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Nuclear Power

– in the House of Commons at 7:31 pm on 22nd October 2002.

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Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry) 7:47 pm, 22nd October 2002

I beg to move,

That this House
notes with concern the decision of the Government to put at risk over #600 million of public funds in order to prevent the bankruptcy of the privatised nuclear power company British Energy;
further notes that several competitor companies in the deregulated market also face financial collapse and that some are petitioning for Government assistance;
believes that nuclear power has been shown in a competitive market to be uneconomic as well as to generate long-term environmental costs in respect of waste disposal and decommissioning;
further believes that it would be wrong for the Government to continue to bail out British Energy shareholders with a massive unplanned injection of public money or encourage new nuclear power projects;
and calls on Her Majesty's Government urgently to bring forward its response to the PIU energy review, with measures to initiate a sustained long-term improvement in energy efficiency and conservation, and to facilitate the more rapid introduction of a variety of new renewable energy technologies as the favoured electricity generating source in the long-term, taking into account the Government's Kyoto targets and the Prime Minister's support for sustainable energy use at Johannesburg.

I shall concentrate on the wide-ranging implications of the Government's intervention in the energy market in the closing days of the summer recess. I shall pose several issues. The first is to register alarm that the Government have now put at risk about #650 million of public money in the form of what appears to be—no doubt we will receive clarification—an unsecured loan to a privatised company that is running serious losses.

The second issue is that slightly over a year after introducing a competitive energy market—NETA—the Government have decided to panic at the first sign that the energy market is doing what it was supposed to achieve: identifying the companies that could no longer compete in an environment of excess capacity.

My third concern is that in intervening to bail out one company but not others—a variety of projects that have failed, some in the renewable energy/combined heat and power sector—the Government have acted in a discriminatory way that may be illegal, although that remains to be tested. They have prejudged fundamentally important issues about long-term energy strategy.

I am partly making debating points, but mainly I am posing questions. It is extremely unfortunate that the Government did not make a statement on the issue. Regardless of how people regard nuclear or other forms of energy, they want to find out what is going on.

Photo of Bob Spink Bob Spink Conservative, Castle Point

The hon. Gentleman talks about the Government panicking. Far be it from me to defend the Government, but the Minister for Energy and Construction is an excellent Minister, and the Government do not appear to me to be panicking at all—in fact, quite the contrary. They realise that if we are to save the planet, we must reduce the amount of CO2, and that we must therefore replace nuclear with nuclear. If we are not brave enough to take that decision to control global warming for the sake of the planet, the Liberals will have a heavy burden to bear. Will the hon. Gentleman address that point?

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

I certainly shall. As the hon. Gentleman well knows, there are different ways of reducing carbon emissions, not least by placing far greater emphasis on energy efficiency, energy conservation and new renewables than the Government have placed on them so far.

I recognise that we must pose questions as well as make assertions. I acknowledge that the Government face difficult choices—for example, thousands of people working in one generator or another being at risk of losing their livelihood is clearly a serious matter. I recognise, too, that the Government have inherited some serious problems in energy policy, not least the privatised company British Energy.

It is important to delve into the past to some extent. The circumstances in which British Energy was privatised were scandalous: it was sold at a price that barely covered the construction costs of one of the eight reactors that were sold off. We saw such rip-offs in Russia in the early days of the post-communist era, but it happened here in this country with British Energy. The people who have subsequently run the company have displayed a mixture of stupidity and greed comparable to that seen in some of the other utilities. In 1999, when severe losses were already accumulating, the company decided to pay out #430 million in an extra dividend to its shareholders. Earlier this year, when the company had already recorded very large losses of more than #500 million, the chief executive was awarded a performance bonus. Those who ran British Energy went around the world making acquisitions—for example, in north America—but did not concentrate on the increasing competitive problems within their own industry. That is the company whose shareholders the Government now want to rescue.

There are other factors to be taken into account—for example, many of the reactors are old. The nuclear power industry has a long and complex history: it started in the 1950s, often inspired by genuine and admirable idealism—people wanted to convert the dangers of nuclear warfare into creating a form of cheap energy that would last indefinitely. Policy was taken forward in the 1960s by Harold Wilson, Tony Benn and others who believed that big science and state planning could drive the nuclear energy sector. Mrs. Thatcher was a great fan—perhaps inspired in part by the fact that it was a form of energy that did not pass through the hands of either Arabs or coal miners. Nuclear power had strong patronage from both sides for a long time, but then came an abundance of reports from the Organisation for Economic Co-Operation and Development and others, including the Brundtland report in the mid-1980s, which shows that not only did the nuclear power sector pose serious environmental problems—waste disposal and so on—but it was not economically competitive. It beggars belief that in introducing an energy market the Government did not anticipate the development that has taken place in the past few months.

Photo of Tom Watson Tom Watson Labour, West Bromwich East

Is the hon. Gentleman suggesting that the Government should allow British Energy to enter bankruptcy? If he is, will he suggest how the 15 per cent. reduction in base load could be replaced overnight?

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

The logic of my argument is clearly that British Energy should, if necessary, go into administration—the process that deals with companies that can no longer trade commercially. I shall explain how I think some of the problems surrounding that could be resolved.

Photo of Mr Kevin Hughes Mr Kevin Hughes Labour, Doncaster North

No one could ever accuse me of being a supporter of nuclear power—I have never been—but I recognise that the Government have to have their eye on security of energy supply in this country, and that to maintain that properly they must secure diversity of production, which has to include some element of nuclear power production. Does the hon. Gentleman accept that?

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

I certainly accept that security of supply is an important consideration, but I do not think that that is an issue at the moment—there is vast spare capacity in the industry. Nuclear power may or may not be part of the story—we neither advocate nor oppose it as a matter of principle.

Photo of Andrew Lansley Andrew Lansley Conservative, South Cambridgeshire

The hon. Gentleman refers to the uneconomic character of the introduction of nuclear power generation, but whether it was economically viable at the outset is not so much the issue today as whether the continuing operation of that nuclear plant is economically viable in relation to the current market for electricity. Does he agree that that is the case, and what is his view on economic viability in terms of the marginal costs of operating British Energy's plant?

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

The current market position is as follows. As the hon. Gentleman knows, there has been a fall of 40 per cent. in the wholesale price of electricity in the past three years. British industry has benefited considerably from that reduction to the extent to which it has been passed on. As a result of competition, monopoly profits in the privatised energy generators have been stripped out to a large extent. That has left the nuclear power industry, especially British Energy, selling at a price 20 per cent. below the price at which it could make a profit. That is how fundamentally uncompetitive the industry has become.

The question is, in those circumstances and with a lot of excess capacity in the energy industry—estimates vary, but National Grid says that there is 30 per cent. excess capacity, and that figure could well rise if there is a downturn in the economy—why should the Government intervene to assist one company? A series of answers to that question have been given, and I shall work through them.

The first and probably the most important answer cites nuclear safety. Last Thursday, I asked the Leader of the House about this matter. He is clearly a highly intelligent Minister and he is familiar with the arguments, so he did not simply spurt out his answer, which was that the Government had intervened because they were concerned about the safety issues that might arise if British Energy were to cease production. The right hon. Gentleman is right to put the fundamental issue of safety at the top of the list—we share that starting point. However, it is an odd argument, because there is no reason why the closure of a nuclear plant should present a risk to public safety. One of the reactors—Torness—has already been closed, for technical reasons. Perhaps the Minister can give one, but there is no obvious reason why a company that has been received into administration should present a health and safety risk. The Government have a health and safety system that is designed to protect the public in such circumstances.

What I think is happening—if it is, it is an alarming development—is that the company is, in effect, blackmailing the Government. The company is saying to the Government, XYou sign the cheques to pay to bail us out; otherwise, we will lock the doors, walk away from our installations and leave you to take the risk of any accidents that occur."

Photo of Parmjit Dhanda Parmjit Dhanda Labour, Gloucester

The hon. Gentleman might be aware that in the local elections earlier this year the Liberal Democrats gained Barnwood ward in Gloucester, which happens to be the home of British Energy. Does he have a message for that Liberal Democrat ward and the 1,000 or more employees of British Energy it contains?

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

The message that I would send to those employees is the same message as I would send to thousands of people across the country, in wards where there are plants with power generation through gas, coal and nuclear, all of which are faced with the loss of their livelihoods. The issue is why the Government have intervened to help one type of plant but not others.

The first ground given for intervention was safety. As I suggested, and I use the word reservedly, I think the Government are being blackmailed into supporting the company. That is a dangerous game. The company could well come back to the Government and say, XYou have given us #650 million. That is not enough. We need more. We need #1 billion. We need #2 billion, and unless you provide it, public safety is at risk." That is a very dangerous argument, if the Government have embraced it.

The second argument that has been advanced relates to the security of supply, which Mr. Hughes raised a few moments ago. It is right that the Government should be concerned that the lights are not switched off—that we do not have a California-style situation. If that is what the Government are concerned about, it is a reasonable preoccupation. However, nothing could be further from the present position. We have, as I said, roughly 30 per cent. spare capacity, despite conditions of peak demand in winter, in an industry where British Energy is generating about 17 per cent. We have a great deal of capacity in the industry. The equivalent of eight nuclear power stations have already received planning consent. As the Government's energy review demonstrated, with reasonable policies the Government could save about 30 per cent. of nuclear output through energy conservation, so the idea that we face a California-style switch-off is ludicrously far removed from the present circumstances.

Photo of George Osborne George Osborne Conservative, Tatton

Mr. Hughes said that nuclear power may or may not form part of the future energy supply, according to the Liberal Democrats. Is Dr. Cable telling us that he has initiated a debate on nuclear power but that his party has not decided whether nuclear power should form part of the future of energy in this country?

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

I shall deal shortly with the so-called issue of keeping the nuclear option open. I have one point to make before I come to that.

The third issue is the Government's concern that if the company goes bust, they will have dumped on them about #5 billion of decommissioning liabilities that at present, technically and legally, are the responsibility of the shareholders. I understand why the Treasury would be concerned about that, but we are grateful to Greenpeace, among others, which has done some delving into the exact accounting position in respect of decommissioning liabilities. Greenpeace made the point, which many people overlooked at the first run, that those massive sums are not discounted to present value. They represent commitments stretching decades into the future. If the Government were concerned about provision for decommissioning, that could be met by an annual payment of #40 million.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

I will give way, but I was hoping to deal with the question from Mr. Osborne about where we see nuclear power in the picture.

The fourth argument that is advanced, which comes to the heart of the debate, is that we must at the very least keep the nuclear option open. The problem is that there are different ways of doing that. It is quite possible that, in years to come, nuclear power technology will have advanced to a point at which it has dealt with the environmental problems that concern us and it is cost-competitive. That is why my colleagues and I believe that it would be prudent and right for the Government to invest in research in nuclear power. That would be a profitable, useful role for the Department of Trade and Industry. That is quite a different matter from a large-scale bail-out of one particular company that cannot compete at this stage.

