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27 Jan 2003 : Column 596—continued
Mr. Wilson: May I try to help the hon. Gentleman? Only a few minutes ago, he said that BNFL drove British Energy into the arms of the Government. In light of what he has just said, he may wish to withdraw that comment and accept that it would have been grossly irresponsible of BNFL to have given a blank cheque to British Energy, something that he appeared to endorse a few minutes ago.
Mr. Blunt: That is not the case at all. I was making the point that negotiations with BNFL were the straw that broke the camel's back. That was the final event that drove British Energy to seek a Government loan—that is exactly what the Minister told the Select Committee and is not a matter of dispute.
As for safety, the only issue that the Government have had to cope with was a bureaucratic one—how to transfer the necessary licence to operate nuclear power stations from British Energy to a potential administrator. It is not as if the Government have not had time to think about the matter. The Minister told the Select Committee that
- "certainly from June or probably earlier through the summer, we were monitoring what was going on at British Energy because clearly the market was an impact on it which could lead to the difficulties which eventually manifested themselves."
Mr. George Foulkes (Carrick, Cumnock and Doon Valley): On a point of order, Mr. Deputy Speaker, in light of what you said earlier, do you believe that there is a remote chance that the Tory spokesman may actually touch on the Bill's provisions?
Mr. Deputy Speaker : If the hon. Gentleman were out of order, I should have told him so.
Mr. Blunt: Thank you, Mr. Deputy Speaker.
In her statement in November, the Secretary of State said:
- "We have therefore prepared detailed contingency plans for administration, in discussion with all the key . . . regulatory bodies, to ensure that whatever happens, nuclear safety and security of supply will be maintained."—[Official Report, 28 November 2002; Vol. 395, c. 489-90.]
Mr. Russell Brown (Dumfries): The hon. Gentleman has placed a heavy emphasis on administration and has talked about management being handed over to the administrator. I do not want to get into a debate about the meaning of administration, but can he tell the House which third party in the wide world would be interested in taking over the running of those sites?
Mr. Blunt: The hon. Gentleman is prejudging the next part of my speech—I shall address that issue shortly.
There is a new factor in the British Energy drama—no one seems to have considered from 1996 onwards the fact that British Energy could indeed go bust and what, in the circumstances, would happen to its nuclear liabilities. There is a ring-fenced fund for decommissioning which partly addresses those costs, but as the taxpayer is now painfully finding out, there is the large matter of back-end fuel costs, liability for which dwarfs the scale of decommissioning costs. The Government's answer is to attempt a rescue, thus putting off a decision about renationalisation or administration. We believe that that is the wrong strategy. If the Government are trying to operate in the taxpayer's interests, they are going about it in an odd way, presumably taking on a £2.1 billion liability and none of the assets. As the Minister explained in response to the hon. Member for Ochil, who wanted to know what the taxpayer got for his £2.1 billion:
- "The taxpayer specifically from that will have the peace of mind of the safe management of nuclear liabilities."
Dr. Stephen Ladyman (South Thanet): The fund for the decommissioning of nuclear power stations was set up at the time of privatisation with an endowment to start it rolling. It was intended to build up over the lifetime of the power stations until, at the end of their life, it was sufficient to cover the costs. If the House were to take the hon. Gentleman's advice and decline to give the Bill a Second Reading, and British Energy were then to go bust, would not the money that the Government
are proposing to loan under the Bill become a grant to cover the cost of decommissioning, which would have to start straight away?
Mr. Blunt: I do not know whether it has escaped the hon. Gentleman's attention, but that is precisely what the Government are proposing anyway. They are proposing to give British Energy between £150 million and £200 million a year, and to merge the decommissioning fund with the fund for back-end nuclear liabilities. The decommissioning fund has been ring-fenced to date, and has had a cash stream of about £20 million a year. Sadly, the fund that the Government are proposing to take over has diminished since the company made its reports. It stood at £411 million in April, but I now understand that it is closer to £300 million. I am afraid that that has more to do with the Government's wider mismanagement of the economy, as I understand that the fund is largely invested in equities. The adage "Sell in May and go away" would have been advice well taken on 1 May 1997. Investors could come back on the election of a Conservative Government.
This issue must be dealt with in a clear and transparent way. The interests of the taxpayer must be protected, and future investors in nuclear energy need to know how the liabilities will be costed so that they have confidence to invest following this debacle. Without that clarity, or a proper framework for energy policy, there will be no new investment from the private sector. When the Conservative party publishes its energy proposals, it will propose a scheme to address that.
In the meantime, the Government's cack-handed rescue scheme, which has been cooked up with British Energy, will not deliver such results. Thus, the Bill is not necessary; indeed, it is an obstacle. The Government have so far endorsed British Energy's proposal, but I suspect that they will be somewhat bewildered by the complexity of the financial arrangements proposed.
Mr. Simon Thomas: I am listening to the hon. Gentleman's argument with great interest. He has certainly done much to demolish the security of supply argument. However, he has not yet addressed what should have happened in the light of British Energy's fortunes. Surely there are only two options: one is that proposed by the Government; and the other is full renationalisation—the only way to safeguard taxpayers' interests in the company and ensure security of supply for as long as we decide to have nuclear energy. The hon. Gentleman mentioned administration, but has not yet said what that option would entail.
Mr. Blunt: I am getting there, if the hon. Gentleman will allow me.
The beneficiaries of the Government's rescue scheme are the bondholders and the existing management of the company. Even Robin Jeffrey continues to defend his position, and there are suggestions today that British Energy is being invited to fund the price of his silence in order to prevent him embarrassing the Government. I hope that the Minister will make it clear in his
winding-up speech that the Government have nothing to fear from Robin Jeffrey being completely free to speak his mind.
Mr. Wilson: Why delay? I say now that I do not think that anybody should be suppressed in that way. If Robin Jeffrey has anything to say, I would be very pleased to hear it, and I think that the public should hear it.
Mr. Blunt: May I say how welcome that statement is? The Minister has made it clear that the Government would deprecate any gagging clause in the terms on which Robin Jeffrey leaves British Energy.
As for the taxpayer, there is only one factor in favour of the Government's rescue. Had the company gone into administration in September, the Canadian assets—Bruce Power, which was valued at £600 million—would have reverted to the landlord, the Ontario Government. The one significant benefit of the Government's support is that that clause cannot be invoked. Yet, one ludicrous product of the Government's aid to British Energy and the current plan is the deliberate destruction of the value of the north American assets of the company. As a condition of the loan, the Government are forcing British Energy to conduct a fire sale of its north American assets by 14 February as a condition of their support. Assets valued at more than £600 million are to be sold for about £300 million, so the Government have halved the only conceivable value of their actions.
What about the costs? BNFL, a Government-owned company, has accepted a chunk of British Energy's price risk, which it may or may not have been prepared to do in early September. What will that cost the taxpayer? If bondholders and shareholders accept the deal, it will be because it is in their interest to do so, yet surely the value that they derive can be only at the expense of the taxpayer. If the company had gone into administration, the Government would have been left with the liabilities that they have already accepted explicitly. Those liabilities were always with them implicitly, although as I said, no one seems to have established that.
However, the administrator would be able to refloat the company on the basis of the cash-generating assets, which have a significant positive value. The taxpayer would have the first charge over receipts from such a sale, and we would have had a nuclear generator—and we can still have a nuclear generator—fully in the private sector, with an opportunity for a transparent and sustainable method of internalising the costs of its environmental pollution. That would have been the best way forward, and it still is. It would be a market solution, and it would be fair to all concerned.
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