Examination of Witness (Questions 60-79)|
WEDNESDAY 31 OCTOBER 2001
60. There is no sort of distribution between
the four parts of the United Kingdom about how much of the target
they will be expected to contribute?
(Ms Hewitt) No.
61. Secretary of State, you were talking earlier
about timescales; what would you expect would be the timescale
for decision-making, once the PIU report is published?
(Ms Hewitt) I think we are going to need to look at
the PIU report; but there will be large decisions to be made,
and my own personal view is that the sooner we have Government-wide
agreement, not only on our objectives but on the strategy, the
better, but it will really depend, I think, on just how far the
PIU team are able to take us, in going beyond simply analysing
the problem and giving us the outlines of the strategy and getting
down into the detail. And, frankly, until I see the report, I
do not know how much more work will have to be done.
62. On a different question, could I ask you
whether you feel that there should be anything factored in for
the present international crisis and the concerns following from
11 September? I just take as an example that a number of people
expressed surprise that the decision to agree to reprocessing
at Sellafield was taken so quickly after those events, given the
concerns that had been expressed as to whether an aircraft flown
into a plant could create a Chernobyl situation, and, of course,
the concerns that the international transport of fuel elements
could, if it fell into the wrong hands, obviously be used at least
in a `dirty' weapon, if not in a full-scale nuclear weapon. Do
you feel that appropriate consideration should be given to that;
obviously, it has environmental and other possible consequences?
(Ms Hewitt) The decision on Sellafield MOx was made
on the basis both of the environmental assessment, including the
assessment made by the Royal Commission, and the economic assessment
that was made and published and you will be well aware of. The
nuclear industry, quite rightly, is very heavily regulated and
very close attention is paid to the security issues; in any case,
those security issues, as you say, become all the more pressing
in the light of the events of 11 September, but I do not think
it would have been right to put that decision on hold. There is
a broader issue. The events of 11 September clearly raised questions
about security of energy supply across the world, and, within
Government, the Treasury and ourselves were working with OPEC
to try to ensure that there was as little disruption as possible
to oil prices and to oil supply, and indeed OPEC have put in place
mechanisms to try to ensure a smooth market going forward in oil.
There is no settled view yet within the oil industry about what
the longer-term effects will be; and, to a large extent, it does
very much depend on what happens both in the military situation
and in the economic situation. But, in a sense, I wanted to respond
to your question by saying that we have indeed been looking at
the broader energy supply implications of 11 September and the
current situation, and we have been working with the energy companies
in doing that.
63. Would you recognise, Secretary of State,
that some people, looking at the history of the last 40 years
at Windscale, Sellafield, might find your confidence about the
quality of its security, and indeed its safety records, a little
(Ms Hewitt) What I was saying was, quite rightly,
nuclear energy is very strictly regulated. There have been some
very serious management failures, and we are all aware of what
happened in recent years. That is something that my Department
and ministerial colleagues and I are looking at very closely at
the moment, we are looking at the situation with BNFL, we are
looking in particular at how we manage those nuclear liabilities
and how we ensure the safe discharge of those liabilities which
have built up over a very long period of time, and which were
not, in a sense, properly taken into account, I think, in decisions
that were made a long time ago. We are looking at that. I hope
to be able to make an announcement on it to Parliament fairly
64. Just a final point on that. Will we be taking
account of the international concerns that have been expressed
by Norway and various other of our friendly neighbours?
(Ms Hewitt) We always take account of concerns of
65. Secretary of State, you mentioned earlier
that the PIU had, I think as you put it, assembled a panel of
experts to advise on the review. To what extent have the PIU gone
out to consult other bodies and pressure groups, as part of the
review that they are undertaking?
(Ms Hewitt) I am sure the Cabinet Office and the PIU
review team would be delighted to give you the details. I know,
just from my own discussions with them and from the NGOs, that
they have had an enormous amount of evidence come in from a very
wide range of organisations, the environmental bodies, industry,
and so on. I believe they have met with a number of those groups,
but I could not tell you exactly who.
66. Forgive me, Secretary of State, I will come
back, if I may, because you did not answer my question. I did
not say how much has come in, I asked you how much they had gone
out to ask?
(Ms Hewitt) As I say, I am sure that the PIU would
be happy to give you chapter and verse on that; but they have
themselves initiated consultation, and I believe, certainly from
what they have told me, they have done that very widely, so that
environmental groups, as well as the industry, have had an opportunity
to feed their views in, and certainly very large numbers of them
have done so.
Mr Francois: That is a fuller answer; thank
67. Secretary of State, we know that the PIU
report is going to put forward a 50-year strategy; of course,
every 50-year strategy has to have a start somewhere. I am wondering
where the consultation on NETA, the New Electricity Trading Arrangements,
which is a fairly short-term thing, as I understand it, is going
to fit in with this; that took two years of consultation to arrive
at, and I just wonder if you can explain if there will be any
relationship between these two things?
(Ms Hewitt) NETA is something that, of course, we
are looking at, at the moment; we are looking at that immediately.
