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Hinkley Point C

Volume 614: debated on Thursday 15 September 2016

With permission, Mr Speaker, I shall make a statement on the Hinkley Point C nuclear power station.

As the House knows, on 28 July, following a decision by the board of EDF to approve the final investment decision on the £18 billion project to build a new nuclear power plant in Somerset, I announced that the Government would consider all elements of the project carefully before entering into a contract with EDF, and that we would make a decision by the early autumn. I can announce today that the Government have decided to proceed with the first new nuclear power station for a generation. However, that decision includes two important changes.

On the Hinkley project itself, the Government will now be able to prevent the sale of EDF’s controlling stake before the completion of construction. That agreement will be confirmed in an exchange of letters between the Government and EDF. Existing legal powers, and the new legal framework, will mean that the Government can intervene in the sale of EDF’s stake once Hinkley is operational.

Furthermore, and even more important, we will reform the wider legal framework for future foreign investment in British critical infrastructure. Those reforms will have three elements. First, after Hinkley, the British Government will take a special share in all future nuclear new build projects. That will ensure that significant stakes cannot be sold without the Government’s knowledge or consent. Secondly, the Office for Nuclear Regulation will be directed to require notice from developers or operators of nuclear sites of any change of ownership or part-ownership. That will allow the Government to advise or direct the ONR to take action to protect national security as a result of a change in ownership. Thirdly, the Government will significantly reform their approach to the ownership and control of critical infrastructure to ensure that the full implications of foreign ownership are scrutinised for the purposes of national security. That will include a review of the public interest regime in the Enterprise Act 2002, and the introduction of a cross-cutting national security requirement for continuing Government approval of the ownership and control of critical infrastructure.

Those changes will bring Britain’s policy framework for the ownership and control of critical infrastructure into line with those of other major economies, which will allow the Government to take a fair and consistent approach to the national security implications of critical infrastructure, including nuclear energy, in the future. The changes mean that, while the UK will remain one of the most open economies in the world, the public can be confident that foreign direct investment always works in the country’s best interests.

This £18 billion investment in Britain provides an upgrade in our supply of clean energy. When it begins producing electricity in the middle of the next decade, it will provide 7% of the UK’s electricity needs, giving secure energy to 6 million homes for 60 years. Furthermore, it must be stressed that the contract negotiated places all the construction risk on investors alone. Consumers will not pay a penny unless and until the plant generates electricity.

The proposed strike price of £92.50, which will be reduced to £89.50 if Sizewell C is built, contains important elements of insurance against any cost overrun in construction and future high gas prices, which have historically been volatile. It compares broadly with the costs of other clean energy such as offshore wind with the additional costs of intermittency, or gas with carbon capture and storage.

Hinkley unleashes a long overdue new wave of investment in nuclear engineering in the UK, creating 26,000 jobs and apprenticeships and providing a huge boost to the economy, not only in the south-west but in every part of the country, through the supply chain of firms, big and small, that will benefit from the investment.

EDF has also confirmed that UK businesses are set to secure 64% of the value of the £18 billion investment being made—the biggest single capital project in the UK today. However, as it is the first of a wave of new nuclear plants, we expect the experience of rebooting the nuclear industry to mean that costs should reduce for future new nuclear power stations, another five of which are proposed.

In any consideration of nuclear power, safety will always be the No. 1 consideration. The construction of Hinkley Point C will be under the close scrutiny of the Office of Nuclear Regulation, which is independent of the industry and Ministers. It has the power necessary to halt construction or require amendments to any part of the plant if at any point it is not completely satisfied with the safety of any part of the reactor and its associated construction. Unlike in the past, the long-term decommissioning costs for the plant will be provided for explicitly as part of the funded decommissioning programme, and at a level that has been assessed independently as prudent and conservative.

Any investment that provides significant electricity supplies for the next two generations of British people and businesses requires and deserves serious consideration. It was right that the new Government should have taken the time to consider all components of the project. Having reviewed the project, the Government are now satisfied that the improved deal and the other changes announced today will, for the first time, remedy the weaknesses of the previous regime for foreign ownership of critical infrastructure. It is important that the right balance is struck between welcoming foreign investment and ensuring that it serves the national interest. That is exactly what these changes will achieve.

