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Lord Whitty: This is a difficult area. The amendments deal with various aspects of the charging of third parties for work carried out by the NDA, including the very large costs of decommissioning.
Amendment No. 8A would set a condition on the Secretary of State's ability under Clause 3(4)(e) to direct, with the operator's consent, the NDA to take over responsibility for private nuclear sites. It would require, as has been said, the operator to have a segregated fund to cover the costs of decommissioning its sites. In an ideal world, the Government would support the principle that any future operators of nuclear sites should be able to
pay the costs of decommissioning. In reality, those costs are substantial, and we do not necessarily believe that it is appropriate for decommissioning funds to be held in advance of need.It is not possible to establish an independent fund that is sufficient to support what appears to be the NDA's long-term programme, unless we get the operators to set aside billions of pounds to meet those decommissioning costs. To establish such a fund now, if it came from the public purse, would hardly be a prudent use of public funds. To require current and, indeed, if there were new nuclear build, future operators of nuclear power stations to do so would have a substantial effect on the economics of nuclear power.
I did not respond to the earlier thrust of what the noble Lord, Lord Jenkin, said to the effect that the economics of nuclear power work out. Certainly, if we were to do it, the economics of nuclear power would not work out, whatever arguments we may have without this. Indeed, in the only example that we have before us now, the amendment would, in effect, prevent the Government meeting their commitment to stand behind British Energy and their liabilities to the extent that British Energy is unable to pay for them itself. Under the terms of the solvent restructuring agreement with British Energy, the company will pay moneys into a nuclear liabilities fund, and that fund is to meet the costs of the decommissioning of BE's nuclear stations and the costs of uncontracted liabilities. As part of that restructuring deal, the Government will have to underwrite that fund, in the event that that fund proves insufficient.
Unfortunately for Treasury Ministers, and for DTI and Defra Ministers, it is ultimately the responsibility of government to ensure the safe operations of the sites. Therefore the agreements with BE provide the Government with an option to acquire BE stations which BE has concluded it intends to close, and the costs of decommissioning will have to take that option into account. The ability to require British Energy or any future operator to establish comprehensive funds now would not be completely feasible. As the noble Lord, Lord Jenkin, acknowledged, if the amendment were taken literally it would also prevent us dealing with emergencies such a nuclear train crash. Clearly the NDA would have to take over such a site immediately. I am sure that no one intended the amendment to have such an effect.
The amendments tabled by the noble Baroness, Lady Miller, seek to establish a new fund that would ensure that the NDA itself controls all commercial receipts, rather than their being paid into the Consolidated Fund. Grant income would also be paid into that nuclear liabilities fund. I assume that the concern is that future Treasury Ministers—not the noble Lord, Lord Jenkin, in his time, I am sure—might look to use the fund for other purposes. Again, that fails to recognise the dimensions of the problem. The costs of clean-up activity and of decommissioning will far outstrip any likely income to the NDA from its commercial activities.
The annual cost of clean-up may be predictable in the short to medium term, but it is not in the long term. As an example I cite the commercial revenues of operating plants such as the Magnox power stations. The NDA would therefore be wholly dependent on an annual grant from government to discharge its responsibilities. The idea that it would hold those moneys to meet the future costs of decommissioning is difficult. The NDA will be funded by the Government within the usual public spending plan.
The Nuclear Decommissioning Funding Account, by recording the NDA's expenditure and income and being maintained at a sufficient level to support a rolling 10-year programme of activity by the NDA in accordance with the agreed strategy, would provide sufficient confidence from the public and markets for the NDA to have the necessary resources to drive clean-up forward and encourage competition for clean-up contracts. However, to require the NDA to keep a fund that would meet all future contingencies would be difficult.
The intention of Amendments Nos. 13, 15 and 33 is to strengthen the interpretation that, in most if not all circumstances, third parties would be required to meet the costs of clean-up carried out by the NDA. That goes back to the "polluter pays" principle. The Government support that principle but there may again be circumstances in which a private sector operator cannot meet its nuclear obligations. In those circumstances, the Government's ultimate responsibility for human safety and the environment means that we must retain the possibility of the Government meeting such costs.
