Amendment 1

Nuclear Energy (Financing) Bill - Report – in the House of Lords at 3:20 pm on 24th March 2022.

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Lord Oates:

Moved by Lord Oates

1: Clause 2, page 2, line 14, leave out from “project” to end and insert “will result in value for money, as evidenced by the publication of the Value for Money assessments conducted to date.”Member’s explanatory statement This amendment would require the Secretary of State to provide stronger evidence that the project will result in value for money through publication of such assessments carried out to date.

Photo of Lord Oates Lord Oates Liberal Democrat Lords Spokesperson (Energy and Climate Change)

My Lords, I shall speak to all the amendments in this group. They deal with value for money for the taxpayer and for bill payers, the impact on consumer bills of the regulated asset base charge, and the final amendment relates to excluding those on universal credit and other legacy benefits from such impacts.

Amendment 1 requires that the Secretary of State is of the opinion that designating a nuclear company will result in value for money, as evidenced by the publication of the value-for-money assessment. In this sense, it is about both value for money and transparency, which we will also touch on in later groups. We want to know not just that such a designation will result in value for money but on what basis that decision has been arrived at. We know from the history of the nuclear industry that promises about costs have rarely been kept and that finances have been opaque, to say the least. If there was one advantage of energy sector privatisation, it was that the costs which had previously been fairly buried in the accounts of the Central Electricity Generating Board became much clearer. That is a significant part of the reason why nuclear power ceased to be attractive, because it was clear that it did not offer value for money either for the taxpayer or for the consumer.

As my noble friend Lord Foster said when he spoke to this amendment in Committee, the Government have said already that they are going to conduct a value-for-money assessment. All we are asking is that that assessment is published as part of the process of the Minister being clear that it is his position that the designation would represent value for money. In Committee, the Minister notably failed to give any such commitment that the value-for-money assessment would be published, so I ask him to tell the House directly in his response whether the Government will publish that assessment. If he does, he will satisfy many of our concerns on this matter. If he does not, he will simply confirm our belief that the result of the Bill will be that the public are going to be landed with eye-wateringly expensive power generation which does not offer value for money and for which they will be forced to pay on their bills in advance.

Amendments 3 and 10 deal with the impact on consumer bills. Amendment 3 requires the Secretary of State to be of the opinion that designating a nuclear power company will not have a significant and material impact on consumer bills and to lay a report before Parliament setting out the reasons and evidence for that opinion. Again, this is about both the protection of the consumer and transparency over decision-making.

Amendment 10 seeks to exclude recipients of universal credit and legacy benefits from the regulated asset base charge, and I am grateful for the support of the noble Lord, Lord McNicol of West Kilbride, and the noble Baroness, Lady Bennett of Manor Castle, on this amendment. It would guarantee in law that the most financially vulnerable in our country do not see an additional increase in their energy bills to finance the exorbitant costs of nuclear power generation. The most indefensible part of the Bill is that the cost of nuclear generation and the way the RAB charges work would have a disproportionate impact on those who are already struggling to pay their bills. With the energy price cap already set to increase by 54% and with further increases very possible, indeed likely, in the autumn, this is no time to place further burdens on those least able to meet them, as the Bill does. On the Liberal Democrat Benches, we believe that we have an absolute duty to protect those least able to meet these costs at such a difficult time.

As finance expert Martin Lewis has said, the financial strain on families is already the worst he has known. He describes the increase in energy bills as a

“fiscal punch in the face”, and adds:

“I am out of tools to help people now … It’s not something money management can fix … we need political intervention.”

But what we have in this Bill is political intervention to make the situation worse. Reports from the Joseph Rowntree Foundation have added that the case for support

“to help people on the lowest incomes could not be clearer”— so why are we doing the opposite? As we all know, the number of people in fuel poverty is increasing at alarming rates; it is estimated that it will have tripled in the space of two years.

Citizens Advice finds that 55% of universal credit claimants are already going without basic essentials. The Government are proposing to increase benefits by just 3.1% at a time when inflation is forecast to peak at 8% to 9%. Many, including the CBI, believe that peak may be sustained over a significant period. This Bill would exacerbate the problem even further. Amendment 10 would at the very least make sure that the most financially vulnerable people in our country are not forced to bear further costs on their energy bills as a result of this unfair policy.

Photo of Viscount Hanworth Viscount Hanworth Labour

My Lords, I wish to speak to Amendment 1. The noble Lord, Lord Howell, disposed of the previous version of this amendment most effectively in an eloquent speech in Committee, yet the Liberal Democrats persist in asking for an unequivocal value-for-money assessment of any project to build a new nuclear power station. It is not clear on what basis such an assessment should be made.