The investment will secure 7% of the UK’s electricity needs for 60 years, helping to replace existing nuclear capacity that is due to be decommissioned in the decade ahead. The electricity generated will be reliable and low carbon, and therefore completely compatible with our climate change obligations. Hinkley Point C will inaugurate a new era of UK nuclear power, with UK-based businesses benefiting from almost two thirds of the £18 billion value of the project, and 26,000 jobs and apprenticeships will be created. All these developments are good for Britain. It is now right that we support this major upgrade —the first of many—to the infrastructure on which our future depends. I commend this statement to the House.

I thank the Secretary of State for the 13 minutes’ advance notice of his statement. Let me be clear that this is an important project that must now go forward without any further interruption or delay. The Secretary of State is aware that by intervening on 28 July, after EDF’s final investment decision, the Government put at risk 25,000 well-paid and well-qualified jobs. He knows that delaying not only risked the £18 billion of investment in UK jobs and infrastructure, but rocked confidence in investors who now believe that the Prime Minister does not understand the significance that companies attach to taking a final investment decision. He is aware of the Ernst and Young index that shows that Britain has fallen from fourth to 13th in attractiveness for low-carbon investment. The delay has only unsettled investors further.

I have a number of specific questions for the Secretary of State. First, in her meeting with President Xi, did the Prime Minister attempt in any way to isolate the building of the Hualong One reactor at Bradwell from the deal at Hinkley Point C? Secondly, if she did, what was the Chinese response?

Thirdly, of course every Member of the House agrees that the Government’s primary responsibility is to safeguard our national security, but neither the Secretary of State nor the Prime Minister has ever been clear about what they consider to be the security risks associated with the current deal. Will he now set those out so that the House and the public can decide whether the modifications that he is proposing adequately reflect the risks he believes exist?

Fourthly, can the Secretary of State specifically set out whether the Government were concerned about the security of the intellectual property associated with the EPR reactor? If so, was he aware that two such reactors are already under construction in China, in the form of the Taishan 1 and 2?

Fifthly, were the Government concerned with the potential for a cyber-attack? If so, did the Secretary of State not consider that, given the importance to the Chinese of having Bradwell as a kitemark for marketing their Hualong One reactor technology around the world, such an attack would undermine the very reason the Chinese wanted to be involved in the project in the first place?

Sixthly, if the Secretary of State wishes to dodge these questions by pleading that he does not wish to discuss security matters, I would ask how he can assure the House and the public that the efficacy of the amendments he is proposing are sufficient to meet the risks and challenges that justified a near-fatal delay in the project?

We must address the sole argument that the Government have actually presented as well as those that they have not. They claim that they have introduced significant new safeguards into the package, in particular that they will be able to require notification from owners or operators of nuclear sites of any change of ownership or part-ownership, but the Secretary of State already has such powers. Will he acknowledge that he can currently prevent the sale of any element of the UK’s critical infrastructure? That being the case, can he explain why he believes the proposed new powers add significantly to the public interest regulations in the Enterprise Act 2002, or are they merely window dressing to make it appear that the Government’s intervention has achieved something, no matter how much appearances may indicate to the contrary?

Is the Secretary of State aware of the House of Commons briefing paper entitled “Mergers & takeovers: the public interest test”? It highlights that energy security is already covered by national security, and that the Government already have the powers to prevent such a sale. Is he also aware that in the House of Lords, during the passage of the Energy Act, my noble Friend Lord Puttnam introduced an amendment specifically to introduce energy security as a new public interest term? Government lawyers then advised that:

“In cases where a merger posed a genuine and serious threat to what is described as societal needs, such as energy supply, this would be covered by the existing provision in the 2002 Act regarding national security—so ministers would be empowered to directly intervene.”

The Government created a commercial crisis. They sent shock waves through the industry and unions alike. They risked a diplomatic dispute with one of our key future trading partners, and in the end all they have done is pretend to give themselves powers that they already possessed. This statement is window dressing. It is face-saving by a Government who talked big and eventually backed down with a whimper.

The Secretary of State should explain whether he has reviewed changes to technology that have occurred in the past 10 years, particularly smart grids, battery storage technology and energy efficiency measures to manage our electricity supply in such a way as to reduce our need for the baseload power that Hinkley supplies.

