§ 3.11 p.m.
§ The Parliamentary Under-Secretary of State, Department of Energy (Baroness Hooper)
My Lords, I beg to move that the Bill be now read a second time.
This measure is largely technical and contains a number of unrelated proposals concerning the nuclear industry. I understand that in the US it would be known as a Christmas tree Bill, which seems very appropriate.
The first proposal contained in Clause 1 aims to increase to £2,000 million the financial limit imposed on British Nuclear Fuels plc by the Nuclear Industry (Finance) Acts of 1977 and 1981. The limit, currently £1,500 million, has been progressively increased from the limit of £300 million set in 1977. The limit is defined in the 1977 Act and comprises: payments for company shares; the principal and interest outstanding on loans from government funds; and the guarantees given by the Government in support of BNFL's borrowing from non-government sources.
BNFL is a public limited company whose principal shareholder is the Secretary of State for Energy. It 829 provides a complete range of nuclear fuel cycle services to utilities both in this country and abroad. It also generates electricity. The company's turnover last year was some £839 million with a pre-tax profit of £100 million and a dividend payment to the Government of £36 million.
BNFL is supporting a massive investment programme of more than £5 billion until the turn of the century, mainly in support of its waste management and reprocessing operations at Sellafield. More than 50 per cent. of this projected capital expenditure, some £2.8 billion, will be spent over the next four years, of which about 45 per cent. is forecast to be met from internal sources, almost 30 per cent. from overseas customers and just over 25 per cent. from borrowings.
Unlike a nationalised industry, BNFL, as a Companies Act company, borrows from commercial sources backed by a government guarantee. Guarantees are only made for specific loans, which are scrutinised individually and notified to Parliament. BNFL's current expectation is that they will reach the existing limit of £1,500 million during 1990 and it is therefore prudent to seek the increase which Clause 1 provides.
Clause 2 of the Bill will enable the Health and Safety Executive to recover the costs of nuclear safety research which it sponsors, as appropriate, from nuclear site licensees and applicants for licences. Your Lordships will be aware that my right honourable friend the Secretary of State for Energy recently announced in another place that much of the safety research currently sponsored by his department would be transferred to the Health and Safety Commission as from 1st April 1990. The programmes will be managed on the commission's behalf by the Health and Safety Executive.
The commission's role in this respect will be similar to that of the department at present. It will be charged with ensuring that adequate safety research programmes continue to be carried out, that the contribution research can make to higher standards of nuclear safety is fully exploited and that the results are disseminated. This will involve close collaboration with the nuclear industry to ensure that the commission is able to take into account the safety-related work the industry is doing for its own purposes in order to avoid unnecessary duplication. The commission will need to ensure that the totality of research is adequate and that an R&D capacity independent of the industry continues to be available.
The safety research responsibility to be transferred relates to established reactor designs which are either in commercial operation now or are under construction for commercial use. In addition some work on general nuclear safety—relevant to commercial nuclear power but not specific to any single type of reactor—is being transferred. It is appropriate that the cost of this safety research should be borne by the plant operators, whose customers will ultimately benefit from it. The cost of the research being transferred is some £20 million per year. However, the amount which the HSE will actually take over is likely in future to be less than this, depending on how much the plant operators 830 wish to sponsor themselves and which programmes the commission judges should be pursued in the common interest.
Discussions involving the HSE, the Department of Energy, the UK Atomic Energy Authority and the industries are already taking place aimed at identifying the programmes which will be the subject of HSE sponsorship. Whatever the results of these discussions, we anticipate that the net effect will be to reduce annual government expenditure by the £20 million which I have referred to.
This clause will also enable the Health and Safety Executive to recover costs incurred in connection with its licensing function from nuclear site licensees and applicants for licences. Costs attributable to licensees are already recoverable under existing provisions, which are now being re-stated.
However, costs relating to a licence application cannot at present be recovered until a licence is granted, and cannot be recovered at all if the application is refused or withdrawn. The new provisions will enable the Health and Safety Executive to recover its costs before, and whether or not, a licence is granted.
Clauses 3 and 4 make minor technical amendments to the rules on insurance cover for meeting third party compensation claims in the event of nuclear incidents.
The purpose of Clause 3 is quite straightforward. Section 18 of the Nuclear Installations Act 1965 sets out the method for determining the maximum contribution which the Government might make towards meeting the cost of compensation claims. This takes into account nuclear installation operators' own insurance cover and any contributions from other governments who are our partners in an international convention in this area.
