Community Funding (Infrastructure Projects)
Mr Ian Liddell-Grainger (Bridgwater and West Somerset) (Con)
I am delighted to introduce the final debate before the recess. This is the last chance in the parliamentary calendar to highlight an issue that causes concern for my constituents, councillors and colleagues, and, indeed, Members throughout the House.
The plan to build a new nuclear power station at Hinkley Point, just a few miles from Bridgwater, is an enormous and vital undertaking. Hinkley is absolutely vital to the national interest. Without new capacity to generate power, the electricity needs of the entire country simply will not be met. Let us be clear about it: the lights would, unfortunately, go out in the future.
Infrastructure projects on this vast scale are complex and incredibly costly. The work to construct the new plant will involve a huge team of people and a considerable amount of local disruption for decades and beyond. The peace and quiet of Bridgwater and West Somerset are in for a bit of a shock. However hard we try to minimise the effect, and however carefully the company, councils and planners work together—which they have—it will still not be easy to balance everything. The process of making electricity with nuclear reactors may be tried and tested—the risks are always minimised—but the legacy will last for several lifetimes, no matter what we do.
We have heard a great deal about legacy this summer. Building the Olympic park at Stratford was, by comparison, a short-term and relatively cheap venture. Hinkley is considerably more than that. The investment needed is gigantic and it may yet require the collaboration of the deep pockets of the Chinese. I cannot overstress the sheer size of the project. Hinkley is not a five-minute wonder. It will be part of our lives for several generations. It will take at least 10 years to get it up and running and there will be thousands of workers involved. The very face of the area that I represent will be changed for ever by the presence of our new nuclear power station.
I believe that a great deal of good can come our way because of Hinkley, and that nuclear power is the only viable option to bridge the national energy crisis that we will face in the future. People need to feel, however, that they have not been forgotten in all this. Hinkley’s construction must come at a price. We need a real commitment from the Government that community benefits will not be an afterthought.
I want the Minister to address the question of money head on. The current estimated cost of Hinkley is about £10 billion, which has an awful lot of noughts. I would like only a tiny fraction of that sum—just a few million a year—to be made available to help local communities and prove that the Government are genuinely concerned about the legacy of nuclear power stations and major infrastructure projects.
Community benefit is not a radically wild policy; it was a deliberate development to compensate for the changes that enormous projects always bring. It was conceived to enable local people to feel more involved in the developments that affect their lives. We might call it a fair method of cash-back. It also fits perfectly with the coalition’s determination to add a little localism to our lives and gives local communities a bit more say in how vast new schemes, such as Hinkley, should be undertaken.
This formula has been around for 40 years. It started in the Shetland Islands at Sullom Voe, where an oil terminal was planned to deal with the riches being drilled from the North sea. A special Act of Parliament was needed to establish the legal framework that allowed local councils to deliver community benefits. Every barrel of crude oil that has come ashore ever since has involved a payment from the oil companies into a special fund that benefits the area.
That principle has been extended since those days both in Scotland and south of the border. Oil may be yesterday’s news. Today’s fashionable fuel—
Mr Liddell-Grainger
Thank you, Mr Speaker. I am glad that you did not name me.
Today’s fashionable fuel is wind power, although far too much windy rhetoric is spoken about its extremely doubtful benefits. Happily, no developer can get away with bunging up a wind farm without contributing a generous wad of notes to the local community in return. Purists may argue that wind power is entirely carbon-neutral, and that it therefore deserves to be on the list for community benefits.
Nuclear power is seen as a different kettle of fish. I do not accept that argument. Nuclear power does not burn fossil fuel, so it, too, is carbon friendly. Nuclear generators and wind farms both come with legacies. It is dealing with those legacies that community benefits should be about.
I will take Drigg in Copeland as an example. It is a small community on the north-west coast, not far from Sellafield. When the Nuclear Decommissioning Authority wanted to build a containment plant for low-level nuclear waste, it chose Drigg. It also helped to establish a community fund that has benefited the people of Drigg by several million pounds and will continue to do so for many years. What I am getting at is that the principle of large developers dipping deep into their pockets to help the local community has been established for a long time, including for nuclear schemes.
