HL Deb 17 March 2003 vol 646 cc1-36GC

Monday, 17th March 2003.

The Committee met at half-past three of the clock.

[The Deputy Chairman of Committees (Lord Murton of Lindisfarne) in the Chair.]

The Deputy Chairman of Committees (Lord Murton of Lindisfarne)

Before I put the Question that the Title be postponed, it may be helpful to remind your Lordships of the procedure for today's Committee stage. Except in one important respect, our proceedings will be exactly as in a normal Committee of the Whole House. We shall go through the Bill clause by clause; noble Lords will speak standing; all noble Lords are free to attend and participate; and the proceedings will be recorded in Hansard. The one difference is that the House has agreed that there shall be no Divisions in a Grand Committee. Any issue on which agreement cannot be reached should be considered again at the Report stage when, if necessary, a Division may be called. Unless, therefore, an amendment is likely to be agreed to, it should be withdrawn.

I should explain what will happen if there is a Division in the Chamber while we are sitting. The Committee will adjourn as soon as the Division Bells are rung and then resume after 10 minutes.

Clause 1 [Expenditure relating to British Energy p.l.c.]:

Lord Ezra moved Amendment No. 1:

Page 1, line 6, at end insert "in relation to qualifying activities"

The noble Lord said: Amendment No. 1 has been grouped with Amendments Nos. 3, 4 and 7. The purpose of these and other amendments tabled today is to limit the aid and support proposed for British Energy so as to put a cap on such aid and support and to prevent it being used for other purposes and other companies. The trouble with the Bill as presented is that it is too open-ended. I believe that it is a proper exercise of our responsibilities to ensure that some limit is placed on the Government's freedom of action in this connection.

I turn first to Amendments Nos. 1 and 7. The purpose of introducing the concept of "qualifying activities" is to limit the Government's aid to the historic liabilities of a company, which is indeed in line with what the Government have said, and to prevent it from incurring operational losses at the taxpayer's expense in the future. There is no doubt that the Government will have to make a major contribution to decommissioning liabilities, and that is allowed for in the figure quoted in Amendment No. 7. I beg to move.

Baroness Miller of Hendon

These amendments are very similar to ones tabled by my honourable friend the Member for Reigate in another place when he supported Liberal Democrat amendments that would have the same effect. We agree with the noble Lord, Lord Ezra, that there cannot be a case for giving unlimited sums to various sectors within the electricity industry, especially when the rest of the sector is under such pressure. We certainly support the amendment.

Lord Jenkin of Boding

I attached my name to Amendment No. 1 because, as I believe I made clear at Second Reading, I entirely share the objective that we should limit the impact of this apparently open-ended Bill. Clause 1, of course, deals with support for British Energy. Later this afternoon, or when we debate later amendments, we shall deal with proposals that might extend that to other companies. The whole question of the support that may be given to British Energy seems to me to be absolutely open-ended and it does not seem to me that that is right. I say that as someone who spent a year or two, some years ago, as the Chief Secretary to the Treasury. I find it strange that the Treasury should be content to allow such an open-ended commitment to stand on the statute book. It is open ended in terms of both the amount and the scope of the activities that it can fund.

I believe that, if accepted, Amendment No. 1 would be a considerable step in the right direction by allowing Parliament to perform one of its proper duties—the control of expenditure. If there needs to be substantial additional expenditure, surely it would be right—as the noble Lord, Lord Sainsbury, indicated in his reply at Second Reading—for the Government to come hack to Parliament for fresh authorisation. That seems to me right. We must impose some limits, both on how much can be spent and on what it can be spent on. The amendments in this group would achieve that purpose. I look forward to the Government's response.

Lord Hodgson of Astley Abbotts

I rise briefly to support this group of amendments. I apologise to the Committee for being unable to attend the Second Reading debate; I was abroad on business. Both the noble Lord, Lord Ezra, and my noble friend Lord Jenkin have mentioned the blank cheque aspects of the proposal, but it seems that the problems are less broad than that. However, the proposal is unsatisfactory for a wide range of reasons. It makes no distinction between the need to keep British Energy's generating capacity, which is necessary to ensure adequate surplus capacity to cope with spikes, and decommissioning expenses. Furthermore, it does not differentiate between historic losses and costs and prospective costs and losses.

I believe that we should be dividing the options available to the Government between the four parts of that quadrant: historic and prospective, and generating and decommissioning. I think that my noble friend Lord Jenkin and the noble Lord, Lord Ezra, have done a valuable service in asking the Government to be clear on how those parts of the quadrant will be constructed.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville)

I shall speak first to Amendments Nos. 1 and 7 and then to Amendments Nos. 3 and 4. I think that a certain amount of clarification is needed on the amendments.

Amendments Nos. 1 and 7 seek to limit the Government's expenditure under Clause 1 of the Bill to historic liabilities. Amendment No. 1 proposes that subsection (1)(a) of Clause 1 be amended so that financial assistance could be provided to the company only in relation to "qualifying activities", which are defined in Amendment No. 7 as, financial liabilities generated by a British Energy company prior to 4th September 2002, to a maximum of £2,100 million". However, the purpose of Clause 1 is not to deal with liabilities in the way suggested by the amendments tabled. It is, of course, true that the Government have stated their commitment to provide assistance for BE's nuclear liabilities. But that will be done using the power provided in Schedule 12 of the Electricity Act 1989, rather than under this clause, provided that this Bill removes the ceiling for expenditure under Schedule 12. I did stress that point at Second Reading when I stated, that the expenditure authorised under Clause 1 will not, as a matter of policy, be used to deal with support for long-term nuclear liabilities"—[Official Report, 3/3/03; col. 607.]— and I reiterate it again today.

So if Clause 1 is not intended to deal with BE's historic liabilities, what is its purpose? Quite simply, Clause 1 is there to cover other expenditure which is not covered by Schedule 12. Principally, this would concern ongoing operational support to keep BE going during the period when a restructuring plan is being put into place. The clause could provide statutory authority for expenditure on British Energy in a number of situations. It puts the loan facility that the Government have provided to BE on a firm statutory footing.

The statutory authority provided by subsection (1)(a) could also be used to authorise Government to provide funding in the event of administration. That would include essential funding to keep the nuclear business running safely as well as funding the administrator in such an eventuality. That would clearly come under the remit of this clause rather than Schedule 12. Finally, it would also allow Government to continue funding the trading arrangements of the operating companies going forward should the restructuring deal fail and should they at any point come into public ownership. Amendments Nos. 1 and 7 would narrow the use of this clause to BE's historic liabilities; but of course, as I have just explained, this clause is not about expenditure on nuclear liabilities, whether historic or future.

Nevertheless, the principles which motivated the amendments should be discussed. I agree with the principle put forward by the noble Lord that any long-term restructuring aid should be restricted to historic nuclear liabilities. However, we have of course reflected that in government support to the restructuring plan. The key is that, in going forward, British Energy has to pay its own way. That is precisely what is established in the restructuring plan, where, following the restructuring, BE will pay its operating costs going forward, including future spent fuel costs. There is, therefore, no need to amend the current legislation as the clause deals with a separate issue and the points raised in the amendments have been addressed elsewhere.

I should point out that Clause 1 could be used only to the extent permissible under EU state aid rules. So there is a restriction on it in that context. As a result, I invite the noble Lord not to press Amendment Nos. 1 and 7.

I turn to Amendments Nos. 3 and 4. I have already explained how it is not the Government's intention to use Clause 1 for expenditure on nuclear liabilities. Government support for nuclear liabilities under the BE restructuring plan will be done under Schedule 12 to the Electricity Act 1989. That is a provision that deals specifically with nuclear liabilities, and indeed it quite clearly defines, the storage or reprocessing of nuclear fuel", as a qualifying expenditure. So, as with Amendments Nos. 1 and 7, Amendments Nos. 3 and 4 are inappropriate. They attempt to narrow down the type of support for nuclear liabilities possible under Clause 1. However, we have already said that we shall not be using Clause 1 for nuclear liabilities.

However, looking behind the specific form of this amendment and considering the principle behind it, I am still confused. Debating this point in another place, the honourable Member for Twickenham said: We would all accept, given the Government's position, that the taxpayer will have to assume decommissioning liabilities in some form".—[Official Report, Commons, 6/2/03; col. 473.] The honourable Member has clearly recognised the special features involved here. Decommissioning costs are unavoidable. They have to be paid for whether or not BE continues to generate. The Government need to ensure that this important nuclear liability is dealt with safely and properly.

However, those arguments apply also to historic nuclear fuel liabilities—I stress "historic liabilities". Fuel that has already been used in nuclear reactors needs to be dealt with—there is no avoiding that—and it certainly needs to be dealt with safely. If British Energy were to fail, then someone would need to pay to deal with the spent fuel. But that is not to say that we think that BE should have no responsibility for dealing with nuclear fuel costs in the future. Government are taking on responsibility for paying for the legacy of BE's historic spent fuel, but we are not paying for the new contracts for future spent fuel. Those contracts have to be paid for by BE. That is an important economic principle. BE has to be able to pay its own way going forward. There is no ongoing operating subsidy.

I hope that that has helped to clarify matters. I ask the noble Lord, Lord Ezra, not to press the amendments.

Lord Ezra

I have noted very carefully what the noble Lord, Lord Sainsbury, has had to say on these amendments. He has made the point that the specific issue raised is in fact raised later in the Bill. None the less, the fact remains that the wording is open-ended. I do not think that it is satisfactory for us to note that some limits to the proposal may be imposed by Brussels. We do not know what those amendments might be; they might be highly variable. I strongly believe that some limit should be placed on this. If we have identified the wrong issues, let us identify the right ones. Let us have the chance of coming back to this. If the noble Lord, Lord Sainsbury, would advise us as to what issues are raised here, we would gladly put that in a revised amendment for consideration at a later stage. He has not answered the point that the arrangement is open-ended so far as the UK Parliament is concerned; I leave alone whatever Brussels may be able to do. We should return to the matter.

