Lord Jenkin of Roding
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Lord Jenkin of Roding
My Lords, I congratulate the noble Lord, Lord Whitty, on the comprehensiveness of his amendments. When we approached this Bill, I was rather under the impression that there had been so much thinking about the creation of the new independent body, the ONR, and so much discussion about it that allotting most of today’s session to considering it was perhaps a bit excessive. However, having studied his amendments—and no doubt there will be others who will wish to make points—I think that the discussion may well take us until 6 pm, although I hope not.
I approach this from a number of different standpoints. First, I think that I am the only Member of the Committee who took part in the debates on the Nuclear Installations Act 1965. That was a few months after I had been elected to the other place, but I have since reminded myself of the provisions of that Act, which are very comprehensive. They have been amended down the years since then—through the lovely system of LexisNexis, one can get a very good summary of what the Bill originally was and how it has changed with time. Therefore, to take issue with the noble Lord, Lord Whitty, I think that the main licensing provisions of the 1965 Act are still going to be in force and are not repeated in this Bill. It is assumed that the authority, the ONR, will have those licensing provisions. There is a substantial area where people will need to look back. That is the first thing.
Secondly, before I entered Parliament I was an employee of a large chemical company and one of the things that we did was to supply CO2 to the Magnox nuclear power stations to be used as a cooling material— I will refer to that later. I have also been one of those who over recent years have been pressing very hard for this change to the ONR to take place. The case that had been very firmly made to me was that remaining part of the Health and Safety Executive meant that inevitably inspectors on the nuclear regulation side were civil servants and thus bound by Civil Service terms and conditions. In fact, experienced inspectors are very valuable people, much sought after around the world. They have been though a long period of training and have a lot of experience. Sometimes people will say an inspector is not really fully qualified unless he has been doing the job for about 20 years—and that has been said to me by more than one person. Therefore, there was considerable pressure from this part of the HSE, the nuclear regulatory part, to separate. I heard those arguments and paid considerable attention to them. The noble Lord, Lord Oxburgh, may remember that when the Select Committee interviewed Dr Mike Weightman, I raised this point and he was very kind to acknowledge that some of us had indeed been pushing this case fairly hard.
That is how I approach the amendments tabled by the noble Lord, Lord Whitty. He makes some good points but I hope that he will forgive me if I point out that some of his amendments may indeed perhaps not quite be what he intended or envisaged. However, as I make these criticisms, no doubt he will have good answers. To take the amendments in the order in which they appear on the Marshalled List, the first with which I take issue is Amendment 38D. The noble Lord made quite a point about associated sites and of course he is quite right to refer to the issue—it is in Clause 57(1)(a)—but, as he readily acknowledged, his amendment may go deeper and wider than he perhaps intended.
Let me return to my previous point. The distillers company for which I worked produced CO2, originally as part of the process of fermentation but eventually as a chemical process, and supplied it to a large number of different industries, not least, of course, the drinks industry. It would be absurd to regard those distilleries and factories as anything to do with the nuclear industry. Of course, when the material is delivered to the nuclear power station it has to be of nuclear quality, which is, quite rightly, properly regulated—but it is not the site where it is made that is regulated but the material that is delivered. No doubt there are many other examples.
I have recently ceased to be honorary president of the Energy Industries Council, which represents something like 600 firms in the energy supply chain businesses, of which nuclear is clearly one. On the rare occasion I was asked to talk to them, I always made the point that they had to make sure that they were producing materials and products to nuclear standards. This was something that quite a number of the firms found quite difficult to do. Those standards are higher than most other engineering standards, particularly for pieces of equipment, but that does not mean to say that the sites where they are made become nuclear sites. I hope that my noble friend the Minister will feel that it would be quite wrong to expect the ONR to go around inspecting sites where no kind of nuclear hazard could conceivably exist.
On Amendment 38F, I agree with the noble Lord. I do not see why this should not be extended to air transport. There must be occasions when nuclear materials are transported by air, although probably not very many, and clearly that should be within the remit of the ONR. That seems to be a reasonable change, but I have criticisms of some of the other amendments.
Amendment 38N refers to,
“other relevant agencies with responsibilities in the nuclear field”.
