HL Deb 22 March 2004 vol 659 cc472-85

3.21 p.m.

The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Whitty)

My Lords, I beg to move that the Bill be now further considered on Report.

Moved, That the Bill be further considered on Report.—(Lord Whitty.)

On Question, Motion agreed to.

Clause 18 [Directions by NDA to the person with control]:

Lord Jenkin of Roding moved Amendment No. 36: Page 18, line 23, at end insert— (3A) In any case in which subsection (3)(g) would require the person with control of the installation, site or facility to disclose to the NDA information, the disclosure of which (otherwise than under any enactment) would constitute a breach of confidence actionable by any person—

  1. (a) the NDA shall consider, having regard to any representations made promptly following receipt of the direction by the person to whom the direction was given, whether the provision of the information is strictly 473 necessary for the purposes for which it was required to be provided and shall require the provision of the information only if it is strictly necessary; and
  2. (b) the person to whom the direction was given shall have no duty to disclose the information to the NDA unless or until the NDA has agreed to be bound by confidentiality obligations in substantially the same terms as the confidentiality obligations which are binding on that person in relation to the information."

The noble Lord said: My Lords, we have a long list of amendments to debate, so I shall be uncharacteristically brief. The point of this amendment is simply that anyone given a direction under Clause 18 by the Nuclear Decommissioning Authority will have to be subject to some of the usual constraints on what should not be disclosed on the grounds of confidence.

Last Thursday, the Government moved two amendments in response to long debates that we had in Grand Committee on what should be disclosed in the NDA's plans, in the strategy that it publishes and in its annual reports. As far as we could see, the government amendments completely and satisfactorily met the anxieties that had been expressed.

However, those amendments did not cover directions given under Clause 18. That is why I have tabled Amendments Nos. 36 and 37. The whole House accepts that in pursuit of its objectives the Nuclear Decommissioning Authority must have a series of powers, in particular, if I may put it in the vernacular, the power to tell other people what to do. There will be site licensees, contractors and, in many cases, sub-contractors. The clause gives the power to make directions to give effect to that intention.

Most of those are uncontroversial, but there are dangers in the directions that may be given to disclose information. Amendments Nos. 36 and 37 would excuse somebody to whom a direction has been given from a disclosure that would constitute a breach of confidence actionable by any person. Paragraphs (a) and (b) of Amendment No. 36 set out the procedure by which this should be considered. In the first place, the NDA should require information only if it is strictly necessary. Secondly, the person to whom a direction is given shall have no duty to disclose it to the NDA unless the NDA has agreed to be bound by the same confidentiality obligations.

The Government have proved very sensitive to the issue of disclosure of information that could be to the detriment of individuals or organisations, particularly in relation to commercial confidentiality, but there are no restrictions, as I see it, on what they can require to be disclosed in response to a direction. Amendments Nos. 36 and 37 remedy that lack and are one way of dealing with the problem. They are not on exactly the same terms as the noble Lord, Lord Whitty, very briefly described to the House last Thursday on disclosure under the other circumstances, but in the circumstances of Clause 18 they are perfectly reasonable amendments.

Government Amendment No. 38 is also in this group. It is very much shorter than my amendments and I am not sure how, if at all, it deals with the problem that I have described. If the NDA is going to do its job properly, of course it must require all the information that it needs, but there must be some constraint because of the need for confidentiality. I am not at all sure that government Amendment No. 38 provides that, but no doubt the noble Lord, Lord Whitty, will satisfy my curiosity and anxieties. I beg to move.

Lord Whitty

My Lords, Amendment No. 38 deals with the balance of the relationship between the NDA and site licensees and others. The rationale behind taking it together with Amendments Nos. 36 and 37 is that our amendment rests on giving the parties flexibility to choose which aspects of their relationship should be governed by the contract and which parts will be subject to directions. It may not be entirely obvious to the noble Lord from the wording, but our amendment addresses some of the concerns that have inspired his two amendments. As he said, we have had prolonged debate on this and other clauses dealing with the disclosure of information.

Clause 20 suspends the entire duty to comply with directions from the NDA given under Clause 18 at any time when an agreement is in force. We have reached the conclusion that the wholesale suspension of the duty to comply whenever there is a contract may be too rigid. There should be greater flexibility so that the parties themselves can agree which aspects of their relationship should be governed by directions and which by contract. That flexibility would have benefits for the NDA as well as for the contractors. It would give the NDA the ability to give directions to the person with control in circumstances where such a person may not be complying with all the terms of the contract. That would enable the NDA to ensure compliance with what needs to be done to discharge its responsibilities without that affecting the rest of the relationship.