Photo of Paddy Tipping Paddy Tipping Labour, Sherwood

The hon. Gentleman is right to say that there is over-capacity in the industry, but he is wrong when he says that it is 30 per cent. at the peak in winter. The figure is probably 17 per cent. His party relies on renewables to make up any gap, but of course renewables are not effective in the winter. There needs to be a reserve power. Is he saying that his party does not support nuclear today, but will support nuclear in the future? That seemed to be the way that he was arguing.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

I said that we should invest in nuclear research, and we would do so with an open mind. [Interruption.] Let me deal with the hon. Gentleman's question. He made a perfectly good intervention, and I shall take it seriously and deal with it. He disparages renewable energy, but the Minister of State, Foreign Office used a wonderful phrase last week in a speech on energy security. He spoke about the need for a portfolio of renewable energies—a variety, not one or a particular one, but a mixture of biomass, wind, wave and so on. All sorts of artificial obstructions, such as planning consents, are being put in the way of wind development. Biomass has developed, but has shut down in this competitive market. The Government are not proposing to bail that out. They are proposing to bail out nuclear power.

Photo of Tom Watson Tom Watson Labour, West Bromwich East

The National Grid believes that overcapacity of 20 per cent. is sufficient to ensure security of supply in times of peak demand. Should British Energy go under, the estimate is that the capacity would be only 8 per cent. over average. Will the hon. Gentleman answer my original question about where the additional capacity would be generated from?

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

There is clearly a debate about the right numbers. The figure that the National Grid supplied to the Government was 30 per cent. It may not be right, and the Minister may come up with different numbers. Of that total, about 6 per cent. has been mothballed, although it can be re-opened at any time.

Photo of Crispin Blunt Crispin Blunt Shadow Minister (Business, Innovation and Skills), Shadow Minister (Trade and Industry)

It is important that we try to establish what Liberal party policy is. I am indebted to federal policy consultation paper No. 61, which states:

XCurrent party policy calls for nuclear power to be phased out as the current stations come to the end of their lives".

The hon. Gentleman has just told the House that he and his hon. Friends have a quite different policy. Perhaps he can help us.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

The hon. Gentleman is either not concentrating or not terribly bright. Any sensible, open-minded energy policy must research its options. The document stated that we supported the phasing out of nuclear power at the end of its life, and I entirely endorse that. I should be interested to hear what public expenditure commitments the Conservatives are prepared to make. The present crisis in the industry has foreshortened the period over which the phase-out will occur.

Several hon. Members:

rose—

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

Let me press on. I have taken a fair number of interventions. I shall take one more from the Government Benches, but then I shall move on.

Photo of David Drew David Drew Labour/Co-operative, Stroud

I thank the hon. Gentleman for giving way. Does he envisage that the phasing out of nuclear energy would include the interconnector? One of the problems for the German Government and the politicians of some parties in the UK seems to be the willingness to use foreign nuclear sources, while getting rid of national nuclear. Is that not hypocritical as an energy policy?

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

I was not proposing to get rid of the interconnector. If French taxpayers are so foolish as to subsidise British consumers, I am not sure that we should look a gift horse in the mouth.

Several hon. Members:

rose—

Several hon. Members:

rose—

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. The hon. Gentleman is clearly not giving way.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

I have tried to deal with the arguments that I think are being advanced for the Government intervention. I shall move on to the future and consider the Government's intentions.

The first question that we need to ask is how the Government will get their #650 million back. That is an important question, because we know that the budget is not as comfortable as it was six months or a year ago. How is the money to be retrieved? As far as I understand it, the loan is not secured. It was made to a company that was losing money in the previous financial year at a rate of #500 million a year. The energy market is not improving, so how will the money be generated? Another #1 billion-worth of creditors have secured their loans. Where will the money go? I have a very strong suspicion that it will simply be lost.

The Government have aired in public a series of options for retrieving the situation. The approach will involve one of two things. Either they will scrap the energy market that they have created, do a complete volte face in respect of the whole principle of competition in energy supply and go back to the days of direction and quotas, or the companies will find money through a different route—in other words, a hidden subsidy rather than an overt one.

I believe that two mechanisms are being seriously negotiated in Government. The first is exemption of the nuclear power industry from the climate change levy. At first sight, that seems perfectly sensible. After all, the nuclear power industry does not produce any carbon dioxide, so why should it pay a climate change levy? If the Government had listened to our advice and established a proper carbon tax that was charged upstream on gas, coal and oil, the problem would never have arisen. However, what they call a climate change levy is not such a levy at all; it is an energy tax that is arbitrarily applied to a set of industries. If they now exempt the nuclear power industry while applying the measure to other suppliers despite the fact that nuclear energy generates its own environmental problems, they will create severe problems in ensuring a level playing field in the market that they have created. The possibility of such an approach also raises the question of where the money to pay for the exemption should come from. The Chancellor said clearly that the funds need to be offset against employers' national insurance, so any rebating will have to be found through that mechanism, which will impose a charge on the rest of British industry.

Photo of Michael Weir Michael Weir Scottish National Party, Angus

Does the hon. Gentleman not accept that the climate change levy argument is a bit of a red herring? Should British Energy finally go under, the inherent cost of dealing with nuclear waste would offset any savings made by the non-emission of carbon.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

That is absolutely right and it is one very good reason why any attempt to introduce such exemption from the levy would not be plausible. Of course, the sums involved are also much smaller than the losses that are being incurred, so the problem would not be solved.

The second mechanism—the one that I think the Government are taking seriously—relates to a technically complicated area. We must closely watch what the Government are doing. They are discussing offloading British Energy's obligation to reprocess waste through Sellafield and BNFL. There is a perfectly good environmental reason for questioning that process. I do not know whether any hon. Members representing the Sellafield region are present, but there are all sorts of worries about Sellafield and sea pollution. I can understand the environmental factors that are involved, but using such issues as a financial mechanism will simply shift the losses upfront from British Energy shareholders and on to the taxpayer through a publicly owned entity. It is a subsidy by the back door.

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West

I think that the hon. Gentleman is trying to make the point that the switch from the pool system to the new trading arrangements has imposed a heavy burden on nuclear energy. I am sure that I can carry him in that assessment. However, the point is surely that vertically integrated operators, such as EDF—Electricite de France—have been able to buy downstream retail operations and transfer the burden in that way.

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West

If the hon. Gentleman will wait one second, I shall finish the point. Of course, BNFL and others have not been able to do the same thing. All that he is doing is trying to transfer a solution from one area to another, but the simple fact is that we need a balanced—

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. The hon. Gentleman's contribution is rather long for an intervention. Perhaps he could draw his remarks to a close.

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West

We need a balanced arrangement for the pricing of energy throughout the country.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

The fact is that the people who run British Energy had the option of buying into the downstream. They considered it and walked away. They made a very bad commercial misjudgment and the Government are now expecting taxpayers to pay the bill for the error.

Photo of David Chaytor David Chaytor Labour, Bury North

Does the hon. Gentleman accept that even if British Energy had acquired an electricity retail business, that would not have disguised the essential point, which is that the generation of nuclear power is intrinsically uneconomic and will always remain so?

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

The hon. Gentleman makes the point with considerable eloquence and I thank him for doing so.

In conclusion, the Government are risking very large amounts of public money to support a failed enterprise in the nuclear power industry for very questionable long-term reasons. If they have large amounts of public money available for that purpose—I did not think that they had—there are other ways in which it could almost certainly be used more cost-effectively. For example, they could support energy conservation. There are probably Labour Members present who, like me, were members of the Committee that scrutinised the Home Energy Conservation Bill before it was sunk because the Treasury was not willing to give the relatively small support that was required. If the money is available, the Government could provide pump priming support for renewables.

I hope that I have posed a series of questions to Ministers. I think that they are legitimate questions about where their intervention is leading. I hope that the Minister can answer them, but I fear that the Government are creating a subsidy on a scale that will eventually make the millennium dome look like a very small leakage indeed.

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry 8:16 pm, 22nd October 2002

I beg to move, To leave out from XHouse" to the end of the Question, and to add instead thereof:

Xwelcomes the publication earlier this year of the Performance and Innovation Unit's review of the strategic issues surrounding energy policy for Great Britain up to 2050;
welcomes the Government's commitment to publish an Energy White Paper in the New Year setting out a long-term framework for energy policy following its recent extensive and innovative public consultation on energy issues;
understands that British Energy's problems, and those of certain other players, are about companies rather than a way of generating electricity and welcomes the speed with which the market can respond to protect the interests of consumers;
recognizes that the future of nuclear power in the UK is a question that has to be addressed on its own merits, not in the light of a particular set of circumstances surrounding a particular private sector company;
further recognizes that it is not the responsibility of Government to bail out electricity suppliers unless it threatens safety or security of electricity supplies;
and welcomes the work Government has done to promote sustainable energy use in terms of energy use reductions and to promote the development of renewable energy."

What we heard from Dr. Cable was mainly a restatement of anti-nuclear arguments dressed up in a slightly different context. The thrust of his argument is that the Government have acted wrongly in relation to British Energy by giving the loan. After he had said that, I sensed some confusion in his argument. I believe that the Government have acted absolutely properly in relation to British Energy because we are motivated by two overriding imperatives: the absolutely safe operation of nuclear power stations and the maintenance of security of supply. According to those criteria, what the Government have done is both proper and absolutely necessary.

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

I shall do so shortly.

I understand that the Liberal Democrats have a big problem on energy policy. They are against lots of things, including nuclear power, and if all those things were withdrawn from our energy mix, the lights would go out and carbon emissions would rise. Therefore, they must also purport to be in favour of things, however hypothetically, to resolve their dilemma. What could be cleaner and cuddlier for them to support than renewables? As we have again heard, they want to outbid the rest of us on renewable targets.

The problem is that the Liberal Democrats did not reach their current mighty heights by being in favour of things. They got there largely by jumping on every opportunistic local bandwagon that happened to be passing. Notoriously, from my point of view, local bandwagons tend to be against renewable energy schemes rather than in favour of them. That is why, in the real world, two thirds of proposed renewable energy developments never happen and why one leading figure in the wind power industry recently said that three issues were obstructing the growth of renewables—planning, planning and planning.

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

No; I shall first give the hon. Gentleman something more to feed on.

So what are the Liberal Democrats doing, as opposed to saying? Let us remember that they are saying that we must abandon existing sources of energy, drive nuclear companies into bankruptcy and replace them with renewables targets far more ambitious than the wimpish ones that we are striving to achieve.

Let us go on a little tour of Liberal Democrat Britain, beginning with the Solway Firth, one of the best areas in the country for developing offshore wind. Only a couple of weeks ago, the rainbow coalition of Dumfries and Galloway turned down the Robin Rigg project, with the Liberal Democrat chairman of the environment committee—yes, folks, the environment committee—leading the opposition. A few years ago in Langholm, it took a public inquiry to overcome Liberal Democrat opposition to a five-turbine wind farm.

