Clause
50
Nuclear
decommissioning: regulations and
guidance
Question
proposed, That the clause stand part of the
Bill.
5
pm
Malcolm
Wicks:
Clause 50 confers on the Secretary
of State a power to make regulations, under the
negative procedure, about the preparation, content, implementation and
modification of funded decommissioning programmes and for the charging
of fees. The clause enables the Secretary of State to prescribe details
about how operators will be expected to prepare and implement
programmes and to ensure that they have the adequate protections in
place. It is analogous with provisions in the Energy Act 2004, which
sets out the regime for offshore renewables
decommissioning.
The
clause allows regulations that make provision for how radioactive and
other hazardous waste will be managed during the operation of the power
station and will then be disposed of; how the power station will be
decommissioned and the site cleaned up; the estimation
of the costs that might be incurred during
decommissioning and waste management, such as how they should be
developed and about the manner in which such estimates should be
verified; the financing of such estimates, including the security
arrangements required; how payments from funds to pay for
decommissioning and waste management are to be made; how information
prescribed or of a description prescribed by regulations is to be
supplied to the Secretary of State; and how fees charged by the
Secretary of State are to be calculated and when they are to be paid.
Regulations can also create offences where specific provisions of the
regulations are contravened.
Penalties created by the regulations are subject to the same limits as
the offences contained in the Bill, namely a fine not exceeding
£5,000 in a magistrates court, or up to two years’
imprisonment or an unlimited fine in a Crown
court. The negative
procedure is considered suitable for the making of regulations under
this power as the content of the regulations will be largely technical.
As I have already mentioned, the provision mirrors the approach set out
in the Energy Act 2004 for the decommissioning of offshore renewable
installations. For example, under that Act, the Secretary of State has
the power to prescribe what security should be provided and to set
sanctions.
As well as
enabling regulations, the clause confers on the
Secretary of State a power to publish guidance about the preparation,
content, modification and implementation of funded decommissioning
programmes. A copy of any guidance published must be laid before
Parliament. Guidance enables a principles-based approach to be adopted
rather than the more prescriptive approach that is typical of
regulations. The guidance is expected to set out certain baselines or
minima, which the operator would be expected to meet. However, the
Secretary of State recognises that operators may be able to put forward
more effective or efficient methods to decommission their stations and
to clean up their sites, as well as to accumulate the moneys necessary
to do so. Guidance, which is based on principles, enables operators to
put forward such proposals, which may be approved, provided they meet
the
principles.
Prior
to the publication of the guidance or the making of regulations,
subsection (6) requires that the Secretary of State consult interested
bodies. The Government do not consider it necessary to subject the
largely technical guidance to a parliamentary procedure, but the
guidance will be laid in the Library. It is not the intention for the
guidance to prescribe how decommissioning programmes should be
formulated and carried out, but rather to allow operators the freedom
to develop their own programmes, within a framework. The guidance will
guide operators in preparing programmes, which may be approvable by the
Secretary of State.
The
approach of the clause is analogous to the existing safety and
environmental licensing regime for nuclear, whereby the Health and
Safety Executive and the Environment Agency issue guidance concerning
the exercise of their statutory powers. The HSE
issues guidance on its functions under the Nuclear Installations Act
1965 and the Environment Agency on its functions under the Radioactive
Substances Act 1993.
Steve
Webb:
This is an important clause and raises a number of
substantive issues. I hope that the Minister can paint a picture of the
way that one of these funds will operate. I want to draw an analogy
that he—as a former Pensions Minister—will appreciate,
and it is between one of the funded decommissioning
programmes and an occupational pension scheme. I hope that he will
humour me with the analogy as it helps to illuminate my point. With an
occupational pensions scheme, there is a set of long-lasting
liabilities. The work force might be aged 21 now, but they may need
pensions when they are 100. We are talking about similar time
scales.
The second
point is that the sums of money involved can be very substantial. When
I originally heard about
the funded decommissioning
programmes, I thought that they would be nothing like occupational
pension schemes and that we were talking about smaller amounts.