The hon. Gentleman raised a large number of points, and I will address them. I hope that we share the view that a confident, long-term energy policy is vital to ensuring that people have access to secure energy that is affordable and clean, and that we should be a world leader in these important energy industries. I hope that he will not think it churlish of me to point out the complete absence of a long-term energy policy during Labour’s 13 years in government, when our nuclear fleet was known to be coming to the end of its life, yet no decision was taken to replace it. It has fallen to this Government to make the long-term decisions for the security of this country. Instead of making like the ostrich and hoping that the problem would go away, this Government are looking to the future, providing the upgrade to our long-term energy security that we need.

With regard to the hon. Gentleman’s position today, I am afraid that I am as confused as ever. His position is no more credible. He seems to be criticising the Prime Minister and the Government for taking the serious decision to review the components of a very important deal—that seems to be the import of his remarks. He said that this had damaged confidence, but when the announcement was made on 29 July, he told the BBC:

“I’m hoping what they will do is take two to three months to seriously review it”.

So much for the suggestion that we should not have had the review in the first place—although I am not sure what the purpose of that two or three months would be, because the very same day he said that he had already made his mind up. He said that he would not scrap the proposal

“because I welcome the jobs and I welcome the 7% of electricity that this will produce for the nation.”

That is from the hon. Gentleman who was urging the Government to take longer to review something, the conclusions of which he had already agreed in the first place. The contrast between that and the seriousness and forensic approach of the Government is marked.

I will address the points that the hon. Gentleman has raised. The powers under the Enterprise Act are subject to takeover thresholds. We are ensuring that any change in ownership or control, of whatever size, will be covered by a national security test. That seems to be sensible.

On Hinkley, until we proposed these changes to the contract, EDF was at liberty to sell its majority stake in that important investment without even needing the permission of the UK Government. Therefore, it seems sensible and prudent to have agreed straightforwardly with EDF that the UK Government’s consent should be required.

I am surprised that the hon. Gentleman, who I would have thought would take a prudent view of matters of national security, should suggest—again, it is not clear—that we should not make these changes. When we debate these matters, he will be able to set out whether he opposes the measures we are taking to safeguard and entrench the same regime for national security in this country that other advanced economies enjoy.

I was clear in my statement that this is the first of what we hope will be a series of new nuclear investments. Just about 20% of power is generated by nuclear. It is important that there is another contribution to a diverse energy mix from nuclear. In so doing, we create new jobs, new opportunities and major advances for the UK economy.

I welcome proposals to make it more difficult for foreign interests, especially nationalised industries and Governments, to buy our crucial infrastructure. Does the Secretary of State agree that future power stations would be much better financed by private sector British investors or even on occasion by Treasury investment, rather than foreign investors, who will be able to take enormous sums of money out of our country for 25 years or more while the project is up and running, which is a cost on the balance of payments that we do not want?

I welcome overseas investment of £18 billion in the UK economy. I hope that, as we develop our nuclear programme and skills and as the supply chain prospers, British companies will invest in the various parts of the new nuclear supply chain. In fact, we expect that to happen, with 64% of the value going to UK companies. However, it is an important part of the deal that the consumer and taxpayer will not pay a penny for construction costs unless and until the plant generates electricity. Knowing the record of cost overruns and delays to new nuclear power stations, I think it is prudent that that risk be held by the investors, rather than the taxpayer.

I thank the Secretary of State for an advance copy of the statement, and I thank his Energy Minister for the courtesy call this morning to explain the Government’s decision. I welcome the fact that we have had the statement before the recess to allow the opportunity for questions. It is unfortunate, however, that the Government have decided to take the gamble with Hinkley. The Secretary of State has outlined improvements, but the deal remains a rotten one; it will cost the bill payer £30 billion. He may say that the risk is with EDF and the construction companies, but, as Barclays outlined, if Hinkley Point C is 25% over-budget and four years late, EDF will still make a profit, at the expense of the bill payer.

If we do not pay a penny until Hinkley is built, or if it is built late, what will fill the gap? We know that coal is due to come off the system by 2025, when this project is meant to come on. If the gap is five years, what will fill it and at what cost? The cost of the project—Hinkley Point C will possibly be the most expensive object in history—is too much.

