Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 100-119)



Linda Perham

  100. You obviously have seen the controversy about the hike in the estimated costs of dealing with the liabilities, about six billion. Now the figures have been thrown around as well about the total cost and the White Paper does go into some detail about saying that a better definition of the problem will almost certainly mean that liabilities estimates will rise, that regulatory and policy requirements may also mean that will rise. What is your view of the estimated costs of liabilities?
  (Mr Tunnicliffe) From the point of view of our evidence Stephen has our record.
  (Mr White) As the White Paper shows, the liabilities under UKAEA's direct control are currently estimated at £7.4 billion. It has been at £7.4 billion for the last five years so, as far as we are concerned, there has been a consistency in our current estimate of the liabilities which we control.

  101. Do you have a view about the global sums that have been quoted?
  (Mr White) We cannot speak for the situation at BNFL sites. In our case these estimates are underpinned by a rigorous estimating process which builds up from an understanding of all of the individual liabilities for which we are responsible. There is a degree of uncertainty in the estimates as a result of the fact that the records that we have inherited are not everything that we might want. There are uncertainties associated with the future in relation to depositories, de-licensing criteria and the like, so I will not pretend that there is not some uncertainty in them, but we are confident that we can give a good account of their make-up and that they have been consistent and stable over the last five years.

  102. And before that?
  (Mr White) Before that, when UKAEA first took responsibility for liabilities management in the way that we do now, which was the beginning of the nineties, the estimate was higher than that. We had a reduction in our estimate from 1994 through to 1998 and thereafter it has remained steady.

Sir Robert Smith

  103. In cash terms?
  (Mr White) That is in undiscounted cash terms at current prices.

Dr Kumar

  104. Can we explore the role of the Liabilities Management Authority? What is your own assessment of the size of the Authority that is being proposed, about 200 people? Do you think it will have the necessary technical and management skills because there is some concern about the level of skills that is necessary?
  (Mr Tunnicliffe) We can only answer that question when the interface between the site licensee and the Authority has been confirmed. That will be very much about how the contract develops and what its shape and its checks and balances are. In our first run-over in our mind I think it is fair to say that we think it is about the right order of magnitude.

  105. What about the managerial skills and technical skills? Do you think that those skills still exist out there to meet what is expected for it to deliver the clean-up objectives it has in managing particular sites?
  (Mr Tunnicliffe) I see no reason why it should not be able to recruit those sorts of skills.

Mr Hoyle

  106. It is interesting that if you have not got the skills you think you can recruit them. What confidence have you got that there are the skills out there and that you will be able to recruit them?
  (Dr McKeown) In terms of the UKAEA, and we can only speak for the UKAEA of course, we have gone through a period over the last three or four years when we have increased the staff we directly employ by some 250 people. We are now addressing one of the issues that the Chairman set out earlier. Yes, you can recruit people out there and when they do not have skills then you have to make arrangements for training them. For instance, the UKAEA together with other nuclear licensees sponsor a course in nuclear physics at Birmingham University, so we are training people to have the skills which we need. When you come to the Liabilities Management Authority, if you are able to get a lot of the skills—and they are not all specific; some are, but the general accounting ones you should be able to get out in the market in general—after that you are going to have to recruit either in the UK or overseas and at the end of the day you may well have to train them too.

Dr Kumar

  107. Can I explore the customer/contractor model that has been suggested in the White Paper? First of all, do you think it is the appropriate model given some of the difficulties that have been encountered in other areas?
  (Mr Tunnicliffe) Do you mean the customer contract model between the LMA and the site licensees?

  108. Yes, page 27.
  (Mr Tunnicliffe) It is not easy to see, is it?

  109. It is the LMA model.
  (Mr Tunnicliffe) The most difficult task in front of the LMA, which I am sure it will succeed in, is getting that contract right between the LMA and the site licensees. In many ways it is analogous of our relationship now with the DTI which is not in a formal contract, and they will have to turn it into a formal contract. My view and experience are that with the right levels of energy, forms will emerge which will give the right assurance. I do think that in this development clearly there will be considerable public interest in whether the insurance mechanisms can be built into the model to make sure that there is value for money, safety and continuity in the key features that the LMA is charged to develop. Certainly they are going very widely in looking at people's models to see if they work. I think one can have every confidence that, given their professional approach, they will come to a sensible balance.
  (Mr White) This model is not completely novel in the nuclear context. There are examples of this sort of contractual relationship in the US and we also have the AWE example in the UK, so there are a lot of analogies that could be used to give confidence that they can make this sort of thing work.

