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6 Feb 2003 : Column 518—continued
Mr. Drew: I thank the hon. Gentleman for giving way, and I hear what he is saying about the financial probity of the arrangement, which should be combed over very carefully. However, the much more important issue is the basis of the nuclear industry. Would not it be possible, if British Energy were put into administration, that its assets could be carved up and sold off? If so, they would be sold only to certain players. Would the hon. Gentleman be happy if those players came from Russia, Ukraine—or even from North Korea? Those countries are home to the key players in nuclear energy around the world.
Mr. Blunt: Before I respond, may I congratulate the hon. Gentleman on his proposal to form a parliamentary group on nuclear energy? That would give us another forum in which to discuss these matters. However, I hope that the group will not detain itself too long on any possible North Korean purchase of British Energy assets. It is a little unlikely that a North Korean purchaser would get the appropriate licence to administer the plants involved. It might be an extreme possibility, but I am sure that we can trust the appropriate authorities to ensure that the eventuality suggested by the hon. Gentleman does not take place. If people want to purchase the assets out of administration, they must pass the tests necessary to establish their suitability to operate nuclear plants.
The Minister was understandably defensive when I intervened to ask if there was any suggestion that the Government might have contributed to the difficulties
of British Energy. We all know that they have done so; the climate change levy is the main example. I hope that at some point the Government will own up and admit formally that the new Labour name "climate change levy" is utterly misleading, that it is in fact an energy tax and that they will change its name accordingly. It is time that they were honest with industry, the public and Parliament; if it were really a climate change levy, it would not be paid on nuclear-generated electricity.
Dr. Ladyman: I am grateful to the hon. Gentleman for giving way again, but he cannot have it both ways. He cannot argue that the Government are at fault for distorting the marketplace while saying that the market should sort things out and the company should go into administration. That is completely illogical.
Mr. Blunt: It is not illogical. I am not saying that the Government are entirely responsible; I made it clear during my Second Reading speech that the main responsibility lies with the commercial strategy pursued by British Energy in a difficult market. I also made it clear that we welcomed that market, which has brought substantial benefits to consumers of power in the UK—be they industrial or domestic.
The Government have contributed to British Energy's difficulties, however. The outcome may have been different if they had not introduced the business rate regime, which they imposed by statutory instrument, or if their negotiations with BNFL—a Government-owned company—had been otherwise. Those arrangements have undoubtedly contributed to the difficulties experienced by British Energy, although as I said, the major factor was the failure of the commercial strategy pursued by the company. When private sector companies cannot cope in a difficult market, they go bust and end up in administration.
Whose interests are served by the Bill? The British Energy rescue effort is certainly not in the interests of the taxpayer, although it will enable the bondholders and shareholders to emerge with some value. Ironically, as British Energy will continue to exist, Robin Jeffrey, who has been pilloried by the Secretary of State for Trade and Industry, will get what is due to him under the terms of his contract. That would not be the case if the company went into administration.
Does our future electricity industry benefit from the Bill? The measure will result in an appalling degree of Government intervention in the electricity market, which will raise the internal rate of return demanded by future investors in private sector electricity generation. That will result in more expensive electricity for industry and for consumers. Not only will the industry lose, but so, too, will every citizen of the United Kingdom. Other producers will lose from the Government's intervention. If the company ends up in the public sector, we shall all lose because the electricity generating industry will be less efficient.
This is an especially sad occasion for the Minister. He has considerable constituency interests in the success of British Energy and in the future success of nuclear generation in the UK. If the Bill is passed, it will sound the death knell for the long-term future of the industry in his constituency and the UK and that is something that we may come to regret.
5.35 pm
Mr. O'Neill: It is unfortunate that the Government have to introduce this legislation and that the company did not anticipate some of the difficulties that it encountered. There were also elements of bad luck but my hon. Friend the Minister pointed out that at the time of ending the pool, no warning was given by British Energy. Indeed, it did not participate in the debate about the pool at the time it was altered.
On occasions, British Energy was irresponsibly generous to its shareholders and insufficient provision was made. When the company did have a large amount of money, it probably did not adopt commercially appropriate courses of action.
