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Malcolm Wicks:
There will be a fixed price, which, as I have indicated, will probably not be the same in respect of a station built in the early days as that for one built 10 years later because by then we will know more about the costs of the geological repository. The principle of the fixed price operates in two parts. First, for the purpose of investor confidence, a fixed price will be determined early in the life of the new nuclear
reactor so that money going into the given fund will be paid from year one—a key part of the Bill. Secondly, because of the uncertainties about the costs—we appreciate the difficulties in this respect because we may be talking about waste that does not need to be disposed of for 40, 50 or more years—what we are calling a risk premium will be determined. We are adding an extra amount to the fixed price to safeguard the taxpayer.
Lembit Öpik (Montgomeryshire) (LD) rose—
Malcolm Wicks: Before the hon. Gentleman comes in, may I try to give a fuller answer to the question I was asked about the full share of waste costs? As I said, those costs are directly attributable to accepting new-build higher-activity waste into a geological disposal facility. Added to that is a contribution towards the fixed costs of constructing that facility, which the hon. Member for Northavon (Steve Webb) mentioned. That will also involve a significant risk premium to cover uncertainties, and the cost of managing waste pending disposal or transfer for disposal. Separately, operators are also responsible for the full cost of disposing of low-level waste in a disposal facility, and managing that and other waste pending its disposal. We are doing our best to put our principle—that the costs must be paid fully by the operating companies, and that there should be no cost to the taxpayer—into practice.
Malcolm Wicks: I do not know whether the hon. Gentleman wishes to intervene on principle or practice or a bit of both, but I am happy to give way to him.
Lembit Öpik: I want to ask about practice. Why is the Minister confident that the new clause provides a mechanism guaranteeing that the taxpayer will not be landed with an additional bill, given the notorious regularity of that phenomenon in the case of the nuclear industry? Has he consulted, for example, the Centre for Alternative Technology, which has gone to great lengths to examine the costs of nuclear power and disposal? Has he factored in the cost of reprocessing waste, which may become necessary as uranium becomes scarcer? All those elements may involve a significant cost to the taxpayer if the new clause is not robust enough to ensure that the industry covers 100 per cent. of the cost.
Malcolm Wicks: That is our intention. We are going into some technical detail, and we are establishing a committee to help us to understand the financial implications and ensure that our intention becomes practice. I know that some people are doubtful about that, pointing to past practice, but we are adamant that there will be no subsidy in this instance—although renewable technology receives a considerable subsidy, and rightly so.
As for consultation, we engaged in one of the widest and most thorough consultations in the history of British public policy. We were given good advice by non-governmental organisations and, indeed, the judiciary, for which we are extremely grateful. The most important part of the process, in my view, was our
random selection from electoral registers of 1,000 people to take part in public consultations in some nine city centres. For a day those people were subjected to the arguments for and against, and I considered it a very good example of modern democracy.
The shorter answer is that I am satisfied that everyone has had an opportunity to contribute thoroughly to consultation on this important issue.
Charles Hendry: I welcome the Minister’s intention of clarifying the issue, although I think that some of his explanations made it slightly more complicated than it needed to be, particularly his reply to the question from the right hon. Member for Scunthorpe (Mr. Morley).
It is vital for taxpayers to know how their interests will be protected, and essential for the companies that are potential investors in new-build nuclear to know exactly what costs they will face before embarking on their investment plans. We need absolute clarity on that issue, because, as both we and the Government have said, we must ensure that there is no public subsidy for new-build nuclear. Our position is clear: we are happy for companies to invest in new-build nuclear as long as there is no subsidy, and as long as they are responsible for the full costs of decommissioning and the full long-term costs of disposal of spent fuel and waste. We think that, in return, they should be given a level playing field when it comes to sorting out the planning problems that they have faced in the past, although we do not agree with the Government about the total loss of local democracy in the measures proposed in the Planning Bill.
We think that there should be site and type approval, so that two of the biggest issues that have delayed developments in the past—the precise type and the precise location of reactors—can be excluded from the debate. We are also keen to reassure investors that any change of Government will not pose a threat to their investments, or fundamentally change the ground rules for the investments that they have been considering. We consider it absolutely right for us to work with the Government to ensure that the right system is introduced.
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We are pleased that the new clause gives those who develop new-build nuclear programmes full responsibility for storing the waste on site for a considerable period, potentially as much as 100 years, and for paying their fair share of the long-term disposal costs and some of the infrastructure costs of building nuclear facilities. We also accept the notion of a flat fee and a risk premium, but here the Minister started to make things a little more complicated. The right hon. Member for Scunthorpe asked whether there would be a ceiling for the premium. My understanding is that there will be a fixed cost but also a fixed element that is the risk premium, which means that if the amount is lower than the ceiling, companies will still pay the full fixed premium. In other words, the ceiling is not flexible.
