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27 Jan 2003 : Column 603—continued
Mr. Blunt: I want simply to establish the facts. The hon. Gentleman points out that BNFL could go only so far at the beginning of September. Has it now gone further as part of the Government's package? That would have an impact on the taxpayer.
Mr. O'Neill: I am not privy to BNFL's secrets. As a close observer of its fortunes, and those of the nuclear industry, I simply say that if it went further without material improvement in its financial circumstances, that would spell danger for the company. That is as much as I am competent to say.
Mr. Hendrick: I fully agree with my hon. Friend that BNFL should not take any steps that would put it in difficulty. Will he say to the hundreds of BNFL workers in my constituency that he supports them in delivering the goods to British Energy and that he hopes that they will continue to do so in the foreseeable future? Thousands of jobs are at risk. If we were to take the course suggested by the hon. Member for Reigate (Mr. Blunt), those people would be out of work fairly quickly.
Mr. O'Neill: My hon. Friend may be over-egging the pudding a wee bit. BNFL is in a strong position in so far as it is a virtual monopoly as far as the United Kingdom is concerned. The French company will not necessarily step in with a lower bid. BNFL has made step changes and radical improvements. We must recognise, however, that the deals that were struck at the time of privatisation were commercially unrealistic. When Robin Jeffrey returned from the United States, he asked the apparently reasonable question, "Why can't I get my nuclear reprocessing done in Britain for the same sort of prices I pay in north America?" In fact, that is not to compare like with like—different circumstances apply—but it was a question that had to be asked. He got a reply of sorts, but it was not as good as he thought that it could have been.
As with many privatisations, several people in those companies thought that they had died and gone to heaven. They were offered shares at ridiculously cheap prices and bought them through long-term schemes, often to the exclusion of any other form of savings. Those poor souls are now seeing their savings going down the drain. Over the years, when shares in British Gas and other privatisations fell, many hon. Members received letters from constituents asking what the Government could do about it. The fact is that there is nothing that the Government can do about it. That happened when I was an energy spokesman for the Opposition and privatisations took place under the writ of the Tories; it happens whenever such fluctuations occur. In this instance, it is little short of a disaster for many people. For that reason, if for no other, proper provision must be made through legislation such as this Bill. Many of the shareholders and bondholders are small savers, and to dismiss them in the manner of the hon. Member for Reigate is callous. He said that it is in their interests to get a deal. Of course it is—sometimes those savings are all that they have.
As my hon. Friend the Member for Dumfries (Mr. Brown) said, a trade sale is not a realistic proposition. What worries me about nationalisation is that nobody in the civil service is qualified to run British
Energy. There are better managers out there who could run the business, but I am not sure that we could lure them to Victoria street.If, in the end, taxpayer's money has to be put up, there must be a means of protecting it. If the company can work its way out of its present difficulties and get itself into a position whereby, as my hon. Friend the Minister suggested, loans can be considered, its fortunes will begin to change. It is important that the business is kept running and that revenues keep coming in. It is much better to keep the power stations going than to have them lying idle while they still have to be cared for and protected. It is not a simple choice. If we discarded just 21 per cent., we would be down to about the lower limit. That is the technical economics of the madhouse. It might work in a wind-driven Wales, in some future independent state that will never arrive, but it will not happen in the United Kingdom, where many people—certainly those in Scotland—depend for half their electricity on the output of two nuclear power stations. I certainly would not want my constituents to go to bed with electricity or power reduced simply to meet the needs of fanatical so-called environmentalists or supposedly hard-nosed business people.
The fact is that nuclear energy in this country will be required for some considerable time and it would be wrong even to discount the possibility of life extensions for existing stations, because the life of a nuclear power station is a guesstimate at the best of times. It could be cut down the way—I admit that if it were technically wrong to run stations they should be closed—but if they are technically capable of being run and their costs have largely been met, that is perhaps one of the better ways to ensure that the public get some return on the loans and assistance. My hon. Friend the Minister seeks to acquire powers for that, but the proviso, of course, is that the European Union can act.
There is a matter that we have not discussed, and I hope that my hon. Friend the Minister makes this point when he replies to the debate: we still have to get the underwriting for the deal from the Commission. I believe that there is still some way to go there. We are discussing a minor milestone in the long journey ahead before we clear up British Energy's problems, but I welcome tonight's debate as a meaningful first step along that road.
