The Secretary of State for Energy (Mr. John Wakeham) : This privatisation has been an outstanding success with the issue over 10 times subscribed. There were 12.75 million applications. Despite this, 97 per cent. of customers who applied and over two thirds of all who applied will receive some shares. About one quarter will receive all they applied for.
The continued overwhelming public interest in participating in privatisation shows the public support for the regional electricity companies and for privatisation.
Mr. Moate : May I be the first to congratulate my right hon. Friend and everyone else involved on successfully concluding today what must be the largest privatisation in the history of the western world? Does not the fact that some 5 million to 6 million people are believed to have applied for shares show that only a few in the socialist bastions on the Opposition Benches do not understand the instincts of the people of Britain for a capital-owning democracy?
Mr. Wakeham : I am grateful to my hon. Friend. He is right that the flotation has had massive public support. As I said, 12.75 million applications were made, and his estimate that between 5 million and 6 million customers were involved is not far from the mark. Over four and a half times as many people applied as did, for example, for shares in the water industry.
Mr. Benn : Is the Secretary of State aware that while he has been spending billions or millions of pounds of public money on floating off the electricity industry, 60,000 people were cut off in the Chesterfield district over the weekend due to the storms, 1,000 faults occurred and 20,000 emergency calls were made? Is he aware that many people will not be reconnected until the weekend and that their water supplies are affected, too? Is he aware that if he were a local councillor he would be surcharged for wilful neglect?
Mr. Wakeham : I appreciate the number of people whose electricity supply was cut off over the weekend. I was included in that number. I visited the National Grid control yesterday afternoon and I have spoken to the chairmen of the companies most affected. Altogether, 1 million customers lost supply at the peak. By early this morning that figure had been reduced to about 380,000. Most supplies should be back on today or tomorrow, but for some it may take longer. The companies have worked hard to restore supplies. The regional electricity companies that are not severely affected are providing assistance to others. Specialist contractors have been brought in and the Army is providing help. I am sure that the whole House wishes to join me in expressing appreciation of the hard work in difficult conditions which the engineers, linesmen and other staff are undertaking.
Mr. Hannam : Will my right hon. Friend accept our congratulations on the success of his undoubted personal efforts in attracting millions of shareholders into the electricity industry? Does he agree that that represents real public ownership, not the parody which the Labour party favours?
Mr. Wakeham : I am most grateful to my hon. Friend. The sale of the 12 companies will realise £8 billion. That is a considerable achievement which disproves the allegation that the privatisation was too difficult to be completed. It represents excellent value for taxpayers.
Mr. Dobson : Will the Secretary of State confirm that, according to the audited accounts of the 12 regional companies and the National Grid Company, the net assets of the industry being sold at the moment are worth £16 billion? Will he confirm that he intends to sell those assets for less than £8 billion in total? What was his primary duty? Was it to look after the interests of the taxpayer and the electricity consumers whose bills helped to build up those assets over the years, or was it to bung £100 million to City advisers and underwriters who took no risks whatever?
Mr. Wakeham : The hon. Gentleman has his way of looking at these things. My task was to find a proper price which was fair to the taxpayer and fair to those who were purchasing shares in the company. The price has been properly based on the value of anticipated future earnings and dividends. That is how the industry should be valued.
Mr. Wakeham : If the hon. Gentleman will keep quiet, I shall do my best to answer the supplementary question of the hon. Member for Holborn and St. Pancras (Mr. Dobson). The hon. Member for Cardiff, West (Mr. Morgan) may have a chance to ask a supplementary question, but at the moment I am trying to reply to his hon. Friend. I have outlined the way in which the industry should be valued. The hon. Member for Holborn and St. Pancras referred to the current cost account of assets, or replacement costs, and that is not what the taxpayer paid for the assets. To go along the line that he recommends
Column 643and to realise proceeds equivalent to current cost account would mean a substantial increase in electricity prices. I am sure that that is not what the hon. Gentleman wants.
Several Hon. Members rose--
Mr. Speaker : Order. May I just tell the House that although I understand the importance of what happened over the weekend several other questions on the Order Paper are more relevant to the bad weather that has been experienced in many parts of the country. Question 6 is, perhaps, an example.
