All 5 Matthew Pennycook contributions to the Nuclear Energy (Financing) Act 2022

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Wed 3rd Nov 2021
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Nuclear Energy (Financing) Bill

Matthew Pennycook Excerpts
2nd reading
Wednesday 3rd November 2021

(3 years, 1 month ago)

Commons Chamber
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Matthew Pennycook Portrait Matthew Pennycook (Greenwich and Woolwich) (Lab)
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My apologies, Mr Deputy Speaker; I thought that another contributor was waiting to speak before me.

It is a pleasure to wind up the Second Reading debate for the Opposition. Notwithstanding the somewhat overly partisan opening from the Minister of State, who came along, as he often does, with a set of pre-scripted remarks that were in danger of being as old as some of the nuclear plants that are presently being decommissioned, it has been a considered and well-informed debate in the main. I thank each right hon. or hon. Member who has taken part.

I will pick up on three points that have featured prominently. First, as my hon. Friend the Member for Southampton, Test (Dr Whitehead) argued convincingly, although the Bill has the appearance of a general piece of enabling legislation, it is in practice concerned solely with the future of Sizewell C; I believe that the hon. Member for Bury North (James Daly) has just conceded that. Sizewell C is a project that EDF has no intention of financing from its own balance sheet and that we know has failed to entice the necessary private investors, as the right hon. Member for Kingswood (Chris Skidmore) mentioned in relation to Moorside and the fact that the current funding model is not fit for purpose.

It is vital that we bear that point in mind as the Bill progresses, because unfortunately for some, and much as the spin might suggest otherwise, it does not herald the dawn of a new nuclear fleet. It is simply a necessary means of resolving the issue of whether Sizewell, the last potential nuclear project that could conceivably begin to generate by the end of this decade, is constructed or not, and—this was referred to by the hon. Member for Morecambe and Lunesdale (David Morris) and, in an intervention, by the hon. Member for Gloucester (Richard Graham)—the issue of whether the cost reductions that will flow from the plant being a clone of Hinkley Point C, and its ability to draw on the skills and workforce associated with that site, are secured.

Several Members, including the hon. Members for Kilmarnock and Loudoun (Alan Brown) and for Richmond Park (Sarah Olney), argued that nuclear should not form any part of the UK’s future low-carbon energy mix. We on this side of the House respect their strongly held views on the subject, but we take the view, as does the Committee on Climate Change, that a limited amount of new nuclear is required to achieve the decarbonisation of the UK’s electricity system within the next 14 years, and to meet our longer-term net zero target. Since Sizewell C is the only power station that can now feasibly come online within that timeframe, we want to ensure that it does, in order to provide the necessary amount of firm power to support a predominantly renewable energy mix.

Alan Brown Portrait Alan Brown
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As I pointed out earlier—and the hon. Gentleman is well aware of this—much of the existing nuclear fleet is going offline before Hinkley even comes online. Does that not indicate that the grid could operate safely and we could have energy security without relying on a new nuclear station?

Matthew Pennycook Portrait Matthew Pennycook
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I listened carefully, as I always do, to what the hon. Gentleman said in his speech. I think what he misses is the fact that the demand for electricity will double, so I do not think that his argument about the amount of baseload or firm power that is required necessarily follows.

Robert Goodwill Portrait Mr Goodwill
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Will the hon. Gentleman give way?

Matthew Pennycook Portrait Matthew Pennycook
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I will, but then I must make some progress.

Robert Goodwill Portrait Mr Goodwill
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Does the hon. Gentleman also appreciate that we may need to generate large amounts of hydrogen, or indeed use nuclear energy for direct carbon capture, and perhaps synthesise jet fuel in that way?

Matthew Pennycook Portrait Matthew Pennycook
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I think we will need a range of technologies. Let me return to a point that has been made by several Members. I think we must take a lead from the Committee on Climate Change, which made its view very clear in its balanced pathway scenario for the sixth carbon budget. It estimates that we will need 10 GW of nuclear power by 2035. We will have a predominantly renewable energy system, but we do need the firm power that comes from a limited degree of nuclear to support that.

My second point relates to what has been the elephant in the room today, namely China’s involvement in UK nuclear power. As we debate the principle of the Bill today and scrutinise its provisions in the weeks to come, that issue cannot be set aside. Members in all parts of the House want to understand more fully precisely where the Government now stand on the deeply flawed deal that they struck with China General Nuclear in relation to Sizewell, which has been mentioned several times in the debate.

The CGN stake in Sizewell was without doubt a sweetener for the far larger prize of unfettered Chinese ownership and operation of a nuclear plant at Bradwell, but while it seems certain that the very notion of a Chinese-run UK nuclear plant is now dead, we have yet to hear Ministers say so explicitly, or tell the House how the Government intend to disentangle themselves from the 2016 investment agreement signed by the then Secretary of State, the right hon. Member for Tunbridge Wells (Greg Clark). We deserve to be told, and I hope that the Minister will at least make some reference to that issue in his closing remarks. We also need to know how the Government plan to divest CGN of its minority stake in Sizewell C, and what the estimated impact of that divestment will be on the overall financing of the project, because that issue has very real implications for the mechanism that the Government have chosen to enable Sizewell to progress, namely the RAB model.

That brings me to my third and final point. A number of Members, including the hon. Members for South Cambridgeshire (Anthony Browne) and the right hon. Member for Kingswood spoke clearly and forcefully about the advantages of the RAB model. It is not in dispute that the proposed model will lower the cost of capital on nuclear projects—I fully accept that—and it is also not in dispute that it would lower overall costs, although Labour Members take issue with the frankly heroic assumptions that underpin the claimed £30 billion to £80 billion in long-term savings vis-à-vis coal-fired financed projects. However, it is also undeniably the case that these advantages would be secured as a result of shifting a proportion of risk on to consumers.

It is worth emphasising not only that the RAB for which the Bill would provide, and the risk therefore entailed in it, are of a different order of magnitude from RAB arrangements utilised on other infrastructure projects, but also that when it comes to the yearly surcharges levied on customers on those projects financed via RAB arrangements—for example, the Thames tideway tunnel, which has been mentioned

several times today—there is an inherent degree of uncertainty about the level at which those charges might peak. That is why it is important that the right hon. Members for Vale of Glamorgan (Alun Cairns) and for Clwyd West (Mr Jones) and the hon. Member for Waveney (Peter Aldous) rightly emphasised the need to scrutinise the precise arrangements that will be brought forward and the need for safeguards when doing so.

