HC Deb 28 November 2002 vol 395 cc488-500 1.55 pm
The Secretary of State for Trade and Industry (Ms Patricia Hewitt)

With permission, Mr. Deputy Speaker, I wish to make a statement on British Energy.

British Energy operates eight nuclear power stations in the United Kingdom, supplies over a fifth of our electricity and employs 5,200 workers in Britain. In May this year the company announced in its preliminary results a pre-tax, pre-exceptionals, profit of £42 million in its British and north American operations, but an overall loss to its UK operations of £41 million. None the less, the company chose to maintain its dividend, paying out £48 million to shareholders.

During the summer, British Energy decided to attempt a bond issue in the United States, which was unsuccessful. On 13 August, one of the reactors at the company's Torness station was taken out of service due to unforeseen problems, reducing the company's income by £56 million. The next day company executives told investors that there were no immediate cash flow problems.

Theoughout the summer, british Energy engaged in discussions with British Nuclear Furls Limited to renegotiate the terms of its contracts. These were entirely commercial disacussions between the tow companies. At the beginning of September, British Energy realized that its financial problems were far greater than it had thought and that any conceivable ldeal with BNFL would not be enough to meet its requirements. On 4 September the company wrote to inform me of a significant worsening in the company"s financial position and about liquidity problems. It said that the board would haave to dicide, on legal advice, whether it could continue to meet its liabilities and therefore trade legally, and it asked for Gopvement help.

On the next day, I announced that the Government were entering into discussions with the company. On 9 September I announced a loan facility of £410 million to support its trading operations both in the UK and north America. On 26 September, after a further request from the company, the Government decided to extend the loan facility until 29 November and increase it to £650 million. That was designed to give the company sufficient time to clarify its full financial position and to come to a clear view on its future options.

Both the initial loan and its extension were notified to the European Commission under state aid rules, and I can tell the House that the Commission announced yesterday that it has approved the loan. I offered that loan because it was the best way of securing the safety of the nuclear power stations and the security of electricity supply to the grid and consumers. Those remain my overriding objectives.

British Energy has submitted a plan to the Government for the solvent restructuring of the company. We and our financial advisers have assessed its implications, and I can announce to the House that the Government have agreed to play their part in allowing the company to attempt solvent restructuring.

Both the company and my Department have made statements to the stock exchange today; I have placed copies of both in the Library of the House and in the Vote Office.

The company has announced that it will continue to make payments to a fund that is used to pay for the costs of decommissioning its power stations, give the fund £275million of bonds in the company and surrender to the fund 65 per cent. of its available cash each year.

The Government will underwrite those arrangements to ensure safety and environmental protection. In addition, we have recognised that if this restructuring is to work, we must contribute significantly to the company's £2.1 billion of historic nuclear fuel liabilities that are managed by BNFL and extend to 2086. The cost to the Government will average £150 million to £200 million a year for the next 10 years and will fall thereafter.

If the company does very well, surpluses from British Energy's contribution to the decommissioning funds will help meet those costs. However, I also intend to look at how the contracts are managed as part of the creation of the liabilities management authority. In addition, BNFL is today announcing that it will agree new contracts with British Energy for fuel supply and for spent fuel services in respect of future nuclear electricity generation.

If the company's proposed restructuring is to succeed, first the existing creditors will have to accept both a temporary freeze on payments and subsequently a significant write-down in the value of what they are owed. Secondly, the company will have to complete the sale of all its north American operations. Thirdly, it will have to implement the new trading strategy that it announced today. Agreement to all that must be achieved by the middle of February.

The Government are prepared to continue to fund BE's operations while the restructuring plan is agreed and implemented. The existing credit facility will be extended to 9 March, with its size remaining unchanged at £650 million. Of that existing facility, £382 million had been drawn down by yesterday. Under the proposal, the money will be progressively repaid as the company's financial situation improves. In the event of administration, we have taken security to protect the interests of the taxpayer and rank above other creditors.