However, this morning, the Minister said that the typical
decommissioning cost would be £600 million and the typical
disposal cost would be £300 million. Presumably, and I apologise
if I have got the wrong end of the stick, one of those funds—for
a single operator for a single, typical plant—might at some
point need up to £900 million. If I understand correctly, an
operator could also be running more than one plant, and therefore we
could be talking about literally billions of pounds at peak. Clearly,
there is an inflow and an outflow, which I will return to, but
nevertheless we are talking about huge amounts of money. There is a big
issue about the adequacy of the funds—which we will come to in a
couple of clauses—and about the control of inflow and outflow.
We have been very focused on the inflow into the funds but, under
clause 50, the regulations also talk about the circumstances under
which a site operator can take money out of a fund. That is a critical
point. Presumably, the money must be lumped in up front quite heavily,
and I would like to probe the Minister further on the profile that he
has in mind. I assume that a lot of money has to go in early and then,
as the life of the plant progresses, the operator will start coming
back to the trust fund. I want to stress that the nuclear White Paper
published in January said:
“Independent funds,
outside of the control of nuclear operators, should be created to
accumulate and manage payments from the operator to meet the full
costs”.
They are
independent funds.
Let us
suppose, however, that I were an operator who had been running for a
while and who now had some nuclear waste that I wanted to get rid of.
Would I go to the fund and say that although I had put £700
million in so far, I would now like to take something out to start
meeting some of my liabilities? Is it the case that I could not take
any money out until I had put in everything that I would ever want to
put in? Is the process similar to a one-way valve? Is it the case that
money keeps going in until it reaches an absolute maximum of all the
money that will have to be spent and it can then be drawn upon? Will I
not incur new liabilities, potentially increasing the amount that must
go in at the same time as incurring costs that I must now spend to
undertake some clean-up for the generation that I have already carried
out?
As an operator,
could I spend my own money—which has never gone through the
trust—on clean-up and then tell the trust that it does not need
to ask me to put in that gross amount as I have already spent some
which I can offset against my liability? These are important questions.
I cannot speak for other members of the Committee, but I do not get a
sense of how the funds will work. Returning to the pension analogy, the
occupational pension fund structure was supposed to do precisely that
kind of thing—ring-fence money for long-term future liabilities.
It failed catastrophically for 100,000
workers.
Mr.
Jamie Reed (Copeland) (Lab): The key issue is
cash flow into the operating plants that want to
decommission more rapidly or meet their other liabilities
with regard to fixed costs of the work force and so on. Does the hon.
Gentleman agree that we need to allow the Nuclear Decommissioning
Authority and other operators of nuclear facilities around the country
to maximise their commercial revenue streams in order to offset costs
to the taxpayer and to ensure a greater amount of surety when it comes
to meeting those costs? I am talking about fuel manufacture,
reprocessing and so on.
Steve
Webb:
I am not sure that I follow the hon.
Gentleman when he talks about off-setting the costs to the taxpayer. My
understanding is that there are no costs to the taxpayer if someone
wants to go into business to run a nuclear power plant with no public
subsidy—if the Government plan to allow them to do so. I would
not see that it is the Committee’s job to help such companies
offset costs that I do not think should arise in the first place;
indeed, that should not be the Government policy. I hope that I have
not wilfully misunderstood the hon. Gentleman, but I do not follow him
on that point.
To
return to my analogy, the kind of structure that we
are talking about has failed catastrophically. Interestingly, the
answer to the failure of occupational pension funds to meet their
long-term future liability was the creation of an insurance
scheme—the Pension Protection Fund—to insure against
trust funds failing to meet their long-term liabilities. I have an
interesting question for the Minister—it could almost be a
dissertation question. We cannot create occupational pension funds that
do not need insurance. If it was so easy to set up a pension fund that
could be guaranteed to meet its long-term liabilities, we would have
done so. However, pension funds need an insurance scheme. Why are we
confident and how can we be sure that the sort of regime set up under
the regulations allowed for in clause 50 will meet its future
liabilities? The position is almost exactly analogous. In fact,
insurance funds are much more predictable—a company pension fund
is based on how many workers it has, how long they will live and how
much they earn. The costs that we are talking about are much more
difficult to estimate.
We have no idea of the margin of
risk. The Minister has still not given us a clue
about its magnitude—it could 10 per cent., 100 per cent. or
1,000 per cent. Clearly, if the margin is huge, many of my concerns
would disappear, but the Minister has not been able to tell us, even to
within a number of zeros, what the margin is.
