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27 Jan 2003 : Column 638—continued
8.6 pm
Mr. Andrew Stunell (Hazel Grove): I am pleased to be able to take part in this debate. I want to start by picking up on a point made by my hon. Friend the Member for Twickenham (Dr. Cable), who said that gambling analogies apply to the Bill. It allows the Minister to do anything that he likes in relation to anything that has British Energy in its title without let or hindrance and with no cash limits whatsoever. That is the plain reading of the words in the Bill. Although discussion of specific sums of money has been useful and instructive, it is somewhat beside the point. All that can be put in the wastepaper basket on the day after the Bill is passed,
all the numbers can be doubled, and the Minister has the authority of the House to do that. If nothing else, that is a good reason to oppose the Bill. As my hon. Friend said, it is like the young man at the tables in Monte Carlo who sends home a message saying, "System working well—send more money." The Government are professing that all is well, but they just need a bit more money to finish it off.Several interesting points have been made in the debate, which has been of good quality and has shown that many hon. Members are seriously engaged in the issue. One of the issues that has been discussed is how the full decommissioning costs fall and who is to take responsibility for them. The right hon. Member for Rother Valley (Mr. Barron) argued that by the Government taking the firm over, the decommissioning costs could be paid for over a longer period from the profits made from the company. He went on to point out that the firm is running at a loss. The hon. Member for South Thanet (Dr. Ladyman) commented that the costs of production for the firm are £16.70 and the market price is lower than that. In other words, every day that it runs increases the loss—it does not allow it to contribute a profit to the fund. We therefore need to move to one of the other mechanisms that the Minister has suggested.
Brian White: The hon. Gentleman mentions the price of NETA. Is not one issue whether the regulator is taking sufficient cognisance of the whole ecology of the industry, or simply believing in a market-oriented approach?
Mr. Stunell: The hon. Gentleman makes a very good point, as did my hon. Friend the Member for Twickenham. What we need is a proper external objective assessment of the costs, how they accumulate and how they can be paid for. The hon. Member for Barnsley, West and Penistone (Mr. Clapham) made a similar point when he referred to the discount rate. A small change in the discount rate completely upsets all the arithmetic that has been discussed so far. We have heard about the £72 million per year contribution to the nuclear liabilities fund, which is very susceptible to assumptions about rates of accrual and so on, and about the £275 million contribution by way of a bond by the company.
I draw the House's attention to the fact that my hon. Friend the Member for West Aberdeenshire and Kincardine (Sir Robert Smith) specifically inquired into that issue in the Trade and Industry Committee. At paragraph 37 of its report, he asked:
- "What is the credit rating of the £275 million bonds?"
- "If British Energy were now to go into insolvency, the government has taken security so the taxpayer will get first call on any value."
The hon. Member for South Thanet complained bitterly that going for a renewables generation solution could easily cost £30 billion. I do not know where he got his sums from, but I remind him that the assessment before the House of the costs of Government support for the nuclear industry so far is £55 billion. The investments would be massive in either case, but I have a clear view as to which would give the House, the country and the environment best value.
If I may, I shall deal with a question that has been mentioned a number of times: whether the company going into administration would mean that the plants had to close immediately, causing some catastrophic loss of capacity or even safety issues to arise. A number of Members on both sides of the House have done well in rebutting that point. In particular, I draw the House's attention to what the hon. Member for South Cambridgeshire (Mr. Lansley) said about it. There will be working plants capable of generating electricity, and any administrator with a mind to maximise the return for creditors will clearly see them in operation, provided that they continue to contribute to the company's cash flow.
Mark Tami (Alyn and Deeside): Is the hon. Gentleman saying that there will be no difference whether the plants carry on as they are or go into administration? That is what he seems to be suggesting.
Mr. Stunell: There will clearly be an important financial difference, which I am just coming to: the Government will be £650 million better off if the plants go into administration than if they take the route set out by the Bill. There are good reasons why the Bill should fail. The key one, which the House should have regard to, is that £650 million will be available for something else in the energy industry, or perhaps beyond it.
Members should imagine that we have before us not the Bill, but the White Paper, and that Treasury is saying to the Minister, "You have £650 million you can spend. What would you like to spend it on?" It would be inconceivable, in the context of the White Paper, for the Minister to say, "There is a drain. Let's tip the money down there, please, and forget everything else in the White Paper." For instance, £650 million would go a long way towards the planned restructuring of and compensation for those bits of the electricity generating industry that are the least efficient and which produce the greatest amount of carbon dioxide. Clearly, when one looks five or 10 years ahead, one sees large, elderly coal-fired plant, which is environmentally and financially not worthwhile.
Mr. Clapham: Presumably, the hon. Gentleman is impressing on the Secretary of State the real need for investment in clean coal technology.
Mr. Stunell: I certainly accept that point, and the hon. Gentleman and I make common cause on it. This country should indeed pay attention to that technology, as well as others. My central point is that the Bill is not the priority investment in the energy industry for the
Government in the context of developing an energy policy and the likely outcome of almost any conceivable White Paper that they might produce. However, it will artificially preserve a huge overcapacity in the industry and lead to low wholesale prices, although, as a number of people have pointed out, not to particularly low retail prices.Another reason for refusing to pass the Bill is that we are seeing a distortion of the competition in the industry. There is competition for investment in the national economy as a whole, but particularly in the energy industry, and the competition for private investment is intense. An energy generator might say to a banker, "Please lend me the odd £600 million. I want to make some money." The banker would say, "What is your business plan?" The energy generator could show the banker any conceivable business plan, but he would be unable to make any money and the banker would not provide such an investment. Such distortion is making such investment more difficult to make.
I am impressed by the argument made by the hon. Member for Sherwood (Paddy Tipping), who thinks that the day of the liberalised market is coming to an end. I think he rather fancies returning to a somewhat Stalinist command economy. We on these Benches do not believe in that. We believe that the market has to be an important component in the development of the energy industry, and it has to be the job of the House and of any Government to set the regulatory framework in which that can take place.
Mr. Watson: Is the hon. Gentleman demanding that market forces should dictate the Liberal Democrats' renewable energy strategy and saying that they will not look for any Government intervention?
Mr. Stunell: I am sorry that I was not speaking loud enough for my voice to reach the Labour Back Bench. I said that it is for the Government and the House to provide the regulatory and fiscal framework. I have talked in the House several times about the need to extend the renewables obligation, for example. However, I shall move on, as I am conscious of the time, Mr. Deputy Speaker.
Our discussion has been somewhat handicapped by the need to set it in a wider context relating to the White Paper and the forthcoming Bill on the Liabilities Management Authority. I do not want to transgress your rulings, Mr. Deputy Speaker, so I shall say that the Bill will open the way to a failed rescue bid of the kind used throughout the 1970s and 1980s for failed industries. Such a rescue will distort the market, deter investment and delay the restructuring that is essential if we are to have a viable energy industry for the future.
British Energy has shown itself to be a failed company in a failed industry. It paid monopoly money for Eggborough, for SWALEC and for project after project. Now, unfortunately, it seems that the Government are ready to pay monopoly money to rescue managers and investors who ought to take the rap for their misjudgments.
8.18 pm
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