3.45 p.m.

Lord Jenkin of Roding

I, too, find the Minister's response only partly adequate. I recognise entirely his point that in the Bill we are dealing with two different objectives for financial aid. The objective with which we are concerned in this context involves the provision of help towards financing running costs; the other objective involves the question of dealing with long-term nuclear liabilities. Neither of the Minister's answers about short-term or medium-term cash help should be as open-ended as they were.

I shall deal with those points in reverse order. The Minister referred to Brussels and the possibility that the Commission may impose some restraints under competition law. Will he say more about where that has got to? Now that the final restructuring proposals are on the table—we finally had announcements about what is being done only a week ago—has there been a submission to Brussels for the necessary consent under the state aid legislation? I asked about that at Second Reading because I had been told that it would take anything up to 18 months to secure that. Has the Minister more information to give to the Committee about where the process has got to and how long it is likely to take? Given the considerable opposition from other generators—I attach much more importance to them than to environmental groups, which have their own agenda in this regard—are the Government confident that the restructuring proposals that British Energy has advanced and which the Government have accepted, will achieve the necessary consents in Brussels? If not, what then?

I turn to the first point, which was about the need for a limit on the sum that can be put in. The Minister referred to Schedule 12 of the 1989 Act. We shall later discuss the fact that some of that Act has been repealed. Paragraph 4 involves the "financial limits" of Schedule 12. Sub-paragraph (1)(b) states that grants, loans and guarantees, shall not exceed £1,000 million or such greater sum, not exceeding £2,500 million, as the Secretary of State may by order specify". It was recognised then by my right honourable friends who were in charge that there might be a need to increase the amount. Paragraph 4(2) states: No order shall be made under this paragraph unless a draft of the order has been approved by a resolution of the House of Commons". In other words, Parliament was given a very clear power to withhold or sanction the increase in expenditure. We do not have a power here to do anything; moreover, it is not subject to any parliamentary procedures whatever.

The Minister prayed in aid the provisions of Schedule 12 of the 1989 Act as the provisions under which the Government are giving their support to British Energy. Why on earth cannot he make that subject to the same limitations as applied when the 1989 Act was passed? It appears that the Government want to have it both ways. With the greatest respect, I do not believe that Ministers should be allowed to do that. I ask the noble Lord: will he have another go?

Lord Sainsbury of Turville

I shall continue with my clarification. On Schedule 12, there is a debate to be had about how the limits should be changed. On Brussels, the plan was submitted on 7th March and will take a considerable time. I raise that only to say that, as with all situations involving state aid, that will obviously involve a limit on what the Government can do in terms of subsidising any future company. Noble Lords were rightly concerned that we should not be in a situation in which we were providing support on an ongoing basis that would interfere with competition between BE and other generators. That is the correct way to look at that.

On the issues involving what the money will be used for, I tried to set out clearly the particular categories of expenditure that the provisions would allow us to cover. In that context, it is difficult to specify a limit because there are two different routes that one could take. One route involves the situation in which the company does not go into administration and the other involves the situation in which it does. In either case, there would be a restriction, which would come from state aid regulations, about any ongoing support, to which other generators could object.

Lord Jenkin of Boding

I mentioned earlier that I had been at the Treasury and was surprised by the way in which the Treasury appeared to have dealt with this matter. Rolls-Royce was one of the events with which I had to deal as Chief Secretary to the Treasury, which noble Lords will remember went bust in, I believe, 1972—I have not looked up the date. There was clearly a huge national interest in making sure that the continued supply, maintenance and upkeep of the engines—not least for defence—should continue. That was all done under administration. There was a necessity to handle that; the same applies in this regard.

It is ironic—historians will find this an interesting observation—that a Conservative government, faced with a necessity to protect the national interest by dealing with a major manufacturer, were not afraid to allow Rolls-Royce to go into administration, and a large part of it became a public corporation. It later fell to me to appoint a chairman with a specific remit to prepare it for privatisation. The noble Lord, Lord Tombs, will remember that. It was nationalised and subsequently privatised.

We now have a new Labour Government who are determined that the company should remain in the private sector, notwithstanding the fact that substantial sums of government help are necessary. They are doing their utmost—I give them some credit for this—to prevent the company from going into administration. As the noble Lord told us at Second Reading, there was no prospect of anyone else wanting to buy it. The Government, as purchaser of last resort, would have to buy and run it; that is to say, it would be nationalised. I am not sure whether there is a very close parallel between the way in which the government dealt with Rolls-Royce in the 1970s and the way in which the Government are dealing with British Energy in the 21st century. In either case, the Treasury needs some control and Parliament needs some control, as was required in paragraph 4 of Schedule 12 to the 1989 Act. So far we have not got that.

Under the rules about which we were informed at the beginning of our sitting, we cannot vote on the amendment at this stage; these would probably not be the right amendments to vote on. We shall return to the matter. I do not believe that the Bill should leave the House without adding some clear limitation on what can be spent without coming back to Parliament for a further permission. Perhaps that reveals the way ahead in this regard. I find all of this highly unsatisfactory.

Lord Ezra

In the light of the Minister's comments, we may need to reword the amendment, bearing in mind that we still feel strongly that there should be a better definition about what the money would be used for and some limit imposed beyond which the Government would have to come back to the House and seek further powers. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Jenkin of Roding moved Amendment No. 2:

Page 1, line 7, leave out paragraphs (b) and (c).

The noble Lord said: In moving Amendment No. 2, I shall speak also to Amendments Nos. 5 and 6, which are wholly consequential on the lead amendment.

The amendments raise the issue of whether the Government are right to take the power to acquire the assets or security of British Energy—that is, to buy the company or a substantial share of it. The Government say that the power is necessary in case the restructuring fails and the company must go into administration, when the Government could buy the shares—but should they have both barrels loaded at the same time?

The Minister and the rest of the Government have firmly hitched their wagon to the restructuring option. That is their decision, although administration would have been preferable, as I said at Second Reading and others have said in another place. Mr Vincent Cable, the Liberal Democrat spokesman, made it clear in another place that he would have preferred administration. However, the Government must now pursue their option. Surely, retaining the power to buy assets or to buy the company in the Bill, without any further parliamentary step needed to authorise it, is to water down their commitment.

The Minister nodded vigorously when I questioned whether the Government needed that power, but it is absolutely open-ended. The Bill refers to, the acquisition … of …

  1. (i) any securities of a British Energy company; or
  2. (ii) any part of the undertaking or assets of a British Energy company; or
  3. (c) the carrying on of any undertaking acquired".

The definition is very broad. In the case of Rolls-Royce, the government of whom I was a member did the only sensible thing to do in the circumstances. This Government have chosen the other option, of trying to keep the company in the private sector. Thereby they have endorsed the whole process of privatising the electricity industry; but I mention that only in passing. Should they have the power to do that automatically, if the restructuring fails? Should they not at least come back to Parliament, and should the power not be subject to statutory instrument, so that Parliament can vote again? Do the Government imagine that events will occur so suddenly that restructuring will fail and the administrator will be appointed one day, and that the next day they will have to step in and act? I do not believe that that would be the case.

As noble Lords and others have repeatedly said in debates on the Bill, an administrator would be perfectly capable of continuing to pay the staff, honouring the pensions and ensuring that the lights are not turned off. Using that continuity of operation as a reason to step in for restructuring has worn a bit thin. An administrator could carry on the business and, if the Government really wanted to, they could provide the administrator with funds to enable him or her to do that. It would not happen immediately, and there would be plenty of time for the Government to come back to Parliament for an order authorising the acquisition, in which case we could consider carefully whether the order was limited to what was necessary to achieve the immediate purpose. Simply to include it in the Bill as an open-ended power is going altogether too far, and I do not believe that the power should remain in the Bill as it is. I beg to move.

4 p.m.

Lord Sainsbury of Turville

Members of the Committee will be aware that this Bill is part of the Government's response to the problems faced by British Energy. Its purpose is to ensure that the Government are properly prepared to deal with BE so that they can play their part in the company's restructuring plan, or have proper contingency plans in place in case that fails and the company goes into administration.

Paragraphs (b) and (c) of Clause 1(1) provide an important part of that contingency plan. They give the Government explicit parliamentary authority to incur expenditure on acquiring the British Energy operating companies or, alternatively, the business and assets directly in the event of administration. That is important, as it allows the Government to be fully prepared for administration should the situation arise.

The provisions within paragraphs (b) and (c) are simply a matter of prudent contingency planning. They certainly do not represent an in-built preference to renationalise the company, as some Members of the Committee seem to fear. If we had wanted to do so, we would have done so already, as did the Conservative government of which the noble Lord, Lord Jenkin, was a member with Rolls-Royce. The subsections simply give the Government parliamentary authority to spend taxpayers' money; they do not require the Government to spend that money or change the law to give the Government any kind of special power of compulsory purchase. As I said, we would acquire BE's nuclear business only as purchaser of last resort, in case the company failed and no private sector company stepped forward.

The amendments proposed by the noble Lord, Lord Jenkin, would remove the explicit parliamentary authority. Amendment No. 2 is the substantive amendment, with Amendments Nos. 5 and 6 being linked consequentially. These amendments would essentially prevent the Government from ensuring that the necessary contingency planning was in place in case the restructuring deal failed and the company went into administration. That would not be a responsible position to take. Surely, everyone will agree that, if British Energy goes into administration, the Government should be able to take the necessary action to ensure nuclear safety and security of supply.

If the company were to fail and we were not prepared, I can imagine what the noble Lord, Lord Jenkin, would say. He would tell us that it was scandalous and improvident that the Government, having had a period of warning of the situation, had taken no steps to take appropriate action. If the power were not in the Bill, we would have to come back and take up valuable parliamentary time in debating it. During the course of that time, which could be several months, we would be spending money on an administrator. That would hardly be prudent or sensible.