While we on this side of the House acknowledge the advantages of the RAB model for new nuclear compared with contracts for difference financing, we have concerns about the potential exposure of customers if costs rise significantly or if serious overruns take place. We do not oppose the principle of the Bill, and we have no intention of voting against it this evening, but we intend to look very carefully in Committee at precisely how the Government intend to implement the RAB model in question, at whether its benefits are as significant as has been claimed, and at how many investors the Government expect to return to the UK market if this legislation passes. Most importantly, we want to work with the Government to explore ways in which consumers might be better protected from escalating costs in the event that things go wrong. New nuclear must provide secure and affordable low-carbon energy, but it is still by no means clear that the Bill stands to deliver in both those respects. It is imperative that it should do so.

Nuclear Energy (Financing) Bill (First sitting) Debate

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Nuclear Energy (Financing) Bill (First sitting)

Matthew Pennycook Excerpts
Virginia Crosbie Portrait Virginia Crosbie
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Q Michael, what have you learned from your experiences of other countries’ financing, and how can you relate that to the RAB model?

Michael Waite: We are currently very active in the Czech Republic, Poland, Ukraine and so on. Those nations predominantly have either majority Government-owned utilities developing nuclear projects or Government financing for up to 100% of the project. They are reducing the cost of capital by fully leveraging Government financing, which is the cheapest financing. Those are absolutely all regulated approaches. No projects that we are doing currently rely just on market forces to develop nuclear; it is too much of a long-term project, with massive long-term benefits, to leave it up to the market.

Matthew Pennycook Portrait Matthew Pennycook (Greenwich and Woolwich) (Lab)
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I have a series of questions relating to—

None Portrait The Chair
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Before you start, Mr Pennycook, I should say that we have five people asking questions and 12 or 13 minutes left, so can everyone be swift in their questions and answers?

Matthew Pennycook Portrait Matthew Pennycook
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Q I will try and rattle through this. I have a series of questions relating to clause 1. Forgive me, Ms Pyke, but I think they will be directed mainly at you. It is quite clear in my mind that Sizewell C is the last project that can conceivably begin to generate by the end of this decade, so the Bill is very much about its effect on Sizewell C. Consumers in particular, but also Members of the House, will want to know whether the Bill is sufficiently discerning about which kinds of companies are designated, and who the RAB will ultimately go to. Could you detail precisely the interest in Sizewell C of China General Nuclear, or its subsidiaries or shell companies?

Julia Pyke: CGN currently has a 20% shareholding in Sizewell C. No material supply chain contracts are in place or intended to be in place with the Chinese supply chain or CGN. Whether CGN chooses to invest at financial close, and the extent to which it chooses to invest, is a matter for CGN itself and the UK Government. As Virginia’s question elicited, the RAB model is designed to bring in a lot more British financing and reduce reliance on overseas investors.

Matthew Pennycook Portrait Matthew Pennycook
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Q I do not want to get into the £1.7 billion—if I heard you correctly, you said that there were no express discussions, but that is really a question for the Minister rather than for you. Leaving the £1.7 billion aside, is it the company’s understanding that the Government’s intention is, as has been widely reported in the media, to divest themselves of that minority CGN stake? What options do you think are being considered in that regard?

Julia Pyke: That is absolutely a question for the Government.

Matthew Pennycook Portrait Matthew Pennycook
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Q Just to be very clear, because I think this has implications for the funding model, do you not think that that minority stake, and the potential force-out divestment by the Government, has any implications for the RAB funding model for Sizewell C?

Julia Pyke: I think that Sizewell C can raise money under the RAB model. How CGN intends to go forward with a financial investment in Sizewell C is a matter for CGN and the Government.

Alun Cairns Portrait Alun Cairns (Vale of Glamorgan) (Con)
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Q As we have highlighted, the benefits of the RAB model are that it reduces the cost of finance and provides financial certainty for any project—those are two key inhibitors in the development of new nuclear fleet. However, the construction of nuclear power stations is inherently uncertain because of the risk associated with it, and costing that risk is extremely difficult. Are you satisfied that the Bill gives the Minister the opportunity to assess the cost of that risk effectively? The alternative would be the failure of the RAB model, which would undermine the fleet generation that we would like to see.

Julia Pyke: I think that the Bill is a great framework under which there is a lot of detail to be developed, and we would expect more detail to be developed in relation to designation and the conditions of eligibility. While I could hardly deny that the cost of nuclear builds has had some uncertainty in some cases, what is not uncertain is whether nuclear works and the technology works. I think there are no cases worldwide of nuclear projects that have been abandoned for technical reasons. The industry knows how to make nuclear power stations work. So I think that there is a degree of uncertainty about the exact cost, but the whole point of building a replica of Hinkley is to minimise that uncertainty, benefit from all the lessons learned and get nuclear on to a stable, repeat-build footing.

David Powell: We designed our SMR BWRX-300 on the basis of proven technology. So we know very much the cost base for that technology, and it is really in our interest and that of investors to ensure that we can deliver to time and to budget on that. With respect to the build, we would obviously want to try to minimise any impact and risk of cost and schedule overruns, because we see this as building a fleet of smaller reactors out of a more modular-type approach.

Nuclear Energy (Financing) Bill (Second sitting) Debate

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Nuclear Energy (Financing) Bill (Second sitting)

Matthew Pennycook Excerpts
Committee stage
Tuesday 16th November 2021

(3 years, 1 month ago)

Public Bill Committees
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Alan Whitehead Portrait Dr Whitehead
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Thank you.

Matthew Pennycook Portrait Matthew Pennycook (Greenwich and Woolwich) (Lab)
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Q Richard, you have spoken with great insight about the balance between the advantages of the RAB model and the risks that come with it for consumers, and also about how those consumers might be better protected. Will you give the Committee your take on what we have learned from those infrastructure projects that have benefited from a RAB funding model, such as Thames Tideway or Heathrow terminal 5? Was the peak of costs on consumers within the estimated range at the start of the project, leaving aside cost and time overruns? How accurately can you predict the peak cost for consumers and ensure that it comes within a set range, if—as may be the case—amendments to protect consumers are not ultimately adopted? How accurate is the forecasting of the total impact on consumer bills?

Richard Hall: On those two specific projects, Heathrow and Thames Tideway, I cannot give any insight. I am not particularly close to those individual cases. It is fair to note that in both cases the cost of capital brought forward by the model seems to have been low, in particular in the case of Thames Tideway. On nuclear, I simply go back to the point that there is a large base of literature looking at historical cost overruns and the extent to which things come in on budget. That tends to display fairly consistently that these types of projects are very likely to be subject to optimism bias at the time that they are procured—a belief that they will be cheaper than they actually will be.

