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Charles Hendry:
We need greater clarity on the position of the hon. Gentleman’s party on this matter. He just made the profoundly important comment that Liberal Democrat involvement in government would put at risk investment in this area, and people who
might be seeking to invest billions of pounds in this project will need to know exactly what that means. Is he saying that a condition of the Liberal Democrats’ entering a coalition would be an end to a nuclear new-build programme? If he is not saying that, what does he mean? If he is saying that, is he therefore saying that the Liberal Democrats would compensate the investment made, or would someone be expected to invest now and then find that that money is simply written off by their involvement?
Martin Horwood: Although I hope that my right hon. Friend the Member for Sheffield, Hallam (Mr. Clegg) has great regard for my opinions, he is unlikely to ask me to determine the basis on which the Liberal Democrats might talk to other parties after a general election by what I say when discussing the Energy Bill.
Mr. Brian Binley (Northampton, South) (Con): Will the hon. Gentleman give way?
Martin Horwood: No, not on that point.
The Minister referred in passing to an advisory committee—the proposed nuclear liabilities financing assurance board—which is mentioned in the White Paper but is strangely absent from the Bill. In Committee, we proposed an amendment that would give statutory force to and statutory reassurance about its role, but that was resisted by the Government. I would not mind hearing the Minister again tell us precisely why the NLFAB was excluded from the Bill and why it is not present in the regime described in the new clause, because that relates to one of the arguments that he is using to assure us on the future financing of the nuclear industry, and the NLFAB surely should have been given legal force.
The risk is that 40 years hence some future Government will find themselves with unexpected problems on decommissioning and disposal—perhaps spiralling financial or political costs. They will say that the situation is nothing to do with them and that it is all the fault of Labour Ministers back in the noughties who made bad decisions in 2008, many decades ago, because they did not know what they were planning. They will ask, “How could those Ministers have landed us with all these problems?” In the end, the taxpayer will have to pick up the bill because, as the right hon. Member for Scunthorpe (Mr. Morley), a former Minister, described in relation to the previous process, there is no way that we can avoid doing so if we become reliant on nuclear energy and we are to keep the lights on.
The chance of this new clause and the Bill being intact in 40 years’ time is virtually nil, and the Government are leading us down a high-risk path given the poisonous legacy of nuclear power and the creation of radioactive waste that will last for millenniums. The new clause and the system that it will help to create involves a high risk for generations of British taxpayers.
Dr. Ladyman: There are two sets of contributors to this debate: those who, like me, believe that nuclear energy will play a key part in reducing our carbon emissions in decades to come, and those who want to stop nuclear energy at all costs and want to continue this debate as a way of making it as difficult as possible for people to invest in the industry.
Before I deal with the substantive issue of the new clause, I should like to correct one of the myths that we have heard. My right hon. Friend the Member for Scunthorpe (Mr. Morley) slightly fell into the trap of citing it, but it has clearly been enunciated by Liberal Democrat Members. I am talking about the myth that the legacy cost is a private liability that was imposed on the public sector and the taxpayer. It was not, because almost all that liability was generated by a nationalised industry, and that public liability has been retained by the public sector. We need to devise a new process and a new structure that deals with a new industry, which will involve private investment and needs to be carefully controlled to ensure that it does not impose a liability on the public sector. That is what the Minister has sought to do through this new clause.
Martin Horwood: I seem to remember that the taxpayer was told, “This electricity will be too cheap to meter.”
Dr. Ladyman: I cannot speak for what people were told in the 1950s, but that is a relevant issue, which is why we need to get the approach right now. The hon. Gentleman has told us that not going forward with the nuclear programme would be a condition of the Liberal Democrats’ involvement in a future Government. He has also said, in effect, that were they to get into power, they would tear up the Climate Change Act, because it will require us to commit to ways of reducing our carbon emissions, and that will almost certainly involve a Labour Government—or, perish the thought, a Conservative Government—building new nuclear power stations. The Liberals will come along at some point saying, “We are not going to have these nuclear power stations any more.” They will thus have to tear up their commitment to the Climate Change Bill, and as the Bill will provide for a legal commitment on the Government, the Liberals would be able to do so only by repealing the legislation once it is enacted. They have got themselves into a complete knot on this matter.
The Minister should be congratulated on listening to the concerns expressed in Committee about the need to provide the industry with clarity and on coming back to us today with a new clause that deals with the issue in a clear and straightforward way.
Mr. Jamie Reed (Copeland) (Lab): My hon. Friend is a scientist, and he has brought much-needed scientific analysis to the debate that I have thus far heard on the monitors. Does he share my dismay that, in addition to the Liberal Democrat position of deterring billions of pounds of investment in the UK economy, there is a regrettable omission in Opposition Members’ analysis of the costs of the waste that we are discussing and their basis? For instance, I have heard it said that the liability costs were incurred by our first fleet of reactors. Does my hon. Friend agree that the costs were essentially incurred as a result of our military programme?