We need much more detail. We know that it cannot be given to us today, but it will be important to our future considerations. Will the fee ultimately be based
on the volume of nuclear waste alone, and if so, will it reflect the balance between high-level and intermediate-level waste? Will it take account of radioactivity levels? The extent to which waste needs to be encased may differ according to the level of radioactivity. Building-cost inflation is higher than inflation in general; how will the fee take account of that?
When does the Minister think the repository will be built? What is his best guess? He said that it was difficult to be precise, but we are not asking for precision. Are we looking at three, five, eight or 10 decades? At what point does he think the site for the repository will be identified and earmarked for further investigation? There is a fear that not enough progress has been made in that regard. Does he think that a single repository will be sufficient for the disposal of both legacy waste and all waste from a new-build programme? The Secretary of State said recently that he thought there might be twice as much nuclear power in a few years’ time. Does the Minister believe that, in the event of a massive expansion of nuclear power, all the waste could be incorporated in a single facility, or does he think that we might need two? That would involve huge additional infrastructure costs, which would need to be taken into account.
The Minister explained about lower costs, and said that there would be no repayment of the risk premium. If it becomes clear that the Government miscalculated, that the cost of building a repository will be much greater than they estimated and that the cost will therefore be greater than the total amount charged to the nuclear companies, including the risk premium, will there be any scope for the Government to tell the companies, “We suggested this amount in good faith but we got it wrong, so a supplementary charge will be necessary”? I know that the Government are acting in good faith, but they may end up subsidising the nuclear waste disposal regime, and I know that that is not their intention.
Dr. Ladyman: Does the hon. Gentleman share my concern about the opposite risk? Is there not a danger that, because in the early days the Government will go out of their way to ensure that all the costs are covered, the early builders will be quoted a higher fixed charge than the people who come along subsequently? Given that we do not want to discourage people from entering the industry at an early stage, the Government may need to give some thought to the possibility of lowering charges later if it turns out that people are paying too much.
Charles Hendry: That is a valid point. If the assumption in the early days was that five nuclear power stations would be needed, the cost of road infrastructure and the building of the repository would be very high; but if we ended up with 20, the figure would change dramatically. There must be equity, or the cost will be prejudiced against the early developers, and it is they who will kick-start the programme if it is to happen.
Will the Minister also tell us more about his approach on the reprocessing of spent and used fuels? There is considerable potential for that within the industry. Britain has led the world on it in the past, and
will be keen to do so again. It could greatly reduce the volume of waste that needs to be disposed of, particularly for the most radioactive of materials. The Government, however, are being rather coy about their plans on reprocessing. Also, how would this be factored into the costs? If some radioactive material were to be reprocessed and therefore did not require disposal so the volumes were significantly different from those initially estimated, how would that be taken into account in the long-term costs?
In general, we accept the way in which the Government are progressing, but we believe that it is very important to have clarity so far as the industry is concerned, and a lot of detail has still to be sorted out.
Mr. Morley: I welcome the thrust of the new clause. It is disgraceful that the nuclear sector has over the decades moved a lot of its liabilities and debts on to public liabilities—although I have to say that that has been the case in just about every country where there has been nuclear power, so it is not unique to our sector. If we are to have new nuclear, it is of fundamental importance that there should not be Government subsidies or a liability that falls on the public after private companies have made their profits over a period of time.
I think that the Government are genuine in their approach to this matter, and I know that my hon. Friend the Minister is, but this is a very complex and difficult area, as has been picked up on in the debate. I now understand exactly what the risk premium will be and also the thinking behind what the Minister has said. However, I know that the Committee on Radioactive Waste Management first recommended that there should be an interim site for the storage of waste, and I presume that the cost of that site would have to be factored into the calculations, and then goodness knows when the longer term depository will be built. The costs and technical challenges of that are huge. That is where the problem lies, because it will be difficult for the Department to calculate what that risk premium should be. It is a bit optimistic to think that we could go back to the nuclear industry and say, “We got it wrong, so can we have some more money?” as I assume that it will have signed various contracts on the arrangements, and it might be a little reluctant to agree to such an approach.
Will my hon. Friend the Minister give us some more detail? For example, is it feasible to have an upper and lower range in the risk premium? I accept that if there is investment the investors need to have some certainty and to know what their maximum liabilities could be. That is not unreasonable; I understand it for such investment in major infrastructure. However, it is also not unreasonable to have some protection for the public and the taxpayer.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): On the issue of protecting the taxpayer, does the right hon. Gentleman think that there needs to be a further protection against the company becoming financially insolvent and therefore being unable to deliver when the need arises? Should some protection against insolvency be built into the system?