I also intend shortly to bring forward legislation to enable me to carry forward the Government's part of the proposed restructuring or, if it fails, to acquire the companies or their assets. This proposal for solvent restructuring will, of course, need state aid approval by the European Commission. Once the company has reached agreement with its financial creditors, we will notify the plan to the Commission.

In September, I said that, if possible, we would look to a solvent restructuring. However, we did not rule out the possibility that the company might decide to go into administration. We have therefore prepared detailed contingency plans for administration, in discussion with all the key responsible regulatory bodies, to ensure that whatever happens, nuclear safety and security of supply will be maintained.

I stress that if British Energy were to go into administration, all its nuclear liabilities would fall to the Government. We cannot walk away from them; no responsible Government could. That is why the situation with British Energy is different from that of any other generator.

I take this opportunity to thank the staff at British Energy. Their skill and dedication is essential in ensuring nuclear safety. This has been an unsettling time for them, but whatever happens, nuclear power stations will continue to generate electricity and will continue to employ staff. Pension entitlements will be met. Trade suppliers will be paid. Customers' lights will stay on.

I understand that today's news will give little comfort to British Energy's financial stakeholders but they, too, must take their share of the pain if the company is to survive. The stakeholders now need to decide whether they are willing to support solvent restructuring; if they are not, the Government are fully prepared if British Energy decides that administration is the only option.

Today, the company announced that Robin Jeffrey is stepping down and that Adrian Montague will succeed him as chairman. Mr. Montague is an experienced executive who brings key business experience, from both the public and private sectors. It is clear that there have been management failings and it is right for the company to seek to strengthen its management team at this critical time.

I have set out the limits of what the Government are willing to do to support solvent restructuring. It is now up to the company, its new management and its financial stakeholders to determine the future of British Energy.

Mr. Tim Yeo (South Suffolk)

I welcome the statement that the Secretary of State has made, a copy of which I received about half an hour ago, some time after Greenpeace helpfully e-mailed my office with details of the press release issued by British Energy in connection with the statement.

The statement at last gives Parliament a chance to question the Secretary of State about her decision, taken almost three months ago, to commit £650 million of taxpayer's money to bailing out British Energy. The statement, which was made at the last possible parliamentary moment, raises a number of questions that I shall come to later. Unfortunately, it does not address the central absurdity of the Government's policy: the imposition of the climate change levy on British Energy.

The Government claim that the climate change levy forms part of their strategy to meet our climate change commitments. As nuclear power is the main energy source that does not produce carbon dioxide emissions, the Government's policy is an absurd contradiction.

The fact is that British Energy will not enjoy fair trading conditions until the burden of the climate change levy is removed. An essential part of the solution to this crisis is for the Government to abolish the climate change levy—an arbitrary tax that does nothing to address climate change—and replace it with a single economic instrument, such as an emissions trading system or a carbon tax.

Is the Secretary of State aware that that is not only our policy, but that of the Royal Society, whose policy document was published a couple of weeks ago? Will she explain why the Government reject the arguments authoritatively put by the Royal Society? Does she recognise that that approach would improve the position of both nuclear and renewables compared with fossil fuels and that it would also make it possible to guarantee that targets for reducing carbon dioxide emissions would be met? Alas, I fear that, even if she accepts those arguments, the Chancellor of the Exchequer, downgraded though he is, still remains higher in the pecking order.

I welcome the news that British Energy has been allowed to negotiate new terms with BNFL. Perhaps the Secretary of State will explain why that has taken so long. Has it not been clear for months, long before the bail-out was announced in early September, that that needed to happen? Will she confirm whether British Energy reached a commercial agreement with BNFL some time ago on terms that had her blessing only to have the deal blocked by the Treasury? Can she now reveal how much British Energy will save as a result of the new contract terms with BNFL?

Does the Secretary of State realise that the Government's muddled approach to nuclear power is damaging confidence in the industry? On 17 November, the Minister for Energy and Construction told The Sunday Times: We need that supply so, come what may, nuclear generation will continue. Just eight days later, the Secretary of State for Wales—a former Energy Minister—told The Western Mail that he wanted to shut down nuclear power stations. With such contradictions inside the Government, it is no wonder that the Secretary of State has difficulty in resolving what the Government's policy should be, but does she understand that, with one member of the Cabinet attacking nuclear power, the attempt at solvent restructuring that she has just outlined will be much harder to achieve? Will she therefore repudiate the remarks of the Secretary of State for Wales?