At present the UKAEA, because it is a public body, is not required to cover its liabilities by insurance in the same way as, for example, the CEGB or BNFL. However, following the Atomic Energy Authority Act 1986 the authority's operations are now being undertaken on a more commercial trading fund basis, and occasions may arise when commercial insurance is considered a more attractive option than the self insurance which is normal for government bodies.
This clause will remove any doubt which may exist over whether funds available from any such insurance may be taken into account when computing the maximum level of government contribution. It also removes any possible doubt as to whether there is a liability upon which insurers should pay.
Clause 4 is designed to overcome an unintended defect in the drafting of the Nuclear Installations Act 1965 which operational experience has identified. The essence of the clause is that it will avoid the need for new insurance cover to be taken out when a new nuclear site licence has to be issued for purely technical reasons.
At present the issue of a new licence to existing licensees is one of the circumstances in which current insurance cover has to be terminated. New cover has to be taken out in respect of future incidents at the 831 site, and at the same time further insurance has to be provided for a period of 10 years to cover any claims which might arise out of the old, and now terminated, insurance period. This duplication of insurance cover is unnecessary, and the requirement for it was never intended.
Clause 5 of the Bill will enable the United Kingdom to ratify the International Convention on Assistance in the case of a nuclear accident or radiological emergency, widely known as the mutual assistance convention.
This convention is one of the two negotiated under the auspices of the International Atomic Energy Agency in July 1986 in the aftermath of the Chernobyl accident. The other convention concerns early notification and we believe that together they offer important reassurance that there is international consensus on the steps that would need to be taken in the event of an accident of radiological safety significance. No legislative changes are needed before ratification of the early notification convention but it is our intention to ratify both simultaneously. In the meantime, we have agreed to act as though bound by the conventions.
The likelihood of the United Kingdom needing to take advantage of the provisions of the mutual assistance convention is, we hope and believe, very remote, but before we can ratify we have to satisfy ourselves that our domestic law would permit us to comply with the terms of the convention. So Clause 5 makes the two changes needed in this respect.
It makes the necessary financial provision to enable payments to be made in the event of the United Kingdom responding to a request for assistance and to receive payments in the event that we decide to seek reimbursement, a circumstance which is provided for in the convention. It also gives the necessary cover for affording certain privileges and immunities to persons from a state which is providing assistance. The relevant provisions of the convention are set out in the schedule to the Bill.
The United Kingdom was one of the first countries to sign the conventions which have been in force for some time. We regard it as an important token of our belief that we should ratify at the earliest opportunity. The provisions of Clause 5 will enable us to take this step. I commend the Bill to the House and I beg to move.
Moved, That the Bill be now read a second time.—(Baroness Hooper.)
§ 3.21 p.m.
§ Lord Williams of Elvel
My Lords, the House is grateful to the noble Baroness for introducing this Bill and taking us through its provisions. When the Minister said, as she did, that the Bill is largely technical, the Opposition's ears started pricking. We wonder whether a Bill described as largely technical in fact has some matters of substance in it. Indeed, the Bill does contain some matters of substance.
The Bill has the rather portentous short title of the Atomic Energy Bill, which would lead us to believe that it concerns the whole atomic energy debate. It was not mentioned in the gracious Speech. It was 832 announced, so far as concerns Clause 2, in a Written Answer in another place that it would be introduced when legislative time permits. It arises in your Lordships' House at a time when the Select Committee on Energy in another place is inquiring into the capital requirements of BNFL. So far as I am aware—and that may not be very far—it was not advised in the last Session that this Bill was to be produced.
Leaving that aside, this Bill is generally to be welcomed, though in parts we give it a guarded welcome. The Bill raises a number of questions and it contains some oddities. I start by following the noble Baroness and beginning with Clause 1, which is the essential piece of the atomic energy part of the Bill. We have these questions.
Why is it that BNFL needs these further assurances in the way of guarantees? We assume that the money that BNFL wishes to raise is for the construction of the thermal oxide reprocessing plant. If that is the case—and we know that it is 16 per cent. above the original budget figure—why did BNFL say (I quote from the evidence to the Commons Select Committee on the Environment in 1985):a full order-book for the first ten years of THORP"—that is the acronym for the plant I have mentioned—…and that pays for that plant"?Has something gone wrong with the order book? Has something gone wrong with the costs of the plant?
