22 Apr 2013 : Column GC287

Grand Committee

Monday, 22 April 2013.

3.30 pm

The Deputy Chairman of Committees (Baroness Andrews): My Lords, if there is a Division in the House, the Committee will adjourn for 10 minutes.

EU: UK Isolation

Question for Short Debate

3.31 pm

Asked by Lord Dykes

To ask Her Majesty’s Government what steps they will take to avoid increasing United Kingdom isolation in the European Union.

Lord Dykes: My Lords, I am most grateful to the usual channels for the opportunity of launching this vital debate today. Sadly, I have to say at once that the rather controversial and rather expensive funeral event last Wednesday provides a sombre memorial to this theme, recalling to all of us the negative attitudes towards Europe of someone who was—again, I feel sad about saying this—one of the most rebarbative Prime Ministers in Britain’s post-war history.

The present Prime Minister, however, was obliged to call off visits to EU capitals to discuss some changes in our links to the rest of the member states. It is very self-defeating if leading Tory Ministers and politicians refer to the over-repeated phrase “British national interest” as if that were wholly different from our membership of the Union and totally different from that of all the other members. At least the late-interred Prime Minister ended up usually agreeing with the others on treaty changes, despite all the Sturm und Drang in those days of shrill arguments. Mr Cameron, however, is now in danger of launching a risky plan which is designed to appease his wilder anti-EU MP colleagues, and which could quickly get out of control.

It also looks somewhat hilarious if a British politician starts trying to educate our German friends on the goals of economic and mercantile efficiency, bearing in mind the huge gulf in our economic performance. We have a UK trade deficit of around £100 billion, despite a quarter fall in the value of sterling over the past four years. Germany’s trade surplus is the other way round, but even bigger. We should all be grateful to the German ambassador for his polite but riveting comments at Bloomberg’s last July on the dangers inherent in irresponsible isolation and to Dr. Rudolph Adam, the plenipotentiary at the moment. He complained to William Hague’s assistant last October that Britain’s refusal to take a lead in Europe meant that we would just see the red lights of the train that has already left the station.

Indeed, we have heard the same complaints from our own citizens, now alarmed at this possible Cameron demarche. I refer to very prominent business leaders such as Richard Branson, Martin Sorrell

22 Apr 2013 : Column GC288

and Sir Roger Carr. Incidentally, the US Government intervened collectively and individually to say, “Please do not go down this path”. Former EU and US British envoys such as Sir Nigel Sheinwald have taken this approach. Indeed, in one of our debates on 17 December 2012, the noble Lord, Lord Kerr of Kinlochard, who was originally speaking in this debate, said:

“As the Prime Minister prepares … I really hope he will avoid the temptation to hold out a false prospectus. One should not talk about ‘new deals’ unless one is sure that they are realistic”.—[Official Report, 17/12/12; col. 1391.]

It is never a weakness for any country, struggling as we are with our economic problems in an exposed position, to pay attention to what others think of us. Sadly, we have to recall, painfully, the derision which many mainland Europeans felt when we were first driven out of the exchange rate mechanism on 16 September 1992 as the Treasury was unable to keep the pound from falling below the agreed minimum level. We then became so scared at the huge obligation and discipline involved in a single currency that we effectively decided not to join at all, despite Tony Blair’s pretences.

We have to recall, therefore, the huge disappointment of the other members in other areas. We received the unique budget rebate but did not then become more co-operative on other areas of European endeavour, despite that unusual privilege. We have to recall the irritation, too, when we sought the biggest number of opt-outs and exclusions when Maastricht and the later treaties, including Lisbon, came along.

The irritation we now cause when a UK Minister arrives for a Council of Ministers meeting is palpable. We have become the bad member of the club, whingeing and moaning about European things again and again. One of the dottiest reasons for this irrational behaviour is because an unusually large number of old-fashioned nationalist Tory MPs are the only politicians I know—apart from some of the scallywags in UKIP, many of whom benefit from the PR system for the European Parliament—who have a notion of national sovereignty which is, literally, at least 100 years out of date.

How many times do positive Europeans have to remind such people that pooling sovereignty by way of signing unanimous treaties, achieved by consensus, is not a loss of real sovereignty, it is an increase? We have done it in other treaties, to no ill effect, all over the world. It is quite extraordinary and myopic that a false pride in our so-called special relationship and so-called hyperbolic link with the US can induce British leaders such as Mr Blair, Mr Brown and, indeed, the present Prime Minister, to go into rather questionable military adventures—which we usually later regret—but also cause us to suffer hot flushes when confronted with a perfectly sensible measure of EU co-operation such as a new financial support system between the central banks. They were watching our reactions very closely at that time.

At the same time, as if to emphasise the muddle, Mr Cameron seeks to remind us that he wants after all to stay in the Union. Before we irritate the others to the extent that they muse again about the Lisbon treaty provisions allowing for recalcitrant member states to leave if they wish, we really need some clarification on these vital—indeed, existential—matters.

22 Apr 2013 : Column GC289

What relationship would replace the present one? As Peter Ludlow, the well known EU analyst based in Brussels, said in January,

“The argument that the rest of Europe will simply acquiesce in whatever kind or arrangement (we) opt for, because ... our partners need us ... more than the UK needs them, is a total illusion”.

Furthermore, when you use the microscope on repatriation, you soon realise that it is the grand illusion and pretence of all time, especially when you see that we already have more opt-outs, exceptions, derogations and exclusions than any other country.

I am therefore extremely grateful to my noble friend the Senior Minister of State at the Foreign Office, Lady Warsi, for coming to answer this debate today— I wish her well in her response—and, indeed, for all the previous occasions when she has dealt with a vast number of questions and debates on these matters with great care and attention to detail. Now she has the precious opportunity to enlighten us all so that we can leave this discussion with a spring in our step.

A few weeks after the PM sadly refused to attend the Nobel Peace Prize award to the European Community in Oslo, I had the chance to ask my noble friend what further opt-outs we would now seek in Brussels. She very kindly stated that,

“the Government always seek outcomes that are in the national interest … our priorities include … the single market and … fair competition”.

When I pressed for more specific answers to try to,

“avoid needless opt-outs of a chauvinistic or nationalistic nature”,

she added that HMG should be,

“putting a case … that the European Union is improved but, within that, we also get a good deal”.—[

Official Report

, 4/2/13; col. 9.].

I hope that she will not consider it discourteous to suggest that this is all rather vague and generalised.

I live in France as well and have the opportunity to observe public life and politics there at close quarters. It is interesting that such a proud—indeed, sometimes very nationalistic—country sees absolutely no contradiction between its own direct interests and those of the Union. They coincide symbolically too—as in Berlin and Madrid, and most other capitals, the EU flag flies proudly alongside the national tricolour. They do not feel the one cancels out the other. The UK is the only major member state where government buildings never, ever fly the European flag. Why are we so nervous about Europe? Why are we so immature?

Let us return to the need for detail on policies. For example can the Minister guide us on what list of opt-outs we will determine for inclusion and exclusion in the JHA review? My impression is that the Government have not got a clue what to do. My noble friend will know of the report of sub-committees E and F of the EU Select Committee showing the huge weight of non-political evidence that abandoning the JHA provisions, or the principal ones, in most of the specific policy areas such as EAW, would be a monumental disaster. I will refrain from commenting too much on what Kenneth Clarke said at the end of January on these matters. How the Prime Minister must now

22 Apr 2013 : Column GC290

regret the way in which the Government, including when they were in opposition, have encouraged the most Europhobic MPs to fuel this anti-EU strategy with the business community outside—although not many leading businessmen are now still involved—to the extent that it is even becoming part of future leadership moves by some ambitious new Tory MPs. The bitterness felt by the EPP in Brussels and Strasbourg about the Tory withdrawal in the European Parliament still lingers.

Can the Minister help us today about what kind of referendum will be constructed after so-called renegotiations have run their course, especially since the Business Secretary reminded us again recently that it will scare off investors and hit the economy?

The other area where we need meticulous care by the Government is in responding to the widespread dismay about the City of London market culture which is expressed here so stridently. The City—and I am a City person myself—is indeed a very precious asset which we are proud of and fortunate to possess, but the market crash of 2007-08, the way in which the banks behaved and the speculative spivery background of some people in the City offend some of our continental friends, and that needs to be acknowledged. Although I shall not quote from them, I commend in this context the lengthy but convincing last two paragraphs of the speech by the noble Lord, Lord Liddle, the chief Opposition spokesperson on Europe in this House, in the debate on the EUC report on banking union in Grand Committee on 26 March. He set out very clearly what our responsibilities should be.

Another area where the UK needs to respond sensitively to our partners is in their anxieties about tax havens, where our overseas territories are a particular preoccupation. Above all, we need to remember the chilling reality that, apart from the natural courtesy of a vague response, not a single other member state agrees with our peculiar attitudes, these initiatives that have recently been promulgated, not even the newest member states, not even Poland, very little in the Czech Republic, not at all in Spain or Italy and certainly not in Croatia. The Tory party needs to show the courage and enthusiasm for Europe that Mrs Thatcher showed in 1975.

I look forward to my noble friend helping us today with some encouraging responses about how these strange negotiations will reduce our isolation.

3.42 pm

Lord Howe of Aberavon: For pretty well all of our 40-year membership of the Union, successive British Governments have sought to maintain a position of strength for this country at the top table of the European Union politics. Whatever opportunities may have been missed and whatever mistakes might have been made, a common thread throughout the period has been that consistently Prime Ministers and Foreign Secretaries attempted to avoid the development of anything approaching a two-speed Europe. We have accepted opt-outs and derogations in specific cases, but we have never allowed Britain to lose its place at the heart of EU decision-making, although we have been sliding away from the centre.

22 Apr 2013 : Column GC291

One of David Cameron’s first acts as Prime Minister was to decline to attend eurozone summits, whereas his predecessor, Gordon Brown, not exactly a noted euro-enthusiast, fought tenaciously to ensure that he was always invited. Our absence has made it more difficult to articulate Britain’s voice on some of the key decisions in the eurozone debt crisis. I do not need to spell out at great length my anxiety about the imminent shift in responsibility for banking supervision, for example, from the traditional EU institutions in Brussels to the European Central Bank in Frankfurt, based on a new banking union from which we seem determined to exclude ourselves. It is worth recalling that when the EU Bill was debated here at Westminster, two years ago, we were assured that it would have no operational effect in this Parliament, yet we now know that fear of the need for the passage of an Act of Parliament helps to explain why the Prime Minister vetoed the EU treaty change that Mrs Merkel wanted in December 2011.

The net effect is not just that we are throwing up unnecessary political obstacles in the way of our own involvement; we are beginning to stand in the way of others moving ahead. In fact, the real terms of British membership of the Union have sadly already been redefined; instead of seeking to continue leading in Europe, the Government are in danger of gradually locking us all into the defensive mentality of a country reconciled to life on the margins, as support for European membership declines and Euroscepticism becomes increasingly dominant.

If the Prime Minister is serious about obtaining what he calls “fresh consent” for our membership of the Union in a referendum that he presumably hopes to win, he must begin now to set out a more realistic account and a more positive vision of why the European Union should feature as part of the future of this country, and how and why we can play an important role in helping to shape the future of our continent, as well.

3.45 pm

Baroness Quin: My Lords, I congratulate the noble Lord on securing this debate. He has consistently advocated the importance of close relations between ourselves and our European partners and has always argued for making Britain’s membership a success, as has the noble and learned Lord, Lord Howe of Aberavon, whom it is a pleasure to follow.

I am not opposed at all to a Government arguing for change within the European Union, nor am I opposed to wide public debate about that issue, providing that it is well informed and open, because there is no doubt that Europe is changing and has to respond to a large number of challenges. However, I have great concerns about the Government’s goals and the lack of clarity surrounding them. I also have concerns about the timing of recent government initiatives, which are sometimes unhelpful, particularly as they come at a time when the eurozone countries are, quite understandably, concentrating on trying to resolve current difficulties. I also have concern about the Government’s approach to alliance-building, both with

22 Apr 2013 : Column GC292

other Governments and in the context of the European Parliament, where the Government seem sadly to have cut themselves off from the European mainstream.

In the short time that I have available, I would like to question the Government about their goals. There is a lot of talk within the Government, and within the Conservative Party particularly, about having a looser relationship with the European Union. The more I read about this, the less I understand exactly what is meant by it, and I would like some clarification of what is in the Government’s mind. For example, what does it mean for environmental policy, an area that has become very important in EU work in recent years? What involvement do the Government expect to have in that very important area of policy in future? What about economic policy? It is not just about the euro but about many other things. How are the Government going to approach this? For example, I was disappointed recently that they managed to get themselves in a minority of one over the bankers’ bonuses issue, even though it is an issue that is of concern to citizens across the European Union. What does it mean for development policy? Will we be involved in development policy in future, in the Government’s view, or is that something that they want to see left to national Governments? What about the extent of foreign policy co-operation, an increasingly important area within the European Union’s work?

Furthermore, we know that the Government said a lot of things in opposition to social policy, which was a part of the EEC from the outset—so it is not a dangerous additional add-on. I remember, when I was first in Parliament, the warnings that the Government gave about what they called the job-destroying social chapter, even though, after the Labour Government signed it, employment was at the highest ever recorded level and their fears seemed to be completely unfounded.

In approaching those things, I urge the Government not to oppose those policies capable of attracting our citizens and electors. I refer to the excellent brief provided to us by the Law Society, which says:

“The EU has taken significant steps towards ensuring equal treatment; in particular in the work place through initiatives such as the Equality Directive and Equal Pay Directive. The Society is keen to ensure that UK works alongside other Member States as the EU continues to protect and uphold such rights whilst respecting differing legal traditions”.

The noble Lord, Lord Dykes, mentioned justice and home affairs co-operation. That has been a welcome area of co-operation in terms of practical results, but it is not at all clear what the Government’s approach will be to that in the future.

My final plea is that I hope the Government will take some of their arguments out to the public so that we can all join in. It would be good if next year’s European elections were about European issues rather than a referendum on national government policies. Perhaps that would be a better opportunity than a referendum at some vague time in the future.

3.50 pm

Lord Birt: We thank the noble Lord, Lord Dykes, for allowing us to debate this highly pertinent issue. I have previously praised the Prime Minister’s speech

22 Apr 2013 : Column GC293

on Europe as a cogent and elegant statement of all the reasons why it is in our interest to remain part of a reformed EU. He set out a positive vision, but I think his speech has created a significant problem for us.

In the past few months, going about my daily business in Europe and countries beyond, I have encountered, as I am sure others here have, senior officials and politicians from some of Europe’s major countries as well as many of the world's leading investors and some substantial business heads who can make investment choices about this country. To a person, they have concluded that the Prime Minister’s announcement of a referendum is the first step in a determined process on the part of the UK to extricate itself from the European Union.

I do not believe that to be the case. I routinely inquire, “Have you read the whole speech?” but, frankly, no one I have spoken to—and I am talking about many people over the past couple of months—has ever read the whole of the Prime Minister’s speech. That should not surprise us. In busy lives, people settle for the summary report, perhaps online, or skim-read and form a quick impression. I have no doubt—again, I am sure that this view will be shared by others here—that all the major players in Europe want us to stay part of the European Union and to engage, not least to help the present and continuing crisis. But in the short term, other major countries doubt our commitment. In the wider world, we risk being seen by major global investors as detaching ourselves eventually from the single European market. I am sure that this will be common ground among us, but we can ill afford an investment pause in the UK for the next four years.

