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6.27 pm
Mr. Tam Dalyell (Linlithgow): I have four questions, to which the Minister might wish to reply in writing.
The greatest nightmare for many of us in relation to safety is what could happen at Kozloduy in Bulgaria, at any of the Czech stations, or at some of the Soviet stations such as Smolensk. The Minister will know that I met the Minister for Industry and Energy, the right hon. Member for Enfield, North (Mr. Eggar) and Dr. Walker in the Department about a year ago. In the past, considerable technical help was given by the British nuclear industry to try to prevent a catastrophe that would have mind-boggling effects, which would be the case if there were a Chernobyl 2 or anything like it anywhere in the world.
First, in the follow-up to privatisation, how can we be sure that British help to eastern Europe will continue when private industry may not have the same financial imperatives to help eastern Europe and the Soviet Union?
My second question concerns decommissioning. The Minister said that liabilities follow associated assets. I went to Sizewell yesterday for the opening, and spoke to many people in the nuclear community who were under the strong impression, rightly or wrongly, that talks about decommissioning were continuing. They had by no means thrown in the towel in their struggle to prove that decommissioning should not be their responsibility. There may be gross misunderstandings about that, but they exist none the less. Are the Government sure that the nuclear industry understands that liabilities follow the assets? There must be some grave misunderstanding on that issue, which should be cleared up tonight.
Thirdly, as I understand it, one of the Government's arguments is that, if the industry were privatised, it would have greater access to capital markets and therefore be in a better position to undertake work overseas. Why have the French, who have a nationalised industry, had no difficulty securing work overseas? If they can do it, why has the British industry found it so difficult? It really does not take privatisation to secure those important markets overseas, or at least to be considered for them. I ask the Government, why was this privatisation necessary from the point of view of orders abroad and the capital market?
I was told, again at Sizewell, and elsewhere, that a legal cottage industry has sprung up--a lawyers' paradise--around this privatisation offer. I shall give just one example. I am told that, in the prospectus for the Hartlepool power station, it was suggested that Hartlepool power station was in an industrial area on Teesside. My hon. Friend the Member for Middlesbrough (Mr. Bell) on the Front Bench is a Teesside Member of Parliament, as is the hon. Member for Stockton, South (Mr. Devlin). I am told on serious authority, and I have checked this, that the lawyers came back and said, "Prove that Hartlepool is an industrial area," because that would be the kind of advertising that it should not undertake. I gather that this kind of thing can be repeated more and more and that legal costs, because of so-called obligations under the Financial Services Act 1986, are spiralling. It is becoming an enormous added cost.
Mr. John Battle (Leeds, West):
This is the first debate that we have had on the nuclear industry since the death, in November last year, of John Collier of Nuclear Electric. I am sure that we would all wish to pay tribute to his contribution to the development of the British nuclear industry.
On 4 March this year, the marketing programme and presentations for stockbroker analysts, fund managers and the financial press were publicly launched. The programme, managed on behalf of the Government by Barclays de Zoete Wedd, their financial adviser, and Dewe Rogerson, publicity advisers to the Government and to British Energy, will pave the way for the newly privatised company to be.
We are in the final countdown of the sale, which is to take place in the mid-summer, yet there is, as has been made clear tonight, widespread confusion, speculation and less clarity than ever as the Government struggle to sell British Energy to the City. There are unanswered questions that focus on the financing of the deal. The Government's nuclear sums do not add up, as my hon. Friend the Member for Linlithgow (Mr. Dalyell), in his excellent summary questions, put it pertinently to the Government.
On 9 November 1989, however, the Government were crystal clear. The nuclear industry was withdrawn from the proposed privatisation of the electricity industry. The Minister at the time declared that retaining the nuclear industry in the public sector was
That rather contradicts some of the comments of Conservative Members.
The then Secretary of State for Energy, now Lord Wakeham, announced:
I hope that we would all agree with that, so we are entitled now to ask: what has changed since then?
In May 1994, the Government set up the nuclear review, which reported in May 1995. It was set up to examine the possible options for introducing private sector finance into the nuclear industry--a precursor to the private finance initiative. The Government went further and said that they were prepared to consider without commitment representations on whether privatisation could, in principle, be feasible.
The accountants KPMG were asked to look at the management of substantial nuclear waste and decommissioning liabilities in the same year. We all know now that the compound liabilities of Nuclear Electric, Scottish Nuclear, British Nuclear Fuels plc and the United Kingdom Atomic Energy Authority amount to well in excess of £40 billion according to the Government's White Paper. Decommissioning alone accounts for some £18 billion--undiscounted--of that figure, according to estimates published by the National Audit Office as far back as June 1993.
KPMG's report was about the management of nuclear liabilities. We should remember that liabilities are defined as costs associated with the reprocessing of spent nuclear fuel, the decommissioning of nuclear plant, and the management, treatment and final disposal of radioactive waste, all of which are irradiated liabilities. KPMG favoured privatisation of all the generators and British Nuclear Fuels plc and as many of their back-end liabilities and associated risk as possible; in other words, pushing the whole lot into the private sector.
What did the Government choose to do? As usual, they went for a half-baked deal, a partial option. They privatised seven modern advanced gas-cooled reactor stations and the new pressurised water reactor, Sizewell B, leaving nine aging Magnox stations and BNFL with all their liabilities in the public sector. The Government propose to strip out the current revenue-generating end of the business for privatisation, leaving behind in the public sector as many of the liabilities as possible.