We have heard the usual litany today from Opposition Members. It may be that the climate change levy made a difference—but no more than £80 million in any one year. The levy started in April 2002 and the impact on the company would not have been £80 million by September, so the period in which the CCL may have had an impact was relatively short. As to rates, neither are they that significant.
I was surprised that the hon. Member for Reigate (Mr. Blunt) did not refer to the windfall profits tax. If anything hit British utilities, it was that tax. Conservative Members neglected to mention that when a Conservative Government had responsibility for regulation and privatisation in the 1990s, the instruction to regulators was to use a light touch and not go too hard on companies, to allow them to make phenomenal profits.
One of the great surprises for a Labour Government has been the lack of opposition from those who paid the windfall tax to that tax. The opposition was such that Conservative Members did not pick up on it when trying to throw something at the Government today. British Energy shareholders lived a charmed life until September and if the financial rescue goes through, they may enjoy a small degree of comfort in future.
Mr. Blunt: I did not raise that matter because I have not been able to identify a precise windfall tax payment by British Energy. Interestingly, £2.1 billion was taken from the electricity industry—which is at least the amount that will have to go back into British Energy from the taxpayer.
The decision by the directors of British Energy was at the margin, which is where Government intervention may have been effective. At the margin, the directors decided that the company could not trade out of its difficulties because of submissions about the future price of electricity from its own advisers. In previous years, in a different risk environment, the directors might have decided to trade on.
Mr. O'Neill: If there is a different risk environment, that is not necessarily the responsibility of the Labour Government in the UK but probably more a question of the international economic situation and declining stock markets. The Government cannot be blamed. To the extent that there may be a UK dimension, it is considerably smaller than anywhere else because of the relative strength of the UK economy compared with most of our foreign competitors.
I will not follow the example of the hon. Member for Reigate, who spoke at considerable length but had nothing substantial to say.
The Bill is necessary so that we can sustain a nuclear industry not in perpetuity, but until the end of the lifetime of the plants. We do not know how long that will be and, although an estimate has been made, it has been extended when the quality of maintenance and of staff has suggested it could be longer than anticipated. So it is very difficult to be specific about what sums would be required.
One of the glaring omissions from the Conservatives' case is that they have not attempted to estimate what the figure should have been if we had included a specific sum in the Bill. There was no attempt to move an amendment that would have included such a sum. The fact is that those figures are very difficult to estimate with any certainty, so such things must be open-ended.
Mr. O'Neill: I shall finish soon because I am conscious of the time.
I shall give this undertaking as the Chairman of the Select Committee on Trade and Industry: we keep a watching brief on a number of issues, and the nuclear industry is one of them because of all the concerns that we have about safety and the cost of future development. I will certainly be very anxious, so long as I am Chairman of the Committee, that Ministers and directors will be called to account for their actions because it is appropriate that we look at this issue. One of the problems with the Public Accounts Committee is that it tends to look retrospectively; we can look prospectively at how things may well end up. We will return to this issue over the years, so there will be parliamentary scrutiny in that sense. I would certainly hope that any report that we produce would be debated either in the Chamber or in Westminster Hall.
With the appropriate safeguards of parliamentary scrutiny and given the fact that we cannot give a specific estimate of the expenditure, it is necessary to make an unspecific and open-ended arrangement. Anyone who tries to estimate the figure will get it wrong; it will be either too high or too low. However, that does not mean that we will bankrupt the country or, for that matter, prejudice electricity generation across the board.
This year, we will start to discuss not just the White Paper, but the new British electricity trading and transmission arrangements. I hope that those new arrangements will provide, for example, opportunities to make payments for capacity and other issues of that nature, as that will go some way to mitigate some of the worst excesses of NETA, which no one could have anticipated.
We have an opportunity with BETTA to try to improve on the shortcomings that have been so glaringly exposed by British Energy and NETA, the consequences of which no hon. Member anticipated. The Government have made a brave attempt to correct some of those shortcomings, so I welcome the Bill.
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