The Prime Minister has now begun his sadly interrupted tour of major European capitals. I have no doubt that he will have conveyed a nuanced picture of our true position to his senior colleagues in Europe. But beyond that, I hope that he will fully engage the global media, which I do not think he has yet done, and seek to counter the damaging perception that has been formed about our true position. I hope that the Prime Minister will put over what I think is his essential message: that reform and commitment, not obstruction and exit, are the UK’s preference and intention.

3.53 pm

The Lord Bishop of Exeter: My Lords, it may be thought that the Church of England does not have a particularly European perspective, but that is far from being the case. Through its diocese in Europe it is present in all the member states of the EU. It has effective links with other churches throughout Europe and is active in the Conference of European Churches. Together with our partner churches, we are also deeply aware of some of the roots of the EU and the vision of its founders in Catholic social teaching.

It is from this broad base that the Church of England engages with the EU itself through its own representation and structures. Also, in March 2012, it made a submission to the House of Commons Foreign Affairs Select Committee on this very question of the UK’s relationship with the EU.

22 Apr 2013 : Column GC294

That submission started from the basis that for the Church the primary purpose of politics, even European politics, is the promotion of human flourishing and the conditions that are necessary to make this happen. This includes economic, social, ethical, cultural and legal conditions. Here, the value of the EU as a single market is not to be ignored. While growth is, of course, not to be treated as an absolute idol, poverty is the enemy of the good life and so of the common good. Thus, regularly over the past 40 years the General Synod has affirmed that, while it has reservations over certain characteristics of European integration—not least its demographic deficit—our propensity as human beings created in the image of God to be creative, productive and generous beings has been enhanced by pooling certain elements of national sovereignty in a common European project. This project, it is worth remembering, has deep spiritual roots. The treaty of Rome is peppered with aspirational phrases such as:

“Determined to lay the foundations of an ever-closer union among the peoples of Europe”,


“Intending to confirm the solidarity which binds Europe and [other] countries and desiring to ensure … their prosperity”,

as well as:

“Resolved … to preserve and strengthen peace”.

One of its founding fathers, Robert Schuman, wrote:

“Democracy owes its existence to Christianity. It was born the day man was called to realize in his daily commitment the dignity of the human person in his individual freedom, in the respect of the rights of everyone, and in the practice of brotherly love towards all”.

It is against this background that we also responded to the Prime Minister’s recent Bloomberg speech, in which he set out a vision and an agenda for European reform. On that occasion, he was certainly right to say that much in the EU needs to change, that the Union should accept the principle that powers can flow not only from member states to institutions but the other way too, and that national parliaments should become more closely involved in EU decision-making. However, there remains a lingering doubt as to whether the Government’s agenda is one of reform for the good of Europe as a whole or a more narrow focus on the repatriation of powers in response to political pressure nearer to home. It would be good to have some clarification about that today.

The value of this debate is that it is a reminder of how much need there is for a more informed public and political debate that might shape both a renewed vision for Europe and our own understanding of how we might best realise it. The churches of Europe see themselves as very much part of that debate and with much to contribute to it. They are deeply embedded in European culture and, although we are distinct, it is still possible and right to think of the family of churches in Europe in terms of the historical embrace of a single faith. Even perhaps particularly as Europe becomes increasingly characterised by the diversity of faiths within it, our own long experience of interfaith dialogue and co-operation has a valuable contribution to make to the pursuit of that founding vision grounded in the common good.

22 Apr 2013 : Column GC295

Finally, in this context, it is perhaps especially good to recall an observation of the Chief Rabbi, the noble Lord, Lord Sacks. In an address in Rome last year, he said that,

“the future health of Europe, politically, economically and culturally, has a spiritual dimension. Lose that and we will lose much else besides”.

He went on:

“To paraphrase a famous Christian text: what will it profit Europe if it gains the whole world yet loses its soul?”.

I hope that the failure of successive British Governments to articulate a coherent and constructive policy towards our European partners and to manage to take public opinion along with this will not contribute to that loss of the European soul.

3.58 pm

Lord Bilimoria: My Lords, today a statement was signed by business leaders, and I was one of the signatories for Business for Britain. The statement was very simple:

“As business leaders and entrepreneurs responsible for millions of British jobs, we believe that the Government is right to seek a new deal for the EU and for the UK’s role in Europe. Far from being a threat to our economic interests, a flexible, competitive Europe, with more powers devolved from Brussels, is essential for growth, jobs and access to markets. We therefore welcome the launch of Business for Britain’s campaign for real change in the EU and urge all political parties to join in committing themselves to a national drive to renegotiate the terms of Britain’s membership of the EU”.

After signing that, I was accosted by many people today saying, “This means you are anti-Europe”. I am not anti-Europe in any way whatever—in fact, quite the contrary. A week ago, before this statement, the British Chambers of Commerce released its survey on Europe. The BCC’s European Union business barometer of more than 4,000 businesses shows support for renegotiation with Europe. A week before this statement came out, John Longworth, the director-general said:

“Companies believe that re-negotiation, rather than further integration or outright withdrawal, is most likely to deliver business and economic benefit to the UK”.

This is the first major survey of British business following the Prime Minister’s policy speech on Europe in January, and it has revealed broad support by business for renegotiation of Britain’s relationship with the European Union. In fact, the results were staggering, such as:

“Remain in the European Union, but with specific powers transferred back from Brussels to Westminster received the highest positive impact rating, with 64% … the lowest negative impact rating, with 11% … Full withdrawal from the European Union received the highest negative impact rating, with 60%”.

Businesses do not want to withdraw from Europe. Another result was:

“Remain in the European Union with no change to current relationship received the lowest positive impact rating, with 15%”.

This is business speaking. Do we want to listen to business or do we want to live in a Utopian world?

I thank the noble Lord, Lord Dykes, for bringing forward this really important issue. The Prime Minister’s speech has raised an important matter. Whether to have a referendum is a debatable issue but the reality is that we are against the financial transaction tax.

22 Apr 2013 : Column GC296

After everything that has happened with the financial crisis, the City of London is still the number one financial centre. On the idea of a “veto” last year with the Prime Minister walking away from the table, I do not necessarily agree that that was the right thing to do. People said that that means that we will not be at the top table of Europe any more. Well, when it came to the budget negotiations the Prime Minister was very much at the top table in encouraging the budget to be cut.

We have MEPs with no representation. Nobody in this country knows who their MEP is; MEPs do not even know their constituents. We have a Parliament that moves between Brussels and Strasbourg. We have billions of euros of waste. We have free trade agreements that are taking years. Will the Minister tell me when the European Union-India free trade agreement will be finalised? We also have the euro, which has been an utter failure.

There is no question that Europe is our biggest trading partner—more than 50%. There is no question that 2.3 million European Union citizens live here and that almost 1 million British citizens live in the European Union. We want the free movement of goods and people but global institutions need to evolve. The UN needs to evolve; the World Bank needs to evolve and the IMF needs to evolve. The EU has evolved, but the euro was a bridge too far. Thank God we did not join the euro but so many people pushed to do so.

Right now we make up less than 1% of the population of the world but we are still at the top table. We are still a permanent member of the Security Council, a member of the G7, the G8, the G20, and we are still at the top table of Europe. The solution is not to cherry pick but for us to sit down together in Europe and remember our priorities—free trade, free movement of people and, most importantly, the maintenance of peace. That peace is priceless and worth much more than the billions we contribute to the European Union every year.

4.03 pm

Lord Bowness: My Lords, I thank my noble friend Lord Dykes for posing this timely question, which should concern everybody who wants to see the UK remain a member of the European Union. That, of course, includes my right honourable friend the Prime Minister who sought to make that clear when he indicated his intention to attempt a renegotiation of our relationship with Europe, to be followed by a referendum on the outcome.

Whether intentionally or not, that has put on the table the possibility of the UK leaving the European Union with all the uncertainty that that creates in people’s minds and the regrettable boost which has been given to UKIP and its fellow travellers. Leaving to one side the question of a referendum, which I personally regret, the UK has to have a twin-track approach if there is to be anything approaching a successful outcome of any negotiation and subsequent referendum. To achieve the first, we have to be clear and realistic about what it is we seek to change. The Government’s review of competences will not be complete until the autumn of 2014. There have been press

22 Apr 2013 : Column GC297

reports that at least two member states—France and Germany—have refused to contribute to the process. Is that correct? I do not expect my noble friend to disclose details of the observations of individual member states but can she indicate whether there have been any responses from anyone and, if so, the nature of those responses?

The Prime Minister is reported to have discussed the question informally with the German Chancellor. Have we already formed a view about what we seek to change prior to the outcome of the competences review and, if so, what is the point of the competences review? Are Ministers looking at matters which could be dealt with by an amendment of existing European legislation? This may be a more productive route and likely to find us more friends among other member states as opposed to treaty change. If we seek treaty change for our benefit, shamelessly exploiting the possible need for eurozone members to make changes for the economic governance of the eurozone, how will we prevent the other member states raising their own particular issues and how many will welcome that process being turned into a wholesale treaty review? Might they not prefer to come to their own arrangements not involving treaty change and, therefore, maybe not involving the United Kingdom? If substantial treaty change is in mind, how do the Government intend to achieve this between 2015 and 2017—the date of the promised referendum—bearing in mind the Lisbon treaty provisions regarding substantial changes?

For us to have influence within the European Union, whether in the Prime Minister’s promised renegotiation or generally, the atmosphere has to change. We must sound as if we want to remain members, recognise negotiations are negotiations, and bring an end to what I have previously described as the current attitude of preferred disengagement. Language and tone for those to whom it is directed and the climate it creates are extremely important.

We have talked of actively discouraging citizens of Romania and Bulgaria from coming here when they become legally entitled so to do. We have thereby created a climate whereby the desirability of having admitted citizens from other EU member states after 2004 is now called into question. Such careless language, which we would not use in respect of nationals of other countries outside the EU, does not win allies, especially when it appears to question one of the four fundamental freedoms of the Union. Can my noble friend state categorically that none of these freedoms is questioned?

The second track, which we must follow if we are to succeed in convincing our partners that we are in the Union for the long run and to win any referendum subsequent to renegotiation, is to put the case for membership unambiguously, enthusiastically and now. The Conservative Party must make it clear that we are not going to dance to UKIP’s tune. UKIP policy on Europe is not the policy of the Conservative Party. The Tory party must not allow itself to become an umbrella under which the otherwise unelectable articulate UKIP views. In passing, would it not be a good thing to change the system of election from closed lists to

22 Apr 2013 : Column GC298

open lists so that voters who wish to vote Conservative may do so without having to vote for candidates who display Tory colours but UKIP tendencies?

If we are seen to put the case for Europe without threats of withdrawal, there may be a chance of achieving some successes and reforms that might resonate with other member states, and of winning a referendum. Failure to show our desire to be fully involved now and in the future can only reduce our influence to our own detriment.

4.08 pm

Lord Davies of Stamford: My Lords, I congratulate the noble Lord, Lord Dykes, on securing this debate. He has been committed to this cause in all the long years that I have known him. He has shown great energy, commitment and often great courage in pursuing that cause. I have great pleasure in paying tribute to him today.

The most interesting thing about this afternoon’s debate is the people who are taking part. Where are all the leading Eurosceptics? Not one of them has turned up. We had a debate in this Chamber about a year ago and all of them turned up. I distinctly remember the noble Lords, Lord Lawson, Lord Lamont and Lord Flight, telling us how the euro was about to collapse and that they had been right all along because they had been saying for years that it was bound to collapse. I remember replying that they slightly reminded me of the Marxists of the earlier 20th century who, every time there was a recession said, “We were right all along; this is the final crisis of capitalism”. I am not sure they appreciated that analogy. They are not here this afternoon, which must be a very good sign as to progress in the European Union.

Of course, there is no disaster to gloat over. The latest news is actually rather encouraging. I am quite convinced that both the EU and the eurozone are emerging strengthened from the crisis. It has been very positive to get the growth and stability pact and to achieve the banking union. The handling of the Cyprus banking crisis has been extremely successful. We have established the principle now that there should be no bailout without a bail-in. We have established the principle that anybody who has more than €100,000 and wants to keep it all in one bank has some responsibility to take a view on the creditworthiness of that bank and, equally, that people who have less than €100,000 in deposits should be protected by public guarantees. All that has been very positive.

Of course, some of these things could and should have been determined well in advance, calmly, because rationally they were the sensible thing to do. But we all know that in human affairs people often only take the right decisions in a crisis. It is difficult to get people to make difficult decisions when things seem to be going well. These structural changes are a permanent legacy and a positive outcome of this crisis.

None of us has very much time to speak, but I do not think that there is an alternative to the EU for achieving what we need to achieve in this country on so many fronts—the environmental, economic, foreign policy and defence fronts. This is an area at which we desperately need to look very carefully now, because

22 Apr 2013 : Column GC299

budgets are so constrained throughout the European Union: how can we best save money through greater degrees of co-operation, including defence specialisation? That is a very complicated matter and we must return to it on another occasion.

All parties like to say that they are taking a cool, calm, objective view of the national interest. But we must do so without prejudice. We must not reject a particular solution if it is actually in the national interest simply because it has the word “European” or “EU” attached to it. There is too much of that emotional counterreaction on the part of the Government at the present time.

I leave the noble Lord with one thought this afternoon. It is time for us to look pragmatically, coolly and calmly, without hysteria, at the possible advantages to us of joining the Schengen agreement. It would not merely remove a lot of the existing burden on the UK Border Agency, which we have seen so much of in the past few months, but it would address a much more serious problem. This country is losing hundreds of thousands of pounds, perhaps even millions of pounds a year, in tourism particularly from visitors from the Far East who tend to travel in groups. Their travel agents arrange a Schengen visa for them. They come to Europe and visit Amsterdam, they go down the Rhine and visit Paris, Rome and Madrid. They have a lovely time, but they never come here because we are not part of the Schengen system. It would involve additional delays and costs to get visas.

This is a major economic problem. The Government have always excluded even looking at Schengen simply because it is European. But if it happens to be the right pragmatic solution on the basis of the national interest, we should go along with it.

4.12 pm

Lord Kakkar: My Lords, I, too, join other noble Lords in congratulating the noble Lord, Lord Dykes, on securing this important debate. I wish to confine my comments to an area where there have been unintended consequences of European legislation—in the delivery of healthcare here in our own country. This is a vital issue. As we move forward, there may be an opportunity for British people to become isolated because they feel that there is an impact on the delivery of healthcare that was unintended and is having a detrimental effect. Before doing so, I declare my own interest as Professor of Surgery at University College London, and as a member of the General Medical Council.

A number of issues have been raised with regard to European legislation and directives that relate specifically to healthcare. They relate to the area of professional qualifications and the free movement of labour within the European Union. There has been important progress with the issue of language testing. The General Medical Council, it is proposed, will now be allowed to test the language skills of all doctors who wish to be registered by the council in the future, including those who come from the European Union. That is an important achievement.

