Written Statement of 3 June 2003

WORK AND PENSIONS

  Employers' Liability Compulsory Insurance
  The Minister for Work (Mr. Nicholas Brown)
  In a written statement on 22 May I announced that the Department would publish a first stage report of its review of Employers' Liability Compulsory insurance immediately following recess, on 3 June.

  I am pleased to announce the publication of that report. I have arranged for copies of the report to be placed in the Library of the House. I understand that the Office of Fair Trading is also announcing today the outcomes of its fact-finding study into the UK Liability Insurance market.

  The Government are well aware that over the past year many businesses have been hit hard by significant price increases in the Employers' Liability insurance market and we are committed to playing our part in helping business in this area. There are, however, no quick or easy solutions to these difficulties and the interim report sets out the key findings of the review on the case for the reform of the Employers' Liability Insurance system and the steps we are now planning to take.

  Over the past months we have worked closely with trade associations, the CBI, the TUC and the insurance industry to improve the outlook for responsible businesses in a difficult insurance market and a number of initiatives are already being developed to assist business.

  The Government will assist in supporting and further developing these initiatives. In particular, Government will be working with interested parties to help develop the basis for more risk-related premiums.

  Government are also committed to working with stakeholders to address the long-term issues. The report identifies four significant areas for further action:
  Government will work with stakeholders to maximise the benefits for EL of current initiatives within the legal system. In parallel, Government will discuss with stakeholders the options for alternative dispute resolution arrangements.
  Government will engage with business, industry and other stakeholders to further evaluate the evidence for separating long-term occupational disease risks from accident risks—more evidence would be needed to assess whether a radical separation is justified.
  Government are committed to make rehabilitation play a more central role in the UK workers compensation system, to improve outcomes for employees and to let compensation reflect this.
  Government will reform the arrangements for enforcement of EL, to tackle the unfairness of competition trading illegally without insurance cover and to better protect employees.
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  This interim report is an agenda for action. We will move swiftly, in discussion with interested parties, to develop a programme for tackling the long-term issues identified in this report.

  There is more to be done in areas such as rehabilitation, the cost of resolving claims and long-term occupational disease. There also remains further information on the operation of the insurance market, and its impact on the wider business community to be gathered.

  Our considerations will be informed by the findings of the Office of Fair Trading's fact-finding study on the liability insurance market. The particular issue of competition in the liability insurance market is a matter for the Office of Fair Trading. Given the ongoing concerns of the business community about the costs of employers' liability insurance, the Government will closely monitor developments in the market, looking at any new information about the workings of the market for employers' liability insurance that becomes available.

  We will report in autumn on the progress that has been made and any further steps we intend to take.

TRADE AND INDUSTRY

  Company Directors
  The Secretary of State for Trade and Industry (Ms Patricia Hewitt)
  I have today placed in the Libraries of the House copies of a consultation document entitled "Rewards for Failure: Directors' Remuneration—Contracts, Performance and Severance".

  The Directors' Remuneration Report Regulations 2002, which I introduced last year, improved disclosure and shareholder accountability in relation to directors' remuneration in quoted companies. As a result, we have seen a welcome increase in the level of shareholder activism on this issue: it is for the shareholders, as the owners of companies, to ensure that remuneration levels and structures provide the appropriate incentives and that directors are held to account for company performance. The new regulations need to be given time to demonstrate their full effect. In the meantime, there remains a justified degree of shareholder and public concern about the level of compensation payments available to directors when they leave a company which has performed poorly. This consultation explores a range of possible best practice and legislative options in the area of directors' contracts, performance and severance payments and the linkage between them. Its purpose is to seek views on to what extent further measures might be required to enable shareholders to ensure that any compensation reflects performance when directors' contracts are terminated. The consultation period ends on 30 September 2003.

  Government Chemist
  The Secretary of State for Trade and Industry (Ms Patricia Hewitt)
  I have just received the sixth annual Review of the Government Chemist and I am arranging
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  for copies to be placed in the Libraries of both Houses plus those of the devolved administrations in Scotland, Wales and Northern Ireland.

