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Proliferation in ParliamentBack to Proliferation in Parliament, Winter 2008 Westminster ParliamentNuclear Industry Finance Debate, Westminster Hall Debate, 19 November
2008
Nuclear Industry Finance4 pmPaul Flynn (Newport, West) (Lab): This is a lamentable saga of a breakdown of parliamentary accountability on nuclear industry finances. It is a matter of the gravest importance, involving the most hazardous nuclear site in the country, and huge sums of money. Initially, the contract was worth about £7 billion—£1 billion a year—but eventually it could cost up to £93 billion. The Government have been bewitched by the pied piper of nuclear power, just three years after deciding that nuclear power was financially an unattractive prospect. They are now uncritically embracing it as a panacea. That might explain the disgraceful events that have taken place. It may also be a subterfuge to bury embarrassing news on the continuing saga and the enormous cost of the nuclear legacy, and also to disguise the fact that the Government are dumping a potential multi-billion pound liability on the taxpayer in a wholly unwarranted and possibly illegal new subsidy for the nuclear industry. All hon. Members except two have been denied any chance of commenting on the policy, which is a parliamentary outrage. Early-day motion 2321, which was signed by more 30 hon. Members, asked for action on the matter. On 14 July, my right hon. Friend the Member for Croydon, North (Malcolm Wicks)—I am delighted to say that he is in his position today—wrote to the Chairman of the Public Accounts Committee, and sent a copy to the Chairman of the Business, Enterprise and Regulatory Reform Committee, in which he set out the proposed arrangements for a public sector supported nuclear indemnity for the winner of the competition for the parent body organisation to take over the management of the massive Sellafield site. He inserted inter alia: “Given the low probability of a claim being brought, the Nuclear Decommissioning Authority has assessed that the benefits of engaging a contractor will far outweigh the small risk that the indemnity may be called on.” He said “small risk”. That is a key issue. The risk was so serious that the main contractor said publicly that without the indemnity his company would withdraw from this very lucrative contract. He said that it was not prepared to take on the insurance risk. The Minister’s letter also said: “I am placing a copy of this letter and the Departmental Minute in the Library of the House.” The Minister placed the letter in the Library, but not on 14 July. It appeared in the Library on 15 October —75 days after the final date on which hon. Members could object. As hon. Members have only two working weeks in which to comment on such departmental minutes, that effectively meant that no MP, other than the two Committee Chairmen, had sight of the minutes within the specified period. That alone should invalidate any subsequent attempt by Ministers to push ahead with the concluding transfer of the management contract for Sellafield. None the less, they concluded the contract on 6 October, the first day that Parliament resumed after the summer recess. Yesterday, in our splendid debate on the feed-in tariff, I heard the
Minister talking about how slowly Parliament moves on many desirable objectives.