In a roundabout way, I am saying
that we do not have a clue. I hope that the Minister does, and that he
will share his insights on the operation of the funds. To take that
point further, will he say whether the money that will go into the
funds is as incredibly front-loaded as I believe it will be from what I
heard in the evidence sessions? As the hon. Member for Copeland said,
companies will obviously make their revenues over the lifetime of the
plant. However, because there is a risk, as with any commercial
enterprise, of companies going to the wall, they cannot say that they
can rely on their year 40 profits to meet their
liabilities, because they might not get to year 40. The money must be
in the trust much earlier in the process. That is my understanding of
how the system will work. How front-loaded is the money? As the
operation of the plant unfolds, how far
are the future decommissioning and disposal costs that it accumulates
front-loaded? It is simply not
clear. To be a brief
friend of the nuclear industry, it will want to know before it signs on
the dotted line how much of the total future liabilities of the sorts
and numbers we have been talking about will be needed in year one, and
how much will be required of it. The industry will immediately take a
view about the profile of its costs and revenues, but what will the
Government ask of the industry?
Who are the trustees?
Regulations will provide for that under clause 50, but we do not know
who they are. How independent will they be? Clearly, they will need
expertise on nuclear liabilities but, presumably, they will be
independent of the industry under the Bill. Will the Minister tell us
more about who the trustees will be? If a company wants some money out
of the fund to do some clean-up work and the trustees say no, what will
happen?
The Government
are consulting on the clause, but they will give widespread
regulation-making powers, and the Committee needs to know in some
detail how the Minister envisages the powers operating. What scale of
process, what profile of payments and what guarantees are there? The
attempt to create a similar regime in pensions failed catastrophically,
so much so that an insurance scheme was needed to back it up. How can
the Minister be confident that the same model, which features an
arm’s length independent fund with trustees, will work when it
has not worked in a similar
situation?
5.15
pm
Charles
Hendry:
The hon. Gentleman gave an interesting analogy.
However, there is a difference between the two funds. A problem for the
pension funds was that they had an unpredictable inflow. They did not
employ as many people as they had done historically, so the amount of
money coming in to the funds was not as great as they had expected.
However, they had a commitment to how much they were going to be paying
out. That is not the case with these funds; there will be a predictable
inflow. There is also a difference in that there will be no significant
calls on the fund while the plant is operating. The main calls will be
once it has closed. All the decommissioning costs will come once the
plant has ceased to operate and it will then be called upon to use the
fund in that respect. The storage of nuclear waste above ground or at
the site will not be covered by the fund. Only when the waste is moved
into a long-term store will the fund be called upon. That is many years
off. Assuming that the natural lifetime of one of the plants will be 40
or 50 years, one will be well into that process before there is a
significant drain on the decommissioning
fund.
It would be
helpful if the Minister could clarify his thinking on how nuclear waste
should appropriately be handled. The Government document
published in February, the “Consultation on
Funded Decommissioning Programme Guidance for New Nuclear Power
Stations”,
said:
“Operators
will be obliged to provide safe and secure interim storage facilities
that are technically capable of being maintained or replaced to last
for at least 100 years from the time when waste or spent fuel is first
emplaced in them.”
Is it
the Minister’s view that 100 years is the appropriate length of
time to store the waste above ground where one can keep an eye on it
directly, or is that figure in the document because he feels that that
is time that might be necessary before a final deep repository is
available and the legacy waste has been put into it, making it
available for new waste? Is 100 years the correct scientific period or
is it based on a practical decision? If it is a practical decision, I
presume that if the waste could be moved to the long-term storage
facility at an earlier stage, he would be in favour of
that.
Can the Minister
also tell us whether he believes that on-site storage should be in
tanks or—as in the United States—stored on the surface?
Although that does not make a fundamental difference to our approval of
the clause, it would be useful to know what he thinks about the
appropriate technology and how long it takes for the waste to cool to a
level at which it can be handled and dealt with more appropriately.
Some say that it takes three to five years; is that his
understanding?