It is my impression that the nuclear regulator has always been able to consult and go much further than just consulting, having very detailed arrangements for regulating the interaction between the various bodies. There are long and substantial memoranda of understanding that cover that sort of field. I have made it my business to get a copy of the current memorandum of understanding between the HSE, which was the body that was running what is to be the ONR under this Bill, and the Environment Agency. When I came to print it out, it was 14 pages and contained a number of very important statements. I will not begin to read them all, but the objectives of the memorandum are to,
“facilitate effective and consistent regulation by ensuring that … activities of EA and HSE in relation to nuclear licensed sites are consistent, coordinated and comprehensive … the possibility of conflicting requirements being placed on licensees, or others operating on nuclear sites (collectively referred to as ‘operators’ in this memorandum), is avoided … synergies are exploited and the appropriate balance of precautions is attained”,
and,
“duplication of activity is minimised”,
which is of course very important if you are trying to keep the costs down. Perhaps most important of all is that,
“public confidence in the regulatory system is maintained”.
I shall not read more than that, but the annexe to the memorandum goes into very considerable detail as to how it is to be done. Presumably these will all remain in force. They may have to be signed by different people because the organisations will be different. The one that I have in my hand was signed by the noble Baroness, Lady Young of Old Scone, when she was chairman of the Environment Agency, and by Timothy Walker, the then director-general of the Health and Safety Executive. If there are to be modifications in the memorandum, they will need to be signed by the current people. I hope that my noble friend may be able to address that.
Amendment 40N would not be right. It would risk all sorts of difficulties, duplication and so on. In particular, it would risk classifying a site as licensed before a nuclear site licence is granted. I heard what the noble Lord said about that, but of course there is the elaborate process of the generic design assessment. He referred to Hinkley Point C. That has been absolutely combed over by the existing nuclear regulator. It was a hugely important step forward when it finally gave approval of the design, but the noble Lord is right that there is not a site licence yet. That will be the last stage. To argue that all this should be taken into account without taking account of the whole GDA process seems a little unreal. Therefore, I say yes as regards air transport but I suspect that the other elements may not be quite what the noble Lord, Lord Whitty, intends. I hope that my noble friend may be able to take account of these representations.
Lord O'Neill of Clackmannan
I congratulate my colleague and noble friend on the rigour with which he has approached this area. It is the nature of probing amendments to make sure that what it says on the tin is what the Government are going to do. If we can get it right, we can avoid the kind of problems which I encountered many years ago as a constituency Member. I picked up the local newspaper to be told that the local authority rubbish tip near one of my villages was a nuclear dump. I then had a terrible job trying to find out who was responsible for the nuclear element within it. It transpired that it concerned a lecturer at Stirling University and that all we were really talking about was the lowest of low-level waste coming out of the radiology departments of the local hospitals. For about 20 minutes, it afforded one of the local hysterics an opportunity to parade his anxiety about all things nuclear. However, it also indicated that there is an awful lot of loose talk. Therefore, if at this stage we can make the issue of associated sites clear and explicit, and even if it is a somewhat tortuous process, as I think my noble friend has indicated, that will be important.
We should not lose sight of the fact that, at some stage or another, a lot of low-level waste is gathered together and taken to Drigg, where it is treated. As we say in Scotland, “Many a mickle maks a muckle”. You end up with a whole lot of little bits of radiological and nuclear waste being brought together on a site and being treated. Therefore, it is important that we differentiate between that which is a nuclear site and that which is not.
It is clear that throughout, for example, the generic design assessment process, which looked at the two new forms of reactors that we may well see in the UK, the Environment Agency walked step-by-step with the nuclear agency at the same time. As Lord Jenkins just said, it is important that we make sure that—
Lord Jenkin of Roding
Perhaps I may make one thing clear at the beginning. I have no ‘s’ on the end of my name. There is correspondence in the archive at Cambridge University between my great-grandfather and the great Lord Kelvin. My great-grandfather said to Lord Kelvin, “Mind you, when you take out the patent, you must not spell my name with an ‘s’”.
Lord Jenkin of Roding
My Lords, I must start with an apology. I dealt in my earlier speech with arguments which are much more relevant to the group of amendments to which the noble Lord, Lord Whitty, has just spoken. I sometimes wish that there were a cut and paste facility for Hansard so that the relevant paragraphs could be taken out and inserted at the appropriate place. I will not repeat those arguments as they are on the record, even if they are in the wrong place. I apologise for that and hope that colleagues will forgive me.
However, I must take issue with the noble Lord, Lord Whitty, on Amendments 38G and 38H. I understand his argument that because the ONR will not be, as it were, under DECC but under the DWP, there therefore needs to be a reference to DECC. I ask him to think what the public perception would be of a clause which said that the operations of the ONR had to be “conducted in conjunction” with DECC. One can only imagine the situation that might arise. Supposing there was an argument whereby the ONR was unhappy about certain aspects of a licence for a nuclear installation but DECC was seriously worried about the implications for the country’s security of supply.