Let us travel north to Skye, where the leader of the Liberal Democrats is also the local Member of Parliament. One might have thought that that provided an opportunity to show leadership in the movement to triple or quadruple our renewables targets. However, wind farm proposals in Skye have inevitably met with noisy, albeit minority, resistance. The website of the group that opposes wind farms on Skye includes a letter from the leader of the Liberal Democrats. He does not support the opposition, but comes as close as possible to requesting that the application be called in. He writes, XAny proposal will require at the very least the approval of the Highland council and will be closely scrutinised at every stage. I would imagine a proposal of this scale may require the approval of the Scottish Executive. I will certainly be monitoring developments closely." With such leadership, how can the renewables revolution fail?

Photo of Malcolm Bruce Malcolm Bruce Liberal Democrat, Gordon

Will the Minister explain whether he is in favour of the new electricity trading arrangements that the Government set up? If so, and if that drives electricity down to the extent of making nuclear power stations uneconomic, do the Government believe that they should ignore the market and intervene? If that is the case, what sort of broad energy strategy do they have? Would not it be helpful to tell us when and why they will next intervene in the market?

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

A detached observer might believe that the hon. Gentleman was trying to change the subject from Liberal Democrats' actions as opposed to their theory.

Let us go to Hereford. At Prime Minister's questions last week, Mr. Keetch famously called for a public inquiry into a wind farm that has not even been proposed. That is spectacular.

I often take hon. Members north to Lewis in the Western Isles, but tonight I want to take them down south to Lewes in Sussex, home to a one-man Liberal Democrat wind machine, and a Liberal Democrat-controlled council. Again, we look for leadership and, in that instance, we find it, albeit in unexpected form. The Liberal Democrats have banned solar power because it does not look nice. That is extraordinary but true. They have ordered Lady Wedgwood, a public-spirited individual as far as I can tell, to remove her solar panels because they do not suit the ambience of the area. Moreover, they have introduced a blanket ban on other solar panels in that part of Lewes because it is a conservation area. We now face a new Liberal Democrat pressure group: not NIMBYs but NIMCAs—not in my conservation area.

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

No. If Norman Baker were here, I would give way to him. I believe that Lady Wedgwood speaks for the nation when she writes, XI am very concerned about saving the environment. It is something everyone should be interested in, especially considering what has happened in Lewes with the flooding. I think the whole thing is ridiculous." So do I.

Photo of Mark Francois Mark Francois Opposition Whip (Commons)

I have very much enjoyed the Minister's tour de force, but I ask him not to omit Wales. The Liberal Democrats often make great play of renewable energy except in the Welsh Assembly, where they consistently oppose applications for wind farms.

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

I am grateful to the hon. Gentleman. Doubtless the tour could be extended ad infinitum. I welcome further contributions. However, I am making a serious point. There is no point in standing up in the Chamber and saying that we should get rid of nuclear power, oil, coal and so on without being prepared to will the means for an alternative. Time and again, local pressure groups, often with support from the precise people who declare most loudly that they favour renewables in principle, vote against them and block projects so that two thirds are never realised. Then they have the cheek to come here and say that our targets are not sufficiently ambitious.

Photo of Mr Simon Thomas Mr Simon Thomas Plaid Cymru, Ceredigion

The Minister is making a good cut-out-and-keep speech, which will certainly be in my back pocket the next time the Liberals come round in Ceredigion. He knows that the Liberals opposed the Cefn Croes application, which was for the largest wind farm in both England and Wales. He approved it, though not in the democratic way that I would have liked. Nevertheless, the application was approved with my support and against the opposition of Liberal Democrats in Ceredigion.

Will the Minister move on to deal with the serious point at the heart of the debate? He must explain the justification for the #650 million British Energy subsidy, how the money will be returned to the Government and whether further demands from British Energy—

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. The hon. Gentleman's intervention is too long.

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

I am unlikely to forget Cefn Croes because the Bishop of Hereford, no less—I do not know whether he is a Liberal Democrat—

Photo of Roger Williams Roger Williams Liberal Democrat, Brecon and Radnorshire

The Minister appears to be saying that there should be a fundamental review of the planning system. [Interruption.] We should have a system whereby we can identify suitable places for renewable energy—[Interruption.]

Photo of Roger Williams Roger Williams Liberal Democrat, Brecon and Radnorshire

We should have such a system rather than speculative applications that are based simply on profit and do not pay due attention to the application's environmental aspects.

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

I agree with the hon. Gentleman. We must work together to find ways in which to overcome Liberal Democrat opportunism.

I dispute the view of Mr. Thomas that I am not making a serious point. It is immensely serious. I am drawing attention to the contrast between words and actions. Liberal Democrats' words on other subjects such as nuclear power are meaningless if they are not matched by actions that give them at least a hypothetical basis of rationality.

Photo of Gregory Barker Gregory Barker Conservative, Bexhill and Battle

I want to lead the Minister to the serious point, namely the #650 million bail-out of British Energy. I presume that the money met the Government's famous best value criteria. At what colossal subsidy will it become uneconomic to bail it out—#800 million, #1 billion, #2 billion? What price will he not pay to keep British Energy afloat?

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

What we put in place lasts until 29 November. Before then, we must decide how to take matters forward after all the discussions that are taking place with the company. However, to characterise our actions as bailing out British Energy is inaccurate. First, the money is a loan [Laughter.] That is an important point. The bond gives us priority over bondholders or shareholders if the company becomes insolvent. However, we are motivated not by bailing out British Energy as a company, but by the safe operation of nuclear power stations and by maintaining security of supply. In spite of the rubbish that we heard earlier, we need nuclear power. Whether we should do so or not is an historic argument, but the idea that any political party in the House could blithely say XLet British Energy go to the wall" is preposterous.

Several hon. Members:

rose—

Photo of Mr Tam Dalyell Mr Tam Dalyell Labour, Linlithgow

Does my hon. Friend agree with the British Energy brief, which states:

XClosing stations early would bring forward decommissioning costs and transfer #5bn of liabilities to the taxpayer."?

Is British Energy right to say that?

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

I am sorry. I lost the earlier part of my hon. Friend's intervention in the hubbub.

Photo of Mr Tam Dalyell Mr Tam Dalyell Labour, Linlithgow

The British Energy brief makes the important statement that:

XClosing stations early would bring forward decommissioning costs and transfer #5bn of liabilities to the taxpayer."

I am asking the Minister—I do not know the answer to this question—whether British Energy is right in making that important statement.

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

I am not going to give my hon. Friend a definitive answer to that. What I will say, however, will put into perspective some of the points that have been made. I have no doubt that it would cost more to close nuclear power stations than it costs to keep them going, and, in keeping them going, we also have that 25 per cent. of the nation's electricity that we need to keep the lights on.

Photo of David Chaytor David Chaytor Labour, Bury North

If we are now moving from the knockabout section of the debate to the serious section, may I ask the Minister about his reference to the 30 per cent. of renewables applications that are turned down? Is it not the case that that figure applies only to onshore wind farm applications, which form only a small part of the whole gamut of renewable energy technologies?

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

It was not one third, but two thirds of the projects approved under the non-fossil fuel obligation that never came to fruition. By definition, most of them were for onshore wind farms. Now that offshore wind farms are coming forward, we are, of course, beginning to hear objections to them. I quoted the example of the Solway Firth site. The only reason that people were in favour of them before was that no one was suggesting them. As soon as sites were suggested, all sorts of interest groups came out of the woodwork—some of them perfectly legitimate, such as civil aviation, Ministry of Defence interests and other maritime users. It is not true that the conditions exist along most of the coastline for offshore wind farms. Furthermore, it is not true that the applications will automatically have an easy ride.

I believe that wind farms have a huge contribution to make, but they are still at the developmental stage, and their technology is not yet fully commercial. As my hon. Friend Mr. Chaytor probably noticed, we have approved two grants of #10 million each over the past two weeks, for the North Hoyle development and for Scroby Sands. I hope that those two examples are the first of many. Okay, most of these are wind projects at present, but that is not because of any preference. It is because, although the other kinds of project have been around for a long time, it is very hard to get them up to a level at which they can be commercially viable.

Photo of Alex Salmond Alex Salmond Scottish National Party, Banff and Buchan

Is it not the case that one of the biggest objectors to wind farms—even bigger than the Liberal Democrats—is the Ministry of Defence? Might not a partial solution be for the Minister to have a word with some of his MOD ministerial colleagues and ask them to stop objecting?

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

I have done, but not in that spirit, because I recognise legitimate interests. Often, when the MOD is blamed for making objections, they turn out not to be from the MOD at all, but from aviation interests in general and civil aviation interests in particular. There is a concern about the impact of wind farms on radar, for example. There are, therefore, perfectly reasonable grounds for concern. I am trying to get a much more stated position from the MOD, so that people know when they are likely to run into objections, but the Ministry is actually co-operating with a large number of developers to give them the advice and guidance that they need. It is worth pointing out that, of the first tranche of 18 offshore wind farm sites to be cleared by the Crown Estate, the MOD objected to or raised concerns about only two. It is not, therefore, true to say that the MOD is making blanket objections.

Photo of David Drew David Drew Labour/Co-operative, Stroud

I thank my hon. Friend; he has been generous with his time. I believe that he will get total support from the whole House—particularly from Labour Members—for the drive towards more renewables, but we must also look beyond renewables to the hydrogen economy. One of the problems involved in trying to shut down the nuclear industry is that, if we lose the knowledge and expertise that it contains, where will the hydrogen economy come from, if not from that source? Perhaps my hon. Friend could tell us that.

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

My hon. Friend makes an excellent point. I keep saying that we have now moved into an era in which the world should not be divided into pro and anti-nuclear fan clubs. We are not fighting the arguments of the 1960s or the 1970s, when the decisions were taken that led to the existence of the nuclear industry. The point is that we have a nuclear industry, and it supplies us with 25 per cent. of our electricity. In Scotland, it supplies us with much more.

The rational, intelligent argument in which we must engage is whether it makes any kind of sense to run down an industry that is the major low-carbon contributor to the energy mix, just when we face an enormous challenge to reduce the carbon content of our energy supply in general. That is the nub of the debate, and it is perfectly possible to talk about it sensibly.

Photo of Patrick Hall Patrick Hall Labour, Bedford

Surely we do not need to talk about running down the nuclear industry. We must look at the next 20 years, during which the existing nuclear power stations will reach the end of their safe lives. Has not the performance and innovation unit suggested in a recent report that that period could present an opportunity for renewables and other sustainable means of electricity production to bridge the gap, meeting the need for a secure supply while reducing some of the public costs and liability involved in the decommissioning of nuclear power?

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

That is roughly what the PIU report said, and I think that there is a strong element of truth in it. In five years, we will know much more about what renewables will actually, rather than potentially, deliver. We will know much more about the potential of offshore wind, biomass, wave power and all the technologies that are being developed. It is a difficult balance, however. If the formula that we should keep the door open to nuclear power is simply repeated as a mantra rather than being backed up by action, at some point it will become a formula for closing the door. As was said by my hon. Friend Mr. Drew, the skills base will be lost, and a long planning run-in is needed for the building of new stations.

