Select Committee on Trade and Industry Minutes of Evidence


Examination of Witnesses (Questions 184-199)

MS ANNE LAMBERT AND MR DENNIS WALKER

TUESDAY 9 JULY 2002

Chairman

  184. Good afternoon. Please could you introduce yourself, for the record?
  (Ms Lambert) As you know I am Anne Lambert, currently and since January head of the nuclear liabilities and BNFL directorate at DTI, and with me is my colleague, Dennis Walker, who is head of the BNFL shareholding team at DTI.

  185. You have been before us in other guises; we are very pleased to have you with us this afternoon. You produced the White Paper; you have not made it very convenient for all of us in the sense that in true Civil Service fashion you bring it out at the beginning of the summer, and probably we have three months in which to respond. The ministerial announcement was last November; why did it take so long for the White Paper to come out?
  (Ms Lambert) Very simply, there was a lot of work to be done by my team in ensuring that we had a clear programme, because the White Paper really sets a clear work programme to be done. Also we attached a lot of importance to talking to all the various stakeholders so we could take their views into account as we drafted the White Paper, rather than just sit ourselves in DTI and produce something and then go and talk, and we have spent a lot of time talking to people.

  186. So this is a White Paper rather than a greenish White Paper?
  (Ms Lambert) It is a White Paper. It has green chapters, particularly the chapter on funding, and we welcome views on all of it but we have tried to take into account views of all the stakeholders as we have drafted it.

  187. And do you think this White Paper will see the legislative light of day in the forthcoming session?
  (Ms Lambert) I think I say the usual line on that—we very much hope to have legislation as soon as possible. As I am sure you know, Chairman, the legislative programme is always crowded but I very much hope we will get this as soon as space can be found.

  188. It has been suggested that this task that you have set yourself is somewhat Herculean in that there is not a great deal of public confidence in a lot of aspects of the nuclear industry. I have to say, qualifying that statement, that we had the UKAEA in this afternoon and some of us remember going up to Dounreay at a time when there was virtually no confidence in that particular location and the way it was being run. There has been since then quite a change. Are you confident that the new structures that you are envisaging will be able to make the nuclear legacy that much more cuddly than it ever was in the past?
  (Ms Lambert) I think "cuddly" might be a step too far but I do think what we are doing, by setting out our proposals for major change, a new national body and strong commitments to operate openly and transparently, as we have been doing so far and as we intend to continue doing in the future, will help build public confidence—but I certainly do not take it for granted. I know how difficult the nuclear industry is, and it is something we all have to work at.

Linda Perham

  189. Can I ask you about the LMU, the Liabilities Management Unit, at the moment? You say that the intention is to appoint a partner who will bring high quality experienced project managers with a proven track record in nuclear liabilities management and with international experience. When will that be done?
  (Ms Lambert) We are in the process of appointing Bechtel as our partner contractor, and I think we put that in the Parliamentary Question, so now I have a team working at the Liabilities Management Unit which is a mixed Civil Service and private sector team and comprises secondees from BNFL and UKAEA and Bechtel and I believe that is quite a good, strong team bringing together a lot of knowledge: it is managed by my colleague, Alan Edwards, on secondment from Ford with extensive project management experience and is in place and starting work.

  190. And when the legislation goes through the LMA will take over?
  (Ms Lambert) The LMU will transmogrify into the LMA. Its job now, as the Secretary of State announced last November, is to help DTI oversee liabilities management, to get a better knowledge of the liabilities owned by BNFL, UKAEA and to establish a consistent methodology for assessing those, and to help prepare the way for the LMA should Parliament so decide to set up the LMA.

  191. One other question: my colleague Mrs Lawrence is anxious about this but she has had to leave—it is about insurance liability. There is a minute dated 10 June concerning the granting of an indemnity to British Nuclear Insurers, and it is about third party liability under the Prevention of Terrorism Act because the commercial sector will no longer cover it. Can you comment on that?
  (Ms Lambert) Yes. The Government had no alternative to intervene once British Nuclear Insurers which is the nuclear pool of insurers decided to withdraw cover for third party liability claims arising from acts of terrorism. Without that cover the operator is in breach of the requirements under the Nuclear Installations Act so the government has intervened. It is levying a charge for that indemnity which gets passed on to site licensees, and we very much hope this is a temporary market failure.

  Linda Perham: I think there is a problem not just in the nuclear industry but with other companies trying to get insurance post September 11, but perhaps things will improve in the future.

