation of the Government's commitment to the nuclear supply industry. That must be the best possible news for BNFL. BNFL has made tremendous strides in recent years. I believe that its future is more secure as a result of today's announcement.

At present, we buy our electricity from the nuclear power stations on a cost-plus basis. It is simply fed through in the bulk supply tariff to the customers. In future, the costs will have to he regulated because, for diversity reasons, we are guaranteeing a market for the electricity. Therefore, that particular source of supply will need to be quite carefully regulated.

Mr. Alastair Goodlad (Eddisbury)

Does my right hon. Friend accept that the imaginative and sensible proposals that he has announced, which combine the introduction of competition with the preservation of the merit order and the integrity and excellence of the nuclear industry, will be widely welcomed throughout the electricity supply industry, which will make the future arrangements work with the dedication and determination that it has shown in the past?

Mr. Parkinson

I thank my hon. Friend for the compliment that he pays to the people who work in the industry. We want to build on their achievements in future. I believe that the prospects for everyone working in the industry will be improved by my announcement today and not threatened in any way. I am sure that the people who work in the industry will work hard to implement the proposals and produce a modern, competitive electricity supply industry.

Mr. Allan Rogers (Rhondda)

Does the Secretary of State accept that the proposals will mean more regulation and direction in the industry? The way in which the Secretary of State and the right hon. Member for Chingford (Mr. Tebbit) spoke about consumerism really is claptrap. The consumers will have only one electricity line to their homes, supplied by only one electricity board. They will have no real choice except that of the primary fuel.

The Secretary of State enunciated six principles on which he was drawing up proposals. No. 5 was that customers should be given new rights. What does he mean by new rights for customers? Will they have special rights if they are old-age pensioners or if they cannot pay their bills, or will it be the same as with British Gas, with an ever-increasing number of disconnections since privatisation?

Lastly, will the Secretary of State tell the House how research and development into potential new sources of energy is to be funded? Who will be responsible for developing such schemes as the fast breeder reactor or the Severn barrage schemes?

Mr. Parkinson

I made it clear in my statement that the distribution companies are regional monopolies and therefore will be subject to regulation in the private sector. That is necessary, and I believe that it will be acceptable to the House.

As for customer rights, I explained to the House—perhaps the hon. Gentleman was not here — that performance standards will be set. If those standards are not met, the customer will have the right to a rebate for any failure by the industry to perform. [Interruption.] I notice that one or two Opposition Members are smiling, but the system is working extremely well in the east midlands. It is a very useful management tool as it shows which areas are operating inefficiently and enables management to take action to improve performance.

Most renewable research at present is funded by my Department, and 30 per cent. of the costs of the fast reactors are being met by the CEGB. Obviously, that will have to be a matter for negotiation, but most of the research into renewables is funded by the taxpayer through the Department of Energy.

Mr. Tony Favell (Stockport)

The proposals are undoubtedly in the long-term interest of the employees of the CEGB and other new companies. In the short term, there will be confusion for many as to who is to be their future employer, including the 600 or 700 employees at Europa house in Stockport. How will these problems be resolved? Will my right hon. Friend put their fears at rest?

Mr. Parkinson

I know of my hon. Friend's interest in the subject. On numerous occasions he has told me about the problems and interests of his constituents. One of the reasons why we made the statement to the House and produced the White Paper was to reassure people in the industry and to end speculation about the future structure of the industry. We have made arrangements for every employee of the electricity supply industry—all 137,000 of them—to receive tomorrow copies of the statement and of the White Paper, which has been written specifically with the interests of the employees, among others, in mind.

Mr. Jack Thompson (Wansbeck)

It seems from the Secretary of State's statement that there will be many technical arguments about the development of the White Paper in future debates on this issue. There is some suspicion about the technical advice that the Secretary of State has received. Who advised him about removing the control of the grid from the generating side of the industry? The logic of that is impossible to understand.

