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22 Oct 2002 : Column 204—continued

Mr. Parmjit Dhanda (Gloucester): The hon. Gentleman might be aware that in the local elections earlier this year the Liberal Democrats gained Barnwood ward in Gloucester, which happens to be the home of British Energy. Does he have a message for that Liberal Democrat ward and the 1,000 or more employees of British Energy it contains?

Dr. Cable: The message that I would send to those employees is the same message as I would send to thousands of people across the country, in wards where there are plants with power generation through gas, coal and nuclear, all of which are faced with the loss of their livelihoods. The issue is why the Government have intervened to help one type of plant but not others.

The first ground given for intervention was safety. As I suggested, and I use the word reservedly, I think the Government are being blackmailed into supporting the company. That is a dangerous game. The company could well come back to the Government and say, XYou have given us #650 million. That is not enough. We need more. We need #1 billion. We need #2 billion, and unless you provide it, public safety is at risk." That is a very dangerous argument, if the Government have embraced it.

The second argument that has been advanced relates to the security of supply, which the hon. Member for Doncaster, North (Mr. Hughes) raised a few moments ago. It is right that the Government should be concerned that the lights are not switched off—that we do not have a California-style situation. If that is what the Government are concerned about, it is a reasonable preoccupation. However, nothing could be further from the present position. We have, as I said, roughly 30 per cent. spare capacity, despite conditions of peak demand in winter, in an industry where British Energy is generating about 17 per cent. We have a great deal of capacity in the industry. The equivalent of eight nuclear power stations have already received planning consent. As the Government's energy review demonstrated, with reasonable policies the Government could save about 30 per cent. of nuclear output through energy

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conservation, so the idea that we face a California-style switch-off is ludicrously far removed from the present circumstances.

Mr. George Osborne (Tatton): The hon. Member for Doncaster, North (Mr. Hughes) said that nuclear power may or may not form part of the future energy supply, according to the Liberal Democrats. Is the hon. Member for Twickenham (Dr. Cable) telling us that he has initiated a debate on nuclear power but that his party has not decided whether nuclear power should form part of the future of energy in this country?

Dr. Cable: I shall deal shortly with the so-called issue of keeping the nuclear option open. I have one point to make before I come to that.

The third issue is the Government's concern that if the company goes bust, they will have dumped on them about #5 billion of decommissioning liabilities that at present, technically and legally, are the responsibility of the shareholders. I understand why the Treasury would be concerned about that, but we are grateful to Greenpeace, among others, which has done some delving into the exact accounting position in respect of decommissioning liabilities. Greenpeace made the point, which many people overlooked at the first run, that those massive sums are not discounted to present value. They represent commitments stretching decades into the future. If the Government were concerned about provision for decommissioning, that could be met by an annual payment of #40 million.

Mr. Kevin Hughes rose—

Paddy Tipping (Sherwood) rose—

Dr. Cable: I will give way, but I was hoping to deal with the question from the hon. Member for Tatton (Mr. Osborne) about where we see nuclear power in the picture.

The fourth argument that is advanced, which comes to the heart of the debate, is that we must at the very least keep the nuclear option open. The problem is that there are different ways of doing that. It is quite possible that, in years to come, nuclear power technology will have advanced to a point at which it has dealt with the environmental problems that concern us and it is cost-competitive. That is why my colleagues and I believe that it would be prudent and right for the Government to invest in research in nuclear power. That would be a profitable, useful role for the Department of Trade and Industry. That is quite a different matter from a large-scale bail-out of one particular company that cannot compete at this stage.

Paddy Tipping: The hon. Gentleman is right to say that there is over-capacity in the industry, but he is wrong when he says that it is 30 per cent. at the peak in winter. The figure is probably 17 per cent. His party relies on renewables to make up any gap, but of course renewables are not effective in the winter. There needs to be a reserve power. Is he saying that his party does not support nuclear today, but will support nuclear in the future? That seemed to be the way that he was arguing.

Dr. Cable: I said that we should invest in nuclear research, and we would do so with an open mind.