The Parliamentary Under-Secretary of State for Energy (Mr. Colin Moynihan) : Alternative sources of energy are likely to feature in future Council discussions. The next Energy Council meeting is planned for 11 March 1991.
Mr. Moynihan : I think that the balance is about right. It is important that we stimulate the development and application of renewable sources of energy wherever they have prospects of becoming economically competitive and environmentally acceptable. The European Community has an important role in this, as do the Government. I believe that we have the balance right at present.
Mr. John Evans : Will the Minister acknowledge that one vital source of alternative energy is conservation and that the insulation of buildings plays a crucial role in that? Is the hon. Gentleman aware that, because there is no credible conservation policy in his Department, Pilkington in my constituency is having to lay off substantial numbers of staff due to a lack of orders? Is not it ironic that it is laying off staff during the coldest weather that we have experienced for a long time?
Mr. Moynihan : I am unaware of the specific example to which the hon. Gentleman referred. I agree with him, however, about the importance of conservation and of energy efficiency. That is why my hon. Friend the Member for Wells (Mr. Heathcoat-Amory), who is new to his job of Under- Secretary of State for Energy, has launched so energetically an energy efficiency programme during his first few weeks in post.
Sir Antony Buck : Is my hon. Friend aware that my grandfather built the last operative windmill in this country? Will he say a few words about the prospects of wind power? That is perhaps not an inappropriate question for me to ask in this Chamber.
Mr. Moynihan : My hon. and learned Friend will be delighted to learn that five new projects have come forward under the first tranche of the non -fossil fuel obligation which was announced by my right hon. Friend the Secretary of State some months ago. One problem in the important work that we are putting into developing environmentally acceptable and economically competitive wind power is posed by the many
Column 644environmentalists who are in favour of wind power but strongly opposed to planning applications. More work needs to be done, especially with my colleagues in the Department of the Environment, on issuing planning policy guidance notes to assist councils.
As my right hon. Friend made clear in his statement on 12 November about the report of the public inquiry into the Piper Alpha disaster, the Government are now acting to implement Lord Cullen's recommendations for a new regulatory system. We are determined to ensure that the lessons of the disaster are fully learnt and thoroughly put into effect.
Mr. Doran : The Minister will be aware that, with members of the Piper Alpha families and survivors group, I have organised a conference to debate the implementation of the Cullen report with particular reference to industrial relations. The Trades Union Congress, the Scottish Trades Union Congress and the director general of the Health and Safety Executive, Mr. Rimington, have supported my efforts to organise that conference and I am grateful to the Minister for the particular support that he has given. Unfortunately, however, the oil industry has refused to participate. Does the Minister agree that health and safety and industrial relations are inextricably linked and that one cannot have bad industrial relations and good safety standards? Does he also agree that the oil industry has lost a valuable opportunity to discuss this important issue?
Mr. Moynihan : I congratulate the hon. Gentleman on his assiduous work in getting that conference off the ground. He is aware that I was keen to participate, but I am unable to do so at short notice. However, I am pleased that Mr. Tony Barrell will be attending the conference--he is the new head of the offshore safety division and I am sure that he will make an important contribution. I have also made it clear to the hon. Gentleman and those organising the conference that I am more than happy to meet the organisers whenever I am in Aberdeen or at a time of their convenience.
I accept that safety must be, and always has been, a top priority. Primary responsibility for safety rests with the operator and I am not convinced that emphasis should be placed too heavily on trade union membership. The important issue is to ensure that on each platform every worker has the opportunity, through his safety representative, to make his voice heard and his concerns clear. It is our determination that that must be the priority.
Column 645the North sea, accept that if it cost another 1p a gallon or 1p a therm on gas from the gas fields to ensure that safety is the absolute top concern it would be money well spent? Lives will always be lost in those dangerous occupations, but the fewer the better. We can never justify making an extra penny for an extra life lost.
Mr. Moynihan : Offshore safety should never be sacrificed by anyone- -on either side of the Chamber--because of lack of resources. We shall place resources at the forefront of our thinking when the changes necessary as a result of the Cullen report are implemented.
