Examination of Witnesses (Questions 280-288)|
TUESDAY 9 JULY 2002
280. Can I move to the structure of the funding
arrangements for the future? Firstly, do you as somebody that
needs to have that sense of confidence from the industry's point
of view in future see any difference in practice between a segregated
fund and a segregated account, taking as read that the segregated
fund in itself gives a greater amount of confidence than a segregated
account in the past?
(Mr Askew) A segregated fund always shows people that
the money is there I suppose. That is the difference, as opposed
to having to be apportioned each year, and I think that is a difference
between the two, but quite honestly programmes are going to be
agreed for the next 5 to 10 years. You are going to have to do
this work, you will de-commission at this rate, you will agree
this is a safe and passive form, you will programme together with
milestones and money will be released against that and will be
paid against performance. But if that five year programme is then
agreed, quite honestly I think the apparent transparency of the
segregated fund becomes less because there is a commitment then
to fund it at this rate for the next five years, and provided
you are not waiting till the end of that five years to do the
next five, ie you are doing it on a rolling five all the time,
then I think that would give enough transparency. So in a way
we are indifferent provided the money is there. We are spending
something like half a billion pounds a year on cleaning, and anybody
who is a site licensee or has a contract to do that wants to know
or have security that that money will be there each year, because
you cannot have a situation where you are bringing people into
work and if you are £100 million short be laying people off,
which I have to say does happen in some schemes operated in the
United States that we are involved in.
281. If it were a fund and it was not controlled
directly by the LMA but by some board of trustees, or something
akin to trustees as mentioned in the White Paper, does that give
an additional degree of transparency as compared to simply trying
to negotiate it with the Secretary of State as part of the public
(Mr Askew) I think it would give some more comfort
to people and people would feel more comfortable with that but
if you have a five year programme laid out and you add another
year to it every year and the funding is then committed which
is beyond the yearly cycle of funding, that is an equally good
way of doing it. Look at it from the point of view of you are
doing the work and you have 6,000 people doing this work, or 4,000,
and what you do not want to do is find suddenly at the last minute
£100 million is cut from the programme next year and you
have to lay people off. The only way this would be done successfully
is if you have a programme for one, two, three, four, five, six,
seven, eight, nine, 10 years and you set yourself up accordingly.
282. Insofar as there are target levels for
the fund, do you think they should be set in advance, one hundred
per cent of years A-C and so on? You mentioned your portfolio
and 88 per cent of future liabilities which presumably in a sense
is a similar calculation100 per cent of immediate liability
and graduated thereafter. Should that be set?
(Mr Askew) I have not really thought about it, to
283. Do you think a segregated arrangement,
whether it be an account or a fund, would protect the LMA from
the charge which could be made against you that you have chosen
not to fund your responsibilities for liabilities to a high enough
figure? You have already helpfully told us it is going to evolve
from 88 to 80, and you attribute that to an increase in the calculation
of liability which you cannot at the moment make provision for.
It could be argued that you are denying one fund in order to subsidise
something else, so would you consider that the segregated account
or fund would be an arrangement which would, as it were, fireproof
someone from charges of that nature, the successor to yourselves?
(Mr Askew) It may be that people would feel more comfortable
with that because they could see the money was there but I go
back to the other point: if you had a five year programme that
was, let us say, half a billion pounds a year, what you have to
start looking at to manage this successfully is you have to think
about this as a half a billion a year spend, not some £48
billion that nobody can get their mind round as to how to manage
it. You cannot ignore itI do not mean thatbut to
get management to get results you have to get down to looking
at whether you are getting value for money. I go back to my point
which was, if you had a five year programme, fully funded, of
half a billion, £2.5 billion, and that was committed, and
after year one you have another half a billion added, that would
be equally I think a sensible way and give people confidence.
It is not quite the ring-fenced way. I think there are other ways
of doing it than ring-fencing, but I can see why people would
feel happy about ring-fencing. As a site operator what you want
to know is that the money is there not just this year but next
year and after that, because then you can deploy your people and
your people know the work is there.
284. It would also mean that when I open the
Sunday paper whose name I will not mention I will not necessarily
see scare stories about the bankruptcy of BNFL?
(Mr Askew) They were just nonsense. We declared technical
bankruptcy in November but the fact of the matter is that as directors
of the company we would not be continuing to trade if we did not
have the cash and the undertaking that the LMA was coming to sort
out that technical bankruptcy in the near future. I would like
to impress upon the Committee very much that we need that legislation
quickly, because the longer this goes on in this never never world
of "We do not like where we are and we cannot get to where
we are going to be" I think is absolute nonsense and will
not help this process, so one of the messages I have got for you
today is really to get this in the Queen's speech and let us get
on with it.
Chairman: I think that point was taken earlier
in the afternoon.
285. We have been trying to explore with witnesses
how they see regulation panning out and how you can get more joined-up
regulation amongst regulators; a close working relationship between
LMA and the regulators but still allowing the regulators to be
regulators and not be sucked in. How do you do that?
(Mr Askew) The regulators have to remain independent.
The NII have a different organisation, ie they do not report through
to the Minister like the EA do and it is that sort of independence.
We are working very well with the EA and the NII; they have put
together a programme as to how they would work together. On the
historic waste strategy in terms of determining the safe and passive
form we are taking the initiative on, they are working very well
with us. I think part of the issue at some stage has to be between
risk-based regulation, where there is a risk and cost assessment
to what you are doing, as opposed to in the EA which is a progressive
reduction of discharges no matter whether there is any risk to
the discharge or not. That is the fault line between the two regulators
that they are working on which has to be worked on.
286. Do you believe Nirex should be made independent,
and what arrangements should be made, if any?
(Mr Askew) It is going to be interesting what comes
out of this waste consultation with DEFRA, and it has to come
quicklysome of it, not all of itbecause we cannot
wait. I think some of the things Nirex do are better done if it
is independent. I think a case may be made to wrap them in with
other agencies but, taking this long term issue of long term storage,
an independent body of the great and the good working on that
and something like the Finnish model has a lot to commend it,
which starts to slightly put me at that end of the spectrum.
287. You have had problems in the past with
security. There is a new style of police authority being recommended.
Are you happy with that? Is it what you recommended, or is it
something you would like to see better in that area?
(Mr Askew) I do not know. We commented on this but
perhaps I can ask Ted
288. You are at one with Greenpeace on this
issue who discovered they had not read the last chapter!
(Mr Askew) I have read it but I do not know where
it came from.
(Mr Williams) It has been read and we are very comfortable
with the proposals put forward.
Chairman: Thank you very much. We appreciate
you are going to be sending us additional information; we have
taken a bit less time with you than we might have done but we
have a vote at 7.00 and therefore we did not want the process
of the Committee to be interrupted. We are grateful for the advice
you have given and look forward to getting any additional information,
and if we can have it by a week tomorrow it will be helpful, and
obviously we look forward with interest to seeing your accounts.
Thank you for the time and the trouble you have taken.