The Secretary of State did not mention safety in the industry. There is a very high standard of safety in the industry, although the nuclear side is suspect. There is a lack of public confidence in the nuclear side of the industry, but in general it has a good safety record. Obviously, when the industry is privatised there will be less enthusiasm to invest in its safety aspects.

The other area—

Hon. Members


Mr. Speaker

Order. Will the hon. Gentleman put his question succinctly?

Mr. Thompson

May I ask the Secretary of State to comment on the effects on the environment when the industry is privatised?

Mr. Parkinson

On the first question, about the technical aspect, we have had the benefit of advice from outstanding consultants, but we have also consulted.widely. It is now a matter of agreement between the CEGB and ourselves that there is no technical difficulty about the removal of the grid. It would argue that there are costs involved and we would argue that savings would flow from the increased competition that would result from the transfer of the grid.

The hon. Gentleman raised a favourite subject of Opposition Members: the suggestion that somehow or other the private sector is less interested in safety than the public sector. There is no evidence of any kind for that assertion; it is just a myth that Opposition Members persist in trying to push. There will be no change in the safety regulations, except that the regulations, which are enshrined in 24 statutes going back to the 1880s, will be put into a modern form. The standards will not be lowered; if anything, they will be improved.

Mr. Andy Stewart (Sherwood)

In view of my right hon. Friend's statement, and the transformation of British Coal's performance in the past three years—production is up by 60 per cent. and coal prices at the power stations are down by 22 per cent. — can he advise my constituents what they should do to secure the future?

Hon. Members

Vote Labour.

Mr. Parkinson

There is no reason to believe that voting Labour would do anything but put a great blight on their prospects, because the prospects for the coal industry depend upon the economy. The hallmark of Labour Governments is economic chaos and crisis. We will continue to promote a sound economy that grows, and that is good news for the miners. Secondly, as my hon. Friend pointed out, if productivity continues to improve, new machinery is well used and new investments are properly exploited, there is no reason at all why the British coal industry should not have a very good future.

Mr. Matthew Taylor (Truro)

Will the Secretary of State guarantee that ministerial responsibility for all aspects of nuclear safety, and so public accountability, will be maintained? Will he say that there will be no minimum nuclear element, as opposed to non-fossil-fuel element, in the requirement for generating capacity and no extra cost put on the taxpayers by the proposals? When will the Minister state that consumers will benefit from this, as the only thing that has happened so far is that prices have increased, affecting the poor and the powerless?

Mr. Parkinson

The change in prices would have occurred whether or not the industry was privatised. I must ask the hon. Gentleman to accept that fact. It spoils most of his statements, but it happens to be true. Secondly, as for Ministers being responsible for nuclear safety, the nuclear installations inspectorate is responsible for nuclear safety. It is licensed as a wholly independent body and it is being strengthened. There is no question that its responsibilities will be changed in any way.

Mr. Dennis Skinner (Bolsover)

Is not the truth of the matter that the statement is the next step in privatisation, after the fattening-up process of increasing prices in the electricity industry, which means that poor pensioners will have to pay the bill for the privatisation which will follow in order to line the pockets of Back-Bench Tory Members, many of whom will be anxious for directorships arising out of the legislation, including the right hon. Member for Chingford (Mr. Tebbit)? [Interruption.]

Mr. Speaker

Order. Time is getting on.

Mr. Skinner

Why should the nuclear industry be feather-bedded in the White Paper, while the coal industry is expected to compete with the slave labour conditions of the South African market and the nine-year-olds mining coal in Colombia? Is he aware that the proposals will provide the Left wing with the means to take us back into public ownership?

Mr. Parkinson

The hon. Gentleman had better have a word with his Front Bench. They are trying desperately to run away from the notion of renationalisation.

Mr. Skinner

I am not worried about that.

Mr. Parkinson

He is not worried about it, but they are worried by him. Perhaps he could have a word with his hon. Friend the Member for Kingston upon Hull, East, because he has moved his position recently. He used to make those rather inane remarks about lining the pockets of the City. He now realises that, if a higher price is obtained for the industry, it will come to the Treasury and the taxpayers, so perhaps the hon. Gentleman and his hon. Friend could have a word and try to understand the problems.

