Conclusions and recommendations
Waste Substitution Income
1. We
emphasise that none of the issues raised in this short report
should have any consequences for the construction of new nuclear
power stations. Separate special funding arrangements are being
developed for their decommissioning. (Paragraph 7)
Shortfall in the NDA's Budget
2. The
National Audit Office (NAO), in its January 2008 report into the
NDA, identified uncertainty as to whether the waste substitution
income budgeted for would actually be forthcoming in the 2007/08
period. It seems that this uncertainty has been resolved and the
money has been raised; we are therefore surprised that the NDA
was suddenly told by the Treasury thatowing to a technical
accounting issueit might not be able to spend it. (Paragraph
12)
3. We
believe this issue could and should have been addressed earlier.
The nature of waste substitution income has been known since the
2004 consultation, if not earlier, and we find it unlikely that
the relationship of these contracts to the original reprocessing
contracts became clear only immediately before contracts were
finalised in December 2007. (Paragraph 13)
NDA Derogation
4. The
previous existence of a derogation allowing the NDA to recognise
the income from some long-term contracts upon receipt suggests
that the NDA, the Treasury and the Department should already
have been alert to the fact that the accounting treatment of long-term
contracts might need to be considered. We are therefore surprised
and disappointed that when this issue reappeared, albeit in a
different context, everyone appears to have been caught unawares.
(Paragraph 16)
5. The
2005/06 derogation could have been the basis for a solution that
would not have involved spending £256 million of the Department's
accumulated EYF and claiming on the reserve. We would like to
know if this was considered as an option once the issue came to
light and, if it was rejected, for what reason. Given the references
to the derogation in the Estimate Memorandum we would like to
know whether any party wrongly assumed that the derogation still
applied and if notas seems likely from the evidence we
receivedwhy the Estimate Memorandum made reference both
to the derogation and the date of its expiry in April 2006. (Paragraph
17)
Spring Supplementary Estimate Memorandum
6. The
Spring Supplementary Estimate Memorandum did not give an entirely
accurate picture of the situation. Accuracy in such documents
is always essential, but for such a large request for additional
funding at such a late stage in the financial year, this is particularly
regrettable. These differences between the Memorandum's version
of events and what we were told in evidence suggest poor communication
between the Department and the NDA, which might have played some
part in the situation occurring in the first place. We expect
that future Estimates Memoranda will be drawn up after close consultation
between the parties involved. (Paragraph 21)
Impact on the Department
7. We
recognise that, due to the provision in the Spring Supplementary
Estimate, there has been relatively little impact on the NDA,
despite the sums of money involved. We are concerned, however,
that accounting uncertainty had the potential to impact drastically
upon the NDA's funding of decommissioning of existing nuclear
liabilities. We urge the Government to resolve this issue as soon
as possible in a way which will not delay future spending on decommissioning.
(Paragraph 25)
8. Sir
Brian told us that the precise sequence of events that led up
to the requirement for an additional £303 million is the
subject of a review within the Department, HM Treasury, the NDA
and the Shareholder Executive. We look forward to receiving the
Permanent Secretary's promised note outlining its findings and
any action to be taken. In particular, we would like to know exactly
when and how this issue came to light, what advice the Department
gave to the NDA, what advice the Treasury gave to the Department,
what grounds there were for the Treasury's apparent insistence
on spreading this income over several years and what action will
be taken to ensure that such issues are identified sooner in future.
(Paragraph 26)
Funding the NDA
9. Public
funding for the NDA will almost certainly have to increase significantly
in the coming years over and above current plans. If nuclear decommissioning
is going to be carried out as planned this has major implications
for the Department for Business, Enterprise and Regulatory Reform,
which already spends over 40% of its Departmental Expenditure
Limit on the NDA. (Paragraph 31)
10. We
welcome the assurance given by the Permanent Secretary that the
Department's budget will be insulated from the NDA for 2008/09
and subsequent years and look for further specific assurances
from Government that NDA funding requirements will not impact
on other areas of the Department's work. Government departments
that have experienced funding problems in one area of their activities
have often had to make reductions in other unrelated areas. The
scale of the NDA as a proportion of BERR's overall budget makes
such a prospect completely unacceptable in this case. (Paragraph
32)
11. We
believe the NDA's funding model is unsustainable. We note the
Department's assurances that a solution has been found for the
current Comprehensive Spending Review period. However, in view
of the volatileand decliningnature of the NDA's
commercial income we are sceptical about how watertight such an
assurance can be. Nuclear decommissioning is too important to
be left to the mercy of changing priorities in the Treasury and
uncertain commercial income; as the Permanent Secretary acknowledged,
a new system of funding is needed, and work on this needs to begin
urgently. (Paragraph 37)
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