Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 80-84)



  80. I can see how attractive it is to say, "Here are all these things we would like the government to do fiscally and otherwise" and not necessarily to distinguish between them. However, by its very nature, when government has to consider this and we as a Committee have to think about it, we have to think about priorities and it is helpful to us if you give us some indication of priorities. Where is the hierarchy? What comes first?
  (Mr Kirwan) As the company faced with the decisions to invest, if the economic gap is not closed, our shareholders could not support us investing. The other factors are all disincentives to private capital being invested but if the economic long term potential is adequate investors will potentially be persuaded to go ahead. It is a combination but the economics are a sine qua non. That has to be put right.

  81. That is slightly in contrast with what Mr Ham was saying about the timeliness of investment. You are saying that the number one priority is to close that gap, perhaps not by the whole of the one penny per kilowatt hour.
  (Mr Kirwan) If the other factors are not addressed, it has to be a bigger economic prize to make these other risks acceptable. Effectively, all these do is increase risk and increased risk requires increased reward. Otherwise, investors will trade them off together. The more the government can help to reduce those risks, the less that reward has to be.

  82. Mr Ham is saying there are degrees of uncertainty associated with planning etc?
  (Mr Ham) That is correct.

  83. The more they continue, the greater are the risks that have to be met by competitive advantage and the more government would have to give you some kind of competitive advantage.
  (Mr Ham) Correct.

  84. Why do you talk about market based measures as being your only preference, so far as reducing that competitiveness gap? Why not an obligation?
  (Mr Ham) The market firstly has been proven to be very powerful in getting changes in behaviour and in obtaining much better performance from each of the sectors, particularly for nuclear because nuclear power in the market situation that has existed for the last ten years has increased its own performance enormously in terms of productivity. There is a general acceptance now in Britain that market related solutions do seem to have the edge on command and control types of approach. I do not think the industry is trying to talk about command and control as a way of going to sort out issues such as security of supply and so on, but a balanced measure of intervention by government it seems to us is essential. There is always, as any businessman or anybody in any major decision making area knows, a risk/reward trade off. At the moment, the risks in terms of uncertainty of future policy and planning mean that the rewards would have to be very large to make potential investors think about future investment. If you can deal with both of those, the reward side can be lower and that is a more economically efficient way of dealing with things. We in the industry would say that we only now really are considering measures which might help the market signalling system to give the kinds of results that are desirable from a national point of view.

  Chairman: Thank you very much gentlemen. Your answers have provoked further questions so we have taken rather longer than anticipated but if there are any other points we would like to take up with you we will communicate with you in the usual way.

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 3 May 2002