The second question relates to the whole matter of the capital programme of BNFL, which the noble Baroness rightly said will amount to more than £5 billion by the end of the century. What will be the effect of the recent increase in interest rates and the recent increase in inflation on that capital programme? Are we to see more atomic energy Bills requiring greater facilities for BNFL?
The third question relates to the cost of shutting down nuclear installations which BNFL will have to meet in the course of time. Indeed, the chairman of BNFL, Mr. Harding, gave evidence to the House of Commons Select Committee that that would be a problem. Certain press reports—particularly one in the Guardian of 1st December—reported Members of Parliament as being concerned that BNFL cannot afford the huge costs of shutting down its nuclear installations. Is part of Clause 1 designed to help that process or is the cost of that process to be passed on to the electricity supply industry, which is BNFL's main customer?
If that is the case, how will the privatisation of electricity affect that programme? After all, BNFL is a government organisation, as the Minister pointed out. It is wholly owned by the Secretary of State. Is it not odd that at this point we should be considering a Bill containing a clause that increases the borrowing powers of BNFL under government guarantee, while at the same time another place has just given a Second Reading to the Electricity Bill, which is designed to privatise the electricity supply industry? Are we not in danger of accepting a Bill which subsidises the supply of fuel to the electricity supply industry while privatising the electricity supply industry itself?
833 We welcome Clause 2 unreservedly. I hasten to assure the noble Baroness that it has our complete support. Indeed, we go further. We have always argued that the safety functions of the Department of Energy should be transferred lock, stock and barrel to the Health and Safety Executive. We believe that in the case of disastrous accidents like Piper Alpha. It should be a continuing process. We are glad to have assurances from the noble Baroness that the Government have that programme in mind.
Nevertheless, I have to ask in regard to Clause 2 whether the commission itself will be free to institute its own inquiries and will not have to rely on BNFL or someone else asking it to come in. Will it be free to take the initiative?
There are no major questions on Clauses 3, 4 and 5, but there are one or two oddities. Clause 3 deals with insurance. The noble Baroness rightly said that Clause 3 is designed to take account of commercial insurance that the nuclear installations in question can take out. However, I draw her attention to the expression in Clause 3 which specifies that there can be claims for compensation against those responsible for problems as a result of a nuclear accident,with any amounts payable under a contract of insurance".That is different from the wording of the Nuclear Installations Act 1965, which specifies "any necessary amounts". Is that a deliberate slip, or is it part of new government policy that the Treasury or the department has no control over what insurance premiums are paid by various organisations for insurance cover?
Clause 4 contains a very odd expression. I quote the whole of subsection (2). It contains only one sentence, but it is interesting. It says:The amendments made by this section shall be deemed always to have had effect".In other words, since the time of the Creation or the Book of Genesis, these amendments are,deemed always to have had effect".I find that a very odd concept because although I am not a constitutional lawyer I was brought up to believe that retroactive legislation in this form was not something of which your Lordships approved. Nevertheless I am sure that the noble Baroness has a proper explanation for that.
I come to the question of the convention. We are glad that the Government signed it in the first place. As the noble Baroness has outlined, it was in the aftermath of the Chernobyl incident, which was very serious and merited international co-operation. There are some oddities. In its wording the convention leaves the state in which the accident occurs responsible for the decision as to whether the accident may have transboundary effects or not. In other words, the convention leaves it to us to decide whether a Sellafield or Hunterston B incident has transboundary effects or not. There is no idea that there should be a body that will say, "Wait a minute, Chernobyl blew up and that is going to affect the Welsh sheep farmers".
The loophole is even wider when we realise that there are no standards in the convention about what constitutes transboundary effects. Every state is 834 entitled to decide what is meant by it. The problem with the convention is that, unlike the 1985 guidelines laid down by the IAEA for information, it does not provide for information to the public. Nobody may know that there is a nuclear incident that has happened because there is no obligation in the convention to tell the public.
There are problems with the convention. I believe that we can, as the Parliament of the United Kingdom, go further than the convention. There is no restriction upon us and we are not bound to limit ourselves to it. To say the least, I am surprised that part of the convention is reproduced as a schedule to the Bill which we have in front of us. My noble friends and I have argued on a number of occasions as regards the Financial Services and Consumer Protection Bills, and so on—I can list them for the noble Baroness if she wishes—that directives and conventions should be published as schedules to the Act. We were told from the government Front Bench time and again that conventions should not be part of United Kingdom legislation because conventions can change.
