Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 280-288)



Mr Lansley

  280. Can I move to the structure of the funding arrangements for the future? Firstly, do you as somebody that needs to have that sense of confidence from the industry's point of view in future see any difference in practice between a segregated fund and a segregated account, taking as read that the segregated fund in itself gives a greater amount of confidence than a segregated account in the past?
  (Mr Askew) A segregated fund always shows people that the money is there I suppose. That is the difference, as opposed to having to be apportioned each year, and I think that is a difference between the two, but quite honestly programmes are going to be agreed for the next 5 to 10 years. You are going to have to do this work, you will de-commission at this rate, you will agree this is a safe and passive form, you will programme together with milestones and money will be released against that and will be paid against performance. But if that five year programme is then agreed, quite honestly I think the apparent transparency of the segregated fund becomes less because there is a commitment then to fund it at this rate for the next five years, and provided you are not waiting till the end of that five years to do the next five, ie you are doing it on a rolling five all the time, then I think that would give enough transparency. So in a way we are indifferent provided the money is there. We are spending something like half a billion pounds a year on cleaning, and anybody who is a site licensee or has a contract to do that wants to know or have security that that money will be there each year, because you cannot have a situation where you are bringing people into work and if you are £100 million short be laying people off, which I have to say does happen in some schemes operated in the United States that we are involved in.

  281. If it were a fund and it was not controlled directly by the LMA but by some board of trustees, or something akin to trustees as mentioned in the White Paper, does that give an additional degree of transparency as compared to simply trying to negotiate it with the Secretary of State as part of the public spending round?
  (Mr Askew) I think it would give some more comfort to people and people would feel more comfortable with that but if you have a five year programme laid out and you add another year to it every year and the funding is then committed which is beyond the yearly cycle of funding, that is an equally good way of doing it. Look at it from the point of view of you are doing the work and you have 6,000 people doing this work, or 4,000, and what you do not want to do is find suddenly at the last minute £100 million is cut from the programme next year and you have to lay people off. The only way this would be done successfully is if you have a programme for one, two, three, four, five, six, seven, eight, nine, 10 years and you set yourself up accordingly.

  282. Insofar as there are target levels for the fund, do you think they should be set in advance, one hundred per cent of years A-C and so on? You mentioned your portfolio and 88 per cent of future liabilities which presumably in a sense is a similar calculation—100 per cent of immediate liability and graduated thereafter. Should that be set?
  (Mr Askew) I have not really thought about it, to be honest.


  283. Do you think a segregated arrangement, whether it be an account or a fund, would protect the LMA from the charge which could be made against you that you have chosen not to fund your responsibilities for liabilities to a high enough figure? You have already helpfully told us it is going to evolve from 88 to 80, and you attribute that to an increase in the calculation of liability which you cannot at the moment make provision for. It could be argued that you are denying one fund in order to subsidise something else, so would you consider that the segregated account or fund would be an arrangement which would, as it were, fireproof someone from charges of that nature, the successor to yourselves?
  (Mr Askew) It may be that people would feel more comfortable with that because they could see the money was there but I go back to the other point: if you had a five year programme that was, let us say, half a billion pounds a year, what you have to start looking at to manage this successfully is you have to think about this as a half a billion a year spend, not some £48 billion that nobody can get their mind round as to how to manage it. You cannot ignore it—I do not mean that—but to get management to get results you have to get down to looking at whether you are getting value for money. I go back to my point which was, if you had a five year programme, fully funded, of half a billion, £2.5 billion, and that was committed, and after year one you have another half a billion added, that would be equally I think a sensible way and give people confidence. It is not quite the ring-fenced way. I think there are other ways of doing it than ring-fencing, but I can see why people would feel happy about ring-fencing. As a site operator what you want to know is that the money is there not just this year but next year and after that, because then you can deploy your people and your people know the work is there.

  284. It would also mean that when I open the Sunday paper whose name I will not mention I will not necessarily see scare stories about the bankruptcy of BNFL?
  (Mr Askew) They were just nonsense. We declared technical bankruptcy in November but the fact of the matter is that as directors of the company we would not be continuing to trade if we did not have the cash and the undertaking that the LMA was coming to sort out that technical bankruptcy in the near future. I would like to impress upon the Committee very much that we need that legislation quickly, because the longer this goes on in this never never world of "We do not like where we are and we cannot get to where we are going to be" I think is absolute nonsense and will not help this process, so one of the messages I have got for you today is really to get this in the Queen's speech and let us get on with it.

  Chairman: I think that point was taken earlier in the afternoon.

Mr Burden

  285. We have been trying to explore with witnesses how they see regulation panning out and how you can get more joined-up regulation amongst regulators; a close working relationship between LMA and the regulators but still allowing the regulators to be regulators and not be sucked in. How do you do that?
  (Mr Askew) The regulators have to remain independent. The NII have a different organisation, ie they do not report through to the Minister like the EA do and it is that sort of independence. We are working very well with the EA and the NII; they have put together a programme as to how they would work together. On the historic waste strategy in terms of determining the safe and passive form we are taking the initiative on, they are working very well with us. I think part of the issue at some stage has to be between risk-based regulation, where there is a risk and cost assessment to what you are doing, as opposed to in the EA which is a progressive reduction of discharges no matter whether there is any risk to the discharge or not. That is the fault line between the two regulators that they are working on which has to be worked on.

Mr Hoyle

  286. Do you believe Nirex should be made independent, and what arrangements should be made, if any?
  (Mr Askew) It is going to be interesting what comes out of this waste consultation with DEFRA, and it has to come quickly—some of it, not all of it—because we cannot wait. I think some of the things Nirex do are better done if it is independent. I think a case may be made to wrap them in with other agencies but, taking this long term issue of long term storage, an independent body of the great and the good working on that and something like the Finnish model has a lot to commend it, which starts to slightly put me at that end of the spectrum.


  287. You have had problems in the past with security. There is a new style of police authority being recommended. Are you happy with that? Is it what you recommended, or is it something you would like to see better in that area?
  (Mr Askew) I do not know. We commented on this but perhaps I can ask Ted—

  288. You are at one with Greenpeace on this issue who discovered they had not read the last chapter!
  (Mr Askew) I have read it but I do not know where it came from.
  (Mr Williams) It has been read and we are very comfortable with the proposals put forward.

  Chairman: Thank you very much. We appreciate you are going to be sending us additional information; we have taken a bit less time with you than we might have done but we have a vote at 7.00 and therefore we did not want the process of the Committee to be interrupted. We are grateful for the advice you have given and look forward to getting any additional information, and if we can have it by a week tomorrow it will be helpful, and obviously we look forward with interest to seeing your accounts. Thank you for the time and the trouble you have taken.

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