Photo of George Osborne George Osborne Conservative, Tatton

One of those skill bases is in my constituency, where NNC, which built virtually every nuclear power station in Britain, employs 1,000 people. The Minister says that to keep the door open we need to start planning new nuclear power stations. Is that what the Government are saying in this debate?

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

I think that I have said what I had to say on that. [Laughter.] I am not sure of the reason for the hilarity. Perhaps I have missed something.

Photo of George Osborne George Osborne Conservative, Tatton

I merely wanted to know whether keeping the door open to nuclear power meant starting to plan to build new nuclear power stations. Are the Government in favour of that?

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

I am even more puzzled about what the laughter was about. I have just recognised that what the hon. Gentleman has raised is an issue. Lines must be drawn; a form of words about keeping the door open means nothing. Those are weasel words unless something is done at some point to give them substance. Because of the long run-in, the decision must be made sooner rather than later.

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

I want to wind up my speech, because I know that others on both sides of the House want to speak, but I will give way once more.

Photo of Andrew Lansley Andrew Lansley Conservative, South Cambridgeshire

I do not wish to interrupt the Minister too much, but there seems to be a confusion that I think he could help to clear up. Dr. Cable pushed the idea that running the current British Energy nuclear plant was uneconomic. Will the Minister confirm that essentially, as British Energy told the Trade and Industry Committee earlier this year, it aims to get its costs down to 1.6p per kWh? That is below the current price curve under the new electricity trading arrangements. It is clearly economically viable to continue to run the plant; the question in relation to British Energy is how to deal in the longer term with the decommissioning costs.

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

That is a fair point. The problems of British Energy are complex—[Laughter.] This is weird.

The central point about NETA and the price of electricity is that no form of generator can indefinitely produce electricity at a price higher than what the market is paying. In fact, it does not matter what the commodity is; the principle still applies.

In the context of this debate, what I find puzzling is why the Liberal Democrats or anyone else should say that that argument is the death knell for nuclear power. By the same token, it would be the death knell for renewables. We recognise that, and the whole House agrees. The renewables obligation is a mechanism enabling renewables to be freed, for excellent reasons, from precisely that trap.

In conclusion, all the issues have to be brought together in the White Paper. Essentially, there are three imperatives of energy policy. First, we must deliver the security of supply that our people are entitled to expect; secondly, we must meet our post-Kyoto environmental targets and obligations; and thirdly, we must deliver affordable energy to households and to industry. This debate and others clearly demonstrate that reconciling those three objectives may be difficult, but it is a central challenge of policy making in the UK.

In many ways, competitive markets are working. In 1998, we passed legislation to create a competitive and liberalised electricity industry that has improved the way in which the electricity and gas industries operate and are regulated in the UK and the early creation of a truly competitive single European energy market remains our priority. It is worth noting that in the competitive market some 900,000 accounts a month are being switched. That is a remarkable degree of churn.

Photo of Chris Mole Chris Mole Labour, Ipswich

Does my hon. Friend welcome the acquisition of TXU(UK) and its associated businesses by Eon-Powergen because , subject to further competition considerations, that will provide some reassurance of supply for consumers and, in the short term at least, of employment for 1,900 TXU employees, many of whom live in my constituency?

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

My hon. Friend will understand my difficulty in simply welcoming the takeover, but I note it with interest and I well understand his point. On my previous point about switching accounts, one of the questions that I raised with Eon-Powergen yesterday was specifically about the XStay Warm" scheme, which applies to pensioners. I would not like to think that there was any concern about the impact of a takeover of TXU on that scheme. I was given the assurance that certainly the existing contracts will be honoured. That is an important message.

The competitive market is working well in many ways. It is true that competition has brought benefits, but it is also true that reductions in the retail cost of electricity, particularly to domestic consumers, in no way reflect the 40 per cent. drop in the wholesale price of electricity over the past 18 months. I believe that if the liberalised market is to have credibility, it must be clear that consumers are benefiting.

I welcome the debate. There is much to be discussed before the White Paper and I genuinely look forward to contributions from hon. Members from all parties as there is a lot of valuable input to be made.

Photo of Tim Yeo Tim Yeo Shadow Secretary of State (Trade and Industry) 8:42 pm, 22nd October 2002

I am delighted that we have this chance to debate nuclear policy and related issues, and I congratulate the Liberal Democrats on choosing it for the second half of their Supply day, although after hearing the Minister's entertaining tour of Liberal Democrat seats and councils where proposals for renewable energy schemes have been turned down, I wonder whether the Liberals may now slightly regret their choice of subject, in view of the fascinating insights into the way in which their policy on energy, particularly renewables, is working out in practice.

I welcome the Minister to the Dispatch Box and I congratulate him on an entertaining speech. It was not as informative as some of us had hoped, but I shall come back to that in a moment. I regret the fact that the Government did not consider that a statement on this subject was necessary last week, given the fact that during the recess #650 million of taxpayer's money was committed to supporting British Energy. It is a matter of widespread concern not only that no such statement was made, but that the Secretary of State chose not to attend tonight's debate on an important and urgent subject. I hope that the Minister will pass on that concern.

Conservative Members take these issues seriously. That is why I have chosen to speak at the first available opportunity that the House has had to debate the subject since I took on the DTI portfolio at the end of July. The fact that the Secretary of State is not here and the delay in deciding what to do about British Energy suggests uncertainty at least, or perhaps some confusion, about the crisis and how to resolve it—perhaps about energy policy generally, but certainly about nuclear policy in particular. It may be that it is more than confusion. Perhaps the reason for the delay is a conflict between Ministers. Mr. Wilson is known as someone who supports the nuclear industry, but his view does not seem to be universally shared by his ministerial colleagues. It is hard to avoid the conclusion that either the Government do not really know what to do, or that they do know, but are afraid to do it. Whichever of those explanations is true, the outcome is bad for the industry, bad for consumers and bad for taxpayers.

This industry, almost more than any other, needs clarity and stability if it is to have the confidence required to make long-term investment decisions. Those decisions are very long term, and some of them have to be taken quite soon. Indeed, Britain's ability to meet our climate change commitments could be compromised without an early resolution of the conflicts that appear to exist inside the Government. The current crisis—

Photo of Michael Weir Michael Weir Scottish National Party, Angus

For the sake of the clarity that the hon. Gentleman mentions, can he say whether he would have put #610 million into British Energy?

Photo of Tim Yeo Tim Yeo Shadow Secretary of State (Trade and Industry)

If the hon. Gentleman is patient, I shall come to exactly that point. The current crisis is played out against the background of an industry that is undergoing fundamental change. After more than a quarter of a century of largely benign conditions in the energy markets in Britain, we face two very big challenges, the first of which is the move from self-sufficiency—we are one of only two G8 countries to enjoy the status of a net exporter—to heavy dependence on imports. Most of that will be gas, and much of it will come from countries that may be subject to some degree of political risk. Secondly, there is the growing international recognition of climate change as an urgent issue. Our obligations to meet our CO2 emissions reduction targets are already quite challenging, and they may well become much more so if future international negotiations set even more demanding targets. I want Britain to play its full part in responding to the problem of climate change, but I do not want us to get ahead of what other countries are doing. However, I certainly do not want us to lag behind them, either.

The Liberal Democrat motion reflects their underlying hostility to nuclear power, but despite 29 minutes from Dr. Cable, I am little the wiser about the actual substance of Liberal Democrat policy. He began by attacking the privatisation of British Energy not, the House will have noticed, on ground of principle, but apparently because the price that was charged at the time was too low. The Liberal Democrat position on privatisation appears to be, XIt's all right—if investors lose enough money."

The hon. Gentleman ducked a question about whether the Liberal Democrats support nuclear power, but their XFederal Policy Consultation Paper No. 61" is quite clear. Should he hold different views, I am glad to tell him that the consultation period ends on 25 October, so he has just enough time to make his own submission—if he can work out what his views actually are. The document states:

XCurrent party policy calls for nuclear power to be phased out".

He also agreed with an intervention from Mr. Chaytor, who said that nuclear power is intrinsically uneconomic. Despite not contradicting such views, the hon. Member for Twickenham did say that he wanted to commit more taxpayers' money to research on nuclear power. At the end of his speech, however, it was still not clear whether he would put in the #650 million of loans. [Interruption.] He would not—at least that is now clear.

The Liberal Democrat claim to support renewables gave the Minister the opportunity to entertain the House exceptionally well, I thought. As was suggested, I shall keep the relevant extract from Hansard with me when I visit the target seats that the Conservative party will regain at the next election. It is worth asking whether the Liberal Democrats have any commitment on the ground to the introduction of renewables. Are there any constituencies in which they would support the siting of wind farms?

Photo of Tim Yeo Tim Yeo Shadow Secretary of State (Trade and Industry)

Indeed. Siting a wind farm in Twickenham is an excellent idea—although not, I hope, on the rugby ground.

Have the Liberal Democrats calculated the cost of turning down every application for an onshore wind farm, on the achievement of the renewables target to which they are committed? How far would the Liberal Democrats regard it as acceptable to raise the price of electricity to consumers in pursuit of their determination to allow Liberal Democrat Members to oppose planning applications up and down the country?

The Minister left several questions unanswered. I was not clear about his present view of the new electricity trading arrangements. Does he feel, for example, that the cuts in the prices paid to generators have been adequately passed on to consumers? Does he believe that the problems at TXU—which were touched on by Mr. Mole and which, happily for consumers, appear to have been resolved satisfactorily—will have a domino effect elsewhere in the industry?

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

I want to be clear about this point. I do not think that the cuts have been adequately passed on to consumers—I thought that I had made that clear.

Photo of Tim Yeo Tim Yeo Shadow Secretary of State (Trade and Industry)

I thank the Minister for that clarification. The Minister was also unclear in his answer to the question posed by my hon. Friend Mr. Osborne. Indeed, the Government's amendment is ambiguous on the subject of nuclear power generally. At least the Liberal Democrats are clear—if wrong on the issue—that they rule out new nuclear power stations. They appear to rule new stations out even if they would deliver cheaper electricity to consumers and might be the best way for Britain to meet its climate change obligations, however important those obligations become in the future. We still do not know the Government's position on the issue; perhaps that is because they do not yet know it.

Every day the Government delay making their position clear—and the decision is left in the in-tray—adds to the costs that taxpayers and, eventually, consumers may have to pay. The Minister made some reference to 29 November, when the issue will have to be resolved, but it is not clear what Ministers will know then that they do not know now. Why do we need to wait another five and a half weeks for the Government's position to be unveiled?

The costs of keeping British Energy afloat mounted rapidly, from #410 million on 9 September to #650 million on 26 September. To put the latter figure in context, it should be compared with the annual budgets of #22 million for the Energy Saving Trust, #26 million for the Carbon Trust and #17 million for the energy efficiency best practice programme. It should also be compared with the #55 million spent on research into renewables.