The New Trading Arrangements were only recently introduced, with
the intention, and they are having the effect, of getting much
more competition into the wholesale electricity market. OFGEM
has already reported on the first three months of the operation,
and the prices are up to 25 per cent lower than they were under
the pool, and that is very encouraging and there are also signs
that the long-term operation of the New Arrangements is going
to be better because investors can see more clearly what the long-term
prices are going to be. But we are worried, and many people are
worried, about the impact of NETA on the smaller generators, and
OFGEM has been looking at that. We will be coming forward very
soon with a consultation, with proposals that are aimed specifically
at dealing with those concerns. So we are not waiting on the PIU
report for that, that is a very near-term issue that we need to
try to deal with, having learned the lessons, or having started
to learn lessons, from the first couple of months of NETA's operation.
68. I was reading an Adjournment Debate on the
subject last week, and it does seem to me that the process of
trying to get a renewable industry started, and you mentioned
yourself this afternoon the possibility of very small generators,
it does seem to me that the whole process has stalled as a consequence
of the conflict between the renewable obligation, if you like,
and the desire to have low prices. Which side would the DTI fall
on, if you were pushed; is it low prices, or is it renewables,
if there is a conflict?
(Ms Hewitt) We are going to have to have both. And
it is difficult to get these markets designed right first time
round, you actually learn by experience with these things. What
we think is happening is that the lower prices that are being
paid for the energy, clearly that is one factor in the impact
on the smaller generators; the other impact, certainly for CHP,
is the impact of higher fuel costs, so those generators are being
hit by higher gas costs coming in and lower prices going out,
and they are caught in the middle. And both those things together
are causing the problem; in other words, it is not just NETA.
Now, we are also very concerned about the rise in gas prices,
and there are arguments about exactly why that is happening; our
own view is that a very significant contribution to it is the
operation of the interconnector across to the Continent and the
fact that, unlike in the United Kingdom, on the Continent gas
prices are linked to oil prices, oil prices have gone up, and
the higher gas prices from the Continent are coming through into
the United Kingdom through arbitrage on the interconnector. So
we will have another document out on that so that we try to deal,
for everybody's sake, as well as the smaller generators' sake,
with the problem of higher gas prices. But we will be publishing,
as I say, a consultation specifically on the operation of NETA
and this issue of the smaller generators. The other problem that
I think has arisen in relation to NETA is that there is a pretty
big spread, a pretty big gap, between the input and the output
prices, and we need to look at ways of reducing that. This is
all getting very technical, I am afraid, but it seems to be inevitable
when you get into energy discussions.
69. I am very interested in the field of providing
incentives, and I know that we have recently made announcements
of £100 million, I think, to go into renewables; do you think
that is enough?
(Ms Hewitt) I think it is a very good start. I think,
as we look to the longer term, the PIU, I certainly hope, will
give us a clearer idea of how much more is needed. But the renewables
obligation, on which we are currently out to consultation, will
be a very important part of enabling the renewables market to
grow very, very substantially. In fact, the financial package
is, if I may say so, actually larger. There is a total package
of over £260 million; the Prime Minister announced in March
the £100 million, there is actually another £130 million
from various sources.
70. It is still peanuts compared with what was
put into nuclear through the Non-Fossil Fuel Levy though, is it
(Ms Hewitt) One of the disadvantages perhaps of nuclear
is its expense, but we are making a substantial investment in
renewables, we are doing that in part through the renewables obligation;
as I say, we are consulting on that. We will look at whether we
need to do more.
71. Finally, can I just ask whether OFGEM should
have a greater role on the issue of sustainable development, when
it has clearly got a role there to enhance competition, but sometimes
those two things, as we started off saying, could be in conflict?
(Ms Hewitt) I think that once you start giving regulators
multiple objectives you run a very real danger that they will
not do anything very well. And my preference, and this is not
specifically in relation to OFGEM but generally, is that they
should have a very clear focus on promoting an effective competitive
market. Now OFGEM has its own sustainable development strategy,
and I welcome that, but, I think, if you give your regulator too
many statutory objectives, as I say, you end up with the danger
that they do not do anything properly.
72. Is that an argument for a Sustainable Development
Agency, I wonder?
(Ms Hewitt) I would not personally be in favour of
a Sustainable Development Agency, no, because, I think, if you
look at the Government's sustainable development commitments,
we are saying essentially that we are pursuing our economic objectives,
our social objectives and our environmental objectives in a way
that links them all; which means, in a sense, the entire Government
is a Sustainable Development Agency, and you certainly cannot
put that out to one agency and tell them to deliver it, it is
something that has to be taken account of in almost every field
of policy, in almost every Department.
Chairman: We hope that is the case, Minister.
73. I just wanted to come back to something
that you said in response to Mr Savidge's question earlier on;
but just before I say that I wanted to welcome the money that
is now available for renewables, and to acknowledge the attention
that you gave to the problems with the interconnector, because
I do think those are important issues. But just in relation to
Sellafield and to MOx, can I just ask you what environmental impact
assessments your Department actually did in respect of that decision,
at the time when the decision was being made, as to whether or
not the Government was going to give the go-ahead for that, under
the other Government Departments?
