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28 Nov 2002 : Column 490—continued

Mr. Tim Yeo (South Suffolk): I welcome the statement that the Secretary of State has made, a copy of which I received about half an hour ago, some time after Greenpeace helpfully e-mailed my office with details of the press release issued by British Energy in connection with the statement.

The statement at last gives Parliament a chance to question the Secretary of State about her decision, taken almost three months ago, to commit £650 million of taxpayer's money to bailing out British Energy. The statement, which was made at the last possible parliamentary moment, raises a number of questions that I shall come to later. Unfortunately, it does not address the central absurdity of the Government's policy: the imposition of the climate change levy on British Energy.

The Government claim that the climate change levy forms part of their strategy to meet our climate change commitments. As nuclear power is the main energy source that does not produce carbon dioxide emissions, the Government's policy is an absurd contradiction.

The fact is that British Energy will not enjoy fair trading conditions until the burden of the climate change levy is removed. An essential part of the solution to this crisis is for the Government to abolish the climate change levy—an arbitrary tax that does nothing to address climate change—and replace it with a single economic instrument, such as an emissions trading system or a carbon tax.

Is the Secretary of State aware that that is not only our policy, but that of the Royal Society, whose policy document was published a couple of weeks ago? Will she explain why the Government reject the arguments authoritatively put by the Royal Society? Does she recognise that that approach would improve the position of both nuclear and renewables compared with fossil fuels and that it would also make it possible to

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guarantee that targets for reducing carbon dioxide emissions would be met? Alas, I fear that, even if she accepts those arguments, the Chancellor of the Exchequer, downgraded though he is, still remains higher in the pecking order.

I welcome the news that British Energy has been allowed to negotiate new terms with BNFL. Perhaps the Secretary of State will explain why that has taken so long. Has it not been clear for months, long before the bail-out was announced in early September, that that needed to happen? Will she confirm whether British Energy reached a commercial agreement with BNFL some time ago on terms that had her blessing only to have the deal blocked by the Treasury? Can she now reveal how much British Energy will save as a result of the new contract terms with BNFL?

Does the Secretary of State realise that the Government's muddled approach to nuclear power is damaging confidence in the industry? On 17 November, the Minister for Energy and Construction told The Sunday Times:

Just eight days later, the Secretary of State for Wales—a former Energy Minister—told The Western Mail that he wanted to shut down nuclear power stations. With such contradictions inside the Government, it is no wonder that the Secretary of State has difficulty in resolving what the Government's policy should be, but does she understand that, with one member of the Cabinet attacking nuclear power, the attempt at solvent restructuring that she has just outlined will be much harder to achieve? Will she therefore repudiate the remarks of the Secretary of State for Wales?

What additional cost to the taxpayer will arise if solvent restructuring cannot be achieved and British Energy is forced into administration? Perhaps the Secretary of State can explain that in terms of the immediate cash outgoings in the next year and the longer-term liabilities. Can she say whether the costs that she now acknowledges will arise to the Government were included in the higher Government borrowing figures announced yesterday by the Chancellor of the Exchequer?

Will the Secretary of State explain what legislation is needed to take forward the Government's part of the proposed restructuring? Does her statement mean that the Government are now considering taking British Energy back into public ownership? If so, will she explain how that will reduce British Energy's costs by a single penny or help it to become more viable in the future?

Delaying decisions about measures such as replacing the climate change levy, which would help to secure British Energy's future, will not make solvent restructuring easier to achieve. The fact that the liabilities management authority Bill is still only a draft suggests that the Government are having difficulty in acting in a timely manner on that issue as well.

The problems of British Energy were caused by a fall in the price that generators receive—a fall that has been sharpened by the new electricity trading arrangements—and British Energy is not the only generator in financial trouble. Is the Secretary of State satisfied that the operation of NETA is consistent with

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the overriding importance of security of supply? Does she consider that the regulator's remit adequately reflects the priority that must be given to maintaining the security of supply, especially when energy markets are about to experience their biggest change for a generation? Does she believe that Britain's energy needs and its climate change obligations can be met in the long term without any contribution from nuclear power?

The Secretary of State has tried to reassure us that throwing a little more taxpayers' money and allowing the company a bit more time will somehow resolve the Government's dilemma over nuclear power. The truth is that the Government's actions and omissions created problems for British Energy that would not otherwise have arisen. The bill for those actions and omissions will fall significantly on the taxpayer, regardless of whether solvent restructuring succeeds. The statement confirms that the Government's handling of this crisis has been bad for the taxpayer, and perpetuates uncertainty about the Government's energy policy.

Ms Hewitt: I apologise to the hon. Gentleman for the late arrival of the statement, although I am assured that it was faxed to his office at 10 minutes to 1. I would always seek to ensure that he receives copies of my statements in accordance with the normal parliamentary courtesies.

I shall now turn to the substance of the hon. Gentleman's response. In relation to the climate change levy, we made our policy absolutely clear in April 2001, when we introduced it. It is not designed to be a carbon tax but to give clear incentives to industry and commercial users to improve their energy efficiency. We will, of course, consider the whole question of whether further changes are needed to the entire policy environment, including the climate change levy, in the White Paper that we will publish in the new year. As I have said, we will not change policy, for instance, in relation to the climate change levy, simply for the sake of one company that has got itself into difficulties, however serious those difficulties are.

The hon. Gentleman asked about the negotiations that have been taking place with BNFL. Let me stress again that they are entirely a commercial matter for the two companies. Although the Government own BNFL, we are not managers of the company, we do not interfere in its day-to-day operations, and we leave the management to get on with those commercial negotiations. It is untrue to suggest, as he did, that there was a deal earlier in the summer, or that it was blocked by any part of Government. The final impact of that deal will depend on future wholesale electricity prices, since the new commercial contracts will be pegged to those market prices.

The hon. Gentleman also asked about the costs of restructuring, and particularly about whether they would vary were the company to go into administration. Let me make it clear that there is no real difference in the cost to the taxpayer between the solvent restructuring that we are giving the company a chance to put into

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place and falling into administration, should that happen. I draw his attention to what the Chancellor said yesterday in the pre-Budget report:

That was the position yesterday, and it remains the position today; it is not affected by this statement.

The hon. Gentleman asked about legislation. I hope that we will introduce the legislation to which I referred in my statement before Christmas. As I indicated, that will allow us to fulfil our part of the restructuring, either in the event of a solvent restructuring or, if administration proves to be the company's decision, in the event of administration.

In relation to the impact on the company of NETA, let me make it clear that even before the new electricity trading arrangements were introduced, prices were falling due to liberalisation and changes in the marketplace. We introduced the new trading arrangements after extensive consultation with the entire industry, including British Energy, to remove the distortions inherent in the old pool system of fixing prices, and to put in place a much more transparent system of arriving at prices than ever existed under the pool. The hon. Gentleman needs to remember that the overcapacity in the electricity market, which is now unwinding itself, and which has led to the reduction of prices following changes to the market environment, was the direct result of the pool arrangements and artificially high prices that led to the unnecessary investment that existed under his Government. He really does need to look at the history.

The hon. Gentleman referred to environmental targets, the importance of climate change and the role of nuclear power. All those issues are considered in the White Paper that will be published in the new year. We are absolutely committed to playing our part in dealing with the enormous problem of climate change. We will have much more to say about the appropriate targets on reductions, especially in carbon emissions, following Kyoto. British Energy's nuclear generators are responsible for 20 per cent. of total electricity generation and it plays a part in contributing to the reduction of CO2 emissions.

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