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22 Oct 2002 : Column 217—continued
8.42 pm
Mr. Tim Yeo (South Suffolk): I am delighted that we have this chance to debate nuclear policy and related issues, and I congratulate the Liberal Democrats on choosing it for the second half of their Supply day, although after hearing the Minister's entertaining tour of Liberal Democrat seats and councils where proposals for renewable energy schemes have been turned down, I wonder whether the Liberals may now slightly regret their choice of subject, in view of the fascinating insights into the way in which their policy on energy, particularly renewables, is working out in practice.
I welcome the Minister to the Dispatch Box and I congratulate him on an entertaining speech. It was not as informative as some of us had hoped, but I shall come back to that in a moment. I regret the fact that the Government did not consider that a statement on this subject was necessary last week, given the fact that during the recess #650 million of taxpayer's money was committed to supporting British Energy. It is a matter of widespread concern not only that no such statement was made, but that the Secretary of State chose not to attend tonight's debate on an important and urgent subject. I hope that the Minister will pass on that concern.
Conservative Members take these issues seriously. That is why I have chosen to speak at the first available opportunity that the House has had to debate the
subject since I took on the DTI portfolio at the end of July. The fact that the Secretary of State is not here and the delay in deciding what to do about British Energy suggests uncertainty at least, or perhaps some confusion, about the crisis and how to resolve it—perhaps about energy policy generally, but certainly about nuclear policy in particular. It may be that it is more than confusion. Perhaps the reason for the delay is a conflict between Ministers. The hon. Member for Cunninghame, North (Mr. Wilson) is known as someone who supports the nuclear industry, but his view does not seem to be universally shared by his ministerial colleagues. It is hard to avoid the conclusion that either the Government do not really know what to do, or that they do know, but are afraid to do it. Whichever of those explanations is true, the outcome is bad for the industry, bad for consumers and bad for taxpayers.This industry, almost more than any other, needs clarity and stability if it is to have the confidence required to make long-term investment decisions. Those decisions are very long term, and some of them have to be taken quite soon. Indeed, Britain's ability to meet our climate change commitments could be compromised without an early resolution of the conflicts that appear to exist inside the Government. The current crisis—
Mr. Weir: For the sake of the clarity that the hon. Gentleman mentions, can he say whether he would have put #610 million into British Energy?
Mr. Yeo: If the hon. Gentleman is patient, I shall come to exactly that point. The current crisis is played out against the background of an industry that is undergoing fundamental change. After more than a quarter of a century of largely benign conditions in the energy markets in Britain, we face two very big challenges, the first of which is the move from self-sufficiency—we are one of only two G8 countries to enjoy the status of a net exporter—to heavy dependence on imports. Most of that will be gas, and much of it will come from countries that may be subject to some degree of political risk. Secondly, there is the growing international recognition of climate change as an urgent issue. Our obligations to meet our CO2 emissions reduction targets are already quite challenging, and they may well become much more so if future international negotiations set even more demanding targets. I want Britain to play its full part in responding to the problem of climate change, but I do not want us to get ahead of what other countries are doing. However, I certainly do not want us to lag behind them, either.
The Liberal Democrat motion reflects their underlying hostility to nuclear power, but despite 29 minutes from the hon. Member for Twickenham (Dr. Cable), I am little the wiser about the actual substance of Liberal Democrat policy. He began by attacking the privatisation of British Energy not, the House will have noticed, on ground of principle, but apparently because the price that was charged at the time was too low. The Liberal Democrat position on privatisation appears to be, XIt's all right—if investors lose enough money."
The hon. Gentleman ducked a question about whether the Liberal Democrats support nuclear power, but their XFederal Policy Consultation Paper No. 61" is
quite clear. Should he hold different views, I am glad to tell him that the consultation period ends on 25 October, so he has just enough time to make his own submission—if he can work out what his views actually are. The document states:
- XCurrent party policy calls for nuclear power to be phased out".
The Liberal Democrat claim to support renewables gave the Minister the opportunity to entertain the House exceptionally well, I thought. As was suggested, I shall keep the relevant extract from Hansard with me when I visit the target seats that the Conservative party will regain at the next election. It is worth asking whether the Liberal Democrats have any commitment on the ground to the introduction of renewables. Are there any constituencies in which they would support the siting of wind farms?
Richard Ottaway (Croydon, South): Twickenham.
Mr. Yeo: Indeed. Siting a wind farm in Twickenham is an excellent idea—although not, I hope, on the rugby ground.
Have the Liberal Democrats calculated the cost of turning down every application for an onshore wind farm, on the achievement of the renewables target to which they are committed? How far would the Liberal Democrats regard it as acceptable to raise the price of electricity to consumers in pursuit of their determination to allow Liberal Democrat Members to oppose planning applications up and down the country?