To my mind, any suggestion that DECC could lean on the ONR to modify its advice in order to satisfy the DECC requirement would be hugely damaging. For that reason, the noble Lord’s amendment needs to be looked at with great care. As I said earlier, the essence of this part of the Bill is to give the ONR a much greater degree of independence than it has had so far. That is done for a variety of reasons, not least of which is that people should have confidence in its expertise to do what is right to secure the safety of nuclear installations and all who work there and of the public who live near them, without showing fear or favour to any government department. Of course, in the end, somebody has to bid for the money to provide that. That is the role of the DWP and in that sense it is separate from DECC. However, that should not give rise to any possible suspicion that the ONR could come under the influence of DECC. That is my view. I shall be very interested to hear what my noble friend has to say about that.
I have already dealt with the question of collaboration. I am worried that if there is too much, one will get a clouding of who is responsible for what. I would not complain in the least if my noble friend were to agree to the request of the noble Lord, Lord Whitty, for a diagram to be produced before Report showing where the lines of responsibility fall. It seems to me that that would be helpful to the debate. Perhaps eventually it could be made available for public consumption, if that appeared to be appropriate. However, one has to be jolly careful in this area. Some of the issues are dealt with already in other parts of the Bill—I have no doubt that my noble friend will refer to that—or in legislative powers that exist elsewhere. I have again looked through the 1965 Act and some of them are there, surviving as current legislation. As I said, the memorandums of understanding are hugely important. Although they may have to be modified in the light of the passing of the Bill, they should certainly continue to exist.
The question of whether regulators other than the ONR should have powers and responsibilities for the enforcement of regulations is difficult. Already, nuclear operators can be prosecuted by two regulators if they are guilty of offences that offend the legislation of both of them. Again, we have to be very careful not to muddle the lines in any way. I ask my noble friend to look at that matter with some circumspection. The noble Lord, Lord Whitty, has posed a series of important questions, and I, for one, look forward to my noble friend’s reply in due course.
Lord Deben
My Lords, I want to refer particularly to the suggestion that DECC and the DWP should in some sense be brought together in this. I speak as a former Minister for health and safety. I also speak from a family background with a great interest in what happened in the coal industry in South Wales. There is no doubt that one of the problems of the nationalisation of the coal industry was that it was always thought that, because it was a nationalised industry, there was no need to make a real distinction between the industry and the way in which it was policed. In the early days, that was not thought to be important because people had a very high-minded view about what nationalisation meant. I am not going to enter into that discussion but that was what people thought. They felt that if it were nationalised there was no need to have too strong a distinction between the way the whole thing was run because everyone was working particularly for the benefit of the miners as well as for the customers outside. One can perfectly understand the history of what led to that.
However, there is no doubt that as time went on it became more and more clear that you had to be very different. You had to think about the fact that, whatever else was true, management—even management with the highest ideals and attitudes—could not really be responsible for policing itself. You had to be very careful about that. Therefore, increasingly we divided it and made sure that the policing of the system—looking at the mines and making sure that they were safe—was very separate.
As a Minister for health and safety, it always seemed that the most important thing about our regulation was that it showed that the ministry responsible for a particular industry had to be second-guessed right the way up to the Minister. The Minister responsible for health and safety was not the same Minister as the one who was responsible for many of the industries which the Health and Safety Executive policed. I always thought that that was terribly important. Inside the then department of whatever it was, now the Department for Work and Pensions, there was a culture of seeing that as a most important independent difference.
I feel very strongly that there is always a suspicion among the public that the nuclear industry is so powerful and strong that it can lean on Ministers. I remember that the industry used to act like that. When I was Secretary of State for the Environment, I got some pretty offensive interventions by senior people in the nuclear industry because I waited until I had the full reports as to whether I should give planning permission for the test drilling of a deep site for nuclear waste. When I turned that down because the nuclear industry had failed to meet the requirements of the Planning Acts, I cannot tell the Committee how rude, offensive and utterly self-opinionated the industry was because I said, “You haven’t obeyed the law. As the planning Minister”—not the nuclear Minister—“I will not give you planning permission because you have not looked at alternative sites and all kinds of other things”, and I turned it down. That was done by someone who was known to be in favour of nuclear power. However, I felt uncomfortable about the two connections because, as the environment Minister, I had responsibilities which ran across the two.
Lord Jenkin of Roding
Does my noble friend recollect, as I do, the ghastly events of the landslide at Aberfan? With three other Members of Parliament, I was due to go on a visit to the mining industry just after it happened. I remember that we were briefed by Lord Robens, who was then the chairman of the National Coal Board. He was completely shattered by what had happened in Aberfan and he made it a matter of personal responsibility. He went down there, he attended a number of the meetings that were held and he followed it up.
