Community Funding (Infrastructure Projects)

Ian Liddell-Grainger Excerpts

Tuesday 18th September 2012 Commons Chamber

[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—

--- Later in debate ---

[Mr Speaker]

I call Mr Ian Liddell-Grainger.

[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.