Sir Trevor Skeet (Bedfordshire, North)

If it is possible for a competent person to build a nuclear power station, under the plan who will undertake the necessary research for nuclear safety and pay compensation in the event of a nuclear accident? As my hon. Friend is conceding to the distribution companies the right to produce electricity, is he prepared to concede to the CEGB full marketing rights and the later opportunity, if need be, to take over some of the distribution enterprises?

Mr. Parkinson

We should like to see the distribution companies remain as independent bodies. One of the strengths of those companies is that their head offices are based in the regions they serve. As a result of the proposals, 12 very substantial regionally based companies will be created in which the workers and people of those regions will have shares and can take a stake. The local identity of the boards is a very important factor which we wish to preserve in the course of the privatisation of the industry.

Mr. Peter Rost (Erewash)

Will my right hon. Friend confirm that many area boards are convinced that they can contract to the private sector for power, or generate their own power, more cheaply than they can buy it from the CEGB? Will he accept that, in the interim before privatisation, it is very important that the private sector should have the opportunity to compete fairly on tariffs and the construction of power stations?

Mr. Parkinson

My hon. Friend is right. One of the reasons why the legislation is necessary is that the Energy Act 1983 simply has not worked, because the monopoly generator has control of the grid. What I have announced today will mean that the private generators can look forward to having access to the grid, using it as a common carrier and striking contracts with people who wish to buy their electricity. The area boards welcome the opportunity finally to have some choice about the generator from which they buy their electricity.

Mr. Frank Cook (Stockton, North)

The Secretary of State will already know that the actuarial risk of any accident in a nuclear power station and the consequential costs must be underwritten by the taxpayers through the House. What provision does the Secretary of State intend to make for the burden of such a liability in the 70 per cent. that he intends to launch on the market? What provision does he intend to make in legislation for the cost incurred in decommissioning the Magnox stations that are already coming to the end of their lives? Who will bear that cost —the British taxpayer again?

Mr. Parkinson

Provisions have already been made and are being made continuously in the accounts of the CEGB for the cost of the decommissioning. At the moment, the provision stands at just under £470 million. That provision is being built up as the stations are being operated. Details of the kind the hon. Gentleman talks about will have to be settled in negotiations between the industry and ourselves. Until the structure was settled, many of the detailed arrangements simply could not be negotiated, but they will be and the full details will be presented in the legislation brought to the House at the beginning of the next Session.

Mr. Phillip Oppenheim (Amber Valley)

Will my right hon. Friend accept that his attempts to reconcile the needs of competition with guaranteed supply and having strategic non-fossil-fuel capacity have been highly successful? Does he agree that it is ironic that the great monopolists in the Opposition should accuse him of all people of not introducing enough competition in the White Paper? Does he accept that the White Paper will be warmly welcomed by Conservative Members?

Mr. Parkinson

I thank my hon. Friend for those remarks. I listened with amazement to the hon. Member for Kingston upon Hull, East (Mr. Prescott) criticising me for not introducing enough competition, when his proposal is to maintain a huge monopoly supplier.

Mr. Martin Redmond (Don Valley)

Is the Secretary of State aware that future generations will condemn him for the long-term damage he will do to the national interest? I listened intently to his speech and I did not hear of any provisions that would satisfy the nuclear nuts, except in their own nuclear waste. I listened to what he said about dumping; he does not have a clue about it. I suggest that when he switches on his electric lights, powered with coal from Colombia that has been brought to the surface by the blood of children, he should learn what dumping is about and the long-term damage it will do to the country.