Mr. Strang : Does the Minister recognise that, now that all Members have had time to study the Cullen report, one is forced to the conclusion that it is the most devastating indictment of any Government's health and safety record to be published? Is not it incredible that at the time of the Piper Alpha disaster 50 per cent. of inspectors' posts were vacant? Is not it also true that more than one third of those posts were vacant at the start of this year? Since the publication of the Cullen report what urgent action have the Government taken to secure an increase in the number of safety inspectors?
Mr. Moynihan : Many steps. First and foremost, we recognise that we want top qualified people in the inspectorate and to achieve that we must pay them. Before Lord Cullen's report was published a 23 per cent. pay increase was rightly awarded to the inspectorate to encourage more people to fill the vacancies. In 1977, the complement of inspectors was 21, but the complement in November this year was 60. In addition, approximately 250 man years have been devoted annually by technically qualified staff of the certifying authorities to the inspectorate. When staff from the inspectorate move to the Health and Safety Executive the priority will be to ensure that they are qualified to do the job and are properly remunerated. As I have already said, resources will be provided to ensure that that objective is achieved.
Mr. Robert Hughes : Although I welcome the Minister's initial acceptance of the recommendations of Lord Cullen's report, how are discussions going on transferring the safety division to the HSE? When those staff are transferred, will he ensure that the resources are available so that the new department does not suffer from the same shortages as were so devastatingly exposed by the Cullen report?
Mr. Moynihan : In fairness, I have answered the question on resources in the affirmative. As for the hon. Gentleman's first question, discussions are going well and are underlined with a sense of urgency about the need to implement the changes relevant to Government as soon as possible. The hon. Gentleman will welcome the fact that today the safety directorate has become the offshore safety division under Mr. Tony Barrell, who has joined us from the Health and Safety Executive. That is an important bridge to have crossed. Important work will now be done to implement the remaining recommendations as soon as possible.
Mr. Kirkwood : Is not it a cruel irony that on the weekend when we saw the final stages of the flotation of the electricity industry, more than 5,000 of my constituents in the Borders were devoid of any electricity supply, sometimes for more than 24 hours, and that some of them are still cut off? Does the Secretary of State understand that were it not for the courage and dedication of the engineers and line staff, that figure would have been higher? When will the Government bring forward a long-term strategy for the energy industry to guarantee future security of supply and ensure that the supply system is hardened against adverse weather conditions so that the effects of events similar to those last weekend will, in future, be minimised?
Mr. Wakeham : I have already paid tribute to the work of all those who were, and still are, involved in restoring electricity supplies in the face of some extremely difficult weather conditions. The electricity companies and the Department are continually considering ways in which security of supply can be improved, and any lessons to be learnt will be learnt. Our broader energy policy is clear ; it is to ensure that the United Kingdom has adequate and secure supplies of energy in the forms that people want it, at the lowest realistic prices, by subjecting as much of energy supply as is practical to the operation of market forces. That includes oil, gas, nuclear, renewables and coal.
As this is the last Question Time with Lord Haslam as chairman of British Coal, I hope that the House will not mind if I take the opportunity to record the Government's appreciation of the impressive leadership that he has given to the industry during the past five years.
Mr. Andy Stewart : Last week the chairman of British Coal announced excellent financial results and said that coal was king again and would feature in any future energy strategy. Those achievements were due entirely to the Government's policies and the Union of Democratic Mineworkers, which negotiated wages and conditions to allow greater take-home pay from productivity, while reducing coal prices to customers by 40 per cent. Will my right hon. Friend confirm that the coal industry has a great future running into the next century as long as the miners watch their backs against the synthetic support of Opposition Members, one of whom has already betrayed the industry by replacing his coal-fired boiler with a gas one? I refer to none other than the hon. Member for Bolsover (Mr. Skinner).
Mr. Wakeham : The coal industry has made significant improvements since the 1984-85 strike which we should recognise and which are a great tribute to the management and the miners. After the strike the average miner produced 571 tonnes of coal ; today that figure is 1, 080 tonnes. Since the end of the strike, output has remained almost unchanged, while the number of collieries has been halved without a single compulsory redundancy. As the House will know, British Coal recently achieved a new productivity record of more than 5 tonnes per man shift.
