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Lord Hodgson of Astley Abbotts: The amendments to Clause 2 have been grouped under two major headings. The first is the aspect of the financial blank cheque. Clause 1 deals with British Energy, but, as various Committee members said, Clause 2 goes much wider. The second is the legislative black hole, which my noble friend Lady Miller of Hendon referred to. The Minister sought to reassure us about both aspects.
My noble friend Lord Gray made a powerful argument, which I accept, about the importance of nuclear energy. Perhaps he will forgive me for saying that, if one wishes to support nuclear energy, it is an extension to Clause 1, not an opposition to Clause 2. Clause 2 is about the expansion beyond the narrower remit, whereas Clause 1 is about British Energy, our
nuclear supplier. I accept his points, especially that on the White Paper, which fluffed the issue and left us no further forward despite months or years of consultation.I, too, accept with gratitude the Minister's change of heart about the proposal on statutory instruments. I accept his good intentions about how the legislation will be used. I accept that he believes in market forces. I heard him talk powerfully about the matter during the passage of the Enterprise Bill, so I know that he believes in the importance of the market. But, as my noble friend Lord Jenkin said, he cannot tie the hands of his successors, and his successors may not have the faith in the market that I know he has.
5.30 p.m.
Lord Sainsbury of Turville: Clause 2 is an important part of the Bill. It has two main elements: removing an existing barrier to acquiring shares from the Electricity Act 1989, and a delegated power to tidy up the rest of Part II of that Act.
I shall focus on the first of those elements because it is the more substantive part of the clause and because we have already debated the delegated power in relation to Amendments Nos. 9, 10 and 11. As I explained, the Bill will ensure that Government are prepared for either eventuality regarding British Energy's restructuring deal. It allows us to play our part in the restructuring if the company can deliver on the other elements of that deal. However, it also ensures that we are prepared for the eventuality that the deal fails and the company goes into administration.
If the company goes into administration, the Government need to ensure continuity for the nuclear business. We will do that by ensuring that they can step in to acquire BE if necessary. That is why we are removing the existing target investment limit block from the Electricity Act.
I have explained why the Government want to be in a position to acquire shares in the BE operating companies. Let me now in turn explain why we are doing that by repealing Sections 72 and 74 of the Electricity Act 1989 in their entirety rather than through some more narrow provision that relates only to BE. The simple fact is that the provisions are now outdated and inappropriate to the current electricity industry and we believe that it is sensible simply to remove them.
The provision of a target investment limit through Section 74 may well have made sense at the time of privatisation. It would have given some level of certainty to investors that the privatisation process would be carried through and not immediately reversed. However, those provisions are of very limited relevance now, a decade later, when the industry looks nothing like it did in 1989. The provisions are very narrowly defined and relate only to a small number of companies: the successor companies created in the industry restructuring for privatisation. They apply only to that small number of specific Companies Act companies and not to any wider
corporate group of which those companies may now be a part or to any new ones. The provisions from 1989 do not anticipate the fact that the assets that were privatised a decade ago may no longer be part of the same Companies Act company—for example, if a company has restructured itself by moving assets into a new company within the same group. The provisions certainly do not take account of all the new entrant companies that have come into the market since then. In short, the provision relates quite narrowly to a specific set of companies from 1989 and not to the electricity industry as a whole.Indeed, there is a significant portion of the electricity industry to which the restriction on the Government's ability to purchase shares does not apply. In the generation sector, new entry and reorganisation already mean that much electricity generation plant is no longer held by successor companies under the Electricity Act 1989. As a result of the Utilities Act 2000, the former public electricity supply companies were required to reorganise themselves into separate supply and distribution companies, again making changes to the industry structure. So, the current barrier to acquiring shares in companies does not apply in a uniform manner. There is no level playing field. It applies in some cases and not in others: whether it applies or not is often a matter of historical accident rather than deliberate logic. The repeal of Sections 72 and 74 would simply remove the indiscriminate application of that law.
I know that some noble Lords have questioned why the Government should still be taking the provision forward, given the progress that has been achieved by BE in relation to the restructuring deal. In particular, I refer to the agreement in principle by BE's creditors on 14th February. Indeed, at Second Reading the noble Baroness said:
- "Despite the fact that an acceptable restructuring scheme has been achieved, the Government are still pressing ahead with the Bill in its present form allowing for the two alternatives of there being a scheme or there being no scheme . . . Why are we not considering a new Bill covering the situation as it now exists, rather than what it might have been without the restructuring scheme?".—[Official Report, 3/3/03; col. 610.]
I admire the noble Baroness's optimism, but we must take a responsible position and be prepared for the worst. British Energy is by no means out of the woods on delivering its restructuring plan. Several important hurdles remain. BE has an agreement in principle from its creditors that it must take it a step further and get a full, binding agreement. It must also sell its stake in AmerGen, its venture in the United States, and the restructuring plan must be agreed by the European Commission under the state aid rules. None of those things is in any way a foregone conclusion, and there is still a realistic possibility that the restructuring plan could fail and the company end up in administration.
A failure of the BE restructuring plan could happen, in spite of what the noble Lord, Lord Jenkin of Roding, said, with limited warning, and Parliament
might not be sitting. So, it would be remiss and short-sighted to assume that the risk of administration had gone away and to remove the provisions from the Bill.Clause 3 [Amendment of Schedule 12 to the Electricity Act 1989]:
Baroness Miller of Hendon moved Amendment No. 12:
- Page 2, line 29, leave out subsection (2) and insert—
The noble Baroness said: Clause 3(2) repeals the provisions in Schedule 12 to the Electricity Act 1989, which limits the expenditure that the Secretary of State may incur for the storage or pre-processing of nuclear fuels; the treatment, storage or disposal of radioactive waste; or the decommissioning of nuclear installations. That limit goes from £1 billion up to £2.5 billion. Those are substantial sums in their own right, but the Government wish to remove that limit.
The Government propose to remove the limit without giving any explanation in the Explanatory Notes. On 5th September last year, when challenged on the subject on BBC news, the Secretary of State said that there was no question of taxpayers writing a blank cheque to British Energy and its shareholders. What is the removal of any spending limit but a request for a blank cheque? At the same time, I ask the Minister to tell us what is the Government's current estimate of the costs incurred for the purposes set out in Schedule 12 that I have just described.
The Minister in another place said that the removal of the limit would give the flexibility to meet eventualities. The limit that the Conservative government wisely imposed on the expenditure was expressly designed to inhibit such flexibility. Flexibility is Whitehall-speak for a free hand to do whatever a Minister decides to do, with no parliamentary control. A Conservative government with a well established track record of financial prudence would not put temptation in their own way to spend however much they chose. How much less should we give such flexibility to the current Government?
In another place, a limit different to mine was proposed. The noble Lord, Lord Ezra, has tabled an amendment proposing a figure of £3.5 billion. I have not plucked the figure in my amendment from the air; it is double the 1989 upper figure, to take care of inflation over the past 14 years and any contingencies that were unforeseen in 1989. It also takes care of the problem that I mentioned at Second Reading, namely that the ring-fenced decommissioning fund has been unwisely invested, resulting in paper losses of £110 million since last April. As I also said at Second Reading, it is Parliament's job to control the excesses of the Executive.
I do not wish to conduct some sort of auction; I simply invite the Government to come up with a realistic figure that they can justify not only to us but
"(2) In paragraph 4(1) (financial limits on grants, loans and guarantees under that Schedule) for "£2,500 million" there is substituted "£5,000 million"."
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