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[Interruption.] Let me deal with the hon. Gentleman's question. He made a perfectly good intervention, and I shall take it seriously and deal with it. He disparages renewable energy, but the Minister of State, Foreign Office used a wonderful phrase last week in a speech on energy security. He spoke about the need for a portfolio of renewable energies—a variety, not one or a particular one, but a mixture of biomass, wind, wave and so on. All sorts of artificial obstructions, such as planning consents, are being put in the way of wind development. Biomass has developed, but has shut down in this competitive market. The Government are not proposing to bail that out. They are proposing to bail out nuclear power.

Mr. Watson: The National Grid believes that overcapacity of 20 per cent. is sufficient to ensure security of supply in times of peak demand. Should British Energy go under, the estimate is that the capacity would be only 8 per cent. over average. Will the hon. Gentleman answer my original question about where the additional capacity would be generated from?

Dr. Cable: There is clearly a debate about the right numbers. The figure that the National Grid supplied to the Government was 30 per cent. It may not be right, and the Minister may come up with different numbers. Of that total, about 6 per cent. has been mothballed, although it can be re-opened at any time.

Mr. Crispin Blunt (Reigate): It is important that we try to establish what Liberal party policy is. I am indebted to federal policy consultation paper No. 61, which states:

The hon. Gentleman has just told the House that he and his hon. Friends have a quite different policy. Perhaps he can help us.

Dr. Cable: The hon. Gentleman is either not concentrating or not terribly bright. Any sensible, open-minded energy policy must research its options. The document stated that we supported the phasing out of nuclear power at the end of its life, and I entirely endorse that. I should be interested to hear what public expenditure commitments the Conservatives are prepared to make. The present crisis in the industry has foreshortened the period over which the phase-out will occur.

Several hon. Members rose—

Dr. Cable: Let me press on. I have taken a fair number of interventions. I shall take one more from the Government Benches, but then I shall move on.

Mr. David Drew (Stroud): I thank the hon. Gentleman for giving way. Does he envisage that the phasing out of nuclear energy would include the interconnector? One of the problems for the German Government and the politicians of some parties in the

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UK seems to be the willingness to use foreign nuclear sources, while getting rid of national nuclear. Is that not hypocritical as an energy policy?

Dr. Cable: I was not proposing to get rid of the interconnector. If French taxpayers are so foolish as to subsidise British consumers, I am not sure that we should look a gift horse in the mouth.

Several hon. Members rose—

Dr. Cable: Let me move on to the future.

Several hon. Members rose—

Madam Deputy Speaker (Sylvia Heal): Order. The hon. Gentleman is clearly not giving way.

Dr. Cable: I have tried to deal with the arguments that I think are being advanced for the Government intervention. I shall move on to the future and consider the Government's intentions.

The first question that we need to ask is how the Government will get their #650 million back. That is an important question, because we know that the budget is not as comfortable as it was six months or a year ago. How is the money to be retrieved? As far as I understand it, the loan is not secured. It was made to a company that was losing money in the previous financial year at a rate of #500 million a year. The energy market is not improving, so how will the money be generated? Another #1 billion-worth of creditors have secured their loans. Where will the money go? I have a very strong suspicion that it will simply be lost.

The Government have aired in public a series of options for retrieving the situation. The approach will involve one of two things. Either they will scrap the energy market that they have created, do a complete volte face in respect of the whole principle of competition in energy supply and go back to the days of direction and quotas, or the companies will find money through a different route—in other words, a hidden subsidy rather than an overt one.

I believe that two mechanisms are being seriously negotiated in Government. The first is exemption of the nuclear power industry from the climate change levy. At first sight, that seems perfectly sensible. After all, the nuclear power industry does not produce any carbon dioxide, so why should it pay a climate change levy? If the Government had listened to our advice and established a proper carbon tax that was charged upstream on gas, coal and oil, the problem would never have arisen. However, what they call a climate change levy is not such a levy at all; it is an energy tax that is arbitrarily applied to a set of industries. If they now exempt the nuclear power industry while applying the measure to other suppliers despite the fact that nuclear energy generates its own environmental problems, they will create severe problems in ensuring a level playing field in the market that they have created. The possibility of such an approach also raises the question of where the money to pay for the exemption should come from. The Chancellor said clearly that the funds

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need to be offset against employers' national insurance, so any rebating will have to be found through that mechanism, which will impose a charge on the rest of British industry.

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