Dr. Ladyman: My hon. Friend is right; the vast majority of the legacy results from defence and military purposes. We need to dispel the myths that have arisen as part of the debate and focus on the way forward.
Mr. Morley: Although I do not disagree with the points being raised and in particular with what is being said about the motivation for the original nuclear programme coming from the military, I seek clarification. That programme was state-funded, and a lot of those costs fell to the state. Whether we like it or not, we now have a privatised nuclear sector. It was privatised by the Conservative party, and, as with many of its privatisations, debts and liabilities were written off to make what was being sold more attractive to investors. The enormous liabilities that we have come from that period, which is why my hon. Friends and I are anxious that that does not happen again.
Dr. Ladyman: My right hon. Friend brings me to the point that I wanted to make about the new clause. By introducing it, the Minister has tried to provide the industry with complete clarity about what it will have to pay in order to contribute a fair share of the cost of decommissioning, cleaning up and storing the new capacity that is generated. He has even made it clear that a risk premium will be imposed on the industry, so it will be clear about that. My concern, which I have expressed in a couple of interventions, is that to ensure that he is 100 per cent. confident that the public sector will not face a new liability in the future, he will have to be cautious in estimating the future costs. He will probably also have to be cautious in estimating the number of nuclear power stations that will be built.
As the need to build more nuclear power stations to provide us with energy security and to attack our carbon emissions in the decades to come becomes clearer and clearer, I suspect we will end up building more nuclear power stations than we initially estimated and the Minister’s initial estimates of the costs involved will turn out to have been far too high. I am concerned that we should be able to reassure potential investors that, if it becomes clear in five, 10 or 20 years that they have been charged too much, there will be some process for reducing their costs.
If we can provide such reassurance, it will encourage people to come forward early, even though they are bound to be cautious about potential investments, especially if they hear irresponsible comments such as those made by the Liberal Democrats today threatening to overturn a policy that will have been instituted. Investors are bound to be cautious, but we could tell them that we will do the best we can to estimate the costs and, if it turns out that we have completely overestimated them—although there will be a risk premium—we would consider reducing the cost to the investors of storage and decommissioning in the future.
Malcolm Wicks: We have had a detailed discussion and I am happy to follow the authoritative speech by my hon. Friend the Member for South Thanet (Dr. Ladyman). I thank him for his contribution.
I shall try to deal with the specific questions that have arisen, but I wish to acknowledge that I am aware of the difficulties we face in the quest to put principle into practice. Technically, this is a complex issue and the time scales are very long. I hope to convince the House that we will use our best endeavours to set up processes and advisory services to get this right.
I was asked whether the risk premium has a ceiling. In a sense it does, because there will be a fixed price and a risk premium on top of that. That will not vary up or down. I listened to my hon. Friend, but if the Government make some money out of this—which is not the intention—and the risk premium turns out to have been too high, that is the quid pro quo for the investor having confidence in the costs through the fixed price.
I was asked whether one geological repository would be enough. That is certainly our intention. We are at the early stages of thinking on the repository, the volunteer principle and so on, but that is our intention. If, generations hence, people return to this issue, that will be a matter for them.
I was also asked what would happen if costs for the geological disposal facility overran. We will do our utmost to be rigorous in project management, although it is more likely that cost overruns will occur in relation to the fixed costs of designing, researching and building the repository rather than in relation to incremental costs that are directly attributable to the cost of disposing of new-build waste. The Government would have to incur the costs of designing, researching and building the repository with proper project management. For each station built a fixed unit price will be set above the central estimate of costs, because of the risk premium provision.
Mr. Jamie Reed: Does the Minister agree that one of the other issues that we need to bear in mind when considering potential cost overruns is the savings that the establishment of a repository will make, not only for the NDA but for the UK taxpayer, by slashing the decommissioning costs that we now face? The current nuclear liability costs are estimated at £78 billion, but the sooner we have a repository in place, the sooner we can whittle those costs right down.
Malcolm Wicks: My hon. Friend is an expert in that area and that was a useful contribution.
Steve Webb: Is he right though?
Malcolm Wicks: My hon. Friend makes a fair point, but at this stage I cannot judge whether his optimism is justified. If it were not for optimism, politics would be a dismal science, and I have always thought that my hon. Friend has an optimistic bias.
Mr. Jamie Reed: I may be an optimist, but I think that I am the only Member present who has worked in the nuclear industry. Indeed, I worked in this particular field, so I speak from a position of some authority.
1.45 pm
Malcolm Wicks: My hon. Friend is a humble optimist— [ Interruption. ] Apparently there are other contenders.