The amendment addresses the concerns behind Amendments Nos. 36 and 37 by allowing the flexibility to suit the needs of the contractor—the counterparty—in different circumstances. For example, existing contracts with third parties may contain confidentiality provisions that would be breached if that information was disclosed to the NDA as a consequence of a contract. As part of our continuing discussions with stakeholders, we have been advised that such confidentiality provisions would not be breached if the information were disclosed in order to comply with the statutory requirement. However, they also advise us that there may be instances when it would be preferable for the disclosure of information from the counterparty to the NDA to be provided for in a contract.

We have explored the options with those who would be affected and have had some considerable discussions with them. We have informed them that it would be best if it were possible to choose which aspects of the relationship would be governed by directions and which by contract. They agree. and the amendment is aimed at providing the necessary level of flexibility.

The effect of the amendment would be that the parties could decide whether Clause 18(3)(g) should be subject to the terms of that contract, for example. In our view, if this amendment were agreed, it would be a more fit-for-purpose framework to deal with confidentiality issues, which are the objective of Amendments Nos. 36 and 37. It will enable companies with control to determine with the NDA on a case-by-case basis which matters are governed by contract and which by statutory powers of direction. The stakeholders—the main companies involved—have indicated that they welcome this flexibility. In such circumstances, when the company in control has a large degree of control over whether arrangements for disclosure of information are governed by contract or direction, and that is the nature of the relationship, we do not consider it necessary to further amend the Bill in line with this and the other amendment, which was moved by the noble Lord, Lord Jenkin.

On that basis, and with that explanation of the admittedly rather terse terms of Amendment No. 38, I hope that the noble Lord will not press his amendments to a Division.

3.30 p.m.

Baroness Byford

My Lords, I thank the Minister for explaining the government amendment and my noble friend for giving the reasons why he moved his amendment. Will the Minister tell the House a little more? He said that the government amendments are there to give greater flexibility, that a decision will be taken on a case-by-case evaluation and that the Government gave the options to the companies involved to come to a decision. I have not had any comeback from the companies as to whether they are happy with the situation—and I do not know whether my noble friend has had any response. But it seems strange that the provision is left so open-ended—in other words, that the matter will be judged on a case-by-case basis to give greater flexibility. The provisions need greater clarification than the Minister has given us, bearing in mind the proposition put by my noble friend. I should be glad for a little bit more from the Minister.

Baroness Carnegy of Lour

My Lords, it seems to me, listening to this debate for the first time, that the important thing is to know what happens if the company concerned will not make an agreement—although the Minister has suggested that those who are likely to be concerned are happy with the government amendment. If the agreement each time is to be case by case, what happens then? The House will probably need to know that.

Lord Whitty

My Lords, when I refer to a case-by-case basis, I am referring to a contract-by-contract basis, not to every individual instance. The House needs to recognise that the vast majority of relationships with the NDA and the site contractors will be covered by contract; they will not be covered by the area that is subject to direction, to which the concerns expressed by the noble Lord, Lord Jenkin, relate. Apart from the information for which there is a statutory duty to be published, which we discussed the other day, the NDA will need to pass on the type of information that Amendments Nos. 36 and 37 are seeking to protect only in response to a freedom of information inquiry or, possibly, to fulfil its own functions as required by this Bill and other legislation.

It is feasible that such situations are excluded from the contract, so that there would be areas still subject to direction for those reasons, but for all other areas covered the contract there would be a specification as to how a request for information would be dealt with, and therefore the confidentiality attached to it. The reason for the case-by-case basis is that the process is done contract by contract with each site licensee; that does not mean that an individual case would always be subject to negotiation. They would normally fall within the guidelines set out in the contract.

Lord Jenkin of Roding

My Lords, I am sure that the Minister has done his best to explain what in Grand Committee we found an extremely complex subject. We were very confused about the role that the Freedom of Information Act 2000 would play, which comes into effect next year, and what would have to be dealt with by contract. Indeed, the Government have sought to deal with the issue by putting in specific statutory protection, which they did through the amendments that the Minister moved towards the end of Thursday's sitting, to give protection for personal information and commercial confidentiality.

