Nuclear Energy (Financing) Bill

Lord McNicol of West Kilbride Excerpts

Report stage
Thursday 24th March 2022 Lords Chamber

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

[Lord McNicol of West Kilbride (Lab)]

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

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

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

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

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

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

--- Later in debate ---

Moved by

[Lord McNicol of West Kilbride]

2: Clause 2, page 2, line 14, at end insert—
“(c) the nuclear company is not owned, wholly or in part, by a foreign power or entity listed in regulations made under section (Barring of certain foreign powers or entities from involvement in UK civil nuclear projects).”Member’s explanatory statement
This amendment makes clear that a company may not be designated by the Secretary of State if it is owned, wholly or in part, by a foreign power or entity specified in regulations laid by the Secretary of State.

[Lord McNicol of West Kilbride (Lab)]

My Lords, I shall speak also to Amendment 6 in this group.

Amendment 2

“makes clear that a company may not be designated by the Secretary of State if it is owned, wholly or in part, by a foreign power or entity specified in regulations laid by the Secretary of State.”

In Grand Committee, my noble friend Lady Wilcox of Newport very ably, in my Covid absence, introduced two Labour amendments that would have severely restricted foreign involvement in the UK’s civil nuclear industry. During the course of that debate, she suggested that if the Government were sympathetic to the arguments but uneasy with the mechanism, they could come forward with an alternative. In responding, the Minister confirmed this. These adapted amendments following Committee take on board the considerations that we debated and, although weakening the original amendments, retain their essence.

It is with that in mind that I hope the Minister will consider Amendments 2 and 6 favourably. They now provide alternatives—rather than banning foreign involvement completely, they would require the Secretary of State to establish and maintain a list of foreign powers and entities that are barred from involvement in UK nuclear projects. This feels both proportionate and reasonable. As we see it, the list would operate in a similar manner to the financial action task force’s list of high-risk countries for money laundering, which is part of our domestic law via regularly updated SIs.

The amendments do not specify criteria for including states or entities on the list; it could be national security, but the Secretary of State could also choose to bar a company that has a questionable track record in other respects—be it a poor delivery record or safety concerns. It may be that the department wishes to bar the involvement of some individuals or entities currently subject to sanctions but who may not necessarily still be on the sanctions list at the time of a future designation.

The Minister told us in Committee that this was an interesting idea and that the department would study it closely. We are grateful that he made BEIS officials available to us for discussion on this and other topics last week, but that meeting took place just hours before the deadline for tabling government amendments, and final agreement could not be reached. The Minister knows we are supportive of the Bill, but our general support should not diminish the importance of our concerns. The feeling of colleagues in Grand Committee and in private discussions since has been that the protections under the National Security and Investment Act 2021 are not sufficient in this area. We feel that Amendments 2 and 6 offer a sensible way forward, building on a system already used by other departments—Her Majesty’s Treasury, for example—and familiar to financial and other institutions across the country.

Should the amendments be accepted, I am sure the department will be free to address any drafting deficiencies, but we on these Benches believe that this is an important point of principle and will test the opinion of the House if the Minister does not accept Amendment 2. With that, I beg to move.

[Lord Vaux of Harrowden (CB)]

My Lords, I speak to Amendments 4, 7 and 8 in this group in my name, but, before I do that, I will quickly say that I also support Amendments 2 and 6, in the name of the noble Lord, Lord McNicol of West Kilbride. In Committee, I said I was unable to support his amendments because I felt that a blanket ban on foreign state involvement in our nuclear programme went much too far, so I am delighted that he has now found a more flexible formulation, which would enable the Secretary of State to decide who should be barred from the nuclear programme.

The amendments in my name are intended to cover a similar point, but perhaps more widely and slightly more flexibly. Last week, we spent a lot of time discussing the importance of being able to identify the ultimate beneficial owners of property in the UK. It seems to me considerably more important that we should always be certain of the identity of any party that may be able to exercise significant control over a nuclear company, either directly or indirectly, and that we should be able to take action to prevent undesirable parties, should they attempt to obtain significant control of a nuclear company. My amendments simply seek to achieve that.