Photo of Mr Simon Thomas Mr Simon Thomas Plaid Cymru, Ceredigion

Surely the more frightening figure is the #2.6 billion that went from the non-fossil fuel obligation to the Magnox nuclear site, purportedly to help to pay decommissioning costs. Not a penny appears to have been spent on decommissioning costs. Would the hon. Gentleman have paid the #650 million?

Photo of Tim Yeo Tim Yeo Shadow Secretary of State (Trade and Industry)

I am coming to that point. [Laughter.] Hon. Members must be patient, because we need to develop the argument logically.

When did the Government realise the extent of British Energy's difficulties? The fact that British Energy was trading at a loss must have been clear to the Minister's advisers well before 9 September. When did British Energy first discuss its anxieties with officials in the Minister's Department? Did not those discussions start months before the crisis package was announced on 9 September? Was not the first advice that his Department sensibly gave to British Energy to go away and discuss with BNFL a renegotiation of the high reprocessing costs that British Energy pays? Can the Minister confirm that those discussions between British Energy and BNFL took place and that an agreement was reached, but that the deal was unfortunately blocked, not by him or his officials but by the Treasury?

Apart from the reprocessing costs, the other big burden that has been imposed on British Energy is the climate change levy. On this point, I agree with the hon. Member for Twickenham. The climate change levy is not a climate change levy, but simply a clumsy and arbitrary energy tax that has nothing to do with climate change. If it did have anything to do with climate change, it would not be applied to British Energy. It is time the Government stopped insulting the intelligence of the energy industry and calling the levy a climate change levy.

It is also time to recognise that there are better ways to encourage reductions in carbon dioxide emissions. Those reductions would ensure that the resources were applied where they would be most effective. That could be achieved by means of a carbon tax, and an emissions trading system that was fully compatible with what will be introduced in Europe.

Does the Minister agree that the cost of supporting British Energy would be much lower if the Government were to allow the company to negotiate freely a new deal with BNFL, and if the Government replaced the climate change levy with a mechanism that directly targeted the carbon dioxide problem?

In that context, I make it clear that the cost of propping up British Energy in the short term could be much lower if the Government were to adopt the measures that I have set out. However, even at #650 million, that cost is lower than would be the decommissioning cost that would fall on the public sector if British Energy were closed down immediately. That cost could not be met by a company whose financial difficulties are as obvious as British Energy's, and it would dwarf the #650 million that has been put in.

That in no way, however, reduces my concern about the delay that is taking place. The matter should be resolved urgently, and I have made two practical suggestions about how the burden could be reduced. To be fair to British Energy, if it must bear the decommissioning and waste disposal costs, it is entitled to have its contribution to helping Britain achieve its climate change commitments recognised. Unfortunately, not everyone is willing to give it that recognition.

The Minister has not yet made clear the Government's solution to the problem. When he winds up, I hope that he will explain to the House what Project Blue is, and whether the Government are examining the possibility of taking British Energy back into public ownership. If he does confirm that, will he explain how that will help reduce the costs that British Energy faces? The problem is that market prices are lower than the costs of production, and that does not have to do with who owns the shares.

Photo of Tim Yeo Tim Yeo Shadow Secretary of State (Trade and Industry)

No, I do not believe that that would be right. I do not see that it would help the current problems in any way. Whether the company is owned privately or publicly would not alter the fact that the costs of production are higher than the prices that it can receive. There is no advantage to be found in taking the business back into public ownership.

Will the Minister also clear up doubts that have surfaced recently about the Government's intentions with regard to the creation of the Liabilities Management Authority? Recent press reports have suggested that the Bill to create that authority may not appear in next month's Queen's Speech, and it would be helpful if those doubts could be set aside. If that Bill does not appear, it will raise further questions about the Government's attitude to the industry.

Looking ahead, the Opposition support the Government's target that 10 per cent. of electricity should be generated from renewable sources by 2010, although we realise that achieving that target now looks a challenging task. We support the mechanism—the renewables obligation—that the Government have chosen to achieve the target, and we are sympathetic to the suggestion in the PIU report that a further, higher target could be set in the longer term, perhaps for 2020. However, Britain will struggle to meet its climate change obligations if the portion of electricity currently generated by nuclear power is generated in future exclusively by fossil fuels. In my view, it would be folly to rule out nuclear power today. A responsible Government would want to keep that option open.

Future generating capacity will have to meet economic and environmental objectives. The environmental costs and benefits of nuclear power would have to be reflected properly in future electricity markets, and the value placed on the instruments will change as our understanding of the scale of the threat from climate change develops and our appreciation of the true cost of the nuclear legacy is refined.

We have the opportunity—but it is only brief—to take advantage of a lull in the development of new non-renewable generating capacity to improve our knowledge and to develop policy instruments that will reflect those costs and benefits fairly in a free market. A future Conservative Government would not take a decision to replace nuclear with nuclear; nor would they rule out new nuclear-generated electricity if, with the legacy costs provided for and the associated risk accounted for, it proved to be the most economic way of continuing to meet the global requirement of addressing climate change.

Photo of Gregory Barker Gregory Barker Conservative, Bexhill and Battle

Does my hon. Friend think it telling that in the greatest free market in the world, the United States, there is no nuclear generator under construction, nor is there ever likely to be, because of the fundamental economics that are recognised there? To do so would require private finance.

Photo of Tim Yeo Tim Yeo Shadow Secretary of State (Trade and Industry)

I think that the circumstances in the United States market are not always the same as those in ours. However, I am clear that we should allow the market to be the primary determinant of where we generate our electricity from. If there are ways of generating it more cheaply from other sources, we should use them. I believe that we will face more onerous obligations because of the greater recognition of the climate change threat. So the need to be able to generate power from sources that do not make the climate change problem worse is likely to grow. Any future Government will have to bear that factor in mind.

Photo of Tim Yeo Tim Yeo Shadow Secretary of State (Trade and Industry)

No, I am about to finish, because I want other right hon. and hon. Members to be able to take part.

There are many other issues on which I hope we can touch on other occasions, including the need to work harder to promote energy efficiency and to avoid unnecessary delays in making grants available for the construction of offshore wind farms.

In conclusion, I hope that the Government's White Paper will not be subject to further delays. I hope that its explanation of Government energy policy will be clear enough to remove the uncertainties that plague the industry. Some matters, however, need not wait until the White Paper comes out next year. The problems facing British Energy, which have led to taxpayers' money being lent to the company, could be significantly reduced by an announcement this evening or in the very near future of a recognition by the Government that their policies have contributed to the company's difficulties. I regret that the Minister has not yet made such an announcement, and I think that the effect of his failure to do so and the continuing delay in deciding how to resolve the problem will be felt by energy consumers—that is, every man, woman and child in the country. The price of the Government's delay will be paid by the people of Britain, and for that reason the Opposition support neither the motion before the House nor the Government's amendment.

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West 9:02 pm, 22nd October 2002

Although I welcome the fact that Liberal Democrat Members have taken the opportunity to initiate this debate, Government and Conservative Members alike can only deplore the lack of seriousness with which they have addressed it. We are dealing not with a single crisis in the nuclear industry but with the entire energy policy for the United Kingdom, not just now but for the next 50 years. Energy policy supremely transcends the time scale in terms of which each of us is naturally inclined to think—the time scale that takes us up to the next election. I thought that Dr. Cable had a great opportunity, living in the nether world of non-office, to say that the Liberal Democrats would take a stand, make their policy clear and overcome their natural tendency to try to exploit the Government's immediate crisis.

I wanted to speak in the debate this evening—I am grateful for being chosen, Madam Deputy Speaker—because I suppose that I bear some responsibility for the change from the pool arrangements for pricing energy to the present new electricity trading arrangements or NETA. Under the old pool arrangements, nuclear energy, including French nuclear—we did not even know whether it was French nuclear; it could have been any energy from France—was guaranteed baseload under any circumstances. All the gas that came in was on baseload as well. All such energy was guaranteed, not at the competitive market price, as was often erroneously thought, but at the intervention price—the price at which the marginal producer, coal, quoted for the production that the others on baseload could not meet. The effect was a very high price, which was rightly paid not to the marginal producer during the short period when marginal total production was required but to everyone—to all those guaranteed baseload. The system was not only anti-competitive but clearly anti-coal. On that basis, in the Treasury, it unfortunately—or perhaps in some ways fortunately, as I welcomed the challenge—fell to me to say that that was no argument for closing down coal-fired energy production or for closing down our pits. It was simply a rigged market that worked in one direction.

I was not there when the new arrangements were entered into. Clearly, since then there has been a switch in the whole bias away from the anti-competitive anti-coal situation to an anti-competitive anti-nuclear situation. The entire drop that was required in the cost of energy has been borne by the generators and not by the retail operators, as yet. Those generators—in particular, nuclear—that have not been able to control their retail outlet and offset the 40 per cent. reduction in the price paid for the generation of electricity have come badly unstuck—none more so than British Energy.

British Energy has behaved very responsibly—unlike Railtrack, if I may say so. It explained its problems to the Government and said that it wanted to be responsible, but that there was no way that it could meet off its own bat a 40 per cent. reduction in a matter of a year or two in the price paid to it for a production cost that it had until then been guaranteed under the old pool arrangements. It took the problem to the Government, saying that it was at least in part of their making. This Government and I personally must accept that element of responsibility for it, even though we were not responsible for setting up the arrangements that preceded that.

That is why my hon. Friend the Minister for Industry and Energy has done a very good job tonight in a brilliant response to a good Opposition-day debate that was marred by the vacuity that the Liberal Democrat party brought to it. My hon. Friend has not tried to evade responsibility for the #600 million plus—it may well turn out to be more—that that policy is going to cost us. Nor, as yet, has he pre-empted the options that are open to him to deal with it.

We can always attribute blame, but rather than looking back we must look forward to find out how we can deal with this problem. I shall devote a few remarks to that subject. First, hon. Members on both sides of the House—even the Liberals with their fantastical imaginations—must accept that the three dominant criteria that must be met in British energy policy are security of supply, diversity and an environmentally acceptable means of delivery. The idea that is implicit—I hate to say this, but at one point one can almost see the drafting hand of the Treasury in it—in the performance and innovation unit report is that those three criteria can be reconciled in a market-oriented policy, but that is just not realistic.

Energy affects the whole country and is vital to our existence—as we have said, the development of a supply can easily extend over 50 years—and it cannot be left to the vagaries of an oil price that might double or treble from one year to the next, or a gas price that could do the same. What company could possibly price its products against that background? What private sector company is going to invest against the background of those criteria, not knowing from one day or one year to the next whether it may face a 100 per cent. change in its gross and net margins? It is for those reasons that, like it or not, the Government have to be involved in energy policy.