What additional cost to the taxpayer will arise if solvent restructuring cannot be achieved and British Energy is forced into administration? Perhaps the Secretary of State can explain that in terms of the immediate cash outgoings in the next year and the longer-term liabilities. Can she say whether the costs that she now acknowledges will arise to the Government were included in the higher Government borrowing figures announced yesterday by the Chancellor of the Exchequer?

Will the Secretary of State explain what legislation is needed to take forward the Government's part of the proposed restructuring? Does her statement mean that the Government are now considering taking British Energy back into public ownership? If so, will she explain how that will reduce British Energy's costs by a single penny or help it to become more viable in the future?

Delaying decisions about measures such as replacing the climate change levy, which would help to secure British Energy's future, will not make solvent restructuring easier to achieve. The fact that the liabilities management authority Bill is still only a draft suggests that the Government are having difficulty in acting in a timely manner on that issue as well.

The problems of British Energy were caused by a fall in the price that generators receive—a fall that has been sharpened by the new electricity trading arrangements—and British Energy is not the only generator in financial trouble. Is the Secretary of State satisfied that the operation of NETA is consistent with the overriding importance of security of supply? Does she consider that the regulator's remit adequately reflects the priority that must be given to maintaining the security of supply, especially when energy markets are about to experience their biggest change for a generation? Does she believe that Britain's energy needs and its climate change obligations can be met in the long term without any contribution from nuclear power?

The Secretary of State has tried to reassure us that throwing a little more taxpayers' money and allowing the company a bit more time will somehow resolve the Government's dilemma over nuclear power. The truth is that the Government's actions and omissions created problems for British Energy that would not otherwise have arisen. The bill for those actions and omissions will fall significantly on the taxpayer, regardless of whether solvent restructuring succeeds. The statement confirms that the Government's handling of this crisis has been bad for the taxpayer, and perpetuates uncertainty about the Government's energy policy.

Ms Hewitt

I apologise to the hon. Gentleman for the late arrival of the statement, although I am assured that it was faxed to his office at 10 minutes to 1. I would always seek to ensure that he receives copies of my statements in accordance with the normal parliamentary courtesies.

I shall now turn to the substance of the hon. Gentleman's response. In relation to the climate change levy, we made our policy absolutely clear in April 2001, when we introduced it. It is not designed to be a carbon tax but to give clear incentives to industry and commercial users to improve their energy efficiency. We will, of course, consider the whole question of whether further changes are needed to the entire policy environment, including the climate change levy, in the White Paper that we will publish in the new year. As I have said, we will not change policy, for instance, in relation to the climate change levy, simply for the sake of one company that has got itself into difficulties, however serious those difficulties are.

The hon. Gentleman asked about the negotiations that have been taking place with BNFL. Let me stress again that they are entirely a commercial matter for the two companies. Although the Government own BNFL, we are not managers of the company, we do not interfere in its day-to-day operations, and we leave the management to get on with those commercial negotiations. It is untrue to suggest, as he did, that there was a deal earlier in the summer, or that it was blocked by any part of Government. The final impact of that deal will depend on future wholesale electricity prices, since the new commercial contracts will be pegged to those market prices.

The hon. Gentleman also asked about the costs of restructuring, and particularly about whether they would vary were the company to go into administration. Let me make it clear that there is no real difference in the cost to the taxpayer between the solvent restructuring that we are giving the company a chance to put into place and falling into administration, should that happen. I draw his attention to what the Chancellor said yesterday in the pre-Budget report: The Government expects the loan facility to be managed within the planned totals for Departmental Expenditure Limits and the financial implications of any restructuring to be consistent with the forecast of the public finances and performance against the fiscal rules published in this Pre-Budget Report. That was the position yesterday, and it remains the position today; it is not affected by this statement

The hon. Gentleman asked about legislation. I hope that we will introduce the legislation to which I referred in my statement before Christmas. As I indicated, that will allow us to fulfil our part of the restructuring, either in the event of a solvent restructuring or, if administration proves to be the company's decision, in the event of administration.