As I mentioned in Committee, it was ruled out of scope when I tried to introduce an amendment that would have allowed the Secretary of State to revoke the licence of a nuclear company if an undesirable party obtained significant control. My amendments here are restricted to the designation under the Bill, but the comments I am about to make apply every bit as much to the licensing regime, and I ask the Minister to keep that in mind.

I have revised my amendments from Committee so that my three amendments now introduce a regime for designated nuclear companies that is similar to that which applies to persons with significant control of UK companies. They further give the Secretary of State the ability—not the obligation—to revoke the designation of a nuclear company either where the Secretary of State is not satisfied that the identity of a party with significant control has been verified, or if a party later obtains significant control and the Secretary of State is not satisfied that they are a fit and proper party to own or control a company.

I am very grateful to the Minister and his team for their helpful engagement on this point—again, unfortunately, just before the deadline for submitting the amendments. They have pointed me towards the National Security and Investment Act 2021—the NSI Act—as providing the protections that I am seeking and, to an extent, they are right. But there remain important gaps, and I want to raise them and hear what the Minister thinks.

First, the NSI Act comes into play only if there is a notifiable transaction, so it does not apply at the point when a nuclear company is applying to be designated. It seems to me important that we designate companies only where we are satisfied that we know the identity of all parties that might have significant control, so Amendment 4 adds a new condition that the Secretary of State is satisfied that the identity of any party with significant control has been verified.

I am sure the Minister will tell us that the Government will of course carry out this verification as part of their due diligence—he is nodding—before a designation is granted. If the Government intend to carry out this step anyway, why not accept the amendment? Secondly, it is, sadly, not uncommon for due diligence not to be completed as thoroughly as we might like—1 am sure we can all think of examples of that. The amendment would not add any burden to the Government, but it would ensure that this critical verification step must be included in the due diligence, so why not accept it?

There is another reason. If the due diligence failed to identify such a party for some reason, without Amendments 4 and 7 taken together there would be no mechanism in the Bill to remedy the situation after the designation had been granted. The NSI Act would not apply, because no qualifying transaction would have taken place. So we would be stuck with a party that we had not verified, which cannot be right.

The next problem with relying on the NSI Act is that the first remedy under the Act is that, if a notifiable transaction takes place without authorisation, it is void. But that can apply only to UK companies. If, for example, a nuclear company has a 51% shareholder that is a Japanese company, and a Chinese company later takes a stake in that Japanese company, there is no way we can void that transaction, regardless of what the NSI Act says.

--- Later in debate ---

With the information I have been able to provide and the necessary reassurances I have given that the Government already have in place the necessary powers and mechanisms to deal with those concerns, I hope the noble Lords will feel able not to press their amendments.

[Lord McNicol of West Kilbride (Lab)]

I am very grateful to the Minister for his detailed response to these amendments and to the noble Lord, Lord Vaux, who ably introduced his amendments and made many powerful arguments in their favour. I appreciate the sentiment and tone of the Minister’s response. It is unusual to hear a Minister not taking up the powers that we are looking to give the Secretary of State and being constrained. In the world that we live in today, and given the importance of the civil nuclear sector, we think that these amendments—the Secretary of State having this power—is so important.

The Minister is right—this is about due diligence—but I think he is wrong when he talks about an outright ban. That would come in on an entity or designated organisation only if the Secretary of State wished it. It would come to Parliament only if it was recommended by the Secretary of State. Amendments 2 and 6 as written give that power to the Secretary of State.

I am also very pleased to hear about the special share. It was in one of the amendments that we laid in Committee, and we fully support moving forward with Sizewell and the Government taking a special share. We would love it to be retrospective as well, for Hinkley, but we understand the difficulties with doing that.

We on these Benches fundamentally believe that Amendment 2 and, consequentially, Amendment 6 set important principles, so notwithstanding the Minister’s response I would like to test the opinion of the House with regard to Amendment 2 and, consequentially, Amendment 6.

--- Later in debate ---

Moved by

[Lord McNicol of West Kilbride]

5: Clause 3, page 3, line 8, at end insert—
“(5A) Where conditions are imposed under subsection (5)(c), these may include duties on the nuclear company to—(a) collect data relating to the quantity and value of domestically produced goods and fuel utilised during the construction and operation of the nuclear project, and(b) make such data available to the Secretary of State to publish in a manner, and at a frequency, that the Secretary of State deems appropriate.”Member’s explanatory statement
This amendment would allow the Secretary of State to compel a nuclear company to collect data relating to domestically produced goods and fuel, with such data to be shared with (and published by) the Secretary of State.