Lord Jenkin of Roding

I specifically said not that the power should be left to another Bill in this case but that it should be subject to parliamentary control by statutory instrument, which could be introduced into Parliament in a few days or weeks. The administrator could be provided with funds in exactly the same way in which the company was provided with funds, to enable him to have the cash to keep the business going. It would seem entirely proper in those circumstances that the Government should come back to seek parliamentary authorisation.

Lord Sainsbury of Turville

As this is a question of the powers that the Government would have in these circumstances, it seems strange to allow this power as a possibility and then to delay it. Nothing would be gained by delaying the use of the power, given that we can debate it and consider the issues at this stage. It would become a reality only in particular circumstances. I can see no harm in saying that, under those circumstances, we should have the powers in place.

When nuclear safety is at stake, it is unacceptable for the Government to stand idly by in the hope that the BE situation will somehow go away. We are keen for the restructuring deal to succeed, but it would be truly alarming if we were not ready for a situation in which the deal failed. Paragraphs (b) and (c) of subsection (1) allow the Government to ensure that they are ready for every eventuality. Their removal would damage the Government's ability to meet their obligations to ensure continuing nuclear safety and security of supply.

I therefore invite the noble Lord, Lord Jenkin, to withdraw his amendments.

Lord Jenkin of Roding

Clearly, there is some merit in what the Minister has said. We may return to the question on another occasion but, in the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 3 to 7 not moved]

Clause 1 agreed to.

Clause 2 [Removal of restrictions on capacity to acquire certain securities]:

Lord Jenkin of Roding moved Amendment No. 8:

Page 2, line 17, after first "acquire" insert "from a willing seller"

The noble Lord said: As we discussed at Second Reading, Clause 2 widens the Bill beyond the question of British Energy. We may have our own ideas as to why that is necessary, as I hinted in my Second Reading speech. The Minister for Energy and Construction was splendidly frank at Third Reading in another place, when he said that a Bill could not deal with one company alone. If it had attempted to deal with one company alone, it would have been hybrid.

[The sitting was suspended fat a Division in the House from 4.7 to 4.16 p.m.]

The Deputy Chairman of Committees

If noble Lords are agreeable, perhaps we could continue with the noble Lord, Lord Jenkin of Roding.

Lord Jenkin of Roding

I shall not repeat what I said before we broke for the Division, except to say that we are now dealing with a power which could extend far beyond the concerns of Clause 1—namely, immediate help to British Energy. Clause 2 repeals the constraint imposed by the 1989 Act on the Government's capacity to acquire securities in electricity companies. Therefore, that can be left entirely at large, the argument being that it is all now expended and we are past that. However, the restrictions are being removed.

Clause 2(1) states: The repeal of section 72(1) does not affect the capacity of the Secretary of State or the Treasury, apart from any enactment, to acquire (or to acquire rights to subscribe for) securities of any company". I stress the words "any company".

Amendment No. 8 is comparatively narrow. Although its wording may be open to suggestion and improvement, it makes it perfectly clear that it refers to the sale between a "willing buyer" and a "willing seller". A willing seller is one which is not being put under any constraints or pressure to allow the Government to acquire rights to subscribe to securities in the company. It is a comparatively short and simple question. I hope that the noble Lord, Lord Sainsbury, will give an equally straightforward and simple answer that there is no intention to have a clause which could allow the Government to acquire forcibly or by compulsory purchase the securities in any company. I beg to move.

Baroness Miller of Hendon

My noble friend Lord Jenkin explained very well what is meant by a willing seller and the difference between a seller under slight coercion and someone who is willing to sell. We support the amendment.

Lord Tombs

I, too, support the amendment. It seems to me utterly unrealistic to speak of a "willing seller" when the other party in the purported transaction controls regulation and fiscal matters and is, therefore, in a position to dictate the terms on which the "willing seller" comes to the table.

I do not like the manner in which this matter has been introduced. A certain amount of suspicious attention is required in order to realise what the clause enables the Government to do. To "smuggle" this provision into a Bill dealing with British Energy is less than fair to Parliament. Provisions of this kind should at least be subject to affirmative resolution but, preferably, the subject of separate legislation.

Lord Sainsbury of Turville

Clause 2(1) repeals Sections 72 and 74 of the Electricity Act 1989, provisions which prevent the Government from buying shares in certain electricity companies and their successors. The repeal of those sections would restore the natural position of the Crown's powers to purchase shares in affected electricity companies.

I explained at Second Reading the Government's motivation for repealing those sections. If the restructuring deal fails and the company goes into administration, the Government have to be ready to acquire the stations—either by directly acquiring the assets or through acquiring the operating companies. I also made it clear at Second Reading that we would, in principle, welcome an appropriate private sector buyer purchasing the companies. However, given the specific nature of the business, and the nature of the risk, we simply do not expect any such private buyer to come forward.

In that case, the Government would need to stand ready to acquire the stations. This is no compulsory purchase. It is simply the Government being prepared to act as a purchaser of last resort if no other buyer steps forward.

Amendment No. 8 proposes that we specify in the Bill that any securities acquired must be "from a willing seller". But that is unnecessary. The repeal of Sections 72 and 74 of the Electricity Act 1989 does no more than restore the Crown's natural powers to purchase securities in certain electricity companies. I must stress that the repeal of these sections does not give the Government a special power to take shares away from shareholders against their will. Essentially, the Crown will be placed in the same position as any other individual and be subject to the same constraints. We could acquire the shares only where a shareholder was prepared to sell.

Therefore, the amendment adds nothing, except some possible confusion as to exactly what a "willing seller" is, as that is not an established concept. There is no hidden agenda to renationalise electricity companies. The Government simply want to ensure that the Crown's natural powers to buy shares in certain companies are restored in order that the Government are able to stand ready to acquire BE stations if that is necessary.

Sections 72 and 74 of the Electricity Act 1989 now have a curious power in terms of which companies they protect. There is now no logic to that because the sections relate to the companies which were then existent. Events have moved on since those days. I therefore ask the noble Lord to withdraw his amendment.

Lord Jenkin of Roding

I must say that I am now less inclined to withdraw the amendment than I might have been when I started. Half of the Minister's reply related to the need to buy securities in British Energy. But we dealt with that issue in Clause 1; and I moved the amendment to suggest that it should perhaps be subject to more parliamentary restraint.

Clause 2 relates to the acquisition of securities in any company—other than British Energy. I am sorry, I give way to the Minister.

Lord Sainsbury of Turville

As a matter of correction, we have not dealt with the situation because, unless Sections 72 and 74 are repealed, they would restrain the Government from making the purchase which they have the power to make under Clause 1. It is incorrect to say that this issue has been dealt with under Clause 1.

Lord Jenkin of Roding

I understand the noble Lord's point. But why is the provision extended to any company? If the proposal was merely to deal with British Energy, perhaps it might have been dealt with more appropriately in an additional subsection in Clause 1. We should then be perfectly clear that the repeal that is now being sought is simply to enable the Government to continue to deal with British Energy. That is not what the clause says. It refers to securities in any company.

As the noble Lord, Lord Tombs, rightly said, because of the way in which regulators can work—or are not working—the market is subject to the considerable turmoil described by international bodies. Some companies have fallen into grave difficulties. Hitherto, the Government have been precluded from buying securities in those companies. The Bill removes that constraint. I find this an extremely difficult addition; it is tagged on to a Bill which is supposed to deal solely with the problems of British Energy.

As has been repeatedly reported in the press, as a result of the 40 per cent fall in wholesale electricity prices, other companies have found themselves in considerable difficulty. Why does this clause not mean that the Government are now taking the power to acquire securities in any of those companies? They might be quite pleased to be taken over by the Government if they have got into difficulties and the Government do a deal which saves something for the shareholders. Is that what the Bill is about? That is not how it has been presented to Parliament, either in this House or another place. But that is what Clause 2 says and we should not let that go.

Lord Sainsbury of Turville

I think the point made by the noble Lord, Lord Jenkin, is that we could achieve the same end by keeping Sections 72 and 74 and amending them specifically for British Energy. The reason for not doing so is that those sections are completely out of date and are quite random in their effect. In that context, it makes total sense to have a clean sweep of what is now outdated and rather arbitrary legislation in terms of its impact.

The provisions are narrowly defined and relate only to a small number of companies—the successor companies created in the industry restructuring privatisation. They apply only to that small number of specific companies as companies, and not to any wider corporate group of which they may now be part, or, indeed, to any new companies. Therefore, this seems a good moment—if we are going to amend the provision—to do a clean sweep and bring this legislation up to date.

Lord Jenkin of Roding

If one is in a hole, one should stop digging. With the greatest respect to the noble Lord, Lord Sainsbury, he seems to be digging himself into an ever deeper hole. Quite rightly, he says that Sections 72 and 74 dealt with the predecessors to the successor companies and that the Government were limiting their powers to a small shareholding in any of the successor companies.

I have not studied the debates but the Act is clear. If the Clause were simply dealing with successor companies, one would accept that. But that is not what the clause says. It seeks to sweep away all the constraints, all the limitations, and the Government are giving themselves the power to buy securities in any company. I am sure that the Minister understands why, on this side of the Committee, we are somewhat suspicious. As the noble Lord, Lord Tombs, said, the circumstances may arise when a company would be happy to be taken over by the Government and save something from the fire.

I do not believe that Parliament should allow this to go by. We cannot vote in Grand Committee, but I make it clear that we shall want to return to this matter at a later stage. For the moment, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4.30 p.m.

The Deputy Chairman of Committees

Amendment No. 9 will, if it is put to a vote, pre-empt Amendment No. 10.

Lord Jenkin of Roding moved Amendment No. 9:

Page 2, line 19, leave out subsections (2) and (3).

The noble Lord said: Amendments Nos. 9 and 10 have been grouped. The substance of Amendment No. 9 has already been covered in our discussion about the repeal of Sections 72 and 74.

