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Written Statements

Volume 626: debated on Tuesday 27 June 2017

Written Statements

Tuesday 27 June 2017

Business, Energy and Industrial Strategy

Joint European Torus Facility: UK Underwrite

Today I have laid before Parliament a departmental minute describing the contingent liability resulting from Her Majesty’s Government’s underwrite of the UK’s fair share of the Joint European Torus (JET) costs.

JET is a world-leading nuclear fusion research facility based in Oxfordshire and supports 1,300 jobs in the UK. JET is funded through a contract between the EU Commission and the UK Atomic Energy Authority. As part of this contract, the EU provides around £60 million of funding per year representing 88% of the JET running costs.

The current JET contract is due to end in December 2018 and the EU Commission is currently considering a potential extension of the JET contract until at least the end of 2020. This extension is crucial to the future of JET, the researchers that work there and to ensuring the UK continues to lead the world in fusion technology and research.

I wrote to the EU Commission on 20 June 2017 confirming that, should the JET contract be extended, the UK would continue to pay its fair share of JET costs. This underwriting of UK JET costs aims to provide the certainty needed to secure the extension of the JET contract and minimise the uncertainty around the future of this world-class facility.

The departmental minute describes the contingent liability that the Government will hold as a result of underwriting the UK’s fair share of the JET costs. The value of the liability is subject to negotiation. Estimates as to the possible value of the liability will need to remain confidential so as to avoid prejudicing the UK’s future negotiating position.

It is usual to allow a period of 14 sitting days prior to accepting a contingent liability, to provide Parliament with an opportunity to scrutinise the proposal and raise any objections. Because of the dissolution of Parliament it was not possible to allow for a period of scrutiny before incurring this liability. This was in order to ensure that the underwrite was communicated to the EU Commission in time to influence a key report on which decisions about the JET contract extension will be based. This action was judged to be in the public interest because of the additional costs to the public finances which might be incurred if the Commission was not informed of the UK’s intentions in time to influence its decisions.



Contingent Liability

I am today laying a departmental minute to advise that the Ministry of Defence (MOD) has received approval from Her Majesty’s Treasury (HMT) to recognise a new contingent liability associated with the Type 26 Global Combat Ship Manufacture Phase 1 Contract.

The departmental minute describes the contingent liability that the MOD will hold as a result of placing the Type 26 Global Combat Ship Manufacture Phase 1 Contract, which will provide for the manufacture and testing of the first batch of Type 26 Global Combat Ships. The maximum contingent liability against the MOD is unquantifiable and will remain until the latest Out of Service Date of the ships manufactured under the contract, in the second half of the 21st century.

It is usual to allow a period of 14 sitting days prior to accepting a contingent liability, to provide hon. Members an opportunity to raise any objections. I regret that on this occasion pressing commercial and industrial requirements to sign the contract within the next few days together with the dissolution of Parliament, have meant that it has not been possible to provide the full 14 sitting days prior to taking on the contingent liabilities. Any delay would have risked losing significant financial benefits for the taxpayer. The Secretary of State for Defence has decided to proceed with the agreement, following scrutiny by the Department’s Investment Approvals Committee which confirmed that the contract offered best value for money for the taxpayer, and subsequent approval by HM Treasury.

Within the contract the exposure of BAE Systems Maritime-Naval Ships to a number of specified claims and to direct losses is limited to £50 million, while in respect of indirect losses and, within certain prescribed categories, catastrophic risks the contractor is indemnified against claims in excess of £50 million. It is the view of the Department that the likelihood of any claim is extremely low.