In addition to the costs and dates I mentioned from the BEIS impact assessment suggesting the average levels of cost overruns, look at a couple of other examples from academia: Sovacool et al. looked at a global example of 180 new nuclear plants and found that 97% of them came in over budget and that the average cost overrun was 117%; and Flyvbjerg et al. found that in a sample of 194 nuclear plants, the median cost overrun was 68% and the median schedule or construction-time overrun was 40%. That is a fairly large sample set of projects, and the analysis tends to suggest considerable optimism bias for new nuclear—it tends to come in late and over budget.

Matthew Pennycook Portrait Matthew Pennycook
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Q I have one follow-up question. Leaving aside the particular problem historically in nuclear projects with overruns, will you elaborate on how the order of magnitude with this particular RAB—or a RAB that the Bill would facilitate for something like Sizewell—increases the amount of risk for consumers vis-à-vis those RABs that have been used on other infrastructure problems, which are smaller? Does the order of magnitude of the potential RAB we are talking about—independent of the dynamics around nuclear—inherently increase the risk significantly, just because it is so much bigger?

Richard Hall: I think potentially it could, simply because of the scale of the project. The cheapest cost estimate in the impact assessment is that, for a Hinkley Point C-sized plant put forward on the RAB model, it would cost about £24 billion. That is the cheapest estimate, so we are talking about extremely chunky consumer spend.

Matthew Pennycook Portrait Matthew Pennycook
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Thank you.

Alan Brown Portrait Alan Brown (Kilmarnock and Loudoun) (SNP)
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Q Richard, following on about costs, you said that Hinkley Point C was estimated at £24 billion. Even if we say that Sizewell is £20 billion, we heard that Rolls-Royce is hoping to build five small modular reactors, which will be about £10 billion. If we look at consumer protection, value for money and achieving net zero—particularly heat decarbonisation—if I gave you £30 billion, would you spend it on nuclear, or would you do something different with such levels of capital?

Richard Hall: It is hard to see a case for this being the most cost-effective way to spend money on generation. A lot of the argument for whether we need new nuclear or not comes down to whether it is perceived as being useful to provide a balanced generation mix, so that it is available when other forms of low-carbon generation are not available. On that point, I note that the Government are more confident on the need for new nuclear than some of their advisers are. The Committee on Climate Change’s sixth carbon budget work from last December shows a range of pathways to net zero by 2050, some of which involve new nuclear. It talks about it being “possibly” needed, not definitely needed.

The National Infrastructure Commission’s 2018 national infrastructure assessment recommended that the Government consider bringing forward one new large-scale nuclear plant in the 2020s—but only one, suggesting that in general terms the cost reductions in renewables were so sharp and likely to continue that a pivot to renewables appeared a better bet than backing nuclear more forcefully.

The case for whether new nuclear is needed is ambiguous at this stage. Could you get better value for money from investing in other things? I think the challenges of making our homes energy-efficient so that we stop spending so much on energy and reduce emissions should be tackled as a priority.

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None Portrait The Chair
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Are there any other questions from Members?

Matthew Pennycook Portrait Matthew Pennycook
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Q I have two open questions for the panel. The first is on clause 1 of the Bill, which I hope you have had a chance to look at, on designating a nuclear company. In previous evidence sessions, some of the witnesses who attended suggested there might be a lack of detail. What are your thoughts on whether there is sufficient detail in the Bill, both on who designates a company and how you designate an appropriate company?

Tom Greatrex: I am sorry, but you cut out slightly. I think you were referring to clause 1 and designated companies, but I missed the question.

Matthew Pennycook Portrait Matthew Pennycook
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Sorry, Tom. From what you have seen, is there enough detail and clarity in the Bill about who designates a nuclear company and whether that is appropriate, and is there enough in there to be clear about whether we are designating the appropriate type of company?

Tom Greatrex: Thank you; I understand the question now. The detail of the designation process is set out in subsection (3) of clause 1, on procedure. I am not absolutely sure that it necessarily gives the full, detailed approach to the designation and who the designation will be of. As this is a framework Bill, we work on the assumption that the detail of that will be set out in regulations subsequently. We are quite comfortable with that being the approach. The broad principle is set out in the Bill, and I think that gives us enough to go on for now.

Rebecca Groundwater: The transparency piece and the openness of the process was mentioned by our members, but the assumption is that the detail will follow.

Tom Thackeray: I don’t think we have picked up strong views from our membership worrying about the level of detail in the Bill at present. I note from the previous comments that political statements and backing are really important in this industry, and making sure there is no ambiguity around the backing that the Government provide. Perhaps that leads us to a decision on who should do the designating, with Secretary of State-level backing for it. We can take further soundings from members on that.

Matthew Pennycook Portrait Matthew Pennycook
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Q My second question is on the total amount of nuclear capacity we require going forward. I am quite clear in my own mind that the Bill is primarily about Sizewell C, but we have had talk of nuclear fleets, SMRs and what might come forward in years and decades to come. Do any of you challenge the Climate Change Committee’s central scenario of its balance pathway, which is that we need 10 GW total nuclear capacity by 2035, and 8 GW of new build. If you take Sizewell B and C and Hinkley, we are talking about a remaining gap of 1.6 GW to 2.5 GW. Do you work on that assumption? Do you think it should be higher or lower? I am trying to get the sense, beyond Sizewell C, of what this funding model might be used for.

Tom Thackeray: I think we are comfortable that the Climate Change Committee’s analysis in the balance pathway is a reasonable assumption. We think nuclear will be a strong part of the energy mix in the years ahead. Obviously, we will need a much bigger electricity capacity up to 2050. As we learn more about the process and the cost of technology starts to drop, there might be slight adjusting of those assumptions in years ahead, but at the moment we do not diverge markedly from what the CCC has said.

Rebecca Groundwater: We are aligned with the CCC report. I have nothing further to add.

Tom Greatrex: It is important to underline that the CCC scenario is for 2035 and towards the sixth carbon budget. I think it is broadly in the right area. The 2050 net zero modelling that was published alongside the energy White Paper has a broader range to 2050. We have to bear in mind, looking beyond 2035 towards 2050 and net zero overall, that the overall proportion of our energy that will come from electricity will be high. It is reasonable to assume that we will be beyond 10 GW by 2050, although 10 GW by 2035 is probably the right ballpark figure.