Clause 2(2) refers to the Secretary of State's ability to, repeal to any extent any of the other provisions of Part 2 of the Electricity Act".

I have much sympathy with the argument that, there are provisions on the statute book that are spent because they were aimed at a particular situation that obtained some years earlier and for which there is no continuing need, it is right, in the interests of tidying up the statute book, that they should be repealed. However, Clause 2(3) gives rise to some concern. Subsection (2) gives the Government the power to make an order, and Subsection (3) says that the order, may make consequential, transitional or saving provision (including provision modifying the Electricity Act 1989 or any other Act)".

That goes far beyond what is appropriate in such circumstances.

The Government have sought to explain their wish to deal with the matter by order by saying that it would give them more time to examine the position in detail and, as the noble Lord, Lord Sainsbury of Turville, told us at Second Reading, consult stakeholders to make sure that there are no untoward consequences of any repeals that they have in mind. That may be a reasonable way to proceed, but Amendment No. 11 would make certain that any such action would be subject to affirmative resolution.

In the mean time, we have the following words: modifying the Electricity Act 1989 or any other Act".

Amendment No. 10 would add the words "affected by this section". That is a necessary limitation of the power of the repeal. A few moments ago, we discussed the words, to acquire securities in any company". Now, the Bill says that the order-making power can be used to amend not only the Electricity Act 1989 but any other Act. We could take out the words "or any other Act", but the amendment, which stands in the name of several Members of the Committee, suggests that the provision should merely be qualified by the addition of the words "affected by this section".

For the life of me, I cannot see why the noble Lord, Lord Sainsbury of Turville, could not accept the amendment. He has said that that is what the subsection means. Why not accept the amendment? I beg to move.

Baroness Miller of Hendon

I shall add nothing to what my noble friend said about Amendment No. 9, but I shall say a few things about Amendment No. 10.

As my noble friend said, our amendment is a simple drafting amendment that would in no way affect or detract from the operation of the Act. It would remove an ambiguity, so that there could be no possible misunderstanding or disagreement about what Parliament intends. Clause 2(2) gives the Secretary of State power to amend by order the provisions of Part II of the Electricity Act 1989. Clause 2(3) gives the Secretary of State power to make, consequential, transitional or saving provision (including provision modifying the Electricity Act 1989 or any other Act)". It is the words "or any other Act" that bother us. They could be very ambiguous in their effect. I shall not trouble the Minister by reminding him of the day that we had the little contretemps about what the phrase "or otherwise" meant, but the phrase "any other Act" is far too wide.

Undoubtedly, the Minister will tell us that, when an Act or part of an Act is repealed, it may be necessary for there to be, consequential, transitional or saving provision", and that other statutory provisions that remain in force may refer to the repealed Act in some way and will need to be covered. Such residual provisions may be in the same Act, of which only part must be repealed, or they may be in a totally separate Act. As I said, we understand and accept that. However, the words "or any other Act" go too far. Unless they are qualified, they could be taken to mean absolutely any other Act whatsoever, including Acts irrelevant to the Electricity Act 1989 or to any aspect of the electricity industry. I anticipate that the Minister will tell us that the words "any other Act" are governed by the qualification that such amendment must be consequential, transitional or saving, following the provisions of the Act. The Minister nods his head, so I must be right to suggest that that is what he will say.

We should not legislate in a way that creates a need for esoteric rules of construction to interpret what Parliament is saying. Nor should that interpretation depend on the application of legalistic semantics. I still recall, as I mentioned, the lengthy battle about the words "or otherwise". I am tempted to repeat it, but I ought not to; I do not want to irritate the Minister before he stands up.

Before the Minister tells me, as he frequently does, that my amendment is unnecessary, I ask him to humour me on this occasion by adding just four clarifying words—whether they are necessary or not, as he may say—to the clause. It will not expend so much paper and ink as to cause an ecological disaster. My noble friend Lord Jenkin of Roding said that he had already mentioned that. It would be neither a political defeat nor a rebuff to the draftsman. It would be just belt and braces, and, although I wear neither, I hope that the Minister will remove the ambiguity, however remote he believes it to be.

Lord Sainsbury of Turville

I shall speak to both amendments but start with Amendment No. 9.

Subsections (2) and (3) introduce a power to repeal the remainder of Part II of the Electricity Act 1989. Part II is concerned with the reorganisation of the electricity industry from its old nationalised structure to the successor companies, which were then sold into the private sector. As such, it contains a large number of provisions for transferring assets from the old bodies to the new companies; provisions to abolish the old bodies; provisions to finance the successor companies while they remained in the public sector; and, ultimately, provisions to sell the shares in those successor companies into the private sector. In short, that part was a set of transitional provisions that enabled the privatisation of the industry.

Subsections (2) and (3) provide a delegated power to repeal provisions of Part II, provisions that were designed to be transitional in nature and are now outdated. We are doing that for two reasons. First, we are already, through subsection (1), repealing Sections 72 and 74 of the Act. We want to guard against any unintended consequences caused by interactions between those sections and the rest of that part. We want to be careful that nothing in the remainder of the part could act as an obstacle to the contingency plans that we have in place.

Secondly, as we are already repealing Sections 72 and 74, and as we want a power to repeal any other provision in that part that might act as an obstacle, it is a sensible opportunity to take a power to repeal the whole of Part II. That is a sensible approach to tidying up old legislation that is no longer applicable. We are taking a delegated power to do that, to make sure that we have time to go through Part II in detail and check whether any of the provisions that it includes do or should still have lasting effect.

[The Sitting was suspended for a Division in the House from 4.39 to 4.48 p.m.]

Lord Sainsbury of Turville

The amendment of the noble Lord, Lord Jenkin, would remove the provisions to give the Government power to repeal the remainder of the outdated provisions in Part II. It would also prevent the Government from making any amendments consequential to those repeals in any other legislation.

The noble Lord should take some comfort from the Delegated Powers Select Committee, which noted that, much of Part 2 is now likely to he of limited practical effect". Taking the powers under Clause 2(2) and (3) allows us to tidy up essentially outdated and irrelevant provisions. I am aware that noble Lords expressed a desire to be able to monitor the use of that power. I draw the Committee's attention to my letter to the Delegated Powers Select Committee, in which I welcomed its recommendation that the provisions be subject to the affirmative resolution procedure. That will be dealt with in due course. With that in mind, I ask the noble Lord to withdraw his amendment.

It would perhaps be helpful if I outlined the intention behind Clause 2(3). As Members of the Committee know, Clause 2(2) gives the Government the power to repeal the remainder of the provisions in Part II of the Electricity Act 1989—apart from Sections 72 and 74, which are repealed outright. Clause 2(3) therefore gives the Government an essentially limited power to amend other legislation only so far as their effect is consequential, transitional or saving to any repeal of the provisions of Part II of the Electricity Act 1989. I re-emphasise that the power to amend Clause 2(3) is already narrow and can be used only to make amendments in some way consequential on using the power in Clause 2(2). It is a narrow power to repeal provisions from the Electricity Act 1989.

The effect of Amendment No. 10 is superfluous, as the Government's powers in this regard must be read within the context of Clause 2, which deals primarily with the repeal of Part It of the Electricity Act. In accordance with all usual principles of interpretation and administrative law, the power would not be construed as an unfettered one. If we added the words proposed, which go further than the usual principles of interpretation and administration, the courts would be inclined to look behind that to see why.

I know that the noble Baroness, like myself, takes seriously the views of the Delegated Powers Committee. On Clause 2(3) it said: we accept that much of Part 2 is likely to be of limited practical effect, and consider that clause 2(2) and the Henry VIII power to make consequential, transitional or saving provision at clause 2(3) are justified". With that conclusion in mind, I hope that the noble Baroness is reassured that the provision is sufficiently limited to meet Committee Members' concerns. I ask her, therefore, to withdraw the amendment.

Lord Jenkin of Boding

I wish to speak to Amendment No. 10. I am still worried by what the noble Lord has just told us. I fail to see why we cannot insert "affected by this section" after the second "Act". The current provision is very wide. The insertion of those words would be entirely in line with what the noble Lord said was the Government's intention. I fail to see why the addition of those words should confuse the judiciary. They are fairly skilled people and would understand that what we are talking about is not any other Act but any other Act affected by the section.

Lord Sainsbury of Turville

The judiciary does not regard the usual principles of interpretation and administrative law as a frivolity; it has regard to how the law should be interpreted and interprets it according to those principles. Given those rules of interpretation and administrative law, if we insert in legislation a further statement that is not usually included, the judiciary will ask why. That might have consequences that we do not seek.

Baroness Miller of Hendon

The Minister invited me to withdraw Amendment No. 10. As he knows, we must withdraw all amendments in Grand Committee.

The Chairman of Committees (Lord Tordoff)

With all due respect to the noble Baroness, Amendment No. 10 has not been moved and, therefore, cannot be withdrawn. We are speaking to Amendment No. 9. The noble Baroness is entitled to speak to Amendment No. 10 because it is in the same group. At the appropriate time, Amendment No. 10 will be called as not moved.

Lord Jenkin of Boding

As I moved Amendment No. 9, it is for me to respond. I recognise entirely the advice that the noble Lord has been given by his legal advisers. I received much the same advice in various departments, and I recognise the force of it. One should try to remain within the normal canons of construction. The words proposed in Amendment No. 10 may not be appropriate to achieve our purpose.

However, I still feel that to leave the wording as "any Act" is to go too wide. I am not certain that it would be appropriate. I have no doubt that the purpose is clear in the Minister's mind and that, if he were to make such an order, he would ensure that it fell within the terms he described to the Committee. But that does not necessarily apply to subsequent Ministers or administrations or even to new personnel of the department drawing up the order. I am grateful for what the Minister said in a pre-emptive strike about Amendment No. 11. No doubt, we shall discuss that in a moment. I do not feel that the wording should be left so broad.