The Minister left several questions unanswered. I was not clear about his present view of the new electricity trading arrangements. Does he feel, for example, that the cuts in the prices paid to generators have been adequately passed on to consumers? Does he believe that the problems at TXU—which were touched on by the hon. Member for Ipswich (Mr. Mole) and which, happily for consumers, appear to have been resolved satisfactorily—will have a domino effect elsewhere in the industry?
Mr. Wilson: I want to be clear about this point. I do not think that the cuts have been adequately passed on to consumers—I thought that I had made that clear.
Mr. Yeo: I thank the Minister for that clarification. The Minister was also unclear in his answer to the question posed by my hon. Friend the Member for Tatton (Mr. Osborne). Indeed, the Government's amendment is ambiguous on the subject of nuclear power generally. At least the Liberal Democrats are clear—if wrong on the issue—that they rule out new nuclear power stations. They appear to rule new stations out even if they would deliver cheaper electricity to
consumers and might be the best way for Britain to meet its climate change obligations, however important those obligations become in the future. We still do not know the Government's position on the issue; perhaps that is because they do not yet know it.Every day the Government delay making their position clear—and the decision is left in the in-tray—adds to the costs that taxpayers and, eventually, consumers may have to pay. The Minister made some reference to 29 November, when the issue will have to be resolved, but it is not clear what Ministers will know then that they do not know now. Why do we need to wait another five and a half weeks for the Government's position to be unveiled?
The costs of keeping British Energy afloat mounted rapidly, from #410 million on 9 September to #650 million on 26 September. To put the latter figure in context, it should be compared with the annual budgets of #22 million for the Energy Saving Trust, #26 million for the Carbon Trust and #17 million for the energy efficiency best practice programme. It should also be compared with the #55 million spent on research into renewables.
Mr. Simon Thomas: Surely the more frightening figure is the #2.6 billion that went from the non-fossil fuel obligation to the Magnox nuclear site, purportedly to help to pay decommissioning costs. Not a penny appears to have been spent on decommissioning costs. Would the hon. Gentleman have paid the #650 million?
Mr. Yeo: I am coming to that point. [Laughter.] Hon. Members must be patient, because we need to develop the argument logically.
When did the Government realise the extent of British Energy's difficulties? The fact that British Energy was trading at a loss must have been clear to the Minister's advisers well before 9 September. When did British Energy first discuss its anxieties with officials in the Minister's Department? Did not those discussions start months before the crisis package was announced on 9 September? Was not the first advice that his Department sensibly gave to British Energy to go away and discuss with BNFL a renegotiation of the high reprocessing costs that British Energy pays? Can the Minister confirm that those discussions between British Energy and BNFL took place and that an agreement was reached, but that the deal was unfortunately blocked, not by him or his officials but by the Treasury?
Apart from the reprocessing costs, the other big burden that has been imposed on British Energy is the climate change levy. On this point, I agree with the hon. Member for Twickenham. The climate change levy is not a climate change levy, but simply a clumsy and arbitrary energy tax that has nothing to do with climate change. If it did have anything to do with climate change, it would not be applied to British Energy. It is time the Government stopped insulting the intelligence of the energy industry and calling the levy a climate change levy.
It is also time to recognise that there are better ways to encourage reductions in carbon dioxide emissions. Those reductions would ensure that the resources were applied where they would be most effective. That could be achieved by means of a carbon tax, and an emissions trading system that was fully compatible with what will be introduced in Europe.
Does the Minister agree that the cost of supporting British Energy would be much lower if the Government were to allow the company to negotiate freely a new deal with BNFL, and if the Government replaced the climate change levy with a mechanism that directly targeted the carbon dioxide problem?
In that context, I make it clear that the cost of propping up British Energy in the short term could be much lower if the Government were to adopt the measures that I have set out. However, even at #650 million, that cost is lower than would be the decommissioning cost that would fall on the public sector if British Energy were closed down immediately. That cost could not be met by a company whose financial difficulties are as obvious as British Energy's, and it would dwarf the #650 million that has been put in.
That in no way, however, reduces my concern about the delay that is taking place. The matter should be resolved urgently, and I have made two practical suggestions about how the burden could be reduced. To be fair to British Energy, if it must bear the decommissioning and waste disposal costs, it is entitled to have its contribution to helping Britain achieve its climate change commitments recognised. Unfortunately, not everyone is willing to give it that recognition.
The Minister has not yet made clear the Government's solution to the problem. When he winds up, I hope that he will explain to the House what Project Blue is, and whether the Government are examining the possibility of taking British Energy back into public ownership. If he does confirm that, will he explain how that will help reduce the costs that British Energy faces? The problem is that market prices are lower than the costs of production, and that does not have to do with who owns the shares.
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