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6 Feb 2003 : Column 467—continued

Mr. Deputy Speaker: The hon. Lady knows that that matter is not for the Chair but for debate. I have allowed her remarks to be placed on the record but her experience in the House will lead her to appreciate that there are other channels through which to convey her strong feelings on the matter.

6 Feb 2003 : Column 468

Orders of the Day

Electricity (Miscellaneous Provisions) Bill

Considered in Committee.

[Sir Alan Haselhurst in the Chair]

Clause 1

Expenditure relating to British Energy P.L.C.

Dr. Vincent Cable (Twickenham): I beg to move amendment No. 12, in page 1, line 5, leave out paragraph (a).

The Chairman of Ways and Means (Sir Alan Haselhurst): With this it will be convenient to discuss the following:

Amendment No. 10, in page 1, line 6, at end insert—

'in relation to qualifying activities'.

Amendment No. 14, in page 1, line 13, at end insert—

'( ) Nothing in subsection (1) shall permit the Secretary of State to incur expenditure on the management, transportation, storage or reprocessing of nuclear waste materials.'.

Amendment No. 15, in page 1, line 13, at end insert—

'( ) Nothing in subsection (1) shall permit the Secretary of State to enter into any arrangement having the effect of transferring financial liability for the storage or reprocessing of nuclear waste material to the Exchequer.'.

Amendment No. 3, in page 1, line 20, after 'loan', insert 'or'.

Amendment No. 4, in page 1, line 21, leave out 'by any other means'.

Amendment No. 11, in page 2, line 3, at end insert—

'"qualifying activities" shall be limited to the financial liabilities generated by a British Energy company prior to 4th September 2002, to a maximum of £2,100 million'.

Amendment No. 26, in page 2, line 8, at end add—

'(4) No money shall be made available by the Secretary of State to a British Energy company for the purposes of reprocessing spent nuclear fuel, or that would have the effect of displacing the cost of reprocessing spent nuclear fuel from the general expenditure of a British Energy company.'.

New clause 1—Historic liabilities—

'Expenditure under the provisions of this Act shall be restricted to the historic liabilities of British Energy plc as at 4th September 2002.'.

Dr. Cable: I am delighted to begin the Bill's consideration in Committee. I am conscious of the fact, however, that we have very limited time. The time for discussion in Committee has been concertinaed, and it has now been further reduced by the statement on Iraq, so I will try to be brief and to the point. I am also conscious of the fact—we had strong guidance about this from the Chair on Second Reading—that this is a narrow discussion; it is not about the general merits and demerits of nuclear power, and this series of amendments will narrow the debate even further.

I wish to focus on three issues, the first of which is captured in amendment No. 12 and relates to the lively debate in government and the European Commission and what should be a lively debate in Committee about

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the relative merits of solvent restructuring versus administration. We have tried to capture that issue in the amendment by proposing the deletion of the relevant subsection.

Secondly, we have tabled amendments Nos. 10 and 11, by which we seek to limit the Government's commitment to their decommissioning liabilities. That is an attempt to address the issue, which is replete in the Bill, of very large, open-ended financial liabilities. Whatever we feel about nuclear power or British Energy, we wish to try to provide some discipline and limits on those financial commitments.

Thirdly, we have a couple of amendments—to which I hope that my hon. Friend the Member for Hazel Grove (Mr. Stunell) will speak—that relate to the link between British Energy and BNFL and our concern that BNFL's losses and British Energy's problems will simply become interchangeable in a very opaque way. The purpose of those amendments is effectively to create a financial firewall between the two undertakings.

Let me address most of my remarks to the very live issue: the relative merits of administration as opposed to solvent restructuring. When I first publicly raised the idea of administration, I vividly recall that it was regarded as being somewhat insane, but I subsequently discovered that my wing of the lunatic asylum is inhabited by the European Commission and, if we are to believe the press, by the Chancellor of the Exchequer, too. It would appear that there are great doubts in government about whether solvent restructuring is the best option for the British taxpayer.

Perhaps I can put the discussion in context by reading the relevant quotations from the Secretary of State for Trade and Industry. In her first statement, which was very well balanced, she made two keys points that frame the whole discussion. She said:

—administration or solvent restructuring—

We are not debating safety issues or security of supply. The Secretary of State has made it very clear that those aspects would be protected under an administration arrangement. She went on to say:

The Government's own starting point is that the two approaches are not fundamentally different financially, but it is very clear that a debate is going on about them.

2.15 pm

Mr. Michael Weir (Angus): Does the hon. Gentleman have any observation to make on the last point about the difference in cost? If, as is proposed by the Bill, the financial ceiling is removed, is there not the danger that British Energy will become a sink down which money is poured?

Dr. Cable: Indeed, that is very much my view, and I hope to develop it in more detail. However, that concern

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is shared not just by Liberal Democrat Members and even by Conservative Members, but in many reaches of the Government. There was a discussion in The Business newspaper on Sunday about the debate that is going on in Whitehall. As none of us has had that kind of information, one must assume that it has some accuracy. It said:

It has been made very clear that the Treasury, which has done its own cost-benefit analysis, is very sceptical about whether solvent restructuring is the best deal for the taxpayer. It concludes that narrative by saying:

So I shall briefly assume the mantle of the Chancellor of the Exchequer, rather than that of Liberal Democrat spokesman, and argue what I think he would argue if he were here defending his corner against the DTI. He would make the point that, if solvent restructuring goes ahead, there are clearly some financial benefits to the Government, and those benefits have to be set against the costs in a fair-minded way.

The Government would derive two benefits from solvent restructuring. First, £275 million in new bonds will be produced by the restructured company. That is new money; it is a positive addition of cash, which the Government would not have got if the company had gone straight into administration. When the issue was raised by the Select Committee on Trade and Industry, the Minister for Energy and Construction was asked to explain the assumption that the bonds can be successfully floated. That is the problem. I do not know whether they can be floated, but we are in a difficult market environment. There are certainly question marks over whether that is deliverable.

The second and most contentious benefit relates to the fact that, under the restructuring deal, the Government will be able to attract into the company, by keeping it private, 65 per cent. of free funds—in other words, net cash flow. Those funds would not be available to the company if it went into administration. At the optimistic end of the range of forecasts, we are talking about £100 million. I shall say in a moment why I think that that figure is wildly optimistic.

Mr. Jonathan Djanogly (Huntingdon): The hon. Gentleman mentions the marketability of the bonds, which was indeed touched on by the Select Committee. Of course, the point is that marketability depends on the market. The private sector does not know what the market is because the White Paper has not been published. That is one of the problems that we have in considering the Bill at this time.

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