They may be inspired by the expectation that an assessment conducted according to commercial accountancy would cast doubt on the economic benefits of building new nuclear power stations. It has been pointed out to them that such a valuation would entail the commercial cost of capital funds, which are available from the financial sector only at an exorbitant rate of interest. It is precisely for the purpose of overcoming this impediment that the financial device of a regulated asset base, which is what this Bill advocates, has been devised.

Commercial accountancy—if that is what the Liberal Democrats have in mind—would be a most inappropriate means of assessing the value of investment in social and economic infrastructure that would provide us with a carbon-free source of electricity for the long term. Not only will this electricity be making a vital contribution to our climate change agenda but it will serve to sustain our industries in the absence of fossil fuels. Surely the Liberal Democrats should support such objectives.

The Liberal Democrats have been enjoined to tell us how they envisage that we might satisfy these objectives in the absence of the secure and reliable supply of electricity that would be provided by nuclear power stations. They have failed to do so. They have failed to tell us how the problems of the insecurity and intermittence of the supply of electricity could be addressed if it were dependent on the wind, the sun and imports from abroad. We must assume, in the absence of any declaration from them, that this is what they envisage. The truth is that they have failed to address the logistics of the energy supply in a meaningful way.

The value of renewable sources of power must be assessed not only on the costs of what they are able to produce but on the costs of what they fail to produce. At times when this power is not available, other sources must be found. In the absence of a baseload of electricity, they are liable to become exorbitantly expensive when there is a dearth in power. Wind and solar power will not satisfy the demand for a greatly increased supply of electricity, which must arise if our industries and our transport are to relinquish fossil fuels. The renewable sources of power would serve to satisfy the demands only of a wholly deindustrialised and socially immiserated version of the United Kingdom.

Photo of Lord Howell of Guildford Lord Howell of Guildford Conservative 3:30 pm, 24th March 2022

My Lords, I rise to oppose this amendment. It is not that I am out of sympathy with the concerns and motives behind it; I am all for any moves that create a more explicit explanation of the real, full value of modern nuclear power and the way in which it is developing. Nevertheless, I oppose the amendment because, if you are talking about value for money, it is wildly unrealistic and out of touch with reality, as the noble Viscount, Lord Hanworth, rightly indicated.

Let us certainly have a good argument about value, but what is the value, first, of national security? What is the value of building up a large chunk of our electricity power for low-carbon reliability in the future when, although we all want to see more wind and sun and so on in the package, we know that any part of a complex energy system can go down or be disrupted at any time? There has to be diversity and a large block of reliable, low-carbon power from modern nuclear, with full provision for taking care of the difficult problems of waste which we discussed in Committee, and all the rest. But there is a value in the national security of having a large section of our power coming from nuclear, ready to come in—at a cost, yes—when the wind does not blow, when there are interruptions in oil or gas supplies, and all the rest, as we are experiencing now, when prices go crazy, when LNG, the frozen gas on which we rely, is beckoned by higher bids from China and turns away from us.

What on earth is the value of having this provision? What is the value of diversity in our system, in having conserved the system which we have now which, alas, is grossly overconcentrated either on renewables, which can go down occasionally, or on gas? We were never meant to have as much gas in our electricity production as we have now. When I was looking after these matters a long time ago—and I should declare my registered interest on that—1% of British electricity came from gas, and Sir Denis Rooke, the then chairman of British Gas, was very opposed to an increase. Now it has gone to the other, mad extreme: we are now at 45% to 50%, and when gas problems go badly wrong internationally, as they have, and we have a sevenfold increase in the gas price, we are hit directly through our gas and electricity prices. So the case for a large chunk of renewable energy through nuclear increases by the day, particularly now that we may get an acceptance that nuclear electricity is green electricity and is approved under ESG rules and so on.

I put it to our Liberal Democrat friends that they must face the issue that there is a value—yes—but it cannot be put into money, because it has to be measured in terms of security, diversity, back-up for wind when the wind does not blow, hydrogen production and a variety of other things. There must be some realism in the stance of great political parties in addressing this issue: that is all I plead for. Therefore, I think this amendment is unrelated to the real needs of our security and our national prosperity, and to the whole helping of the poorest and the most vulnerable in society in the future. It cannot be the right amendment to make.

Photo of Viscount Trenchard Viscount Trenchard Conservative

My Lords, as acknowledged by the noble Lord, Lord Oates, Amendment 1 was debated in Committee. And, as acknowledged by the noble Viscount, Lord Hanworth, just now, I also thought that my noble friend Lord Howell explained very well, both in Committee and today, that value for money is totally subjective. The judgments that have to be made will, of course, take account of the financial plans for projects. I thought that the noble Baroness, Lady Worthington, was spot on in referring to Switzerland, whose electricity grid depends almost entirely on hydro and nuclear. It is hard to put a price on the huge value that energy security gives that country.