Virginia Crosbie Portrait Virginia Crosbie
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Q What more do you need to see from the UK Government to get us back into leading in this critical sector on the global stage? We have had the energy White Paper, the Prime Minister’s 10-point plan and the net zero strategy announced by the energy Secretary a few years ago. We have the RAB nuclear financing model and we had a good presence from nuclear at COP26 in Glasgow. What more do we need?

Rebecca Groundwater: I would go back to that stability and the pipeline of opportunities that are viable. The supply chain is ready and equipped with the people, skills and capability. It is world class. We have a brilliant energy sector here in the UK. In the market forces piece, it is unclear which one will take the lead out of all the technologies. It has caused uncertainty, and that is not what the supply chain needs. When we talk about the supply chain, we are talking about the breadth of it. Each organisation has different needs, but they need that investment piece; they need to know where to upskill and when; they need to know the timescales.

That is why this legislation going through quite quickly is helpful, because it showcases that decisions can be made now to drive forward investment in what is needed. That ongoing dialogue and conversation—the message, “This is serious, and we’re taking it forward,”—will give that stability and the ability to the financial markets to come in. We know they are talking about the sustainability goals and we know that parts of the supply chain are struggling with how to implement them and what that will mean for them, depending on their size. That wider conversation now needs to start to break down a little, so that we are looking at how that impacts each of the different sectors. That way, we can drive it forward and bring it all together.

Tom Greatrex: All the things you mentioned have been important, significant and welcome for the sector over the last period. This legislation is key, as I mentioned previously. As for what else we need, we know that development of the taxonomy is ongoing—the Treasury has an expert group leading on that. It is important that the taxonomy is objective and avoids some of the mess the Europe-level taxonomy has managed to get into, in terms of setting a framework for investment in infrastructure that will contribute to a low-carbon future and to net zero. The requirement will be to pace delivery of agreements, to enable projects to go forward—for example, negotiations are ongoing between EDF and Government on Sizewell C, although that goes beyond the scope of the Bill, and with others on the SMR programme; last week’s announcement was very welcome. A number of things are in the purview of Government to deliver—siting, for example. We need all those things to happen. If I were to characterise what is needed in one phrase, it would be: an appropriate sense of urgency, given the urgent situation of our current and future power mix requirements.

Tom Thackeray: I would echo many of the points the others made: detailing objective, sustainable finance taxonomy for the UK including nuclear will be really important over the next few years. More holistically, there is the extent to which the Government can build out their export and skills strategy, taking advantage of the technology developments we are making in a lot of the clean areas. I have a slight concern, not in the nuclear sector but potentially in other green economy areas, that there will be a squeeze on the labour market, with multiple industries going after the same labour pools, which will probably put a brake on our capacity. We need to think really strategically about some of that stuff.

You invited general comments about the 10-point plan. In some areas, there is a need to detail the routes to market for things like the hydrogen economy. That goes back the points the other Tom made about pace of delivery and urgency. However, having just come back from Glasgow, I think it really hit home how far advanced the UK is in some of these plans compared with others. We can always ask for more, but I think we are genuinely world leading in a lot of these areas.

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Kirsty Blackman Portrait Kirsty Blackman
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Q Would you be happy to pay more money on your energy bill in order to fund new renewables, for example?

Doug Parr: Yes. I have always been very clear that there are particular hazards around new nuclear developments, whether it is waste, the terrorist threat, what to do with them or security issues. That is why I think, as a society, it is worth avoiding those hazards and, if necessary, paying a bit more. In practice, there are models out there by, for example, Imperial College that say that no more new nuclear is on the cost-effective pathway, given the cost of renewables. Theoretically, I can say that. In practice, I am not sure that is the situation we are facing.

Matthew Pennycook Portrait Matthew Pennycook
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Q I have a two-part question for the panel, but in particular for Professor Thomas. The Bill is clearly designed to facilitate primarily Sizewell C. I still think there is a lack of clarity about Chinese investment in that project and how that interacts with the Bill’s intentions. What is the panel’s understanding—and specifically Professor Thomas—about what is in the October 2016 strategic investment agreement and what provisions are there in that agreement that would allow the Government to remove CGN from the project? Related to that, we had a number of questions earlier about the £1.7 billion allocated to nuclear in the Budget. The Budget line says that that funding is there:

“to enable a final investment decision for a large-scale nuclear project in this Parliament, and the government remains in active negotiations with EDF over the Sizewell C project.”

What is your understanding of what that means and can you comment on potentially the use of that £1.7 billion as it relates to the RAB funding mechanism? It is a very different two sets of scenarios, if we are talking about whether that £1.7 billion is for a buy-out of the CGN minority stake or potentially put in as part of a pot of money alongside the funds generated from RAB.

Professor Thomas: If we go back to the 2016 agreement, CGN agreed to take a third of the Hinkley Point C project: the construction and the operation of the plant. It agreed to take 20% of the Sizewell B/C project up to final investment decision. It has an option to take 20% of the construction and operation of the plant if it goes ahead and for Bradwell, there is the 66% of CGN and 33% of EDF. EDF and CGN have spent about £0.5 billion developing the plans to the point they have reached so far. Let us say it is going to take another £0.5 billion to get to final investment decision—that is at the most. So £1.7 billion seems a bit too much for that. The wording of the £1.7 billion is very vague. Some people have assumed it will be an 8.5% stake, or whatever £1.7 billion works out as.

In terms of how you would get CGN out of Sizewell C, I think it is really dependent on what happens to Bradwell B. It is clear that CGN’s presence in the UK is for only two reasons. First, to build the Bradwell B plant, and the price for that is its involvement in Sizewell C and Hinkley Point C. The other is to get the British safety regulator’s endorsement of its technology. If it is not going to be allowed to build Bradwell B, I cannot see why on earth it would be interested in putting money into Sizewell C. It is not CGN’s technology, it would provide nothing and it would not be particularly profitable. So if Bradwell B is abandoned, the Sizewell C CGN problem will solve itself. Can you briefly repeat me the gist of the second part of your question?

Matthew Pennycook Portrait Matthew Pennycook
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Q I think you have answered it in part, but it is about your understanding of how that £1.7 billion might potentially be used in a Sizewell C project and how that, in a sense, relates to the RAB funding mechanism set out in the Bill.