However, there is still concern about the ability to test professional qualifications and the nature and structure of the postgraduate training that has been

22 Apr 2013 : Column GC300

delivered to healthcare professionals throughout the Union. This is an important issue because doctors coming from other parts of the world are subject to that kind of rigorous testing before they are allowed to join the register.

The issue that I would like to focus on is the European working time regulation. In 2010, when the coalition Government was formed, the then Health Secretary committed to begin negotiations with the European Union on ensuring that working time regulations could be applied in a more flexible fashion with regard to working in our hospitals to reflect the fact that the nature of the delivery of healthcare—the structure of our hospitals and broader healthcare environments—is somewhat different from other European countries, and a degree of flexibility would be important. I recall that the then Health Secretary and the Business Secretary were to commence discussions in January 2011 on this matter, but all seems to have gone quiet because of the broader review of competences that is currently taking place.

We need to be very sensitive to this issue. Recently we have started to see coroners’ narrative verdicts starting to cite European working time regulations as a contributory factor in patient death. We have seen in the Francis report into the problems that were experienced at Mid Staffordshire hospital that the working time regulation was identified as a potential contributor to an inability to provide continuity of care within the hospital system. These kinds of descriptions in coroners’ verdicts and in important reports, such as the Francis report, can cause unnecessary anxiety.

With increasing pressure in the healthcare system, we need to be sensitive to problems identified by, for instance, the Royal College of Surgeons, which estimates that 400,000 surgical hours a month are lost from the healthcare system as a result of the application of the working time regulation to surgical rotas and that some £750 million a year is now spent on locums to ensure that locum doctors can fill gaps in those rotas. Equally, the Royal College of Physicians has identified this whole area as a major issue for the delivery of healthcare.

Therefore, I should like to ask the Minister what progress is being made with regard to the discussion about the working time regulation. This was identified as important on the basis of patient safety and the need to ensure continuity of training to a high standard for our trainees, who will lead the healthcare system in the future. It seems to have become mixed up in the broader question of competences and of bringing them back from Europe. If this issue is not addressed, there could be major problems in the future that will be attributed to it and this could have a detrimental impact on the public perception of Europe, because health was never an issue of competence and this matter is specific to the delivery of healthcare in the United Kingdom. Is the Minister able to guarantee that this important discussion, which started long before, will be continued in a timely fashion?

4.17 pm

Baroness Coussins: My Lords, one of the underlying causes of the UK’s isolation in the EU is our lack, as a nation, of the foreign language skills to enable us to

22 Apr 2013 : Column GC301

participate fully and to derive the full economic, cultural and educational benefits from membership. I declare an interest as chair of the all-party group on modern languages.

There are three main ways in which our language skills deficit is damaging. The first is in terms of influence. The Foreign Office itself has noted that a shortage of British staff in international institutions is detrimental to the national interest and undermines our policy influence. UK nationals make up only 5% of the European Civil Service, although we are more than 12% of the population. In 2011, a mere 2.6% of applicants were from the UK—fewer than from any other member state—and a key reason for this was that English-speaking applicants must offer either French or German as a second language.

Secondly, poor or non-existent language skills prevent UK nationals taking advantage of labour mobility within the single market, while of course leaving them open to competition from incomers. UK employers are dissatisfied with the language skills of British graduates and end up recruiting far more multilingual graduates from other EU countries than employers from any other member state. Although this shows that the single market is working well in terms of the free movement of people, British workers are limited in their ability to take advantage of this freedom in the opposite direction.

This is, of course, linked to export growth. The Department for Business, Innovation and Skills noted recently that the proportion of the UK’s exports to the other 26 member states is falling and now stands at less than 50%. A considerable body of evidence now links export growth to languages. Business leaders say that it is language availability that drives export decisions, not market strategy.

Finally, UK participation in EU mobility programmes is worryingly low, yet this is what equips people with the skills to work across borders. In 2011, more than twice as many French and nearly four times as many Germans took part in work experience placements within the EU. UK university placements under the Erasmus programme are around one-third of those of France and Germany.

To sum up, we are barely present in the EU administration, our students are keeping themselves to themselves, and trade with other member states is in decline.

While I warmly welcome the fact that the Foreign Office has recognised the importance of languages in diplomacy by increasing its budget for language training and the number of posts for which languages are now regarded officially as an absolute requirement, I should like to ask the Minister two questions. First, what specific action will be taken to increase the number of UK nationals able to compete successfully for positions in the European Civil Service? Secondly, given that our language deficit is the concern of so many different government departments, will she undertake to discuss with colleagues and with No. 10 the value of appointing a single government Minister to have cross-departmental responsibility for a co-ordinated policy on foreign languages? Without a step change in our language

22 Apr 2013 : Column GC302

skills, we will continue to compound our isolation within the EU and be unable to play a full role in the formulation of strategy and policy.

4.20 pm

Lord Giddens: My Lords, like noble Lords here present, I have been travelling widely across Europe over the past few months and talking to a range of political leaders and academics. My reading of the situation with regard to the UK is a bit different from that of other noble Lords who have spoken because I think it is much more serious and difficult for Britain than we imply from the speeches that have been given hitherto. Being an academic, I shall express this in terms of a number of steps of reasoning and ask the Minister to say where the flaw in the argument lies because I do not see one.

It goes in seven quick steps: first, the economy of the UK is heavily dependent on that of the wider European Union and there is no chance of diminishing that dependency in the short term. Secondly, saving the euro and returning the eurozone to prosperity is of key importance to a stable future for the EU and hence to the UK’s economic fortunes. The collapse of the euro would have catastrophic consequences for all of us. Thirdly, the euro cannot be saved without greater European integration, including, at a minimum, some form of banking union in the eurozone and, almost certainly, some sort of loose federation for the EU as a whole down the line. Fourthly, you cannot have greater integration and variable geometry at the same time because they are mutually exclusive. This is the reason why our normal allies, such as the Danes, gave such a tepid response to the Prime Minister’s speech in January. Fifthly, the chances of treaty change along the lines the Prime Minister wants to produce are therefore, to my mind, pretty close to zero. The main reason is that they are simply in the opposite direction to that in which Europe has to travel if the eurozone is to be saved, and the eurozone must be saved; at least, it must be stabilised in the short term as a minimum. Sixthly, hence, if by some miraculous happenstance the Government win the next election, the Prime Minister will be forced, when a referendum is called, to campaign for a no vote. Seventhly, since the Prime Minister says that he wants the UK to stay in Europe, this outcome can be described in Shakespearian jargon as:

“Hoist with his own petard”.

4.23 pm

Baroness Valentine: My Lords, it is difficult to follow that. The question of this debate takes as its premise that UK isolation is a bad thing, but is that the case? In my role as chief executive of London First, I talk to many business people who have given serious thought to how a UK that is not part of the EU might fare. Some point to our historic success factors—an open business culture, our time zone, English law and the English language—none of which comes from Europe. They question whether our membership really makes it easier to do business in Europe than with, say, Norway. Further, they argue that our focus should be on the emerging economies. Others challenge

22 Apr 2013 : Column GC303

the assumption that leaving the EU would damage London’s role as a financial centre. Supposing the EU were, in effect, to shrink to the eurozone, a new European financial centre would almost certainly emerge, but with an inward-looking focus, and meanwhile the UK would expand its global financial role.

However, it seems to me that these views merely represent pragmatic ways of dealing with a situation that few would actually welcome. Certainly, business people complain about red tape and employment law emanating from Brussels, but of those multinational companies that I speak to, not one has advocated divergent regulation within Europe. Furthermore, they understand the logic of negotiating global free trade agreements from a base of 500 million people rather than 60 million. While the need to shore up the euro necessitates reviewing relationships in Europe, I have yet to meet a senior business figure who would actively have sought a referendum at this time.

Continental Europe remains a major trading partner for the UK. We must value and respect that relationship. Let us not forget that for many companies, whether British, Asian or American owned, London is the location of their European head office. Any suggestion that the host country is at odds with other countries in the region is clearly unhelpful.

In financial services, what Europe needs is a financial centre which is competitive with the Americas and Asia. What the UK needs is friends to make that point, rather than enemies who resent the Anglo-Saxon business model. This is about tactics in Europe as much as whether one is a Europhobe or a Europhile. Some countries may wish to see London lose its position but there are also European firms and member states that value having globally competitive capital markets within our time zone. Certainly, tactically, it is not clever for the Chancellor to be voted down 26 to 1 on bankers’ pay, whatever way you look at it.

Therefore, my plea to government is not to risk vital relationships with political posturing. The only way to improve the relationship with Europe is to put two feet firmly inside the tent, identify allies and commit wholeheartedly to making the Union work for everyone’s benefit.

4.27 pm

Lord Judd: My Lords, the noble Lord, Lord Dykes, serves us well and may he long continue to do so.

The first reality for all of us in Britain is our total interdependence with the world as a whole. We fail the electorate, we fail our children and we lamentably fail our grandchildren unless we take every opportunity to bring that home. Since we last debated this issue, the realities of interdependence have become more underlined than ever. The economic crisis continues, the euro crisis—with all its implications for us as well as for everybody else—is still there, and of course this is complicated by the emergence of south Asia and China as increasingly significant economic realities.

Global security is challenging. There is Syria, the Arab spring with all its implications, the Korean peninsula and more besides; there is climate change, which is not unrelated to the issues of migration, which are immense;

22 Apr 2013 : Column GC304

and then, of course, there are crime and terrorism. One of the things that we all have to face is that significant crime and significant terrorism are, by definition, international in character. None of these issues can be satisfactorily resolved for the British people by Britain on her own. They all require constant, growing and effective co-operation.

Sub-Committees E and F will produce their report this week. I declare an interest as a member of Sub-Committee F but I commend the report to all members and take this opportunity to thank the noble Lords, Lord Hannay and Lord Bowness, for their outstanding leadership in chairing those two committees. I also commend the evidence because there has been a real attempt to keep the report of those committees evidence-based. One should read that evidence. All the people involved in the front line in fighting international terrorism and crime are saying that it would be madness at this stage to pull out from the closest possible co-operation which is developing so well within Europe.

I conclude by simply making this point. In the aftermath of the Second World War, in those very difficult situations our leaders across the political divide recognised that our future lay in the future of the world, and they became central to the building of viable, relevant international institutions. This was as true of the Conservative leadership at that time as it was of the leadership of my own party. What has happened that we have lost sight of that reality? The challenges today demand that same vision. Of course, there are weaknesses and huge flaws within the European Union, but those are best tackled by a Britain that is seen to be relentlessly committed to its involvement and belonging to the international and European community, not by a Britain that neurotically and negatively constantly undermines the European cause. I thank the noble Lord, Lord Dykes, most warmly and hope that he will continue to keep us up to the mark on scrutiny on this issue.

4.30 pm

Lord Hannay of Chiswick: My Lords, it would be idle to pretend that Britain’s always turbulent relationship with the other member states of the EU is not currently going through a more than usually troubled phase, and for that reason, I thank the noble Lord, Lord Dykes, for his initiative. The misguided attempt to veto a fiscal union treaty in December 2011, the balance of competence review, whose purpose often seems obscure to its authors, let alone to most of the other member states which treat it with deep suspicion, and the Prime Minister’s reckless commitment, in my view, to an in/out referendum in 2017 all contribute to a negotiating climate that could easily end up negating the objective of establishing a more settled relationship for a Britain firmly engaged as a full and fully participating member of the European Union.

How is such an outcome, which would be so damaging to Britain’s national interest, to be avoided? First, we certainly cannot afford to sit around waiting until we see the result of the 2015 general election before embarking on a process of reform. Nor can we afford to found such a process on the entirely false premise that the other member states, particularly the members

22 Apr 2013 : Column GC305

of the eurozone, are poised to embark on an overall rewrite of the treaties, which would provide the opportunity for us to put forward a wish list of our own. That will simply not happen any time soon, and certainly not in the timescale envisaged by the Prime Minister. Nor can any such process of reform afford to be based on a purely British list of vetoes, red lines, no-go areas, items for repatriation or renegotiation. We need a positive reform agenda which takes proper account of the wishes and interests of other member states, and thus has some chance of enlisting their support. That positive agenda needs to enlist cross-party support in Britain; it must not be a ragbag of items designed to appease the unappeasable in UKIP and the wilder shores of Euroscepticism, neither of which forces has the slightest interest in an approach that would leave Britain inside the European Union.

Can such a reform agenda be put together? I believe that it can but it would need to move beyond the comfort zone of Britain’s traditional EU agenda—completion of the single market, with stronger provisions on services and a digital market, further enlargement and freer and fairer world trade, valuable though those components continue to be. It will need to include a more wholehearted embrace of a common foreign and security policy and it should surely include, too, some strengthening of the common security and defence policy to face up to the impact of austerity on defence budgets. It should be focused on policy reform rather than on institutional reform. There will, of course, need to be some areas of increased flexibility in the operation of an EU moving beyond the soon-to-be 28 member states. Variable geometry is alive and well—here I rather disagree with the noble Lord, Lord Giddens —and has been operated successfully in Brussels since the end of the 1980s. We need only look at Schengen, the eurozone, justice and home affairs opt ins and opt outs. There will probably need to be more of that as the eurozone moves to a more integrated economic and monetary union within a European Union where there is still likely to be a substantial number of member states not yet within the eurozone, nor likely to be so in the near future. What needs to be avoided is making such a variable geometry the main operating principle of the European Union—that would be to sound the death knell of the single market; and to avoid, too, any fixed group of inner and outer circles of member states, which would be inherently unstable and unsustainable. It makes no practical sense anyway, as Britain is an essential leading player in any strengthening of common foreign security and common defence policy.

If I had one immediate plea, it would be for the Government to jettison their silly and untrue slogan of wanting less Europe—untrue because the Government’s policy is for more single market, more European trade agreements, and more new members of the European Union. Who are they kidding? The slogan is silly and counterproductive because it separates us from our natural allies in Germany, Sweden, the Netherlands, and in central and eastern Europe, who will never march into battle under the banner of “less Europe”. Shaping and beginning to negotiate with our partners and with the Commission over such a positive reform

22 Apr 2013 : Column GC306

agenda is the right way ahead, and a far better option than preparing to play a game of Russian roulette in 2017.

4.35 pm

Lord Jay of Ewelme: My Lords, it is perhaps worth remembering that the EU has three great achievements to its credit: it brought cohesion to western Europe after World War 2; it provided east and central Europe with a democratic home after the collapse of the Soviet Union; and it has created an almost but not yet complete single market of some 500 million people. All those greatly benefit Britain and the rest of the EU. The second and third of those owe a great deal to the influence exerted by successive British Prime Ministers and Governments, including on enlargement, and here I differ slightly from the view of the noble Lord, Lord Dykes and of Lady Thatcher.

The EU now has no such great forward-looking project. Indeed, in creating the euro, it has created huge, although not—and I agree with the noble Baroness, Lady Valentine—insurmountable problems for itself, brought on and exacerbated by the financial crisis. I believe we were right not to join the euro, but we also benefit hugely from the single market of 27 member states. Therefore, our interest as a nation surely lies in the maintenance of a coherent European Union of 27 or 28, with the euro at its core and the single market intact. That is easy to say but it is not a straightforward goal to achieve. There are strains between the eurozone and the rest, and within the eurozone, not least at present between Germany and France. Achieving that goal, crucial to our interest, will require patience, determination, tough negotiations and compromise, because negotiations always do require that. It will, above all, require maximising our influence, which we should never underestimate.