I am not at all clear from what the Minister said, and in particular from the answers that he gave to my noble friend Lady Byford, exactly how the matter is to be dealt with. However, as we have discovered, there are occasions when one needs to read the Minister's words very carefully to be able to understand them. Mostly, one does understand them—but, sometimes, one does not.

It is splendid to see my noble friend Lady Carnegy of Lour back in her place, as we missed her on Thursday. I do not believe that her question has been answered. I shall not press the amendment to a Division today, but I reserve the right to return to the matter at Third Reading when we have studied the Minister's remarks. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 37 not moved.]

Clause 20 [Duty to comply with directions under s.18]:

Lord Whitty moved Amendment No. 38: Page 20, line 4, leave out from "duty" to end of line 14 and insert "to the extent that he is relieved of it by the provisions of an agreement—

  1. (a) between the NDA and that person; or
  2. (b) between the NDA and a body corporate of which that person is a subsidiary."

On Question, amendment agreed to.

Clause 21 [Financial responsibilities of NDA]:

Lord Triesman moved Amendment No. 39: Page 21, line 7, after "authorised" insert "or required

The noble Lord said: My Lords, this group of amendments on Clause 21 make technical and drafting changes, whose purpose is to improve and offer greater clarity to the contracting framework through which the NDA will introduce competition for nuclear site management.

Amendment No. 39 tackles a particular concern on the proper interpretation of the phrase "authorised by" in Clause 21(4). As a consequence of discussions with stakeholders we wish to clarify that all actions under Clause 17, including any costs that may arise as a consequence of doing nothing, are covered by the NDA's funding obligations. There was some uncertainty expressed at an earlier stage over whether Clause 17(2) authorises the person with control to stop using a site. In other words, the concern is that the person with control would not need to be authorised not to do something which could then result in the NDA not meeting the costs of such an eventuality, where for example regulatory action had halted work. Incidentally, I know that there were three "nots" in that sentence; as there was an odd number, noble Lords can see that the sentence ended up in negative form I make that point for the mathematical purists in the House.

The amendment to add "or required" makes it clear that, if there is a cost attached to the person with control not doing something, Clause 21(4)(b) would also cover that. An example might be a situation in which the person with control is obliged to pay off sub-contractors as a consequence of regulatory action, which prevents or delays the work that they were engaged to do being carried out. The amendment means that any cost that the person with control incurs as a result of using the site for regulatory compliance—covered by the term "authorised"—or preventing the use of the site for a purpose which would be a contravention—which is covered by the term "required"—will be met by the NDA.

Amendments Nos. 40 to 43 clarify that the NDA's financial responsibility under Clause 21 does not preclude the person with control from incurring liabilities—for example, to pay staff salaries or sub-contractors—even though the costs will in effect be reimbursed by the NDA. That was always the intent, but we have sought to respond to uncertainty brought to our attention by the stakeholders and their advisers.

Finally, I turn to Amendments Nos. 44 and 45. Clause 21 as currently drafted requires the NDA to pay for everything that relates to its responsibilities unless it is allowed by the clause to pass that burden on under subsection (9). This reflected the view at the time the Bill was finalised for introduction that payment under the contract would be on the basis of reimbursement of costs, plus a fee. We expect this to remain the case in respect of contracts awarded in the initial stages of the NDA's existence.

However, as work on setting up the NDA and on the proposed contract structures has continued it has become clear that in the long term it would be overly restrictive if the NDA could not enter into contracts that provided for payment on the basis of a fixed price as opposed to cost reimbursement. We believe that we should enable the NDA and a contractor to agree on the element of risk sharing, for example on outturn cost. I beg to move.

Lord Jenkin of Roding

My Lords, I shall make a few observations on what the noble Lord, Lord Triesman, has said. In the somewhat acrimonious exchanges that we had at the beginning of business last Thursday, when we complained about the plethora of government amendments that have poured on to the Marshalled List in the past few days, I think that I was guilty of not expressing sufficient thanks to Ministers for the amount of trouble that they have taken in writing letters to us to try to explain what they were going to do. Other noble Lords may feel the same. Some of the letters were not wholly intelligible, at least to my feeble mind, but I am sure that Ministers were trying to be helpful.

In this case, the noble Lord, Lord Whiny, sent a number of us copies of an exchange of correspondence between one of his senior officials, David Hayes, director of the NDA team, and Mr Alvin Shuttleworth of British Nuclear Fuels. Unlike some of the other letters I referred to, these were extremely clear. I understand that British Nuclear Fuels now feels that it is sufficiently covered by the addition of the words "or required" in the first amendment.