Mr Berry

  192. Could I ask about clean-up costs? The public sector liability on 28 November last year was estimated to be £42 billion and we are now advised it is £48 billion—an increase of £6 billion—annualised at a rate of increase of 30 per cent. Where does that £6 billion suddenly come from?
  (Ms Lambert) I am going to spend a little time on figures and I will try and make them clear but it is a complex business.

  193. You are about to say I should regret that question!
  (Ms Lambert) Not in the slightest. I will try and be as open and transparent as I can be. The £42 billion was announced last November, and the Secretary of State at the same time said that BNFL have just done a further review on their historic liabilities that they have and that was going to result in an increase of £1.9 billion. That I am advised is a discounted figure and the problem is that we tend to be comparing discounted and undiscounted, so we have an increase of £5.7 billion from the £42 billion. You have the £1.9 billion discounted which translates into £3.3 undiscounted, which is BNFL's own share, and there is a further £2.4 billion undiscounted that is recoverable from customers. In short, therefore, the increase resulted from BNFL conducting a review of their historic liabilities but the figure in the White Paper is consistent with what the Secretary of State said last November.

  194. It is a very significant revision though.
  (Ms Lambert) It is a significant revision and it results from a review of looking at what the historic wastes are and what has to be done. I understand that most of it was due to more capital expenditure, the need to maintain the plant and buildings longer.

  195. I acknowledge that the undiscounted figure of £48 billion will change in the future, no doubt, but is there confidence that in six months' time it will not be as significantly different from that figure as £48 billion is from £42 billion?
  (Ms Lambert) I really do not want to speculate what the figures and the timescale might be. What I can say, as the White Paper says, is we believe as we investigate and as the LMU and the LMA start to work with the UKAEA and BNFL the figure will go up, but I also believe that this reinforces the need for the LMA who will be able to get a grip, to take an overall view and, in due course, bring pressure to bear by increasing cost effectiveness and we hope driving down costs. But this is not a simple exercise. Regulatory requirements can change the costs. Equally you can have a trade-off between how fast you want to go and how much you want to spend, so it is not an exact science but the task of the LMU and the LMA is to really examine the liabilities, to put them on a consistent basis and to work out and define a work programme for dealing with them which will enable us to get a grip of the figures.

  Mr Berry: I appreciate it is not an exact science but you have answered my question. Thank you.

Mr Hoyle

  196. Nobody can be accurate but do you know if the figure is an overestimate or an underestimate of the revised figures?
  (Ms Lambert) I really do not want to speculate either way. Once the LMU has done its work, the LMA is established, we can be more confident of the figures but again it will never be precise. We will get much more confidence as the work starts.

  197. Or is the truth of the matter we have no real idea how much it will be?
  (Ms Lambert) I do not think that is the truth—"no real idea". We have an idea; a lot of work has been done by BNFL; and I think when we start the new programme with the LMU with all their expertise, with the LMA, we will then get a much better idea.

Mr Lansley

  198. You do say in the White Paper that in the short run better definition of the problem will almost certainly mean that liabilities estimates will rise?
  (Ms Lambert) I do, yes, and I think it is important that we are clear about that because otherwise we will be misleading people, but then I very much hope we get a firm fix on the figures.

Mr Burden

  199. When we were pursuing these areas of questioning this morning with BNIF, they took the view that really the new process would more accurately enable them to manage uncertainty and allocate risk. How would you see the roles of the different players? Would you agree with that? If you do, who minimises the uncertainty and what is the risk for the different players?
  (Ms Lambert) I think I would agree that the new arrangements will help minimise uncertainty. I cannot pretend total certainty—this is an uncertain business—but they will be able to get a better fix on the figures. What I think is most important is they will establish certainty to the strategic direction, what we are trying to do, and the priorities and one of the things that the LMA is going to do, working with the site licensees, and some progress has already been made, is that the site licensees will draw up long term site remediation plans, and also, by putting the clean-up on to a contractual basis, the contracts will set out specifically the defined work programme, what is going to be done and who is going to bear the risk, and who is going to be incentivised and what they have to do to get paid. I think all of this will put it on to a much firmer and much more rigorous basis. It will not remove the unexpected and what we find when things get more difficult than we thought they were, but we will all have a clear plan, a clear strategic direction and clear idea of what needs to be done.


 
previous page contents next page

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

© Parliamentary copyright 2002
Prepared 12 August 2002