Mr. Morley:
The hon. Gentleman is a mind reader, because that was the second point that I was going to
raise. There has been a history of financial instability in the private sector in the nuclear industry. We all know what happened to British Energy, for example; it had to be bailed out by the taxpayer. There was no choice in that, because if we want to keep the lights on, we have to step in and pick up such liabilities.
Will my hon. Friend the Minister clarify the following point? I understood from what he said that the investors in new nuclear will make a regular payment into a fund, year on year, which covers part of my point. However, in order to protect the taxpayer from people walking away from their liabilities by just wrapping up and going into bankruptcy, is there an argument for some protection such as a bond? That is not unprecedented. It is the case in the waste industry, for example; the Government rightly require waste disposal companies to put down a bond that guarantees the future maintenance of sites. Might the Minister like to consider something like that?
Martin Horwood (Cheltenham) (LD): It is welcome to have before us a measure that attempts clarification, as the hon. Member for Wealden (Charles Hendry) said, but that is difficult to achieve in this case. Nevertheless, I share the Minister’s intention of trying to clarify matters, as I do his high regard for Greenpeace and its contribution to the process that has brought us to this point—although I suspect my tongue is slightly less in my cheek in saying that.
The Liberal Democrat position on the nuclear question is clear. We think that the safest way to ensure that there is no public subsidy for nuclear new-build is not to build it. I assure any investors who may be watching our debate on the parliamentary channel that their investment will be at risk if we play a part in any future Government, because if we had the chance we would seek to slow down, and if possible to stop, the development of nuclear power.
Sammy Wilson (East Antrim) (DUP): I understand where the hon. Gentleman is coming from, but will he therefore outline the Liberal Democrats’ position on buying in power from other countries? When there is a need to supplement peak load, would his party oppose buying in from countries that supply power through nuclear power stations?
Martin Horwood: The hon. Gentleman raises a quite different point that does not relate to the Bill, so I shall pass on. Let me say, however, that energy markets are complex and we cannot always prescribe where the energy will come from, but my ideal would be that we do not in future source nuclear power from any country, because I would not want those countries building nuclear either.
Dr. Ladyman: Will the hon. Gentleman give way?
Martin Horwood: I shall not give way, as I wish to make some progress.
Charles Hendry: Will the hon. Gentleman give way?
Martin Horwood: No; I want to make just a little progress.
The context of this issue is the enormous cost of decommissioning and clean-up with which the first generation of nuclear power stations left us. In Committee, we explored the various current costs that the taxpayer is having to pick up from the nuclear installations inspectorate, CoRWM, the potential nuclear financing assurance board, and the big daddy of them all, the Nuclear Decommissioning Authority. The Minister gave assurances that many of those were intended to be covered under the new regime. That is quite a threat to investors, given the cost of the NDA. The net grant-in-aid contribution of the taxpayer to the NDA in 2007-08 is £1.4 billion. That is rising by 8 per cent.—a very good settlement, as many public sector organisations would agree—in 2008-09, and by almost a further 5 per cent. in 2009-10. Therefore, the taxpayer will soon be facing an annual bill of £1.6 billion from the last generation of nuclear power stations. It is brave of the Government to be leading us down the same path a second time. When we listed all the potential costs to the taxpayer, the Minister gave a lot of assurances about which of them were intended to be entirely covered by the regime, but there was one exception: long-term storage and the financial regime covering that, which the new clause addresses.
It has rightly been said that there is, in effect, a ceiling to the risk to the private sector and an ongoing liability and risk to the taxpayer. We discussed at length in Committee the various time-scale problems. The hon. Member for Wealden has again raised a lot of the questions, many of them unanswered, such as about how the costs can be predicted or divided. For instance, although the new generation of nuclear power stations may, should it ever come to pass, produce radioactive waste in smaller volumes, it may well be much more radioactive and therefore pose new technical challenges that are different from those facing the repository for the current generation of nuclear power stations.
There is also the question of whether we are expecting to take in foreign radioactive waste, as we have done in the past. Are we, in effect, to become the nuclear dustbin of the whole of Europe, or countries further afield, by being one of the few countries brave enough to progress with the idea of repositories?
It is tempting to try to apportion proportions of the blank cheque that we think is at risk of being written, but as the Minister has honestly accepted, the problem is that we cannot know the real context in which all this will be decided in 40 or 50 years’ time. We are seriously expected to sign up to licence fees for a repository for radioactive waste that does not exist, in a location that has not been found, for amounts that we cannot calculate, and all for power stations that might never be built and that no sane investor would touch with a barge pole. This is nuclear fairyland, and the Minister has an impossible task in persuading us that he can provide clarity and reassurance on this matter.
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