Enterprise and Regulatory Reform Bill

Lord Wigley Excerpts

Monday 3rd December 2012 Grand Committee

[Lord Jenkin of Roding]

My Lords, I have some doubt about the proposed new clause of which my noble friend has just spoken. The Nuclear Liabilities Fund very properly seeks to avoid the situation that the country got into over many years when large numbers of nuclear installations of one sort of another were left to be decommissioned and their radioactive materials dealt with, and there were no funds available. One is always astonished at the huge amounts of money that have to be set aside to satisfy the obligations that are now being discharged to decommission these nuclear plants safely and effectively. My noble friend Lord Teverson may contradict me on this, but I believe that it is intended entirely to be confined to that purpose; it is intended to be there when it is needed and nuclear establishments come to be decommissioned. When my noble friend says that this increases the firepower of the Green Investment Bank, what does he mean? Is it intended that the fund should be invested in other green projects, which may or may not achieve the return expected when the fund was invested? I would have thought that that would risk defeating the purpose of the Nuclear Liabilities Fund.

The question of the rate of interest that should be earned on that fund is something that the Minister may wish to look at. I had not refreshed my memory of Professor MacKerron’s report, and I was grateful to my noble friend for reminding me what was in it. Of course, it is a very low rate of interest, as he has rightly said. But the fact of the matter is that this is a hypothecated fund; it is there for a particular purpose, and the idea that it could be used by the Green Investment Bank to invest in something else that might produce a higher return risks prejudicing the absolute and essential purpose for which it has been set up—namely, to meet the costs of decommissioning nuclear plants when they are available. I hope that the Minister will give some indication that he will look at this proposal in the proposed new clause with some suspicion, because I believe that it might be misconceived. I apologise to my noble friend Lord Teverson for putting it in that form, but I feel very strongly about this.

One of the best things that the previous Government and this Government have done is to make sure that future nuclear liabilities will not fall on the taxpayer but are regarded as a proper cost of those who invest in nuclear installations, power plants and so on. That is what it is intended to do. It is a very wise thing to do, and I hope that it will not be prejudiced by diverting it to some of the other purposes of the Green Investment Bank that noble Lords have talked about this afternoon.

[Lord Wigley]

My Lords, I apologise for coming in rather late, but I am in good time for the amendment that I wanted to catch up with, Amendment 11, and to follow on from the question regarding nuclear decommissioning. I live in a part of north-west Wales where there are two nuclear power stations. Trawsfynydd nuclear power station stopped generating two decades ago. It now employs some 600 people on decommissioning, more than it ever employed when it was generating electricity. The message that comes home from that is the uncertainty with regard to the cost of decommissioning and the length of time, and the need, therefore, to have financial cover for that.

This becomes particularly relevant with regard to the new reactor that is likely to be forthcoming with Hitachi at Wylfa in Anglesey. There is considerable support in Anglesey for the renewal of the nuclear power station. But the one reservation that people would have is if there were uncertainty as to the eventual decommissioning and the resultant costs arising from that station, particularly if in the private sector the company running it were to go out of existence. There needs to be a cast-iron guarantee with regard to funding for that purpose in order to maintain the good will towards the building of that new reactor at Wylfa. It is needed in energy terms and in terms of investment in the local economy in north-west Wales.

Therefore, the amendment goes to the heart of some very important aspects of nuclear power. Whereas I have a considerable amount of sympathy with the amendment in terms of the green bank and developing green alternative sources of electricity, that has to go on side by side with the nuclear dimension. Whatever settlement is finally reached it has to encompass both sides of that equation.

[Baroness Worthington]

My Lords, I welcome the amendments tabled by the noble Lord, Lord Teverson, if for no other reason than that they encourage us to have a wider debate about how this bank can operate and gain access to finance. This is important in the context that we need to see a huge upscaling of investment into the UK’s low-carbon infrastructure. It is estimated that between £220 billion and £330 billion is needed over the next decade, and historic levels of investment have been very low at only £6 billion to £8 billion. We need to be thinking creatively about how we can massively increase the available revenues for the bank. It is unfortunate in that context that the Government have set out on this path with at least one arm tied behind their back by preventing borrowing. We will come on to talk about that as we move through the amendments.

In the context of having set up a bank and putting a relatively low amount of money in to start, then putting in a hurdle against borrowing further, it is important for us to think creatively. In fact, it forces us to think creatively so I very much welcome the amendments of the noble Lord, Lord Teverson, which raise two very interesting ideas.

The EU ETS is a complex piece of legislation, but it creates a new asset class in that it creates allowances that have a financial value. I am not sure how they are managed because maybe that falls between DECC and the Treasury, but I suspect that we are not managing them as well as we could be. In addition to thinking about the revenues that we have gained directly from the auctions, how about thinking about the allowances themselves as assets that can be used to secure loans? They clearly have a financial value but as the noble Lord, Lord Teverson, suggested, sadly their value at the moment is low because we simply have an overabundance of these allowances.

I welcome the creation of the Green Investment Bank if for no other reason than it now means that we have a smart set of individuals drawn largely from the private sector—from banks and financial institutions—who I am sure can, if they put their minds to it, come up with various clever mechanisms for raising finance. I urge the Minister and his department to say to the noble Lord, Lord Smith, and his board, “Let’s think creatively and open up this debate. We have an emissions trading scheme that creates this asset class. How could we use it to increase the level of investment into the things that we want to see built?”.

On the second suggestion regarding the Nuclear Liabilities Fund, I share some of the concerns of the noble Lords, Lord Jenkin of Roding and Lord Wigley. But again, it shows we are thinking creatively. I understand that a financial fund needs to be available for the time of decommissioning, but the nuclear profile of our stations is fairly clear. We may have life extensions and we all know in advance when that money is needed. I do not see any danger therefore in using some of that to raise more finance and create wealth in the interim as long as we are managing it correctly. So I welcome the amendment; it opens up an interesting debate about how we currently manage money in government. Now that we have created essentially a Government-owned bank, I hope that over time and, as the noble Lord, Lord Teverson, was very keen to stress, when the right moment occurs, we will see this bank stepping into much more interesting territory. We look forward to the Minister’s comments on that point.