More
generally, I spoke this morning about the Swedish working model, an
example that shows how the Swedes plan to dispose of nuclear waste for
the longer term. Some 10,000 people a year go to see it and there is 80
per cent. local support for the approach. Has the Minister considered
whether we should have something of that nature here? We are some way
off identifying a suitable location, but would it at some point be
appropriate to have such a working model so that people could see what
it is like, be reassured about the process and have their safety
concerns taken into
account?
Malcolm
Wicks:
I am slightly loth to pursue the comparison with
pensions. The hon. Gentleman and I have been in this Committee
room—or a similar one—discussing the establishment of the
Pension Protection Fund and I can therefore see the analogies. Of
course, we acknowledge the responsibility of the then Liberal party for
establishing the first national insurance regime in this country. I am
not saying that the party is at fault for any difficulties that might
have arisen in that fund—but why
not?
Essentially,
what we are talking about, in simple outline—it will obviously
get more complex—is a separate fund for each nuclear
installation, which will be at arm’s length from the company and
will therefore be protected in terms of insolvency law, as we will
discuss later. The fund cannot be touched for any other purpose. Yes,
there will be trustees. One imagines that they will have expertise not
altogether different from that of the people who will staff the new
board that we are establishing, including finance experts and, no
doubt, those with some expertise of nuclear itself, fund management and
investment. The first payments to the fund will be made straight away,
and the aim will be to build up the fund. From time to time, it will be
reassessed to see whether payments need to be increased or, perhaps,
reduced.
In
broad outline, that is what we are trying to achieve, so that at the
end of the day we have sufficient moneys for successful decommissioning
of the structure; for putting the site back into greenfield condition,
wherever that is appropriate and possible; for storage, both short
term—although it could be 100 years or so—or longer term;
and for the share of the geological
repository.
To
go through this in a little more detail, cost estimates will be
regularly reassessed, and contributions to the
fund modified accordingly. We believe that the costs for decommissioning
are predictable, and more predictable than for pensions given its
issues around longevity. However, I am not saying that the costs will
be easy to predict, and I can see that there is a thesis to be written
about that statement. The fund will aim for more than 100 per cent. of
expected costs. On the premium, we have emphasised that we want to be
as sure as we can be that the taxpayers’ interest will be
protected. Moreover, if
the fund is insufficient for whatever reason, the
additional securities—for example, insurance, a financial
instrument or some other guarantees that the Government
require—will kick in. If the fund is insufficient, the operator
must make good the difference, and the provisions in the Bill aim to
ensure that they are required to do
that.
I have been asked
whether money could be taken out of the fund
only when it is full. The funded decommissioning programme must set out
proposals for disbursement from the fund. That is covered in more
detail by the draft guidance currently out for consultation; we are
consulting on all of this. Of course, decommissioning costs, by
definition, are incurred after operation ceases and when the fund is
complete. Costs incurred during the operating life of the
station—for example, for low-level waste disposal—will be
paid for from operating expenditure. Some through-life costs, such as
the construction of interim stores, will be paid for by the fund and
regulated by fund managers. During decommissioning, expenditure from
the fund will be monitored annually and every five years against the
progress on decommissioning and waste management, to ensure that moneys
are being spent on the right
thing.
Charles
Hendry:
Will the Minister provide some clarification? He
referred to facilities where waste might be stored. If waste were going
to be kept for a time in a pond on the site, would the construction and
maintenance of that be covered by the fund? Is that what he is
saying?
Malcolm
Wicks:
Yes, I am saying that. I am not talking about just
the final deep geological storage. I am not a technical expert and
would not pretend to be, even for the sake of this Committee, but I am
talking about a possible range of storage facilities, including, as the
hon. Gentleman suggested, storage that could last a long time. I am not
talking about 100 years, but it is clear that interim storage can be
for a very long time, as we know from
experience.
Mr.
Binley:
Can the Minister give me an idea of the timing
that he has in mind for ensuring that moneys are in place for
decommissioning, recognising that we are talking about perhaps 50 or 60
years? The estimated mean cost for decommissioning is some £640
million, and those who say that it is higher would give a figure of
almost £1 billion. When does he expect to have that sort of
money in the bank and available for
use?
Malcolm
Wicks:
In the situation that we are talking about, it is
important to appreciate the time scales. We are legislating for a
long-term future. I recognise all the
difficulties involved; one must be sensible about
it. The most optimistic suggestion seems to be that the first nuclear
reactor could be up and running by 2018—some say 2017, while
others, perhaps more safely, say 2020. At about that time, the first
moneys would be paid into an arm’s-length fund. I do not know
whether I am addressing the question.