That will apply whether the Secretary of State decides to charge in a direction to the NDA or whether the NDA is carrying out its established function. Amendment No. 33 would impose a similar obligation on the NDA to charge for anything for which it does not have formal financial responsibility under Clause 21.
The amendments would not have the desired effect. Although I can see why people are reacting to the use of "may" in the circumstances—it seems to cut across the "polluter pays" principle—it recognises that there needs to be an element of discretion, the exercise of which will be subject to the normal requirements of administrative law. Replacing it with "should" would in practice introduce another level of uncertainty about what happens when the private operator's funds are not sufficient to meet the costs of the clean-up. That uncertainty is precisely what we want to avoid in the Bill.
Amendment No. 18 would prevent the Secretary of State giving the NDA the function of acting on his behalf in relation to agreements with third parties for nuclear decommissioning and clean-up activity. An example would be the NDA undertaking a similar arrangement to that made by the Government in respect of British Energy.
While I understand the argument, to proscribe the Government from using the NDA to fulfil such obligations would deprive them of the expertise and experience of the public body best equipped to deal with, for example, British Energy. If they were
prevented in that regard, the Government would have to develop other expertise, thus duplicating the capacity of the NDA. That would not be in the best interests of the taxpayer or represent good value for money.That is not to say that the Government's responsibility for funding these activities will be in any sense different because, as I have said, the commercial income of the NDA would not cover them. But using the NDA as a conduit or interface for any future British Energy-type crisis should not be prevented by this legislation.
The legislation should allow the NDA to take over not only responsibility for the clean-up of private sector sites—that is central to its function—but, in extremis, to meet the costs of those activities and to act on behalf of the Government in various ways to ensure that those activities are carried out and paid for.
This is a complicated group of amendments, all of which address the issue of the costs of clean-up and decommissioning. However, some of the suggested changes do not fully reflect the enormous costs involved or the reality that, in certain circumstances, it is inevitable that the operator will not have sufficient funds to cover those costs. Ideally, we would want to see all such costs internalised and any nuclear component of our future energy requirements to be so covered. However, the real world is not like that; it is certainly not like that now, as the position of British Energy demonstrates.
It is also difficult to envisage such a situation in the future, even for those members of the Committee who want to see a large nuclear sector. Were the economics to work out in the short term, there would still be a real problem if we restrict payment for decommissioning and clean-up either to segregated funds for the operator or to our pre-established fund for the NDA itself. Ultimately there may be some liability to be borne by government, but that is simply to recognise the reality of these matters.
5.45 p.m.
Baroness Miller of Chilthorne Domer: I wish to apologise on behalf of my noble friend Lord Ezra. He deeply regrets the fact that he has had to leave the Committee to attend an urgent appointment at five o'clock. He is extremely sorry to have missed the debate and the Minister's response, but he will read carefully the report. Under any other circumstances, he would not have left the Committee.
I thank all noble Lords who have spoken in this debate. I was pleased to hear the noble Lord, Lord Jenkin, say that this issue must be taken seriously. It is an enormous subject. In his response the Minister stressed that we must look at the reality of the situation. Of course we must do that, but it is also our duty when considering legislation of this kind to consider what should happen in an ideal world.
One of the difficulties of the Government's stance is that it does not recognise the problems of the past that we are trying to resolve so that we can approach the future on a more ideal footing. It is interesting to note
that both the pro-nuclear build lobby and those members of the Committee who represent the anti-nuclear build lobby are agreed that this is something we want to see included in the Bill.The amendment is desirable, first, for the reasons set out by my noble friend on introducing it and, secondly, because without it the whole of the rest of the private energy market will be skewed in favour of any future private nuclear operators. They will not have to consider seriously the costs of decommissioning.
I should also refer the Minister to what the then government said in their July 1995 policy review of radioactive waste management. They declared that segregated funds should be established for decommissioning. I wonder whether this Government have actively changed that policy, or whether it has been altered without any discussion anywhere other than in this Committee. I realise that a different government said that, but it seems to be a change of policy that slipped through.
Grouped with the amendment were our objections to Clauses 32 and 74 standing part of the Bill.
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