House of Commons - Explanatory Note
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Clause 13: Powers for carrying out functions

91.     Clause 13 gives the NDA the general and specific powers it requires to carry out its functions. In addition to the general powers, in subsection (1), some particular powers are identified in subsection (2) which might not be thought to fall within its general powers in the absence of a specific mention. They are included because they are or may become a necessary part of the NDA's activities. The power to operate power stations is for the NDA to be able to operate, besides the Magnox stations that will be designated under clause 5(1), the Combined Heat and Power station at Fellside which provides essential steam and electricity to the Sellafield site and the Maentwrog hydroelectric station which is located on the lake which supplies a Magnox decommissioning site. The power to hold a nuclear site licence is there as a fall back lest it is decided that the NDA must take more direct responsibility for the work on any site. The NDA would of course need to demonstrate it met all the requirements of a site licensee before it could secure a licence from the Nuclear Installations Inspectorate of the Health and Safety Executive.

92.     Other powers covered by subsection (2) include those to make grants or loans for the benefit of socio-economic development or other activities that produce other environmental benefits or for research into decommissioning and clean-up; and to use facilities on its sites for carrying out research for third parties and in this respect or otherwise to generate funds which will ultimately contribute to the resources to be made available to the NDA. In order to carry out its functions, the NDA may exercise its statutory powers itself or contract with others to do things on its behalf. The clause does not empower the NDA to do anything which is not required for the purpose of, or in connection with, the carrying out of its functions.

93.     Subsection (3) gives the NDA power to charge for work done in relation to sites, installations or facilities for which it is not itself financially responsible (for the definition of financial responsibility see clause 24) subject to the approval of Ministers either under the initial designation or otherwise.

94.     Subsection (5) provides that in determining whether and how much grant to make available to the NDA, the Secretary of State take a view on the extent to which the NDA should make grants and loans under subsection (2)(c) to mitigate any adverse impact on the social or economic life of communities living near designated installations caused by decommissioning designated facilities.

Clause 14 and Schedule 2: Strategy for carrying out functions

95.     Clause 14 places a duty on the NDA, once established, to prepare a strategy for carrying out its functions and to keep that strategy under review. Whenever the NDA is given a new responsibility for securing the decommissioning or clean up of an installation or site, it must review the relevance of its strategy for that purpose and, if need be, revise its strategy accordingly (subsection (2)).

96.     Under Schedule 2, the strategy must be approved by the Secretary of State and, in respect of responsibilities given to the NDA jointly under clause 8, by Scottish Ministers. Schedule 2 sets out various procedural arrangements for preparing and revising the NDA's strategy including timing; consultation by the NDA as part of the process of preparing or revising its strategy; approval of the strategy by the Secretary of State, and publication of the strategy once approved. Further information can be found at the notes to Schedule 2.

Clause 15: Contents of strategy

97.     Clause 15 sets out various requirements regarding the matters the strategy is to address and the basis on which it must address them. The key requirements are that the strategy must:

  • cover both the decommissioning and clean up of the installations and sites for which the NDA is responsible and its strategy for operating installations and facilities whilst they remain operational (subsection (1));

  • set out the NDA's objectives in relation to the decommissioning and clean up of the various installations and sites for which it is responsible, including the condition to which sites are to be restored, and how, and over what period and at what estimated cost, it intends to achieve those objectives (subsections (4) to (7));

  • set out the NDA's priorities, and how it intends to promote a skilled workforce, competition, good practice, and encourage or support activities benefiting the socio-economic or environmental development of communities near its installations and sites, as well as the rationale for its strategy (subsection (2)). It must also set out how the NDA intends to publicise its strategy, engage in stakeholder dialogue, and listen to external views (subsection (3)).

98.     Subsection (9) requires the strategy to take account of sites, installations and facilities which have been designated, but which have yet to become the responsibility of the NDA by that designation entering into force.

Clause 16 and Schedule 3: Annual plans

99.     Clause 16 requires the NDA, for each financial year, to prepare a plan showing how it intends to carry out its functions during the year in question and to submit it to the Secretary of State, and Scottish Ministers for approval. Scottish Ministers' approval is needed in respect of responsibilities given to the NDA jointly with the Secretary of State under clause 8. The plan will relate directly to the NDA's strategy - i.e. the plan will set out the basis on which the NDA proposes to implement its strategy in the twelve months concerned.

