Nuclear sale 'could be put on back burner': Energy industry officials fear delay will harm privatisation plans. Colin Brown and Tom Wilkie report

THE pounds 2bn privatisation of the nuclear power industry could be put on hold following a decision by ministers that they will need primary legislation to float the assets of Nuclear Electric on the market.

The Government is under pressure to include a Bill in the Queen's Speech in the autumn. Any further delay could end the privatisation chances, and would be seen as evidence that the crisis of confidence in John Major's leadership has led to a loss of nerve.

In a second blow to the nuclear industry's hopes, a shadow has been cast over the future of the two nuclear reactors it is proposing to build at Sizewell in Suffolk, adjacent to Britain's first pressurised water reactor, Sizewell-B, which will start generating in the late summer. Tomorrow, Suffolk's planning officer is expected to recommend to the county council that it should oppose the pounds 3bn development because the Government's nuclear policy is unclear.

Nuclear Electric plc is privately lobbying ministers to give the go- ahead for its privatisation without legislation. Officials have told ministers that the Government is technically entitled to do so. Nuclear Electric was set up as a private company owned by the Government after electricity privatisation because the costs of nuclear waste disposal and decommissioning old reactors made it unsaleable. Some leaders in the nuclear industry fear any delay until after the next general election, because they believe that their privatisation hopes will only be realised by a Tory government.

However, two senior ministers have confirmed that the Government believes it will need primary legislation. One ministerial source said it would be 'politically unacceptable' to go ahead without seeking the approval of Parliament.

Nuclear Electric, which owns and operates reactors in England and Wales, has been enticing the Government with the prospect that it could gain pounds 2bn from the sale of the company in 1996, if it gave an early go-ahead for privatisation. But a split has opened in the industry's ranks, with its Scottish counterpart being noticeably less 'gung-ho' for privatisation.

Publication of the terms of reference for a review of the nuclear industry, a necessary precursor to privatisation, has been delayed for at least four months. Tim Eggar, the Minister for Energy, promised the terms for a review of the nuclear industry by the end of last year. They were stalled by the legal objections to the opening of the Thermal Oxide Reprocessing Plant (Thorp) at Windscale in Cumbria. It was strongly expected by the industry they would be announced a week ago, but the date slipped again.

That led to a strong rumour that the review had been abandoned. Yesterday, a Department of Trade and Industry spokesman said: 'The review has not been abandoned.'

In principle, the terms of reference may be announced when the Commons resumes next week after the Easter recess, but ministers are keen to ensure that starting the review should not open the way to a legal challenge to the inauguration of Sizewell B.

There has been an intense ministerial wrangle over the terms of reference, with the DTI insisting on a short internal feasibility study before giving the go-ahead for privatisation.

Ministerial sources yesterday indicated that the Department of the Environment had succeeded in ensuring that the long-term environmental impact of nuclear waste would be taken into account. The Treasury has also been keen to ensure that the cost of decommissioning of nuclear plant in the next century would be fully covered if the industry was privatised.

The decision to seek primary legislation makes it more difficult to meet the timetable of privatisation before the next election. The DTI, which is in charge of energy policy, has to introduce a gas Bill in the next Queen's Speech to open the industry to more competition. It is considering privatising parts of the Royal Mail. Opposition sources said it was unlikely the DTI would find a third slot in the autumn for a Bill to privatise nuclear power. 'After that it will be too late, because it would be too close to the election,' one Labour source said.

Labour believes that Michael Heseltine, President of the Board of Trade, will not allow privatisation to die. 'I suspect we are getting into Heseltine's leadership manifesto here. He still wants to be seen by the right-wing as a radical,' the source said.