Professor Thomas: The CGN EDF consortium have spent about £0.5 billion so far, and they have some more money to spend to get to the final investment decision. They would then expect to sell that work to the company that actually builds and operates the plants, so they would get their money back. If Sizewell C goes ahead, it is sort of alone. It seems to make more sense to see it as a stake in the plant, which might encourage institutional investors to go in. If they saw Government involvement, they might think that it will probably not be allowed to collapse, but it is up to the Government to provide a bit more clarity about what they expect the £1.7 billion to do.

Alan Brown Portrait Alan Brown
- Hansard - - - Excerpts

Q I have a question for Stephen Thomas. We heard this morning that the Sizewell C company is looking for a 60-year contract under the RAB funding. Does that mean that, effectively, bill payers will be paying for the asset before it comes into use and can generate electricity, and that they will continue to pay for it once it has reached its end of life? Are there any protections in the Bill? If Sizewell goes ahead and then goes offline early in the way that Dungeness went offline and had to be shut down seven years early, would the bill payer still be stuck paying for that under the RAB model, or is it possible to have recovery mechanisms in order to counteract that?

Professor Thomas: I think there is a lot of missing detail in the RAB proposal, and one of the biggest elements of missing detail is how much the surcharge for consumers will be during the construction phase. The Government have said that it will be a maximum of about £10 per year per consumer. That makes no sense, because it would yield about £6 billion. In the context of a project that the Government said would cost between £24 billion and £40 billion, plus financing costs, £6 billion is a nice little present, but it will not be much of a game-changer. We need to see much more clarity about what that cost will be, because if it is to make a big change to the cost of power from Sizewell C, it has to be quite a significant surcharge. We also need to include that in the price of power. At the moment, we are talking about £60 per megawatt-hour and completely forgetting the £6 billion, or however much it will be, that consumers will put in during the construction phase.

In terms of what happens if the plant has to close early, there is a big problem with decommissioning. Decommissioning funds work on the basis of discounted cash flow—in other words, a liability that falls due in 50 years. You have to have enough money in place now, plus the interest it would earn for 50 years, to pay off the debt. If the plant closes early, you do not earn all that income and you have to bring forward the process of decommissioning, so there will be a big hole in the decommissioning funds.

I remind members of the Committee that the decommissioning funds that we have in the UK have continually failed. Consumers have paid three or four times over, only for the money to disappear and not be available for decommissioning. Decommissioning is a very serious issue. It appears to disappear because of the belief that you can invest a sum of money at 2.5% or 3%, in real terms, for 100 years. That is not the case, I am afraid—not on the historical evidence.

Nuclear Energy (Financing) Bill (Third sitting)

Matthew Pennycook Excerpts
Mark Jenkinson Portrait Mark Jenkinson (Workington) (Con)
- Hansard - - - Excerpts

Ms Fovargue, I draw the Committee’s attention to my entry in the Register of Members’ Financial Interests. It is a matter of public knowledge that I worked in the nuclear industry before my election to this place.

Clause 1

Key definitions for Part 1

Matthew Pennycook Portrait Matthew Pennycook (Greenwich and Woolwich) (Lab)
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I beg to move amendment 1, in clause 1, page 1, line 15, at end insert—

“(6) ‘Owned by a foreign power’ means owned by a company controlled by a foreign state and operating for investment purposes.”

This amendment is a definition of “foreign power” set out in amendment 2.

None Portrait The Chair
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With this it will be convenient to discuss amendment 2, in clause 2, page 2, line 14, at end insert—

“(c) the nuclear company is not wholly or in part owned by a foreign power.”

This amendment prevents the Secretary of State designating a nuclear company owned or part-owned by the agents of a foreign power.

Matthew Pennycook Portrait Matthew Pennycook
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It is a pleasure to serve with you in the Chair, Ms Fovargue. The amendments you have grouped stand in my name and that of my hon. Friend the Member for Southampton, Test.

Taken together, the purpose of amendments 1 and 2 is to ensure that in enabling nuclear companies to benefit from the RAB model and for the Government thereby to bring a large-scale nuclear project to a final investment decision by the end of this Parliament, as they are committed to do, the Bill nevertheless makes it clear what kind of companies it would be inappropriate for the Secretary of State to designate for that purpose. In moving the amendment, my assumption—Government Members may correct me if I am mistaken—is that the Committee as a whole would accept that it would be inadvisable to allow some nuclear companies to own and/or operate a nuclear reactor on British soil. That is because civil nuclear power is, without question, critical national infrastructure, the compromise of which would have real implications for national security, given that any company owning and/or controlling such infrastructure would have direct access to the national grid.

Conservative Members, or indeed the Minister when he responds, may argue that the amendments are unnecessary, because no Secretary of State would choose to designate a nuclear company to benefit from the RAB model that posed any threat to national security. Yet it is precisely because previous Secretaries of State have been content to allow companies that the Opposition would argue should never have been given the opportunity to own and operate UK nuclear plants that we believe we need such additional safeguards in the Bill.

Put simply, we want to ensure that the legislation is amended so that this Government, or any future Government who might wish to use the RAB model for new nuclear, cannot make the kind of error that was without doubt made in recent years. Namely, a company owned and directly controlled by a foreign state—a state that the integrated review is clear poses a systemic challenge to our security, prosperity and values—was given the opportunity to own and access critical national infrastructure.

I will touch on the way in which the Government might, if they were minded to accept our amendments or table modified versions of their own on Report, differentiate companies owned and directly controlled by a foreign power and those in which a state merely has a majority financial stake. Before that, I will examine the error that I have mentioned and the lessons we might draw from it to improve the Bill.

On Second Reading, we made it clear that our strong view is that although the Bill has the appearance of a general piece of enabling legislation, it is in practice concerned solely with the future of Sizewell C, as the last potential nuclear project that could conceivably begin to generate by the end of the decade.

Alan Brown Portrait Alan Brown (Kilmarnock and Loudoun) (SNP)
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I note that the hon. Gentleman was choosing his words carefully. We all know that it is about the China General Nuclear Power Corporation; many people have concerns about its involvement in the nuclear sector, which I echo. He talked about when a state is a majority shareholder, which includes EDF in France, but surely the amendment says

“not wholly or in part”.

As France is a majority shareholder in EDF, would that not eliminate EDF from participating in the RAB exercise for Sizewell C?

Matthew Pennycook Portrait Matthew Pennycook
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The hon. Gentleman pre-empts what I will come on to say. We are keenly aware of the need to differentiate different types of companies, which is why, thankfully, the Chair has allowed me to group this amendment with amendment 1, which clearly defines what we mean by “owned by a foreign power”. It is not just owned by in terms of a majority stake, but directly controlled by in the way that I would argue EDF is not.