The most recent example that I can cite is the Copyright Bill. We argued that the Berne Convention on Copyright should be a schedule to the Act. This was refuted by the government Minister, who said that it could change. Why cannot this convention change? If this convention changes as a result of some other nuclear accident, which we would all deplore, does that mean that we shall have to have new primary legislation in order to amend the schedule to this Act?
These are the questions and certain oddities in the Bill. It does not mean to say that we are going to oppose what the noble Baroness has rightly described as a "Christmas Bill". It is the time of Christmas and we are certainly not going to make the life of the noble Baroness more difficult than it will be next summer when the electricity Bill comes to your Lordships' House. Nevertheless, we remain unconvinced that the Government can answer all the questions that I have asked. Unless they can do so, we reserve the right to apply careful scrutiny to the Bill, as is our duty in opposition, when it comes to your Lordships in Committee.
§ 3.34 p.m.
§ Lord Ezra
My Lords, in preparing for my contribution to the debate on this Bill I looked up the debate on the earlier Bill to which the noble Baroness referred; namely, the Bill of 1977. I found that on that occasion, in place of the noble Baroness herself, the participant was the noble Lord, Lord Strabolgi, and that the role of the noble Lord, Lord Williams of Elvel, was taken by the noble Lord, Lord Trefgarne. The role that I am taking now—here at least there is a degree of consistency—was taken by my noble friend Lord Avebury.
What was interesting was that the comments made by the Government and other parties on that occasion were very similar to the comments now being made. I should like to follow that theme and ask a couple of questions. The first point is that, according to what the noble Baroness told us—which we know from the accounts of BNFL—it is a very 835 prosperous company. We have been told today that it has a turnover of £839 million. It makes a profit of £100 million, which is a very good return on that turnover, and it pays a dividend equivalent to £36 million.
It seems that there is some anomaly in the Government's treatment of the whole nuclear industry. Why is this organisation being left as a company which is supported by government guarantee? That obviously means that whenever it wants to borrow money it can do so cheaper than anyone else. On the other hand, the nuclear industry as such, and the generating part of it, is being privatised at the present time. The matter is being debated this very day in another place. That seems to be an anomaly. Perhaps we may have some explanation.
I am here following what the noble Lord, Lord Williams, had to say. I believe we are entitled to some explanation as to why the totality of the nuclear industry is being run in these different parts. If the Government really want to privatise electricity generation and the nuclear industry, why is not the whole lot being privatised? Why is this part of it which is evidently so profitable being kept under public ownership whereas the rest is being privatised and its costs or benefits being borne by the consumer? That is my first question.
My second question is a more technical one. I was interested to note that my noble friend Lord Avebury, on the occasion of the 1977 debate, raised the question of the progress being made with the process of vitrifying high level radioactive wastes. These wastes can be held either in liquid or solid form, in which vitrification, which reduces the area required by this high level waste, is the process. This process is widely used in France. The answer given by the noble Lord, Lord Strabolgi, on that occasion was,This project is now at such a stage that its successful conclusion can be confidently predicted".—[Official Report, 24/3/77; col. 730.]I ask the noble Baroness where we stand on the question of vitrification. This is regarded generally as being a safer and more convenient process for storing nuclear waste. I should like to know whether, after all these years, we have now solved the problem and are adopting that process.
§ 3.39 p.m.
§ Baroness Hooper
My Lords, I am most grateful to the noble Lords, Lord Williams of Elvel and Lord Ezra, for their, albeit in some respects, guarded welcome to this small Bill. I believe it is a "Christmas tree Bill" and not just, as in American terminology, a "Christmas Bill". I shall endeavour to answer as fully as possible the barrage of questions that were raised, while understanding the noble Lord, Lord Williams, when he said that rights are reserved to go into these matters further at the Committee stage. Of course that is correct.
On the first question raised by the noble Lord, Lord Williams, the Select Committee on Energy is considering BNFL's report and accounts but not its capital requirements. The Select Committee on Energy routinely looks at the report and accounts of 836 all publicly owned energy bodies. The investment plans are outlined in detail in the annual corporate plan which has to be approved by both the Department of Energy and the Treasury.
§ Lord Williams of Elvel
My Lords, I apologise for interrupting the noble Baroness and I promise not to do it too often. If the Select Committee of another place is considering the report and accounts, and if the corporate plan is within the report and accounts and is published, is not the committee also considering the corporate plan which includes the capital investment programme for the company?