The only question that I have to ask—which we discussed at length in Committee and again on Thursday—is why the complex relationship between the department, the NDA, which is being set up by the Bill, the management in charge of the site, the site licensees and the contractors could not have been worked out before legislation was brought before the House. One gets the impression that this was all patched up in the department and when the Bill was published a lot of people said that it was not right. It is not a good way of legislating.

Nevertheless, having said that, I agree that the words "or required" will meet the concerns that BNFL has expressed to us: that it would find itself liable to pay and it would not be reimbursed by the NDA if, for instance, a contract had to cease and the work was not done. So I accept these amendments but I express some surprise that they were necessary.

3.45 p.m.

Lord Triesman

My Lords, I suspect that those with great experience of the lengthy passage of complex Bills might observe that it was often thus. As Bills go through, the nature of the debate means that complex issues are understood more thoroughly and the amendments that are needed are then set out in a way that meets the objections. I hope your Lordships agree that this is part of the process. On this occasion, I can say that the exploration led to greater illumination and the changes that noble Lords urged in Grand Committee are in amendments today. I hope they are acceptable to the House in that light.

On Question, amendment agreed to.

Lord Triesman moved Amendments Nos. 40 to 45: Page 21, line 13, leave out subsection (5) and insert— (5) Nothing in so much of this section as—

  1. (a) restricts the extent to which a person is, or may become, liable to meet any costs in relation to a site, installation or facility, or
  2. (b) requires any costs in relation to an installation, site or facility to be reimbursed or otherwise met by the NDA, is to be construed as restricting the extent to which the person with control of the installation, site or facility may be or become subject, in relation to a person other than the NDA, to the liability or obligation in respect of which the costs arise."
Page 21, line 17, after "NDA" insert "for the purpose of discharging its financial responsibilities Page 21, line 20, after "liabilities" insert "to persons other than the NDA Page 21, line 22, leave out "and" and insert— ( ) It shall also be the duty of the NDA to make all such arrangements as it thinks fit for securing Page 21, line 27, leave out subsection (7). Page 21, line 37, leave out subsection (9) and insert— ( ) The preceding provisions of this section have effect in relation to an installation, site or facility subject to the terms of—
  1. (a) any agreement between the NDA and the person with control of the installation, site or facility or
  2. (b) any agreement between the NDA and a body corporate of which that person is a subsidiary."

On Question, amendments agreed to.

Clause 27 [Tax exemption for NDA activities]:

Baroness Miller of Hendon moved Amendment No. 46: Page 25, line 40, leave out paragraph (b).

The noble Baroness said: My Lords, I shall move Amendment No. 46 which stands in the names of my noble friends Lady Noakes, Lord Jenkin of Roding and my own. I shall also speak to the other amendments in this group. My noble friend Lady Noakes apologises for being unable to be with us this afternoon because of other commitments. She has asked me to deal with the amendments standing in our names in this group.

In Grand Committee, my noble friend Lady Noakes put a number of detailed questions to the Government in respect of the tax clauses. In response, the Government said that they would table unspecified amendments. It says something about the quality of the drafting of the Bill that the Government had to table 27 amendments to parts of the Bill that should have been routine and technical. As the Minister is aware, these amendments were available very late. We may want to return to them at Third Reading when we have had a chance to consider them in more detail.

For today, I shall just raise a few issues. The Government have tabled a number of amendments to Clause 27, together with three substantial clauses after Clause 27. However, none of these amendments deals with the points raised by my noble friend Lady Noakes in Grand Committee. I shall therefore repeat those questions today in the hope of getting some answers.

Our Amendment No. 46 probes why a company, other than an NDA company, should get a tax exemption from Clause 27. In Grand Committee, the Minister said: Where the activities might be carried out on behalf of the NDA by site licensee companies … it might still be appropriate for them to be exempt".—[Official Report, 22/1/04; col. GC 412.] But the Explanatory Notes were very clear. Paragraph 130 said: It is [the] Government's intention that private companies will not be able to realise tax free profits through the tax exemption". Will the Minister say what the regulations referred to in subsection (5)(f) will contain? Is this a backdoor way of exempting some particular companies from tax? We think that we should be told whom the Government intend to exempt from tax under Clause 27 and why.