  British Energy
  The Secretary of State for Trade and Industry (Ms Patricia Hewitt)
  In light of today's publication of British Energy's preliminary results for the financial year 2002–03, I am taking this opportunity to inform the House about two aspects of the restructuring plan: the value of the aid that Her Majesty's Government has agreed to give to the company based on BE's estimates of its liabilities; and the company's plan to dispose of its 50 per cent. stake in Amergen, its joint venture in the US.

  VALUE OF THE AID

  In my statement to the House on 28 November 2002, I said that the Government would contribute significantly to the company's £2.1 billion of historic nuclear fuel liabilities that are managed by BNFL and extend to 2086. In addition I said that the Government would underwrite the fund that will be used to pay for the costs of decommissioning BE's nuclear power stations. These costs, together with BE's uncontracted liabilities, were estimated in the company's statement to the Stock Exchange on 28 November at £1.6 billion. To the extent that BE's payments fall short of the fund's requirements, the Government will make up the difference. I stated that the cost to the Government of meeting these liabilities would average £150 million to £200 million a year for the next 10 years and would fall thereafter. DTI is currently considering how the value of its aid for BE should be reported in its annual accounts for 2002–03, and will be discussing this with the National Audit Office.

  BE today has estimated the total value of the Government's indemnity as £3.6 billion (net present value) in its preliminary annual results for their financial year 2002–03. This figure is simply the difference between its estimate of the total liabilities underwritten by the Government and funds held by the Nuclear Liabilities Fund (NLF). It does not include an estimate of the future contributions by BE to the NLF to fund its own liabilities.

  We expect the European Commission may shortly disclose, as part of the state aids process, a valuation of £3.3billion (net present value) for the aid. This figure was prepared according to EC requirements. It is calculated by discounting the estimated amount of aid that the Government might provide after taking into account an estimate of the amount that the company will contribute to fund its own liabilities.

  This £3.3bn figure includes £0.9bn for the estimated value to BE of a tax disregard provided for in the Electricity (Miscellaneous Provisions) Act, the commitment to contribute significantly to the historic nuclear fuel liabilities, and an estimate of Government's contribution to decommissioning and uncontracted liabilities. The tax disregard will not result in any extra cost to the Government. It has been provided to avoid a
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  large tax charge hitting BE as a result of the aid and thus the need for the aid to be correspondingly higher to achieve the same effect.

  It is important to note that estimates of this kind are subject to a significant degree of uncertainty, particularly when different accounting treatments, assumptions, and discount rates are used in their calculation. The key points are that the Government's underlying commitment remains the same as it was last year and that our estimates of the cost to the Government (£150 million—£200 million a year on average for the next 10 years falling thereafter) is unchanged.

  AMERGEN

  British Energy has been taking steps to realise its 50 per cent. interest in Amergen, in accordance with the restructuring principles agreed with the Government on 28 November 2002.

  The company had planned to be in a position to enter into a sale agreement by 30 June 2003. I understand from BE that although discussions with a number of interested parties are ongoing, this timetable will not now be achieved. British Energy, however, has reaffirmed its intention to dispose of its interest in Amergen as soon as practicable.

  I have confirmed to British Energy that, in view of the progress made to date to sell British Energy's interest in Amergen, I can continue to support the restructuring. However, as I said in my statement to the House on 28 November, the Government remain prepared for administration in the event that, for whatever reason, the restructuring fails.

DEPUTY PRIME MINISTER

  Bellwin Scheme (Runnymede)
  The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Mr. Christopher Leslie)
  Runnymede Borough Council experienced exceptional flooding and consequential damage on the weekend of 1–10 January 2003. Given these circumstances I am satisfied that financial assistance under the Bellwin scheme is justified. A scheme will therefore be established under section 155 of the Local Government and Housing Act 1989. Grant will be paid to the authority to cover 85 per cent. of the eligible costs above a threshold, which it has incurred in dealing with the flooding.

  Bellwin Scheme (Scarborough)
  The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Mr. Christopher Leslie)
  Scarborough Borough Council experienced exceptional flooding and consequential damage on the weekend of 1 and 2 and 10 and 11 August 2002. Given these circumstances I am satisfied that financial assistance under the Bellwin scheme is justified. A scheme will therefore be established under section 155 of the Local Government and Housing Act 1989. Grant will be paid to the authority to cover 85 per cent. of the eligible costs above a threshold, which it has incurred in dealing with the flooding.