Some might say there is already a mechanism in place that guarantees such help: section 106 of the Town and Country Planning Act 1990. That provision affects all our constituencies. Do not get me wrong—my constituency is very grateful for section 106. I know that my hon. Friend the Member for Suffolk Coastal (Dr Coffey), in whose seat Sizewell sits, feels exactly the same. I am grateful for her support. Section 106 ensures that developers contribute to easing the disruption that their developments cause, but it was never meant to cover anything else. Sedgemoor district council, West Somerset council and Somerset county council have worked successfully with EDF to hammer out a section 106 deal, which was struck just over a week ago. It will involve EDF spending £94 million to help pay for road alterations, housing the work force, training and many other things.
Section 106 was never designed to deal with the long-term legacy. Section 106 agreements must be directly related to the development, and are limited and inflexible. They are capable of addressing only a narrow range of projects. In truth, the entire planning system cannot address the scale, scope and nature of the burden that will be borne by local communities as a result of hosting new nuclear developments. I sincerely hope that the Minister and his colleagues understand that. I believe that they do.
The national infrastructure plan made it crystal clear that a lot more could and should be done in the way of community benefits for new nuclear power proposals. It was published as long ago as November 2011 and promised that the Government would bring forward proposals for nuclear community benefits by 2012. At the start of the year, the Minister’s predecessor said that the Department recognised that nuclear developments had special features that justified going further than section 106 agreements. Nine months later, we are not much the wiser.
It is no secret that a great deal of discussion has been taking place between different Departments, including the Treasury, on how such legacy benefits might be developed, and that is welcome. All the right noises are being made by most of the right people, but we humble souls at the coal face—or in this case the nuclear face—cannot decipher what the muffled sounds mean. This has been going on for the best part of a year and we keep being told to wait for a definitive statement. We are famously patient souls in Somerset, as you well know, Mr Speaker, but I have to tell the Minister that we are beginning to get a bit twitchy, and a little confused, because of how fast the project is moving. The confusion comes because we remain unclear about the Government’s attitude to using a proportion of Hinkley’s business rates to kick-start local community benefit funds. It is obvious that Ministers have different views, but they are also not saying the same things.
The Department for Communities and Local Government wants to let local authorities hang on to some of the business rates because, quite rightly, that demonstrates “localism”—a good coalition buzzword. Theoretically, councils should be able to use business rates to attract enterprise to their area, and if a proportion of those rates goes straight to the council rather than to the Treasury, that is seen as a device to let local governments stand on their own financial feet, which as my hon. Friend the Minister will accept, would save the Treasury a lot of money.
Some of those ideas are enshrined in the Local Government Finance Bill, which is now grinding its way through the parliamentary process. There are limitations, however, of which the most annoying is that if a wind farm receives clearance to put up turbines, the council can retain a chunk of the business rates because wind is supposed to be renewable. Strictly speaking, however, nuclear power is not renewable. It may be essential to produce energy when renewable windmills fail to renew—as I am afraid they frequently do—but we still cannot get at those business rates.
When Hinkley is ready for operation, the rateable value of what it does is likely to be around £10 million a year. Under the current system, that money will go straight to the Treasury, which I believe is unfair on Bridgwater and West Somerset and Somerset councils and their residents. We will have to learn to live with Hinkley, as will our children and grandchildren, and I think we deserve a bit more. At present, however, the rules say that because the energy is not renewable, we do not qualify for business rates. That is not joined-up thinking, and much still needs to do be done.
Even if the Minister announced tonight that a national infrastructure project such as Hinkley should allow local councils to retain a slice of the business rates, there would still be another mess to sort out. The official, “preferred allocation of business rates” appears to have been calculated by someone whom I suspect is locked in one of those Whitehall offices we hear so much about—someone who has never been near Hinkley and has no idea about the local geography of the area I represent.