We tabled Amendment No. 50 to delete Clause 27 in order to probe what activities would be exempt. The Government's amendments have shed no light on that. We still need to see the regulations under subsection (3) and I hope that the Minister will now commit to making those draft regulations available before we reach Third Reading.

We also tabled two detailed amendments, Amendments Nos. 54 and 55 to Schedule 4. We were very surprised by the Government's responses in Grand Committee and had hoped to see the Government tabling amendments for Report. But these are not matters of great principle and we shall not be moving those amendments today. I beg to move.

Lord Davies of Oldham

My Lords, I am grateful for the manner in which the noble Baroness, Lady Miller, has moved her amendments. I hope to meet her points in full.

As she has indicated, she is not entirely happy with the government amendments that follow this group. In a sense the two groups form part of a total debate and I will, in moving those amendments, hope to reinforce the arguments I shall make in response to her questions on these amendments. But I shall do my best to answer the questions that she has addressed in Amendments Nos. 46, 50, 54 and 55.

As I mentioned during Grand Committee, we intended to return to these tax provisions on Report. We shall discuss the government amendments later. These amendments are the same as those tabled by the noble Baroness, Lady Noakes, in Grand Committee. I realise that they were tabled again before the government amendments were tabled. I am a little concerned that the noble Baroness indicated that they are also there because of dissatisfaction with the government amendments. We will come to that part of the debate in the next group.

The letter of my noble friend Lord Whitty to the noble Baroness, Lady Miller, that was sent on 9 February—a copy of which was placed in the Library of the House—covered some of the issues that we discussed in Grand Committee and explained the rationale for the tax provisions in the Bill. However, it may be necessary to summarise our general aims regarding the tax provisions to set the context for the various tax amendments. I will then speak directly to the amendments to which the noble Baroness spoke.

Clause 27 and Schedule 4 introduce the concept of "relevant site licensees" and allow for Treasury regulations to be made to exempt from tax certain trading activities of the NDA. As we explained, the NDA is not itself exempt from tax; activities such as electricity generation by the Magnox power stations will be taxable in the normal way.

However, our intention is to consider making regulations to provide for exemptions in certain narrow circumstances, particularly for the Thorp and SMP activities that are expected to be loss-making for tax. Such regulations will be appropriate only if the detail of contractual arrangements with site licensee companies is such that any losses or profits would in economic terms be the NDA's.

The concept of "relevant site licensee" also applies to some of the tax provisions allowing for nuclear transfer schemes to be tax neutral for the transferor and the transferee. The detail of the transfer tax provisions is in Schedule 9, introduced by Clause 43. These provisions allow for tax neutral transfers of assets and companies between publicly owned companies, such as BNFL, the UKAEA and the NDA. They also allow for the ownership of site licensee companies that are "relevant site licensees" to be transferred in a tax neutral way.

The challenge that we have faced has been to develop the detail of the tax provisions in the light of the detail of the emerging possible contractual and other relationships between the NDA, site licensee companies and parent management companies. We have been working closely with both the Inland Revenue and professional tax advisers to get that extremely important detail right. Allowing for future flexibility has made the tax provisions somewhat complex.

Returning to the precise points raised by these amendments. Amendment No. 46 would remove site licensee companies that are not 100 per cent subsidiaries of the NDA from the scope of limited exemption and from the scope of the transfer provisions in Part 3 of Schedule 9.

Clause 27 allows Treasury regulations to be made that would exempt from tax certain of the NDA's activities. As I mentioned earlier, the activities that we have in mind are those at Thorp and SMP. I repeat that these are expected to be loss-making for tax purposes, yet computing their tax position accurately would be tricky if their activities are bound up with the decommissioning and clean-up activities of the NDA. It therefore makes sense on pragmatic grounds to exclude them from tax where they are carried on by the NDA.

Activities such as operating Thorp and SMP might be carried out on behalf of the NDA by site licensee companies. Depending on the detail of the contractual arrangements between the NDA and the site licensee companies, it might be appropriate to include site licensee companies within the potential scope of the exemption; for instance, in cases where the NDA bears the economic responsibility for losses and profits, yet the detail of the contractual arrangements means that any potential tax liability or tax relief for losses falls on the site licensee. That is what subsection (4)(b) of Clause 27 allows. It also allows for relevant site licensees to come under the provisions for transfer schemes in Part 3 of Schedule 9. Amendment No. 54 would remove the ability to disallow charges—in a tax sense—on income to the extent that they are referable to exempt activities.