  110. How successful are they in America?
  (Mr White) I think the US DofE view is that they are very successful but you need to talk to the US DofE. I think the view in the States is that you can make it work. It is not straightforward, as the Chairman said. I think this is going to be a challenge for the LMA but I think it can be done.

Mrs Lawrence

  111. Can I ask a very general question, getting back to the costs? The £42 billion before the six billion that we talked about earlier—you say you element of that was seven billion.
  (Mr White) £7.4 billion.

  112. So presumably the rest falls on BNFL.
  (Mr White) Yes.

  113. The six billion since that, which brings it up to the new figure of £48 billion, what proportion of that is down to you? Bearing in mind the split, is this whole exercise not just a means to get BNFL if you like into a position where it is getting rid of all its financial problems?
  (Mr White) I will try the first part of the question. On the first part of the question, the answer is that none of the increase, apart from the £100 million, is down to us. Our new accounts which are due out later this month will show £7.5 billion.[3]

  114. So out of six billion £100 million is down to you?
  (Mr White) Yes.
  (Mr Tunnicliffe) On the matter of what is the purpose of the LMA, obviously I came into this job on 1 April and I was very interested in what it was all about and read the stuff and so on. Subsequent to that I had a lot of conversations with civil servants and a couple with ministers. I was left extremely strongly with the view that the LMA is to clean up the nuclear liability. That is its core objective. Everything else is subordinate to that core objective. If you read through the report you will notice that it is sequential. It is about set up the LMA, get a plan and then look at BNFL and then look at UKAEA. I think the Government is very serious about this. This is why I was happy to come into this industry. It wants to shoulder the liabilities. As I said earlier, it is putting this in statute. Remember that until now we have been relying on assurances and White Papers, but now it is putting it in statute that the liabilities belong to the Government and the Government will find the funds to tackle it. I think that is their motivation. I cannot know it but everything I have seen leads me to that view.

  115. But one of the problems in the past has been the secrecy involved in this. Do you think the LMA is going to have the teeth to get to the core issues to be able to do its job?
  (Mr Tunnicliffe) Absolutely.

  116. Can you expand on why you think it has got sufficient teeth?
  (Mr Tunnicliffe) It is just listening to people, looking at the White Paper, looking at the fact that they will have the budget. There are no teeth stronger than having the budget. They will have the budget, they will have the responsibility, they will have the public accountability and they will have the level of independence. They start off with the Minister, the White Paper and everybody saying that the key tenet will be transparency. It will be an open and transparent authority. I believe them. I see no reason sensibly, given all our experience, particularly in the nuclear world in other places, of the damaging impact of secrecy in the modern age. There is every incentive to set off in this transparent way that they have promised to.


  117. Could you define for me in your own terms what the words "developing and implementing an overall strategy for discharging the nuclear legacy" mean? What do you think that means because that is the only real objective? All the rest of it is means. This is an end.
  (Mr Tunnicliffe) Absolutely.

  118. If you were to explain in your own words what "discharging the nuclear legacy" was, how would you put it?
  (Mr Tunnicliffe) If I were starting from scratch I would say that as a result of the nuclear energy programme and other nuclear research in the United Kingdom over the last 50 years we have sites and facilities which are redundant or are becoming redundant and they have so affected where they are that that ground cannot readily be returned to normal use. That is the liability. It is the summation of all those sites. The liability is actually a physical thing; it is not a money thing. I see discharging the liability is Government's commitment to accept that returning those sites to general use over many years, up to perhaps 100 years, even more in one or two cases, the Government's commitment to return those sites to general use by getting them de-licensed is essentially what is meant by "discharging the nuclear liability". The money is a way of describing it. Because BNFL is a limited company, it appears in the accounts, the liability is a series of physical things and discharging it is returning it to normal use.[4]

  119. Do you think from your own point of view that you get off your back some of the problems that you have had and that it enables you to clear your books in some ways as well?
  (Mr Tunnicliffe) I do not think the impact of this in our books is in the least bit relevant. What is valuable about this document is forward commitment, forward funding, and a challenge for us to prove that we can be supplier of choice.

3   See supplementary evidence showing the trend in UKAEA's liabilities estimate from 1995 to 2002: Appendix 5. Back

4   See supplementary evidence: Appendix 5. Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 12 August 2002