In a statement on the conclusions of the nuclear review, on 9 May, the then President of the Board of Trade made it clear that the Government intended to press ahead with privatisation on that basis. He said that no primary legislation would be needed, that the Government would not need to come back to the House, and that full and proper parliamentary scrutiny would not be necessary. During questions on the statement, my hon. Friend the Member for Edinburgh, Leith (Mr. Chisholm) posed a critical question. He asked:
Needless to say, the President of the Board of Trade, now the Deputy Prime Minister, brushed the question aside--as usual. That devastating critique--inThe Economist, of all places--bears another glance. The editorial declared:
What has happened since then? Nothing, except that the Government have pressed ahead in defiance of those comments.
The Select Committee on Trade and Industry, in the absence of any full parliamentary scrutiny, set up an inquiry into the plans to privatise the nuclear industry. It focused in particular on the scale of the liabilities, how they would be covered, Government guarantees to the private operators and questions of safety and insurance. According to Gordon MacKerron, the special adviser to the Select Committee, the key argument in favour of privatisation was the raising of the proceeds for and the removal of the AGR-PWR liabilities from the taxpayer. The funds raised would have to compensate for the loss of future income from the privatised reactor.
In his paper, Mr. MacKerron concluded:
In other words, the special adviser to the Select Committee doubted whether there was scope for further significant cost and efficiency improvements following privatisation, given the nuclear companies' record over the past five years.
More important is the question of guarantees that a private company would meet. The key questions concern the real costs of decommissioning the pressurised water reactors and the advanced gas-cooled reactors and how much the private nuclear power companies would be required to set aside for the long-term storage of the nuclear waste produced by its reactors.
On 8 June 1995, in a written answer, the Minister said:
As usual, we are not to know until after the event, when it will be too late.
It is notable that, when the Government first brought the privatisation proposal to the House, the then President of the Board of Trade--now the Deputy Prime Minister--confused us by saying that there would be segregated funds to cover public and private liabilities. He quickly had to correct the Government's position--but the confusion remains. As hon. Members have said, how can the public-private liabilities--decommissioning, reprocessing, waste management and future storage--be clearly separated out so that everyone is clear about where the assets and the liabilities lie?
The independent segregated fund, set up to cover British Energy sites and the longer-term post-closure costs of decommissioning, has now been announced at£230 million. However, as my hon. Friend the Member for Clackmannan (Mr. O'Neill) said, the key question is whether that will be a payment for reprocessing the core. We do not know what the fund is for. What we do know, however, is that that £230 million, plus the £16 million a year that has been set aside, comes to the exact figure included in the two-year provision in the Red Book for future years. In other words, the figure was already built in to cushion the sale.
The exact nature of the transfer of AGRs and Sizewell B liabilities to British Energy was one of the main issues studied by the Select Committee. Seventeen of its recommendations referred to the cost uncertainties. Those uncertainties will remain until there is a full debate on the report. The general proposition that, whatever the level of liabilities, they should follow the assets, is accepted by the Government, but every time we press the Minister on whether that means all the liabilities or some of the liabilities--and if so, exactly which ones--we get an evasive answer. Neither BNFL nor Magnox knows what liabilities it will have to pick up in future. They could be left holding the irradiated nuclear liabilities.
Mark Baker of Magnox said in his evidence to the Select Committee that he was not fully aware what the eventual shape of his balance sheet would be. In the light
of increasing Government obscurity, it is tempting to say that the discharge of liabilities is being accelerated now to push towards privatisation and provide a cushion in the City. As the European Commissioner suggested, it practically amounts to illegal state aids to get the industry into the private sector. It is a rescheduling of the AGR liabilities, which are being loaded into the public sector as a sweetener for privatisation. Estimates for the annual contribution to the segregated fund would double if all the post-shut-down expenditure were to be covered. There is a real risk that the assets will not be sufficiently profitable to pay for inherited and future liabilities.
The Select Committee said that it was difficult to envisage how the fund could cope with a fourfold increase in a major part of the liabilities, especially if the increases occurred after existing stations had ceased to produce any revenue. The liabilities cannot be covered if stations are shut down.
"the best way of ensuring a long-term future for nuclear power in this country."--[Official Report, 9 November 1989; Vol. 159,c. 1174.]
"The Government told the House on a number of occasions during the passage of the Bill that the arrangements for nuclear power would strike the appropriate balance between the interests of the taxpayer, the electricity consumer and the shareholder. In the event, unprecedented guarantees were being sought. I am not willing to underwrite the private sector in this way."--[Official Report,9 November 1989; Vol. 159, c. 1171.]
"Was not The Economist magazine right when it said that it was a short-term financial fiddle to help the Tories but not the country? Why should the Government cherry-pick the nuclear industry so that a few individuals can make a great deal of money, while the vast majority of the British people are bribed with their own money in the short run and have to face higher taxes to pay for decommissioning costs in the long run?"--[Official Report, 9 May 1995; Vol. 259, c. 576-77.]
"The privatisation of part of the nuclear-power industry set out in a white paper on May 9th looks likely to be a particularly creative example of the well-honed technique of bribing the voters with their own money. In this case, the bribe may be financed not just by selling assets that the taxpayers have paid for once, but by money borrowed from future taxpayers too."
"The Government seems optimistic both about the size and the uncertainty of the Magnox liabilities, and about the cash sums likely to be available to the public sector as credit against their eventual
26 Mar 1996 : Column 881discharge. And the contribution that the sale of the most profitable parts of the nuclear industry is likely to make to the notional funding of these public sector liabilities will probably be small both in relation to the public money expended on nuclear power in the past and in relation to the net present value of the assets to be sold."
"The Government will ask all nuclear operators to draw up strategies for decommissioning their redundant plant . . . The precise level of the liabilities to be met will be a matter for the companies and their auditors in due course."--[Official Report, 8 June 1995; Vol. 261, c.269-70.]
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