The opportunity cost is also a concern: we cannot spend the money twice; we cannot have the engineers working on things twice; and we cannot have the grid producing the electricity to be consumed twice. We could spend the money better. We could use our expertise better to develop an industrial strategy. The Government have said that that is part of their new policy, but that industrial strategy will mean foreign ownership, investment and profit. Instead we could develop the home-grown industries, which would see our country flourish, by investing in clean carbon capture, offshore wind, storage and solar. It would be better to invest in those things. I ask the Secretary of State to invest in the energy of the future, not the energy of the past.

I am grateful for the courteous words with which the hon. Gentleman started his remarks. He talks about investing in energy sources of the future, rather than those of the past. I gently point out to him that, given the SNP’s record on energy forecasts in recent months, SNP Members might keep their crystal balls to themselves, if I can put it that way.

On the hon. Gentleman’s injunction to invest in renewables, that is very important. He will know that Scotland has a high proportion of renewable investment. However, I am confused by his party’s position. As I understand it, the SNP has stood on a platform of a nuclear-free Scotland but, it seems to me, with its fingers crossed behind its back, because it is happy to rely on the two nuclear power stations functioning in Scotland—Hunterston B and Torness—that are producing low-carbon electricity. Indeed, a former leader of the SNP wrote to EDF to say that he was happy to extend the life of the two power plants well into the 2020s. Therefore, he wants to condemn his cake and eat it, and then have another slice.

We do want to attract overseas investment into this country. It is a vote of confidence in this country that investors are working with us to have this major uprating of our infrastructure. We welcome that across different sectors. The hon. Gentleman is wrong that that is at the expense of other opportunities in this country. One of the features of the deal is that it does not burden the public balance sheet. The Chancellor of the Exchequer and the Chief Secretary to the Treasury have wisely ensured that the UK balance sheet remains able to support other investments, because this will be provided through private investment.

Mr Speaker, with your indulgence, may I thank the Secretary of State and the Prime Minister for making exactly the right decision? I emphasise how important this is for the Bridgwater and West Somerset constituency. I invite the Secretary of State to come down as soon as he practically can to visit the Hinkley Pont C nuclear power station. Will he look with some urgency at the nuclear college that we urgently need to build at Cannington? Further to the letter that I sent him from the local enterprise partnership, we need the last bit of the funding to ensure that the infrastructure to deal with the project in the local area is up to scratch and we can deliver the power plant on time and on budget, for the benefit of the UK.

I return the compliment and thank my hon. Friend for his level-headedness and patience, while the review has been conducted. It is an extremely important investment for his area. I am looking forward greatly to going with him to visit Hinkley. He is right. Investment such as that in the college will provide the skills that will charge ahead the whole of the south-west and, indeed, the rest of the country. The supply chain extends to all parts of the UK. My right hon. Friend the Member for West Suffolk (Matt Hancock) will also be a beneficiary of the project. It requires an upgrade to the local infrastructure, and I will respond to the LEP on that. Earlier this week, I had a positive conversation with the Somerset chamber of commerce. It was clear that the benefits of what was then a proposal would be considerable —in fact, game changing—for Somerset.

The Secretary of State will be aware that Britain’s two most respected economy and finance publications, the Financial Times and The Economist, have both come out strongly against Hinkley C on value for money and on energy policy grounds, with The Economist describing it just last month as a white elephant before it is even built. Can he confirm that nothing that he has announced today is an improvement on the dreadful deal negotiated by the former Chancellor on the guaranteed price? Absolutely dreadful.

I do not agree with the right hon. Gentleman. It is a good deal that will secure 7% of our energy into the future. Given that 20% of our nuclear capacity will be decommissioned over the next 10 years, it is incumbent on him and his hon. Friends to tell us how they would replace it if they are not going to be forward looking and make positive decisions such as those that we have made.

I welcome my right hon. Friend’s statement, which is good news for the energy sector and for my constituents in Bradwell-on-Sea. I can assure him that they welcome the prospect of Chinese investment in the Maldon district, where there is a long history of nuclear power generation. Does he agree that any future power station should be regulated by the UK inspectorate and staffed by British employees and that the cyber-security evaluation centre, which assesses technology supplied by Huawei for the telecoms sector, sets a good precedent for addressing any security concerns?