Amendment 3, in the names of the noble Lords, Lord Oates and Lord Stunell, is unnecessary, because the Secretary of State will clearly consider this point in assessing any applicant company under the designation process. Furthermore, Ofgem is bound to protect consumer interests as part of the consultation process. I recognise that electricity bills are already rising exponentially, and I expressed concern in Committee that payments under the RAB model will further increase the subsidies that consumers are required to pay. The solution here is to reduce the subsidies paid to renewables projects, to provide a more even balance between support for those sectors and support for the nuclear sector, which has been left out in the cold until very recently.

As for Amendment 10, in the name of the noble Lord, Lord Oates, and others, I fear that the costs of administering such a complicated exemption would far outweigh any possible benefits to the particular groups of people concerned. Besides, there are other groups facing difficulty in meeting higher electricity bills, such as pensioners, who are seriously disadvantaged by the suspension of the triple lock. The best way to assist the people whom noble Lords who put their names to this amendment seek to assist is to enable a stable, well-funded energy mix, including a significant amount of nuclear, both large gigawatt plants and smaller, more flexible SMRs and AMRs. On the latter, the Government are trying to reinvent the wheel and are moving much too slowly in the case of JAEA’s HTGR technology, which has been operating for 10 years and is inherently safe.

I hope that the Prime Minister’s much greater enthusiasm for nuclear, revealed in recent weeks, will lead to rapid changes to the very cautious current plans of BEIS, in three phases, merely to establish a demonstration by the early 2030s. We need this technology yesterday, and we should be rolling it out commercially before the end of the decade. The Times reported last week that Ministers are exploring the creation of a state-owned nuclear company that would take stakes in future nuclear projects, to reduce our reliance on foreign energy. That is very welcome. What a pity it is that such a company was not in existence before Hitachi made the decision to cancel the Horizon project in September 2020.

Photo of Baroness Bennett of Manor Castle Baroness Bennett of Manor Castle Green

My Lords, I speak in favour of Amendments 1 and 3 in the name of the noble Lord, Lord Oates, and in favour of Amendment 10, also in his name and to which I have attached my name.

Speaking for the first time on Report on the Bill, I am getting something of a sense of déjà vu. I do not know whether the ministerial Front Bench has brought its snacks this time, but it can sit and watch the show as we see enthusiasm from both Labour and Tory Benches for new nuclear power.

It is interesting to go back to the Explanatory Notes. The policy background that explains the purpose of this Bill is

“a clean energy system that is reliable and affordable for energy consumers”.

These three amendments particularly address that last point—although the comments of the noble Lord, Lord Howell, on reliability were also interesting. The words that he used were interesting: “decentralised”, “security” and “stability”. Why put all your eggs in a few large baskets rather than into an extremely decentralised system of renewables, storage and, particularly, energy conservation? That is a genuinely diverse and secure supply. Ask the Japanese about what happened after Fukushima, and they will tell you that, if nuclear goes wrong, you can lose the lot—and then you have a very large problem, as the Japanese did.

With regard to security and affordability, there is an interesting letter in the Financial Times this morning, headed:

“Arguing for more nuclear power was wrong then too”, from Andrew Warren, chair of the British Energy Efficiency Federation, in Cambridge. It picks up my point that the cleanest, greenest energy that you can possibly have is the energy you do not use. It also comes to the point about value for money and the argument that new nuclear is essential. Mr Warren says that

“back in 2006, when the then Labour government … committed to a ‘family’ of further nuclear power stations”, it was on the basis that our usage of electricity was going to go up enormously and therefore we needed new nuclear power stations, which of course did not happen. The letter points out:

UK electricity consumption has in fact gone down by over 15 per cent since 2006. In other words, all that expectation of demand growth which was used to justify new nuclear power stations was grossly exaggerated … by over 30 per cent.”

As Mr Warren notes,

“no new nuclear power stations have been added to the system. The system hasn’t collapsed, and it’s also far less carbon intensive.”

I can imagine that many noble Lords might say at this point, “Well, yes, but we have to electrify transport and home heating”. However, if—to use a word associated with the Prime Minister—we went gung-ho on energy efficiency and a modal shift to walking, cycling and public transport instead of private cars, we could greatly reduce the kind of assumptions that are made. The policy background suggests that the UK electricity supply will need to double and low-carbon sources quadruple by 2050. If we build a different kind of society that needs less power, that is an extremely cost-effective way forward.