Malcolm
Wicks:
Although none of us can predict, a
reasonable estimate is that 40 years later a new nuclear plant might be
decommissioned, and the moneys would be needed then. Some say that it
could take 10 more years than that, but who knows? It is not for us to
worry about that now. In relation to the fund, the aim of the
fund’s trustees and the national board that we are setting up is
to ensure that the funds are on course to build up the moneys required
by the middle of this century. I hope that is
helpful.
Anne
Main:
I ask for clarification but if the Minister has
already answered this question, I apologise. To use the pension fund
analogy that we were given, will people be allowed to take holidays
from paying into the fund or make deferred
payments?
Malcolm
Wicks:
I recall from recent social history that holidays
for pension funds have created some difficulties for us. Therefore, it
is not for me to say. The important thing is to ensure that the fund
builds up at the right momentum for the right time period. The duty of
the trustees, the national board and the Secretary of State is to
ensure that that happens. The premiums could vary depending on whether
they need to be increased; possibly they could be reduced. The purpose
is to have adequate moneys at the end of the day. If anything, we are
over-egging the pudding. We may well have more money than is
required.
Malcolm
Wicks:
Riches here are presented to me. I give way first
to the hon. Member for
Northavon.
Steve
Webb:
This is a critical issue, relating to something that
the hon. Member for Wealden asked the other day. The Minister keeps
saying “enough money by the end of the day”. The danger
is that the end of the day might come not in 40 years’ time but
in five—if, as the hon. Member for Wealden said the other day,
the technology changes dramatically, or if the cost of producing
nuclear energy is uncompetitive so that the nuclear industry cannot
sell its power at the price for which it has budgeted and becomes
insolvent. Surely the goal is for the funds to build up enough money
not at the end of the day and by gradual accumulation, but quickly
enough so that if something happened suddenly, the money would be
there.
I am not clear
about the profile. Will the liability that the fund must meet be
incremental, or will most of a plant’s future viabilities be
guaranteed once it is running, so a lot of the money must be put in
early on? I am not clear what the Minister is saying about
that.
Malcolm
Wicks:
If a nuclear reactor were to stop after five years,
although I do not think that anyone is assuming that that will happen,
various things that we have discussed—the liability on the
parent company and so on—would have to come into the equation
and the arithmetic. In terms of the schedule of payments, operators
must put forward their proposals for the schedule of contributions to
the independent fund. Of course we favour the front-loading of
contributions in the early years of stations’ operating life.
However, the Government might accept what might be called
straight-line payments, as long as our principles are
met——in other words, as long as the fund is sufficient
before operations cease and as long as adequate alternative securities
are in place to top up the fund should the liabilities crystallise
earlier than expected in the way that the hon. Gentleman suggested.
Such securities will include insurance or bonds or parent company
guarantees. Payments to the fund must begin from day one of electricity
generation at the station, as I hope I have emphasised. I hope that
helps him a little. It looks as if it did not, but he is of that nature
sometimes in his most difficult
ways.
5.30
pm
Charles
Hendry:
I found the explanation quite helpful, so I am
grateful to the Minister. We have discussed how much decommissioning
might cost, and the hon. Member for Copeland suggested the figure of
£600 million, which seems to be a widely regarded figure. If a
plant closed one year after operation, it would cost as much to
decommission as if it ran for 50 years; the facility would have been
used and the decommissioning costs would exist. The point that the hon.
Member for Northavon is trying to get at is whether the £600
million will need to be in the pot on the day that it starts generating
electricity, so that it is available for decommissioning if it closes
down early, or whether —I think this is the answer from what the
Minister just said—as long as there are other guarantees to make
up the money to that level, the plant will not have to have that money
in the pot to begin with, but there will have to be guarantees that the
money will come from other sources.
Malcolm
Wicks:
We do not envisage all the money having to be in
the pot on day one. We have talked about the possibility of earlier
payments—front-loading. However, I said that when we felt that
there was adequate security, through insurance, bonds or clear
commitments from the parent company, the issue could be straight-lined.