I shall conclude with a story. There is a case that appears in all legal storybooks about the Local Government Act, which was a private Act of Parliament hundreds of pages long that provided a huge amount of power to the local authority promoting it. It was so long that nobody read it the whole way through. The town clerk had successfully slipped into the Act, where nobody would look, a provision that the town clerk's marriage shall hereby be dissolved. The Bill was enacted, and he got his divorce. That happened before the Divorce Act. Such incidents could happen; therefore, the wording of Bills should be limited so that a permanent secretary cannot get a divorce by inserting a provision in the order without anyone noticing.

I accept entirely that the Minister's intentions are honourable in how he described the intention behind the Bill. My unhappiness is that that is not what the Bill says. We shall return to the matter. I beg leave to withdraw Amendment No. 9.

Amendment, by leave, withdrawn.

[Amendment No. 10 not moved.]

Baroness Miller of Hendon moved Amendment No. 11:

Page 2, line 24, leave out subsection (4) and insert— "(4) No order shall be made under this section unless a draft of the order has been laid before and approved by a resolution of both Houses of Parliament."

The noble Baroness said: I apologise to the Chairman for attempting to withdraw Amendment No. 10. I made the mistake simply because the Minister asked me to withdraw my amendment. I assumed incorrectly that he referred to Amendment No. 10.

Amendment No. 11 is virtually self-explanatory. The Minister mentioned that there would be a change from negative to positive resolution, which is half the purpose of the amendment. However, I shall not alter my amendment until that happens—not that the Minister would say so if it were not the case. I shall, therefore, speak to my amendment.

5 p.m.

Lord Sainsbury of Turville

Perhaps I may briefly explain the rationale behind our decision to take a delegated power to repeal Part II of the Electricity Act 1989. Essentially, Part II outlines transitional arrangements for privatisation of the electricity industry. The intention behind this legislation has long since expired and, as the electricity industry has developed over time the provisions contained in Part II of the Act have become increasingly irrelevant.

In effect, Part II of the Electricity Act is, to a large degree, spent. The Government have decided to take a power to repeal the remainder of Part II—apart from Sections 72 and 74, which are repealed outright. That is so that the Government have the opportunity to explore fully the effect of the repeal of existing provisions.

Given the fact that the provisions contained in Part II of the Act are largely spent, we do not believe that there would be any potential repeals that would be particularly controversial. For that reason, we suggested that a negative resolution procedure would be the most appropriate for this particular power.

However, we carefully considered the recommendations made by the Select Committee on Delegated Powers and Regulatory Reform. The committee points out that there is potential to repeal a provision which is both live and significant. Our view is that we do not expect any future repeals under this provision to be significant or controversial, and will not, as a matter of policy, seek to repeal live provisions. However, given that the impact of this change from negative to affirmative resolution is likely to be very small in practice, and as we cannot be certain that there will be nothing significant or controversial until the work is done, we are content to take the advice of the Delegated Powers and Regulatory Reform Committee and have written to the committee stating as much.

On that basis, we should like to accept in principle Amendment No. 11, tabled by the noble Baroness. I hope that she will not object when I say that we should like to make sure that the technical drafting of the amendment is sound. I should be grateful, therefore, if she would withdraw her amendment at this stage on the basis that a similar amendment will be tabled on Report.

Baroness Miller of Hendon

I thank the Minister for his remarks. As he is accepting the amendment, there is no reason why he should not provide the technical drafting. That would include the second part that I mentioned; namely, that this should be by positive resolution of both Houses, not just one. We hope that the Minister will be able to take advice quite quickly, so that when we return to the amendment on Report we shall know whether or not that is acceptable. In any event, at this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

On Question, Whether Clause 2 shall stand part of the Bill.

Lord Gray of Contin

I had not intended to speak on Clause 2 stand part. However, when I arrived today, I found that my noble friend Lord Jenkin of Roding had added his name to most of the amendments. I did not feel inclined to disagree with him each time, so I thought that I would keep my few remarks for the clause stand part debate.

I strongly supported the Bill at Second Reading, and I still do. The Minister has dealt adequately with the amendments that have been moved. The answers he has given certainly satisfy me, if not my noble friends—but that is part of life.

It would he a mistake, as was suggested in relation to Part I, always to create a set of prohibitions to be included in the Bill—for example, that money must not be used for this, that, or whatever—because one never knows what may lie in the future. For example, at some future time British Energy might have a subsidiary which might be involved in some kind of arrangement with a chemical company. Is the intention to have a Bill that would prohibit the transportation of dangerous chemicals? Why do we always pick on the nuclear industry? It seems to be the easy target when people want to launch criticism.

I strongly support the nuclear industry and want to do everything to encourage it. I do not want to see anything included in the Bill or removed from it that might, at some future date, be of disadvantage to the industry. That is my main concern.

[The Sitting was suspended for a Division in the House from 5.5 to 5.15 p.m.]

Lord Gray of Contin

I gave the example of a possible association with a chemical company. But it does not stop there. At some time in the future, British Energy might have a relationship with a company involved in coal purification—dear to the heart of the noble Lord, Lord Ezra. Are we to include that in the list of companies with which it will be prohibited from dealing just because, in years gone by, the coal industry was a major polluter, when today it is a most attractive source of power generation?

My noble friend Lord Jenkin of Roding was a distinguished Chief Secretary to the Treasury. But all those chaps who go to the Treasury never quite lose its influence when they leave. Something gets into their nature. They query everything to do with expenditure—which is probably a very good thing.

I have had personal experience of this. Between 1979 and 1981, I was Minister of State for Energy. In the autumn of 1981 there was a Cabinet reshuffle. I was on holiday at the time, and my private secretary telephoned me, saying that I would be interested to hear who was the new Secretary of State for Energy. She told me that it was Mr Nigel Lawson—with whom I had been fighting for almost all of the previous two years when he was Financial Secretary to the Treasury. However, I learnt that those in the Treasury can change a little. Nigel Lawson taught me a great deal about the Treasury and how people there should and should not be approached. He got more out of the Treasury in his first year as Secretary of State for Energy than we had in the previous two. But that is beside the point. I am sure that my noble friend Lord Jenkin has the same gift, although he is not prepared to use it at the moment.

Whatever restrictions are placed on the use of money which may in the future be available to the company, I do not want anything ruled out if doing so would bring disadvantage to the nuclear industry in general and to British Energy in particular.

Nuclear waste is divided into several categories. The key problem lies in the disposal of the most highly active, long-lived components; namely, the used fuel elements, and, if reprocessed, the material left over. I refer to separated plutonium. But, given present technology, the waste package can be kept intact for several thousand years and stored in a deep burial chamber. Such repositories could be created without any problems. They already exist elsewhere. However, the "nimby" factor has yet to be overcome in the United Kingdom.

It would have been so much easier for all those with interest in energy had the Government, in their recently published White Paper, been more positive and more definitive in regard to the various uses of energy and what will, and will not, be acceptable. They have left the energy industry in a difficulty: no one is quite certain just how much of any particular type of energy will be in favour. That applies particularly to the nuclear industry.

Come what may, the nuclear industry is, and will be, essential for power generation in this country for the foreseeable future. It may be, costs being what they are, that the only way in which nuclear energy can truly progress is by a combination of interests. I refer not only to interests from within this country but. European interests. Nuclear energy has been very successfully developed in France, for example. It seems tragic that, certainly in Scottish universities at the moment, there is no course for nuclear technology in this country. One day, we may have to go begging to our European neighbours in a field where we once took the lead.

Whichever government have to take these decisions, it will take a lot of courage and a lot of resolve to spell out the future for nuclear power. I hope that the Bill will lay a foundation to help British Energy and all the other generators to recover and prosper in the future. I single out British Energy not only because the Bill deals exclusively with that but because it is our largest generator of electricity from nuclear power.

The fact that the Government have stepped in to save British Energy is commendable. I think that it would have been outrageous for the Government not to come to the aid of British Energy. I pay tribute to them for that. They do plenty of other things for which I would not pay them tribute, but I believe in giving credit where it is due. As far as I am concerned, they have done a good job here. I shall continue to support the Bill. I hope that, despite the enthusiasm of my noble friends, nothing will be deleted from the Bill on Report.

Baroness Miller of Hendon

I should like first, if I may, to tell my noble friend Lord Gray of Contin that I am truly sorry. He had great difficulty in not opposing the first few amendments because our noble friend Lord Jenkin of Roding had put his name to them and he wanted to be seen to oppose our noble friend only once. I am very sorry about that.

We on this side oppose the Question whether Clause 2 should stand part, although I readily admit that affirmative resolutions will make the provision somewhat better. I agree with my noble friend Lord Gray of Contin that we certainly would not want to do anything that failed to ensure a nuclear dimension to our energy mix. The trouble with the Bill, and particularly with Clause 2, is that it is too wide and is taking all the other provisions with it. That is the problem. We wanted to open up that debate for consideration.

I shall not repeat the points which I made in earlier debates about the need for regulations to be approved by affirmative resolution. We seem to have reached that position. However, I should like to draw the Committee's attention to the serious—perhaps even sinister—implications of Clause 2(1), which in my view has been slipped into the Bill for no valid reason. The provision bears no relationship to the Bill's objectives and does nothing whatever to further those objectives. As we heard, Clause 2(1) repeals Sections 72 and 74 of the Electricity Act. It is not necessary for me to trouble noble Lords with the complicated and convoluted provisions of the two sections themselves as the excellent Explanatory Notes outline the provisions very well. I should like instead to quote from the Explanatory Notes in a slightly abbreviated form. They state that Section 74, originally ensured that the privatisation of a Government owned electricity company could not be subsequently reversed. It did this by restricting the Secretary of State's common law powers to acquire ordinary shares in certain privatised … companies beyond a specified limit". They go on to explain that Section 72, is a special provision for purchase of shares in successor companies (which … comprise certain of the privatised electricity companies)". Clause 2 proposes simply to remove those restrictions. In other words, the Government want the power to purchase shares in privatised electricity companies—the very power that the Government admit those two sections were expressly passed to prevent. Specifically, the restrictions were intended, in the Government's own words, to prevent re-nationalisation. They do that under the pretext of the Explanatory Notes, which blandly claim: In the main, Part 2 has served its purpose and the provisions no longer apply or are now irrelevant". The Minister repeated that twice earlier.