I do not believe that the noble Lord, Lord Birt, and I can be alone in hearing from business colleagues and others in Paris and elsewhere in the EU that Britain’s traditions of a liberal market economy, an international outlook and democratic strength are really needed in the EU, and the more the EU is in difficulty, the more, frankly, those qualities are needed. I fear, however, that we are also not alone in sensing that some at least in the EU seem increasingly to have given up on us, sensing that there is no longer a commitment in Britain to the European Union at a time when our contribution in our own interest, as well as in the interest of the European Union, is so important. That conclusion is wrong but I understand why they have come to it.

I end by looking on the bright side. I was delighted to see the Prime Minister and family spending time with Chancellor Merkel. I am delighted to see too that the Chancellor of the Exchequer played down the rhetoric of his opposition to the financial transaction tax, focusing instead on the British interest in opposing it. That, surely, is the way to promote our influence and our interests: state clearly our commitment to an EU of 27; establish close links, including at a personal level, with the key member states; and in that framework fight hard for British interests. As it is sometimes said, if you are not at the table, you tend to be on the menu. I know which I would rather be.

22 Apr 2013 : Column GC307

4.39 pm

Lord Liddle: A lot of the speeches we have heard in this excellent debate seem to make an assumption that David Cameron is going to be Prime Minister after 2015, and that therefore the referendum promised for 2017 is going to take place. In my four minutes, I shall briefly set out what I think a Labour-led Government should do.

One assumption lying behind our present predicament is that, because of the euro crisis and the presumed strengthening of integration that has to go with it, Britain is condemned to be on the fringes of a much more integrated eurozone and therefore can no longer aspire, as Tony Blair’s Government certainly aspired, to play as leading a role in Europe as France and Germany. I think that that assumption is flawed. I am sceptical about whether the steps necessary to save the euro require the creation of an inner core federal Europe. That argument is overdone. I also believe that there are policies that a Labour Government could advocate which would put it right at the core of Europe.

The key thing is that we present a positive vision for the future of the EU, as the noble Lord, Lord Hannay, and others, have said, which suits our national interests but can win support from our partners. There are three key elements to this. One is to have a plan for growth, so that it is pro-reform and pro the single market—and we have talked about extending it in digital and services—but also anti-austerity, and trying to get out of the trap of collective austerity in which Europe has put itself. There is an instrument, for instance, in the European Investment Bank, which could be greatly expanded to deal with that problem.

Second is the need to demonstrate the role of the European Union in tackling the big long-term challenges that all our European societies face, including innovation, climate change, demography and inequality. On innovation, we should be pressing for more co-operative research. On climate change, there is an urgent need to do something about the minimum carbon price. The failure in the European Parliament last week was extremely significant. We cannot have a credible national climate change policy without a complementary European policy. On demography, we should be talking about how we manage the challenges of migration, rather than making cheap points about benefits to Britain. On inequality, we should look again at how we use European legislation to strengthen a more Germanic model of responsible capitalism.

Thirdly, there is the crucial role that the EU can play in the world. We heard a lot in the aftermath of Margaret Thatcher’s death about how she put the “Great” back into Britain. But given that we account in our changing world for about 2% of world GDP, which will be our position in about 10 years’ time, the idea that Great Britain can on its own influence the world is for the birds. We have to do it through the European Union; that is the only way in which we can protect our essential values and interests, and that is what I believe a Labour Government would try to do.

Along with that would have to be sensible institutional reforms. A belief in a stronger EU in some areas is not an argument for a more centralised EU. Powers should

22 Apr 2013 : Column GC308

flow in both directions—the Prime Minister is right about that—and we should look at the present acquis to see what can be got rid of, as well as arguing for political reform that makes Brussels more accountable both to the European Parliament and to national Parliaments. But the fundamental point is that this has to be an agenda of reform, not of unilateral negotiation of some special deal for Britain, which is really a blind alley.

I shall finish by asking the Minister two questions. Will she take this opportunity to rule out once and for all on behalf of the Government that there are any conceivable circumstances, if they should be in power after the next election, in which they would recommend withdrawal from the EU in a referendum? Do they agree that the task is to forge an agenda of reform with our partners and not to draw up a list of unilateral demands?

4.46 pm

The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi): My Lords, I congratulate the noble Lord, Lord Dykes, on securing this important debate. Our discussions on this subject are timely as the Government continue to work effectively with partners across the EU to agree on practical, pragmatic reforms that are good for the UK and the European Union. I hope that the noble Lord, Lord Liddle, realises that in that statement I have probably answered his second question.

My noble and learned friend Lord Howe of Aberavon is right to say that the UK needs a positive vision. I believe that we have one. The Prime Minister has set out his vision for keeping the UK at the heart of a reformed EU. It is a vision of a more competitive, adaptable and flexible EU with a strong mandate from the citizens of the EU. I thank the noble Lord, Lord Birt, for his positive comments and assure him that the Prime Minister’s approach is one of reform and commitment, not of obstruction and exit. Unfortunately I disagree with much of what the noble Lord, Lord Hannay, said, but I can assure him that policy reform is a key element of the Prime Minister’s speech, and I agree that the European Union is about much more than just a single market. There is more that we can do to make the common foreign and security policy more effective and to step up the agenda on enlargement, trade development and other matters.

The noble Lord, Lord Jay, referred specifically to a coherent EU of 27 members. I believe that the Prime Minister has set out his vision that tries to address that, based on boosting the competitiveness of the EU as a whole and ensuring fairness for those inside the eurozone and also for those outside it.

I shall return to the original question raised by the noble Lord, Lord Dykes. His question is quite clear; I want to be equally clear in my response. The UK has not been, and is not, isolated in the European Union. The proposals the Prime Minister has set out for reforming the EU ensure that this remains the case. This view is shared by others. The responses of many of our European partners to the Prime Minister’s speech in January acknowledged the key role the UK plays in the life of the EU.

22 Apr 2013 : Column GC309

Many also agree on the need for reforms: countries such as Portugal, Sweden, Austria and Estonia have all said so recently. The Netherlands, Finland, Hungary, Portugal, Belgium and the Czech Republic have all said that they too want a more flexible, diverse and democratic European Union. The Prime Minister of Italy at the time, Mario Monti, said he shared the Prime Minister’s opinion that prosperity and growth must be Europe’s priority. Noble Lords can see that the idea of the UK being isolated from partners such as these who are on the record as agreeing with the importance of our reform agenda does not stand up to scrutiny.

The supportive words of our European partners are valuable, but I want to talk about actions, not words. I ask noble Lords whether an isolated member of the EU could achieve the scale of progress we have recently achieved in reform-focused decisions across so many EU policy areas. The Government have, as usual, been busy, influential and successful. Let me share with you some examples. The noble Baroness, Lady Quin, asked specific questions on policy areas, and I hope that some of these examples will answer those questions. Last December, we worked with partners such as France and Germany to secure an agreement on banking union which preserved the integrity of the single market. In February this year, we led efforts to finalise a deal on a unified patent court which will reduce costs for businesses and encourage innovation. Just last month, we worked with other states including Denmark, Germany, Sweden and the Netherlands to abolish the policy of discarding caught fish as part of a wholesale reform of the common fisheries policy.

We delivered the first ever cut in the multiannual financial framework. This is an excellent example of how we have worked with our European partners. Few were happy with the idea of reducing the budget when we started negotiations, but we worked hard to form a coalition and persuaded all member states to agree a good deal for European taxpayers. In the European Union, you cannot reach agreements like those with 26 partners if you are unsupported and isolated.

The EU and the US recently announced their decision to pursue negotiations on a free trade agreement. It is influential member states such as the UK which drive this process behind the scenes. Such agreements are of critical importance to growth and prosperity across Europe and the United Kingdom.

In 2011, we concluded a free trade agreement with South Korea. Last year, we reached agreement with Singapore. This year, the UK is continuing to play its usual leading role as we come close to concluding talks with Canada. If we completed all of the negotiations on agreements currently on the table, it would be worth an additional €60 billion for the EU every year, according to the European Commission. From free trade to fisheries reform, from banking union to bailout rules, we continue to agree sensible changes to benefit the UK and the European Union.

The noble Baroness, Lady Quin, raised the specific issue of banking union, as did other noble Lords. Our key objective is to gain member states’ support that no banking union measures harm the unity and operational

22 Apr 2013 : Column GC310

integrity of the single market. Banking union is a single currency and not a single market issue. As the UK is not a member of the eurozone, we have been clear that the UK will not participate in the sharing of eurozone risk or the new supervisory system. However, while it is for those who will join the banking union to design the framework, the UK will continue to play an active role during negotiations to ensure that the operational integrity of the single market is protected.

The noble Baroness also raised concerns that the Government are in the minority on the issue of bankers’ bonuses. This is clearly a very politically sensitive issue within the European Union at the moment. This made the debate very difficult. We voted against Capital Requirements Directive IV. Obviously we are not satisfied with the outcome. We have argued that the agreement on remuneration will have an adverse effect on financial stability. But this should not obscure the fact that many aspects of the agreement represent a positive achievement for the UK such as on higher prudential standards and the treatment of investment firms.

The right reverend Prelate the Bishop of Exeter asked, “Is this reform or repatriation?” as detailed in the Prime Minister’s speech. I can assure him very clearly that this is reform. The Prime Minister’s speech does not mention the word “repatriation”. We all need to help re-engage what the European Union means to European citizens and what citizens want. He also spoke about the common good and not to lose the soul of Europe, but I am sure he would agree that we will lose the soul of Europe if the current democratic deficit is not addressed. I hope that he and the church will feed into the balance of competences review.

My noble friend Lord Bowness referred to the balance of competences and to France and Germany’s contribution. The balance of competences review will give us an informed and objective analysis of the UK’s relationship with the European Union. Several foreign partners have already responded in the first semester along with a number of international organisations. Ultimately, the analysis will be focused on what the EU means for the UK and our national interest. We have already received 500 pieces of evidence and we will publish the full list of those who have fed into the review when the first reports are published in the summer, later this year.

The noble Lord also raised issues about UKIP and Conservative candidate selection. My views on both are on record from when I was party chairman.

The noble Lord, Lord Kakkar, raised some very specific issues in the area of health. I hope that he, too, feeds into the first semester of the balance of competences review, which reports in summer later this year. But in relation to the specific issue about the working time directive, the coalition Government have committed to seek to limit the application of the working time rules. We are continuing to work with EU partners whose votes we need to bring this about.

A question was raised in relation to Schengen. The UK already participates in some parts of the Schengen acquis where it makes sense, such as co-operation in managing borders. However, I can assure noble Lords that in 2012 more than 31 million people visited the UK, according to VisitBritain. The noble Lord, Lord Bilimoria,

22 Apr 2013 : Column GC311

referred to the Business for Britain campaign, which called for a national drive to renegotiate the terms of Britain’s membership of the European Union. I welcome his contribution and the contribution of that campaign on how the UK can continue to be an active member of a reformed European Union. The voice of business is essential to that debate.

The noble Lord, Lord Dykes, referred to our opt-outs on the JHA in 2014. Discussions are ongoing and we have committed to a vote in both Houses, which will take place in good time. Of course, the national interest will be a key factor in deciding which measures we agree to rejoin. The noble Baroness, Lady Coussins, referred to foreign languages. This has been a longstanding issue and we recognise the importance of increasing UK nationals in EU institutions. We have reintroduced language training and indeed, the language school at the Foreign and Commonwealth Office. We have also supported the European fast-stream work and foreign languages in curriculums in schools.

The noble Lord, Lord Giddens, set what seemed like a series of undergraduate questions. He was clearly back in academic mode and I quickly went into undergraduate mode, with sweaty palms, and realised that I had not crammed enough to answer his questions, but I will try to answer them in writing. The noble Baroness, Lady Valentine, stressed the importance of EU free-trade agreements and trade with Europe. The Prime Minister has been very clear that the UK’s national interest is best served as an active member of a reformed EU. We seek reform of the EU for the benefit of all member states, and many European partners agree with us. I fully agree with the noble Baroness on the importance of the EU concluding free-trade agreements, and the Government are actively supporting an ambitious programme.

The noble Lord, Lord Judd, raised the issue of common security and defence policy. The UK has successfully driven common security and defence policy in the EU and we have made it a useful tool for delivering British objectives, whether in the Horn of Africa or the West Bank, and whether it was to improve policing in Palestine, Kosovo or in Georgia, British personnel were in key positions of influence and multinational efforts to help local populations deal with the legacies of conflict. The noble Lord, Lord Judd, also realises that there are flaws and weaknesses in the system, and it is those that we are attempting to deal with, and what the Prime Minister attempted to deal with in his speech.

This has been a thoroughly interesting debate and I thank the noble Lord, Lord Dykes, for giving us the opportunity to examine the issues once again. I thank all noble Lords who have contributed from across the House. As with all matters on Europe there is a full spectrum of views and opinions about the fundamental principles of the debate, but the noble Lord, Lord Dykes, talked about steps taken. In the snapshot of the most recent events I have given today, I hope that the facts speak for themselves, but this is not just about what the European Union is doing now; it is about what the EU wants to do as part of the future. The Prime Minister started the debate in January and it has aroused healthy discussions. We do not deny

22 Apr 2013 : Column GC312

that there is a range of views across Europe; it would be odd if there were not, but I hope that I have made it clear that this Government dispute any notion of UK isolation. We will continue to put the case to our partners and continue to deliver changes to encourage growth now. We will continue to lead the wider debate on reform to secure long-term prosperity in the United Kingdom and the European Union.

Lord Bowness: Before the noble Baroness finishes, I have two specific questions which she did not deal with. Will she repudiate the policy advocated by UKIP of leaving the European Union and will she commit the Government to a categorical support of the four freedoms, to which I referred in my speech?

Lord Giddens: Mine were not undergraduate questions but Socratic propositions.

Baroness Warsi: On the question asked by the noble Lord, Lord Bowness, the primary supposition is very clear. It is very apparent that the Conservative Party’s policy is one of renegotiation. In my last job I spent many hours touring the country speaking to Conservative members. When I asked them whether they wanted out, in as it is now or renegotiation, more than 90% always went for renegotiation. That is the Prime Minister’s position and I hope that it is clear.

Energy: Nuclear Power

Question for Short Debate

5.01 pm

Asked by Viscount Hanworth

To ask Her Majesty’s Government what is their assessment of the role of nuclear power in helping the United Kingdom to meet its climate change and energy security goals.

Viscount Hanworth: This is a timely debate, which comes some time in advance of the introduction to the House of Lords of the Government’s Energy Bill. We are eager to discover how, in truth, the Government foresee the future provision of electrical power in the UK. We should like to know what steps they intend to take to secure our future supplies of energy if the optimistic scenario that they have depicted in recent documents fails to materialise and if the commercial providers are not forthcoming. I should like to put this question to the Minister.