That would be inequitable as it would allow charges that are linked to the exempt activities to be deducted against other taxable income. If certain activities are to be exempt, then it is right that their associated charges should not qualify as a deduction for tax. As the noble Baroness, Lady Noakes, mentioned in our earlier debates—and we regret that she is not able to aid us with these deliberations today—it is true that for corporation tax many kinds of deductions that were previously treated as charges ceased to be so treated in 2002. However, it is appropriate to cater for charges such as certain annuities and those relating to payments to scientific research associations and to charities, which might include universities commissioned by the NDA to carry out research on its behalf—and that is the purpose of paragraph 3 of Schedule 4.

Amendment No. 55 relates to the provision in Schedule 4 paragraph 4 concerned with the difficult subject of finance leasing. The provision ensures that the NDA and any subsidiaries it forms cannot, viewed together, have their cake and eat it by enjoying the benefit of the exemption on the NDA's income while obtaining tax allowances, available against its non-exempt income, for expenditure on capital equipment used in the exempt activities.

The amendment would take this restriction even further by preventing finance-lessor companies outside the aegis of the NDA making use of those tax allowances. As the noble Baroness, Lady Noakes, said in Committee, there may be a case, as a matter of fiscal logic, for extending this restriction. However, there is at present no across the board restriction on the availability of tax allowances to finance lessors providing assets for use by public sector bodies enjoying a tax exemption. I am not persuaded that it would be appropriate to break new ground with such a restriction here, especially as my colleagues in the Treasury are currently reviewing the tax treatment of finance leasing generally. I should confirm that the NDA—I made this point earlier—is not itself exempt from tax. Activities such as electricity generation by the Magnox power stations that are clearly separable from the Thorp and SMP activities, and from the decommissioning and clean-up activities, will be taxable in the normal way.

I share the concerns expressed by the Opposition that private sector enterprises should not be able to make tax-free profits. Where the activities are effectively not carried on by the NDA, exemption will not be appropriate and regulations will not be made.

However, depending on the detail of the contractual arrangements between the NDA, site licensee companies and private contractors, it may be appropriate for the activities of some site licensee companies to be exempt. We had in mind the possibility of site licensee companies carrying on some commercial activities where the losses and profits would in economic terms be the NDA's. But because of the contractual arrangements and the application of normal tax law, the commercial activities will be taxed in the site licensee company and not the NDA. For that reason, Clause 27 allows for the exemption to apply to activities that are specified in Treasury regulations and are carried on by relevant site licensees, the definition of which would also be the subject of regulations.

The concept of "relevant site licensees" is also relevant to the transfer tax provisions in Schedule 9. That schedule allows for the tax neutral transfer of shares in relevant site licensees, which will facilitate the transfer of site licensee companies under transfer schemes. In practice, the principal commercial activities that would be considered for exemption are the Thorp and SMP activities. As I have already mentioned, these are expected to be loss-making for tax, yet the commercial activities are intertwined with decommissioning and clean-up work. Whether it is appropriate to make regulations exempting these activities will depend on the detail of the contractual and other arrangements between the NDA and the site licensee company running these activities.

In our discussion in Grand Committee, the noble Lord, Lord Jenkin of Roding, was right to be concerned about some kind of blanket tax exemption for the NDA along the lines that he recalled debating for the British National Oil Corporation. However, what we are proposing here is a very narrow potential exclusion only for trading profits and losses and then only from certain trading activities. The NDA itself will remain a taxable entity—I cannot emphasise that point enough—and, indeed, trading activities such as the Magnox electricity generation will remain taxable in the normal way.

Regulations to allow for exemption will be appropriate only if the detail of contractual arrangements with site licensee companies is such that any losses or profits would in economic terms be the NDA's. The concept of relevant site licensee also applies to some of the tax provisions allowing for nuclear transfer schemes to be tax neutral for the transferor and the transferee. The detail of these provisions is in Schedule 9, introduced by Clause 43. These provisions allow for tax neutral transfers of assets and companies between publicly owned companies such as BNFL, the UKAEA and the NDA. They also allow for the ownership of site licensee companies that are "relevant site licensees" to be transferred in a tax neutral way.