Who, apart from the Government and the unions, says that the threat of re-nationalisation is no longer relevant? Who says that inhibitions against nationalisation or re-nationalisation have served their purpose? At the TUC conference only last year, a resolution was unanimously passed calling for British Energy to be re-nationalised. Sure enough, the Government included that provision in this Bill. Mr Wilson admitted to another place: It is true that repealing that provision could, in theory, permit the Government to acquire shares in certain other electricity companies where we cannot currently do so, but I stress that we have no intention of doing so".—[Official Report, Commons, 27/ 1/03; col. 589.] As I mentioned at Second Reading, I naturally accept the Government's assurance. At 4.50 p.m. on 27th January, when the assurance was given, the Government probably did not have any such intention. I am sure that the Minister will repeat something similar this afternoon.

We would like to put temptation entirely out of the way. If the Government change their mind and decide that re-nationalisation of electricity companies or any other company is necessary, let them come back to Parliament and specifically seek the power to do so rather than indulge in such a method at this stage. The Labour Party did not include in its manifesto for either the 1997 or 2001 general election any pledge to nationalise or re-nationalise anything. The Government do not have a mandate to do that, especially using this section of the Bill to do so virtually through the backdoor as the Minister in another place accepted could happen.

In the call for re-nationalisation of British Energy at the TUC conference, John Edmonds, the leader of the GMB, called for what he called a Railtrack-style solution. I leave that on the table, the Government's manoeuvres that drove Railtrack into administration and, therefore, enabled the Government to appropriate it without compensation to the shareholders were in effect an act of re-nationalisation.

The Prime Minister claims the credit for removing Clause IV of Labour's constitution, which expresses an aim to secure, the common ownership of the means of production, distribution and exchange". Clearly, that aim is still there in the person of John Edmonds. We feel that such provision could be slipped into the Bill. I hope that the Minister can assure us that there is no such intention.

Lord Hodgson of Astley Abbotts

The amendments to Clause 2 have been grouped under two major headings. The first is the aspect of the financial blank cheque. Clause 1 deals with British Energy, but, as various Committee members said, Clause 2 goes much wider. The second is the legislative black hole, which my noble friend Lady Miller of Hendon referred to. The Minister sought to reassure us about both aspects.

My noble friend Lord Gray made a powerful argument, which I accept, about the importance of nuclear energy. Perhaps he will forgive me for saying that, if one wishes to support nuclear energy, it is an extension to Clause 1, not an opposition to Clause 2. Clause 2 is about the expansion beyond the narrower remit, whereas Clause 1 is about British Energy, our nuclear supplier. I accept his points, especially that on the White Paper, which fluffed the issue and left us no further forward despite months or years of consultation.

I, too, accept with gratitude the Minister's change of heart about the proposal on statutory instruments. I accept his good intentions about how the legislation will be used. I accept that he believes in market forces. I heard him talk powerfully about the matter during the passage of the Enterprise Bill, so I know that he believes in the importance of the market. But, as my noble friend Lord Jenkin said, he cannot tie the hands of his successors, and his successors may not have the faith in the market that I know he has.

5.30 p.m.

Lord Sainsbury of Turville

Clause 2 is an important part of the Bill. It has two main elements: removing an existing barrier to acquiring shares from the Electricity Act 1989, and a delegated power to tidy up the rest of Part II of that Act.

I shall focus on the first of those elements because it is the more substantive part of the clause and because we have already debated the delegated power in relation to Amendments Nos. 9, 10 and 11. As I explained, the Bill will ensure that Government are prepared for either eventuality regarding British Energy's restructuring deal. It allows us to play our part in the restructuring if the company can deliver on the other elements of that deal. However, it also ensures that we are prepared for the eventuality that the deal fails and the company goes into administration.

If the company goes into administration, the Government need to ensure continuity for the nuclear business. We will do that by ensuring that they can step in to acquire BE if necessary. That is why we are removing the existing target investment limit block from the Electricity Act.

I have explained why the Government want to be in a position to acquire shares in the BE operating companies. Let me now in turn explain why we are doing that by repealing Sections 72 and 74 of the Electricity Act 1989 in their entirety rather than through some more narrow provision that relates only to BE. The simple fact is that the provisions are now outdated and inappropriate to the current electricity industry and we believe that it is sensible simply to remove them.

The provision of a target investment limit through Section 74 may well have made sense at the time of privatisation. It would have given some level of certainty to investors that the privatisation process would be carried through and not immediately reversed. However, those provisions are of very limited relevance now, a decade later, when the industry looks nothing like it did in 1989. The provisions are very narrowly defined and relate only to a small number of companies: the successor companies created in the industry restructuring for privatisation. They apply only to that small number of specific Companies Act companies and not to any wider corporate group of which those companies may now be a part or to any new ones. The provisions from 1989 do not anticipate the fact that the assets that were privatised a decade ago may no longer he part of the same Companies Act company—for example, if a company has restructured itself by moving assets into a new company within the same group. The provisions certainly do not take account of all the new entrant companies that have come into the market since then. In short, the provision relates quite narrowly to a specific set of companies from 1989 and not to the electricity industry as a whole.

Indeed, there is a significant portion of the electricity industry to which the restriction on the Government's ability to purchase shares does not apply. In the generation sector, new entry and reorganisation already mean that much electricity generation plant is no longer held by successor companies under the Electricity Act 1989. As a result of the Utilities Act 2000, the former public electricity supply companies were required to reorganise themselves into separate supply and distribution companies, again making changes to the industry structure. So, the current barrier to acquiring shares in companies does not apply in a uniform manner. There is no level playing field. It applies in some cases and not in others: whether it applies or not is often a matter of historical accident rather than deliberate logic. The repeal of Sections 72 and 74 would simply remove the indiscriminate application of that law.

I know that some noble Lords have questioned why the Government should still be taking the provision forward, given the progress that has been achieved by BE in relation to the restructuring deal. In particular, I refer to the agreement in principle by BE's creditors on 14th February. Indeed, at Second Reading the noble Baroness said: Despite the fact that an acceptable restructuring scheme has been achieved, the Government are still pressing ahead with the Bill in its present form allowing for the two alternatives of there being a scheme or there being no scheme … Why are we not considering a new Bill covering the situation as it now exists, rather than what it might have been without the restructuring scheme?".—[Official Report, 3/3/03; col. 610.] I admire the noble Baroness's optimism, but we must take a responsible position and be prepared for the worst. British Energy is by no means out of the woods on delivering its restructuring plan. Several important hurdles remain. BE has an agreement in principle from its creditors that it must take it a step further and get a full, binding agreement. It must also sell its stake in AmerGen, its venture in the United States, and the restructuring plan must be agreed by the European Commission under the state aid rules. None of those things is in any way a foregone conclusion, and there is still a realistic possibility that the restructuring plan could fail and the company end up in administration.

A failure of the BE restructuring plan could happen, in spite of what the noble Lord, Lord Jenkin of Roding, said, with limited warning, and Parliament might not be sitting. So, it would be remiss and shortsighted to assume that the risk of administration had gone away and to remove the provisions from the Bill.

Clause 2 agreed to.

Clause 3 [Amendment of Schedule 12 to the Electricity Act 1989]:

Baroness Miller of Hendon moved Amendment No. 12:

Page 2, line 29, leave out subsection (2) and insert— "(2) In paragraph 4(1) (financial limits on grants, loans and guarantees under that Schedule) for "£2,500 million" there is substituted "£5,000 million"."

The noble Baroness said: Clause 3(2) repeals the provisions in Schedule 12 to the Electricity Act 1989, which limits the expenditure that the Secretary of State may incur for the storage or pre-processing of nuclear fuels; the treatment, storage or disposal of radioactive waste; or the decommissioning of nuclear installations. That limit goes from £1 billion up to £2.5 billion. Those are substantial sums in their own right, but the Government wish to remove that limit.

The Government propose to remove the limit without giving any explanation in the Explanatory Notes. On 5th September last year, when challenged on the subject on BBC news, the Secretary of State said that there was no question of taxpayers writing a blank cheque to British Energy and its shareholders. What is the removal of any spending limit but a request for a blank cheque? At the same time, I ask the Minister to tell us what is the Government's current estimate of the costs incurred for the purposes set out in Schedule 12 that I have just described.

The Minister in another place said that the removal of the limit would give the flexibility to meet eventualities. The limit that the Conservative government wisely imposed on the expenditure was expressly designed to inhibit such flexibility. Flexibility is Whitehall-speak for a free hand to do whatever a Minister decides to do, with no parliamentary control. A Conservative government with a well established track record of financial prudence would not put temptation in their own way to spend however much they chose. How much less should we give such flexibility to the current Government?

In another place, a limit different to mine was proposed. The noble Lord, Lord Ezra, has tabled an amendment proposing a figure of £3.5 billion. I have not plucked the figure in my amendment from the air; it is double the 1989 upper figure, to take care of inflation over the past 14 years and any contingencies that were unforeseen in 1989. It also takes care of the problem that I mentioned at Second Reading, namely that the ring-fenced decommissioning fund has been unwisely invested, resulting in paper losses of £110 million since last April. As I also said at Second Reading, it is Parliament's job to control the excesses of the Executive.

