Examination of Witnesses (Questions 184-199)|
TUESDAY 9 JULY 2002
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
(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 thatwe
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
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 confidencebut 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.
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
191. One other question: my colleague Mrs Lawrence
is anxious about this but she has had to leaveit 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.
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 billionan
increase of £6 billionannualised at a rate of increase
of 30 per cent. Where does that £6 billion suddenly come
(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
193. You are about to say I should regret that
(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
(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.
196. Nobody can be accurate but do you know
if the figure is an overestimate or an underestimate of the revised
(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.
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.
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 certaintythis
is an uncertain businessbut 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.