To come back to cost effectiveness, I have looked at some figures on this. The Nuclear Industry Association has suggested that the proposed new nuclear plants at Sizewell, Wylfa and Bradwell could come in at £60 per megawatt hour. We have just seen, in the most recent offshore wind projects selected for round 3 of the contract for difference allocations, strike prices as low as £39.65 per megawatt hour. The noble Viscount, Lord Trenchard, referred to concerns about green subsidies. These do not need subsidies because they are cheaper than any other source of power. That is offshore wind, without even coming to the fact that onshore wind, which I am delighted to see the Government now moving towards, is much cheaper again, as indeed is solar.

Of course there is Hinkley Point C, with a £92.50 contract. The nuclear industry says, “Oh, it will all get better eventually”. It is confident about the £60 figure—and we know how confidence about the cost of nuclear power has worked out in the past—and that over the long term it will eventually get to £40, which is what offshore wind is delivering now.

I particularly want to address Amendment 10, as the noble Lord, Lord Oates, did so effectively in introducing this group, to which I have attached my name, and to look at where we are with fuel poverty. From 1 April, 27% of UK households are expected to be in fuel poverty—and that is a watered-down definition of fuel poverty—so that is 6.3 million households. Each year around 10,000 people die prematurely as a result of cold homes. Again with regard to the policy landscape, if we insulated those homes, those people would not die prematurely. It is interesting that the charity National Energy Action notes that this seems to be within the bounds of some perverse statistical acceptability; we just accept it as being normal and continue to go on as we are.

I want to address the point about the Government’s levelling-up agenda and look at some of the figures for fuel poverty that will be in place from 1 April. The Bushbury South and Low Hill area of Wolverhampton will have an 88% rate of fuel poverty. The Washwood Heath area of Birmingham, Castle and Priory ward in Dudley and the Shelton area of Stoke, will have more than 80% of households in fuel poverty. Areas of Rochdale, Leeds, Sheffield and Derby will have just below 80% of households in fuel poverty. We are talking about adding significantly to the cost of those bills through nuclear power when cheaper alternatives are available.

I entirely agree with the noble Viscount, Lord Trenchard, on bringing back the triple lock to pensions, but it was his Government who took it away. By focusing on universal credit, we are not reaching everybody who will be in a worse situation because of nuclear power, but we would at least reach a very significant group of people and, because of universal credit, a significant number of children through Amendment 10.

Finally, another question to address was raised by the noble Viscount, Lord Hanworth. He suggested that the Liberal Democrats were not interested in sustaining our industry, but if our industry is competing with a world that has gone for far cheaper renewables, and our industry is relying on expensive new nuclear power, then that is not the way to sustain our industries.

Photo of Baroness Worthington Baroness Worthington Crossbench 3:45 pm, 24th March 2022

My Lords, I shall speak to this group of amendments, particularly Amendment 1, moved by the noble Lord, Lord Oates. As I said in Committee, I have some sympathy with the greater transparency of the assessment of the value for money of new nuclear, partly because it will prove once and for all that there is a very strong case for pursuing reinvestment in our nuclear capabilities at every scale, whether the large-scale reactors that we are considering at Sizewell and Hinckley Point, or the SMRs, which I hope will be pursued with a considerable increase in speed as we address our needs for secure, affordable and zero-emission electricity.

As noted by the noble Baroness, Lady Bennett, we will be seeing a greater need for electricity. We will, I hope, see a huge increase in energy efficiency as we move to electric vehicles, because they are inherently more efficient than the combustion engine fuel supply chain, but there will be a greater load on the grid so we will need vastly more electricity, even as we get more efficient. We need a varied set of technologies providing power reliably and with resilience throughout the year. Nuclear can clearly play an excellent role alongside greater increases in solar, wind and other forms of renewable electricity. There is no need for these to be seen as competing; they complement each other very well.

I suspect that the Minister will reply that it is not necessary and that there will be information in the public domain about the choice. The noble Lord, Lord Howell, made a very compelling case for how difficult it would be to provide a full value-for-money assessment when such things as national security are so hard to translate into a sum of money. As we noted in Committee, there are countries much less concerned by the terrible events in Ukraine because of the nature of their electricity supply. It is right and proper that the UK should pursue the Bill—that we get on with it and see money flowing in the sector, which has been very stop-start. If we get this going, can sustain our interest and not do stop-start, the value for money will increase. The Bill is all about making these investments less costly for the taxpayer and the consumer and I support it. I am sympathetic to the amendment, but I do not support it.