To return to the involvement of the China General Nuclear Power Corporation in UK nuclear more widely, we believe that the case of Sizewell C illustrates precisely why amendments 1 and 2 are required. Driven by an almost embarrassing enthusiasm for Chinese investment, which was shared and arguably surpassed by the coalition Government that preceded it, the Cameron Government eagerly embraced Chinese involvement in UK civil nuclear energy. As a result, Hinkley Point C, while largely financed by EDF, is underpinned by effectively foreign Government part-financing in the form of a 33.5% interest on the part of China General Nuclear Power Corporation.

When the final investment decision for Hinkley Point C was approved, associated heads of terms were agreed for CGN to take a 20% stake in Sizewell C and to secure majority ownership, complete control of planning and financing, and unfettered operation of the nuclear plant at Bradwell-on-Sea in Essex that would incorporate, subject to generic design approval, a Chinese-designed Generation III Hualong One reactor. Bradwell B was always the ultimate prize for CGN and why it was willing to take a significant stake in the Hinkley plant and a minority stake in the development work to progress Sizewell C toward a final investment decision.

As far as we can ascertain, although the present Conservative Administration have never said as much—I invite the Minister to remedy that if he wishes—there is now a general acceptance that acquiescing in the construction of a piece of critical national infrastructure at Bradwell that would be designed, planned, owned and operated by a subsidiary company of a Chinese state-owned enterprise, and, as all SOEs are in China, controlled ultimately by the Chinese Communist party, was perhaps not the wisest decision that the Cameron Government made.

Furthermore—I do not believe a Minister has said this explicitly, so I urge the Minister to provide greater clarity to the Committee when he responds—I take it as read that the present Government now take the view that such an arrangement is no longer tenable, and that it is their intention to remove the influence of the People’s Republic of China from the Sizewell C project entirely, and, should any new nuclear view on that project prove necessary, the future UK nuclear programme more widely.

The press release accompanying the publication of the Bill stated:

“The RAB model will reduce the UK’s reliance on overseas developers for financing new nuclear projects”.

The Committee will appreciate that that statement is not a clear declaration of intent when it comes to rolling out foreign Government part-financing, ownership and control of civil nuclear power in this country. If it is the Government’s intention to end foreign Government part-financing and ownership of new nuclear projects, the Committee should be told what that means in practice for the October 2016 Sizewell C strategic investment agreement, as well as what the Government’s reneging on that deal would mean for CGN’s 33.5% stake in Hinkley Point C. More specifically, it is right that the Committee is also given a sense of how, assuming it has been determined, the Government intend to remove the CGN minority stake from the Sizewell C company, or, if it has not, the various options being considered.

That brings me to the £1.7 billion committed to nuclear in the recent Budget, the purpose of which, according to the Red Book, is

“to enable a final investment decision for a large-scale nuclear project in this Parliament”—

the very same intention that we are told is the purpose of the Bill. As I am sure Members will appreciate, that statement contained in the Red Book is wilfully obscure. Given that Sizewell C is, as I have said, the last potential nuclear project that could conceivably begin to generate by the end of this decade, and the fact that this Bill creates the funding model that will almost certainly enable a final investment decision on it to be made, the Minister needs to be more transparent with the Committee about the future of the CGN minority stake, because the answer could have real implications for the applicability of the funding model set out in this legislation, and, as a result, the bills that consumers in all our constituencies will pay in the years ahead.

We heard from Professor Stephen Thomas in our evidence session on Tuesday that the cost of buying out the CGN minority stake in Sizewell C is likely to be a tiny fraction of the £1.7 billion allocated to nuclear in the Budget, so what will the rest of that public funding be used for? Will it in whole or in part be used to finance Sizewell C beyond financial closure? If so, how do the Government intend to require the consortium to allow them to participate, and will the investment of direct public funding, if made, have any impact on the amount of RAB financing that will be required for Sizewell C to proceed?

Whatever the £1.7 billion committed to in the Budget is ultimately used for, the involvement of CGN in UK nuclear power over recent years illustrates the risks associated with foreign states, particularly ones of an authoritarian nature, financing and operating critical national infrastructure. We should not only learn the lessons of that, but ensure that clauses 1 and 2 are tightened so that the Bill cannot be used to facilitate such involvement in the future. That is the purpose of amendments 1 and 2. Taken together—this follows on from the point made in the intervention earlier—they would ensure that the Secretary of State cannot designate a given company to benefit from the RAB model provided for in the Bill if the company in question was owned and directly controlled by a foreign power. Their combined effect would not be to prevent the coming together of consortia that are not UK majority-owned. That would almost certainly render future projects unviable or more costly, but the amendments’ incorporation in the Bill would ensure that consortia drawing upon the RAB model could not include investors owned and controlled by a foreign state.

The use of the word “controlled”, as per amendment 1, is critical. This follows on from the point I made in response to the hon. Member for Kilmarnock and Loudoun. We are acutely aware that in attempting to amend the Bill to prevent a company such as CGN from benefiting from the RAB model, we would not wish to prevent all companies in which states have a majority interest—EDF is the most obvious example—from doing so. That is why amendment 1 specifically defines “owned by a foreign power” as one owned and controlled by a foreign state.

I hope the Minister responds to the amendments in the constructive spirit in which they have been tabled and that the Government will see the value of incorporating them into the legislation.

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Greg Hands Portrait Greg Hands
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I would say two things in response. First, Sizewell C may not feel it is appropriate to comment on the deployment of taxpayers’ money. Secondly, I know from long experience of Government that often the best way of securing taxpayers’ money in a negotiation is not to reveal too much about what approach the Government might be taking. We have laid out in the Budget document, which was quoted by the hon. Member for Southampton, Test, what we think is going to be in scope—what the £1.7 billion might be spent on.

The hon. Member for Greenwich and Woolwich asked a more general question about China. He asked whether this was about sending a message to China, or words to that effect. The answer is no. The UK welcomes foreign investment in our infrastructure, but as we have always said, that should not come at the expense of our national security. It is already the case in UK law that all investment involving critical nuclear infrastructure is subject to thorough scrutiny and needs to satisfy our robust national security and other legal and regulatory requirements. The National Security and Investment Act 2021 also strengthens our powers to act should we need to.