I do not wish to conduct some sort of auction; I simply invite the Government to come up with a realistic figure that they can justify not only to us but to all noble Lords and to the noble Lord, Lord Ezra. Interestingly, we supported the Liberal Democrat amendment in another place. We have no problem with it here today, other than the fact that my noble friend had tabled an amendment using a figure of £10 billion. His amendment was not called, so he supported the Liberal Democrat amendment. I know that the noble Lord, Lord Ezra, has added his name to this amendment, but we wait to see what the Government's position is. I beg to move.

The Deputy Chairman of Committees

I draw the attention of noble Lords to the fact that if this amendment is agreed to, I shall not be able to call Amendment No. 13 because of pre-emption.

Lord Ezra

I support the remarks of the noble Baroness, Lady Miller. It is worrying that we again have a proposal for an open-ended facility. Surely the Government should give us a figure—figures of £3.5 billion, £5 billion and even £10 billion have been mentioned. There must be some limit above which the Government feel, even in the most extraordinary circumstances, expenditure should not be incurred. We believe that it would be quite wrong to introduce the concept of unlimited expenditure in this clause, as well as in previous clauses. I therefore strongly support the remarks of the noble Baroness.

Lord Jenkin of Roding

In replying to the amendment, I hope that the Minister will tell us about the progress of the nuclear liabilities fund, into which all nuclear generators are contributing so as to provide a fund to deal with the problem. I believe that I am right in saying that the Nuclear Decommissioning Fund is up and running and that money is being paid into it. The nuclear liabilities fund was proposed in a White Paper some while ago but I believe that its inception has been delayed. I am not entirely clear where we stand now. Presumably, some part of the moneys that will be put forward on behalf of British Energy to cover its nuclear liabilities will go into the nuclear liabilities fund. However, if that does not exist, that might be rather difficult. It would be helpful if the Minister explained the situation.

I will continue talking for a bit because the gentleman behind the Minister is still scribbling and I do not want to place the Minister in any embarrassment. Another relevant Bill will come before the House but I believe that it will not deal with this issue. We need to know where we stand. As I understand it, legislation is not required to set up the body; it merely requires a government decision to get it involved.

On the figures, I am interested to hear the Minister's comments because we are dealing with vast sums. I turn to the length of time for which the nuclear waste process should be left before the approach starts in earnest. I say this in deference to the noble Lord, Lord Tombs, who chaired a committee four years ago and gave the Government a clear steer in that regard. So far, practically nothing has happened. That is part of the problem that the Government face in dealing with nuclear liabilities. I hope that the Minister can tell us something about that fund and answer the questions of my noble friend and the noble Lord, Lord Ezra, and that he is now briefed!

5.45 p.m.

Lord Sainsbury of Turville

I thank noble Lords for tabling Amendments Nos. 12 and 13. There is understandably some concern about the size of the liabilities that the Government intend to take on. The amendments posed represent a constructive attempt to address those concerns. However, for reasons that I will explain, I do not agree with them.

As noble Lords will know, the Government, as part of BE's restructuring package, have agreed to take responsibility for BE's historic spent fuel contracts with BNFL, and to underwrite the nuclear liabilities fund, which will meet decommissioning costs and uncontracted liabilities and to which BE will be making contributions. That nuclear liabilities fund will be established on the restructuring of British Energy.

For the restructuring to work, the Government must be in a position shortly where they can give a binding commitment to BE, in the form of a legal undertaking, to meet those liabilities. There is an important point to note here Although those expenditures—payments for the historic contracts and any payments that might be necessary for underwriting the other liabilities—may have to be paid over many years, the binding undertaking needs to be given up front. The reason for that is that the other parties to the restructuring plan, such as the board of directors of BE and BE's creditors, need to have confidence that the Government will deliver on their part of the plan.

There is a problem with that in the shape of the current limits in Schedule 12. As noble Lords are aware, Schedule 12 to the Electricity Act 1989 permits the Government to provide financial assistance towards nuclear liabilities. Expenditure under this schedule is currently limited to a total of £1 billion. This limit itself can be raised up to a maximum of £2.5 billion through a statutory instrument. These limits were set at the time of privatisation of the electricity industry in 1989. They have not been changed since. As they stand, the limits represent a barrier to the Government delivering on their part of the British Energy restructuring package. The existence of these upper limits could cast doubt on the validity of a commitment from the Government. The limits that are in place are too low. However, given the form of the commitment that we need to make, I do not think it appropriate to try to place any limit up front in this way.

Noble Lords have already asked why the existing limits are too low. The undertaking from the Government needs to give enough certainty to assure creditors that the Government will deliver their part of the deal. It also needs to be able to be recognised by the company as an asset that can offset its existing provisions for nuclear liabilities. We do not expect to pay the full value of these provisions—the whole point is to get the company back on its feet so that it can make significant contributions itself—but we do need to be able to underwrite those amounts to allow this deal to work.

[The Sitting was suspended far a Division in the House from 5.46 to 5.55 p.m.]

Lord Sainsbury of Turville

I explained why we have a problem with the limits on Schedule 12 to the Electricity Act 1989. I turn to our position on nuclear liabilities.

The company's estimate for the full cost of its nuclear liabilities—in other words for station decommissioning and spent fuel management—is £5.2 billion discounted at a rate of 3 per cent real per annum. The payments will not have to be made until many years—in some cases, many decades—in the future. By the time the payments are made, time will have changed the estimated present value of the cost, which is £5.2 billion, into cash of perhaps as much as £14 billion. Within that figure, the current estimate of the cost of the historic spent fuel contracts is £2.1 billion discounted, but that is expected to result in cash payments of perhaps as much as £5 billion.

The actual amount of cash that will be paid out in due course will depend on a variety of timing issues and the rate of inflation of the costs in future, which is impossible to predict now. That point was riot recognised in Schedule 12 to the Electricity Act 1989— which set limits that would apply to the eventual cash payments, not to their present value, and therefore set the limits at a level that was clearly inadequate to deal with liabilities of such a magnitude.

The sums that I mentioned are large. However, it is important that, rather than focusing on the numbers, we focus on why the Government have decided to give the undertaking and on existing mechanisms for monitoring and scrutinising government expenditure in this area.

The Government have agreed to take on responsibility for paying for BE's fuel management contracts which relate to historic spent fuel. They have also agreed to stand behind the nuclear liabilities fund, which will cover the cost of decommissioning and uncontracted liabilities. The undertaking recognises the fact that, ultimately, the Government must ensure that nuclear liabilities such as these are dealt with safely and properly. If the company failed and could not afford to pay to deal with the liabilities, the Government would need to step in. Our commitment of support, and the removal of the limit that enables it, is largely an honest recognition of this position.

Providing a commitment in this way has the benefit of providing BE with a chance of restructuring. The proposed restructuring deal ensures that the company will contribute significantly to the cost of its own liabilities. It will do that by making certain fixed payments to the nuclear liabilities fund and will in addition contribute 65 per cent of available cash flow in perpetuity to the NLF. Essentially, although the Government are underwriting the NLF, the mechanism is in place to ensure that the better the company does, the more it contributes to the cost of meeting its liabilities. The Government strongly believe that the deal offers the best option for taxpayers going forward.

It is also important to note that in considering the restructuring proposal and the implications for the company's viability after restructuring, the company's exchange of a long-term liability for an obligation to make fixed and variable contributions to the nuclear fund—contributions that would vary depending on station lives and BE's ability to pay—was an important factor taken into consideration by the directors of BE and by the creditors. Any restriction on the Government's undertaking, and therefore the reopening of a potentially open-ended liability for BE, would mark a material departure from the proposal and would risk jeopardising the success of the restructuring deal.

We all share a desire to keep BE in the private sector, if possible. If that is truly the position of the Members of the Committee who tabled the amendment, they must give the Government the legislative power to play their essential part in the restructuring. The Government have been careful to ensure that taxpayers' interests are met and that mechanisms are put in place to guarantee that the company is doing all that it should to meet the costs of its own liabilities. Under the operation of the NLF, the Government propose to put in place a series of controls and incentives to ensure that BE runs its nuclear stations as though it were exclusively responsible for the discharge of nuclear liabilities.

I hope that the Government's prudent planning offers some comfort to Opposition Members. In addition to the ongoing monitoring provided by the Government, there are mechanisms for providing accountability to Parliament in the current system. Parliament will have an opportunity to scrutinise Government expenditure on liabilities through the usual supply estimates process. In addition, information on DTI-managed nuclear liabilities is also provided to Parliament in the annual expenditure plans report, including expenditure. That would also be the case for liabilities that we have taken on for British Energy. We believe that this process, complemented by the annual report to Government from the NLF, provides a far more sophisticated and transparent check on the Government's expenditure than could a fixed statutory limit.

Some concern has been expressed at the idea of Parliament being given authority to spend money without setting a limit. But there are numerous examples of powers of expenditure in primary legislation, wide and narrow, that are not subject to any limit other than that provided by the existing system of parliamentary scrutiny; for example, Section 126 of the Housing Grants, Construction and Regeneration Act 1996.

The Government are committed to meeting the cost of nuclear liabilities to the extent that the company is unable to meet them itself. The eventual costs of the undertaking is subject to some uncertainty, but it is certain that the Government need to ensure that liabilities are dealt with safely, whatever the cost.

Amendments Nos. 12 and 13 would specify the amount that the Government could provide to meet nuclear liabilities. That is the wrong approach. Apart from the issues of the timing of payments and the future inflation rate, it would be difficult or impossible to set a limit flexible enough to ensure that the Government could give a valid undertaking to stand behind their responsibilities to meet those liabilities, should the company fail to do so. If the company could not meet its nuclear liabilities, the Government would have to step in and deal with them in any event.

The existing accountability in the parliamentary scrutiny system, combined with the additional reporting mechanisms that the Government have put in place, should comfort Committee Members that they can apply the same level of scrutiny to the power to incur expenditure under Schedule 12 as they do to other legislation that does not include limits for expenditure. I ask that the amendments be withdrawn.

6 p.m.