§ Baroness Hooper
My Lords, in so far as the corporate plan comes into the report and accounts, that is certainly so. However, the primary purpose of the committee's investigation is to look at the report and accounts, not at the capital requirements.
The main reason for the increase is to finance the low active effluent discharge plant. This will involve expenditure of the order of £500 million up to 1991—92. Expenditure of this scale was not envisaged when the previous legislation was introduced in 1981. THORP is progressing well. The fuel handling and storage facility is now operational and received its first fuel this summer. BNFL announced earlier in the year that THORP costs had increased by 16 per cent. However, it announced at the same time that the anticipated throughput of the plant had also increased by 16 per cent. I can confirm that BNFL most definitely has firm contracts for the first 10 years of THORP. Two-thirds of these are with overseas customers and they will be a valuable export earner for the United Kingdom. THORP is expected to begin commercial reprocessing in late 1992. The lifetime of the plant will be governed by a combination of economic, commercial and operational factors. But experience of other reprocessing plants suggests that THORP can be expected to operate well into the second decade of the 21st century. That is, on the whole, good news.
As to the effects of electricity privatisation on BNFL, the Government's commitment to nuclear power should ensure a healthy future for the company. Under the privatisation proposals, National Power, one of the two main generation companies, will be free to test the market for nuclear fuel services. But for Magnox and much of the AGR work, there is no alternative to BNFL. I am confident that where alternatives exist BNFL will quote a competitive price. Its valuable overseas reprocessing contracts already demonstrate its ability to compete successfully for private sector contracts. I believe therefore that the fears of the noble Lord, Lord Williams, are unfounded.
In this context perhaps I may refer to the question of the noble Lord, Lord Ezra, concerning the vitrification plant at Sellafield. I have had the opportunity to visit the plant and I can inform the noble Lord that it is well on line. It is expected to be ready to come on stream in accordance with the original plan. I cannot give the noble Lord the exact date but it is certainly going ahead according to plan and indeed to some extent has benefited from the French experience.
§ Lord Ezra
My Lords, perhaps I may revert to what the noble Baroness said earlier. In the case of the privatisation programme, can she explain the apparent anomaly of keeping a thoroughly profitable company like BNFL in public ownership and the other plans of the Government for the rest of the electricity industry?
§ Baroness Hooper
My Lords, crystal ball gazing is perhaps not appropriate in this context. However, in taking a major step such as the privatisation of the electricity supply industry, it is important that we should concentrate all our efforts. For the time being there are certainly no plans to look at any changes in regard to the ownership and operation of BNFL, which we believe is working efficiently and satisfactorily under the present arrangements.
I was asked whether the Health and Safety Commission would be free to take initiatives in regard to Clause 2. The Health and Safety Commission will determine its programme of nuclear safety research after consultation with the nuclear industry and such other sources of advice as it deems appropriate. The decision will ultimately be that of the Health and Safety Commission in accordance with objectives to be agreed between the Secretary of State and the commission.
I was asked about the appropriateness of commercial insurance in regard to Clause 3. Prior to 1986 the United Kingdom Atomic Energy Authority was primarily vote funded and so commercial insurance was then inappropriate. Commercial insurance could have attractions in the new commercial environment. This clause is intended to facilitate these arrangements if they are thought desirable. There is no intention to press the Atomic Energy Authority to insure commercially. We wish merely to ensure that arrangements will allow it to do so if it wishes.
Clause 5 relates to international conventions. As I have indicated, the Convention on Assistance is one of a pair. The early notification convention provided some guidance on those areas in which an accident of radiological safety significance might occur. As to information to the public, under the terms of the early notification convention member states will have provided to the International Atomic Energy Agency details of incidents. The agency will disseminate this information very widely. That covers the publication point. In addition in certain instances bilateral early notification agreements already exist. There is no hard and fast rule on inclusion of the whole or part of a convention but we have attempted to cover this area in the provisions which are necessary in order to give effect to the convention arrangements in our domestic law.
I was asked why the convention should be attached in the schedule to the Bill. I should like to make it clear that not all of the convention is attached in this way but only those provisions relevant to the privileges and immunities to which I referred.
I hope that I have covered most of the questions. I commend the Bill to the House.
On Question, Bill read a second time, and committed to a Committee of the Whole House.