My right hon. Friend is absolutely right. It is important that we should welcome overseas investment, but we should also have the kind of regime and powers that other advanced economies benefit from. That is something that mature countries would expect to have, and that is what we are going to have as a result of these changes.

Having pressed the pause button, why is the Secretary of State now pressing the fast-forward button? Does he not recognise that, as the Financial Times has pointed out, this project does not represent value for money? Does he accept that the cost to consumers has gone from £6 billion to £30 billion and that his Government are now willing to put in public subsidy, which, under the coalition, they said they would not do? Also, this is happening at a time when the cost of renewables is plummeting.

No, I have said that the construction costs will be entirely financed by the private investors in the site. It is important that we take a consistent long-term approach to energy policy, and in so far as this can be cross-party, that will be beneficial. It is especially ironic that two Liberal Democrat Energy Secretaries were closely involved in the negotiation of this deal. The right hon. Gentleman obviously takes a different view.

Can my right hon. Friend confirm that, by the end of its life, this new power plant will have generated the most expensive energy in the history of energy generation? Does he agree with the National Audit Office that, by that point, consumers will have ended up subsidising EDF to the tune of £30 billion? Finally, can he tell us what is going to happen to the mountains of nuclear waste that this plant will generate?

Securing a reliable source of energy for 60 years is a good investment in the future stability of our energy supplies, and that is worth having. Of course it is impossible to know what the alternatives will be during that time. We have seen very volatile energy prices. Sir Winston Churchill’s principle on energy security was that diversity, and diversity alone, was the key. I think that that is the right approach. I said earlier that decommissioning was provided for explicitly in the contract.

EDF says that this will mean 1,500 jobs in offices in Bristol, as well as those associated with the plant, and I am meeting representatives of the company on Monday at Hinkley to discuss that, but these will be incredibly expensive jobs, given what we have already heard about the deal. Does the Minister really think that this is value for money? Would it not be better spent by investing in the renewables sector, which would also provide jobs in the south-west?

I am slightly confused by the Opposition’s demeanour. In his rather confusing reply, the shadow Minister seemed to welcome the fact that the project was going ahead. Certainly, the trade unions in the south-west and across the country, which I imagine the hon. Lady speaks to, are very positive about it. The national secretary for energy for the GMB has said:

“Giving the thumbs up to Hinkley is vital to fill the growing hole in the UK’s energy supply needs.”

Frances O’Grady of the TUC has also welcomed the announcement. When the hon. Lady goes back to her constituency this weekend, perhaps she might like to talk to some of the unions, which are delighted on behalf of their members.

I welcome this announcement, which will bring £465 million-worth of contracts to businesses in the south-west and a £4 billion boost to the economy of the south-west. Does the Secretary of State agree that we need to look at these decisions in the context of the fact that we have a fleet of nuclear power stations dating back to the 1960s and 1970s that will close over the next 10 years? These are not either/or decisions: we need both kinds of energy provision.

That is exactly why long-term planning is essential. As I have said, about 19% of our electricity is generated by nuclear power, and if we do not renew it, that figure will fall to 2% by 2030. It seems to be prudent to get on with replacing it.

Iwelcome this decision. It has been a long time coming, and it is a shame that it is been delayed over and again. I hope that Moorside power station will be built in the not-too-distant future. It will be incredibly important for economic development in my constituency. Can the Secretary of State assure me that the nuclear renewal programme will not be beset by delays?

One of the reasons that we are so keen to inaugurate this new programme of nuclear engineering in this country is our need to replace the nuclear power stations that are being decommissioned and to build up in constituencies such as that of the hon. Lady the skills that can make a valuable contribution to local life and to the national economy.

I welcome this start to the building of the new fleet of nuclear power stations and the opportunity that this will provide for British manufacturing. Will my right hon. Friend do all that he can to ensure that, in these deals, we buy the best of British?

I will indeed. In the past 24 hours, EDF has made a commitment to me that 64% by value of the content will be spent with UK companies. That shows the tangible benefits to the whole economy of this programme.