100.     Subsection (2) requires the plan to be submitted for approval not less than three months before the start of the financial year in question. Subsections (3) and (4) specify certain matters which the plan must cover in relation respectively to decommissioning and clean up and the operation of installations and facilities. Subsection (5) requires that the plan must also set out all the activities of significance that the NDA proposes to carry on during the year in question in relation to its other functions. Subsection (6) gives the Secretary of State power to direct the NDA to deal with other matters in its plan for any financial year. Subsection (7) ensures that in preparing its annual plan the NDA can anticipate it taking on responsibility for other sites, installations or facilities for which a designation is due to come into force in that year.

101.     Schedule 3 deals with various matters relating to the preparation and revision of annual work plans, in particular as regards consultation with stakeholders, approval of plans by the Secretary of State and publication of plans once approved. The provisions are very similar to those in Schedule 2, including the requirement that the Secretary of State must consult Scottish Ministers on any proposals for sites in England and Wales relating to the non-processing treatment, storage or disposal of hazardous material that would have an effect on the management of hazardous material or availability of a site in England and Wales for the treatment, storage or disposal of hazardous material located in Scotland. The main difference between Schedule 3 and Schedule 2 is that, given that work plans will implement an approved strategy, paragraph 2(2) of the Schedule leaves open the possibility, in cases where a plan is revised in year, of the NDA only consulting those stakeholders directly affected by the changes proposed before submitting the revised plan for approval. As with Schedule 2, the method of consultation is left for the NDA to decide with its stakeholders.

Clause 17: Annual reports

102.     Clause 17 deals with the preparation and publication of the NDA's annual report.

103.     Subsection (1) requires the NDA to produce an annual report on the discharge of its responsibilities and the carrying out of its other functions as soon as reasonably practicable after the end of the year in question and to send it to the Secretary of State and Scottish Ministers.

104.     The report must cover all the matters specified in subsection (3) and any others which the NDA may be directed to cover by the Secretary of State after consulting the Scottish Ministers. Subsection (5) requires that the report must also deal separately with activities in respect of decommissioning and clean up and operational installations and facilities such as the Magnox stations, THORP and SMP. This reflects the commitment in the White Paper to provide specific information on the performance of Magnox, THORP and SMP and the rationale for keeping them open.

105.     Subsections (6) and (7) require the Secretary of State to lay the NDA's report before Parliament and to publish it in the manner which, in her opinion, is most appropriate for bringing it to the attention of stakeholders. Subsection (8) requires the report to be laid before the Scottish Parliament. Under subsection (9), the Secretary of State may exclude anything before laying and publishing the report which she considers to be against the interests of national security, or which relates to the private affairs of an individual or the commercial interests of a particular body of persons where publication of such information would seriously and prejudicially affect the interests of that individual or body.

Clause 18: Duty to decommission and clean up installations and sites

106.     Clause 18 sets out what the NDA has to do in order to discharge a responsibility it is given under clause 6 for decommissioning or cleaning-up. It puts a specific duty on the NDA to take all such steps as it considers appropriate for securing the implementation of its approved strategy and annual work plan in respect of each of the installations and sites which it has designated responsibility for decommissioning and cleaning up. This includes achieving the objectives set out in the strategy under clause 15(4) and (5), for each installation or site. Where a site is a contaminated site rather than a principal nuclear site (for definitions see clause 39), the duty is subject to such directions as the Secretary of State may make in respect of the discharge of the NDA's responsibilities for such sites (subsection (3)). Such directions are to be given jointly with Scottish Ministers in respect of sites in Scotland. Thus the Secretary of State cannot give the NDA directions as to how the NDA is to carry out its main decommissioning and cleaning up task on principal nuclear sites. This is to be up to the NDA, subject to the need for the Secretary of State to approve the strategy and annual plan under clauses 14 and 16 respectively.

Clause 19: Duties to operate installations and provide treatment, etc

107.     Clause 19 places duties on the NDA in respect of its responsibilities for the operation of installations and facilities, including any under clause 7(2), the treatment, storage, transportation or disposal of hazardous material under clause 6(1)(e) and the management of any land under clause 7(1) or (2). The NDA is to carry out these tasks in accordance with such general and specific directions as may be given to it by the Secretary of State and, where there was a joint designation, Scottish Ministers. The NDA must also act in accordance with its approved strategy and annual plan.