There is already a plethora of printed information from which one might seek some enlightenment. In March, a flurry of documents emanated from the Department for Business, Innovation and Skills and from the Department of Energy and Climate Change. Some of these documents contain new information, but much of their material is already familiar from previous publications. These documents seem to indicate a strengthened commitment to a nuclear future. Nevertheless, they do nothing to dispel the doubts about this future.

22 Apr 2013 : Column GC313

One of the most significant of the recent publications is the so-called Beddington report, A Review of the Civil Nuclear R&D Landscape in the UK. This report, which has been conducted by the Government’s Chief Scientific Adviser, represents an independent appraisal. The Beddington report amounts to an inventory of our existing research facilities. It has revealed some serious lacunae.

Another enlightening document is a report of the Energy and Climate Change Committee of the House of Commons, Building New Nuclear: The Challenges Ahead. Here, one will find a full expression of the doubts and anxieties concerning the nuclear programme and the energy policy of the UK in general. This document, which comes in two volumes, contains the brief and cogent report of the committee, together with a mass of oral and written evidence from numerous parties. It is to this report that one should go to discover the realities of our situation, which are in contrast to the optimistic aspirations of the Government.

The doubts that affect the Government’s programme arise mainly from the fact that it persists in seeking a wholly market-based solution to the energy problem. Their stance implies that they will have a limited control over the outcome, unless there are contingency plans for the eventuality that the markets will fail to deliver what is required. As the Commons report asserted, there is no evidence of any such contingency plans and it is likely that the markets will fail to deliver.

It is also clear that, in the absence of a successful nuclear renaissance, the UK will fail to meet its commitments, proclaimed in the Climate Change Act 2008, to stanch its emissions of carbon dioxide. According to existing plans, which have been influenced by our climate change commitments, the UK will lose in the coming decade about a quarter of its coal-fired power stations. We will lose all of the old oil-burning plant. We will be losing most of the existing nuclear plant, which consists of the eight advanced gas-cooled reactors and the one pressurised-water reactor, Sizewell B. This is the only current reactor that will still be operating after 2023. That is the reality of the energy gap, which the Government are hoping that the private sector can be induced to fill.

What we will be left with, in the absence of new nuclear plant, is an electricity-generating sector dependent almost entirely on gas and wind power. This assumes that the UK would continue to fulfil its climate change commitments. In such circumstances, the UK will be faced with the choice between breaking those commitments or suffering an even more severe dearth of energy supply.

One might look to the obiter dicta of some of the Ministers to discover what the Government really intend. We know that the Chancellor of the Exchequer, George Osborne, has been vocally supportive of the UK’s shale gas industry, arguing that this prospective energy source could be a cheap and secure way of meeting the country’s energy needs, as ageing power stations are decommissioned. However, most experts have doubts regarding the extent of the shale gas in

22 Apr 2013 : Column GC314

the UK and its accessibility and they point to the environmental damage that would arise from its extraction. If the UK were to depend on gas, it would need to be imported from abroad. The global supplies of gas are limited and are liable to be pre-empted by other nations that have forsworn the use of nuclear energy. The supplies of gas from abroad will be both insecure and expensive.

Another possibility for filling the energy gap, in the absence of nuclear power, would be by burning coal, which nowadays the UK imports in large quantities. Some people have been able to imagine that this would be an acceptable recourse, if it could be accompanied by the as yet unrealised technology of carbon capture and storage. This technology appears to be a fantasy and the prospect of continuing to rely so heavily on coal fills all but the most ardent climate change sceptics with horror.

Finally, there is the suggestion that, in the absence of nuclear power, we could rely on wind power and wave power, on biomass energy and even on energy abstinence. The supply of biomass is limited and its burning is highly polluting. The energies of the wind and the waves are intermittent and they have to be accompanied by other sources of power to meet the base-load requirement. These renewable sources can play only a marginal role. Moreover, when the full costs of renewable energy, including those of the base-load provisions, are taken into account, they are seen to be exorbitant.

Now I must explain why the Government’s intention to achieve a nuclear renaissance by means of free market enterprise seems so improbable. For a start, one can point to the fact that no commercial supplier has yet given a firm commitment to build nuclear plant in the UK. A significant number of prospective suppliers have already withdrawn. One should also note that there are no other examples of nuclear power stations that have been constructed without the major involvement of a national Government. A new nuclear power plant has a life expectancy of 60 years. Ten years can pass from the initiation of a nuclear project, when the first expenses arise, to its completion, when the revenues begin to flow. Seventy years hence is way beyond the horizon of any commercial enterprise.

The logic of commercial project appraisal depends on a rate of discount that is applied to future earnings and diminishes their present value as they recede into the future. The commercial rate of discount obliterates the value of future earnings to the extent that no enterprise would undertake investment in such a long-term project as a nuclear power station unless it was heavily subsidised. Nuclear power is virtually incompatible with private enterprise. At present, the only realistic hope for a new nuclear plant in the UK is one that would be constructed by what is essentially a state-owned enterprise, namely EDF, or Électricité de France. The heavy subsidy that EDF can expect to receive is largely on account of the high cost of the alternative sources of power with which nuclear energy would be competing. Even so, it is unclear that this would offer a sufficient inducement for it to bear the risks of such a project.

22 Apr 2013 : Column GC315

What should the Government do in the face of the eventuality that commercial enterprises will not be prepared to undertake the building of the much needed nuclear power stations? The answer is that the Government should commission and finance the projects directly, as has been the case invariably in the past. By financing the projects directly, the exorbitant costs of the risk premia that are demanded by the financial markets would be avoided and the benefits would accrue to the public.

The Government should not allow themselves to be hamstrung by an atavistic free market ideology. Nor should they be obsessed by the totem of their nominal borrowing requirement. If the Government can afford such massive financial quantitative easing as we have witnessed recently, surely they can afford to finance our energy future. I earnestly hope that the Government have a contingency plan and that it is one that is dictated by common sense.

5.10 pm

Lord Jenkin of Roding: My Lords, in my three minutes I really only want to make one point. The assumption behind all the documents published last month was that nuclear energy is going to have to play a major role in the low-cost, low-carbon supply of energy to this country. Of all the reports that were published last month, may I express particular enthusiasm for what the noble Viscount has called the Beddington report, namely the report about the response to the Lords report on nuclear research and development? The other report, on strategy, is also extremely positive and forward-looking. With it, we also have the road map reports, something that the Select Committee called for specifically.

Together, these reports should now provide Ministers with all the guidance that they need on how to ensure that the UK nuclear industry can achieve three things. First, nuclear power should play a long-term role over the decades ahead in providing security, which the Question refers to, and a low-carbon source of electricity. Secondly, by expanding focused research on new technologies, the UK should be able to rebuild its leading role in global nuclear development, something which again the Select Committee looked forward to. Thirdly, the reports should enable the UK industry to become a major nuclear exporter to the rest of the world. These things are all spelled out in the documents with great clarity, certainty and force. I do not share the pessimism of the noble Viscount.

With regard to the Ad Hoc Nuclear Research and Development Advisory Board, I give full support for all 12 recommendations. However, I would like to ask my noble friend just two questions. The first concerns the role of the National Nuclear Laboratory, about which we had a great deal of evidence in Select Committee. When will Ministers be able to announce details of the proposed new structure and role of the laboratory and the details of the programme referred to in the report? There is also recognition that extra funding will be needed. We know that this cannot come from DECC, because it does not have any money, but BIS does. It is, in a sense, the research department. Therefore, I hope that we can look forward to the funding necessary to deliver the programme spelled out in the report.

22 Apr 2013 : Column GC316

The second question relates to one of the four areas of opportunity set out in the Nuclear Industrial Vision Statement, which refers to “nuclear fuel cycle services”, where the UK,

“could expand its international market share in current fuel supply and spent fuel management”.

There has been a lot of publicity about the future of URENCO, with the suggestion that the Government may be willing to sell their one-third share in it. That is inconsistent with what I have just read out from the report. Could my noble friend give us any further information about that?

5.14 pm

Lord Giddens: My Lords, first, I congratulate my noble friend Lord Hanworth on having initiated this debate. Three minutes on nuclear power is not very much, so I am going to limit myself to three questions to the Minister.

First, exactly what lessons have the Government learnt from the notorious examples of the Olkiluoto plant in Finland and the Flamanville plant in France? Both, as everyone here will know, have been subject to horrendous delays and cost overruns. With Olkiluoto, the whole process was initiated in 2000 and the plant was supposed to come into service in 2009. However, the date now given is 2015 and we do not know whether that will be achievable. The project is billions of euros over its original estimated cost and an unseemly squabble has broken out over who will pay the difference. How are the Government setting out the lessons to be learnt so that we can avoid those outcomes?

Secondly, even if built more efficiently, the reactors planned by the Government will take many years to come on stream. The level of technological innovation in the energy sector is now very high—much higher than it was a few years ago. What will prevent the reactors becoming expensive white elephants? The report sent to the Government by their three main scientific advisers proposes the development of fast reactors using nuclear waste as a power source, thorium reactors and perhaps nuclear fusion. I would support all of those, but how will such development be carried out alongside the building programme and who will pay?

Thirdly, what is the Government’s latest position on the convoluted issue of subsidies, which seems to run and run? As I understand it, the Government are no longer sticking to their position that nuclear investment could go ahead only if there were no subsidy. I do not know anyone working in or around the industry who ever thought that that was possible. Does the Minister agree with the calculations of the energy analyst Tom Burke, who has mounted a series of attacks on government policy? According to him, if the strike price at Hinkley Point was just under £100, the constructors would receive something like a £50 billion subsidy from the Government if the contract were for 40 years and the market price averaged £50 to £60. Does the Minister agree with that?

Finally, with nuclear power there is the constant issue of insurance. What insurance scheme do the Government envisage? Will the taxpayer be mainly

22 Apr 2013 : Column GC317

responsible if there is a nuclear accident where the costs are over £1 billion, which is mentioned in the government analysis? It would be very useful to know just what kind of insurance scheme the Government have in mind, because different countries use different ones and no one has come near to paying the costs of a serious nuclear accident.

5.18 pm

Baroness Parminter: I add my thanks to the noble Viscount, Lord Hanworth, for posing this important Question. I would contend that the complexity and, indeed, the continually rising costs involved in building nuclear reactors and in putting in place appropriate safety, waste management and decommissioning arrangements will limit the role that nuclear energy can play in helping the UK to meet its essential climate change and energy security goals. I have three principal concerns, to which my noble friend Lord Giddens referred.

First, I agree with my noble friend about the costs of new build. He referred to the costs of the proposals in Finland and France. I would add to that the costs of dealing with existing waste. Decommissioning of the UK’s civil nuclear facilities—principally Sellafield and Dounreay—is estimated at being in excess of £86 billion and is expected to rise. By contrast, as observed by the Economist in its recent study on nuclear, the costs of many renewable energy technologies are falling fast.

Secondly, there is the issue of waste. Despite 60 years of civil nuclear expertise, there is still no long-term solution for storing high-level radioactive waste.

Thirdly, there is the issue of accidents—again, referred to by my noble friend Lord Giddens. With corporate liability limitations, it is the British taxpayer who is liable for the clean-up of any major nuclear accident. As the total clean-up costs for the Fukushima nuclear accident are likely to top £160 billion, it is clear that if the nuclear industry had to insure itself properly, its electricity would be unaffordable.

The noble Viscount mentioned the recent report of the House of Commons Energy and Climate Change Committee on nuclear power in the UK. It concluded that the failure to deliver nuclear new build does not pose a significant threat to our energy security. A viable and sustainable option to deliver a successful and cost-effective decarbonisation of the UK’s power sector by 2030 is an increased deployment of renewable energy technologies coupled with a greater focus on improving energy efficiency. Increasing the UK’s interconnection with European grids must also be a priority, with gas playing a role as a transitional and system-balancing fuel.

In conclusion, I shall ask the Minister two questions: first, when do the Government expect a decision on whether the current electricity market reform proposals are illegal state aid under EU law, given that tendering for nuclear electricity does not fulfil the requirements of Directive 2009/72, Article 8? Secondly, following the decision of Cumbria County Council, what plans do the Government have for locating an affordable, long-term solution for UK nuclear waste?

22 Apr 2013 : Column GC318

5.20 pm

Lord Moynihan: My Lords, I am a supporter of nuclear power for the main reason that it will be a critical component in our future security of supply. The main case that needs to be made by government is the economic case for nuclear power. The decision to go ahead with new-build nuclear on existing sites should be driven by government, independent of direct links to the pricing of, say, future projections of renewables or new-build CCGT. New-build nuclear must secure a significant part of our essential base load supplies of energy. These stations require substantial up-front capital requiring low marginal and operating costs. They face, as was pointed out, major decommissioning costs. However, above all, the Government should not carry the risk of escalating construction costs. The industry has, as has been pointed out, a bad track record, with Olkiluoto in Finland and Flamanville in France both late and substantially over budget. Can the Minister confirm that the contractor will bear in full any cost escalation during the construction and operating phases of the project?

The second point I shall raise today relates to the proposed contracts for difference. Will the Minister confirm how the proposed plan to fund nearly all low-carbon generation through CFDs and the prospect that nearly all future generation will effectively be remunerated under a contract determined by government can be consistent with overall European Union aims for a competitive single electricity market? As the noble Baroness, Lady Parminter, pointed out, this would be extraordinarily difficult. As the Oxford Institute for Energy Studies has pointed out, the European Court of Justice’s 2010 judgment in Federutility, concerning regulated electricity tariffs and the presumption of the EU’s internal energy market legislation, that the market mechanism should be allowed to operate, would indicate that the Energy Bill appears to fly in the face of the Commission guidelines.

The Commission says, among other things, that in assessing environmental operating subsidies it will consider the following:

“duration of the aid: If operating aid is granted for a long period, this is more likely to distort competition … gradual decrease of aid: If operating aid is reduced over time, the undertaking will have an incentive to improve efficiency; therefore, the distortion of dynamic incentives will be reduced over time”.

To me, a grandfathered, 40-year plus contract for a nuclear power station would be seen by the Commission as foreclosing a significant part of the market. What we have here is the prospect of a legal challenge between national targets for carbon reduction and nuclear and the promotion of renewable sources on the one hand and the development of a European barrier-free market on the other. Will the Minister inform the Committee of the Government’s view of this discrepancy and place in the Library any copies she may have of the legal advice the Government have sought to reconcile these discrepancies in advance of Second Reading of the Energy Bill in your Lordships’ House?

5.25 pm

Lord Whitty: My Lords, my noble friend’s question relates to the contribution that nuclear energy can make to both energy security and climate change.

22 Apr 2013 : Column GC319

I shall focus mainly on the latter. The answer to the question obviously depends on the timescale and, in a different sense, on the nuclear industry overcoming the legacy to which the noble Lord, Lord Moynihan, referred, of economic overconfidence, not to say mendacity on the part of the economics of nuclear power. I support nuclear power, but I recognise that history. We have to overcome it and the continuous slanging match between those who support renewables, who slag off nuclear power, and those who support nuclear power who slag off the renewables lobby. We have to get over that because both are vital if we are to meet the climate change target. Mutual recrimination only benefits longer-term use of damaging fossil fuels.