In relation to the impact on the company of NETA, let me make it clear that even before the new electricity trading arrangements were introduced, prices were falling due to liberalisation and changes in the marketplace. We introduced the new trading arrangements after extensive consultation with the entire industry, including British Energy, to remove the distortions inherent in the old pool system of fixing prices, and to put in place a much more transparent system of arriving at prices than ever existed under the pool. The hon. Gentleman needs to remember that the overcapacity in the electricity market, which is now unwinding itself, and which has led to the reduction of prices following changes to the market environment, was the direct result of the pool arrangements and artificially high prices that led to the unnecessary investment that existed under his Government. He really does need to look at the history.

The hon. Gentleman referred to environmental targets, the importance of climate change and the role of nuclear power. All those issues are considered in the White Paper that will be published in the new year. We are absolutely committed to playing our part in dealing with the enormous problem of climate change. We will have much more to say about the appropriate targets on reductions, especially in carbon emissions, following Kyoto. British Energy's nuclear generators are responsible for 20 per cent. of total electricity generation and it plays a part in contributing to the reduction of CO2 emissions.

Dr. Vincent Cable (Twickenham)

One of the few welcome aspects of this worrying statement is the tough conditions that the European Commission attaches to the loan. Perhaps we should be grateful that it is more concerned than Ministers are about the prudential use of British taxpayer's money.

How much is involved? The Government cite the figure of £650 million, but I received a fax yesterday from the Commission that said that it had approved a loan of £900 million, with additional contingencies of £275 million. Which figure is right? The Government seem to have contingent liabilities for the company greater than those provided for the Iraq war. If the figures double every three weeks, how can we have confidence in the numbers that the Government use?

The nuclear safety issue is paramount. Am I correct in understanding that there is no regulatory provision for the protection of nuclear safety if British Energy becomes insolvent? If that is the case, it reflects badly on the people who privatised it, but why did the Government take five years to notice the problem and prepare for it?

Why is there a fundamental problem with security of supply? National Grid states that British Energy provides 13 per cent. of capacity—not 20 per cent. as the right hon. Lady said—and there is 25 per cent. of spare capacity to meet demand. The industry's regulator, Mr. McCarthy, who presumably knows something about the industry that he regulates, says that the problems of British Energy pose no threat to security of supply, either in whole or in the event of some of its older reactors ceasing production. If the Government are at such odds with their regulator, why is he still in his job?

On competition, the Government have arranged a rescue operation for a failed and badly managed company and its shareholders. What answer does the Minister give to the workers and shareholders of other companies in the energy industry, such as renewable power generators and AES Drax, in which people are losing their livelihood and money as a result of competition with the enterprise that the Government are rescuing?

Ms Hewitt

The hon. Gentleman refers to the tough conditions supposedly imposed by the European Commission. He takes that phrase from the title of its press release issued yesterday. Had he read on, he would have found that we imposed the "tough conditions" as a condition of making the loan in the first place. In other words, the loan facility that we made available was not handed over to the company. It was put into a separate account and every bill or guarantee met from the facility is first checked and cleared by our accountancy advisers. The European Commission welcomed the fact that we had put in place such tough controls.

So far, thanks to the extremely tough and prudent management of the facility that we put in place, only about 60 per cent. of the total facility has been used, so we do not propose to increase it. However, we have discussed with the European Commission the maximum amount that may be required for the six-month period for which rescue aid has been approved. That is why the Commission has approved a figure higher than the £650 million that we already have in place; in other words, the Commission's approval relates to the maximum that may be required but our objective is to pay only the minimum. We will continue to do everything necessary to achieve that through the tough management of the account.

The hon. Gentleman asked whether the safety and regulatory conditions would apply if the company decided to put itself into administration. We have spent a large part of recent weeks in discussions with the various regulators to ensure that even if the company decides that it needs to go into administration, health and safety, including nuclear safety, will be properly secured. One of the main reasons why we were not prepared, many weeks ago, to risk letting the company fall into unplanned administration is that, at that time, the question of health and safety, among others, was not clear.