Photo of Lord Stunell Lord Stunell Liberal Democrat

My Lords, there were a couple of paper tigers dancing around in the Chamber today. I will deal with one of them straightaway. We are not unique in this Chamber in thinking that it is a good idea to do a value-for-money study on these projects. In Clause 2(3)(b), one of the criteria for designation is that

“the Secretary of State is of the opinion that designating the nuclear company in relation to the project is likely to result in value for money.”

Given that the Government themselves believe it is appropriate to have a value for money study, those who think we have somehow dreamt up something totally unfeasible, ridiculous and stupid need to address their remarks to the author of the clause, not the authors of the amendment. The two amendments actually say two things, the first of which is that we believe the Secretary of State thinking it likely to result in value for money is not a sufficiently high level of evidence. It needs to be that it

“will result in value for money”.

I would express that as being the difference between “the balance of probabilities” in a civil case and “beyond reasonable doubt” in a criminal case. Basically, we want a better than 50% chance that the value for money guess comes out right. I do not think that unreasonable or contrary to the spirit of value for money, as Governments ought to be exercising it when spending public money. That needs to be considered quite carefully by those who think that value for money is somehow a Liberal Democrat evil which has been conjured out of nowhere.

The second of our Amendments says that when that has been done it should be published. My noble friend Lord Oates drew on examples in the nuclear industry in the past 60 years of evidence and material being gathered and kept very, very quiet. Of course, eventually it all comes out, if only in the decommissioning costs or from the actual unit cost of producing the electricity, which nobody can any longer avoid. The first generation was built on the basis that the electricity would be so cheap we would not need to have electricity meters. We tend to forget that those kinds of claims were ever made, but they were never supported by evidence because the evidence was never published at a relevant time when it could have affected the decisions being made.

The two amendments the Liberal Democrats have put into play are based on making sure that the Secretary of State does a proper value for money exercise and that they base their decision not just on the balance of probabilities—“If we’re lucky it’ll be all right; if we’re unlucky, well there we go”—but with some reasonable level of certainty that the exercise has produced the right result. Making it transparent and putting it on the public record is a good way of making sure that those who make a professional evaluation of value for money are well aware that what they put into their report will be in the public eye and open to challenge and discussion.

If only that had been the case with previous generations of nuclear generation decision-making, we would have got a better outcome. I do not mean that there would be no nuclear plants built, but we would have perhaps avoided what the noble Baroness, Lady Bloomfield, speaking on behalf of the Government, complained about in relation to the decommissioning process. The noble Baroness, Lady Worthington, said that it is necessary to avoid “gold-plating” decommissioning costs

“that deliver millions of pounds to contractors unnecessarily”.—[GC 434.]">Official Report, 8/3/22; col. GC 434.]

I thought those were powerful words. She was talking about decommissioning costs, but should we not be doing the same with commissioning costs? What can be wrong with testing that out?

Also, value for money is not something that can be assessed anyway, because there are impenetrable questions which make valuing the outcome completely unfeasible. When one looks at the value for money of any project, there are two issues. The first is the actual cost of the project. Have the costs been realistically assessed and are they properly built into the estimates being presented? For generation after generation of nuclear plants, it has been perfectly obvious that the cost of building them has not been correctly assessed. Indeed, that is true of the plants currently under construction.

The second thing that needs to be quantified is the nature of the rewards that one gets from the project when it has been built. What are they? The rewards from a nuclear plant consist of the electrical output and the security factor. The noble Lord, Lord Howell, made an excellent contribution on that topic in Committee, the essence of which he repeated just now. I do not reach quite the conclusion that he did, but I will say how I think we might best analyse it.

We know that at the moment, the electricity that will be produced will be at least 50% more expensive than if it came from offshore wind power, for example. The noble Baroness, Lady Bennett, gave some of the figures. This plant will not come on stream for another 15 years. We do not know what the unit cost of offshore wind will be in 15 years’ time but, if you follow the graph, it is reasonable to suppose that it will be quite a lot cheaper than it is now. So it is a competition where nuclear starts 50% ahead; it will probably be more like 70% ahead when it comes online. I am setting aside any consideration of whether any allowance should be made for decommissioning costs.

Then, we get to the security argument: what happens when the wind does not blow? Well, we have a strike price that is nearly double that of offshore wind. It is therefore obviously a premium product. It is not something you would indulge in unless you could see a substantial value that was related not to its electrical output but to something else. The carbon reduction is real and not to be neglected but, of course, other renewables—certainly offshore wind, solar and onshore wind—have those carbon savings. It is a matter of debate whether they provide more or fewer savings per gigawatt than nuclear but, as I understand it, nobody is really saying that other renewables would not deliver the same carbon savings. So security of supply is the point in play. For me, the exam question, therefore, is this: can we get that security of supply in any other way that is cheaper and faster, with less or no impact on the RAB figures, which consumers will have to pay at the end of the day?