Mr. Skinner : Does the Secretary of State understand that people who have been without electricity over the past weekend appreciate only too well that their supplies have not been reconnected because the electricity companies
Column 647have been more concerned with selling off their assets in the privatisation organised by the Secretary of State, at less than half their proper value?
Mr. Wakeham : The hon. Gentleman's question convinces me that his party will never get into government again. If Labour has such contempt for the thousands of people in the electricity supply industry who worked their hardest over the weekend to restore supplies, no wonder people are looking elsewhere for political support.
Mr. Moss : The tremendous success of the first stage in the privatisation of the electricity industry is due not only to an attractive share flotation but to the radical reorganisation that the Government undertook in the generation and supply of electricity. Does my right hon. Friend agree with the statement recently made to me by the president of the New York Power Authority, that the United Kingdom is now seen as a world leader in electricity supply, which was not the case before privatisation?
Mr. Wakeham : The electricity supply system that we have devised is regarded with admiration and envy in the west as well as in the old iron curtain countries. The United Kingdom's flexible approach to marketing and competition serves as a model for the whole world.
Mr. Hardy : Referring to the point made by the hon. Member for Cambridgeshire, North-East (Mr. Moss), which the Secretary of State echoed, may I ask the right hon. Gentleman to accept that, although British Coal has secured splendid improvements in productivity, the coalfield communities have paid a vicious price in terms of their changing economy and environment?
Has British Coal paid its electricity bill? Perhaps the Secretary of State can explain why, for the first time in modern history, collieries in South Yorkshire found themselves without electricity, when men were travelling up the shaft in the pit cage?
Mr. Wakeham : The question whether British Coal has paid its electricity bill is for its management. I have no doubt that the bill has been paid and that the management has negotiated good supplies with the regional electricity companies. Last weekend saw some of the worst weather ever experienced. That is certainly true of north Nottinghamshire, as I know from the chairman of the electricity board there. But it ill behoves the hon. Gentleman continually to snipe at the work force that is trying to put things right.
Mr. Trimble : Does the Secretary of State appreciate the need for a truly national energy policy--one that ensures that all parts of the kingdom have access to national fuel and energy resources? I refer not just to the provision of oil and gas to Northern Ireland but to an electricity interconnector. Does the right hon. Gentleman accept the need to ensure that not only private consumers but commerce and industry in Northern Ireland are not penalised by high energy prices?
Mr. Wakeham : I do not have responsibility for the regime in Northern Ireland, but I know that my right hon. Friend the Secretary of State for Northern Ireland has proposals for improving the position there. In privatising the electricity industry in England and Wales, we have borne in mind the principle that while interconnectors can certainly be built, they must be commercially justifiable.
Mr. John Marshall : Will my right hon. Friend promise the House that part of his long-term strategy will be the early privatisation of the coal industry--which would be popular with customers, miners and taxpayers? Does he agree that the only contribution of the hon. Member for Bolsover (Mr. Skinner) to a national long-term energy strategy is hot air?
Mr. Wakeham : I must disagree. The hon. Member for Bolsover (Mr. Skinner) represents the mining industry vigorously in the House. I mostly disagree with what he has to say, but no one could say that he has no knowledge of the subject, or that he does not express his views with vigour. He will not like what I am going to say next--the Government are committed to the privatisation of the coal industry, although not until after the next election.
Mr. Barron : Does the Minister recognise that there is a difference between diversity of supply and security of supply? Does he think that anyone will be any happier after the events of this weekend when, as my hon. Friend the Member for Wentworth (Mr. Hardy) mentioned, many coalminers were left underground? Many in my constituency were also left underground for hours on Friday night. I refer to the fact that the duty to supply electricity to consumers has been taken away.
Mr. Wakeham : That is a misunderstanding of the arrangements. Security of supply is now protected by arrangements which the regional electricity companies have to enter into, the contracts that they have to enter into and the terms of their licences.
Mr. Wakeham : The hon. Gentleman misunderstood the position in the past and he misunderstands it now. The regional electricity companies have an obligation to enter into contracts for the adequate supply of electricity, under the terms of their licences. If they do not contract for enough, they will have to go into the market to buy it, and it will be very expensive.
Mr. Moynihan : Provisions under the non-fossil fuel obligation have already provided a substantial boost to renewables development, and further orders will be brought forward during the 1990s. My Department's research and development budget for renewables is due to increase next year by about 20 per cent., to more than £24 million.
