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27 Jan 2003 : Column 620—continued
Mr. Simon Thomas: British Energy has to put into its accounts some account of this "height of irresponsibility", because it has to say what the liability costs are. Its accounts say that for the first five years the liability costs about £600 million, which is the very minimum of what we are giving British Energy in the Bill, and that the vast majority of costs are after 35 years. Therefore, the right hon. Gentleman should accept that it is unproven that the open-ended cheque that we are writing for the nuclear industry in the Bill is any better than the real decommissioning costs of nuclear energy.
Mr. Barron: I think that the hon. Gentleman is second-guessing on that. I shall have something to say about what the Bill does, especially to schedule 12 of the Act. I well remember the debates in Committee about this issue. Nobody can say that we could turn the nuclear stations off tomorrow, whether we have excess generating capacity or not—and we have. We have to recognise also that for most of their lives these generators have been base-load generators, and there is a lot of other generation that would be put in place. That may have severe implications for electricity generation in this country.
Mr. Stunell: Surely the right hon. Gentleman appreciates that for years nuclear plants throughout the country have been turned off, when necessary, for maintenance, or left idle for periods, and then brought back on stream when the market would bear it or the repairs were completed. He is painting a wholly unrealistic picture of the way in which nuclear plants are brought on and off stream.
Mr. Barron: On liabilities, if nuclear plants are turned off, any revenue stream will end, and that has major
implications for the taxpayer. We cannot wish these things away. The issue of whether we ought to have used nuclear plants in the past or of whether there should be new ones in future does not matter; we will wait and see what the White Paper says. However, it would be irresponsible to turn off plants, and the taxpayer may end up having to spend more money.
Dr. Ladyman: I agree with much of what my right hon. Friend says. Does he agree that, in real terms, the cost of decommissioning these plants is the same whether one does so early or at the end of their lifetime, but if we decommission them early, we will receive no profit from the electricity that they could have been producing in the meantime?
Mr. Barron: That is exactly the point. They are earning revenue for British Energy, and they will continue to do so if the company is saved.
Mr. Barron: I shall not give way because I have only about four minutes left, and I want to finish my speech.
In the Westminster Hall debate, the Minister used the word "indigenous" to describe nuclear energy. I have strong thoughts about other indigenous fuels which I would like to express, but not in this debate. I know, Madam Deputy Speaker, that I cannot do that. I just hope that the last colliery in my constituency, which is under threat, will still be around when we are able to debate the energy White Paper in a few months. Some people tell me that that is doubtful; I hope that they are wrong.
I turn briefly to clause 3, which amends schedule 12 of the Electricity Act 1989. That provided for financial assistance from the Government for nuclear liabilities, up to a ceiling of £2.5 billion. The Bill will remove that ceiling. I have a couple of questions for the Minister. One concerns a report in The Mail on Sunday yesterday. I gladly admit to my hon. Friends that I am guilty of buying and reading that newspaper. [Hon. Members: "Shame."] I know that it is a shame, and most of its contents are a shame. The article says:
- "As part of the restructuring deal, the Government has agreed to pay £2.1 billion towards the generator's decommissioning liabilities . . . There is also growing confidence within the company that the White Paper on energy will not spell the end of nuclear power in Britain".
My other question concerns the protection that taxpayers will have in relation to the operation of the amended schedule. How can we safeguard taxpayers' money and prevent it from being given to a private company that has mismanaged its affairs and consequently has to go into administration? Will taxpayers' money used to manage nuclear liabilities be ring-fenced within such a company so that, even if it goes out of business, there is still money to pay for the clean-up of the end of the nuclear fuel cycle? The hon. Member for Reigate suggested that that may be the case.
This debate will go on long after the passage of the Bill. However, we ought to secure the protection of taxpayers' money. We ought to ensure that if that money is being paid to a private company, it will be used for exactly the purpose for which it was intended. In this case, that is to meet the liabilities of the nuclear fuel cycle, and the money should not go into shareholders' pockets or be used for any other purpose.
6.55 pm
Mr. Mark Field (Cities of London and Westminster): It is a great pleasure to speak after the right hon. Member for Rother Valley (Mr. Barron), who gave a spirited defence of his long-standing interest in the energy industry, and the hon. Member for South Thanet (Dr. Ladyman), who suggested that, by voting against Second Reading, we would be voting to write off the whole nuclear industry.
It seems that there is no problem so big that a good dose of Government intervention cannot make it worse. Although I accept that, from the Minister's point of view, it is prudent to plan for all eventualities, and that the Bill is obviously the result of such planning over recent months, no one should be deceived. This is wholesale renationalisation of the business, or at least the first and most important step towards that.
Mr. Simon Thomas: It is an expensive way of doing it.
Mr. Field: It is indeed. There is a great fear among Opposition Members that this may become Railtrack mark II and that the taxpayer will effectively be asked to sign a blank cheque. The Minister will remember that, on that long ago day in October 2001 when Railtrack was reorganised, to put it at its most euphemistic, it was said that no taxpayer's money would be spent, and of course we have seen the results of that in the intervening 15 or 16 months.