In the short term, nuclear power will not make a huge contribution to carbon targets. To meet our carbon trajectory, we will have to rely on increased renewables and a switch from coal to gas. In the medium term, however, it could be different. In the nearest thing to a road map that the Government have come up with—the carbon plan—it is envisaged that at the end of the fourth carbon budget we will have 10 to 14 gigawatts of new nuclear power on stream, potentially rising to 20 gigawatts by 2030. On present form that seems pretty improbable, but it is no more improbable than that, in the same plan, we will also have 35 to 50 gigawatts of renewable energy, which will be equally difficult, even if we have the subject of the next debate on stream and working. It is important to take decisions now to set the guidelines for nuclear investment to ensure that we get somewhere close to the 27 or 30 targets for nuclear contribution.

The immediate prospect before the Government is the Energy Bill, which will be before this House in a couple of months. The test case for contracts for difference is the nuclear investment by EDF in Hinkley Point. It is a terrible dilemma for the Government and a severe test of whether the contract for difference can actually work. It will also determine whether we have a viable means of delivering nuclear investment in this country. Part of the media coverage on this has been misconceived. The Treasury has a stronger hand against EDF than is indicated. There is not a lot of demand for nuclear power in Europe. The state-aid issue, to which the noble Baroness, Lady Parminter, referred, will be an important inhibitor on what the Government can do for EDF in any case. The idea that we all have to roll over to EDF demands to bring Hinkley Point on stream is exaggerated. That is not to say that it will be an easy negotiation or that the precedents set in the outcome of that negotiation will necessarily be tenable for other proposals for investment into other nuclear sites. I urge the Government to play hardball in this respect, and ensure that the deal that is done on Hinkley Point, which I very much support, is one that benefits the British people and the British economy rather than straightforwardly EDF.

5.28 pm

The Lord Bishop of Hereford: My Lords, I welcome the debate and congratulate the noble Viscount, Lord Hanworth, on securing it. In the three minutes allotted to me, I shall make four overrushed points. First, I am hugely supportive of us walking the nuclear path.

22 Apr 2013 : Column GC320

I would love the 85% target for 2050 to be achieved, and I stress that thorium molten salt reactors should be on the medium and long-term radar. There is four times as much thorium in the world as uranium. One tonne of thorium is equivalent to about 200 or more tonnes of uranium, which is equivalent to 3.2 million tonnes of coal, which would produce 8.5 million tonnes of carbon dioxide and 900,000 cubic feet of waste fly ash. That is a no brainer when we are starting to be green and looking to be green. There is no argument about that, apart from one of cost, but it could be turned on its head and we could say, “Can we not afford this? Is there a way to achieve those reductions without it?”. I do not think that there is.

Secondly, research and development are vital. I appreciate very much the steer towards putting a bit more money in. What a shame that since 1995 we have had almost no money in R&D for fission. I understand that at the moment in our universities there are only five PhD students doing R&D in fission and, if noble Lords would like to guess the number of post-docs, it is 0.2 of a researcher. That is desperate, and we are heading for a massive skill shortage unless we do something about this now and step up hugely the amount of money spent on research. It is greatly needed.

Thirdly, the national decommissioning authority must surely be given a remit that is new, fit for purpose and joined up with the rest of the documentation we have here. Instead of the national decommissioning authority working on its own brief to its own agenda and therefore not being able to use its money to help with the research, we need to make sure that we change the mindset so that some of what is regarded as waste can be regarded as fuel. If we have thorium molten salt reactors, that would be possible. We need to recognise that the new generations of reactors have far less wastage and therefore there is ultimately far less to decommission, which is another good reason for walking this path, and we need to cut down the £2.3 billion a year that is being spent, which I understand is 80% of DECC’s annual budget. That seems an outrageously large sum, and we need to close the gap.

My fourth point is that this cannot and will not happen without government putting in the initiative, as the noble Viscount, Lord Hanworth, has made clear. Anything that has a 15 or 20-year, let alone a 60 or 70-year, lead time is hardly going to be commercially attractive. It needs government to do it. We are having such trouble finding anybody to build our reactors at the moment because we have trusted to private enterprise, and things of this scale have to be joined up and have government support. I would like us also to have something that is far more clear, coherent and comprehensive with a commitment from the Government to go for that, and then others would come aboard with university and other research money to follow.

5.31 pm

Lord Judd: My Lords, clearly the demands of climate change mean that this issue has to be promoted to a top priority in government consideration and action. We have got to stop dithering and get on with it. If we are going to get on with it, there are several points

22 Apr 2013 : Column GC321

which have to be addressed. The first is why we are not deliberating our energy policy more seriously than we do with a real drive for energy conservation. Are we just fatalist about the level of energy consumption and therefore trying to meet it, or do we have a policy on energy conservation, and how is that being pursued and resourced? Talking about further education, higher education and skills, how much effort is going into producing the people who can be expert and relevant in this field?

Next comes the issue of real cost. That has been well illustrated in what has been said already. We have to look at the long-term costs. We have to be very certain. I do not believe that there can be any total certainty, but we have to be as certain as we can be about what those real costs will be and stop shadow boxing. In that context, the real costs of the alternatives have to be evaluated. What is the competitive advantage? There are special dimensions to this, and it would be foolish to overlook them. There is safety, of course, and there is also security in an age of international terrorism and the rest. What we need to be clear about in these extra costs is exactly where the responsibility lies. From the outset, we have to be clear about what the taxpayer may be expected to fork out in the future and what the industry itself is expected to meet. There are some huge issues in that sphere, but we have to be clear about them. We cannot just drift into another example, like the banks, of de facto welfare capitalism in which when something goes wrong, taxpayers are expected to fill the bottomless pit with their taxes.

The noble Baroness, Lady Parminter, referred to waste. I simply say that I think it is irresponsible to move into the next generation of nuclear energy before we have demonstrated what we are going to do with the existing stock. This has immense implications for future generations for hundreds of years ahead. I cannot understand why in Britain we do not have a costed, carefully researched list of suitable sites for the storage of nuclear waste across the country as a whole—suitable geologically as well as on security grounds. Of course, voluntarism in this area matters, but voluntarism should come into operation in the context of what is clearly the best place and what are clearly the less good places in which this waste should be stored. I simply do not understand why that is not being done and I believe that it should be done as a matter of urgency.

5.35 pm

Lord Davies of Stamford: My Lords, we must have a nuclear programme. Renewables are not a substitute, as the House knows very well, because they are not base load. Carbon capture and storage is not a satisfactory substitute because it is still an unproven technology, and it would be deeply irresponsible to set our future by making a bet on that particular number on the board. The same applies to shale oil. I think that we should seriously pursue shale oil opportunities, but there are very serious environmental concerns about it. There are suggestions that the fracking process could permanently pollute the water table, and that should obviously be taken extremely seriously. However, even if that matter is resolved, combined-cycle gas-fired power stations continue to emit carbon. If we really

22 Apr 2013 : Column GC322

are serious about reducing our carbon emissions to the greatest possible degree, we must at least try to replace a proportion of our energy with electricity generated through nuclear fission. As has already been said, that is a very tall order because all the stations except for Sizewell B will be decommissioned by 2023 and it takes 10 years to build a nuclear power station. Therefore, we can see the problems that we have got ourselves into.

I do not agree with the noble Baroness, Lady Parminter, or indeed with my noble friend Lord Judd, with whom I normally agree on most things, that the problems of nuclear waste storage should in any way hold us up in taking decisions about investing in a new generation of nuclear power. We have that problem anyway with the existing stations that we are closing, and the problem is much greater with the present nuclear power stations because current technology is much less efficient and much more waste is produced. Therefore, I do not think that that is a very good argument.

I want to take the opportunity, as I think we all do this afternoon, to ask a very simple question of the Government. What the devil are they doing? What do they have to show in this area after nearly three years in office? They have been arguing about contract differences for two years. They would have been in a much better position to come to a deal two years ago, when we had two German groups, as well as EDF, who were extremely keen on getting involved in the nuclear project in this country. Therefore, I fear that the Government may have got themselves into a very unfavourable position simply by not being sufficiently dynamic or focused earlier in this Parliament.

My second question is: what is the fallback position? If the Government cannot come to an agreement with EDF, what do they do? We know that the Government do not have a fallback position on the economy and their economic policies have not worked. They have not thought through that situation properly. They have not thought through the possibility that the initial strategy that they are pursuing might go wrong. That is a very irresponsible way to run any business or any country. What fallback position do the Government have in mind for our energy requirements if they cannot come to an arrangement with the private sector to build new nuclear power stations?

5.39 pm

Lord Jay of Ewelme: My Lords, I must declare an interest straight away as a non-executive director of the main Paris board of EDF. Indeed, I am the only non-French member of that board. I should stress that I favour nuclear energy not because I am a member of the EDF board; I was delighted to accept membership of the board because I believe that nuclear energy should be part of our energy mix. I hope very much that the present negotiations between the Government and EDF over Hinkley Point will succeed. A year or so ago, I would have said that they seemed condemned to do so. However, having observed negotiations more recently, albeit indirectly from both Paris and London, I do not think that success is in any way assured. Robert Peston got it right in his FT blog last week, when he talked of both sides proceeding

22 Apr 2013 : Column GC323

with “cautious pessimism”. I hope that I am being too pessimistic myself. If we do not renew our nuclear capacity over the next 10 or more years, I believe that we will face real problems of energy security as existing nuclear and coal-based plants close, as gas prices rise when, as it is hoped at some point, the economy picks up, with shale gas being less significant inevitably on this side of the Atlantic than on the other side, and as wind power remains expensive and intermittent.

We would also find it much harder without nuclear as part of our energy mix to meet our carbon reduction targets. It is worth remembering that a nuclear power station will emit around five tonnes of CO2 per gigawatt hour of electricity generated, compared with nearly 500 tonnes from gas and 900 tonnes from coal. I add, in case the noble Lord, Lord Lawson, is listening somewhere, that climate change is not the only reason for clean energy. There is also a very strong public health reason for clean energy as anyone who has experienced Beijing smog in recent years will know.

For all those reasons I welcome the Government’s commitment to nuclear power. I also welcome the conclusion of the Government’s nuclear industrial strategy—in particular its review of the nuclear research and development. Nuclear R&D needs to be far more robust than it is at present. That approach is needed if we are to respond to Britain’s needs and, as the noble Lord, Lord Jenkin, said, if we are to exploit the rise of nuclear power elsewhere in the world, which is the real opportunity for us as a society. Finally, like the right reverend Prelate the Bishop of Hereford, I hope that molten salt reactors and thorium fuel will get the attention they deserve in our R & D programmes in the future, in providing the prospect of nuclear power that is safe, provides economic benefits and much more manageable waste disposal.

5.42 pm

Lord Foulkes of Cumnock: My Lords, we should be grateful once again to my noble friend Lord Hanworth for drawing our attention to the looming crisis in the electricity supply industry. We raised it in the energy sub-committee of the Cabinet in 2001. To be fair, successive Governments have done nothing about it—I was going to use another phrase there, but nothing about it is more polite. A total of 19% of our electricity now comes from nuclear power and all but one of the existing power stations will close by 2023. What are the Government planning? They hope to build 16 gigawatts of nuclear capacity by 2025, but we have already heard from my noble friend Lord Jay that even he is pessimistic about EDF being able to deliver the only one that is in prospect, which will produce just over six gigawatts. It really is a looming crisis.

As my noble friend Lord Hanworth said, the markets are failing to deliver. In the past, nuclear power stations have either been funded by Governments, and we cannot do that any more because we privatised British Energy and now it is owned by the French—we know we have one person looking after our interests there, but mostly by the French—or were provided on the balance sheets of companies against their other revenue and assets. As the departing chief executive Volker Beckers of RWE nuclear power made clear, balance

22 Apr 2013 : Column GC324

sheet financing is not now an option. Therefore the only option is to try and find these loans from the market, and they are proving both illusive and expensive. That is why, as the noble Lord, Lord Jenkin, said, they have been pulling out of the option of building. What is the way forward? By contrast to these expensive loans, the cheapest source of funding would be for the Government to build the nuclear power stations and then either sell them to the utility companies or bring companies in to operate them.

I have only one question for the Minister and I will conclude on it. Why is the Government’s ideology stopping this being done? I predict that this is the only way that we will be able to fund this—I see no other way forward. It would be cheaper, easier and quicker for the Government to build their power stations with the option of selling or hiring them to contractors once completed. Is it only ideology that is stopping the Government doing that?

5.45 pm

Lord ONeill of Clackmannan: I thank my noble friend Lord Hanworth for introducing this debate, although when it was first announced I was not sure that we would have much to debate. I thought that we would probably be well on the way to getting a strike price. Secondly, I did not anticipate the European Parliament having the vote that it did, throwing the carbon market up in the slates. The first question that we have to ask the Minister is what the Government propose to do to retrieve the situation so that the price of carbon can be made clear so that potential investors in all forms of generation of a low carbon character, whether renewable or nuclear, have some sort of idea of where we are going in Britain.

If there is a problem, it is not the Government as such; in my view it is the Treasury. In my recent experience of the nuclear industry within the past decade, I remember two occasions. One of them concerned the pay and conditions of the Nuclear Installations Inspectorate, where there was a dramatic leakage of staff because of the skill and expertise of these individuals and because their pay and conditions was of a Civil Service character. It took the Treasury years to come to an appreciation of the fact that these people had to be put into a special employment box, as it were. Thankfully, the Government’s upcoming legislation will deal with that.

Secondly, there was the whole question of the contractorisation of Sellafield and the insurance thresholds that had to be set for that. It took months and months of trying to get the Treasury to appreciate the significance of this insurance question. The insurance question was quite straightforward. There had to be a raising of the threshold whereby the Government would become responsible for any potential difficulty. It was not an issue that was raised by a single company although the one I was associated with at the time, the Washington Group, had been the favourite company to take the Sellafield account. It eventually took the intervention of the shareholder executive from BIS to get the Treasury moving. We know the merits of the case one way or another and it has been described already, but the Treasury is the department causing the problem.

22 Apr 2013 : Column GC325

It is fair to say that DECC in these matters is a well-intentioned lightweight spectator. It has to get its act together. There is so much at stake here. We need to get a price and we need to get a signal sent because there are people not only in EDF but other contractors that are prepared to come in and spend money and to use different forms of generation and different reactors, which could widely expand our industrial base. If nothing else, given that we are no longer going to be able to build lean-tos and conservatories, we need something to help the construction industry. Certainly, starting work at Hinkley Point as quickly as possible would be a good signal to all concerned.

5.48 pm

Baroness Worthington: My Lords, if you thought it was challenging speaking on nuclear power for three minutes, try summing up this really fantastic debate in three minutes and also questioning the Minister. It has been fantastic and I congratulate my noble friend Lord Hanworth on securing the debate. It shows what great industry there is in the House for energy matters. I am sure that these debates will continue when the Energy Bill reaches us. On balance, most speakers seem to agree that nuclear power has an important role to play in both decarbonising our power systems and in providing more security of supply. But important caveats were put down by speakers today. My noble friend Lord Whitty said that we may want to pay for nuclear power, but not at any price. It must not be at the expense of consumers.