The formula for allocating business rates is based on where the project is. Hinkley Point is on the coast just inside the boundary of West Somerset district council. Let me, therefore, say a little about West Somerset council. The area is delightfully rural—it is Exmoor; it is beautiful—but much is in the middle of nowhere. The roads are tricky, the population sparse, and the council finds it difficult to make ends meet because of the settlement received from the Government. Everybody knows that the only way to get heavy traffic—or any traffic—in and out of Hinkley is via Bridgwater and the M5. Therefore, although West Somerset district council will suffer some disruption, most will be borne by Sedgemoor district council and Somerset county council.
It does not need a genius to work that out, but when the rules were devised, there seems to have been a shortage of thinking. Thanks to the way the rules are drafted, West Somerset council will qualify for all the cash, and Sedgemoor and Somerset county council will not receive any in mitigation. That is a muddle and I know it is not what was intended. I am sure that the Minister will agree—at least, I hope he will.
Sedgemoor council, Somerset county council and EDF believe that business rates should be split in proper recognition of the effect of the project on all communities in the area. First, however, we need an intelligent rethink about which projects should qualify. The Department for Communities and Local Government conducted a consultation exercise before the rules were established, and spelled out the terms of reference for energy projects. That was meant to prove that only wind power schemes would qualify for business rates, but in fact those terms of reference put nuclear power on top. I will quickly demonstrate that, if I may, by going through the Department’s checklist: creating a diverse energy mix—yes, Hinkley ticks that box; decarbonising our economy—we tick that box; creating energy security—we tick that box; protecting consumers from fossil fuel price fluctuations—we definitely tick that; driving investment and jobs—we tick it again; meeting carbon emissions reductions—yes, we’ve done it; incentivising development for growth—that is seven out of seven. We tick all the boxes.
No wind farm could ever tick all those boxes, no matter how big or how good, and Ministers need to think about that issue. I am puzzled because I know that the Minister, and his predecessor, know that to be the case, and I am grateful for their support.
I confess that I am a little worried about the mixed messages that have been sent. In July, Sedgemoor council received an encouraging letter about business rates from the Minister for Government Policy. It is worth quoting just one sentence of it:
“The design of the business rates retention scheme will ensure that there will be significant outgoing benefits to those authorities hosting low carbon energy infrastructure—not just renewable energy projects.”
At face value that was what we wanted to hear, but barely a month later a Minister in another Department contradicted him.
The clock is ticking. We need decisions, because as the Minister knows, the infrastructure project is in place. I suggest to him that if the business rates are £10 million, we would like about £4 million to be retained in the local community. I realise that would probably cause trouble in the Treasury, but I invite him to come down to Hinkley to meet the local community. He was very helpful in his previous job in the case of Bridgwater college, and I am grateful to him for that. We would welcome him down there and show him exactly what we do. I do not think it is necessary to get another Bill through the House, but we do need meaningful dialogue to ensure that the project works.
The Minister of State, Department of Energy and Climate Change (Mr John Hayes)
I hope to bring energy to energy, and I hope, too, in the weeks and months to come to electrify the House without undue hot air. In that spirit, I welcome the debate and congratulate my hon. Friend the Member for Bridgwater and West Somerset (Mr Liddell-Grainger) on securing it. He will know that Benjamin Disraeli said that, as a general rule, the man with the most information is the most successful man, and my hon. Friend has illustrated tonight that he has the information at his fingertips, which is what makes him such an assiduous and effective representative of the people of his constituency.
As my hon. Friend said, nuclear energy is a vital part of the UK energy mix. Its benefits are significant, but of course there are also significant challenges in hosting new nuclear power stations, particularly, as he said, the impact that that will have on communities. For a community, hosting such a station cannot be achieved without some compromise. However, we agree that the case for new nuclear power being deployed in the UK is compelling.