The fixed unit price will be based on the best available cost information at the time an operator requests a fixed price, with uncertainty factored in when determining the appropriate risk premium. Consequently, dependent on the date of the nuclear
power station’s construction, operators of different power stations may be set different fixed unit prices for waste disposal. A road map, published alongside the consultation on the draft guidance, sets out further detail of when we expect to be in a position to publish the methodology we will use to determine the appropriate level for the fixed unit price.
I was asked a difficult question about my best guess on when the repository would be available. We are pursuing an approach to the siting of the geological disposal facility based on voluntarism and partnership. An important part of the process will be to agree an indicative timetable with the volunteer community. Therefore it is not possible to give a firm indication now. However, the “Managing Radioactive Waste Safely” White Paper will include more information and will be published shortly.
I was also asked what would happen if a company or operator went bankrupt. If a nuclear operator were to become insolvent, we would expect that in most circumstances it would be economic to continue running the plant, as the additional costs of operation are likely to be less than the revenue earned from generating electricity. That would make the acquisition of a power station attractive to an alternative nuclear operator. Additionally, moneys in the fund have to be secure in the event of insolvency, and the operator is required to have back-up protection in place to top up an insufficient fund.
The hon. Member for Wealden (Charles Hendry) asked me about radioactivity versus volume and the effect on the price. That is work that is ongoing, and we will publish a methodology and model in due course.
I was asked about reprocessing, and specifically whether the fixed unit price would include possible reprocessing. The fixed unit price will be based on the Government’s current policy for waste disposal, as set out in the nuclear White Paper. We consider that spent fuel from new nuclear power stations will not be reprocessed, but will be disposed of in the geological disposal facility. That is not to say that we are closing the door on the idea of reprocessing, but we have to make some assumptions. The fixed unit price will be based on the expected costs of geological disposal of spent fuel, not on any assumption of reprocessing.
I was asked by the hon. Member for Cheltenham (Martin Horwood) whether we will take on foreign waste, as we have in the past. I remind the hon. Gentleman of the international conventions governing the movement and disposal of radioactive waste. Those would need to be taken into account when considering any proposals to dispose of foreign waste in the geological disposal facility.
I turn now to how the fund will be monitored. Operators will be required to have in place arrangements for monitoring both the expected costs and the performance of the fund, which will be at arm’s length from the company of course. Arrangements would include annual reviews by the operator and the fund managers, which would be submitted to the Secretary of State; in-depth quinquennial reviews conducted by the operators and fund managers and submitted to the Secretary of State; notification of changes, such as operational or technical changes that materially increase the operator’s liabilities; and other specific events, including a change of control or
ownership of the operator, or a change in the credit rating of the operator or parent company. Ministers may also obtain information if required. They may call on the expert advice of the board that we are establishing, the NLFAB, and of independent third parties.
I should say that by creating the new board as an advisory body we are ensuring that the Secretary of State retains overall responsibility for the approval of the funded decommissioning programme. That enables the Secretary of State to take a view not only of the advice of the board on the suitability of the funding arrangements, but of any advice from environmental and health and safety regulators. We can argue, as we have, that this approach is more cost-effective than creating a statutory board that would require further consultations and a permanent body of members.
My ambitions today are twofold. First, with the leave of the House, I want to see Report and Third Reading safely through the Chamber. Secondly, I want to watch the football this evening. It is not my ambition to enter into jests with those on the Liberal Benches, but I heard the hon. Member for Cheltenham say that future investors could have no confidence that a Liberal Government would maintain a nuclear programme. I regret that, of course, because responsibility in government is important. I note that British Energy has a base in Gloucester and employs about 1,000 people. I imagine that some of them reside in the hon. Gentleman’s constituency and will have listened to him with great care. I do not know whether he has any further message for the Liberal Democrats who are hoping to hold on to their seats in Barnwood ward, where British Energy resides, and it may be that a change of policy is afoot.
Martin Horwood: I can tell the Minister that I would advise them to vote Liberal Democrat, as they are currently saddled with a Labour MP.
Mr. Deputy Speaker (Sir Alan Haselhurst): Order. I think we can draw a line under the hustings at this stage.
Malcolm Wicks: Indeed. Anyone would think that there were elections coming up later in the week, would they not, Mr. Deputy Speaker?
That was exactly where I wanted to draw the line—on a trivial note. I hope that I have done enough to satisfy colleagues that our amendment should be accepted.
Clause read a Second time, and added to the Bill.
‘(1) The Secretary of State may modify—
(a) a condition of a particular licence under section 6(1)(c) or (d) of the Electricity Act 1989 (c. 29) (distribution and supply licences);
(b) the standard conditions incorporated in licences under those provisions by virtue of section 8A of that Act;
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