Matthew Pennycook Portrait Matthew Pennycook
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I take the point about the National Security and Investment Act. The Minister will know that that was given Royal Assent only in 2021. The strategic investment agreement that applies to Sizewell C was signed off—agreed—in October 2016. I think that I am right in saying that the National Security and Investment Act does not apply retrospectively, so how does it cover the specific arrangements in place as a result of that deal? Can he expand on what regulation is in force to give us assurance about safeguards in relation to foreign states and investment in civil nuclear?

Greg Hands Portrait Greg Hands
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I thank the hon. Gentleman for that intervention. Of course, the final investment decision has not yet been taken on Sizewell C. All the relevant parts of the NSI Act will be in place—he is right to say that it got Royal Assent this year—but that final decision has yet to be taken.

The hon. Gentleman asked about Chinese involvement at Hinkley. May I be absolutely clear? The Bill is not reopening that decision. Hinkley Point C is vital to reducing our reliance on fossil fuels and exposure to volatile global gas prices. CGN is a partner in financing and building that important project. There is no involvement by any Chinese company in any major contract at Hinkley, including the instrument and control system.

As for Sizewell, to be clear, this Bill does not determine the ownership structure of Sizewell C or any other future nuclear project. That is another really important point to understand about the Bill. The Bill increases our options for financing nuclear projects, ending our reliance on overseas developers for finance—we are not excluding overseas developers—which has led to the cancellation of other nuclear projects in the UK. It will ensure that our own new nuclear power plants can be financed by, for example, British pension funds and institutional investors—often from our closest partners. That is the purpose of it.

Matthew Pennycook Portrait Matthew Pennycook
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I would like to pick up and press the Minister on the thrust of amendments 2 and 1, which is a consequential amendment. I take what he is saying about the purpose of the Bill being to attract, potentially, more UK investment—we do not know how much, but potentially—and about not wishing to exclude foreign investment. I take the point that he made earlier about the language used in our amendments and how he sees it as meaning a blanket ban. I would argue that it does not have that intent. There are complexities here, but does he not differentiate in his own mind between state-sponsored companies and state-controlled companies—controlled by foreign powers—that his own Government say pose a systemic challenge, and if he does, why does he not think that it is worth putting this in the Bill? Surely there is a need to differentiate and ensure that those types of companies—the latter—are not able to access RAB funding.

Greg Hands Portrait Greg Hands
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I thank the hon. Gentleman for that intervention. Looking at the amendments, amendment 2 states that

“the nuclear company is not wholly or in part owned by a foreign power”

and amendment 1 states that owned by a foreign power means

“owned by a company controlled by a foreign state and operating for investment purposes.”

To be frank, I have a different interpretation, or at least I am not fully seeing his interpretation as being what he has in the amendment. The amendment strikes me as being worded in such a way that it could, for example, include nuclear operators from some of our closest partners. I look at what I see in front of me, rather than necessarily what Her Majesty’s loyal Opposition say that something might mean.

Matthew Pennycook Portrait Matthew Pennycook
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If the Minister is unhappy with our language, will he undertake to introduce Government language on Report that satisfies that differentiation?

Greg Hands Portrait Greg Hands
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As I have made clear, we think that the Bill adequately addresses these issues, particularly in combination with the National Security and Investment Act, so I do not see it as necessary for us to make any further clarification. Ultimately, the Bill is about bringing in more financial options for future nuclear power, not cutting them.

The hon. Member asked about Bradwell. To reiterate, that is not a decision for now. CGN does not have regulatory approval for its reactor, nor has it submitted any applications to build a nuclear plant in Essex. We are in negotiations for Sizewell C, as the most advanced nuclear project in the UK.

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Matthew Pennycook Portrait Matthew Pennycook
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The Minister is being incredibly generous in giving way, which I appreciate. On the basis of what he just said, could CGN continue to be involved in a future project as long as those two criteria were met for that project, whatever it might be?

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Matthew Pennycook Portrait Matthew Pennycook
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I thank the Minister for his response. I also very much welcome his opining on the sanctity of the UK-EU trade and co-operation agreement—a refreshing change.

I agree with the Minister entirely that we are aligned on the importance of national security in our critical national infrastructure, but I am afraid he has not done enough to reassure me. From the argument he made, as long as the two criteria that he spoke to are met, it seems that we could still end up, having passed the Bill, with financing from companies such as China General Nuclear in future UK nuclear projects. Also—this is critical—because of the sequencing agreement that has been spoken about at length and has been agreed already, that would allow China in theory to own, plan, finance and operate a site at Bradwell. We might have not only CGN financing involved, but CGN operation.

I remain unconvinced by what the Minister said about the national security regulation that is in place. In essence, he said, “Trust the Secretary of State when the point of decision comes”, but we do not think that that is enough. We think this should be in the Bill. If he is unhappy with the wording of the amendment, I invite him to propose wording more appropriate to his mind, but that does the job. We will therefore press amendment 2 to a Division—not amendment 1, which is definitional in nature and consequential. I beg to ask leave to withdraw that amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Greg Hands Portrait Greg Hands
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I think we have already had the debate, but I will say briefly that the clause defines the key terms referred to in part 1 of the Bill. Subsection (2) defines a “nuclear company” as one that holds an electricity generation licence granted by the authority for a nuclear energy generation project. The authority is the Gas and Electricity Markets Authority, the governing body of Ofgem.

The clause goes on to make a distinction between an ordinary licensed company and one that has been designated by the Secretary of State to benefit from a RAB through having its licence modified by the Secretary of State. Subsection (4) defines a “relevant licensee nuclear company”. To become one such, it is necessary for the company to have had its licence modified by the Secretary of State to insert RAB special conditions and to amend the licence terms. It is also necessary for the company to have entered into a revenue collection contract with a revenue collection counterparty, so that RAB funding may flow to the company’s project.

Nuclear Energy (Financing) Bill (Fifth sitting)

Matthew Pennycook Excerpts
Matthew Pennycook Portrait Matthew Pennycook (Greenwich and Woolwich) (Lab)
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The Minister has just mentioned the obligation on the Secretary of State that is in the Bill. My hon. Friend the Member for Southampton, Test made the point that this levy may be £10 a year on average, or it may be more. Have the Government made any assessment of the number of customers that that increase will potentially tip into a qualifying benefit, therefore making them eligible for the warm home discount? Have they assessed what a nuclear RAB might do to the number of people who are eligible for that discount? The argument we are trying to make is that there is potentially a saving for Government here by socialising the risk among non-warm home discount consumers when it comes to funding these types of projects.

