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6 Feb 2003 : Column 484—continued
Mr. Djanogly: Surely the Minister accepts that restructuring is possible and, indeed, normal within administration.
Mr. Wilson: As I said when I wound up the Second Reading debate, we came to the last chapter in Tory alternative scenarios, in which I thought we would be told who was likely to take the company out of administration, other than Government, to which there came no answer. What the hon. Gentleman says may be right in other cases, but there is not much sign of it being an option in the present case.
The debate seems to have proceeded on a misapprehension—that somehow, if we went down the administration route, that would be cost-free, and that administration could proceed without the benefit of the Bill. Let me be clear. We have never been dogmatic about restructuring versus administration. At every stage of the process, we have said that everybody must sign up to restructuring, otherwise administration is an option. The Bill provides the legislative basis necessary to accommodate either eventuality.
We are not saying that one course is absolutely right and the other absolutely wrong. We are saying that, on balance, we think that it is better for the taxpayer, better for security of supply, and better for nuclear safety if restructuring is the chosen option. If everyone signs up to that, restructuring will take place. However, if everybody does not sign up, administration is the alternative way. As a responsible Government, we have to take powers in that direction as well.
Mr. Weir: I am interested in what the Minister is saying. My understanding is that following the privatisation of nuclear energy, if the company was unable to continue, irrespective of whether the Bill was in place, the assets, such as they are, and the liabilities would come back to the Government in any event. The Public Accounts Committee made that point in a report in 1999. Therefore, would not the taxpayer pick up the tab in the event of administration, whether or not the Bill is enacted?
Mr. Wilson: No. The assets of the industry are now in the hands of a private company. If restructuring is successful, they will continue to be in the hands of the private company, and if it is not successful, they will go into the hands of an administrator, who will still have to run the business. The stations will continue to run, as was properly made clear by the hon. Member for Twickenham (Dr. Cable), and that will happen precisely because Government have taken the appropriate steps to make sure that funding is available in the form of a temporary loan facility and ultimately—this is the important point—if necessary in the form of funding to an administrator.
The stations will not continue to run if no one is providing the financial support to allow them to run. That would lead to massive problems, which no
responsible Government could contemplate. Whichever route we go down, there will be costs associated with it. Clause 1(a) is framed to provide maximum flexibility, so it could be used for the rescue aid loan facility that we are providing—I emphasise again that it is a loan facility, so we should not play off the definition of a loan against suggestions that this is a cost in terms of grant or support to other industries. It could be used to support BE companies if they go into administration, funded through the administrator, and it could be used to fund trading arrangements, but not nuclear liabilities of BE's operating companies in public ownership if they were acquired under clause 1(b)(i).3.15 pm
We are taking the maximum range of powers for the full range of eventualities. However, we will not use the authority to fund under clause 1(1)(a) to fund the solvent restructuring. That will be done under the schedule 12 provision, which is specially designed for liabilities. Nor will clause 1(a) be used for subsidising the private sector BE in any way, apart from liabilities that perhaps begin to meet the Hazel Grove conspiracy theory. I stress that, as has been said, clause 1 can be used only to fund to the extent permissible under EU state aid rules.
Dr. Ladyman: I fully support my hon. Friend's approach in trying to give solvent restructuring a chance. The nightmare scenario presented by the hon. Member for Twickenham (Dr. Cable) raised the question of what would happen if that restructuring goes ahead but circumstances change. Is it not correct that, in those circumstances, under company law, the fiduciary duties of directors of the company would be the same, in effect, as the fiduciary duties on the administrator—in other words, to minimise the losses and liquidate any assets of the company? What the hon. Member for Twickenham depicts as a nightmare scenario is no such thing, and my hon. Friend's approach is the only sensible one to try.
Mr. Wilson: I welcome my hon. Friend's comments. He is right. The hope and the expectation of Labour Members—or most Labour Members—is that the restructured British Energy would be a successful company, and that the measures that we are taking in the context of the restructuring would facilitate that outcome.
There has been some confusion, which the spokesman for the Opposition, the hon. Member for Reigate (Mr. Blunt), was helpful in clarifying, about BE's costs. The hon. Member for Twickenham suggested that costs would have to be reduced by 10 per cent. That is the reduction that would be necessary before restructuring, but of course the restructuring plan cuts costs by removing historic liabilities. Together with the projected improvements in output, that would deliver a sufficient cut in costs to ensure profitability. No further improvements would be needed, beyond the restructuring plan. Clearly, the willingness of people to sign up to a restructuring plan is based on that expectation and belief.
I do not accept that the costs of administration are lower than those of restructuring. Administration involves the cost of paying the administrator and
impacts on BE's operation. We support restructuring not for any dogmatic reasons, but because it is a pragmatic way of ensuring the continued safe operation on fair terms for the taxpayer. Government support is not open-ended and is limited to nuclear liabilities.
Mr. Blunt: The really clever thing about what the Minister is doing is that not only are consultants and lawyers running up vast fees preparing the plan to rescue British Energy, but it is almost certain that the administrator will run up equally vast fees as well, so the taxpayer will get a double benefit from the Government's strategy.