My noble friend has given an example of the kind of thing that can go wrong if you muddle the responsibilities. My noble and learned friend Lord Howe of Aberavon was one of the counsel who took part in the Aberfan case and for him, too, it was one of the most shattering events that he had ever taken part in. Aberfan is a very good example of why one has got to make absolutely certain that these responsibilities are separated.
Lord Deben
I agree with my noble friend about that example. The reason I drew from familial experience was that I was brought up by a father who had pastoral responsibility for one of the mining villages in south Wales. For him, that event was most devastating. Although as a family we were not affected by it, my father was affected by his memories of what he had to do in those kinds of circumstances. I remember vividly his comment that you can never trust to police an industry those for whom the main interest is the industry as a whole. That is not because they are bad men and women, but simply because they would have to wear two different hats, and you should not ask people to wear two different hats. That is why we keep on talking about declarations of interest and so on. We know that however good and sensible you are, it is sometimes quite difficult to remember which hat you are wearing.
Again, I agree with my noble friend—Aberfan remains in one’s heart in a very special way and will be there until the day one dies, even though one was removed from it. That is simply because of the effect it had on people one knew and upon the memories of my father. I feel strongly that we should not allow the lesson that we should have learnt from the coal industry to be forgotten in this industry.
Lord Jenkin of Roding
I am extremely grateful to the noble Lord, Lord Whitty, for his kind remarks about the two amendments which stand in my name. It is very important, when you are setting up a board of this kind, to have a proper balance between executive and non-executive members. We are in an interim position concerning the executive members. The chief inspector, Dr Mike Weightman, retired earlier this year, and that was a considerable loss. He established not only a huge personal relationship but an important overseas relationship with the regulator in this country. There is great admiration from many nuclear countries overseas for our system of regulation, and a succession of chief inspectors, not least Dr Weightman himself, have made a major contribution to that.
Obviously, one has to have a strong chief executive and chief inspector, but it is also very important that one has on the board a mixture of executive and non-executive members. My amendment simply prescribes that:
“At least one non-executive member must have experience of, or expertise in, matters relevant to the ONR’s nuclear safety purposes”.
That is self-evident, but it is not in the Bill. I think that that is the right way to do that.
On the other hand, I do not agree with the amendment of the noble Lord, Lord Whitty, that there should be appointments from the NDA and the other body mentioned. They seem to me to be much too directly involved in the work of the board and of the ONR. They are among the regulated, and that is probably not right. There are a number of experts from academia and elsewhere in industry who could fulfil that role without having to look to the Government’s own bodies to provide people for the board. Under my amendment, at least one of them must have experience in the matters which concern the board. That would strengthen the board and the legislation and add to the public reputation of the ONR and its board.
Baroness Verma
My Lords, again, I am extremely grateful to the noble Lord, Lord Whitty, and my noble friend Lord Jenkin for their amendments prompting this debate.
Amendment 38W increases the number of non-executive directors on the ONR board from seven to eight, and Amendment 38X makes a corresponding change. These amendments would result in the ONR’s board having a maximum membership of 12, which is quite large for a relatively small organisation. Amendments 38W and 38X accommodate Amendment 40A of the noble Lord, Lord Whitty, which empowers the Secretary of State to appoint an executive member nominated by the Environment Agency or a member nominated by the Nuclear Decommissioning Authority. Although I fully appreciate the importance of the ONR having a strong working relationship with other regulators and relevant bodies, including the Environment Agency and the Nuclear Decommissioning Authority, such relationships are already in place and we expect them to continue when the ONR becomes a statutory body. The Bill does not prevent persons recommended by those organisations being appointed as non-executives, so I do not feel that the amendments are needed. Consequently, it is not my view that Amendments 38W, 38X and 40A are required.
Amendment 38Y sets out some areas of expertise that the Secretary of State might consider when appointing a non-executive. Nuclear matters, governance, health and safety, and employment are all areas where an ONR non-executive could have expertise, but they are not the only ones. We also need to look at areas such as finance, audit and project management, which are crucial to the effective and efficient operation of any organisation and should not be dismissed.
I do not believe that the legislation should limit the skills that a non-executive can bring to the ONR or fetter the Secretary of State’s ability to make appointments. Nor do I think that persons without a background in such matters are incapable of bringing valuable skills and experience to the ONR. On that basis, I do not believe that Amendment 38Y is required.
Amendment 40B would remove the power of the ONR to pay non-executive members, except for the HSE member, a pension or gratuity. This power helps to enable the ONR to draw upon the widest pool of suitably qualified people as prospective non-executives. It is especially relevant for those with an extensive range of relevant skills and expertise who have reached or are approaching retirement age. Such sums that the ONR might decide to pay must be approved by the Secretary of State, so there will be suitable checks on the ONR’s spending on this front. On that basis, I do not believe that Amendment 40B is desirable.