Greg Hands Portrait Greg Hands
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The hon. Gentleman asks a fair question, which I would answer in a couple of ways. First, this issue is best considered in the round as part of the process we have outlined, with the consultation and decisions to be made next year. Secondly, the actual amount would depend very much on the nuclear project in question. What we have shown is that we believe the RAB model will make bills overall less expensive to the consumer by roughly £10 a year for an average dual-fuel bill payer, as the hon. Gentleman has rightly pointed out. However, that amount will ultimately depend on the size and scope of the nuclear plant that is proposed. I think a better way to deal with this issue is to deal with it in the round, in the way the Government are proposing. I stress that the RAB is designed to save consumers money over the life of the plant; that is one of the key reasons why we are proposing it.

I am grateful to the hon. Member for Southampton, Test for tabling this carefully considered amendment and for raising the important issue of energy costs for low-income households. Nevertheless, I hope that I have shown both that the Government are already taking action to help this group and that this clause forms part of a wider conversation about how we transition our energy system away from fossil fuels in a way that is fair and affordable for all. I therefore hope that the hon. Gentleman will withdraw his amendment.

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Greg Hands Portrait Greg Hands
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I will try to deal with the two questions that the hon. Gentleman raised. First, he asked whether the funds can be held for a long time, and about the period over which they can be held. Obviously, the regulations will be laid before Parliament in due course, and will be subject to the affirmative procedure. However, I point him to how the contract for difference regime works under the 2013 Act. My belief is that in this case, the reconciliation takes place after a period of months—that is probably the best way to describe it. It depends on what the hon. Gentleman means by somebody holding on to funds, or indeed having a shortfall of funds, for “quite a long time”, but we always have to strike the balance between what is operationally straightforward and what prevents somebody from holding on to funds, or from having a shortfall of funds over a period of time. However, the workings of the contract for difference regime might give the hon. Gentleman the most likely pointers as to what the regulations may look like; they will obviously be subject to consultation in due course anyway.

The hon. Gentleman also asked what happens to the money, and whether the supplier is obliged to return the money to the customer. He raises a fair point. The difficulty is that there is no obligation on the supplier to take the money for the RAB from the customer in the first place. The assumption is that the supplier will bill the customer for the cost of the RAB, but there is not an obligation to do so, so I am not sure that creating an obligation in this legislation to send back money the other way would be appropriate. Again, I refer the hon. Gentleman to the workings of the contract for difference under the 2013 Act.

Matthew Pennycook Portrait Matthew Pennycook
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That raises an interesting, and quite concerning, point: what in the legislation prevents a supplier from overcharging its customers on the basis that it is levying the RAB? Is there a limit to which a supplier can levy the customer? On the basis of what the right hon. Gentleman has just said, the supplier could overcharge the customer, make the payment owed to the counterparty and find itself with additional funds raised from those customers.

Greg Hands Portrait Greg Hands
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First, the whole process will be regulated by the authority—in this case Ofgem—which would have oversight. Secondly, that would also be a matter for the regulations that are to be published in due course. Thirdly, the frequent reconciliations would obviate risk of that happening in the way the hon. Gentleman describes.

Question put and agreed to.

Clause 20 accordingly ordered to stand part of the Bill.

Clause 21

Application of sums held by a revenue collection counterparty

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Matthew Pennycook Portrait Matthew Pennycook
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I rise to speak briefly to amendment 17, because it relates to an important matter that builds on our earlier discussions. I listened to the Minister and heard what he said about the revenue collection contracts arrangement seeking to replicate the tried and tested CfD arrangement, as he put it. The thing that makes what we are talking about different is that there has never been a CfD arrangement of the size of the RAB nuclear model. The scale of the capital commitment involved in a nuclear project dwarfs anything that we have seen before. The changes in total nominal amounts that are likely to happen from year to year in the scale of that capital value could mean that we have large fluctuations in the amounts being collected by the counterparty.

The Minister has said that regulations will address that and are forthcoming via the affirmative procedure. He expects that the reconciliation process of attempting to ensure that the revenue stream matches the allowed expenditure will happen twice a year, but there is the possibility that very large sums will sit within the counterparty, even if just for months. The amendment tries to address the possibility of those funds, or a proportion of them, finding their way into the Consolidated Fund.

It surely has to be the case, and I assume that it is the Minister’s intention via regulations, that the reconciliation process should be as frequent as possible so that the revenue stream matches the allowed expenditure at any point in the construction. I foresee circumstances in the production phase, however—perhaps not in the construction phase, because it is unlikely that a future nuclear project will come in under budget given their history—in which a company’s revenue from power sales might exceed the allowed revenue. There is a chance that we could see large mismatches and, therefore, lots of funds being stored up in the counterparty.

The central thrust of what the Opposition are trying to do with the Bill is to protect consumers and ensure that they pay the lowest possible amount to get a project such as the one that we are talking about onstream. It is therefore really important that we ensure that the Treasury cannot in any circumstances, unless it has exhausted all other options, take part of the funds that may sit with the counterparty for relatively brief periods. The Treasury could decide to take sizeable amounts, and it is important that they flow back to suppliers and, ultimately, to customers. That is the thrust of the amendment.

Greg Hands Portrait Greg Hands
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As the hon. Members for Southampton, Test and for Greenwich and Woolwich laid out, amendment 17 addresses the situation in which funds held by the counterparty may be paid into the Consolidated Fund, which of course is the Government’s general bank account at the Bank of England. Currently, the legislation allows the revenue regulations to provide for sums to be paid into the Consolidated Fund. The intention of the amendment is to narrow the scope of that so that the regulations can provide for sums to be paid into the Consolidated Fund only where there is no alternative.

I thank the hon. Members for the amendment, which they explained well. It certainly echoes my sentiment that consumer funds should not generally go into Government accounts. I reassure Members that we envisage the power to have limited but important uses. For example, it could be used to ensure that the counter- party repays a loan given by the Government—by the taxpayer—to respond to an emergency. That is not a hypothetical situation. We saw the importance of it quite recently in the course of covid, when the Government did indeed have to provide a loan to the counterparty for the contract for difference regime: to the Low Carbon Contracts Company.

The taxpayer should be able to be repaid that loan, but the amendment provides that sums cannot be paid into the Consolidated Fund where there is an alternative. I could see a number of people making an argument that different things that could be done with that money would provide alternatives to what is being envisaged: in this case, repaying the taxpayer. If passed, the amendment would unnecessarily narrow the scope of the power in a way that would limit its use. I hope that my explanation has shown Members the importance of the power, which is in my view unlikely to be used. However, I have given a real example from the last couple of years of where exactly such a situation arose.