Clause 20: Duty to use installations etc for purposes of NDA

108.     Clause 20 puts a duty on the person with control (see clause 39) of a designated principal nuclear site, a designated nuclear installation or a designated facility situated in or on a principal nuclear site not to use or dispose of that site, installation or facility except in order to discharge the NDA's responsibilities in relation to it or to enable the person with control to comply with relevant statutory and regulatory requirements. For the purposes of this clause, disposal covers granting a lease or licence of the site or contracting to do so (subsection (9)). This clause does not mean that a site, installation or facility cannot be used or disposed of where the NDA has given its consent (subsection (3)). In a case where the site, installation or facility has been transferred to the NDA, the person with control has a right under subsection (4) to use them for those two purposes, without the need for any further permission from the NDA.

109.     Except where the NDA directs or where the NDA is charging for the work it is doing, subsection (5) further requires the person with control to pay to the NDA any sums and other benefits received as a consequence of operating the site, installation or facility or the disposal of an interest or right in relation to the site, installation or facility. The main purpose of this provision is to ensure that where the NDA is funding the operation of installations such as THORP, SMP and Magnox stations, it also receives the income provided. It could also include sums received by way of rents and disposal of surplus assets. Clause 25(3) requires the NDA in turn to pay the money received to the Secretary of State. This clause does not impose any obligations on the persons in control of contaminated sites.

110.     Subsections (6) and (7) provide that where a management contract or other agreement is in force between the NDA and a person with control or its owner, fulfilling the terms of the agreement by definition facilitates the discharge of the NDA's responsibilities.

111.     Both the duty under subsection (2) and the right under subsection (4) apply to interests or rights in the installation, site or facility and subsection (8) extends those to anything located on the site, e.g. vehicles, a business or undertaking operated from the site and intellectual property.

Clause 21: Directions by NDA to the person with control

112.     Clause 21 places a duty on the person with control of a designated principal nuclear site, nuclear installation or facility situated in or on a principal nuclear site to prepare such plans for the discharge of the NDA's responsibilities in relation to that site, installation or facility as the NDA may direct; submit them to the NDA for approval; and comply with any further directions the NDA may give in accordance with the provisions of subsection (3).

113.     These directions may be given to persons with control of a principal nuclear site, installation or facility. These directions may cover any related site which is designated under clause 22 in relation to the principal nuclear site or installation or facility concerned. Where the person with control of a site is owned by a company, as might be the case where the NDA has contracted for the management of the decommissioning and clean up of a site, subsection (4) means that the company must also comply with directions given by the NDA to ensure that the person with control does what it is required to do. Subsection (5) provides that directions may only be given by the NDA for the purpose of giving effect to its strategy and annual work plans. Under subsection (6), the NDA may also issue directions regarding consultation by the person with control on the preparation of plans for the site, installation or facility concerned. The expectation is that consultation will be carried out on a similar basis to that required in the preparation of the NDA's strategy and annual work plans and involve the same parties.

114.     Subsection (7) makes express provision to the effect that no direction given by the NDA may authorise a contravention by the person with control of the statutory requirements which apply to the operation of an installation or site. Consequently, any purported direction by the NDA that would, if the person with control were to give effect to it, place him in breach of any regulatory requirements would be unlawful.

Clause 22: Designation as a related site for the purpose of section 21

115.     Clause 22 enables the Secretary of State to designate a contaminated site (see clause 39 for the definition) as being related to a principal nuclear site or an installation or facility on such a site - a 'related site' (paragraph (a) of subsection (1)). Such a site is then brought within the scope of clause 21 and the person with control of the principal nuclear site (or the installation or facility on such a site which caused the contamination) can be subject to directions for the related site as well. By virtue of subsection (2), this can only happen in situations where the contamination, whether radioactive or chemical, has been caused, directly or indirectly, by activities in, or connected to the particular principal nuclear site or the installation or facility on such a site (subsection (4)), which must also be the responsibility of the NDA under a direction. The activity could have taken place before the principal nuclear site was used for nuclear purposes. A number of such sites had previous military or other uses that may be responsible for contamination. As with designations in respect of the NDA's principal functions (clause 6(4)), a direction making a site a related site can only be made where the person with control is a Crown appointee, the UKAEA, a publicly owned company or the NDA, or where the person with control has given consent (paragraph (d) of subsection (2)).