By coincidence, yesterday morning, I attended a presentation given by National Grid. It was asked some quite poky questions about whether it thought that the national grid would have the resilience for all the electrical power that will be demanded to flow through the system. Its answer was surprisingly upbeat. It said that it would be relaxed about the grid’s capacity if, for instance, there were 15 million or 20 million electric-powered vehicles dispersed widely throughout the United Kingdom, and, incidentally, concentrated in the places where electrical demand is greatest, such as the south-east of England. It sees the grid as a fundamental element of the storage of power to cover the times when it is needed. It did say, however, that there will have to be additional investment by the distributive network organisations, or DNOs, to reinforce the local distribution grid.

As the noble Baroness, Lady Bennett, has pointed out, doing some proper retrofitting and demand reduction in the domestic sector, never mind the industrial and commercial sectors, will also produce dividends. We should not forget that we have a project of nuclear expenditure which is costing something like £3 billion a year per plant at present. If the question is: could we get more bang for our buck by spending that £3 billion on a mixture of reinforcing the local distribution grid, accelerating the rate of transformation for electric vehicles and investing in demand reduction in the domestic, commercial and industrial sectors, the answer is probably yes. But, let us face it, that needs proper study.

I say to the noble Lord, Lord Howell, that although it is unconventional thinking that we should perhaps not produce as much as we used to and stop warming up the sky with our leaky houses, that is the way we ought to be going if we were rational. I hope that sets out my reply to the noble Lord and other critics who perhaps express their view less elegantly than he does.

So what is the answer? If we are to take seriously the reduction of the burden on the poorest households from the cost of the energy that they use, surely we ought to give very careful consideration to Amendment 10. Whatever the merits of this nuclear programme, it will, as it stands, increase the burden on them, when some of us certainly believe that the alternative strategy which I have just set out, in only the sketchiest form, would save that burden being placed on them and result in an altogether much more satisfactory energy mix.

That is exactly what Amendment 10 does, so I hope that noble Lords will stop trying to shoot down value-for-money studies because the Government want one and understand that making it transparent means that it is more likely to be honest. I hope they will support the view that we ought to be protecting the poorest against fuel poverty, and support Amendment 10.

Photo of Lord McNicol of West Kilbride Lord McNicol of West Kilbride Deputy Chairman of Committees 4:00 pm, 24th March 2022

My Lords, this Bill is about finance as much as it is about nuclear power. Labour believes that new nuclear has an important supporting role to play in the energy mix, alongside the decisive shift to renewables needed to deliver the climate transition and low-carbon energy and secure our energy for the future. As set out by the Climate Change Committee, we need all the low-carbon sources at our disposal to deliver that rapid and fair transition.

The fundamental point is: if we are to build new nuclear power stations, how are we to fund them? Labour supports the building of them for a number of reasons. Nuclear energy is the only proven technology which can supply low-carbon baseload electricity at scale. At a time when we face a global climate crisis, the further rolling out of nuclear energy will also play a crucial role in the UK meeting its climate targets.

I am grateful to the noble Lord, Lord Oates, for tabling Amendments 1, 3 and 10 in this group and was pleased to add my name to Amendment 10, following the extension of the scope into legacy benefits. We are in agreement on the importance of achieving value for money but, given the Government’s track record on their use of taxpayers’ money, it is no surprise that many noble Lords want to see stronger requirements in the Bill. Amendments 3 and 10 bring us to the core issues here: the impact of the RAB model on consumer bills and the practical impact on people on very low incomes.

For weeks the Government have been promising meaningful action to help people across the country through the ever-worsening cost of living crisis. Try as the Government might to blame rising inflation, energy bills and Ukraine, the OBR’s stark warning about living standards shows that the problem faced by many is an issue around the British economy. In meetings over recent weeks, we have been told that protecting claimants of universal credit and other social security benefits is simply too difficult, particularly as we are talking about saving only £1 or £2 a week, but in these circumstances £1 or £2 a week will be critical for many families and households.

However, yesterday’s Spring Statement did nothing to support pensioners and benefit claimants and we must consider Amendment 10 against that backdrop. If we had faith that the most vulnerable in society would be protected, there would have been no need for the noble Lord, Lord Oates, to table this amendment. In less than two weeks’ time, pensions and other social security payments will be cut in real terms. People are already having to choose between heating and eating.