I take the point that the Government acted wisely, prudently and in a measured fashion. There was no panic in the Department at that time, and it is wrong and demeaning to officials and Ministers to suggest that. The problem is difficult and it will not be solved overnight, but the Bill is a useful first step on the way to a solution and I welcome it.
5.46 pm
Dr. Vincent Cable (Twickenham): Listening to the Minister's sober and restrained introduction called to mind a quotation from one of his predecessors, Mr. Fred Lee, who stood up in the House in 1965 and said that
- "we have hit the jackpot . . . we have the greatest break-through of all time."—[Official Report, 25 May 1965; Vol. 713, c. 237-8.]
I was brought up in a stern, non-conformist tradition, so I am not sure what the gambling term is for the opposite of a jackpot, but the Government and their predecessors have hit it. That issue is worth pursuing before getting into the substance of the arguments, because, as the hon. Member for Barnsley, West and Penistone (Mr. Clapham) hinted, the package, which is incorporated in the Bill and will lead to the lifting of the ceiling on the Government's commitments to £2.5 billion, comes on top of a lot of other liabilities that the taxpayer is being required to assume.
A couple of years ago, the late Mike Sadnicki put to the Environment Sub-Committee a paper in which he bravely attempted to calculate that sum. He came up with a figure of about £55 billion—that was £20 billion at current prices, after discounting—which was a conservative estimate of the liabilities that would fall to the taxpayer. Those are liabilities to which we propose to add.
Returning to the jackpot analogy, when a gambler is losing money, there is always an instinct to stay at the table. I sense that, in a way, that is what the Government are trying to do. The recurrent theme that comes through their arguments on the financial case—we shall come to the wider arguments later—is that it is cheaper to stay at the table and keep British Energy in solvent restructuring than for it to go into administration, and cheaper to keep production going than to close it down.
This is a technically complex area and I do not in any sense claim to be an expert on it, but all the figures on the financing aspect that I have seen suggest that both propositions are wrong in fact. The Minister shakes his head, and he may be right. None of us has a definitive answer. However, before the Bill proceeds through Parliament under the Government's hurried programme, can we have an independent financial assessment? I do not know who could make that assessment in the space of a few weeks, but perhaps the National Audit Office or the Select Committee on Trade and Industry, under the chairmanship of the hon. Member for Ochil (Mr. O'Neill), could do it. Is administration really more expensive than solvent restructuring? Is keeping production going cheaper than stopping it? We might at least agree on issues of fact before we debate issues of principle.
Mr. Simon Thomas : Does the hon. Gentleman agree that we need an independent assessment of one of the Minister's arguments? He said that it is better to give British Energy a loan so that it can continue to pay money into the public nuclear liability contingency fund. Should that argument not be open to scrutiny? An independent assessment would be useful.
Dr. Cable: That is part of what I propose. I shall return to the details of the financial arrangements.
I have spoken on trade and industry and energy for two and a half years, in which time there has been a long succession of Conservative spokesmen. Although I have
rather lost track of who they all are, until today I could almost rely on the fact that they would put up a robust defence of private nuclear power and of putting more money into it. I listened carefully to the hon. Member for Reigate (Mr. Blunt), and something has changed. I do not know whether there has been a rebranding exercise or whether the hon. Gentleman has been allowed to use his initiative and has come up with a sensible statement on many key issues. Much to my surprise, I found myself agreeing with much of what he said.On the other hand, I profoundly disagreed with the Minister and the Government's case, and my colleagues and I will vote against the Bill. Temperamentally, my instinct is to find common ground and to try to identify areas in which we start from the same point. On nuclear safety, the Minister was absolutely right to say that safety must be guaranteed. That is obvious: nuclear power stations cannot have small accidents—any accident is a potential catastrophe. We entirely share that starting point.
The problem with the Minister's argument is that the only risk that he identified is that of a sudden—his word—shutdown of all capacity in the industry. No one has ever suggested that. No one is promoting it or thinks it remotely feasible. If the matter went into administration, the administrator would almost certainly keep the power stations running. So long as they cover their interest charges, that would be in the economic interest. We certainly do not advocate a sudden shutdown.
We know from experience in the United Kingdom, quite apart from that overseas, that nuclear power stations can be shut down. Torness, on the east coast of Scotland, is shut down at present.
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