However, in the 19 Nov 2008 : Column 120WH case of nuclear, the Government move with the speed of a striking cobra. When it comes to renewables, their actions are very similar to that of an arthritic sloth, yet speed was of the essence in this matter. By coincidence, I tabled a detailed question to the Minister on 14 July. I asked him
Therefore, the Department should have been well aware of my interest and possibly that of other hon. Members. The reply came back, which said inter alia: “It would not be viable for any of the bidders to proceed without an indemnity because any fee earning benefits of the contract would be overwhelmed”— interesting choice of words— “by the potential liabilities. The NDA has assessed that the benefits of engaging a new contractor far outweigh the remote risk that an indemnity might be called upon”—[Official Report, 14 July 2008; Vol. 479, c. 76W.] The Minister chose not to inform me at that time—this was in July again—that he had written to the Chairmen of the two Select Committees and that he had not put the departmental minute in the Library. Perhaps the Minister could explain why that was the case. I pursued my inquiries. I tabled a question on the insurance indemnification and asked what the financial value was of the insurance indemnity. The answer said: “While the impact of any call on the proposed nuclear indemnity could be very high, there is an extremely small possibility only of the indemnity ever being used, and it is therefore not possible to put a meaningful financial value on the indemnity.”—[Official Report, 22 July 2008; Vol. 479, c. 1146W.] May I gently suggest to the Department that the reason why it cannot put a value on the risk is not because the risk is small, but because the liability is enormous, given the cost of clearing up after any nuclear accident? Now, that responsibility is being put on the backs of the taxpayers, because neither the contractor nor commercial insurers will accept the risk. On 28 August, during the recess, I again wrote to the Secretary of State to find out what was happening with the PBO transfer. I said: “When does the Government intend to place a similar departmental memorandum”— to the one that accompanied the Drigg PBO transfer in February— “before Parliament.” I also asked him whether he would place into the public domain “all the correspondence”— including letters, e-mails and memorandums— “between ministers or officials in BERR and the NDA in regard to the indemnification for Sellafield.” That has never been done. I ask the Minister to do that now. In response to my further inquiries and to my point of order on 22 October,
I received a further reply from the Minister. He talked about the schedule
for evaluation 19 Nov 2008 : Column 121WH of the PBO bids provided for the announcement of a preferred bidder on or around 11 July. He went on to talk about the rigour of the programme that had been carried out. He was not very convincing. The Minister also said that there was no scope for slippage in the contract because it would cause problems if a new contractor had to be found for Sellafield. The Department for Business, Enterprise and Regulatory Reform circumvented the usual procedures in place to inform Parliament, and privately wrote to the two Select Committee Chairmen instead, and failed to lodge the minute. On the same day as the Minister’s letter to me, 27 October, the Chairman of the Public Accounts Committee—a greatly respected senior MP—wrote to the Secretary of State saying that the guidance to Ministers in the manual “Managing Public Money” is unequivocal. He cited the relevant extract: “It is essential to give Parliament prompt and timely notice of any significant commitments, including contingent liabilities into which the Government intends to enter.” The Chairman also said that the Public Accounts Committee will feel that the period for objection should be reopened. That is the same view as that of those who signed the early-day motion. Mr. Andrew Smith (Oxford, East) (Lab): I commend my hon. Friend’s forensic work on the issue and support his call for full and transparent accountability in respect of Sellafield, as well as for any financial support from taxpayers or consumers for future nuclear power, whether through subsidies or more covertly through indemnities or guarantees, none of which, on his evidence, would be in the public interest. Paul Flynn: I am grateful for that intervention, and I agree entirely with the points made. Things get even more worrying in the rest of the Secretary of State’s letter of 3 November. He admitted that hon. Members had not been informed due to “an administrative error”, but then went further, seemingly denying his own claim and—this is rather alarming—attempting to justify the strategy of circumventing appropriate parliamentary scrutiny. He said: “‘Managing Public Money’ sets out two procedures for notifying an impending indemnity—notifying the House or writing to the Chairs of the relevant Committees. These are alternates.” That is the letter that he wrote challenging the Chairman of the Public Accounts Committee. I believe that what the Secretary of State said and his interpretation lay down a precedent for future policy. We must resist the idea that something of enormous cost and importance—a huge burden on taxpayers now and in the future—need not go through parliamentary scrutiny, but that one or two Select Committee Chairmen can place a tick on it. It is an extraordinary usurpation of the rights of parliamentarians to suggest it, but that is what he is saying:
that is, to the Chairman of the Public Accounts Committee— “instead of notifying the House, undertaking to withhold final approval to proceed” until there was a reply. 19 Nov 2008 : Column 122WHOf course, there was a reply. The Chairman did not object, and so the process continued. The Secretary of State said: “No objections were raised and you confirmed in your letter to Malcolm Wicks of 22 July...that you had no objection to the Department’s proposal”. What about all the rest of us? Many of us did have objections. It was clear from the flow of parliamentary questions—I have quoted mine alone, but other people have been involved—that we had no opportunity whatever to object, because we did not know that the minute was there until 75 days after the period of objection. I am sure that hon. Members present will agree that that is an utterly unacceptable rationalisation of something that was at best a foul-up, but looks more like a cover-up. I would like to draw attention to the question of risk and how serious it is. The Washington-led management consortium URS was reticent to take over the insurance for Sellafield because, as its representatives said in a public meeting, it is highly hazardous and a very dangerous nuclear site. Who says so? In October 2006, Justice Openshaw presided at the trial of British Nuclear Group for a processing accident at its Thorp site. His conclusion about the hazards of Sellafield was: “By reason of its huge scale, its nature and its complexity Sellafield...is the most significant and potentially the most hazardous nuclear site in this country.” Even the British Nuclear Group’s own board of inquiry report on the incident, which involved something called a feed clarification cell, stated: “Given the history of such events so far, it seems likely that there will remain a significant chance of further plant failures occurring in the future”— I stress this—
of the report’s recommendations. BNG decided to change the system, but said that the risk was still there. There are extraordinary statistics, including in the memorandum submitted to the Select Committee on Defence in January by the international nuclear safety expert Dr. Gordon Thompson, executive director of the Institute for Resource and Security Studies. He said that “the B215 facility at Sellafield...houses 21 steel tanks”. 4.15 pmSitting suspended for a Division in the House. 4.25 pmOn resuming— Paul Flynn: From the evidence given by Gordon Thompson, the nuclear specialist, to the Defence Committee, I want to give one example of the danger of Sellafield. He described the amount of high-level radioactive waste there as containing
He went on to say that, by comparison,
At the time of the Chernobyl accident we were assured that it was a mild
risk, and yet the sheep in north Wales that were contaminated 22 years
ago are still under
control orders now. To put it another way, there was 27 kg of caesium-137 at Chernobyl; there is 2,400 kg at Sellafield. No doubt the company that took over these consortiums exercised due diligence before reaching the conclusions that it did. Hon. Members of all parties should collectively regard what has taken place since then as unacceptable, sharp and evasive practice in a modern parliamentary democracy. I urge the Minister when he replies to put away any prepared notes that he has and just respond to these points: I ask him to commit Her Majesty’s Government to suspending the current contract between the Nuclear Commissioning Authority and the new USR Washington-led parent body organisation, or PBO; I ask him to look again at the subsidy that is being paid and to check that it is within European rules; I ask him to postpone the planned go-ahead on 24 November until such time as this House has had the opportunity to scrutinise in detail all the financial implications for taxpayers of this indemnification procedure; and I ask him to set up a fully independent examination of Sellafield’s risks and insurability. Finally, the series of events that I have just described besmirches the good name of Parliament by contemptuously disregarding the rights of parliamentarians. The Government and the nuclear industry cannot bury the true cost of nuclear power. It is our responsibility to clear up that mess, but they must be open and transparent. In their plans for future nuclear operations, they have tended to disregard the vast cost of nuclear waste and, in this case, the insurance that is an essential part of that cost. I urge the Government and the nuclear industry to face up to their demons and ensure that the industry pays its full costs. Mr. Peter Atkinson (in the Chair): Order. Before I call the Minister, I inform hon. Members that this debate will now end at 4.42 pm, subject to there not being another Division in the House. 