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Lord Hodgson of Astley Abbotts: I rise briefly to support this group of amendments. I apologise to the Committee for being unable to attend the Second Reading debate; I was abroad on business. Both the noble Lord, Lord Ezra, and my noble friend Lord Jenkin have mentioned the blank cheque aspects of the proposal, but it seems that the problems are less broad than that. However, the proposal is unsatisfactory for a wide range of reasons. It makes no distinction between the need to keep British Energy's generating capacity, which is necessary to ensure adequate surplus capacity to cope with spikes, and decommissioning expenses. Furthermore, it does not differentiate between historic losses and costs and prospective costs and losses.

I believe that we should be dividing the options available to the Government between the four parts of that quadrant: historic and prospective, and generating and decommissioning. I think that my noble friend Lord Jenkin and the noble Lord,

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Lord Ezra, have done a valuable service in asking the Government to be clear on how those parts of the quadrant will be constructed.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville): I shall speak first to Amendments Nos. 1 and 7 and then to Amendments Nos. 3 and 4. I think that a certain amount of clarification is needed on the amendments.

Amendments Nos. 1 and 7 seek to limit the Government's expenditure under Clause 1 of the Bill to historic liabilities. Amendment No. 1 proposes that subsection (1)(a) of Clause 1 be amended so that financial assistance could be provided to the company only in relation to "qualifying activities", which are defined in Amendment No. 7 as,

"financial liabilities generated by a British Energy company prior to 4th September 2002, to a maximum of £2,100 million".

However, the purpose of Clause 1 is not to deal with liabilities in the way suggested by the amendments tabled. It is, of course, true that the Government have stated their commitment to provide assistance for BE's nuclear liabilities. But that will be done using the power provided in Schedule 12 of the Electricity Act 1989, rather than under this clause, provided that this Bill removes the ceiling for expenditure under Schedule 12. I did stress that point at Second Reading when I stated,

"that the expenditure authorised under Clause 1 will not, as a matter of policy, be used to deal with support for long-term nuclear liabilities"—[Official Report, 3/3/03; col. 607.]—

and I reiterate it again today.

So if Clause 1 is not intended to deal with BE's historic liabilities, what is its purpose? Quite simply, Clause 1 is there to cover other expenditure which is not covered by Schedule 12. Principally, this would concern ongoing operational support to keep BE going during the period when a restructuring plan is being put into place. The clause could provide statutory authority for expenditure on British Energy in a number of situations. It puts the loan facility that the Government have provided to BE on a firm statutory footing.

The statutory authority provided by subsection (1)(a) could also be used to authorise Government to provide funding in the event of administration. That would include essential funding to keep the nuclear business running safely as well as funding the administrator in such an eventuality. That would clearly come under the remit of this clause rather than Schedule 12. Finally, it would also allow Government to continue funding the trading arrangements of the operating companies going forward should the restructuring deal fail and should they at any point come into public ownership. Amendments Nos. 1 and 7 would narrow the use of this clause to BE's historic liabilities; but of course, as I have just explained, this clause is not about expenditure on nuclear liabilities, whether historic or future.

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Nevertheless, the principles which motivated the amendments should be discussed. I agree with the principle put forward by the noble Lord that any long-term restructuring aid should be restricted to historic nuclear liabilities. However, we have of course reflected that in government support to the restructuring plan. The key is that, in going forward, British Energy has to pay its own way. That is precisely what is established in the restructuring plan, where, following the restructuring, BE will pay its operating costs going forward, including future spent fuel costs. There is, therefore, no need to amend the current legislation as the clause deals with a separate issue and the points raised in the amendments have been addressed elsewhere.

I should point out that Clause 1 could be used only to the extent permissible under EU state aid rules. So there is a restriction on it in that context. As a result, I invite the noble Lord not to press Amendment Nos. 1 and 7.

I turn to Amendments Nos. 3 and 4. I have already explained how it is not the Government's intention to use Clause 1 for expenditure on nuclear liabilities. Government support for nuclear liabilities under the BE restructuring plan will be done under Schedule 12 to the Electricity Act 1989. That is a provision that deals specifically with nuclear liabilities, and indeed it quite clearly defines,

"the storage or reprocessing of nuclear fuel",

as a qualifying expenditure. So, as with Amendments Nos. 1 and 7, Amendments Nos. 3 and 4 are inappropriate. They attempt to narrow down the type of support for nuclear liabilities possible under Clause 1. However, we have already said that we shall not be using Clause 1 for nuclear liabilities.