The hon. Gentleman also asked about security of supply. The difference between the figures of 13 per cent. and 20 per cent. is simply a matter of the base that one uses—whether one measures production against capacity or against total generation. As a result of the significant mothballing of plant that has taken place over the past year, particularly in recent months, the capacity margin, although certainly adequate to ensure security of supply throughout the winter, is significantly lower than it has been.

Several hon. Members

rose—

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. We have an important Bill to discuss this afternoon and many hon. Members want to take part in that debate. The Secretary of State for Trade and Industry said that she will shortly introduce legislation, so we will have an early opportunity to return to this subject. I do not intend, therefore, to run this on much beyond 2.40 pm. I hope that I may have the co-operation of the House in that respect, and I ask for short questions and short answers.

Mr. Geoffrey Robinson (Coventry, North-West)

I congratulate the Secretary of State on her robust and intelligently constructed position, which puts the onus for the financial recovery and solvency of British Energy firmly on the company itself. She has created a position in which, over the next few months, we can debate the implications of NETA and its current operation—it is not an entirely satisfactory replacement for the pool, as she no doubt realises—and other aspects of energy policy, notably the security and diversity of supply that we seek. It is entirely to her credit that she has created t hat opportunity for us, and I hope that all parties in the House will engage constructively in a debate that is in the national interest.

Ms Hewitt

I am grateful to my hon. Friend for those comments. On NETA, perhaps it will help if I stress that we are already supporting changes to its operation, in particular to assist smaller generators and to improve the way in which the balancing mechanism works. He is right to say that we will need to return to that and many other issues in the White Paper.

Mr. Michael Jack (Fylde)

The manufacturers of British Energy's fuels, namely, the workers in my constituency at Salwick, will be grateful to the Secretary of State for the help that she has given the company. However, will she confirm that the revised arrangements with BNFL will not harm that company's profitability? Will she also explain to the House how the revised arrangements will affect the cost of generation of each kilowatt-hour of nuclear energy from British Energy? Will the company thereafter trade profitably within the constraints of NETA?

Ms Hewitt

The new contracts that British Energy is putting in place with BNFL are part of a strategy to reduce its costs and establish new longer-term contracts with the energy suppliers to protect itself against possible further downward movements in prices. As for BNFL's profitability, I elaborated on that matter last year in a statement on the creation of the liabilities management authority.

Anne Picking (East Lothian)

I, too, welcome the Secretary of State's statement. Torness is in my constituency and her remarks about the staff, their commitment, hard work and loyalty were welcome. I visited the station on numerous occasions when both reactors were down and everybody, including the station master, the staff and unions, was working together. I also welcome my right hon. Friend's reaffirmation of the Government's commitment to nuclear power generation and a balanced energy policy.

Ms Hewitt

I thank my hon. Friend. I thank her constituents and those of the right hon. Member for Fylde (Mr. Jack) for their continuing commitment to the safe and effective operation of nuclear power.

Mr. David Heathcoat-Amory (Wells)

Before the Secretary of State introduces a policy for British Energy, she needs a policy for nuclear power. Will she comment on the fact that over the next 20 years, all Britain's nuclear power stations except one will be decommissioned? Even on the most optimistic projections for alternative energy, emissions of carbon dioxide will therefore rise, whereas the Government are committed to reductions. Why, after more than five years in office, have the Government still not got to grips with that? Why have they not practised joined-up government and brought their energy policy into line with their environmental commitments, which other sections of the Government are pleased to boast about?

Ms Hewitt

We are taking tough action to try to improve energy efficiency and achieve an increase in renewables generating capacity of 10 per cent. by 2010. The broader issues raised by the right hon. Gentleman, including the role of nuclear power and the much broader energy framework needed to achieve continuing reductions in CO2. are matters for the White Paper.