(Ms Hewitt) There was an extensive environmental impact
assessment, and, of course, the Royal Commission also looked at
SMP, sorry, the Sellafield MOx Plant, and cleared it for go-ahead.
74. Irrespective of your particular Department,
irrespective of the DTI?
(Ms Hewitt) We looked at the environmental analysis
that had been done of it as well as the economic analysis.
75. And that was done in house, was it?
(Ms Hewitt) As far as I remember, we did not specifically
do our own, but it is worth remembering that, of course, the decision
on Sellafield MOx was not one for me to make, the decision was
one for the Secretary of State for Environment and actually the
Secretary of State for Health.
76. I understand that, but just in view of the
overall commitments to environmental sustainability?
(Ms Hewitt) Oh, yes. Our view of that decision was
based on the environmental assessment that has been done as well
as the economic assessment.
77. I would really like to turn to the World
Trade Organisation and the next meeting in Doha, and really about
what our agenda is within that. At the last meeting in Seattle,
there were criticisms particularly that the United Kingdom and
the European Union were more interested in reducing barriers to
international trade and investment than promoting increased resource
productivity and clean technology and capacity-building for developing
nations. And there is a lot of things that we need to put right,
in that, to make sure that developing nations do make sure that
their voices are heard as well as ours, and that we have, hopefully,
a shared agenda. First of all, I would like to know what your
objectives are for those talks in Doha?
(Ms Hewitt) Our objectives are, first of all, to secure
a new trade round, that deal is not yet done; we want to secure
a new trade round and we want to secure a new trade round that
will benefit the developing countries as well as the developed
countries, and that will support greater trade around the world
while strengthening the protection of the environment. That, in
a nutshell, is our objective for Doha. I would say that we have
been one of the leading countries supporting the case for a round
that is good for the developing countries, and we have ourselves,
Clare Short and DFID, have invested £30 million in capacity-building
work for the developing countries. But we are also very strongly
making the case, which has been put forward, obviously, on our
behalf by the European Commissioner, for environmental concerns
to be reflected in the negotiations that we hope will start as
a result of Doha.
78. Thank you. And in terms of the actual agenda
there, how much input were the DTI able to have into that agenda,
and you have got your objectives, do you feel that you have been
able to have our voice heard in doing that in the agenda as it
will be taken forward?
(Ms Hewitt) Yes, I do. I think we are highly influential
in this process. We obviously play a leading part within the European
Union, supporting Commissioner Lamy in the work he does as the
Trade Commissioner; but Liz Symons, my Trade Minister, and myself,
the Prime Minister himself, other colleagues, also play an active
role, working directly, for instance, with the Americans, trying
to ensure that we agree common positions. We have also been working
very closely with key countries in the developing world to ensure
that we understand their concerns, that that is then reflected
in the positions adopted by the European Union, and indeed the
United States, and that we work with the developing countries
to encourage them to support a round. So, for instance, the work
that was done on the implementation issue, which is of huge concern
to India but to the bulk of the developing countries, we played
really quite a large role there, I think, in ensuring that there
was a serious package of proposals, the first basket on implementation,
put on the table at Geneva, and that the developing countries
appreciated that there was real movement there on the part of
the developed countries, and that more would be available both
at Doha and in subsequent negotiations.
79. Moving on to the problems that surrounded
Seattle and the protest groups, the NGOs, we have got some very
tough targets to actually achieve anything out of these talks
in Doha. In your opinion, how confident are you about reaching
a successful conclusion, and, of course, we cannot ignore the
current political situation worldwide, which will add a further
layer of complexity on to a very difficult agenda already?
(Ms Hewitt) The current situation across the world
is what has made us all the more determined to get agreement at
Doha. Because it was quite clear, I think, before September 11,
that a new World Trade round was the best way of helping developing
countries out of poverty, and there is very clear evidence that
if we can halve the trade barriers, halve the tariff barriers,
in both the developed and developing countries, we would give
a boost to the economies of the developing world significantly
greater than the boost we would give to the developed countries,
and much greater than we can give them through aid. That was clear,
anyway, before 11 September, but, of course, what has happened
since 11 September is that we have constructed across the world
this very wide coalition against terrorism, which needs to be
underpinned by an economic relationship. We have also seen the
world economy, which was slowing down anyway before 11 September,
slow down further as a result of that economic as well as humanitarian
shock, and therefore there is renewed economic importance in getting
a World Trade round off the ground, because it would be a real
boost to confidence in the world economy, and we have been making
those arguments just as forcefully as we can with all our partners
in the WTO. And I think it is fair to say the WTO is much better
prepared for Doha than it was for Seattle; the deal is not done,
we still have an awful lot of work to do, both in the next week,
before we go to Doha, and then at Doha itself, but I am cautiously
confident that we can get agreement on a new round.
1 Environmental and Social Action Plans available at