I shall canter through a quick history of the UK energy sector. I accept, as I am sure that the right hon. Member for Rother Valley does, that there has been rapid change in the past 50 years. In 1950, we relied on coal for about nine tenths of our energy, and roughly one tenth came from crude oil. Gas, high-grade oil and nuclear power were not even a gleam in anyone's eye. Now, 43 per cent. of energy comes from gas, 32 per cent. from oil and only 15 per cent. from coal. We may not be sure about the route that we will take in the next half-century, but one thing that we can all be sure of is that there will be rapid change in the energy sector. I suspect that, whether or not Liberal Democrat councillors get in the way, the hon. Member for South Thanet is right to suggest that wind power will not be the answer to all the UK's problems.
More recently, the energy review has tried to envisage what energy policy we will have in 50 years. There is a fallacy of over-prescriptive planning, and one has to consider the law of unintended consequences, which all too often rears its ugly head in any planning that promotes one sector over another. I greatly fear that, in giving this Bill a Second Reading and giving a thumbs-up for the long-term future of nuclear energy, which intrinsically I support, we will distort the whole energy market. It will be interesting to see how the energy White Paper, when it is eventually published in late February, early March or even a week or two later, is integrated with the Bill.
There is widespread acceptance of certain beneficial impacts, both economically and environmentally, of the changes that have taken place in the past 10 or 11 years. The hon. Member for Preston (Mr. Hendrick) hit the nail on the head when he said that there had been a sea change in thought about environmental issues in the past 12 or 13 years, particularly in relation to greenhouse gases and global warming.
The changes in the 1990s, both under Conservative Governments and more recently since Labour was elected in May 1997, have reduced the cost of production as a result of the liberalisation of the market. Wholesale reductions in the cost of raw materials have fed through to the consumer. That has led to a reduction in UK fuel poverty, which was a large-scale problem discussed by many only 10 years ago, but it has not been in the headlines in more recent years. We have also seen a switch from coal to gas, which has allowed us to achieve many international environment targets.
Madam Deputy Speaker: Order. I remind the hon. Gentleman to return to the Bill's content.
Mr. Field: I shall indeed. I apologise.
There is little doubt that one problem in the electricity sector is the precipitate fall in wholesale prices, down 40 per cent. since 1998 as a result of misguided pricing policies and over-building. That created a generation capacity 22 per cent. higher than required, to which hon. Members referred. The role of NETA, the new market clearing system, accelerated the worsening position since 2002. The fallout in the increasingly international energy market has also been a problem. We fear that that is not over and that British Energy is at the forefront of the financially embarrassed market.
What is the right way forward? We all agree that there are problems. We need a concerted strategy, not just as an Elastoplast for the stage that we are considering, but as something that plans for the years and decades ahead. British Energy provides about 20 per cent. of the UK's electricity, with more than 5,000 staff and 15 of the 31 nuclear reactors. The precipitate problem that began only last August, with the shutdown of new plant owing to the probe over a fault, led to a run on the British Energy share price, which lost a third of its value almost overnight. That resulted in the financial position turning down from the already precarious to the somewhat ugly. At the end of 2002, creditors were owed £1.26 billion.
Even the Department appreciates that the introduction of NETA opened up competition between operators and helped to drive down prices of wholesale electricity. That would not be such a problem but for the fact that British Energy has no retail business on which it can rely. After the warnings of insolvency, which Conservative Members espoused as recently as September, the Secretary of State assured us:
- "There's no question at all of taxpayers writing a blank cheque to British Energy and its shareholders".
Last autumn was characterised by the extension and increase of British Energy's financial support package. The blank cheque rose in value from £410 million to £650 million to provide working capital because of its
shot-through balance sheet. Even the Bill can only take effect to the extent permitted by the European Union state aid rules. We may not have heard the last of that. My hon. Friend the Member for Stone (Mr. Cash) tried to address the problem in a point of order before the debate. I suspect that we will return to it on Report next week and later. It is of great concern that the papers will not be given to the Commission until March, by which time there is a risk of the package falling apart. The Minister will know that the Commission has reportedly launched a new investigation into British Energy after its request to local councils to defer business rates. There is the suggestion that that falls foul of state aid provisions.We are gravely concerned that the Bill amounts to unnecessary Government intervention. It is anti-competitive and, by exposing the taxpayer to an unlimited and uncosted liability, there is a risk that it will not be in the public interest. Specifically, it is clear that British Energy will not enjoy fair trading until proper account is taken of the true effect of the climate change levy. Given the absence of carbon dioxide emissions, the proper account should be nil. Although I am instinctively supportive of measures that will improve the global environment, the Government have all too often allowed the environmental tail, in the form of the climate change levy, to wag the energy dog. Their policies, as highlighted by the Bill, make neither economic nor environmental sense.
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