The noble Baroness, Lady Parminter, made very important points about waste. Waste is an issue. We cannot move to 60 or 70 gigawatts of nuclear power with a once-through fuel cycle. It generates far too much high-level waste. We need innovation if we are to be able to solve that waste problem. My noble friend Lord Judd quite rightly said that we cannot in all conscience go forward planning lots of new reactors until we have solved the problem that we already have today and, importantly, worked out what it costs.

There seems to be a common theme that the noble Viscount, Lord Hanworth, started off: what is the contingency plan? If our current proposals to move ahead with these large-scale pressurised water reactors do not happen, and a number of speakers raised the fact that they are very difficult for the private sector to deliver with the timescales and capital costs involved, the contingency plans and the insurance, it is a very difficult issue. A number of noble Lords mentioned that in the past there has always been a fairly high level, if not a complete level, of state involvement. It is not clear that this is going to work out as we might hope, therefore there needs to be a contingency plan. Many noble Lords mentioned the cost overruns of the Flamanville and Finish reactors. We need to learn lessons from them if we are to pursue this course.

I shall make a few suggestions, picking up on something that the right reverend Prelate the Bishop of Hereford mentioned. There is a way for the state to get involved in nuclear R&D at a much higher level than it is at the moment through rethinking our approach to decommissioning. At the moment, a huge proportion of DECC’s budget goes on the NDA and its role in

22 Apr 2013 : Column GC326

decommissioning our existing reactors. The legislation that created the NDA in 2004 was written at a time when we did not conceive that nuclear would need to have a renaissance or that it would come back to help us tackle climate change, and therefore the NDA was given a very narrow and limited remit just to dispose of the waste. When is waste not waste? It is when it is fuel. Some of those fuels that are currently stored as waste could kick-start a new generation of nuclear reactors, whether fast-breeders or any kind of closed-cycle nuclear system. If we use thorium, which a number of noble Lords mentioned, we can move to much more sustainable nuclear power, so if the Government do not have a contingency plan, I ask that they develop one and base it around the concept that we could bring about quite a high degree of innovation in the nuclear industry and get back to what the UK was very good at.

We have a very good history of innovation in nuclear power. It was only in the 1980s that we started to see a precipitous decline in R&D and the closure of eight of our 12 nuclear research labs. With the Beddington report, I hope that we are starting to turn that cycle. Let us get involved in nuclear fission research again; let us increase the budgets and make sure that we try to help bring the world a much more sustainable nuclear future in which nuclear can compete with carbon capture and storage, renewables and all the other solutions that will be necessary to deliver us from climate change. I do not think it is an either/or, or that it is nuclear or renewables or CCS. They all have to play a role, but we probably need a new type of nuclear, and I would love us to play a part in bringing that to reality.

5.53 pm

The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma): My Lords, I thank the noble Viscount, Lord Hanworth, for raising this debate today. I know that he has a long-standing interest in this subject. I agree that this is a very timely debate. I hope that when I go through my speaking notes I will be able to answer some of the questions that have been raised by noble Lords today. Those that I cannot answer in the short period that we have for the debate I will write to noble Lords about and place a copy in the Library.

I do not approach this debate as the noble Viscount, Lord Hanworth, did, with pessimism. My endeavour today will be to lift his spirits a little. Noble Lords have asked searching questions. I may have to give better, detailed responses to many of them, so it would be prudent of me not to give half-baked responses now.

We are aware that one-fifth of our power generation will be coming off within the decade and therefore it is vital for our nation’s energy security that we work towards long-term certainty and investment. That is why I am pleased to say that this Government, in recognising that, have introduced the Energy Bill, which will bring forward the biggest electricity market reform that we have seen for a very long time.

Nuclear power has a part to play in the UK’s energy mix. For more than 50 years it has been part and parcel of a route for electricity supply to this

22 Apr 2013 : Column GC327

country and it contributes more than 19% of all electricity generated in the UK. We are committed to seeing nuclear as a part of the energy mix, alongside renewable energy and carbon capture and storage from fossil fuels. A new generation of nuclear power stations will help to ensure that we have secure, affordable and low carbon energy.

Towards the end of last year we saw the successful sale of Horizon Nuclear Power to Hitachi, and EDF was granted the first nuclear site licence in 25 years at Hinkley Point C. Regulatory approval of the EPR reactor has been given. This March, the Secretary of State gave planning consent for a multibillion pound project planned at Hinkley Point in Somerset. This project alone could enable the generation of enough low carbon electricity to power around 5 million households, making it one of the largest power stations in the UK. The noble Viscount, Lord Hanworth, specifically focuses his Question on our assessment of how nuclear power will help the UK to meet its climate change goals. As he is aware, we see a new generation of nuclear power stations alongside other low carbon forms of electricity as being the most cost-effective as well as energy-secure way to meet our legally binding carbon targets.

The life cycle of carbon emissions from new nuclear plants will be similar to that of emissions from wind power and, of course, much less than those from fossil-fuelled plants. It is competitive with other generation technologies and is expected to be one of the cheapest sources of low carbon electricity in the future. New nuclear can contribute significantly to our economic growth, creating long-term employment and supply chain opportunities. The Energy Bill currently going through the other place is bringing in some of the largest changes in reforming electricity that the UK has ever seen. The Bill will put into place measures to attract the £110 billion investment that is needed to replace current generating capacity and upgrade the grid by 2020 as we see a rising demand for electricity. The Bill puts into place the certainty that generators have looked for in investing in large projects and, through our capacity market, is also building in a mechanism to ensure energy supply. These measures are intended to try to shield us better from price hikes that occur on the international markets and over which we have little or no control.

Last month we published the Nuclear Industrial Strategy, which provides us with essential bridges between our shorter-term policy for the next tranche of new build and the research and development needed for nuclear to play its part up to 2050 and beyond. The strategy’s key actions are to have a new nuclear council that brings together relevant players from across the nuclear supply chain. The strategy will better co-ordinate research and development and innovation through the new bodies—the Nuclear Innovation and Research Advisory Board and the Nuclear Innovation Research Office. It will ensure a long-term plan to meet skills in the sector and will look at how to reduce costs across the industry.

The strategy was in response to the House of Lords Science and Technology Committee’s insightful 2011 report, when the Government undertook a number of

22 Apr 2013 : Column GC328

actions, along with the findings and recommendations from Sir John Beddington’s advisory board, which formed the basis of the strategy. Government and industry will be working together to drive economic growth and job creation. As noble Lords are aware, we are currently in negotiations with NNB GenCo regarding the contract for Hinkley Point C. The Government are determined to work for a deal that delivers a fair, affordable and value-for-money deal for consumers. Should an agreement be reached, it will be laid before Parliament, and it will include details of the strike price.

Before concluding, I have a number of questions to which to respond, and I will try to whizz through them as quickly as possible. The noble Viscount, Lord Hanworth, asked about our response to the Energy and Climate Change Select Committee’s report on new nuclear. Of course, we welcome the report. It recognises the important role that new nuclear will play in meeting the UK’s energy security, but we will put forward a proper response to the report some time in the coming days.

My noble friend Lord Jenkin asked about investment. I think I laid out clearly to noble Lords that the Government have announced increased investment. Over £45 million-worth of additional investment is going into nuclear research and development, alongside the publication of the Nuclear Industrial Strategy, which was published in March this year. I could give a breakdown, but if noble Lords would like me to do so, I will write to them about that.

My noble friend also asked about EURENCO. The Nuclear Industrial Vision Statement sets out the industry’s own ambitions for the future. The Government intend to work with our partners in EURENCO to move forward preparations for the sale of all or part of our one-third of the shareholding. It is government policy not to continue to hold shares in companies where the shareholding does not deliver any policy objective.

My noble friend Lady Parminter asked whether current electricity market reform proposals are in line with European state aid rules. We are working with the European Commission to ensure that our policies—particularly contracts for difference and the capacity market—are compliant with state aid rules. It is important to ensure that we have a stable and certain regime that has the confidence of industry and provides best value for consumers.

My noble friend also asked about our long-time approach to the management of nuclear waste, as did the noble Lord, Lord Judd. We remain fixed to the idea of GDF being the best way to ensure that nuclear waste is dealt with properly, but we recognise that we need to have communities that come to the process voluntarily. Therefore, when west Cumbria decided in January this year not to go ahead, we began the process of looking at the lessons to be learnt. We recognise that an approach has to be voluntary because in places where voluntarism was not taken forward the process faulted there too.

My noble friend Lord Jenkin asked about the role and structure of NNL. The Government recently announced changes to the management structure of NNL when the current contract expires. We are working

22 Apr 2013 : Column GC329

with the company to ensure that it is at the centre of our future programme of research and development through the operation of the Nuclear Innovation Research Office.

The noble Lord, Lord Giddens, asked about subsidies in relation to nuclear. The coalition has agreed that there will be no public subsidy for new nuclear power unless similar support is available more widely for other types of low carbon generation. However, it is for the private sector energy companies to construct, operate and decommission nuclear power stations and for the Government and independent regulators to ensure that appropriate levels of safety, security and environmental regulations are met.

The noble Lord also spoke about the experience in France and China. We are already looking at lessons learnt around the generic design assessment, and mitigating risk by making sure that our requirements are understood and that designs are completed on time. But, again, it is for us to work and engage closely with industry and regulators to ensure that early build programmes applied in the UK are built to the UK context.

Both my noble friend Lady Parminter and the noble Lord, Lord Giddens, asked about electricity market reform proposals in relation to nuclear and, in particular, in relation to the minimum price agreement with EDF. We have not yet come to an agreement. We are still in negotiations. These are commercial negotiations and therefore it would not be right for me to discuss here and now where we are with those negotiations. All we can say is that this Government are determined that, whatever price is agreed, it will allow for fairness and provide value for money for the consumer.

I am rapidly running out of time and I still have quite a number of notes to go through. Therefore, I shall conclude and will write to all noble Lords on the questions to which I have not been able to respond. I thank all noble Lords for their valuable contributions to this important debate. We have made, and will continue to make, great progress in ensuring that new nuclear can contribute as much as possible to the UK’s future energy mix. This Government are fully committed to cost-effective new nuclear power contributing alongside other technologies. This is not about ideology; it is about the need to ensure that the UK has a secure and cost-effective low carbon energy supply.

Severn Barrage

Question for Short Debate

6.07 pm

Asked by Lord Cope of Berkeley

To ask Her Majesty’s Government what evidence they have received about the effects of building a Severn barrage.

Lord Cope of Berkeley: My Lords, I beg leave to ask the Question standing in my name about the possibility of a Severn barrage as proposed by Hafren Power, which the Government are considering. Evidence given

22 Apr 2013 : Column GC330

to the Commons Select Committee on Energy and Climate Change has made it clear that it is a naive proposal, absurdly short on detail, and I am sure that it will not happen. I am glad about that, because its effects would be highly damaging. I hope that it will be strangled very soon. As long as the idea exists, it is delaying proper, careful thought about realistic ways of generating power from the colossal energy of the tides in the Severn estuary and it is also damaging investment.

When I was first in the Commons, my constituency boundary was the Severn for some 18 miles from the edge of Avonmouth to upstream of Sharpness, although boundary changes later took away the northerly six miles.

The reasons that the present proposals will not be put into practice are several and distinct. The four main ones can be summed up in the words “silt”, “habitats”, “economics” and “ports”.

The Severn is a muddy estuary. Millions of tonnes of sediment—literally 30 million tonnes at high spring tides—are washed up and down by the huge power of the tides twice a day. The question is where the sediment will settle if a barrage is built. On the scale that we are talking about, dredging is an unrealistic solution which makes no commercial sense.

There is no chance of replacing the destroyed habitats as we are required to do under the habitats directive. Salmon and other fish will not survive the turbines according to the Environment Agency and other experts during the Select Committee’s inquiry.

The economics are also crucial. Any tidal generator will produce power at highly forecastable but limited times of day and not always at the peak. However, gas, coal or biomass-fired stations, let alone nuclear ones, cannot be switched on and off as the hours of high water come and go. In any case, you have to provide enough generating capacity of other types to fill the peak while the barrage is resting.

That brings me to the effect on the ports. I am particularly concerned about the ports of Bristol and Sharpness, which I first knew as an MP. The evidence to the Select Committee from Associated British Ports concerning its ports in South Wales is similarly hostile to the proposals.

I was primarily motivated to ask for this debate by paragraph 37 in Hafren Power’s submission to the Select Committee, the only paragraph which refers to the ports. It says there will be,

“minimal inconvenience to navigation. Hafren Power intends to minimise any impact on current business at ports upstream”.

In fact the port of Bristol believes its operations would be fatally maimed by the building of the proposed barrage. Forty years ago, Bristol City Council, which owned the docks, built the new Portbury Dock to add to the existing Avonmouth Dock. Some years later, under a Labour council, it sold the whole complex to the present company. Since that sale, over £500 million more has been invested, making Bristol one of the most modern and productive ports in our country. More major investments are planned to support continued growth, but they are currently inhibited by the existence of the Hafren Power proposals.

22 Apr 2013 : Column GC331

Bristol is a big ship port. Ships come from all parts of the world with a very wide variety of cargoes. If the Hafren Power scheme were constructed, the navigable water depth at high tide would be reduced by over two metres and perhaps by three metres, depending on the silt, which I mentioned earlier. In the older Avonmouth Dock, ships over 30,000 deadweight tonnes with draughts of nine metres and above would be unable to enter. That would kill important business for the port. In the newer Portbury Dock, the effect would be similar, but it is larger and vessels with a draught of over 13 metres would be very restricted, and the existing largest vessels, currently up to 130,000 deadweight tonnes, could not enter. Of course, ships with lower draughts would be able to enter, but on many fewer days in the year. The port would be commercially unviable, and the current investment would be wasted.

The new locks to be incorporated within the barrage are another problem. They would necessarily be in the deep water channels, and the ships approaching them would be exposed to the full force of the Atlantic weather, unlike the sheltered approaches to the existing ports. There would be delays and risks attached to their operation. There would also be large costs, not only for lock operations but for dredging, pilotage, survey and towage and for the shipping companies. These costs must be paid by the barrage and guaranteed for its lifetime, but we have not been allowed to see the calculations.

Hafren Power wants a hybrid Bill, sponsored by the Government for the benefit of its consortium which would then sell it on to a sovereign wealth fund. It makes it sound simple. This part of its submission attacked my blood pressure and my funny bone simultaneously. Has it no idea of what the procedures, costs and complications of a hybrid Bill are? Let it look at the Cardiff Bay Barrage Bill proceedings and it will begin to understand the timescale and the huge costs to all parties—promoters and objectors alike—of this route. It would be a long and highly costly process, profitable only to the QCs and their colleagues involved, as well as to large armies of experts. The ports either side of the estuary and many NGOs are united against the proposal. They remain mystified by some of the claims made in Hafren Power’s submissions.

There have been numerous studies of the possibility of a barrage done over the past century and more. The latest thorough government study took several years, examined all kinds of options, and rejected the idea a couple of years ago. Other countries have considered and dismissed this as a form of power generation—for example, Canada, France, or more recently South Korea.