Mr. Flynn : Does the Minister agree that if the ancestor of the hon. and learned Member for Colchester, North (Sir A. Buck) tried to build a windmill today, he would find it almost impossible because of obstacles placed in his way by the Government, as the people developing Mynydd Cemaes in mid-Wales are finding? Why have the Government not applied to the EC for continuing favoured treatment for renewables after 1998? Do they still not realise the enormous potential of renewables to
Column 649provide us with energy from sources which are free, British, benign to the human habitat and eternal in their duration?
Mr. Moynihan : The grandfather of my hon. and learned Friend the Member for Colchester, North (Sir A. Buck) would also not have had the opportunity to benefit from the substantial Government programme of assistance for the development of wind energy. The United Kingdom wind energy research and development programme is second to none. The hon. Gentleman refers to difficulties faced by those putting forward applications, but they are simply the difficulties of bringing forward planning proposals for consideration by local councils. I hope that many of those proposals come into play, not least because we want to ensure that there is a sound commercial base for the exploitation of wind energy in this country. We need to ensure that we have appropriate wind farms in different places to test their economic viability and environmental acceptability.
Mr. Aitken : In relation to my hon. Friend's remarks about the need for a sound commercial basis for renewable energy sources, will he take note of the disappointing results produced by Britain's largest wind generator, situated in Richborough in my constituency, which produces electricity at a cost of well over 10p per kilowatt, compared with the cost of generating electricity from oil which is approximately a quarter of that sum? Is not that some indication of the fact that some of the heady words about wind power may be only so much hot air?
Mr. Moynihan : My hon. Friend will perhaps have taken note of the fact that whenever I have referred to wind power and its environmental acceptability, I have also emphasised the importance of ensuring that it is economic. One of the important lessons learnt in the past few years is that if we move to smaller wind farms--a number of smaller wind farms were contracted under the first round of the non-fossil fuel obligation--we hope that they will be more economically competitive. We have a long way to go. I am undoubtedly of the view that putting research and development and support behind separate wind trials next year under the NFFO will assist us to make them economically competitive as well as environmentally acceptable.
Mr. Campbell-Savours : Would not it be a very enlightened move if British Nuclear Fuels were to invest some of its considerable research and development personnel in this area? Would not that help to green the reputation of British Nuclear Fuels' development?
Mr. Moynihan : I have never seen any reason why expenditure on renewables research and development should bear any proportional relationship to nuclear expenditure. I recognise, however, that we need top -quality manpower, researchers and scientists to embark on wind energy research and development projects, and those men we have.
12. Mr. Pike : To ask the Secretary of State for Energy what representations his Department has received regarding proposals by National Power and PowerGen to generate electricity using the combined cycle gas turbine.
The Parliamentary Under-Secretary of State for Energy (Mr. David Heathcoat-Amory) : My right hon. Friend has received a number of representations regarding applications by National Power and PowerGen for his consent to construct and operate individual CCGT stations.
Mr. Pike : Does the Minister believe that a national limit should be fixed for the amount of gas that can be used to generate electricity? Does he see any possibility of British Gas itself being able to generate electricity using this system?
Mr. Heathcoat-Amory : The use of fuels is a matter for the commercial judgment of the generators. There are substantial reserves of gas in the North sea and it is perfectly acceptable for some of that to be used to generate electricity, but a large share of the British energy market will continue to be provided by the burning of coal.
Mr. Haynes : Mr. Speaker, Sir, I welcome the Secretary of State's comments about the miners and the mining industry, and the wonderful contribution that they are making to meet the energy requirements of the nation. Is the right hon. Gentleman aware that there are two chairmen--the chairman of PowerGen, who is leaving us in a few months, and the chairman of National Power, who has already gone--and will he think seriously about the amount of compensation paid to those two people? Will he take that into consideration when miners lose their jobs in the pits due to privatisation of the electricity industry and will it have a knock-on effect so that miners who are made redundant can enjoy like compensation?
