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22 Oct 2002 : Column 201—continued

Nuclear Power

Mr. Deputy Speaker (Sir Michael Lord): I must inform the House that Mr. Speaker has selected the amendment in the name of the Prime Minister.

7.47 pm

Dr. Vincent Cable (Twickenham): I beg to move,

I shall concentrate on the wide-ranging implications of the Government's intervention in the energy market in the closing days of the summer recess. I shall pose several issues. The first is to register alarm that the Government have now put at risk about #650 million of public money in the form of what appears to be—no doubt we will receive clarification—an unsecured loan to a privatised company that is running serious losses.

The second issue is that slightly over a year after introducing a competitive energy market—NETA—the Government have decided to panic at the first sign that the energy market is doing what it was supposed to achieve: identifying the companies that could no longer compete in an environment of excess capacity.

My third concern is that in intervening to bail out one company but not others—a variety of projects that have failed, some in the renewable energy/combined heat and power sector—the Government have acted in a discriminatory way that may be illegal, although that remains to be tested. They have prejudged fundamentally important issues about long-term energy strategy.

I am partly making debating points, but mainly I am posing questions. It is extremely unfortunate that the Government did not make a statement on the issue. Regardless of how people regard nuclear or other forms of energy, they want to find out what is going on.

Bob Spink (Castle Point): The hon. Gentleman talks about the Government panicking. Far be it from me to defend the Government, but the Minister for Energy and Construction is an excellent Minister, and the Government do not appear to me to be panicking at all—in fact, quite the contrary. They realise that if we are to save the planet, we must reduce the amount of CO2, and that we must therefore replace nuclear with nuclear. If we are not brave enough to take that decision

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to control global warming for the sake of the planet, the Liberals will have a heavy burden to bear. Will the hon. Gentleman address that point?

Dr. Cable: I certainly shall. As the hon. Gentleman well knows, there are different ways of reducing carbon emissions, not least by placing far greater emphasis on energy efficiency, energy conservation and new renewables than the Government have placed on them so far.

I recognise that we must pose questions as well as make assertions. I acknowledge that the Government face difficult choices—for example, thousands of people working in one generator or another being at risk of losing their livelihood is clearly a serious matter. I recognise, too, that the Government have inherited some serious problems in energy policy, not least the privatised company British Energy.

It is important to delve into the past to some extent. The circumstances in which British Energy was privatised were scandalous: it was sold at a price that barely covered the construction costs of one of the eight reactors that were sold off. We saw such rip-offs in Russia in the early days of the post-communist era, but it happened here in this country with British Energy. The people who have subsequently run the company have displayed a mixture of stupidity and greed comparable to that seen in some of the other utilities. In 1999, when severe losses were already accumulating, the company decided to pay out #430 million in an extra dividend to its shareholders. Earlier this year, when the company had already recorded very large losses of more than #500 million, the chief executive was awarded a performance bonus. Those who ran British Energy went around the world making acquisitions—for example, in north America—but did not concentrate on the increasing competitive problems within their own industry. That is the company whose shareholders the Government now want to rescue.

There are other factors to be taken into account—for example, many of the reactors are old. The nuclear power industry has a long and complex history: it started in the 1950s, often inspired by genuine and admirable idealism—people wanted to convert the dangers of nuclear warfare into creating a form of cheap energy that would last indefinitely. Policy was taken forward in the 1960s by Harold Wilson, Tony Benn and others who believed that big science and state planning could drive the nuclear energy sector. Mrs. Thatcher was a great fan—perhaps inspired in part by the fact that it was a form of energy that did not pass through the hands of either Arabs or coal miners. Nuclear power had strong patronage from both sides for a long time, but then came an abundance of reports from the Organisation for Economic Co-Operation and Development and others, including the Brundtland report in the mid-1980s, which shows that not only did the nuclear power sector pose serious environmental problems—waste disposal and so on—but it was not economically competitive. It beggars belief that in introducing an energy market the Government did not anticipate the development that has taken place in the past few months.

Mr. Tom Watson (West Bromwich, East): Is the hon. Gentleman suggesting that the Government should

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allow British Energy to enter bankruptcy? If he is, will he suggest how the 15 per cent. reduction in base load could be replaced overnight?

Dr. Cable: The logic of my argument is clearly that British Energy should, if necessary, go into administration—the process that deals with companies that can no longer trade commercially. I shall explain how I think some of the problems surrounding that could be resolved.

Mr. Kevin Hughes (Doncaster, North): No one could ever accuse me of being a supporter of nuclear power—I have never been—but I recognise that the Government have to have their eye on security of energy supply in this country, and that to maintain that properly they must secure diversity of production, which has to include some element of nuclear power production. Does the hon. Gentleman accept that?

Dr. Cable: I certainly accept that security of supply is an important consideration, but I do not think that that is an issue at the moment—there is vast spare capacity in the industry. Nuclear power may or may not be part of the story—we neither advocate nor oppose it as a matter of principle.

Mr. Andrew Lansley (South Cambridgeshire): The hon. Gentleman refers to the uneconomic character of the introduction of nuclear power generation, but whether it was economically viable at the outset is not so much the issue today as whether the continuing operation of that nuclear plant is economically viable in relation to the current market for electricity. Does he agree that that is the case, and what is his view on economic viability in terms of the marginal costs of operating British Energy's plant?

Dr. Cable: The current market position is as follows. As the hon. Gentleman knows, there has been a fall of 40 per cent. in the wholesale price of electricity in the past three years. British industry has benefited considerably from that reduction to the extent to which it has been passed on. As a result of competition, monopoly profits in the privatised energy generators have been stripped out to a large extent. That has left the nuclear power industry, especially British Energy, selling at a price 20 per cent. below the price at which it could make a profit. That is how fundamentally uncompetitive the industry has become.

The question is, in those circumstances and with a lot of excess capacity in the energy industry—estimates vary, but National Grid says that there is 30 per cent. excess capacity, and that figure could well rise if there is a downturn in the economy—why should the Government intervene to assist one company? A series of answers to that question have been given, and I shall work through them.

The first and probably the most important answer cites nuclear safety. Last Thursday, I asked the Leader of the House about this matter. He is clearly a highly intelligent Minister and he is familiar with the arguments, so he did not simply spurt out his answer, which was that the Government had intervened because

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they were concerned about the safety issues that might arise if British Energy were to cease production. The right hon. Gentleman is right to put the fundamental issue of safety at the top of the list—we share that starting point. However, it is an odd argument, because there is no reason why the closure of a nuclear plant should present a risk to public safety. One of the reactors—Torness—has already been closed, for technical reasons. Perhaps the Minister can give one, but there is no obvious reason why a company that has been received into administration should present a health and safety risk. The Government have a health and safety system that is designed to protect the public in such circumstances.

What I think is happening—if it is, it is an alarming development—is that the company is, in effect, blackmailing the Government. The company is saying to the Government, XYou sign the cheques to pay to bail us out; otherwise, we will lock the doors, walk away from our installations and leave you to take the risk of any accidents that occur."

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