Alongside the challenges that exist, I want to outline the significant rewards, to which my hon. Friend alluded. They include long-term jobs and sustainable economic growth. The Government see nuclear energy as a vital part of our country’s energy strategy. It provides security of supply and ensures that there is affordable electricity, thanks to its competitiveness with other low-carbon technologies.
Perhaps one ought to say at this point that, although some people assume that we automatically mean renewables when we speak of low-carbon technologies, nuclear power is indeed a low-carbon technology that can help us meet our carbon emission targets. It can be deployed on a large scale and provide continuous supply. For example, the planned nuclear development at Hinkley Point could provide about 6% of the UK’s electricity and power approximately 5 million homes. A new nuclear programme will contribute substantially to the Government’s growth strategy, by providing jobs and skills, bringing investment into the UK through construction supply chains, encouraging local business growth in the vicinity of plants and enhancing the social fabric of surrounding communities.
In our nuclear national planning statement, the Government have designated eight potentially suitable sites for new nuclear development—seven in England and one in Wales—but if the scheme is to be delivered, we must address the issues of community interest and values that my hon. Friend raised. It is my desire—no, it is my mission—that that is delivered. We must turn these plans into action.
The rewards to a community of hosting a large energy infrastructure project are a pressing matter for the House and my Department to consider. The purpose of a community benefits package is to ensure that communities and local authorities have a sense of ownership of a project to build a nuclear power station in their locality. They should feel satisfied that, although the project is primarily of national interest, it brings benefit to local communities. Accordingly, they should engage with developers to share ownership of the project’s success.
In recent years, my Department has extensively consulted local authorities, parish councils, community groups and individual residents affected by all the potential sites that have been identified. That consultation has been followed up with frequent visits, stakeholder meetings and correspondence involving those groups, particularly in my hon. Friend’s constituency, in which, as he said, Hinkley Point C has long been regarded as the most likely site of the first new power station in more than 20 years.
The issue of community benefit is regularly raised during these contacts. Local authorities have naturally taken the lead with the Government, but it is clear to us that in doing so they represent the wider views of community groups, individual residents, and so on. When these matters are raised by hon. Members who combine my hon. Friend’s assiduity and effectiveness, those representations reach their very apex in this mother of Parliaments. We will therefore take very seriously the points that he has made, which I hope to deal with in the few words that I say to the House. Should I not be able to complete my response to him in the fullest form, I will write to him, and of course I accept his invitation to engage with him on these matters more fully. It is absolutely right that Ministers should do so, and his invitation is gratefully received and, I hope, accepted in the spirit in which it is offered.
The Government recognise that each new nuclear power station will be a very large project with significant impacts in small communities. As my hon. Friend made clear, they are generally sited in comparatively isolated rural locations with small populations. Aside from the lengthy construction period, the plant is likely to operate for 60 years and so will affect our children and grandchildren; the impact is generational, as well as significant during the period of construction. Such large projects bring about significant national and local benefits, and there will be significant local economic growth as well. I am therefore grateful for the support from the local authorities and residents, without which there could be delays to the new build programme, adding significant costs to the overall construction process and ultimately leading to an increase consumer prices.
Although the majority of local residents broadly support a new nuclear power station, the Government recognise that there will be concerns in rural communities that are asked to host a large infrastructural projects. That is the sort of thing that I want the opportunity to discuss with my hon. Friend and other interested parties when we take these matters further in the way that he has described.
Let me deal with section 106 agreements, with which my hon. Friend and all Members will be familiar from their own constituency experience. These agreements are used during the planning process to mitigate and compensate for the impact on local communities for the disruption of delivering such infrastructural projects. To put this in perspective, a new nuclear power station will take between seven and nine years to construct. The scale of the construction project is significant; it is one of the largest infrastructural developments planned for the UK.
Let me say at this juncture that when we speak of infrastructural investment and its macro-economic relationship with growth, we often speak of housing and roads, and those matters are quite properly worthy of our consideration, but too rarely do we recognise the highly significant role of energy infrastructure in delivering growth. Perhaps in the past we have punched below our weight in these terms, but no longer. I intend to punch powerfully to make the argument about the macro-economic relationship between the development of these stations and the effect that they have on the wider economy and on the communities affected.