The Government will always be involved; they can try to avoid the problem and say, XThese are hideous things and we want to leave them to the market". They could try to do what the Tories did, which was to dismember the sector and liberalise it; but at the end of the day, as we have all seen, all those problems come back to the Government. I certainly saw that when I was faced, in 1997–98, with the imminent collapse of the coal industry, just as the present Minister faces the imminent collapse of our private sector nuclear industry. We must face the problems.

Instead of facing the problems, the Liberal party gave us a trivial contribution, although I hate to say it, from the normally distinguished hon. Member for Twickenham. If we are to face the problems, we have to reconcile those three key criteria. If we are to have diversity, we must accept that gas will become more predominant; it is the cheapest and, to some extent, the cleanest fuel. We need nuclear energy. Where else will the 20 per cent. come from? There must be a continuing role for coal for as long as the supply lasts, for as long as there are reserves and mines are sunk and miners are willing to work them. There must be an increasing role for renewables. I am sure that the whole House will agree about that.

Photo of Mr Kevin Hughes Mr Kevin Hughes Labour, Doncaster North

Coal has a future; it has a key role in our energy supply. It can produce fewer emissions with the use of the new-generation clean-coal technology that could come on stream with some support and help from the Government. My hon. Friend rightly points out that we need to maintain diversity. Any sensible Government must do that.

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West

I entirely agree with my hon. Friend, and I am grateful for his intervention. Coal is seen as old technology that has to be subsidised; nuclear technology is new, yet subsidy is implicit in its use. What price do we want to pay?

What of security? If the House decided that the free market should reign and that we should again let loose the dash for gas that we halted in 1998, we would be 90 per cent. dependent on gas within 20 years. I do not believe that we can obtain much more than 10 per cent. from renewables. However, even if we get 15 per cent. of our energy from renewables by 2020, we will still be 85 per cent. dependent on gas. Where will it come from? What security will there be? I mean no disrespect to the gas-producing countries, but there are thousands of miles of pipeline. Countries that do not have—

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West

I am aware of the hon. Gentleman's views and although we are under time restriction—[Hon. Members: XNo".] Very good. I shall give way in a moment—

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West

I shall give way to my hon. Friend, too.

The argument was made at the Treasury in the past: how can we let this country become 90 per cent. dependent on gas that travels thousands of miles from countries that are subject to political turbulence, to put it no more strongly than that? That scenario is not acceptable. Rather than letting the free market—although it would not be entirely free even in that context—hold sway, this country would do much better to plan. I hate to use the word Xplan" because I know that it is anathema to both sides. However, we need an arrangement or a scheme to provide a balanced source and diversity of energy supply.

Photo of Gregory Barker Gregory Barker Conservative, Bexhill and Battle

The hon. Gentleman looks to the future by as much as 20 years, yet the solutions to our energy problems have been distinctly 20th century. He has made no mention of fuel-cell technology or combined heat and power. Surely, we should be investing in new technologies such as those, and breaking the grip of large-scale generators, rather than trying to project 20th-century solutions on to 21st century challenges.

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West

On the contrary, I think that I have something of a reputation for being a pioneer in new technologies—new industry. I believe, though, that one cannot be totally dependent on their coming off. That is one thing on which we cannot depend. One can plan on the basis of one's coal reserves, knowing what they are and being reasonably sure of extraction and production rates. We do not know so much about the new technologies, in which, as I am sure my hon. Friend Ian Stewart would agree, we must invest more. We must move towards fusion and so on. What we cannot do is count on technologies being available in future and close down what is available to us now.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

Does my hon. Friend accept that one cannot rely on market mechanisms alone to ensure the future of energy supply—that, almost uniquely, requiring renewables to come to market by predominantly market mechanisms is not a logical part of a future energy policy?

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West

I agree with my hon. Friend entirely. I believe that it is a desirable part of a future energy policy, and I would support those new technologies, as all Labour Members do. The Liberals support them in theory, but—as always with the Liberal party—not in practice. We have to put in place every mechanism that is available to us to help the new technologies succeed in due course. But what I cannot do, and what I am sure, in light of his intervention, my hon. Friend would not do, is to base the security and diversity of our supply on their realisation.

Photo of Mr Bill Tynan Mr Bill Tynan Labour, Hamilton South

On the question of new technology, does my hon. Friend accept that as regards nuclear waste, there is an urgent need to ensure that we invest in technology that can deal with our present problem; and that if we do, we should not necessarily agree that that would open the door for nuclear energy to be used as a fuel in the future?

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West

I agree with my hon. Friend, and I think I accept what the chief scientific adviser to the Department of Trade and Industry said: broadly speaking, in the absence of any immediately credible alternative to nuclear fuel, we have to see that nuclear fuel, at 20 per cent. approximately, is replaced by nuclear fuel. That is the position that we come to. We must have a big national debate on that, focused on the House and decided on in the House. I noticed that the Tory party was agnostic in its approach, although I suspect that its Members agreed with me that the option has to be decided one way or the other, because if it is left open for ever while the reactors close down, it is clear to everyone that one no longer has an option.

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West

I give way once more, but I do not think that I should give way again after that.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I listened with interest to my hon. Friend's speech and agree with much of what he is saying, but I was disappointed by his slighting reference to planning. Some 22 years ago I was co-author of a document called XA Planned Energy Policy" for a fine trade union called NALGO. I think my hon. Friend would agree that had we followed a planned energy policy for the last 22 years, we would not be in the mess that we are now in.

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West

I am grateful to my hon. Friend. I was not suggesting that I had changed my spots over the past few years. I still believe that in certain areas, planning is a very sensible thing to do. We have not always got it entirely right in the past, but I am sure of one thing—that in energy, a sensible Government overview of the whole situation and a sensible principle that will guide the decisions that we take, are essential.

I shall now discuss the immediate crisis, which is the occasion of our debate. The transfer of the liabilities—the legacy—must be carried through in the next Queen's Speech. The agency must be set up. These are things that we all, as Governments and consumers, have accumulated and inherited. The agency must be set up, to enable us to move to a new situation in which there is a solvent British Energy. That too will require a very sensible, commercial approach to dealing with what will be left of British Energy, together with BNFL.

I put this concept to the Minister. There is a possibility, admitted throughout the House—even by the Liberals, who say that we should continue research into it—of an ongoing role for nuclear energy. It is well known that BNFL owns Westinghouse, has the licence to generate electricity from pressurised water reactors and has created 200 power stations throughout the world. The Minister and the Government should therefore consider bringing together BNFL and British Energy in a new public-private enterprise, in whichever way one wants to structure it and in whichever of today's acceptable terms one wants to define it, so that they can be shorn of the inherited liabilities and free to make their case to join in a role—the House must decide if there is one—for nuclear energy in the future.

Photo of Michael Jack Michael Jack Conservative, Fylde 9:20 pm, 22nd October 2002

Mr. Robinson made some important points about the way in which the electricity generation market and the pricing thereof has developed over time, but I want to spend a few moments saying a few words on behalf of the 1,500 nuclear energy workers at BNFL Salwick in my constituency. With the exception of the fuel for the pressurised water reactor at Sizewell, they make all the nuclear fuel in this country. If some of them had been in the Public Gallery tonight, they would have scratched their heads in disbelief, particularly at the terms of the Liberal Democrat motion, given that it simply expresses concern, without giving an opinion, about the very proper action that was taken to safeguard British Energy's short-term future.

The Liberal Democrat motion also refers to the so-called competitive market proving that nuclear-generated electricity is uneconomic and also generates long-term environmental costs. Neither in the motion, nor with great clarity in the remarks made by Dr. Cable, was any serious comment made about energy security, carbon dioxide emissions or a proper, sustainable balanced energy policy—all of which are vital to the United Kingdom.

Although the Minister was excellent in his scathing denunciation of Liberal Democrats' equivocation and double-dealing in their policy statements, the Government motion is equally unclear on the industry's future, which affects so many of my constituents. It says that it:

XRecognizes that the future of nuclear power in the UK is a question that has to be addressed on its own merits, not in the light of a particular set of circumstances surrounding a particular private sector company".

At the heart of our nuclear policy lies a publicly owned company—BNFL. It is very much the key to some of the issues involving the disposal of the waste of the nuclear electricity generating business, but there is not much mention of that in the Government motion.

One company's difficulties do not necessarily make a policy, but the Minister touched on the new electricity trading arrangements. That illustrated the important failure in the Liberal Democrat motion to acknowledge that Governments have effectively determined the market for electricity and its price in the United Kingdom since the end of the second world war.

To return to the remarks made by the hon. Member for Coventry, North-West, if the previous market had some failings, one must acknowledge that there may be something wrong with NETA. If a company such as British Energy, which turns over #1.9 billion a year, is effectively on the brink of not making any profit and having to be shored up by a Government loan, given the disparity between the receipts from the sale of the electricity and its wholesale price, there is, as they say, something wrong in the state of Denmark, which ought to be investigated without delay.

Those of my constituents who are involved in the manufacture of nuclear fuel have observed that the current market arrangements lack any serious long-term underpinning. The base load characteristics of nuclear electricity generation are not properly recognised in the present market arrangements.

To put it very simply, we have to decide whether this country wants to enjoy what it has been happy to enjoy until now—a balanced electricity portfolio including coal and nuclear energy, which is under our direct control, and gas, which is questionable because it comes from more volatile and less secure sources of supply, as was mentioned by the hon. Member for Coventry, North-West.

If we want to keep those issues in balance, we had better quickly reach decisions about the future disposal and legacy of nuclear waste, about the right pricing model to ensure that the base load characteristics of nuclear energy are properly recognised and about the need for some long-term assurances to enable planning to take place, for example, with the improved technology of the AP1000-type generator, which would certainly be more economic and efficient in the future.

The nuclear fuel workers in my constituency have striven to improve their operation and to reduce their production costs. They have an excellent safety record. As a company, they have taken full cognisance of their environmental responsibilities, yet their prospects seem deeply uncertain.

Everyone who speaks in the debate will wish to acknowledge the important role of renewables. However, with the kilowatt hour charge for landfill gas of between 2.5p and 3p per kilowatt hour, for wind of between 4p and 5p and for renewable crops of between 6p to 8p, we are considering important economic developments, but at a cost. With energy, we cannot have our cake and eat it.

Photo of Michael Jack Michael Jack Conservative, Fylde

I will not give way now because I want to speak for 30 more seconds and then resume my place to allow others to make their points.

If we want to have a sustainable supply of electricity with proper investments in the right sorts of energy that recognise environmental obligations—there is the long-term question of the disposal of waste for all industries, with the exception, perhaps, of wind and wave—we cannot have electricity that is so cheap that it does not generate long-term investment funds. The nuclear fuel workers in my constituency will look to the Minister for answers—if not tonight, in his White Paper—that will secure their future and the security of the nation's energy supplies.

Photo of Stephen Ladyman Stephen Ladyman Labour, South Thanet 9:27 pm, 22nd October 2002

My hon. Friend the Minister said that in perhaps five years' time we shall have seen what renewables can contribute. I may have misunderstood what he was saying because we can work out now what renewables can contribute. I am a great supporter of renewables, as is everyone who has contributed to the debate. However, it is important that we are realistic about what we can and cannot achieve through them.