We support the use of the RAB model to finance new nuclear projects and we very much hope that having a more reliable energy baseline will make costs more predictable. However, it is our duty to look at those who are disproportionally impacted by this decision. We have only to look at the newspaper headlines this morning about the deepest cost of living crisis since the 1950s. On that basis, we hope that the noble Lord, Lord Oates, will test the opinion of the House when we come to Amendment 10 and that MPs will have the opportunity to debate this important matter.

Photo of Lord Callanan Lord Callanan Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

I thank all noble Lords who have contributed to the debate. There was a certain element of déjà vu about it from the discussions in Committee. In particular, the noble Baroness, Lady Bennett, rehearsed her well-documented and faintly nonsensical views. She will be pleased to know that I will resist the temptation to tackle them again as we did in Committee, not least because it was done fairly expertly by my noble friends Lord Howell and Lord Trenchard, the noble Baroness, Lady Worthington, and the noble Viscount, Lord Hanworth, who made some very good points. If I would leave her with one word in response it would be “intermittency”, which is the key argument against her point.

Starting with Amendments 1 and 3, I remind noble Lords that designation is only one step in a rigorous process to ensure that a potential nuclear RAB project is sufficiently scrutinised, evaluated and subject to all relevant approvals prior to a final investment decision. As discussed in Committee, we have set out a transparent designation process which requires the Secretary of State, at the point of designation, to be of the opinion that designation is likely to result in value for money. This process requires the Secretary of State to draft reasons for designation and to consult on those reasons with consultees as set out in the Bill. Importantly, as my noble friend Lord Trenchard reminded us, they will include Ofgem, which, as per its principal objective to protect the interests of existing and future consumers, will ensure that consumer impacts are fully considered at the point of designation.

I reassure noble Lords that the Bill requires the final designation notice to be made publicly available. It will include the reasons for designation, which will incorporate details of the value-for-money assessment made to support the designation decision. We would expect that a value-for-money assessment at this stage would consider the potential impact of designation on consumers, using all relevant information available at the time.

However, as per my previous comment, designation is only one of a number of approvals that will mature our understanding of a project’s costs, alongside intensive negotiations. I feel therefore that Amendment 3, tabled by the noble Lords, Lord Oates and Lord Stunell, perhaps comes too prematurely in the overall process of approving a project to receive the benefit of the RAB funding model.

It is important that we retain our flexibility in how we negotiate with different project companies that are designated for the purposes of the RAB model. We can therefore commit that, at the point of directing a revenue collection counterparty to offer to enter into a revenue collection contract with a designated nuclear company, the Secretary of State will publish a value-for-money assessment of the project and its impact on consumers, along with all the appropriate documentation, save for information which the Secretary of State considers would be likely to prejudice someone’s commercial interests or would be contrary to the interests of national security. I can confirm that this would mean that value-for-money considerations would be published at two key points in the approval process: both when designating a project company in its final designation notice, as I outlined previously, and once the outcome of negotiations and market engagement have been reflected in project costs. I am not sure that even two value-for-money assessments would convince the Liberal Democrats of the value of this, but nevertheless I am prepared to give it a go.

On Amendment 10, I will begin by slightly correcting the figures used by the noble Lord, Lord McNicol. I value the noble Lord’s support for the principles of the Bill and Labour’s support for new nuclear. I think that the noble Lord used the figures of £1 to £2 per week for this model. Our estimate is closer to £1 per month. This will obviously depend on the negotiations, but it is not quite as drastic as the noble Lord implied.

I understand and share the desire from noble Lords to protect vulnerable consumers. Of course, we all want to do that. The Government agree on the importance of supporting low-income households, particularly at this time of high energy prices. I will remind noble Lords of the commitments which we have made to supporting households to meet the costs of energy bills. This includes the energy bills rebate scheme, worth a total of £9.1 billion and covering a £150 non-repayable rebate for households in England in council tax bands A to D, as well as an additional £144 million of discretionary funding for billing authorities to support households that are in need but do not meet the council tax criteria. This is in addition to the actions we are taking through the warm homes discount, cold weather payments and the household support fund, which the Chancellor announced yesterday will be doubled to £1 billion from April this year. All of these are aimed at providing immediate support for vulnerable households.

Over the longer term, we are helping to lower energy prices by supporting increases in energy efficiency through the energy company obligation, the sustainable warmth programme, the local authority delivery scheme and the home upgrade grant. I know that the noble Baroness, Lady Bennett, does not want to be reminded of this, but the Government are spending considerable funds, of up to £6.6 billion in this Parliament, on energy efficiency schemes. To that extent, I agree with the noble Baroness that energy efficiency is a good thing to do, and indeed we are doing it. Noble Lords will see from this programme that the Government take the support of low-income households at this time incredibly seriously. However, it is our strong view that this challenge is best tackled holistically.