I recognise that there will be considerable disruption during the construction period. There will be a work force of 5,600 people at the height of construction, with heavy traffic and noise from the construction process. Even with the best of intentions and mitigations, that may cause concern. The planning system allows for payments to be made to local communities, to compensate for the disruption to the lives of residents. As my hon. Friend acknowledged, section 106 agreements are legal agreements between local authorities and developers that are used to mitigate such effects. The agreements are locally negotiated and varied to reflect local circumstances, but in the case of infrastructure as substantial as a nuclear power station, there is scope to address the extensive impacts on the community of the kind to which he referred.
EDF’s application for development consent at Hinkley Point sets out a detailed statement of its undertakings under section 106. As my hon. Friend suggested, large sums of money are involved. I am sure that he would join me in welcoming the recent agreement between EDF and the local authority to find appropriate compensation and mitigation through the planning process to allow the project to progress constructively. Of course, £94 million is a large sum of money, and I am sure that it will be spent in a way that benefits all the communities affected by the construction phase of the development.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
The invitation is, of course, extended not only to Somerset, but to Suffolk, where, I hope, Sizewell C will be built at some point. I thank my hon. Friend the Minister for his eloquent description of the restricted uses of section 106 agreements and how community benefit money might be used in a wider context to ensure that all the community benefits, not solely those in a very narrow tunnel, so to speak.
Mr Hayes
I shall deal with both those points. First, of course, I look forward to discussions with my hon. Friend about her local circumstances. Indeed, last evening over coffee, we had a brief initial discussion on that very subject. Secondly, she will know that section 106 agreements are locally negotiated. I hear what she says about the breadth of their effect, which I am prepared to discuss further with her and with my hon. Friend the Member for Bridgwater and West Somerset.
Aside from section 106 agreements, however, which mitigate and compensate the impacts, there are a number of ways in which the community will directly and indirectly benefit from hosting a new power station, such as increased long-term employment and increased spending in the local economy. However, there is also the issue, raised by my hon. Friend, of business rates retention. I am pleased to reassure him that business rates from new nuclear sites will be treated in the same way as growth from other sectors. Therefore, increases in a local authority’s business rates that arise from a new nuclear plant will be retained by the local authority in accordance with the principles set out in the Government’s proposals for business rates retention. It is likely that that will amount to a significant increase in funding for local authorities over the first 10 years of operation.
I do not believe that section 106 agreements are sufficient in themselves to provide a full basis for community benefit; nor do I believe that retaining business rates for 10 years is an adequate reflection of the recognition that a local community deserves for the long time scales involved in its operation. That, of course, affects our judgment on these matters, as my hon. Friend pointed out.
More importantly, section 106 agreements do not address the need to create sustainable economic growth for the long term or look for ways to make the area attractive to other investors and the wider public, which is precisely the argument made by my hon. Friend the Member for Suffolk Coastal (Dr Coffey).
The national infrastructure plan, published in 2011, committed the Government to
“engage with developers and local authorities on community benefit and bring forward proposals by 2012 for reform of the community benefit regime to provide greater certainty for all parties”.
My hon. Friend the Member for Bridgwater and West Somerset said that he was getting twitchy about this. I do not want him to get twitchy, as it would be a most unappealing prospect, so I commit—sooner rather than later, in the terms that he used—to clarify our position on this matter.
Now that I am on this task—missioned to do this job—I can assure my hon. Friend that I will draw the matter into sharp focus, and we will indeed deal with it in the short term. My officials have been working on a number of ways, including business rates retention, in which a community benefit package could be delivered. The principles of such a package are, it seems to me, very clear: meaningful action on behalf of the community; spending decided by the community; fair and equitable practice across all sites—indeed, we have the representatives of two affected communities here this evening—and the intergenerational impacts, which we have referred to.