Clause 23: Duty to comply with directions under clause 20

116.     Clause 23 sets out the basis on which the duty to comply with directions given under clause 21 applies and that it is enforceable by civil proceedings primarily for an injunction or, in Scotland, an interdict. Subsection (3) makes it clear that the duty is subject to the NDA discharging its financial responsibilities for the installation or site concerned. Subsection (4) provides for the disapplication of the duty to the extent that there is a contract in place between the NDA and the operator. This provides for flexibility as the parties to the contract can decide which aspects of their relationship contract should govern and which directions should govern.

Clause 24: Financial responsibilities of NDA

117.     Clause 24 gives the NDA financial responsibility for the decommissioning, operation or cleaning up of installations, facilities, sites or related sites which, at the time the relevant designation is made under clause 6, are controlled by one of the persons listed in subsection (2). From that point, the NDA is responsible for the future costs of carrying out its responsibilities. It is primarily intended to ensure that the fact that the NDA will be assuming responsibility for the cost of decommissioning and cleaning-up will result in the recognition of an asset representing sums recoverable from the NDA. This asset would match the nuclear liabilities that under accounting rules must be provided for in the accounts of BNFL or any successor companies holding a site licence.

118.     Where the NDA has financial responsibility but is not itself the person with control of an installation, site or facility, subsection (3) provides that the person with control is not to be or become liable for the costs of doing anything the NDA has to do to discharge its responsibilities for decommissioning, cleaning-up or operation. Subsection (5) makes it clear that this does not mean that the person with control will not be liable to make payments under, for example, contracts it enters into with third parties. Subsection (4) prohibits the NDA from charging the person with control when the NDA has financial responsibility and provides that the person with control does not have to make any financial provision for meeting costs for which the NDA has financial responsibility. This would include making provision for any future costs in the accounts of the person with control. The effect of subsection (4) with subsection (6) is to require the NDA to put the person with control in funds to meet the costs it incurs in meeting regulatory obligations (as authorised or required by clause 20), as well as the costs of complying with directions given by the NDA under clause 21. Subsection (9) makes the provisions of clause 24 subject to a contract in place between the NDA and the person with control of the installation, site or facility or a body corporate of which that person is a subsidiary.

119.     Where the NDA is given responsibility for an installation, facility or site without it including financial responsibility under subsections (1) and (2), a payment could be required by the Secretary of State under clause 8(2) on making the designation or the NDA could charge for the work under clause 8(3) or clause 13(3). However, if no charge is made under either of those provisions, the NDA will carry the cost of the work itself. Subsection (10) makes it clear that the NDA can also carry the financial burden in cases where it does not have financial responsibility under this clause.

Clause 25: Expenditure and receipts of NDA

120.     Clause 25 sets out how the NDA is to be put in funds and arrangements for handling any income it generates.

121.     Subsection (2) enables the Secretary of State to fit the payment of grants to the requirements of the NDA so that it has the funds it needs as and when required.

122.     Subsection (3) requires all sums received by the NDA other than by grant from the Secretary of State to be paid to the Secretary of State who, under subsection (4) is required to pay them into the Consolidated Fund. Clause 34 provides the mechanism by which these sums are credited to contribute to future decommissioning and clean up costs. This covers income from operating nuclear installations such as THORP, SMP and Magnox, and charges to third parties, whether for decommissioning work carried out on their behalf or for the use of other facilities or land which are the responsibility of the NDA.

123.     While it will be important that the NDA operates any income generating facilities in the most beneficial way, this must not distract the NDA from its principal task of decommissioning and clean up. In the interest of transparency therefore any income the NDA generates itself will be clearly separated from the grant it receives from Government. It follows that the resources available to the NDA to carry out its functions will derive principally from grants provided by the Secretary of State in line with its agreed strategy and annual plans.

Clause 26: Borrowing by the NDA

124.     Clause 26 sets out the framework for the NDA to borrow from the Secretary of State. This is principally to enable the NDA to support the carrying on of normal business practices which optimise the contractual arrangements which are necessary to support the decommissioning, clean up and operational activity of the persons with control of designated sites, installations and facilities which it funds.

125.     Subsections (4) and (5) allow the NDA to borrow from other sources so that it could consider entering into PFI arrangements for particular projects, subject to the approval of the Secretary of State and the Treasury.

