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27 Jan 2003 : Column 586—continued
Joan Ruddock (Lewisham, Deptford): The Minister speaks of liabilities, one of the most pressing of which is the disposal of nuclear waste. Has he estimated the difference entailed by any move from reprocessing to dry storage, which I believe British Energy supports?
Mr. Deputy Speaker: Order. Before the Minister answers that question, it might be helpful to the House if I said that the provisions of the Bill are very tightly drawn and that we are not debating energy policy in general.
Mr. Wilson: My hon. Friend the Member for Lewisham, Deptford (Joan Ruddock) knows very well that waste is the subject of ongoing research, led by the Department for Environment, Food and Rural Affairs. I do not know where British Energy stands now on dry storage. At one time, not long after I came into the House, it certainly supported dry storage, and a number of us were taken to witness the wonders of dry storage in Colorado. British Energy then got a better deal from BNFL and, suddenly, it forgot about dry storage. I do not know if it has come back to the idea of dry storage or not, but clearly the treatment of waste is an important issue. It is essential that we come up with answers, and my hon. Friend's comments on the advantages of dry storage will be noted.
From the taxpayer's point of view, it is important to emphasise that we have made sure that the more successful the company is, the more it will contribute. For this deal to work, the Government need to make a firm commitment now of the support we are prepared to give BE over future years. In order to enable the Government to give that guarantee, the Bill will remove the existing statutory ceiling on payments for nuclear liabilities under schedule 12 to the Electricity Act 1989, a ceiling that is currently set at £1 billion. Removing the limit recognises that, ultimately, the Government have overriding responsibilities for nuclear safety and environmental protection. If the company could not
afford its liabilities and were to fail, the Government therefore would have to step in to ensure that they were dealt with properly.
Sir Robert Smith (West Aberdeenshire and Kincardine): Does the Minister have any estimate of how far the figure is likely to go over the current ceiling?
Mr. Wilson: There is not a figure because the amount is not predestined to go over any ceiling, but the existence of the current ceiling is not a natural inhibition. Therefore, we have to have room for manoeuvre in all eventualities. However, that certainly does not imply any figure.
Mr. Mark Field (Cities of London and Westminster): Has the Minister been in touch with the Treasury to ensure that, if the ceiling is taken off, the amount concerned is put into the public accounts? If it is to be a liability, it should be a liability with regard to the public accounts.
Mr. Wilson: The hon. Gentleman will not be surprised to hear that we are in constant touch with the Treasury on these matters.
Mr. Crispin Blunt (Reigate): Schedule 12 to the 1989 Act, says that the amount
- "shall not exceed £1,000 million or such greater sum, not exceeding £2,500 million, as the Secretary of State may by order specify."
Mr. Wilson: No. I was emphasising that it is not inherent in making these changes that there is an expectation that figures will rise above their present levels. We need the flexibility to respond to eventualities; that, indeed, is the whole purpose of the Bill.
I must emphasise that, under the solvent restructuring plan that the company has presented to its creditors, we are certainly not writing a blank cheque for British Energy's nuclear liabilities. The Government have a duty to the taxpayer to ensure that there is no potential for the commitment that they would be offering to be exploited at the taxpayers' expense, nor should there be any incentive to run the company's stations in a way that might be inefficient for the country as a whole.
We understand very well the nature of the company's liabilities and we will put appropriate controls in place to safeguard taxpayers' interests and ensure that we only provide the aid necessary to ensure the safe and secure discharge of these liabilities. Changes to decommissioning plans or station operation that would materially increase the nuclear liabilities would need to be authorised by the Government in advance, working in close consultation with the regulators. The planning and contracting of the work necessary to tackle the nuclear liabilities will need to be transparent and provide value for money.
The company will be required to continue to maintain a high standard of operation of its sites and will be liable for any consequences if its actions fall short of that. The new arrangements will also ensure that, while recognising that the company must be given the space to
run its stations commercially, due account is taken of the costs of decommissioning in view of taxpayers' exposure.The Bill will also ensure that the commitment to financial support given by the Government for BE's nuclear liabilities would not cause an immediate, massive tax bill for the company; that would undermine the deal, given the company's cash position, and would be an unforeseen revenue windfall. It would be perverse for us to write out an IOU with one hand and then immediately snatch cash back from the company with the other, tipping it into insolvency.
I want to consider the role of the Bill if the restructuring deal fails. If the deal fails, we expect the board of the company to decide to put it into administration. We anticipate funding the administrator so that we are able to ensure that our key objectives of nuclear safety and security of supply are met. We have been undertaking detailed contingency plans for administration, in discussion with all the key responsible regulatory bodies. Furthermore, we have notified the Chairman of the Public Accounts Committee of the terms of the proposed indemnity that the Government would give the administrator.