19 Nov 2008 : Column 123WH—continued 4.28 pmThe Minister of State, Department of Energy and Climate Change (Mr. Mike O'Brien): This issue arose as a result of an administrative error by a junior official in the Department for Business, Enterprise and Regulatory Reform. That official was told that the letter to the Chairman of the Public Accounts Committee on this matter needed to go in the Library. It did not go in the Library. When it was checked, some months later and after the parliamentary recess, whether that letter had gone in the Library, it was found that it had not gone in. On that day, that letter was put in the Library. In the last 15 minutes or so, I have heard references to cover-up, to conspiracies and to contempt of Parliament, and I say this to my hon. Friend the Member for Newport, West (Paul Flynn): his concoction of conspiracy theory, innuendo and hyperbole has reached new heights in this House. It is the case that there was a minor error by a junior official, who should not be crucified for that error by my hon. Friend; that would be unworthy of my hon. Friend. This happened within the Department. There was no requirement on the
then Minister of State, my right hon. Friend the Member for Croydon, North
(Malcolm 19 Nov 2008 : Column 124WH Wicks), to place the letter in the Library. He took the view that that was necessary in order to be open about this matter. An error was made by a junior Department official—humans are fallible—but I expect better of the hon. Gentleman than to talk about cover-ups and conspiracy. This attempt to manufacture a mountain out of such a tiny molehill is ridiculous. The idea that the letter was secret is complete nonsense; it is a farce. Letters to the Chairman of the Select Committee on Public Accounts are not secret documents. They belong to the Committee, and members of the Committee can see them and refer them to the press. Far from trying to mount some sort of cover-up, as my hon. Friend suggests, my right hon. Friend was trying to be open with the House of Commons and to make sure that Members knew what was going on. I utterly refute the allegations, innuendo and concoctions that my hon. Friend has put forward. It is unworthy of him, and I expected much more from him. Paul Flynn: Will the Minister explain why the Members who were interested in this matter were not informed? There is a great deal more to this. The Department tried to blame the Library, saying that it had not told the truth. The Department also said, in a press release to the Western Mail, that the reason it was done was because it was a rushed procedure and it did not have any time. The Department has been wholly consistent on that, but it has given two versions. The first is that it did not have time and had to rush things through, and the second is the one that the Minister is giving now, that there was a failure. Mr. O'Brien: I am sorry that my hon. Friend believes that he should be specifically informed of such matters above other Members. The two people who were informed were those who were clearly in a position to get the letter. The Public Accounts Committee Chairman was to receive the letter and would therefore clearly be informed. The letter was put in the Library to make it available to anyone who wanted to read it. If my hon. Friend has a long-term opposition to nuclear, that is fine. I have no problem with that. Many people in the House have long-term oppositions to nuclear, but they do not concoct stories, conspiracies and cover-ups out of nothing as he has done. I have seldom felt so worried by the way in which stories are made up out of nothing as when I was listening to him today. There has been a regrettable error, and the Department regrets that things were not done as they should have been. My right hon. Friend wanted things to be done properly and ordered them to be done. He took a decision, not because the procedure required him to, but because he wanted things to be done openly. My hon. Friend suggests that the opposite was the case, but he is simply wrong. My hon. Friend accuses the Government of dumping liability on the public,
but who on earth does he think owned those nuclear power stations? Does
he think that they were somehow owned by a private company when they were
created? They were owned by the public—he knows that. No liability
is being dumped on anyone, secretly or otherwise; there is a public liability.