Clauses 27 and 28: Limit on NDA borrowing and Government guarantees for NDA borrowing

126.     Clause 27 limits the capacity of the NDA to borrow to £2 billion, the limit which applies to BNFL in the Atomic Energy Act 1971 (c.11). In view of the long timescales involved in nuclear clean up, the Secretary of State can amend that limit by order. Clause 28 provides that the Secretary of State may guarantee borrowing by the NDA with the approval of the Treasury.

Clause 29: Accounts of NDA

127.     Clause 29 establishes the framework for NDA financial reporting in accordance with the usual rules governing non-departmental public bodies (NDPBs). It requires the NDA to keep proper accounts and accounting records and prepare an annual statement of accounts in accordance with requirements laid down by the Secretary of State with the approval of the Treasury. The accounts must be audited by the Comptroller and Auditor General (C&AG) and, together with the C&AG's report, laid before Parliament.

128.     The NDA's accounts will show income from and expenditure on operational plant such as THORP, SMP and Magnox separately from income and expenditure on decommissioning and clean up. The DTI will be seeking views from stakeholders before final decisions are taken on requirements to be made as to accounting treatments and the presentation of the NDA's accounts.

Clause 30 and Schedule 4: Tax exemption for NDA activities

129.     Clause 30 allows for the exemption from corporation tax, with appropriate safeguards, of certain activities carried on by or on behalf of the NDA. The main activities to be considered for exemption from corporation tax are those which count as a trade for tax purposes but are undertaken by or on behalf of the NDA where such activities are closely intertwined with decommissioning and clean up work and are likely to be loss-making for tax. For the NDA, under normal tax rules, the work of decommissioning and clean up will not in itself count as a trade for tax purposes. (Although subject to clause 33, provisions for such work arising from current income generating activities may be taken into account in calculating the profit or loss from those activities for tax purposes.)

130.     Under subsection (1), trading income from exempt activities of the NDA or an NDA company is not taxed, nor can the exempt activities give rise to tax losses. To be exempt the activities need to be specified in regulations. Subsection (2) gives effect to Schedule 4, which makes further, detailed provisions for the exemption. Further information can be found in the notes to that Schedule.

131.     The exempt activities are defined in subsection (3) and are activities covered by clause 6(1), where the activities are also specified in Treasury regulations. Activities that could be covered by the exemption include THORP and SMP at Sellafield, which are likely to be loss-making for tax and where any activity that could in theory be taxable is intimately bound up with the wider decommissioning and clean up activities on the Sellafield site. Other trading activities, such as electricity generation, are more clearly separable from decommissioning and clean up, and more likely to be profitable for tax, so the intention is that such activities will not be specified in Treasury regulations and so will remain taxable.

132.     An NDA company is defined in subsection (4) as either a wholly owned subsidiary of the NDA, or alternatively as a relevant site licensee. This is so that any tax exemption is given only to NDA subsidiaries or site licensee companies linked to the NDA carrying out trades that include and are intimately bound up with nuclear legacy decommissioning and clean up activities. In such cases the cost and effort of ascertaining the tax position (where losses would be likely) would be disproportionate. It is Government's intention that private companies will not be able to realise tax-free profits through the tax exemption. The intention is that regulations to allow exemption will only apply where the detail of the arrangements with the site licensee companies carrying on the activity is such that any losses or profits would in economic terms be the NDA's.

133.     Subsection (5) lists the conditions to be met if a company is to qualify as a relevant site licensee company. These include holding a nuclear site licence and where a management contract is in force with the NDA, the contract is with the company in question or with its parent. Conditions to be specified in Treasury regulations will also have to be met for a company to qualify as a relevant site licensee company. The specified conditions will be drafted so as to ensure that where shares of site licensee companies are held by management contractors, the contractor cannot extract any profits or utilise any losses in respect of the exempt activities of the site licensee company.

134.     Subsection (6) requires the agreement of the Secretary of State for any Treasury regulations setting out conditions that need to be met for a company to qualify as a relevant site licensee. Subsection (7) explains that the regulations are to be made under the negative resolution procedure in the House of Commons.

135.     Various definitions are given in subsection (8), including those for "management contract", "trading income" and "trading losses".

136.     Subsection (9) specifically concerns the tax treatment of trade credits under the loan relationships and derivative contracts legislation. Where, but for particular tax rules, they would be regarded as trading receipts, and the trade in question is exempted, the credits themselves are exempted.

137.     Subsection (10) ties this clause to the corporation tax legislation.

 
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Prepared: 23 April 2004