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28 Nov 2002 : Column 493—continued

Dr. Vincent Cable (Twickenham): One of the few welcome aspects of this worrying statement is the tough conditions that the European Commission attaches to the loan. Perhaps we should be grateful that it is more concerned than Ministers are about the prudential use of British taxpayer's money.

How much is involved? The Government cite the figure of £650 million, but I received a fax yesterday from the Commission that said that it had approved a loan of £900 million, with additional contingencies of £275 million. Which figure is right? The Government seem to have contingent liabilities for the company greater than those provided for the Iraq war. If the figures double every three weeks, how can we have confidence in the numbers that the Government use?

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The nuclear safety issue is paramount. Am I correct in understanding that there is no regulatory provision for the protection of nuclear safety if British Energy becomes insolvent? If that is the case, it reflects badly on the people who privatised it, but why did the Government take five years to notice the problem and prepare for it?

Why is there a fundamental problem with security of supply? National Grid states that British Energy provides 13 per cent. of capacity—not 20 per cent. as the right hon. Lady said—and there is 25 per cent. of spare capacity to meet demand. The industry's regulator, Mr. McCarthy, who presumably knows something about the industry that he regulates, says that the problems of British Energy pose no threat to security of supply, either in whole or in the event of some of its older reactors ceasing production. If the Government are at such odds with their regulator, why is he still in his job?

On competition, the Government have arranged a rescue operation for a failed and badly managed company and its shareholders. What answer does the Minister give to the workers and shareholders of other companies in the energy industry, such as renewable power generators and AES Drax, in which people are losing their livelihood and money as a result of competition with the enterprise that the Government are rescuing?

Ms Hewitt: The hon. Gentleman refers to the tough conditions supposedly imposed by the European Commission. He takes that phrase from the title of its press release issued yesterday. Had he read on, he would have found that we imposed the Xtough conditions" as a condition of making the loan in the first place. In other words, the loan facility that we made available was not handed over to the company. It was put into a separate account and every bill or guarantee met from the facility is first checked and cleared by our accountancy advisers. The European Commission welcomed the fact that we had put in place such tough controls.

So far, thanks to the extremely tough and prudent management of the facility that we put in place, only about 60 per cent. of the total facility has been used, so we do not propose to increase it. However, we have discussed with the European Commission the maximum amount that may be required for the six-month period for which rescue aid has been approved. That is why the Commission has approved a figure higher than the £650 million that we already have in place; in other words, the Commission's approval relates to the maximum that may be required but our objective is to pay only the minimum. We will continue to do everything necessary to achieve that through the tough management of the account.

The hon. Gentleman asked whether the safety and regulatory conditions would apply if the company decided to put itself into administration. We have spent a large part of recent weeks in discussions with the various regulators to ensure that even if the company decides that it needs to go into administration, health and safety, including nuclear safety, will be properly secured. One of the main reasons why we were not prepared, many weeks ago, to risk letting the company fall into unplanned administration is that, at that time, the question of health and safety, among others, was not clear.

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The hon. Gentleman also asked about security of supply. The difference between the figures of 13 per cent. and 20 per cent. is simply a matter of the base that one uses—whether one measures production against capacity or against total generation. As a result of the significant mothballing of plant that has taken place over the past year, particularly in recent months, the capacity margin, although certainly adequate to ensure security of supply throughout the winter, is significantly lower than it has been.

Several hon. Members rose—

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. We have an important Bill to discuss this afternoon and many hon. Members want to take part in that debate. The Secretary of State for Trade and Industry said that she will shortly introduce legislation, so we will have an early opportunity to return to this subject. I do not intend, therefore, to run this on much beyond 2.40 pm. I hope that I may have the co-operation of the House in that respect, and I ask for short questions and short answers.

Mr. Geoffrey Robinson (Coventry, North-West): I congratulate the Secretary of State on her robust and intelligently constructed position, which puts the onus for the financial recovery and solvency of British Energy firmly on the company itself. She has created a position in which, over the next few months, we can debate the implications of NETA and its current operation—it is not an entirely satisfactory replacement for the pool, as she no doubt realises—and other aspects of energy policy, notably the security and diversity of supply that we seek. It is entirely to her credit that she has created that opportunity for us, and I hope that all parties in the House will engage constructively in a debate that is in the national interest.

Ms Hewitt: I am grateful to my hon. Friend for those comments. On NETA, perhaps it will help if I stress that we are already supporting changes to its operation, in particular to assist smaller generators and to improve the way in which the balancing mechanism works. He is right to say that we will need to return to that and many other issues in the White Paper.

Mr. Michael Jack (Fylde): The manufacturers of British Energy's fuels, namely, the workers in my constituency at Salwick, will be grateful to the Secretary of State for the help that she has given the company. However, will she confirm that the revised arrangements with BNFL will not harm that company's profitability? Will she also explain to the House how the revised arrangements will affect the cost of generation of each kilowatt-hour of nuclear energy from British Energy? Will the company thereafter trade profitably within the constraints of NETA?

Ms Hewitt: The new contracts that British Energy is putting in place with BNFL are part of a strategy to reduce its costs and establish new longer-term contracts with the energy suppliers to protect itself against possible further downward movements in prices. As for BNFL's profitability, I elaborated on that matter last year in a statement on the creation of the liabilities management authority.

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Anne Picking (East Lothian): I, too, welcome the Secretary of State's statement. Torness is in my constituency and her remarks about the staff, their commitment, hard work and loyalty were welcome. I visited the station on numerous occasions when both reactors were down and everybody, including the station master, the staff and unions, was working together. I also welcome my right hon. Friend's reaffirmation of the Government's commitment to nuclear power generation and a balanced energy policy.

Ms Hewitt: I thank my hon. Friend. I thank her constituents and those of the right hon. Member for Fylde (Mr. Jack) for their continuing commitment to the safe and effective operation of nuclear power.

Mr. David Heathcoat-Amory (Wells): Before the Secretary of State introduces a policy for British Energy, she needs a policy for nuclear power. Will she comment on the fact that over the next 20 years, all Britain's nuclear power stations except one will be decommissioned? Even on the most optimistic projections for alternative energy, emissions of carbon dioxide will therefore rise, whereas the Government are committed to reductions. Why, after more than five years in office, have the Government still not got to grips with that? Why have they not practised joined-up government and brought their energy policy into line with their environmental commitments, which other sections of the Government are pleased to boast about?

Ms Hewitt: We are taking tough action to try to improve energy efficiency and achieve an increase in renewables generating capacity of 10 per cent. by 2010. The broader issues raised by the right hon. Gentleman, including the role of nuclear power and the much broader energy framework needed to achieve continuing reductions in CO2, are matters for the White Paper.

Paddy Tipping (Sherwood): Will the Secretary of State confirm that none of the measures that she announced in her package prejudices security of supply, which will be considered in the White Paper? Will she go further and give a commitment to meet coalfield Members and people from coalfield communities to explain how a package of £650 million and an ongoing commitment of £150 million to £200 million a year to nuclear energy can be set against the limited aid given to coalfield communities?

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