On the specifics of Amendment 10, as my noble friend Lord Trenchard said, the RAB model charges suppliers rather than consumers. The amendment means that suppliers could be required to pay their full share of the RAB charges but not pass the cost down to consumers on universal credit. Suppliers would be very unlikely to meet those costs themselves. Instead, they would most likely spread the additional charge among other consumers who are not exempt, placing addition burden on, for example, low-income households and those who were not on benefits. The amendment would also create a substantial administrative burden, as suppliers would need to accurately identify and verify benefits recipients—information which could be difficult for them to access. Again, it is likely that they would choose to pass the administrative costs of this on to other consumers, including other vulnerable groups, such as pensioners.

I also have concerns about the compatibility of the amendment with a scheme which, if implemented, could last for many decades over the life of nuclear projects. For instance, the amendment specifically references universal credit and “any legacy benefits”, and it is likely that alternative benefits will be brought forward during this period. Referring to universal credit on the face of the Bill would result in updates to the legislation being needed whenever changes to the existing benefits system were made. I hope that noble Lords will accept that this would clearly be impractical.

Ultimately, it is expected that the overall RAB charge will make up only a very small proportion of overall energy costs for consumers, which are largely driven by volatile global fossil fuel prices. The Government’s policy is to consider holistically the impact of all cost drivers of energy bills, and to develop plans to support households in the light of these. If, however, circumstances arose in which it was considered that the burden of charges to contribute to nuclear RAB projects was felt to be too great, the Secretary of State could also, if considered appropriate, include provision in revenue regulations under the Bill to exempt part or all of a supplier’s obligation to pay RAB charges, for example based on the consumer base.

Although I have set out our strong support for a holistic approach to supporting households in meeting the cost of energy bills, I can commit to the House that, as part of the statutory consultation required on the revenue regulations, we will explore further the arguments for introducing such an exemption, and whether the administrative arrangements required to give effect to this would be considered proportionate and appropriate. Placing the requirement in primary legislation would prevent us giving the proper careful thought that any such proposal would properly deserve.

I thank noble Lords for their consideration of these matters, and I want them to know that their concerns have been heard. I therefore hope that, with the reassurance I have been able to provide that the Government are taking the necessary steps to deal with the concerns behind their amendments, noble Lords will feel able not to press Amendments 1, 3 and 10.

Photo of Lord Oates Lord Oates Liberal Democrat Lords Spokesperson (Energy and Climate Change) 4:15 pm, 24th March 2022

My Lords, I am grateful to all noble Lords who took part in the debate. I thank the Minister for his response. The issue of value for money, as my noble friend Lord Stunell pointed out, is a central part of the Bill. All we are asking is that the value-for-money assessments the Government rely on are published. I am pleased that the Minister said that they will be published, albeit not at the stage we would wish them to be. That is some progress at least, but it puts the slightly bizarre argument that this is not an issue for amendment in that context.

Regarding universal credit, the Minister said that it would be administratively difficult because the electricity suppliers are charged the RAB charge and would have to pass it on to consumers. It would, of course, potentially be possible for the Government to exclude the relevant amount for universal credit and other legacy benefit users. It would also be possible and open for the Government, if they wanted to, to assess whatever the RAB charge is and give that as an additional benefit to those people. But the essential issue is that we cannot put further burdens on people who are already suffering enormously with the cost of energy and cost-of-living increases. This has to be solved. I am sure it is not beyond the Minister and his colleagues, if he says that there are technical problems with putting universal credit or other legacy benefits into the Bill, to correct that when it goes back to the Commons and bring forward an amendment that they think would work.

Overall, we have to take some action to protect these very vulnerable consumers. I think we can all agree on that and I hope the House will support the amendment when we come to it. As I said to the Minister, I am grateful on the issue of value-for-money assessments. I am sorry he could not go further on the impact on consumers’ bills as a whole. We really need more transparency on that.

Finally, I say to the noble Viscount, Lord Hanworth, that I am absolutely delighted by his interest in Liberal Democrat policy. Knowing his deep and clear affection for the Liberal Democrats, as shown in these debates, I am surprised that he has not already read our excellent policy paper Tackling the Climate Emergency, which sets out in comprehensive detail, as only a Liberal Democrat policy paper can, how to decarbonise the grid without the need for new nuclear. However, if by any chance he has not had the chance, I would be very happy to send it to him. With that, I beg leave to withdraw Amendment 1.

Amendment 1 withdrawn.