I recognise that this afternoon my noble friend cannot be expected to give the Government’s considered comments on all this. Apart from anything else they need to see the report of the Select Committee, which I suppose will be with us within a few weeks. But I hope the department realises that the matter needs to be settled. My concern is, as was expressed to some degree in the previous debate, that the Department of Energy and Climate Change has that insidious Whitehall disease of ditheritis—constantly talking and consulting about things and never deciding for years on end. These proposals are unworkable and damaging. It is

22 Apr 2013 : Column GC332

time to decide and to say, “no”. Then we can get on with deciding how really to harness the massive tidal energy of the Severn without all the damage involved.

6.16 pm

Lord Whitty: My Lords, I rise with some diffidence, given that the noble Lord, Lord Cope, has made his position on this issue clear. I am afraid that I am still somewhat ambivalent about this proposition. On the face of it, it is a fairly major contribution to meeting our climate change targets—5% of Britain’s electricity could be generated by this. It also has economic upsides of substantial employment. There are probably enough speakers on the list who will emphasise the Welsh dimension. I also emphasise that in the south-west there will be a significant number of jobs—probably more than at Hinkley Point.

However, there are economic and ecological downsides. I declare a past interest as a member of the board of the Environment Agency. I was persuaded, with some reluctance, that we should oppose this proposition, largely on the grounds of the effect on migratory birds and fish and the need to find compensatory habitats, as well as the effect on the whole ecology of the Severn estuary. It is not possible to replace the habitats that exist in south Wales for migratory birds, nor frankly is it possible to construct turbines that do not have some fairly negative effect on large numbers of fish. Nevertheless, this is a conflict between two different environmental objectives. We have to bear in mind that to meet the trajectory of carbon reduction to which we are committed—in a sense the subject of the previous debate—we will have to make some unpalatable decisions and face up to some fairly unpalatable costs, whether it is nuclear energy or some of the major renewable projects, including this one.

I do not think that I will have quite changed my mind again. Despite what the noble Lord, Lord Cope, said, I think that the new proposition has some mitigating factors, although they are not entirely convincing, even to me. We need to look at the latest version with some considerable scepticism, but the project as such has some serious merits. However, I want to seize on the last remarks of the noble Lord, Lord Cope, on whether there are other ways of making use of the great tidal difference in the Severn. There were earlier propositions of having a series of lagoon-type projects that would not save so much carbon—we have to be fair about that—but which would probably cost only slightly less, and would not have either the negative ecological effects nor the damaging effect on the Bristol ports to which the noble Lord, Lord Cope, referred. I ask the Minister specifically whether those other alternatives are still being considered as well as the latest Hafren proposal. I would not want to be as dismissive of it as the noble Lord, Lord Cope, but the Government need to look seriously at other propositions as well.

6.19 pm

Lord German: My Lords, I start by looking at the whole issue of the elusive trail that we have had over many decades to try to harness the power of the Severn estuary. I wish that we could call it the Bristol

22 Apr 2013 : Column GC333

Channel and Severn estuary because when I was a boy we were taught that the line between Newport across to Avonmouth was the line of the Severn and that after that it became the Bristol Channel. Of course, the barrage that has been referred to is in the Bristol Channel, and we need to look at it as a whole.

The elusive trail indicates that we have had sufficient studies and need to consider what might be the best way in which to move forward. I agree with the previous Government’s report, which said that,

“the Government does not see a strategic case to bring forward a Severn tidal power scheme … The costs and risks for the taxpayer and energy consumer would be excessive compared to other low-carbon energy options”.

So the test of all this is, therefore, to find a way of harnessing this energy that meets the energy needs to which we all aspire but also provides a satisfactory solution to the environmental, economic and technical problems that are an inevitable consequence of this work. The challenge is that putting all our eggs in one basket could result in the outcome that was predicted and agreed to by the last Government, with which I agree: that we cannot do it without significant cost and economic and environmental damage.

I believe that we need to look much more widely at the whole range of energy uses—tidal stream, tidal range, wave power and offshore wind power. All those forms of power and energy are available to us; the problem is that we have only nascent technologies, which have not yet been brought to a level where they can be put into action in demonstrable projects. The whole energy sector has been dogged, for example, by the difficulty of creating appropriate turbines to deal with the rise and fall of the tide. I understand that, in the current proposal, Rolls-Royce owns the concept and patent for a nascent turbine that will work in both directions, but there is no sense that it has been developed beyond a prototype into something that could be seen to work. That is why, for example, a lagoon would allow that testing to take place, allowing that to happen and to build in an appropriate manner.

I understand that the Government have invited submissions, which is where this Hafren proposal has come from. Is there a role for Her Majesty’s Government not just to ask for submissions but to give some sense of direction and promotion to the way in which those suggestions should come? We have an urgent need for a scaled-up demonstration project. Out of that might come the world-wide excellence that we need, and expertise and technology that can be developed elsewhere. Are the Government now in a position to establish what the net economic benefit of the current Hafren proposal is to the United Kingdom? What steps do they propose to take to promote the use of alternative and multiple technologies within the Severn and the Bristol Channel so that we can begin to satisfy the need that is there?

6.23 pm

Lord Berkeley: My Lords, I am afraid that you have me today, and not my cousin, who joined the House about a month ago. We both have fewer connections with Berkeley than the noble Lord, Lord Cope of Berkeley,

22 Apr 2013 : Column GC334

who used to represent it in the other place. I certainly have a great interest in this project. Having worked briefly on it as an engineer about 40 years ago, I was interested to read a comment in the

Financial Times

on 18 December last year, saying:

“There are two varieties of Severn bore. The first is a regular surge of water up-river due to the funnelling effect that the English and Welsh coastlines have on the tide. The second is a regular surge of enthusiasm for slinging a barrage between said coastlines to generate tidal electricity”.

That probably sums up where I think we have got to today.

This is a very big project, if it happens, and much bigger than the Channel Tunnel, on which I worked for about 15 years. The difference is that the Channel Tunnel, although it was difficult to finance in the private sector—and Margaret Thatcher clearly and rightly said that it should be—used proven technology. The technology for boring a tunnel in chalk is well proven, but even so, finances were difficult for the tunnel.

However, for this project the small details available do not yet give me any confidence that the new technology is at all proven; the noble Lord, Lord German, mentioned turbines, which I was about to mention, there are locks, and there is the actual design of the, presumably rock, barrage itself. Bearing in mind that the Severn—or the Bristol Channel as it is quite rightly named—is very deep there, it has already got strong tides and wave heights of between six and eight metres. I do not know who has been in a small boat in a six to eight metre swell. I went to the Scilly Isles last week and the swell was quite big.

The force of the tide on a breakwater is pretty frightening even to conceive. About 30 years ago, a breakwater built in a place called Sines in Portugal had a similar storm attack it and it collapsed completely. I am sure designs have moved on since then, but we need to have confidence not only that the design is adequate for these very difficult conditions but that it can be built on time and on budget. The constructability is equally important. We have had no real answers to any of the questions that noble Lords have asked this afternoon, the noble Lord, Lord Cope, in particular. Until they are answered, I do not think one can talk about finance in the private sector.

I recall very early when we were trying to do the Channel Tunnel trying to get commitments from bankers to say it could be financed in the private sector. We got a variety of letters, but in the end they said, “If it does not rain next Tuesday and it does snow next Wednesday, we think we can finance it in the private sector”. That is not good enough nowadays. You need a lot more study, effort and investigation of all the effects, including on the ports, which are extremely serious. I am very doubtful. My recommendation is to cancel the thing now and start looking at smaller schemes, develop the technology and make sure it does not completely wreck the River Severn and the Bristol Channel.

6.27 pm

Lord Jenkin of Roding: My Lords, anyone who has crossed the Rance barrage near St Malo in France will have seen the attraction of being able to harness the

22 Apr 2013 : Column GC335

tides to generate electricity. Of course, it is a very narrow dam and it is entirely sheltered in the great bay that St Malo stands on—totally different from what we have in the Severn or the Bristol Channel. I have long seen the attractiveness of trying to do it, but from what I have read and studied, this proposal by Hafren Power is simply not the way that it is going to be done.

My noble friend Lord Cope referred to the effect on the ports, particularly the ports of Bristol and Portbury. I would like to say a word or two about that. The thing that has always puzzled me is how on earth it was going to be financed—and there has been a lot of discussion—other than if the Government were going to find the money. As noble Lords will realise, that is not currently feasible. Therefore, is it going to come from the private sector? We do not know. Hafren Power has been extraordinarily economical with its business plan. It has published documents, but not given any real indication of what the whole business case is. The negative impact that this would have on the port of Bristol has been full spelled out to me by the port company. I have greatly admired what it has done in recent years. My noble friend referred to some of the investments and improvements that have been made. Its growth depends entirely on its competitiveness, and its ability to attract shipping in and out in competition with the many other ports that this country has.

This company’s brief refers to,

“the immediate and ongoing impact of commercial blight on their operations and in the longer term if a barrage was consented and built, the drastic impact the change in the tidal range would have on the viability of the port”.

It says it,

“would eventually lead to closure of the port at the cost of many thousands of real jobs”.

That is its view, and I have not seen the answer to that.

Hafren Power has attempted to answer the points, but I am sure that I am not alone in having seen the port of Bristol’s meticulous attack on the Hafren Power paper in which it describes Hafren Power’s claims as far-fetched, unfounded, naive and ignorant of the way a port in this country is operated. I cannot help feeling that this has all been made perfectly clear to the Select Committee, but it is desperately important. My noble friend has said that this threat should be removed and we should be looking again, as others have said, to alternative methods of harnessing the power of the tides in the Bristol Channel and the Severn estuary.

6.31 pm

Baroness Jones of Whitchurch: My Lords, I thank the noble Lord, Lord Cope, for giving us the chance to have this debate. So far all the contributions have been fairly negative, so I am very pleased to say that I am going to put the opposite point of view and state some of the advantages of the scheme that is being considered today.

The barrage offers us an enormous opportunity to harness the tidal power of the Severn in a way that could create something unique with a worldwide reputation in terms of its concept and impact. I find it an exciting and innovative project, and if we can find a way technologically to deliver it, it is a prize worth having. It would be clean, secure, sustainable and low

22 Apr 2013 : Column GC336

carbon. It would deliver 5% of the UK’s total electricity needs. It would be a predictable source of energy as the tide ebbs and flows and, once built, it could continue to produce energy on that basis for over 100 years. Those are all a prize worth having.

The energy it would produce would negate the need for three or four nuclear reactors, going back to our earlier debate, or more than 3,000 wind turbines at a lower cost than either. It is something that should be explored in more detail and, I hope, embraced with both hands.

A number of noble Lords spoke about the environmental impact and obviously this cannot be ignored. There will be changes to the local habitat, but I see this in the context of evolution and transformation rather than of damage and destruction. We had a very similar debate at the time of the creation of the Cardiff Bay initiative with lots of concerns about the wildlife impact, but the truth is that the bay has now attracted new species of birds and fish and has become a new, welcome wildlife sanctuary. I believe that a similar process will occur in the lake behind the barrage which will attract species previously unable to breed successfully because of the strong current.

As I understand it, Hafren Power is working hard with wildlife groups to minimise the environmental impact, and it is important that these discussions continue, but I hope that the local environmental groups will also see the benefit of a big green initiative in their backyard. At the same time, the barrage is being designed to have a minimal ecological impact by being permeable to fish and invertebrates and providing numerous fish ladders which, I understand, take fish only one generation to master.

I have spoken mainly about the environmental advantages of this project but, of course, there are serious economic advantages as well. It will be funded by private investment, with 80% of the investment being spent in the UK. It will employ at least 20,000 people, the construction of the 1,000 turbines will help revitalise the struggling South Wales economy and it could be a major export for us if we get it right.

There is increasing urgency about this matter. We are falling behind in terms of meeting our green energy targets. There may be other options, but to me it seems that this is the only game in town at the moment, so I hope that when the Minister replies to the debate she will be able to reassure us that the Government are taking this seriously and are prepared to consider facilitating the necessary Private Member’s Bill.

6.34 pm

Baroness Miller of Chilthorne Domer: My Lords, the noble Lord, Lord Cope of Berkeley, in his extremely able introduction to this debate, mentioned four particular downsides. I would have to add a fifth, which would be flooding. Somerset has had a terrible winter. The effect of the barrage there, as the Severn surge comes up the channel and the Parrett is trying to empty the flood water down into the channel, has not been properly modelled by Hafren. I doubt whether anyone will be able to model it sufficiently. By dint of simply having the barrage, you might be writing off a large part of

22 Apr 2013 : Column GC337

Somerset. You only have to look at what was flooded this winter to see how likely that is. That is a tremendous downside, especially, obviously, for the people of Somerset. It is a matter that needs to be settled.

The noble Lord, Lord Cope, remarked on what he called ditheritis, which is an extremely important point. Back in 2004, Friends of the Earth published a good comparison between the barrage and smaller, more varied schemes, particularly tidal lagoons. It is now 10 years later and we have lost the lead that we might have had on tidal lagoon technology. It is not too late to imagine that we could still forge ahead with it, but which investors will put their money into anything like that before they know what will happen with the barrage? This needs to be settled and settled urgently.

The smaller schemes offer tremendous upsides as well. If we are thinking about technology that we can export, we can pilot a number of things—the tidal stream and the tidal lagoons, as suggested in Swansea bay, which join up with the land and ones that do not join up with the land as suggested for Bridgwater bay. They relate better to communities and would undoubtedly bring the same sort of employment opportunities as a whole barrage but with a more varied application throughout the world. Not everyone has the place to build an enormous barrage. It might be a world tourist attraction, but it would not be the sort of technology that would lead to replication across the world. There would be only one or two other places where a barrage-type structure as proposed would be applicable, whereas the tidal lagoons could happen in a number of other places.

My question to the Minister, which is not original this afternoon, is what is DECC doing to support the piloting of tidal lagoons? It has been remarkably silent on that subject to date. I remember going to see the noble Lord, Lord Whitty, when he was the Minister to talk to about this. He was very helpful, and we had a discussion about habitats and so on. He, of course, was a Defra Minister and it was the responsibility of another department on the energy side, but departments have changed name so often that I cannot remember what it was called then. We really need to get on now and make a decision so that we can look at the more promising technologies.

6.38 pm

Lord Hylton: My Lords, I regret that some remarks about the Severn by senior politicians seem to have generated more heat than light. Following the noble Lord, Lord Jenkin, I suggest that we should learn from France. The tidal scheme, La Rance, opened in Brittany in 1966. It generates 240 megawatts, is extremely reliable and has never had to have a major refit. It operates on an average tidal difference of 8.2 metres, whereas the mean for the Severn is 14.5 metres. A much smaller generator at Strangford in Northern Ireland has been working since 2007.

The Severn and its estuary are a national asset waiting to be developed. Of course, I understand the doubts and reservations already expressed by port, wildlife and fishing interests. It is important, however, to realise that a massive fixed barrage is not the only

22 Apr 2013 : Column GC338

possible means of generating electricity. A much smaller scheme has been proposed up-river at a site known as the English Stones. Tidal lagoons and tidal canals are both possibilities with or without pump storage. A Bridgwater bay lagoon may perhaps have lower generating costs. It occurs to me that the existing supports for one or both motorway bridges could be strengthened to carry turbines driven by the incoming and outgoing tides.