Mr. Parkinson

The hon. Member for Don Valley (Mr. Redmond) and other hon. Gentlemen refer to Colombia. We consume about 100 million tonnes of coal in this country. The latest estimate is that approximately 200,000 tonnes of it comes from Colombia. May I break some news to the hon. Gentleman, which he would regard as good news, although some of my right hon. and hon. Friends might not? There are not the handling facilities to bring in more than about 15 million tonnes of coal, should that be desired, nor can facilities be developed. That is part of the price we paid for reassuring the miners that we wanted to sustain their monopoly. We now realise that that was a big mistake. The monopoly supply position of the British coal industry has been abused, and used as an economic and political weapon. The miners, by their activities, made the people suspicious of being over-dependent on coal.

Mr. Tony Speller (Devon, North)

May I assure my right hon. Friend of the great support he will have from all the alternative electricity generating industries, which will have at long last a chance to sell their wave, wind and solar energy or any other form of alternative power. We all welcome the White Paper from the viewpoints of the environment, choice and the consumer.

Mr. Parkinson

I am grateful to my hon. Friend. He has highlighted an important fact—that the commitment to non-fossil fuels includes renewable fuels. In certain areas of the world, such as California, there are substantial renewables generating power plants. If any of the alternative sources of energy prove to be economic, those will become part of the proportion of non-fossil-fuel-produced electricity available for purchase.

Several Hon. Members


Mr. Speaker

Order. I will preserve the list of those hon. Members who have not yet been called, and shall ensure that they will have some priority if they wish to speak in the subsequent debate.

Mr. Bob Cryer (Bradford, South)

On a point of order, Mr. Speaker. You will recall that the Secretary of State said at the conclusion of his statement that the White Paper was available now in the Vote Office. It is a convention that a White Paper should be published here and that the Secretary of State should make a statement to the House first of all. Yet again, Mr. Speaker, the television news coverage at 1 pm today carried full details, as did today's early morning newspapers. Quite clearly, the Secretary of State has ignored his primary obligation to the House, which I believe that hon. Members wish to sustain, as well as you yourself, Mr. Speaker. We can have resort only to you to defend the rights of the House against an elective dictatorship that is intent on ignoring the rights of the House and their obligations to come here first. If it was otherwise, the first information about the project would have been given to the House rather than to television and the newspapers.

Mr. Parkinson

Further to that point of order, Mr. Speaker. I join the hon. Member for Bradford, South (Mr. Cryer), for once, in deploring this leak of the White Paper and of the details. We had nothing at all to gain from it and we sought very hard indeed to make sure that the House was the first body to hear of our decisions.

The decision was finally taken in the Cabinet this morning and was announced to the House as soon as possible after that.

Mr. Redmond

On a point of order, Mr. Speaker. I have been listening to the Secretary of State's reply to my hon. Friend the Member for Bradford, South (Mr. Cryer) who deplored information being leaked prior to the Secretary of State's announcement to the House. Will the Secretary of State pursue an inquiry to find out the source of that leak, as I did not hear him mention that course? I should like to know, Mr. Speaker, whether the Secretary of State intends to hold an inquiry.

Mr. Martin Flannery (Sheffield, Hillsborough)

Further to that point of order, Mr. Speaker. Can we be assured that an inquiry will take place? If we do not have an inquiry into such a leak, that means in effect that we condone it by doing nothing, and further leaks will occur.

Mr. Skinner

Further to that point of order, Mr. Speaker. It is worth recalling that the Secretary of State probably admitted that it is not usual for Secretaries of State to say that there had not been a leak, and that the matter had gone to the Cabinet for consideration this morning, so that he could not understand how the information had got out. But he never said that what did get out was wrong. Apparently, the information was correctly reported in some newspapers this morning and on the television news, as my hon. Friend the Member for Bradford, South (Mr. Cryer) said. The Secretary of State says now that he has no knowledge of how it happened and that it was not caused by him, and there must be a prima facie case for an inquiry. The Secretary of State ought to have the guts to get up and tell us now.

Mr. Cryer

He is just shrugging his shoulders.

Mr. Speaker

Order. It is not a matter for me whether there should be an inquiry. I repeat what I have so frequently said— that the House should always be the first to be told. I have heard what the Secretary of State says about this matter. I hope that the press will keep the embargoes placed against these statements.