The Minister has said that the Hinkley decision will not burden the national balance sheet. Can he clarify the status of the offer made by the previous Chancellor of the Exchequer to give EDF a Treasury guarantee of £2 billion to supplement the company’s liquidity? The National Audit Office has said that that offer puts the taxpayer at risk.

I am delighted to answer that question. In fact, EDF has confirmed to me that it will not be taking up that £2 billion guarantee, so the taxpayer is fully insulated from the costs of construction.

I welcome the Secretary of State’s statement today. Can he confirm that he will continue to work with business groups such as the China-Britain Business Council and the French Chamber of Commerce in Great Britain to ensure that we build on this nuclear partnership and attract future investment into the UK?

I will indeed. We want to have good investment opportunities for countries around the world, and China has been an important and valued source of investment right across the United Kingdom. It is important that we build on that.

In the light of the announcement today, is the Secretary of State now admitting that when the Government entered into the original contract, they failed to protect national security and critical infrastructure?

Despite the injunction of the hon. Lady’s colleague on the Front Bench, the hon. Member for Brent North (Barry Gardiner), I can tell her that taking the opportunity seriously to review these matters before signatures were given has allowed us to improve the security of the arrangements. That seems to be a wholly good thing that I hope she will welcome.

The Secretary of State is quite right to point out that nuclear energy provides a valuable part of UK energy security, but it is dependent on having the fuel to put into the system. The fuel for reactors in the UK is made in my constituency. Will he assure me that all efforts will be made to ensure that nuclear fuel for new reactors in the UK will be made in the UK whenever possible?

Indeed, and I would be happy to visit my hon. Friend’s constituency see the production facilities for myself.

I very much welcome the review, but I am astonished that a review of the strike price was not part of it. The strike price will rise to close to £120 per MWh by the mid-2020s, and it will rise with inflation thereafter. Will the Secretary of State tell us whether a serious examination of the cost and value for money for bill payers was part of the review?

Of course we looked at every component part. To construct a new nuclear power station, the first for generation in this country, at no risk to the taxpayer or the bill payer is a considerable achievement and represents good value.

This is good news for my constituency, as we are now going to have a third nuclear power station built. Good news travels fast, and I have already had the local radio station desperate to get an interview with me. I should like to congratulate the Secretary of State on all his hard work and thank him for what he has done for my constituents. Will he agree to meet me shortly to discuss how we can speed up the decisions on the five proposed reactors, and will he also help me by discussing Heysham as soon as possible?

We have an excellent Secretary of State who came to this House and made a full statement. He quite rightly gave the details of the statement to the Opposition and SNP spokesmen, but he also gave them in advance to the BBC. I read all the details on the BBC website. That is not how this House works. It may be that the pressure of spin doctors is still prevalent in Departments. That must stop. The House must be informed first. Does the Secretary of State agree that that is the convention of this House?

I understand my hon. Friend’s point. I hope that he will concede that I have come to the House at the earliest opportunity. Such decisions have consequences for financial markets, and it is the norm to disclose such decisions at the opening of the markets. He can rest assured—I am sure that he will accept this—that my sense of responsibility to the House is clear in my mind, but the conduct of business must be orderly when it comes to the implications for financial markets.

I welcome the announcement about the golden share and support what my right hon. Friend the Member for Wokingham (John Redwood) said about future British investment, perhaps through a UK investment bank or UK pension funds, being important. Will the Secretary of State confirm where the currency risk will arise, in particular, for future subsidy payments out of the contracts for difference?

I welcome the long-term investment in low-carbon energy and the creation of 25,000 jobs. Will the Secretary of State confirm EDF’s commitment to local jobs and to small and medium-sized businesses in the supply chain, such as James Fisher Nuclear in my constituency?

I am sure that that firm will attest to that. The Somerset chamber of commerce was clear that the orders that had already been placed during the preparation of the site have been beneficial to the county.

This is obviously a massive infrastructure project, and I welcome what the Secretary of State has had to say about the opportunities for UK supply chains. I hope that those opportunities will be extended to the steel industry. I strongly urge the Secretary of State to get out there and make the case that all the steel used in the project should be British. May I put in a plug for Corby tubes?

They are of excellent quality. The commitment given to me by EDF that 64% by value of the work will be with UK firms will be of particular benefit to such firms and to the supply chain right across the country.