Mr. Wilson: If that is a policy statement saying that the Tories are against consultants and lawyers running up fat fees, I welcome it as the biggest U-turn in political history. Of course, the best way of avoiding the administrator running up fat fees is not to have an administrator. That is one of the reasons why restructuring of the company is our preferred option.
Mr. Chaytor: On the limitation of funding to liabilities, is not my hon. Friend therefore agreeing with amendment No. 26, which I tabled? The amendment seeks to ensure that the funding will not be used for future reprocessing. Will he deal with the point that I made earlier regarding negotiations between BNFL and British Energy about the future costs of reprocessing?
Mr. Wilson: I do not disagree with the spirit of that intervention, but I should like to deal with the issue in my own way. I do not want to speak for too long, as I am aware that there are other groups of amendments and I do not want to close down debate on them.
Clause 1(1)(a) provides statutory authority for expenditure on British Energy in the situations that I have described. It puts the loan facility that the Government have provided to BE on a firm statutory footing. The facility is currently being provided under the authority of the Appropriation Act 2002, which is entirely proper, given the circumstances. However, the principles of a long-standing agreement between Parliament and the Government spell out that, although that Act can be relied on in the short term, it is a matter of good practice that significant expenditure should have the explicit statutory authority of Parliament. Clause 1(1)(a) gives that authority in relation to the loan facility.
The statutory authority provided by clause 1(1)(a) could be used by the Government to provide essential funding to keep the nuclear business running safely in the event of an administration. That could include funding the administrator. It would also allow the Government to continue to fund the trading arrangements of the operating companies if they came into public ownership.
Paddy Tipping: The Minister has rightly set out the provisions to allow the aid to be made available. What he has not said is how much remains in his energy budget. Although the £650 million is a loan, does it preclude the provision of extra financial aid to other energy sectors?
Mr. Wilson: I do not think that my hon. Friend can throw away the key point merely by including the word "although" in his comments. A loan is a loan, so it is expected to be repaid. The safeguards that the Government have established in that regard are well known. None the less, I would prefer to answer his question on a positive note. As he knows, we had a very constructive meeting today on the subject of coal, which is close to his heart and mine. I do not think that this is a time at which we should try to play off one sector against another. We have obligations and responsibilities in respect of British Energy, security of supply and the safe operation of nuclear power stations. It is up to us as a Government to ensure that those issues are compatible with our other responsibilities. Of course, that will be reflected in the energy White Paper. We are making progress on all those issues, so I say to him that now is not the time to drive in wedges, although I know that that is not his intention.
Amendment No. 12 seeks completely to remove clause 1(1)(a), which exists for reasons that I have explained. Given the points that I have made about the importance of the provision, I hope that hon. Members will not press that amendment.
Amendment No. 10 proposes that clause 1(1)(a) should ensure that financial assistance can be provided to the company only in relation to "qualifying activities", which amendment No. 11 defines as
- "financial liabilities generated by a British Energy company prior to 4 September 2002, to a maximum of £2,100 million."
New clause 1, which was tabled by Opposition Front Benchers, suggests that any expenditure
- "under the provisions of this Act shall be restricted to the historic liabilities of British Energy plc as at 4th September".
Amendments Nos. 3 and 4 essentially seek to limit the way in which financial assistance can be delivered to BE. Grants, loans and guarantees are clearly the main ways in which we expect to deliver assistance. However, as I said, the Bill needs to prepare us for all eventualities, so
we want to ensure that the provision preserves flexibility to enable us to act appropriately in the circumstances. That is in the interests of taxpayers.Amendments Nos. 14 and 15 seek to ensure that the Government can commit no expenditure
- "on the management, transportation, storage or reprocessing of nuclear waste"
My hon. Friend the Member for Bury, North (Mr. Chaytor) said that support should not fund reprocessing of fuel. Again, I do not approach the matter from any ideological point of view. Storage might have been cheaper if plants had been built on that basis, but with the exception of Sizewell B, storage facilities are very limited. This is an issue not of principle, but of practicality, and contracts on operational arrangements envisage that some fuel will be stored. I emphasise that I am not getting into discussing the relative merits. From personal experience, I know that British Energy has at some points during its history favoured on-site dry storage. It all depended on the deal that we could get out of BNFL. Storage versus reprocessing remains an operational matter and I am sure that BE and BNFL will communicate any future changes to plans. However, my hon. Friend made his points well.
Amendments Nos. 25 and 26 would provide that support for BE could not be used
- "for the purposes of reprocessing spent nuclear fuel".
Let us consider the longer term. We have already said that we shall review the way in which nuclear liabilities are managed when the liabilities management authority is established. Again, that might help my hon. Friend the Member for Bury, North, and I hope that he will not press his amendments.
I hope that I have explained sufficiently the problems that are attached to the amendments in the group. If the hon. Member for Twickenham withdraws the amendment, we shall have even more time to discuss the next group.
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