Select Committee on Environmental Audit Minutes of Evidence


Examination of Witness (Questions 60-79)

WEDNESDAY 31 OCTOBER 2001

RT HON MS PATRICIA HEWITT MP

  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.

Mr Savidge

  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 surprising?
  (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 shortly.

  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 friendly neighbours.

Mr Francois

  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 you.

Mr Challen

  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 not?
  (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[1], 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.

Joan Walley

  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.

Sue Doughty

  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 www.ofgem.gov.uk Back


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 28 November 2001