However, looking behind the specific form of this amendment and considering the principle behind it, I am still confused. Debating this point in another place, the honourable Member for Twickenham said:

"We would all accept, given the Government's position, that the taxpayer will have to assume decommissioning liabilities in some form".—[Official Report, Commons, 6/2/03; col. 473.]

The honourable Member has clearly recognised the special features involved here. Decommissioning costs are unavoidable. They have to be paid for whether or not BE continues to generate. The Government need to ensure that this important nuclear liability is dealt with safely and properly.

However, those arguments apply also to historic nuclear fuel liabilities—I stress "historic liabilities". Fuel that has already been used in nuclear reactors needs to be dealt with—there is no avoiding that—and it certainly needs to be dealt with safely. If British Energy were to fail, then someone would need to pay to deal with the spent fuel. But that is not to say that we think that BE should have no responsibility for dealing with nuclear fuel costs in the future. Government are taking on responsibility for paying for the legacy of BE's historic spent fuel, but we are not paying for the new contracts for future spent fuel. Those contracts have to be paid for by BE. That is an important

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economic principle. BE has to be able to pay its own way going forward. There is no ongoing operating subsidy.

I hope that that has helped to clarify matters. I ask the noble Lord, Lord Ezra, not to press the amendments.

Lord Ezra: I have noted very carefully what the noble Lord, Lord Sainsbury, has had to say on these amendments. He has made the point that the specific issue raised is in fact raised later in the Bill. None the less, the fact remains that the wording is open-ended. I do not think that it is satisfactory for us to note that some limits to the proposal may be imposed by Brussels. We do not know what those amendments might be; they might be highly variable. I strongly believe that some limit should be placed on this. If we have identified the wrong issues, let us identify the right ones. Let us have the chance of coming back to this. If the noble Lord, Lord Sainsbury, would advise us as to what issues are raised here, we would gladly put that in a revised amendment for consideration at a later stage. He has not answered the point that the arrangement is open-ended so far as the UK Parliament is concerned; I leave alone whatever Brussels may be able to do. We should return to the matter.

3.45 p.m.

Lord Jenkin of Roding: I, too, find the Minister's response only partly adequate. I recognise entirely his point that in the Bill we are dealing with two different objectives for financial aid. The objective with which we are concerned in this context involves the provision of help towards financing running costs; the other objective involves the question of dealing with long-term nuclear liabilities. Neither of the Minister's answers about short-term or medium-term cash help should be as open-ended as they were.

I shall deal with those points in reverse order. The Minister referred to Brussels and the possibility that the Commission may impose some restraints under competition law. Will he say more about where that has got to? Now that the final restructuring proposals are on the table—we finally had announcements about what is being done only a week ago—has there been a submission to Brussels for the necessary consent under the state aid legislation? I asked about that at Second Reading because I had been told that it would take anything up to 18 months to secure that. Has the Minister more information to give to the Committee about where the process has got to and how long it is likely to take? Given the considerable opposition from other generators—I attach much more importance to them than to environmental groups, which have their own agenda in this regard—are the Government confident that the restructuring proposals that British Energy has advanced and which the Government have accepted, will achieve the necessary consents in Brussels? If not, what then?

I turn to the first point, which was about the need for a limit on the sum that can be put in. The Minister referred to Schedule 12 of the 1989 Act. We shall later

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discuss the fact that some of that Act has been repealed. Paragraph 4 involves the "financial limits" of Schedule 12. Sub-paragraph (1)(b) states that grants, loans and guarantees,

"shall not exceed £1,000 million or such greater sum, not exceeding £2,500 million, as the Secretary of State may by order specify".

It was recognised then by my right honourable friends who were in charge that there might be a need to increase the amount. Paragraph 4(2) states:

"No order shall be made under this paragraph unless a draft of the order has been approved by a resolution of the House of Commons".

In other words, Parliament was given a very clear power to withhold or sanction the increase in expenditure. We do not have a power here to do anything; moreover, it is not subject to any parliamentary procedures whatever.

The Minister prayed in aid the provisions of Schedule 12 of the 1989 Act as the provisions under which the Government are giving their support to British Energy. Why on earth cannot he make that subject to the same limitations as applied when the 1989 Act was passed? It appears that the Government want to have it both ways. With the greatest respect, I do not believe that Ministers should be allowed to do that. I ask the noble Lord: will he have another go?

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