I now turn to the amendments tabled by my noble friend Lord Jenkin. These concern the expertise and experience held by the ONR’s non-executive directors in the areas of nuclear safety and nuclear security. Amendment 39 is designed to enable more than one non-executive director with security experience or expertise to be appointed to the ONR board, and Amendment 40 requires at least one non-executive to have experience relating to the ONR’s safety purposes.
As drafted, the legislation gives the ONR a skills-based board, ensuring that there is a balance of individuals with the necessary experience and expertise to provide strong governance to a modern regulator. To ensure that the ONR’s security interests are carried out in the context of wider national security policies, the legislation makes it a requirement for the board to have one non-executive director with relevant security experience. The legislation also enables more than one such non-executive to be appointed by the Secretary of State. I therefore reassure my noble friend that the current wording of the Bill does not limit the ONR board to simply one member with security experience or expertise, and on that basis I hope that he recognises that Amendment 39 is not required.
Nuclear safety expertise on the ONR board will be provided, at the very minimum, by the chief nuclear inspector, who will be an executive member. Further executive or non-executive members with nuclear safety experience can be appointed if it is felt necessary. I agree wholeheartedly with my noble friend that in the former chief nuclear inspector, Mike Weightman, we had an excellent, world-class inspector who was globally recognised, particularly given the work that he did post-Fukushima. Due to him, we have strengthened our reputation across the globe as a lead inspectorate. Tribute must be paid to Mike Weightman. His eight years of service have been highly appreciated by us all.
The ONR is an organisation whose role is predominately concerned with safety. The Government are confident that the ONR board will, without specific provision in the Bill, include individuals with the experience and expertise to provide governance in this area. Thus, experience of safety issues will be held not necessarily in one individual but across a number of members, who will bring with them a range of expertise. Therefore, I do not believe that Amendment 40 is required.
I shall just touch on the question asked by the noble Lord, Lord Whitty, concerning the presence of a member from the unions. The ONR board will be a skills-based board rather than being made up of representatives of particular stakeholders. I reassure the noble Lord that the board will not be minus just the trade unions; industry representatives will not be on it either.
I hope that the noble Lord, Lord Whitty, and my noble friend Lord Jenkin have found my explanation reassuring and that they will agree to withdraw their amendments.
Lord Jenkin of Roding
My amendment has of course not been moved so I cannot withdraw it, as I am sure that my noble friend realises. I may study her remarks quite carefully, together with the advice that I have been taking on these matters. I hope that I will not need to return to this on Report, but the advice I had was that people felt pretty strongly that there had to be one non-executive director with experience in the area of the ONR. I am not quite sure whether the Bill gives them the power to do that. We hope that it should be firmly written into the Bill that they must, but I have not moved the amendment so I cannot withdraw it.
Lord Whitty
My Lords, I am somewhat disappointed by the Minister’s reply, but I should first apologise to the Committee that I did not refer in my opening remarks to the last three amendments in this group, which deal with cross-appointments. They would not be compulsory, but the Secretary of State should have the option of appointing people from other bodies with a role within the nuclear industry. It would be helpful to have something like that in the Bill, as co-ordination between agencies is aided by having non-executive directors who cross-represent. We do too little of it and, as a result, we have turf wars and misunderstandings between agencies. I could bore the Committee with some of those from my experience as a non-executive director of two such agencies and as a Minister. I agree that the Secretary of State should not be bound to do this, but the Bill should at least point him in that direction and I am disappointed that the Minister does not accept that.
On the point about pensions, this was a probing amendment. Very few regulators pay pensions to their board members. It is all part of the market rate for nuclear-trained and qualified people. I will not say any more about that in that case, as it is fine, but it is slightly odd to have that in legislation.
On the central question about the make-up of the board, it seems to me that the board, including the non-executives, must represent the best traditions in health and safety governance. That means that they have to have a high level of expertise and knowledge of the law, and of the technical and scientific areas, in which they operate. I am therefore a bit surprised that the Minister is not prepared to accept something like the amendment of the noble Lord, Lord Jenkin. It also means that the success of the Health and Safety Executive over 40 years—it has been a great success, since it has brought down the level of injuries, deaths and dangerous practices across the board in industry—has in part depended on it being seen as a collaborative effort.
The symbolism, and usually the reality, of that was that at the top level there were people representing the unions as well as the Government. Clearly, the Government still accept that view of the make-up of the HSE board even though they do not want to consult the TUC about it. Their advertisement for the board of the HSE, which I briefly considered, makes that clear.
