His promise to cut bills by per cent through abolition of the nuclear levy lifted Tory morale after last week's local election disaster. The sell-off could raise £3bn, enough to cut 1.5p in the pound on income tax, and was condemned by Labour as a "squalid" election bribe. But the net cost of decommissioning nuclear generators could reduce the proceeds to just £1bn.
The President of the Board of Trade was cheered in the Commons by Tory MPs although the package had been widely trailed. The nuclear levy will be abolished with privatisation, Nuclear Electric and Scottish Nuclear will be merged, and the ageing Magnox stations will remain state-owned. Mr Heseltine ruled out any state funding for new nuclear plant and said private investors are unlikely to be willing to foot the bill. The Government's review of the nuclear industry, published yesterday, concluded that "private finance is unlikely to be available at present for new nuclear construction". But Nuclear Electric pledged to continue its fight for Sizewell C, in Suffolk, to be built with private capital.
Announcing plans for the merger, Mr Heseltine said: "There is, at present, no case for government intervention to distort the electricity market by providing finance or guarantees to one form of generation over another." The merger decision was taken despite a vociferous campaign by Scottish Nuclear to be privatised separately. But Ian Lang, Secretary of State for Scotland, was promised that the new British nuclear company will have its headquarters in Scotland.
Backed by lobbying from his aides, Mr Heseltine won over Scottish Tory MPs who had warned Mr Lang they would rebel by assuring them that it could lead to more jobs in the nuclear industry in Scotland.
The sell-off was attacked by Jack Cunningham, Labour's trade and industry spokesman, as attempt to pay for pre-election tax cuts. He said the cost to the taxpayer would be greater than the £3bn receipts for tax cuts.
The liabilities of the industry were estimated at £8.5bn by the White Paper, The Prospects for Nuclear Power in the UK.
"The private sector gets a cut-price bargain - the tax payer gets the bill," said Mr Cunningham, whose constituency includes the Sellafield reprocessing plant.
The flotation will not require legislation, but it will be subject to a parliamentary order, and a vote is expected in the Commons before the end of July.
The nuclear stations were withdrawn from electricity privatisation five years ago because investors did not want to take on the fuel reprocessing and decommissioning liabilities of the Magnoxes.
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