[Lord McNicol of West Kilbride (Lab)]

My Lords, I am sure this group will be very brief. Amendment 5 does exactly what it says: it instructs

“the Secretary of State to compel a nuclear company to collect data relating to domestically produced goods and fuel, with such data to be shared with (and published by) the Secretary of State.”

When tabled in Committee, this amendment was far broader and wider, but I have edited it down in the hope that the Minister will accept it. If it is not technically quite right, we could bring back some wording for Third Reading. We believe the actions required would not be onerous on industry, as much of the data already exists within its procurement process.

The reasons for tabling this amendment are twofold. First, as was said in relation to amendments in the previous group, in my name and those of the noble Lords, Lord Vaux and Lord Oates, the nuclear industry is a highly sensitive one. Parliament and the Secretary of State knowing where the component parts originate is just a sensible approach. With the war in Ukraine and problems with Russia, China and other nations, being clear on where goods and component parts originate makes good sense.

Secondly, we are unashamedly in favour of government, Parliament and the Secretary of State supporting the development and promotion of British goods, skills and jobs. To do that and to invest in relevant areas, it helps—and they should be required—to know what is and is not domestically produced, and thus where the gaps are.

We have just completed Report on the Subsidy Control Bill, which replaces the historic EU state aid scheme. If implemented well and properly by devolved authorities, local authorities and national government, the Bill will assist in the direction of subsidies to help the UK industry. With those few words, I beg to move Amendment 5.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise briefly to speak in support of Amendment 5 and particularly to pick up an aspect of it that we did not really discuss in Committee. It was brought to my attention by a foreign visitor. If we are talking about the source of the fuel, it is not just about whether the fuel going into the reactor is manufactured in the UK but where the raw material, the uranium, comes from. As the noble Lord, Lord McNicol, just said, there are issues of security here, as well as issues of human rights et cetera. Looking down the list of the world’s top uranium producers, Kazakhstan is number one and Russia, China—according to an estimated figure—and Ukraine are also in the top 10. I have been trying to establish what the current situation is—perhaps the Minister will tell me, or write to me later—about our current fuel and the origin of the supplies, but it is important in the context of this amendment that we consider that.

[Baroness Bloomfield of Hinton Waldrist (Con)]

I thank the noble Lord for his continued and constructive engagement with the Bill. I state clearly to him and to the noble Baroness, Lady Bennett, that I share the ambition to maximise the opportunities for UK industry in the nuclear supply chain. We are taking steps actively to support and develop the UK nuclear supply chain, including our world-leading nuclear fuel industry, which the recent spending review confirmed will be supported up to £75 million to preserve and develop the UK’s nuclear fuel production capability. We expect developers to play their part in this, supporting UK businesses to compete for opportunities in new projects, and to share their plans with government. For example, EDF has set out that, if the Sizewell C project is approved, it will aim to place 70% of construction contracts with UK companies—up from 64% at Hinkley Point C—and has engaged with the department on its plans for the plant’s supply chains.

For those projects that proceed to construction and operation, we expect that data on their supply chains, including what opportunities are being won by UK businesses, will continue to be shared with the department. Specifying that a nuclear company must use UK nuclear fuel would create a significant risk of putting the UK in breach of its obligations under the TCA, and potentially also of our obligations under the WTO and other international agreements—but we do expect developers to be transparent with the public about UK content in their effective supply chains during construction, as EDF has been with the Hinkley Point C project. We will support developers to make this information public where it does not prejudice commercial interests.

We believe that the matter is best taken forward through negotiations on new projects seeking the support of a RAB funding model and ongoing partnership working with the sector. Therefore, I do not believe that it is appropriate to accept the noble Lord’s amendment today. However, I accept the spirit in which the amendment was tabled, and I hope that I have given some assurance that we will actively aim to maximise the opportunities for UK companies as we deliver on our ambitions for nuclear power. As for the specific question from the noble Baroness, Lady Bennett of Manor Castle, I need to check with my officials to make sure that that can be divulged and, if it can, I will write to her after this stage of the Bill. In the meantime, I ask the noble Lord to withdraw his amendment.