Paddy Tipping (Sherwood)

Will the Secretary of State confirm that none of the measures that she announced in her package prejudices security of supply, which will be considered in the White Paper? Will she go further and give a commitment to meet coalfield Members and people from coalfield communities to explain how a package of £650 million and an ongoing commitment of £150 million to £200 million a year to nuclear energy can be set against the limited aid given to coalfield communities?

Ms Hewitt

I should be delighted to meet my hon. Friend and other colleagues from the coalfield communities. I am happy to confirm that, far from jeopardising security of supply, my statement and all my actions have been designed to secure it.

My hon. Friend asked about support for the coal industry and coalfield communities. We have invested £150 million since 1997 in operating aid to coal companies, particularly through the Office of the Deputy Prime Minister. We have invested hundreds of millions of pounds more in helping people in the coalfield communities, including the one represented by my hon. Friend, to cope with the costs of the brutal restructuring of the mining industry under a previous Conservative Government.

Mr. Ian Liddell-Grainger (Bridgwater)

Given that both Hinkley A and B are in my constituency—one owned by BNFL, the other by British Energy—is the Minister happy that money being put aside for the decommissioning of one at the moment and another in a decade's time is sufficient to sort out the entire Hinkley Point area, which, the House will appreciate, is extremely important to my constituency?

Ms Hewitt

I completely understand the hon. Gentleman's concern. I confirm not only that we are strengthening arrangements for the nuclear decommissioning and nuclear liabilities fund in the steps that I announced today but that the Government, as always, stand as the guarantor of last resort for those nuclear liabilities.

Mr. John Grogan (Selby)

My right hon. Friend referred to the aid that the Government have given the coal industry in the past. To enhance her reputation for even-handedness and fairness, will she look at the modest amount that the coal industry is making compared with the nuclear industry—nothing like £150 million to £200 million a year—and agree to lift the cap on operating aid to UK Coal?

Ms Hewitt

My hon. Friend is aware that the operating aid scheme has come to an end, although we extended it until the end of this year in order to deal with one particular problem. We succeeded earlier this year in securing, within the new European aid framework, provision for investment aid to that industry and we are now consulting on the nature of that investment aid scheme.

Mr. Simon Thomas (Ceredigion)

Does not the abject failure of British Energy spell the beginning of the end of nuclear power in this country and certainly rule out new build for the future, as announced by the Secretary of State for Wales? Will the right hon. Lady take the opportunity to put on the record what the excess generating capacity is at present and what advice she has received from the regulator? Does she accept that this is a wake-up call to her Department to get moving on energy efficiency and renewables?

Ms Hewitt

No statement has been made about the future of nuclear electricity beyond what I have said in relation to both British Energy and BNFL. For the longer term, those are matters that we will consider in the energy White Paper, which, as I have said several times today, will be published in the new year. Of course we need to do more on energy efficiency and on renewables. We are already doing a great deal—with the hon. Gentleman's support, I hope—and we shall have more to say on the subject in the White Paper.

David Hamilton (Midlothian)

With regard to the security of energy supply, may I draw to my right hon. Friend's attention a concern shared by many miners throughout the country that one company, UK Coal, could change the position within the United Kingdom? It is imperative that a single company should not be allowed to determine the policy of this country.

Ms Hewitt

As I understand the position, in the eventuality that my hon. Friend describes, the coal resources would revert to the Coal Authority. The broader issue of the place of coal in securing a diverse and safe electricity supply will be considered in the White Paper.

Mr. Nick Gibb (Bognor Regis and Littlehampton)

The answer that the Secretary of State gave to my right hon. Friend the Member for Wells (Mr. HeathcoatAmory) and to the hon. Member for Midlothian (David Hamilton) is not good enough. The fundamental reason for the insolvency of British Energy is that the market price of electricity, low as it is and welcome as that is, is lower than the production cost of nuclear energy. In making a commitment of public money, the right hon. Lady must have a policy on future nuclear build. What is that policy? If there are to be no new nuclear power stations, how does that fit in with the Government's policy of reducing CO2, emissions?