Lord Jenkin of Roding

Will the Minister say something about the NLF?

Lord Sainsbury of Turville

As I said, the NLF will be introduced as part of the restructuring of BE. I believed that that answered the noble Lord's point.

Lord Jenkin of Boding

Perhaps I was looking for more information. The proposed fund has been on the stocks for well over a year, but it still does not exist. It is not entirely limited to BE's nuclear liabilities—it may also provide a place for other payments for other sources. That was all spelt out in the White Paper last year, but since then nothing has happened.

Lord Sainsbury of Turville

The noble Lord may be referring to a separate fund for public sector nuclear liabilities, which will be established as part of the new nuclear decommissioning agency.

Baroness Miller of Hendon

We thank the Minister for the detailed information that he gave us, but we take note that the question that my noble friend Lord Jenkin asked has not been answered to his satisfaction. Perhaps the Minister will add something to his reply on Report, because it deals with an important aspect of the legislation.

We understand the Minister's explanation that the Government could not possibly give an upper limit because of the extensive sum that might be needed. The Secretary of State said on BBC radio that the Government were not giving a blank cheque, but it looks like a blank cheque if one cannot get any idea of the amount. However, we will read carefully what the Minister said. I beg leave to withdraw the amendmet.

Amendment, by leave, withdrawn.

[Amendment No. 13 not moved.]

Clause 3 agreed to.

Clause 4 [Undertakings to make grants under Schedule 12 to be disregarded for tax purposes]:

Lord Jenkin of Boding moved Amendment No. 14:

Page 3, line 7, leave out subsection (2).

The noble Lord said: The Explanatory Notes give a marvellous explanation of the proposal in Clause 4(1) for the provision of exemption from taxation. I tabled Amendment No. 14 in order that I may seek further information as regards subsection (2).

Paragraphs 21 to 27 of the Explanatory Notes spell out in considerable detail why there must be a provision for exemption from the taxation of the value of the undertakings when they are given—namely, that it is based on the manner in which the accruals basis is used for making up the company's accounts. I accept that.

However, I should like an explanation as to the purpose of including subsection (2). I believe that that might have been included as an excess of caution—one is not supposed to use Latin words to describe legal concepts. Is that all it is? Or does it have an operative effect which would occur if subsection (2) was not in the Bill?

Lord Sainsbury of Turville

The short answer is yes, it does have a purpose. It is not an excess of legal caution. Perhaps I may explain. The Government have already indicated that they are prepared to play their part in supporting a private sector restructuring of British Energy. We shall do that by providing financial support in relation to British Energy's historic liabilities. Doing that will help put BE on a sound financial footing in order to go forward in the future. In that way, they could continue to run the stations and generate revenue that can be put towards these liabilities.

To ensure that this restructuring plan can succeed we need to ensure that the Government can deliver their side of the bargain. That is why we are clarifying the tax effect of any support provided by Government in respect of British Energy's decommissioning liabilities. Without that, when the Government sign the restructuring deal committing to provide support for the liabilities, this promise of support will trigger an immediate liability to corporation tax. We would give with one hand and take back with the other. But, of course, what we give is a promise of money over a long period, whereas what we take back is immediate cash—cash that British Energy can ill afford.

Amendment No. 14 would remove subsection (2) of Clause 4, changing the scope of the tax disregard. That scope was derived following discussions with the Inland Revenue and with advisers who understand the accounting system for nuclear liabilities. The disregard essentially comes in two parts—subsections (1) and (2). Subsection (1) states that the making of a Schedule 12 grant should not trigger a tax charge. Subsection (2) clarifies that subsection (1) refers only to the initial recognition of the Government's grant.

The undertaking to provide financial assistance to BE will be long term, but it is the initial giving of the undertaking that we are concerned about in relation to tax. It is this initial giving of the undertaking that would trigger a significant tax bill if we did not address this matter through legislation.

While we want a tax disregard for the initial value of the undertaking, we do not want a tax disregard in relation to changes to the value of the undertaking in future years. The value of the undertaking made by the Government will change over time. It will change in line with changes in the value of the underlying nuclear liabilities that they are guaranteeing and will be funding.

The accounting value of the liabilities will change over time as the discount for the fact that payment of these liabilities is still some time in the future unwinds and as costs become accurately known. As that value changes, the value of the undertaking given by the Government will change by an equivalent amount. Therefore, any credit for the increase in the value of the undertaking will be matched by an equivalent debit for the increase in the value of the liabilities. The two will cancel out and symmetry will be achieved.

That symmetry should apply to the ongoing tax treatment of BE's liabilities and the Governments undertaking. This is symmetrical in all ways. If BE's liabilities increase, any tax benefit that they might receive from increased provisions in its accounts, should be offset by an increased value of the undertaking. If its liabilities decrease, the tax charge that they might receive from reduced provisions would be offset by a reduction in the value of the undertaking.

By changing the definition of the tax disregard, Amendment No. 14 could upset this symmetry. The result could be an increase in the tax benefit available to BE. It would receive a tax benefit whenever its liabilities increase—even though those liabilities are now covered by the undertaking from Government— because the result of the amendment would be to exempt any credit from a change in value of the undertaking.

I imagine that that was not the intention of the noble Lord, Lord Jenkin, and I ask him to withdraw the amendment.

Lord Jenkin of Roding

I should want to study that explanation carefully. I think that I understood it. The noble Lord, Lord Sainsbury, was reassuring when he said that this issue had been discussed with the Inland Revenue, as well as with advisors. This is the result of advice. I do not intend to take the subsection out in the light of what he says. Therefore, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 4 agreed to.

Clause 5 [Short title and extent]:

Baroness Miller of Hendon moved Amendment No. 15: Page 3, line 24, at end insert— ( ) This Act shall cease to have effect five years after it receives Royal Assent unless it has been extended from time to time for periods not exceeding two years by resolution of both Houses of Parliament.

The noble Baroness said: This Bill has been necessitated because of what amounts to an emergency in the electricity generating industry—particularly as regards the dire straits in which British Energy finds itself.

We discussed the reasons for this problem at Second Reading. It is unnecessary for further recrimination at this time. It is to be hoped that the measures taken by the Government, the public funds pumped into British Energy and, not least, the passage of this Bill, will resolve the crisis once and for all. That being so, there is no reason why this Bill should be permanently on the statute book.

The Government recognise that parts of the Electricity Act 1989 are no longer relevant. The Explanatory Notes to the present Bill refer to the provisions in Part II of the 1989 Act as, "in the main, spent". They state that, In the main, Part 2 has served its purpose and the provisions no longer apply or are now irrelevant". From my opposition to the whole of Clause 2, Members of the Committee will be aware that I disagree that Part II of the Electricity Act 1989 has become redundant or irrelevant. However, the Government clearly concede that parts of the basic electricity legislation may have a limited shelf life. But, how much more is that so for the present Bill? It is legislation designed to cope with an emergency—we trust a temporary emergency—which will eventually be resolved, making the provisions of this Bill no less inapplicable or irrelevant or spent—to use the Government's own words.

One could suppose that that happy state of affairs does not happen sooner rather than later. I propose an initial five-year term, but that the Bill be extended for successive two year periods for as long as may he necessary. I beg to move.

Lord Sainsbury of Turville

As I have made clear, this Bill allows the Government to be prepared for every eventuality. The provisions made within the Bill ensure that the Government have effective contingency planning in place to deal with BE should the restructuring deal fail and the company goes into administration.

The proposed amendment aims to limit the effect of the provisions of the Bill to five years from the date of Royal Assent. After that date, the Act would cease to have effect.

The effect of the amendment is difficult to gauge. It would affect the clauses of the Bill differently. For example, the effect that it would have on the amendments made by Clause 3 is not clear. We want to amend Schedule 12 to remove the existing limit, so that we can make our financial commitment, but if the Act were to cease to apply, it could cause legal uncertainty as to the effect on Schedule 12. A similar point applies to Clause 4. That clause already has a carefully drafted sunset provision, such that the tax disregard would apply only to undertakings made in the next five years. The effect of a complete repeal of the clause would be less clear.

In that context, any sunset clause must be drafted more carefully. Such a clause might not be totally unacceptable, but it would have to be drafted to take account of its relationship to different clauses. If the noble Baroness produced such a clause, we would examine it on its merits. The current amendment would introduce a great deal of legal uncertainty.

6.15 p.m.

Lord Jenkin of Roding

The noble Lord seems to have omitted to mention the fact that my noble friend's amendment does not just end the operation of the Bill after five years; it gives Parliament the power to extend it, from time to time for periods not exceeding two years". It is unlikely beyond possibility that Parliament would not vote for the order extending the Act, if it were necessary to do so. The amendment is not a cut-off; it would simply allow for renewal subject to parliamentary control. The noble Lord, Lord Sainsbury of Turville, did not address himself to that part of the amendment.

Lord Sainsbury of Turville

The noble Lord has cast some doubts on what my successors might do, but he cannot speak for what Parliament might do, in a situation in which the undertaking in Schedule 12 could last for decades. There is a need for certainty as to how the law will operate, and we cannot simply rely on the hope that Parliament would extend the Act.

As I said, the problem is that any sunset clause must be worked through to cover its effect on different clauses, if it is not to introduce a great deal of undesirable uncertainty.

Baroness Miller of Hendon

I thank my noble friend Lord Jenkin of Roding for making the point that we are not imposing a cut-off; Parliament could extend the Act regularly.

I shall read carefully what the Minister has said about the effect that the amendment might have on different clauses. I must confess that I did not take that into account, and I want to think carefully about it. Re-drafting the amendment to take the different clauses into account might mean getting a little more expert help, rather more, perhaps, than was necessary with the current amendment. That is why I liked the comment made by my noble friend Lord Jenkin of Roding that it should not have been necessary. At this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 5 agreed to.

Bill reported without amendment.

The Committee adjourned at eighteen minutes past six o'clock.