[Lord McNicol of West Kilbride (Lab)]

I thank the Minister for her response and for her assurances. It is good to hear that the information on where the products come from is shared with the department. We were hoping that it could be shared more widely and publicly to help promote our industries. With that, I beg leave to withdraw the amendment.

Amendment 5 withdrawn.

--- Later in debate ---

Moved by

[Lord McNicol of West Kilbride]

11: Clause 31, page 23, line 22, at end insert—
“(3A) Nothing in this Part prevents the Secretary of State establishing a Government-owned company into which the assets, liabilities and undertakings of the relevant licensee nuclear company may be transferred in order to allow electricity supply to be commenced or continued.”Member’s explanatory statement
This amendment makes clear that nothing in Part 3 of the Bill (the special administration regime) prevents the Secretary of State from taking a project into public ownership, where that would allow electricity supply to be commenced or continued.

[Lord McNicol of West Kilbride (Lab)]

My Lords, Amendment 11 would require the Secretary of State to undertake an assessment of the case for establishing a state-owned entity to take over the delivery and operation of a nuclear project in the event that a nuclear company fails and cannot be saved or have its assets transferred:

“This amendment makes clear that nothing in Part 3 of the Bill (the special administration regime) prevents the Secretary of State from taking a project into public ownership, where that would allow electricity supply to be commenced or continued.”


The ultimate aim of the Bill is to get power generated and distributed to homes and businesses across the country. We hope that firms will not fail, but if they do, there needs to be a clear process to ensure that plants are able to be built or continue to operate. I am sure the Minister will argue, as he did in Committee, that the special administration regime does this, but there is still potential for steps that may be needed, and surely, options should be defined in legislation now, rather than waiting until the worst should happen.

Amendment 12, in the name of the noble Lord, Lord Ravensdale, is fundamental to how nuclear energy is seen in the green mix. The Prime Minister has made this argument in favour of the wording within this amendment: I realise that we on these Benches do not often call for the Prime Minister’s words to be turned into law, but in this case we do. In fact, the government briefing and policy background to this Bill states, in paragraph 2:

“The Government has made high-level commitments to eliminate its contribution to greenhouse gas emissions. This includes the passage of legislation that requires the UK to bring all greenhouse gas emissions to net zero by 2050, as well as subsequent commitments to reduce carbon emissions by 78% and to decarbonise the electricity system by 2035.”


That is all commendable. It goes on:

“This will require rapid, significant changes in the energy sector: total UK electricity supply will need to double by 2050 and electricity from low-carbon sources will need to quadruple, in order to deliver the UK’s commitment to become a Net Zero emissions economy by that year.”


This is the important bit; it goes on, in paragraph 3:

“A key part of this will be to secure the transition to a clean electricity system that is reliable and affordable for energy consumers. This will require a substantial deployment of renewable technologies, alongside technologies such as nuclear which can provide energy to consumers when the wind is not blowing or the sun does not shine.”


Finally, paragraph 4 says:

“Large scale nuclear power plants are the only proven technology available today to provide continuous, reliable and low carbon electricity.”


I think the Government’s words speak for themselves, and I am happy to support the noble Lord, Lord Ravensdale, in his amendment. With that, I beg to move my Amendment 11.

--- Later in debate ---

[Lord McNicol of West Kilbride (Lab)]

My Lords, I am really looking forward to reading Hansard tomorrow and I compliment the Minister on hiccuping his way through the whole of his response, as with his introduction.

I thank the Minister for his detailed explanation and response to my Amendment 11 and for committing those words to your Lordships’ House. I also thank all other noble Lords for their participation in the debate, especially the noble Baroness, Lady Neville-Rolfe, on the next steps. Hinkley has been a good start; RAB, if this measure makes it through both Houses, is a vast improvement on CfDs; and, hopefully, Sizewell will be another step forward. But there is still more to do. The noble Baroness’s mention of SMRs and future large-scale civil nuclear developments is important. With that, I beg leave to withdraw the amendment.

Amendment 11 withdrawn.