Ms Hewitt

The question of new nuclear build has nothing whatever to do with the issue of British Energy and how it will manage its responsibility for existing nuclear stations. It seems to me that the causes of British Energy's problems are many, but a company that has constantly changed its strategy, constantly sought—but failed—to secure alliances and mergers with supply companies, gone through three chief executives in about five years and lost a deputy chairman earlier this year is a company in which there have been very serious management failings. Its problems cannot be blamed on the market environment, particularly when British Energy itself, publicly and privately, welcomed the introduction of those market arrangements.

Mr. Parmjit Dhanda (Gloucester)

I thank my right hon. Friend for her support for British Energy. She may well know that its national headquarters are based in Barnwood in my constituency. Does she have a message for the people of that ward who voted Liberal Democrat when the Liberal Democrats gained the seat in May this year, bearing in mind that the Liberal Democrats would take away the £650 million loan and jeopardise more than 1,000 jobs in that ward?

Ms Hewitt

My hon. Friend makes an extremely interesting point. The Liberal Democrats in Gloucester told the voters of Barnwood in my hon. Friend's constituency that they oppose the policy of immediate administration that was proposed today by the hon. Member for Twickenham (Dr. Cable), who speaks for the Liberal Democrats on these matters. As ever, what we are seeing from the Liberal Democrats is opportunism and confusion combined.

Mr. Andrew Lansley (South Cambridgeshire)

Will the Secretary of State confirm—I admit that I have made my calculations while we have been sitting here—that a minimum of two thirds of the £2.1 billion discounted cost of the historic waste liabilities of British Energy will be transferred to the taxpayer? Will she clarify the relationship with the liabilities management authority, which will get from BNFL liabilities, a fund and the management of assets? What does she propose to transfer to the LMA from British Energy?

Ms Hewitt

As I said, we anticipate that the costs of the historic nuclear liabilities for British Energy will average between £150 million and £200 million a year for the next 10 years, although if the situation improves British Energy will be expected to put more into the nuclear liabilities fund. We are making good progress on the legislation and practical arrangements necessary for the establishment of the liabilities management authority. We will consider whether it would be appropriate for British Energy's historic liabilities to be managed through the LMA; we have not yet made a decision about that.

Rob Marris (Wolverhampton, South-West)

I applaud the Government's attempts to sort out this mess. I note that they are underwriting a rescue package, that the creditors are not going to be paid in full and that they will assume all nuclear liabilities if the company goes into administration.

Will my right hon. Friend tell the House how many nuclear reactors have been built around the world in the past 25 years without direct or indirect subsidy for building, operating or decommissioning costs?

Ms Hewitt

I do not have that figure, but I know that several countries are now commissioning new nuclear power stations in order to meet their judgment of how best to achieve their carbon reduction targets.

Mr. Mark Lazarowicz (Edinburgh, North and Leith)

Given the management failings that my right hon. Friend mentioned, I welcome the fact that there are to be changes at the top of the company. Will she assure us, however, that an example will not be set whereby the people responsible for presiding over massive losses in their business walk away with massive payouts as compensation for their troubles? Will she assure us that there will be no rewards for failure on this occasion?

Ms Hewitt

I have made my views about big rewards for big corporate failures very clear on several occasions. In this situation, there are certain contractual requirements, but I would be very concerned about large remuneration payments to the former chairman. I have no doubt that he we will want to face up to his responsibility for the position in which the company finds itself. Large payments to the former chairman or anyone else involved would send a very damaging signal when all the other stakeholders face either considerable uncertainty, as in the case of employees, or are directly bearing a share in the pain. I hope that the former chairman will take the same view as me, which is that he should play his part in sharing that pain.

Glenda Jackson (Hampstead and Highgate)

Despite my right hon. Friend's previous replies, if British Energy is taken into administration that surely must have an impact on the Government's consideration of what part nuclear energy will play in providing sustainable energy in the future. Even if that does not mean excluding nuclear energy completely, a reduction in its use is something that many of my constituents would welcome.

Ms Hewitt

The problems that we are dealing with today relate to one company. They do not arise specifically from the nature of nuclear power, whose future role will be considered in the White Paper. I am sure that my hon. Friend's constituents will be as interested as everybody else to see it in the new year.