It seems wrong that we should depart from that culture for the creation of something which is taking on responsibilities such as those of the ONR in a sector where collaboration and understanding between management and unions—and their ability to have a coherent approach to the management of risk on a daily basis—is so important, because the results of not so doing could be utterly catastrophic. The Government will regret not putting that structure in. Depending on the judgment of future Secretaries of State, they may regret not explicitly saying that they want one of the non-executive members to,
“have experience of … nuclear safety”.
It is not sufficient to say that that will be provided by the executive directors. The whole point of non-executive directors is that they can, on equal terms, discuss these issues with the executive directors. In terms of representation, it may not have the structured or corporate state kind of formal representation that was there in the origins of the HSE, although I regret the passage of that. In reality, they ought to have been able to reproduce the culture of the Health and Safety Executive at top level, and they ought to have on the board people who have experience of the main areas which are the responsibility of the ONR.
I think that it is unfortunate that the Government do not reflect that in the legislation. It is one of the things we may return to. If the Bill goes through in this form, I hope that the judgments of future Secretaries of State, whichever department is responsible, will take these things into account anyway. It would be better, frankly, if it were in legislation. That would set the tone and nature of the organisation. In the mean time, I beg leave to withdraw my amendment at this stage.
Lord Whitty
My Lords, the Committee will be relieved to know that Amendment 40C is the lead amendment in the final group for today. This group deals with aspects of the financial structure of the ONR. I am not sure that even the totality of 60 pages of regulations and another 60-odd pages of schedules makes this subject clear to me.
Amendment 40C is pretty straightforward. I cannot see in the reporting mechanism, although I am sure that this would be the fact in practice, that the report that the ONR has to give to the Secretary of State, and that the Secretary of State gives to Parliament, must include a fully audited set of accounts. That seems fairly straightforward. If it is there somewhere else in the Bill, I will withdraw, but it seems helpful to put it in the formal reporting structures.
Amendment 40D deals with borrowing. It is a probing amendment. I do not, in principle, object to the ONR being able to borrow, but it is not a provision that we find very frequently in the powers of regulators. We know that there has been some indication that the amount of public funding that the Government will give to the ONR—directly out of the taxpayers’ pocket, as it were—will be £35 million a year, I think, potentially rising to £80 million. It is a fairly hefty whack and a very important contribution.
The ability to borrow over and above that, and the ability to charge fees, is pretty unusual in a regulator. Can the Minister give us some indication of what she expects the total expenditure to be, not just the taxpayers’ and the fee income, but the total expenditure, roughly, of the ONR in its early years of operation? How much of that does she expect will need to be raised through borrowing? This is quite a delicate area. I am sure there are some public bodies that can borrow but, generally speaking, not regulators.
In the nuclear sector, speakers on previous amendments have emphasised the absolute necessity of the ONR being independent. There is a wider issue of conflict of interest over whom it would borrow from and what obligations that borrowing would provide. It is presumably not helpful if the ONR borrows from the industry it intends to regulate or anybody with connections to it. If we go ahead with an ability to borrow, there should be some pretty explicit restrictions on it. If the provision simply means that the ONR can borrow from the public works system of loans from the Government, we probably should say so. If it goes outside that, issues do arise.
This is not only an industry issue; security and safeguard issues are also involved. Would we want it to borrow from overseas sources? Probably not in most cases. In a subsequent clause we allow the ONR to operate overseas, but should it be able to borrow money to do so? Again, who will it borrow the money from to regulate or help regulate someone else’s nuclear sector? I am suspicious about this. My amendments would delete the lot but I am willing to listen to something short of that. Before we finish with the Bill, the Government need to be cautious about this and make explicit what powers we are giving it, what the limitations are and what the money is for.
On Amendment 40G, Clause 34 allows the ONR to charge fees. However, it is not clear on what basis those fees will be charged. In general, the Treasury would require regulators to charge fees based on full-cost recovery. Is that the principle on which the ONR is to operate? It is not quite the principle on which the HSE operates, but it is moving towards it. It is, broadly speaking, the principle on which the Environment Agency operates and it would be useful to know on what basis it is to charge fees to the industry and to whom in the industry it is to charge fees. Is it simply the operators of the nuclear sites and installations, or is the whole of the supply chain feeding into that operation to be charged fees as well?