That is the important point. The important thing is that we make sure,
as reasonably as possible, that the money exists from the company, from
the fund, but not from the taxpayer, to ensure appropriate
decommissioning.
Mr.
Binley:
Will the Minister give
way?
Malcolm
Wicks:
I am torn between answering earlier questions and
taking new ones, but of course I shall take a new
one.
Mr.
Binley:
Just one more intervention, because I hope that it
may help the Minister. One assumes that the fund will be held
centrally. We are talking about
more than one station, and I assume that it will be held in a central
holding and there will not be any separate accounts for separate
stations.
Malcolm
Wicks:
It is not a Government fund; it will be for the
company to establish an independent fund at arm’s length run by
independent trustees. As civil nuclear is rolled out, there will be a
number of different funds, all separately accountable. There will be no
pooling of funds or sharing of risk in that sense. The only
modification to which I might need to return is when one company is on
one site with more than one nuclear reactor. Indeed, I shall return to
it straight away, because I am so intrigued by the question.
The hon. Gentleman will know
that it is for the operator to set out in its decommissioning programme
its proposed fund structure. Operators may decide to create a
single fund or establish separate funds for their decommissioning,
waste management and waste disposal costs. Whether a company has
separate funds for each reactor or one company fund is a matter for its
judgment, but there will be no pooling across different companies or
across all new nuclear reactors in the land. I hope that that clarifies
the situation; I am grateful for the hon. Gentleman asking me about
it.
I shall
emphasise those points, although I am in danger of repeating myself. It
will be possible to make payments out of the fund only to meet the
costs of waste management and decommissioning. I think that I have made
clear the structure of the fund and our plan to ensure that there is
sufficient funding. The hon. Member for Northavon asked whether money
can be spent outside the fund and claimed back from it. I think that
that was the burden of his question, and the answer is no. We must be
very clear about what the fund is available for and what permissions
are necessary to draw on it.
The hon. Member for Northavon
asked me about the timing for ensuring that moneys are in place for
decommissioning. It would certainly have to be in reasonable time
before the date on which the station is expected to cease electricity
generation to ensure that the appropriate moneys have been built up.
Certainly, sufficient moneys must be in the fund, having regard to
expected investment
performance.
Steve
Webb:
I am puzzled, because the Minister is talking
about bonds and insurance as alternatives to money in the fund. I think
that that is an accurate understanding. In oral evidence, Dr. Higson, a
departmental official, said that because many of the costs will be
front-loaded, either the money would have to be in the fund or bonds or
insurance would have to be in place. The implication was that that will
be an alternative to having cash in the fund. If bonds and insurance
are good enough, why bother with a fund at all? Why not just have bonds
and insurance? What is the added value of the fund? If it has one, how
can we have confidence in it, if it only builds up enough money decades
into the process? I am
confused.
Malcolm
Wicks:
Let me see if I can help the hon. Gentleman with
his confusion. Centre stage is the concept of the fund, which will be
at arm’s length from the company, so that it cannot draw on it.
Generally,
the fund will not be distributed among those calling on the company or
creditors for money if the company goes bust. It is for nuclear
decommissioning and waste disposal.
We are consulting on that
matter, but it is early days, and want to seek expert
advice and to hear from the industry and others. We are saying that a
company could front-load a scheme. I do not mean that it would write a
cheque for, say, £600 million on day one—it could, if it
wanted to, but I doubt that it would—but that it might
front-load in the early years to build up a reasonable amount of money
to guard against eventualities. However, if the company felt that it
would rather take a more rational and straight-lined approach, it would
be allowed to do so only if other securities were available. We are
discussing that with the industry. A company wishing to take a
straight-lined approach could say, “Here are some bonds”,
or, “Here is an insurance scheme.” That could be an
alternative if the company could provide clear guarantees from the
parent company. I hope that the hon. Gentleman is happy with
that.
The
hon. Member for Wealden asked for clarification on the length of time
it takes for waste to cool before it can be disposed of and on the
Government’s strategy for interim storage. Our base case, set
out in the guidance, assumes that spent fuel will be stored in cooling
ponds for a period following removal from the reactor, which follows
best practice and advice from experts. The length of that period will
depend on a number of factors and will need to satisfy the requirements
of the regulators. Spent fuel will then be transferred to interim
stores, the design of which must be agreed with regulators and meet UK
regulatory
requirements.