I apologise for speaking at great length but in so doing I hope that I have allayed concerns about the government amendments and perhaps foreshortened debate on them, although that may be a wish and a prayer rather than the reality. For those reasons we believe that Clause 27 will facilitate the NDA's primary role of decommissioning and clean-up of Britain's civil public sector nuclear sites. On that basis I am confident that noble Lords will recognise that Clause 27 as drafted should stand part of the Bill.

The noble Baroness asked the obvious and entirely appropriate question whether we shall have the regulations before Third Reading. I am afraid that we shall not be able to provide the regulations by that time. They involve a great deal of detail on the contractual arrangements between the NDA and contractors. I regret to say that we shall not be able to provide the regulations by Third Reading.

The noble Baroness also asked why we should allow non-NDA companies to be exempt. The site licensee companies will be transferred between management contractors as contracts expire and new contractors win competitive tenders to manage the site licensee companies. Although they are vehicles for the NDA to achieve its objectives, they will not always be—indeed, we do not expect them to be—owned by the NDA. Profits and losses on activities from which the NDA gets the economic benefit may arise so far as the site licensee is concerned.

I hope that I have explained the tax philosophy behind the Government's thinking. I regret that I am not able to provide the additional information at this stage although I think the noble Baroness probably realises that she is asking for rather a lot at this point. Nevertheless, I hope that I have helped to sketch out the Government's general position in such a way that the tax provisions in the Bill make sense and are seen to be equitable and fair.

4 p.m.

Lord Jenkin of Roding

My Lords, I think this is the second or third time that the noble Lord or another Minister on the Government Front Bench has used the phrase "emerging problems". If I may say so, one has the impression that they have been making it up as they go along. When one now hears—as the noble Lord, Lord Davies of Oldham, has just said—that it is not until they know the details of the contracts that will exist between the site licensees and the contractors that they will be able to make the regulations—my noble friend asked whether we might have them before Third Reading—one really begins to wonder how on earth all this is put together.

My mind goes back to the time when—I was a junior Treasury Minister at the time—my party came into government in 1970 with a commitment to introduce value added tax. At the first meeting that my then boss, the late Iain Macleod, held with Customs and Excise we said that we would publish a Green Paper and consult widely. "Oh", said the officials, "you do not need to do that. We understand all about value added tax. We can produce a tax for you more or less straight away". However, we replied, "No, we shall consult widely on the matter". A year later the deputy chairman of Customs and Excise—I am delighted to see that my noble friend Lord Higgins has entered the Chamber as he was in government at the same time as me—said, "It was a terribly good idea to have a Green Paper because we learnt a tremendous amount that we would never have known at all".

I get the impression that to some extent Ministers have found themselves in the same situation with this Bill. Their officials will have told them that they do not need to worry too much and that they can put down what is in the Bill. Then, lo and behold, along come all the outside interests saying, "You have not got this right at all". One just wonders how a Bill like this reaches the statute book. The Government had to admit straight away that the questions asked by my noble friend Lady Noakes in Grand Committee were very valid questions that would need to be dealt with.

There are two points here. Is it really the case that the regulations will not be made until after some of the contractual agreements have been made? I find that quite astonishing. Will they have retrospective effect in those circumstances? How much consultation was there before the Bill was published, or has it all happened since the Bill was published last November? I find this a very strange business indeed.

Baroness Miller of Hendon

My Lords, I thank my noble friend for making two of the main points that I intended to make. I am delighted that he was able to do so as there is no doubt that he did it much more effectively than I could.

The noble Baroness, Lady Noakes, would have been here if it were possible but unfortunately she lost her father on Friday. Under those circumstances she is not able to be here today. In Grand Committee she seemed to be the only one who could take all of this under her belt and in her stride. It was extremely nice to have present a person who was so efficient and knowledgeable on these matters. The Minister said that he would take away many of these matters and consider them. We shall most definitely read what he has said extremely carefully. The Minister has no reason to apologise for speaking at length as he provided much detail. However, as my noble friend said, with all the detail in the world, we do not know why we find ourselves in such a position.

I understand what the Minister is saying as regards the regulations. He has to wait to see the contracts and what is negotiated. My noble friend asks whether that means that something will happen retrospectively. On this side of the House, we wonder whether the regulations are likely to come into being and whether the contracts will have been sorted out by the time the Bill reaches Third Reading in the other place, never mind in this place. It is extraordinary that this matter has to be left. However, we shall read what has been said very carefully and by Third Reading I am sure that my noble friend Lady Noakes will have had a chance to absorb the issue, and better than I could. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.