The broad principle behind the provision of both section 106 agreements and a community benefit package is that this should be directed by the local community to projects that can help to resolve both community and individual impacts that arise from the proposed development, but which cannot be included in a section 106 agreement because they are not judged essential for the project to go ahead. That rather more permissive view of community benefit must lie at the heart of any changes that we make, in line with my hon. Friend’s apposite call for the matter to be dealt with speedily.
The focus should therefore be on planning and investing for the time post-construction to enable long-term sustainable growth through redeployment of labour and creating new business opportunities once the main construction phase is completed. Doing so would help to ease the transition between the sizeable influx of employees, the fluctuation of employment during the lengthy construction period and the more stable and sustained employment associated with the operational phase of the plant. That would enable local businesses better to plan for the future and to provide more certainty for the longer term. It could also allow other infrastructure projects to go ahead, to provide additional long-term jobs for the area, better transport, community facilities and so on.
That brings me to a very important feature of a community benefit package: the right of local communities, principally, to be empowered to determine how to transform themselves, in line with the principles of localism. Localism is dear to my heart. As you know, Mr Speaker, I am an admirer of Joseph Chamberlain, who, of course, framed his career in Birmingham long before he came to this place and became a figure of such national importance. In those days, energy was in the hands of local authorities—a fact rarely mentioned in the House and sometimes forgotten. They not only had responsibility for energy, but gauged the effects of investment in resources on their locales. The sense of ownership that I described was implicit in those arrangements. It is important that we borrow from those days the principle that local communities must feel a profound sense of ownership of major projects. They must never feel that the projects have been imposed on them, regardless of their will or their interests. An imposition of that kind will not happen under this Government; I give the House that absolute assurance.
In Somerset, my Department has constituted a Hinkley strategic development forum, comprising representatives from central Government Departments, the local authorities, the local enterprise partnership, the local chamber of commerce and EDF, to maximise local benefits from the development. Such forums would be a suitable vehicle to help steer plans for the allocation of community benefit. Indeed, we feel that all district councils are working constructively to ensure that the whole area benefits from the development of Hinkley Point C. We are clear that any package needs to be meaningful to the local community and to provide some of the things that I mentioned earlier.
This debate adds further weight to the case for a package that is entirely suitable, well fitted and decided locally, as far as that is possible for a project of this size and national importance. Fairness and equity need to be managed as part of these discussions to ensure that the principles apply not only to each new nuclear site, but to other large infrastructure projects, such as geological disposal facilities.
In conclusion, as my hon. Friend correctly points out, discussions have been ongoing for some time on putting together proposals for a community benefits package that meets all the criteria of being meaningful, making a difference, managing to achieve a sustainable local economy and having a lasting impact for generations, and we are on track to bring forward those proposals by the end of the year; I have this evening already committed to doing that.
I am, however, sympathetic to the points that my hon. Friend raises, and I recognise that ongoing uncertainty for the local community is simply not helpful. I will therefore personally drive forward these negotiations across the Government. I will look to meet the Economic Secretary to the Treasury in the near future to discuss the issue and other important matters of the kind raised by my hon. Friend, relating to investments. We must plan our energy future on the basis of the sort of engagement that he has articulated so powerfully in this short debate. We should be in a position to provide clarity on all these matters sooner rather than later, to use his terms, and so can give the residents of his constituency and others the certainty that they need.
In these matters, clarity is the prerequisite of certainty, and certainty is the prerequisite of the kind of engagement and support that is absolutely necessary if we are to drive forward an energy strategy that has nuclear power at its heart. There has not been an Energy Minister with a greater insight into these things than mine, for I draw experience from a long apprenticeship in local government. I hope that I can bring that insight to our deliberations on this matter and others. I look forward with excitement to further meetings with my hon. Friend and to my visit to Somerset, and I do so very much in the spirit in which he brought these matters to the House tonight. If that is not sufficiently electrifying, regard it as a first step; I will attempt to be still more electrifying as I grow into this role.
Question put and agreed to.