Clause 79 allows the ONR to provide services to anyone, more or less, provided it has the consent of the Secretary of State. Presumably that includes overseas. In principle, it may be okay to provide the expertise of ONR staff in areas for which the ONR is not responsible—which, as I read it, Clause 79(2) to (5) allows—but that seems a bit odd. If the expertise and services it is providing are not in the areas for which the ONR was set up, you could have all sorts of odd operations. A top nuclear inspector in his spare time may also be an expert in karate or in almost any area. On the basis of this clause, the ONR could hire out its services under the label of ONR. More likely, you could get the ONR running an engineering consultancy service, a scientific and technical service or a metric measuring service using its expertise, but not in the areas for which it is responsible.
If we are going to do that, we will be creating a somewhat different beast—a beast that can diversify. As we find with quasi-public bodies that diversify, if that side concern turns into a seriously commercial money-making concern, it can distort the priorities and the nature of the organisation as well as create areas for conflicts of interest.
I hope these wide and bland powers to provide services to almost anyone will be looked at again by the Government, and that clarification will be given, if not in legislation then at least in the guidance, on how the ONR board and management will eventually operate. I beg to move.
Lord Jenkin of Roding
My Lords, I have doubts about two amendments in this group. On Amendment 40G, I am told that full cost recovery always takes place. However, you have a potential position whereby a licensee who needs to be properly regulated may be in financial difficulties and unable to pay the charges that he would otherwise have to. It may be a rare occurrence but, given that they attempt a full cost recovery at the moment, there needs to be a possibility that some essential services may not be paid for on the spot by the licensee because they do not have the money. I would be very interested to hear any other arguments.
I am unhappier about Amendment 40K. This point has been raised with me by the Nuclear Industry Association, which feels that it would be greatly to the advantage of the UK generally and the ONR in particular to be able to develop and make the best use of its expertise in markets not just in this country. The effect of eliminating subsections (4) to (9) of Clause 79 would be to reduce the ONR to its absolutely core activities. There is quite a strong feeling that that would not be to everybody’s advantage.
My noble friend referred to the effect of the Fukushima disaster and the great tsunami there, and I said earlier that it greatly enhanced the reputation of regulation in this country because of the work of Dr Weightman—but it goes wider than that. The supply chain for the nuclear industry is very much concerned with spreading its activities abroad to increase overseas earnings, and here, too, the ONR could provide valuable services and should not be prevented by the Bill from doing so. Of course, it will always be concerned primarily with its regulatory duties in this country, but it has the expertise, and will develop increasing expertise, to provide wider services and perhaps earn some money for itself and for this country. So I would be unhappy to see the elimination of those four subsections.
On the question of the account of what the total money might be, I await with interest the answer from my noble friend.
Lord Deben
My Lords, I wanted to build for one moment on what my noble friend Lord Jenkin has said and take it to a further degree. This House should be very careful about restricting a body that we have been careful to construct. There is a terrible habit in your Lordships’ House, of which there was a good example today when somebody got up and said to the Minister, “What are you doing about Egypt?”—as if we were doing anything about Egypt, or as if we should always do something about everything. It is about time that we realised that there are a lot of things in this world that we are not likely to do anything about at all. One thing that we should not do is to do things about things about which we cannot at this moment know anything whatever.
We have no idea how this organisation will develop. We have some suggestions, which my noble friend Lord Jenkin has put forward, which may represent some of the routes. But here is the idea that we should be so frightened that we should write down now what this organisation may or may not do, when it has been carefully built, with a whole lot of non-executive directors and all sorts of restrictions as to the nature of the people who run it. I find that one of the problems of government. I would prefer the organisation to be in the position of doing rather too much or doing something wrong than not being able to do what it needed to do, or what came to it, or to take up opportunities that might arise. We have to be a bit freer on this. There is a kind of determination to control that we should resist. I would much prefer this organisation to be sensibly built and then left to get on with it. So I hope that we resist any suggestion that, at this moment, we should decide what this organisation should do in two or three years’ time, or indeed in five or six or 10 or 11 years. It is much better to leave it as it is, and I hope that my noble friend will resist any such proposal.
Baroness Verma
I am extremely grateful that the noble Lord ended on his last note, because I consider everything extremely carefully, but I agree with my noble friends Lord Deben and Lord Jenkin that we must not be so restrictive on what the ONR could do to enhance its standing in the world. I would like to address the amendments of the noble Lord, Lord Whitty, as they are grouped, so that I can clarify for him the reason why we are taking the position that we are.
Amendment 40C would require that the ONR’s accounts are presented to the Secretary of State and laid before Parliament at the same time as the annual report. The noble Lord, Lord Whitty, asked whether the accounts would be made available. Accounts are already required to be audited and laid before Parliament under paragraph 21 of Schedule 7, and, in practice, the accounts and the annual report will be published together. I hope that that answers the noble Lord’s question on reporting and laying before Parliament.