The 10 per cent. target that the Government have already set is a stretch target. There are already serious doubts about whether we can reach it. The 20 per cent. target that is proposed in the PIU report by 2020 is almost impossible. Any discussion with engineers or anyone else who is involved with trying to implement renewable resources will lead to them telling my hon. Friend the Minister that it is impossible.

I shall run through one or two of the reasons why it is impossible. For example, let us consider the number of windmills that we would need to match the output from the type of power station that Mr. Jack mentioned—that is, a 1,000 MW nuclear power station. We would require 6,000 windmills with 20 m blades. To reach 20 per cent. production of our electricity capacity using wind by 2020, we would have to start building 40 windmills per month, every month, from now until 2020. That will not happen in Liberal Democrat constituencies, will it? It is impossible to have such targets.

I was grateful for some comments that were made by Professor Ian Fells at a meeting that was held at Portcullis House last night. He gave a vivid example. He said that if we put the whole of Kent—the entire landmass—into coppiced willow and converted that into biomass energy production, we would have only half the energy production of Dungeness B on the coast. Those are the simple facts. We can make these calculations; we do not need to wait five years to find the answers to such calculations.

Dr. Cable, who spoke for the Liberal Democrats, talked about the problems of NETA. He said that under the current arrangement a market is being created in which nuclear power is not economic. If we take that argument to its logical conclusion—if we say that we will have only that which is economic in the short term with no intervention in the marketplace—we have to start building gas-powered stations and nothing but. There will be no renewables because by any estimate of costs, renewables are three times as expensive as nuclear power—not even taking into account the additional capacity needed for the times when renewables are not available.

Professor Laughton of the university of London sent a letter during the recess—to all of us, I assumed, although having listened to the comments of those who overestimate wind input I realise that either some hon. Members did not read the letter or it did not reach them. He points out that the times that wind capacity in this country can generate power do not coincide with the times of peak demand; therefore if we build 20 per cent. wind capacity, we have to build matching conventional capacity that can be switched on to supplement provision when wind power is not available.

Photo of Stephen Ladyman Stephen Ladyman Labour, South Thanet

I cannot, because other hon. Members want to speak and I have only a few minutes in which to make my key points.

My hon. Friend the Minister and his team have to address the following issue when they are preparing the White Paper. The reason why intervention in the marketplace is necessary is that if we rely solely on a market mechanism, we will not achieve the balanced energy supply that we need. We will be forced into consuming increasing amounts of gas and into becoming net importers of energy—in fact, we became net importers about two weeks ago. Ultimately, we will be forced to buy our energy from Scandinavia and then the countries of the former Soviet Union. That is no way to build a stable energy supply for this country. We must not only keep the nuclear option open, but force it forward.

Everyone seems to forget the health consequences of energy policy. We talk about global warming, but ignore air pollution. The United Nations estimates that 3 million people die each year as a consequence of air pollution caused by burning fossil fuels. The Minister for the Environment estimates that each year 24,000 people in this country die prematurely as a result of the burning of fossil fuels. Every year, the 25 per cent. of our energy production that is currently produced by nuclear generation saves 4,000 lives in this country. If our efforts to build a broad energy portfolio result only in our replacing the 25 per cent. nuclear production with 25 per cent. renewables, we will have made no contribution either to cutting greenhouse gas production or to reducing the huge number of people who die prematurely as a result of inhaling pollutants.

I ask my hon. Friend the Minister to think carefully when he is drawing up the White Paper. Not only must he keep the nuclear door open, but he must kick it down and make sure that we start actively to pursue a nuclear policy. That is right for our energy policy and right for the environment.

Photo of Richard Ottaway Richard Ottaway Conservative, Croydon South 9:33 pm, 22nd October 2002

I declare my interest as a consultant to AEP Energy Services, as set out in the register.

Two dogs have not barked tonight: first, the European Union, and secondly, the role BNFL is playing in market interaction. For the first time, we in this country have a pure market in energy, and the consequences are profound. Since 1998, there has been a 40 per cent. fall in wholesale electricity prices but, tragically, the consumer has not benefited. Ann Robinson, chair of Energywatch, the independent gas and electricity consumer watchdog, said:

XThis long-awaited NETA end of year review fails to answer the questions we have raised about the massive difference between the savings being enjoyed by electricity suppliers as a result of NETA and those being passed on to domestic consumers. The report has done little to alleviate our fears that consumers are being ripped off."

That is the state of play: despite the fall in wholesale electricity prices, the consumer is receiving only about an 8 per cent. reduction.

One of the problems that we face is that, in my judgment, in the vertically integrated players—the generators and the suppliers—there may well be cross-subsidy going on, which is not feeding through to the consumer. I suggest to the Minister that he invite Ofgem to take a much harder look at what the suppliers are doing, particularly the vertically integrated suppliers, and what can be done to generate much more competition between the suppliers so that that can work its way through to the public.

The first dog that is not barking is BNFL. In focusing on British Energy tonight, we are looking at the wrong company. It happens to be the weakest of the companies in the private sector, so it is the first one that hits the stops when the going gets rough in the market. BNFL, owned by the Government, is far more uneconomic. If one draws up a list of the 10 most uneconomic power plants in this country, the five Magnox plants still in operation are Nos. 1, 2, 3, 4 and 5 on that list. That is what is causing the distortions in the market. Under normal circumstances, one would expect those stations to be phased out, but for reasons that we have discussed and for the reason that we have not hit the stops until now, they are being kept open.

Any restructuring of British Energy must take account of the whole market, so the Minister should not be looking just at British Energy—he should be looking at BNFL. If he were to phase out the uneconomic power stations in a sensible way, he would see the price of electricity rising, which would bring the cash back into the market and into the generators, so that alternative forms of energy could be considered, and nuclear and clean coal could become viable options again. However, he must get the price up and get more liquidity and more investment into the market.

The second dog that is not barking tonight is the European Union. I have no doubt that giving state aid to just one company in the market is discriminatory and is distorting the market. I am sure that in the long term that would be in breach of the EU state aid regulations. I appreciate that, in the short term, the Minister is doing the right thing in sorting out the problems, but if there were a long-term package that favoured British Energy against the rest of the market, in my judgment he would fall foul of the EU regulations.

That is not the Minister's fault; he is in a difficult position. He has the White Paper coming up, as well as the shake-out of the market and the problems in the nuclear sector. As other hon. Members have said, the difficulties with gas arise from the fact that from 2006 we will start importing and we do not want excessive reliance on gas. As regards coal, the rules for sulphur and nitrogen emissions will start biting, and unless the Minister can get clean coal technology into place, the coal-fired power stations will run into difficulties, but the market is too low at present, so he cannot get the investment into clean coal technology. As others have commented in respect of renewable energy, the Government will be hard pushed to hit their target of 10 per cent. by 2010. I wish them well in their efforts. The Minister is doing an admirable job in pushing the renewable project as hard as he can, but there are limitations.

Any restructuring must take into account the whole market. My advice to the Minister is to take out the uneconomic plants, let the prices come back up and get the liquidity back into the market.

Photo of Mark Tami Mark Tami Labour, Alyn and Deeside 9:38 pm, 22nd October 2002

Thank you, Mr. Speaker, for giving me the opportunity to speak in the debate this evening. It is a pity that we do not have more time to spend on an issue of such great importance for the country.

The energy review published in February this year was a useful document identifying some of the key challenges facing Britain in the coming years. Identifying the problems is one thing; doing something about them is quite another. We have had reviews, reports and studies in the past, but we have never translated those into a meaningful and structured energy policy for Britain. In the pre-privatisation days, we relied predominantly on large coal-fired stations supported by a strategic nuclear component. I seem to recall that the three new coal-fired power stations that were due to be built by the Central Electricity Generating Board were cancelled directly after privatisation. We have not seen, and nor are we likely to see, the building of another coal-fired power station.

Likewise, nuclear generation enjoyed a turbulent ride through the privatisation process. First, it was to be included in National Power, but the City got cold feet and it was removed. The Magnox power stations were also removed and the rest of the nuclear power industry went to what has subsequently become British Energy. As in the case of coal, the end result is that we have not seen the building of another nuclear station and we are not likely to do so in the foreseeable future. The approach to renewables has perhaps been more consistent. The CEGB and the Scottish generators did not see them as a worthwhile and viable investment, and it is fair to say that the privatised companies have followed suit.

We saw under privatisation an incredible and ultimately unsustainable dash for gas that led to the early closure of many coal-fired power stations that could and should have produced energy for many years to come. That had the terrible effects on the UK coal industry that we have all seen. For the longer term, the dash for gas has had even more damaging effects. A country that rightly prided itself on being self-sufficient in energy production now faces dependency on imported gas in the not-too-distant future. We will be a net importer of gas by 2005. The energy review is not worried about the increased use of imported gas in terms of energy security, but I am not too sure about that. While supply might not be a major problem, we cannot guarantee price, and that must endanger security. The recent changes in gas prices have already had an effect on existing gas-fired stations and on the likelihood of further stations being built.

Where are we now? On the positive side, as many hon. Members have made clear, we have the cheapest electricity for 10 years. We have also made some progress on carbon emissions, although that is a by-product of the increased use of gas rather than part of any concerted plan of action. However, I do not think that we have addressed the major issues that we face today in terms of meeting our energy needs in the years to come and into the middle of the next century, while maintaining our presumably growing commitments on climate change.

The industry is currently geared almost purely by commercial decisions. While that remains the case, I cannot see how we will make a meaningful change in how we produce energy in this country. The energy review rightly calls for an increase of some 20 per cent. by 2020 in the contribution made by renewables. That is a very tall order and I think that it will be unobtainable if we are not prepared to grasp the challenge of greater intervention in the mix of fuel generation. The review rejects that possibility on the ground that it distorts the market, but surely that is the point. It goes on to say that the

Xrole of government should be to monitor the actions of the market participants and only intervene at the last resort."

If we are not prepared to intervene or exert influence, we will recognise what we have done only when it is too late. We will then have to intervene, as we will be at the last resort. If we leave things entirely to the whims of the market, the reality is that nothing will change, or if changes occur, they will be driven purely by price, rather than by any need for diversity or by environmental concerns.

Nuclear power currently accounts for 15 to 20 per cent. of our electricity generation, but that percentage will fall. By 2020, the majority of our nuclear power stations will have closed. We must either be prepared to accept that or to change it. We must face up to the current situation. While nuclear power is not and never has been the cheapest means of energy production, it makes a major contribution to reducing carbon emissions. We must consider nuclear power in a full light and not purely in price terms.

Photo of Robert Key Robert Key Conservative, Salisbury 9:44 pm, 22nd October 2002

The debate has been a wasted opportunity. A pathetic, 19th-century motion was followed by a limp, 20th-century argument from the Liberal Democrats. We should have discussed the future of energy—science and engineering. We want to be involved in nuclear fusion and on the way to the hydrogen revolution. We will get there through science and engineering. We must abandon the country's perception that it is anti-science. It is preposterous to debate energy in an anti-science culture that looks backwards, distrusts science and will not understand the reality.