The Nuclear Decommissioning Authority has been set up to deal with the
public liabilities that we have as a country and as a Government. We are
trying to deal with those 19 Nov 2008 : Column 125WH liabilities in a sensible, coherent way, and to ensure that that is done openly and with full consultation. There has been widespread consultation on this matter. The idea that something is happening secretly is nonsensical, as this matter has been addressed in the blaze of publicity. The nature of the indemnity is very clear. There is a legislative restriction, in terms of the Government’s liability, so that they are able to deal with those liabilities if an incident happens in the UK. Under the Paris and Brussels conventions, other countries have signed up to agreements on how nuclear incidents might be dealt with, but the United States is not a signatory to some of those. My hon. Friend says that we are failing to put a value on the level of the indemnity, but what is the indemnity about? It concerns the remote possibility that if an incident happened in the UK, an American court might take a view about a court fine or settlement over there. All the companies that bid in the process said that they were quite to happy to undertake the task, but that they would not be responsible for a liability that some American or other court, which has not signed the Brussels and Paris conventions, might impose. The NDA therefore decided, quite properly and openly, that it would have to come forward with the indemnity. When that was done, my right hon. Friend wrote to the Public Accounts Committee, and that letter was to go into the Library. An administrative error, and nothing more, resulted in that not happening. The day that we found out that it had not happened, it was immediately corrected. That is what happened, and all the other claims do not add up to a hill of beans, if we are talking about hills and mountains. Mr. Jamie Reed (Copeland) (Lab): I am gratified by the way in which my hon. and learned Friend is dissecting the incoherent concoction that has been put before him. Much has been said about the speed with which the process has been carried out, but does he agree that speed was of the essence? The regulator, the NDA and the Government all wanted the process to be addressed with speed, and speed was essential for operations at the Sellafield site to remain both smooth and safe. Mr. O'Brien: That is the case. We had to undertake the process, for which negotiations and bids were received, and the letter of indemnity had to be agreed at the end of that process. As soon as it was agreed, it was decided that Parliament should be informed and that a copy of the letter to the Chairman should be put in the Library. I want to make it clear that it is the Government’s responsibility
to deal with and to pay for decommissioning and to clean up our historical
civil nuclear liability. The NDA’s mission is therefore funded from
the public purse, and is subject to parliamentary approval for expenditure
and funding in the normal way. Since its creation, significant resources
have been allocated to decommissioning. The NDA’s total spend was
£2.4 billion in 2005-06, rising to £2.8 billion in 2007-08.
Its budget for the next three years is set to rise to more than 19 Nov 2008 : Column 126WH £8 billion, which is the largest amount ever spent on UK civil nuclear clean-up programmes over that sort of period. The competition at the heart of this issue was also at the heart of the NDA’s mission to deliver fast, cost-effective clean-up. In March, the competition for the low-level waste facility near Drigg was completed, and the Sellafield competition is on course for completion on 24 November. I am letting my hon. Friend the Member for Newport, West know that. Those are significant milestones, and indemnity is a common feature in those sorts of commercial contracts. In the case of the NDA’s estate, the decision whether to grant a nuclear or other form of indemnity to a contractor is a commercial matter for the NDA. It approaches each competition on a case-by-case basis. If giving indemnity represents good value for money, it will consider giving it on sensible commercial terms—I should like to emphasise that point. Paul Flynn: Will the Minister give way? Mr. O'Brien: I have given way already. It is about time that I set out my case to my hon. Friend, because I would like him to listen to one or two things. We have listened to his views at some length, so perhaps he would care to listen to some of my replies to his points. In the UK, claims relating to third-party damage arising out of nuclear occurrence are exclusively regulated by the Nuclear Installations Act 1965, which implemented the principles long established in the Paris and Brussels conventions on third-party nuclear liability. The NIA restricts compensation claims to personal injury and property damage caused by a nuclear incident in the UK. It also excludes from making claims those who are not UK citizens or from other Paris and Brussels signatory states. The United States is not part of that arrangement. That means that there is an extremely small risk—I emphasise that—of non-eligible victims taking their claims to courts elsewhere, possibly the country of the contractor, such as the United States. The NIA and the Paris convention place a financial cap on the liability of the operator, currently £140 million for standard sites, in return for the acceptance of strict and exclusive liability. That means that claimants do not have to prove fault, and all claims are channelled to the operator, not to his supply chains. However, any contractor whose home country is not party to the convention risks unlimited liability if an action is brought in courts in their country, for instance the US. Parties cannot obtain insurance against that. An indemnity was therefore considered appropriate against the risk of such claims arising from a nuclear incident that falls outside the protections of the Nuclear Installations Act and the Paris and Brussels conventions. There are no insurance facilities available for that risk. I say to my hon. Friend that the matters in question have been dealt
with appropriately. I apologise for the error of a junior official in
the Department, and he was right to take us to task, but not in the way
in which he did. He exaggerated, went way over the top in his condemnations
and traduced my right hon. Friend who was seeking to be open with him
and other Members, not, as he suggested, to form some sort of cover-up.
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