Mr. Wakeham : As I have already said, the great improvement in productivity in the mines has been brought about in part by the number of redundancies that we have made, but all those redundancies have been made on a voluntary basis. I hope that that basis can continue, but that is a matter for British Coal and the workers concerned, and the levels of compensation are matters to be negotiated between them--as, of course, is the question of compensation paid to the chairman of a nationalised industry or Government company when he retires. The Government have always worked on such a basis--we seek to find a sum equivalent to the amount that would be awarded if the matter went to court.
Mr. McCartney : There is almost a conspiracy of silence in the Government about the effect on the coalfield communities of the purchasing policies of companies such as PowerGen and National Power. Those communities are experiencing thousands upon thousands of job losses, and a dislocation of environmental and economic well-bing. What steps will the Government take to assist local authorities and the private sector to rebuild and re-establish those communities? This winter, in my constituency, hundreds of miners are being made redundant, and thousands have already been made redundant. How long will it be before our
Column 651communities have been bled dry on the altar of privatisation? The Government cannot continue to wash their hands of the matter. When will the Minister intervene to provide resources for the rebuilding of our shattered communities?
Mr. Wakeham : The hon. Gentleman expresses views which are strong but not necessarily accurate. Far from hiding a light under a bushel, on the day contracts were negotiated between British Coal and the generators I came to the House and announced the details--I was very proud of what had been achieved by British Coal and by the generating industry. I also paid considerable tribute to the way in which British Coal and its work force had adapted to the new situation. There has been a vast improvement in productivity--to which I would expect the hon. Gentleman to give credit, rather than making carping remarks--and the redundancies that have been made have all been on a voluntary basis, for which we should all be grateful.
Mr. Morgan : I have heard the words "successful privatisation" reiterated so often by the lemming tendency on the Conservative Benches that I almost expected to see the Secretary of State for Energy dressed in his Santa Claus uniform. He obviously believes that a major tax cut for the yuppy classes has come early this year in the form of privatisation, in time for them to buy their Christmas presents. It has been described, not by me but by the Lex column of the Financial Times this morning, as a fraud on the taxpayer. When the Secretary of State privatises the generators next February or March, will he have learnt anything? Does he consider that when he privatises the generators it will be necessary to discount them by 40 per cent. and put them on a running yield of more than 30 per cent., thus privatising our major national assets at junk bond prices?
Mr. Wakeham : The hon. Gentleman does not understand these matters. That is evident from the way in which he put his question. The price being placed on the 12 electricity companies is a proper price, based on the value of expected future earnings and dividends.
Mr. Wakeham : If the hon. Gentleman is seriously interested in fraud, I could answer his question, but the way in which he prefaced it suggests that he knows very little about fraud. There is of course the question of fraud. We are very careful about fraud and take it very seriously indeed. We have developed highly sophisticated methods to detect fraud. We have learnt lessons from the previous flotations. That may come as news to the hon. Gentleman, who seems to leak information of a partial sort to the newspapers. I would not disclose publicly the methods used to detect fraud, as it might assist criminals.
Mr. Banks : I congratulate the right hon. Gentleman on becoming his master's voice in the Conservative party. The figure that he has just given is absolutely scandalous. Taxpayers' money is being used to subsidise the Conservative party. That is what it is ; it is a non-Government job. If the Labour party were to suggest that, one can imagine the outrage in the country. Is the right hon. Gentleman aware that he might obviate some of the more obvious public criticism of this waste of taxpayers' money if, as chairman of the Conservative party, he were to go to Cheltenham and expel the disgusting racists in the Conservative association there and if he would also end the discriminatory employment practices at Conservative central office?
Mr. Patten : The hon. Gentleman will doubtless have read in the newspapers the remarks that I have made about Cheltenham. As for his observations about expenses, he should not assume that the way in which he may have behaved as chairman of the Greater London council is the way in which Ministers behave. As the hon. Gentleman knows, I make a contribution to the Government as Chancellor of the Duchy of Lancaster, although intense personal modesty constrains me from setting out exactly what it might be.
Dr. Cunningham : Are we to believe that a Cabinet--including the right hon. Gentleman, whom I congratulate on taking up his new office and retaining his seat in the Cabinet--able to bring about the almost instantaneous resignation of one of the most powerful Prime Ministers this century is incapable of getting rid of a few despicable racists in the Tory party in Cheltenham?