Amendment 40D would remove the ONR’s powers to borrow. This is not an element of the Bill that it is intended that the ONR would use frequently, and it can be used only with the Secretary of State’s approval. It is certainly not a blank cheque, but there may be instances where the ONR’s work may require extra funding in the short term to achieve a long-term goal, and in this instance I believe that the ONR’s power to borrow money, with appropriate checks and balances, is suitable for an independent public body.
Amendment 40G, on the other hand, would seek to require the ONR to recover the full costs of an inquiry. Laudable though the intention is, we cannot always guarantee that full cost recovery will be appropriate. The costs of some inquiries may not be fully attributable to one or even a group of duty holders. We would not wish unfairly to add extra charges to business for costs not incurred by them.
I am grateful to the noble Lord for tabling Amendment 40K. It would remove provision in Clause 79 for the ONR, with Secretary of State approval, to provide services related to its expertise but not part of its purposes. My noble friend Lord Jenkin eloquently articulated how important the provision is, because of the specialist knowledge that ONR possesses, if resource were available, to, for example, assist another country with assessing the safety of a new reactor design. Under the Bill, ONR could charge for such work, including at a commercial rate. The provision of such advice would have real benefits—not just financially, but, as my noble friend said, by helping to spread the UK’s high standards of practice internationally and giving ONR inspectors wider experience.
Let me be clear: the ONR’s first priority will be to meet its obligations as the UK’s nuclear regulator. Nothing will allow us to detract from this. My noble friend Lord Deben is right; we must allow the ONR to get on with its core activities. To ensure that there are no actual or perceived conflicts of interests, any commercial work which the ONR undertakes will be only with the consent of the Secretary of State. For those reasons, I hope that the noble Lord will withdraw his amendment.
Lord Jenkin of Roding
Before my noble friend sits down I hope I may be allowed to say how much we owe to the noble Lord, Lord Whitty, for enabling us to have debated a large number of matters during the course of the afternoon. As I said earlier, I had my doubts about whether we would take the time. We will stop just half an hour short and are most grateful to him.
Lord Whitty
Flabbergasted as I am, I thank the noble Lord and others who are saying, “Hear, hear!” I wondered if we could get through a full day when I started on this process, because, in principle, we agree with the Government’s broad strategy and we certainly want an ONR which is effective, independent, vibrant and innovative. Anything I have said is not intended to restrict that. I am grateful to the noble Baroness for pointing me to paragraph 21 of Schedule 7 about the annual accounts. It would be helpful to have them all in one place, but nevertheless this seems to cover the point.
On full recovery of costs, there will be situations in which regulators cannot do that. They usually have to explain why to the Treasury, certainly if it is done on any systematic basis. There will be exceptions, but I think that the Government have said they will be pursuing the principle of full recovery of costs. I am not therefore pursuing the argument that this needs to be in legislation. At least we have a clear answer that that is the principle and that fees and costs will be covered plus the Secretary of State’s allocation of grant in aid—or whatever we call it these days.
That might still leave a gap which presumably is intended by the borrowing provisions here. As my noble friend Lord O’Neill says, I have proposed deletion, not to say that I am utterly opposed to borrowing powers, but to see to what degree the Government are likely to use them. The Minister has pretty much indicated that they would not use them that often, but they are there. Given that they are there, I think that in some capacity or another, the Government—it could be the Secretary of State in guidance, or whatever—need to be pretty careful of what kind of borrowing the ONR engage in, because this gets into the area of conflict of interest.
This also applies to my amendments in relation to what services the ONR can sell. Because my deletions would still leave subsections (1) and (2) of the clause, which allow the ONR to sell services anywhere in the world which relate to its areas of purpose—that is, nuclear safety in the widest sense—all the objectives of selling services to other states that are interested in developing nuclear power would be allowable, even if my full deletion was accepted. I am worried about a provision that says we can also sell services to anyone anywhere that are not related to our purpose. That seems to allow for a money-making venture which is not really related to the role of the ONR.
At the end of the day, through all of this, we have to remember that the ONR is a regulator. As a regulator it has to be cleaner than clean. It has to have clear sources of operation; clear standards to which it operates; clear standards for the qualification of its staff; and—yes—some limitations on what those staff and the organisation can do. To retain a genuinely world-class regulator in a very difficult and delicate field, we need to be careful not to allow any loopholes which allow a conflict of interest to be claimed, even if it is not for real. I am a bit suspicious about the issue of selling services. I think the Government should reflect on it. For now, I am happy to complete this stage—only 20 minutes in advance, regrettably—and beg leave to withdraw my amendment.