Finally,
the hon. Member for St. Albans asked about payment holidays. Having
read a note that I have received, I think that I have dealt with that.
The crucial things are that the moneys build up to the necessary level
and that the fund will be regularly reviewed to ensure that it is on
course.
Steve
Webb:
I shall not sleep tonight, unless I get this
straight in my head. My assertion is that company pensions went wrong
and did not have enough to meet the liabilities, despite all the
safeguards that we are talking about, because there
were quinquennial reviews. A lot of this money will presumably be
invested in the stock market, although not necessarily in a risky way.
However, this is a long-term investment so presumably it will be risky.
Stock markets can fall 5 per cent. in a day, so how can the Minister be
confident about what will happen the moment the balloon goes up or the
insolvency event happens, or whatever? There is a way of keeping an eye
on things annually. However, the Minister used the word
“quinquennial”. We know that when such things happen over
time things can change dramatically, funds can be underfunded and the
taxpayer might have to fill the gap. Since that is and was a concern in
respect of pensions, why could it not happen in this
case?
Malcolm
Wicks:
I could say, but I would not convince the hon.
Gentleman, because in this case a former Pensions Minister, namely
myself, is in charge of the strategy. When the hon. Gentleman was the
Liberal Democrat pensions spokesman, the argument never seemed to
reassure him, so I doubt whether it would reassure him in this
instance.
Of
course, there are sometimes significant fluctuations in the value of
equities. In the United States, for example, there has been a credit
crunch. I should have thought that one of the implications
here—it is similar for prudent financial management—is
that the trustees and the board that we are establishing would want to
consider this matter in due course and ensure two things. First, they
would want to see that there is the usual reasonable spread of
investments, as in any fund. Secondly, to make a useful comparison,
when a person is reaching the age at which they wish to retire they
will ensure, wherever possible, that their moneys move into safer
havens—I do not mean tax havens—such as bonds and post
office or building society accounts. They would have to choose a
building society carefully—[Interruption.] Actually, it
is not a building society, so I should not have said that. It should
have stayed a building society, arguably. Nevertheless, as people move
into safer investments on retiring, I assume that 10 years before
decommissioning it would be sensible for even safer investments to be
made. In that way, trustees would do their best to ensure that
all is well with the level of the
fund.
Charles
Hendry:
One thing is for certain: if Robert Maxwell had
been running a nuclear power station, he would not have run off with
the nuclear waste, so that would have been an
improvement.
I
was concerned by the Minister saying that there would be either a
single fund for each nuclear power plant or a joint fund to cover a
range of plants. I am not clear about that: I think that it is being
consulted on, rather than being set in stone. However, that worries me
considerably, because if there is a fund for a group of nuclear power
stations and one is sold there will have to be a difficult
reconciliation of the funds’ relationships and which plant is
being dealt with to ensure that a fund moves with the sale of the
plant. In addition, if there were a downturn in the stock market when
the first plant was due to be decommissioned, more might have to be drawn
out of the fund than was anticipated, which means that money that had
been intended to be used for other power stations’
decommissioning may be taken out earlier. I urge the Minister to
consider having just one fund per installation to provide the security
that we all feel is necessary in this
area.
Will the Minister
clarify whether the appointment of the fund’s trustees will be
wholly in the gift of the companies to whom they relate or would there
have to be Government approval in respect of the trustees being
suitable to carry out their
tasks?
5.45
pm
Malcolm
Wicks:
On the approval of the trustees, I
am sure that we could not just leave it to the
company, but I may be able to give the hon. Gentleman more reassurance
about that. That is an important
question.
In respect of
whether there should be a separate fund per reactor or whether there
could be one for the whole company, certainly, there must be
transparency and separate reporting of funds for each station. I am
advised that there is no prospect of cross-subsidy
between funds set aside for each station. I imagine that we are
discussing whether it is sensible, almost for administrative
convenience, to have one group of trustees. We are consulting on that.
I see the arguments for and against having one set of trustees rather
than trustees for each nuclear reactor. I am sure that we will take the
hon. Gentleman’s advice into
consideration.
Question
put and agreed
to.
Clause 50
ordered to stand part of the
Bill.
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