The proposition that renewable energy is not favoured and is not on an even playing field with other forms of energy is ridiculous. The renewable energy programmes are important and we welcome them, but they would not have a prayer if they did not have free ride on the back of the formerly nationalised electricity systems. We must inject some science, technology, sense and engineering into our debates.

Some of us are convinced that we must have a new generation of nuclear stations, constructed with new technology. I do not mean the old-fashioned, defence-based technology, which, as we all acknowledge, had terrible problems in the past. We want to move beyond that, and I hope that the Government will have the courage to do that.

Will the Minister state that he genuinely wants to support the work in plasma physics at Culham, and to look forward beyond Jet to the ITER programme, which must be the greatest hope for the planet?

Photo of Andrew Stunell Andrew Stunell Shadow Chief Whip (Commons), Shadow Spokesperson (Environment, Food and Rural Affairs), Liberal Democrat Chief Whip, Liberal Democrat Spokesperson (Environment, Food and Rural Affairs) 9:46 pm, 22nd October 2002

The debate has been lively and interactive. There are many points about which I wish to speak, but it is simply not possible to do so.

After six and a half years, we do not have a Government energy policy, and the payment of #650 million to one company constitutes another contradictory bombshell. Other companies are in the queue, holding out their begging bowls.

The Minister produced some good, knockabout stuff, which I enjoyed. I suggest that he speak to my hon. Friend Dr. Pugh, who is desperate for an offshore wind project near his constituency; he has been denied one by the Ministry of Defence.

British Energy is 20 per cent. above the market price. If Conservative Members believe that a 20 per cent. price premium should be paid to keep the company afloat, good luck to them.

On security, more than 20 per cent. capacity above maximum peak demand is available. On diversity, my hon. Friend Dr. Cable referred to the necessary portfolio of technologies. On safety, I point out that a series of nuclear plants have been successfully closed down in good order in the past 10 years. There is no problem about closing down the remainder.

It is important to keep the environmental impact of our energy policy in focus. My hon. Friend the Member for Twickenham made our position clear. If anyone wants more detail, I say for the third time in the Chamber, XPlease buy my book." It deals with the matter in depth.

The #650 million has been wasted. The Energy Saving Trust made it clear that if the money was invested in achieving the 20 per cent. improvement in energy efficiency in the domestic market, we could save the amount of energy that such plants produce.

The Energy Saving Trust has a budget of #28 million rather than #650 million. Much more could and should be done. I tell those people who claim to be in favour of both nuclear and renewable energy that there is a competition for resources in this country. The Government must decide whether to pump the limited money into a failed nuclear giant, renewables or energy efficiency and conservation. It is competition for resources that this argument is blowing to smithereens; this is not about pro and anti-nuclear arguments. The Government have so far failed to explain how high a price they are prepared to pay to keep British Energy alive. How will they be able to justify refusing bids from other firms and other technologies if they have rescued British Energy?

We had 20 minutes of knockabout from the Minister, followed by 10 minutes of evasion and three minutes of departmental brief, but we are still no clearer about where the Government stand on these matters. What is the Government's long-term energy policy?

Photo of Andrew Stunell Andrew Stunell Shadow Chief Whip (Commons), Shadow Spokesperson (Environment, Food and Rural Affairs), Liberal Democrat Chief Whip, Liberal Democrat Spokesperson (Environment, Food and Rural Affairs)

Next week, next year, next decade—who knows?

Our motion poses serious questions not just about British Energy but about Britain's energy in the future, and I urge the House to support it tonight.

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry 9:50 pm, 22nd October 2002

I am delighted to hear that the Liberal Democrat spokesman enjoyed my opening remarks, so I shall give him just one more. We have had an excellent, if all-too-short, debate and contributions from both sides have served the important purpose of feeding serious views on serious subjects into the White Paper process. I would welcome more debates and more dialogue, because they would allow people who really know what they are talking about to contribute to the White Paper.

We have heard a great deal about renewables targets. This matter was summed up for me by a press release issued in Scotland. The Scottish Environment Minister, Ross Finnie, announced that the Scottish Executive were setting a new 40 per cent. target for renewables. Splendid! I have to say that I am slightly allergic to targets. If a target has been set for 20 years hence, for example, that can often be a substitute for the need to do anything for the next 10 years. Anyway, within milliseconds of that statement being made by Mr. Finnie—who, for the benefit of our external audience, is a Liberal Democrat—a press release was issued by the Scottish Liberal Democrat environment spokesperson, a Ms Nora Radcliffe MSP, under the inspiring—inspirational, indeed—headline

XSNP scunnered over green energy challenge".

[Interruption.] I am sorry. Is that word taught in public schools? Do we all know what Xscunnered" means?

Ms Radcliffe went on to say that the main point in support of this 40 per cent. target was that

XThe SNP have clearly been scunnered with this announcement as their own target stands at only 30 % of green energy supplies by 2020."

The comparison with wee boys—or, indeed, wee girls—in a playground making contrasts between their respective anatomies springs to mind here.

I do not want to labour the point, but setting targets achieves nothing. Delivery achieves something, and I hope that the Liberal Democrats will take my remarks to heart, because, instead of being regarded as the party of sustainable energy, as it would wish, it is in some danger of being regarded as the party of unsustainable hypocrisy.

The substance of this debate has been excellent. I fully respect the reasons why the Opposition spokesman has had to leave the House, but I want to answer some of the points that he raised on the nuclear issue. First, Project Blue is nothing sinister. That is not a name that I would have chosen myself, but the use of code words when discussing commercially sensitive information is perfectly normal, and there was no agenda there. The name describes a process of monitoring what was going on in British Energy.

That leads me to the answer to another of the hon. Gentleman's questions. Of course we knew that there were problems with British Energy, and we were monitoring them very closely. It is true that we did not know the full extent of British Energy's problems until the company approached us in early September. When the discussions between two commercial entities—BNFL and British Energy—concluded without delivering the solution that had been widely hoped for, the extent of the difficulties became apparent and the company approached the Government. There is absolute transparency about what we discussed and when we discussed it. I shall be happy to answer further questions if they are asked.

Photo of Andrew Lansley Andrew Lansley Conservative, South Cambridgeshire

I want to avoid confusion. Liberal Democrats assert that British Energy is producing electricity at 20 per cent. above the market price. If past liabilities are not taken into account, is not the marginal cost of production for British Energy's nuclear fleet about 1.8p per kilowatt hour—only slightly above the prevailing market price?

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

The hon. Gentleman makes his own point, which is a perfectly reasonable one.

What is undoubtedly true is that even given the slight swing that has occurred because of the market difficulties with electricity, the wholesale price has risen to a point at which British Energy is presumably operating profitably. I agree with much of what has been said on both sides: decisions that are fundamental to security of supply, and the economic interests of the country cannot be left entirely to the vagaries of a marketplace that can produce such a swing. [Hon. Members: XYour marketplace."] That sounds like an allegation, but my hon. Friend Mr. Robinson has been entirely open. He gave a frank and analytical explanation of why the changes were made. They were made for good reasons, and they have produced many benefits. What we must recognise, however, is that they have not been an unqualified good; they have had other effects, which we must now examine in the spirit of wanting not only a competitive market but of wanting to be sure that the objective of that market—driving down the price of electricity—is not achieved at the cost of security of supply or our environmental obligations. That strikes me as a straightforward proposition, but a complex one to deliver in practice, especially in a liberalised market.

Photo of Malcolm Bruce Malcolm Bruce Liberal Democrat, Gordon

This is a serious point, which is at the heart of the debate. If the market is not the whole answer and there is a strategy, should not the Government make clear which kind of energy they wish to encourage, how they will react to changes in the market, and what their long-term policy is? Without that clarity, we do not know what they are doing. Are they just manipulating the market according to their whim? That is what they have been accused of doing. The Minister really must make their position clear.

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

We are manipulating the market in one sense, through the support we are giving to renewables. Are the Liberal Democrats criticising us for manipulating the market in favour of renewables?

I believe that the #650 million loan to British Energy—I emphasise that it is a loan, and that it is capped—makes sense for the energy industry. Let me say in passing that it also makes sense for the people who work for British Energy. I believe it makes sense for security of supply, but I believe too that it makes sense for the taxpayer. The daftest option, from the taxpayer's point of view, would be to switch off electricity generation by British Energy, surrender the revenue, and at the same time pick up all the costs that would be associated with such action. That, it appears to me, is the sequence of actions that the Liberal Democrats and their associates are recommending, and it is bonkers.

Photo of Mr Paul Marsden Mr Paul Marsden Liberal Democrat, Shrewsbury and Atcham

Is it not shameful that a Labour Minister should defend the nuclear energy industry when he knows as well as I do that it should not be propped up by the Government? We should be giving far more support to the renewable energy industry. The Minister should be ashamed.

Photo of Mr Brian Wilson Mr Brian Wilson Minister of State (Industry and Energy), Department of Trade and Industry

The hon. Gentleman's comments reflect the fact that he arrived in the Chamber two minutes ago. Tell them that in Shrewsbury.

Let me say something about NETA

Photo of Robert Smith Robert Smith Opposition Deputy Chief Whip (Commons)

rose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly, That the original words stand part of the Question:—

The House divided: Ayes 54, Noes 313.

Division number 326 Nuclear Power

Aye: 54 MPs

No: 313 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith, pursuant to Order [17 October] and Standing Order No. 31 (Questions on amendments):—

The House divided: Ayes 293, Noes 52.

Division number 327 Nuclear Power

Aye: 293 MPs

No: 52 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly agreed to.

Mr. Speaker forthwith declared the main Question, as amended, to be agreed to.

Resolved,

That this House welcomes the publication earlier this year of the Performance and Innovation Unit's review of the strategic issues surrounding energy policy for Great Britain up to 2050; welcomes the Government's commitment to publish an Energy White Paper in the New Year setting out a long-term framework for energy policy following its recent extensive and innovative public consultation on energy issues; understands that British Energy's problems, and those of certain other players, are about companies rather than a way of generating electricity and welcomes the speed with which the market can respond to protect the interests of consumers; recognizes that the future of nuclear power in the UK is a question that has to be addressed on its own merits, not in the light of a particular set of circumstances surrounding a particular private sector company; further recognizes that it is not the responsibility of Government to bail out electricity suppliers unless it threatens safety or security of electricity supplies; and welcomes the work Government has done to promote sustainable energy use in terms of energy use reductions and to promote the development of renewable energy. DELEGATED LEGISLATION

Ordered,

That the Countryside (Provisional and Conclusive Maps) (England) Regulations 2002 (S.I., 2002, No. 1710), dated 7th July 2002, be referred to a Standing Committee on Delegated Legislation.—[Mr. Caplin.]