BE's nuclear liabilities and the particular financial risks associated with its nuclear operations put it in a special position, and we are not aware of any credible private sector interest in acquiring BE if it were to end up in administration. The Government must thus plan for the eventuality that a private sector buyer will not be found for all the company's power stations. That is why we are preparing for the possible acquisition of BE's nuclear stations by the Government, either through acquiring the nuclear operating companies directly or through buying the assets and business of those companies.
The Bill ensures that we are prepared for either approach, giving the Government the financial authority to make such an acquisition and to finance the continued safe and secure operation of the business. Any acquisition would of course be a commercial arrangement with the administrator of the same kind that a private buyer might make; the Bill gives the Government no special powers in that regard.
Paddy Tipping (Sherwood): It is conceivable that the Bill will not have received Royal Assent before the company goes into administration. What plans are there to ensure that the company continues to operate smoothly and satisfactorily in those circumstances?
Mr. Wilson: My Department is in constant touch with BE, as indeed are the regulatory bodies, and I can give an absolute assurance that in any eventuality the smooth and safe running of the stations will be maintained; it will be our highest priority. However, my hon. Friend's point emphasises the need to introduce legislation and to progress it as expeditiously as possible—exactly as we are trying to do.
My focus is on what the Bill would enable in the immediate future, but I also flag up that bringing nuclear stations back into the public sector would not necessarily rule out future collaboration with the private sector in the longer term. I am sure that many hon. Members will already have noticed that the measure will
repeal some old provisions relating to the original privatisation of the electricity industry. Those provisions effectively prevent the Government from acquiring shares in certain privatised electricity companies, thus preventing us from owning the BE operating companies that we want in the current circumstances.Those provisions may have made sense at the time—to show that the Government had confidence in the privatisation process and that they did not intend to reverse it immediately afterwards. However, such provisions no longer make sense a decade later when the shape of the industry is unrecognisable compared with the immediate post-privatisation period.
The provisions apply only to the original legal entity formed by the industry restructuring, and not to other companies in the same group. That legal entity may no longer exist; even if it does so, it may no longer own its original assets. The provisions will not apply to any companies that have newly entered the electricity market. If nothing else, they are discriminatory and reflect former conditions and the imperatives of our predecessors in government. They are not an accurate reflection of the industry at present.
It is true that repealing the provisions could, in theory, permit the Government to acquire shares in certain other electricity companies where we cannot currently do so, but I stress that we have no intention of doing so in relation to other companies. So there is nothing sinister about repealing the provisions wholesale; we simply want to tidy up old, outdated provisions. Indeed, the rest of part 2 of the Electricity Act 1989, which deals with the initial restructuring, appears to be spent, so the Bill will take a power to remove it.
Hon. Members should not read anything sinister into that. The reason that we are taking that power is simply a practical matter of timing. As a principle, we want to repeal part 2, but, before we go ahead and do that, we want go through and check every provision thoroughly to see whether any of them needs to be retained in any form. We will do that in due course, but, to avoid holding up the pressing issue of dealing with British Energy, we are taking a power to repeal later on.
I have not tried to address the Government's wider energy policy, since that is not the subject of this debate, as you have pointed out, Mr. Deputy Speaker. I suspect that hon. Members may wish to extend the range of the debate, but I should like to remind them that, as has been said already, there will be a full opportunity to debate the Government's energy policy when the energy White Paper is published in a few weeks' time.
The White Paper will set out our policy on achieving energy reliability, competitive energy prices, our environmental goals and, indeed, our wider social objectives. Of course there will be a statement to the House when the White Paper is published, but I am mindful of the position of British Energy's financial creditors who are considering the restructuring deal that the company has put before them. There has been speculation about how measures to be announced in the White Paper might impact on British Energy, and I thought that it would be helpful to address that.
I should like to make it clear therefore that the energy White Paper will not contain measures that are likely, in the Government's view, to have a material impact on the financial position of British Energy. I should perhaps also emphasise that the restructuring proposals put forward by the company were not in any way predicated on future changes through the White Paper, so the statement I have just made does not affect the viability of those proposals.
British Energy has put forward its restructuring plan, and we wait to see whether it will be able to deliver it. The Government need to be able to play their part in the solvent restructuring if that succeeds, but we need to be equally prepared to act swiftly if it fails and the company goes into administration. The Bill will ensure that we are prepared for either eventuality, and I commend it to the House.
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