Parliamentary debate
(a)	We consider that the time is ripe for a parliamentary debate on BNFL's future status and prospects. The delay in bringing the proposed public private partnership to fruition offers an opportunity to test parliamentary opinion on the subject. Following the recent recommendation of the Liaison Committee, we append as an Annex a draft resolution to be put to the House (paragraph 3).
Monopoly
(b)	Prior to implementation of a PPP, there must be clear arrangements for ensuring that BNFL is not able to use its UK monopoly position to unfair commercial advantage (paragraph 13).
Competitive environment
(c)	Business lost by BNFL is more than likely to be business won by an overseas competitor. Any assessment of a PPP and of the future course of BNFL's business requires an appreciation of the competitive environment in which the company operates (paragraph 14).
Review
(d)	It was not a perception of incompetence or underperformance by BNFL which originally prompted a review of its status and structure, but of rapid growth in the company demanding a fresh look. While the terms of reference of the KPMG review did not restrict consideration of options to a PPP, it is apparent that it was understood from the start that this was indeed the intended outcome. There is no sign from the published summary of the review that any option other than a minority shareholding was given any detailed consideration. No alternative means of introducing private sector disciplines seems to have been considered. It seems to have been assumed from the start that only "ownership disciplines" could produce the required improvement in performance (paragraphs 16 to 19).
Privatisation
(e)	KPMG was asked to look at the value for money to be achieved by a partial as opposed to a full privatisation, but not at the operational merits of the two options. We see no purpose at this stage in detailed examination of the merits of full privatisation. The arguments for and against privatisation, including a trade sale, should have been plainly set out in some readily accessible form, and tested by thorough analysis. We recommend that Ministers take advantage of the opportunity offered by the debate which we propose to set out the arguments surrounding full privatisation (paragraphs 20 and 21).
Timing and effects of delay
(f)	When the process of moving towards a PPP began some two years ago, the prospects for BNFL looked reasonably bright. Two years on, things look very different. We welcome the decision to delay the introduction of a PPP; it would plainly be unrealistic to proceed at the pace originally envisaged. The process of preparation for a PPP has already had a number of useful effects, which are all the more important now that the PPP is to be delayed. We have had the impression that BNFL has been allowed to go its own way for too long, constrained more by regulators and pressure groups than by supervision exercised by Ministers; and that it is only as they come to sell part of the company that a full understanding of its operations is being gained. We must, however, record our concern that it seems to be only now that Ministers should be exercising their rights and obligations to have a thorough understanding of BNFL, having owned the company for almost 30 years (paragraphs 24 to 28 and 35).
Reports from advisers
(g)	We expect the Minister to keep us informed of the contents of reports from advisers (paragraph 29).
Targets
(h)	BNFL and DTI agree that the targets will not be met this year. Targets should be stringent but achievable, and linked to the company's own objectives. We recommend revision of the targets already set and the introduction of fresh targets directed to the performance of all the constituent parts of BNFL's business with clear timescales for achievement (paragraphs 32 and 33).
Loose ends
(i)	Preparations for the PPP have turned up a number of contractual uncertainties and loose arrangements from the early days of BNFL which require resolution before embarking on a PPP (paragraph 34).
PPP
(j)	In broad terms, we endorse the proposal for a PPP as set out by the Secretary of State in July 1999 as the best available means of introducing commercial disciplines into BNFL, noting that it is an extension of a policy formulated on BNFL's formation 30 years ago. The PPP cannot and must not be expected to solve all of BNFL's problems. No more must the delay in its introduction be used by Ministers as a reason for delaying some vital policy decisions which are required. For the next three financial years the Government is likely to remain the sole shareholder. The analysis of BNFL on which the PPP proposal is based takes as a starting point the regrettable absence of ownership pressures on BNFL. DTI Ministers must devote some effort over the next three years to improving their performance as shareholders (paragraph 36).
Regulation and PPP
(k)	The recent history of nuclear safety regulation does not suggest that private ownership offers a danger, nor public ownership a protection. The regulators are confident in the sufficiency of their powers, and hopeful that delays in getting things done, whether as a result of shortage of capital or management delay, may diminish with a stronger private sector ethos. Experience does not suggest that a change in ownership will of itself make the task of BNFL's regulators significantly more difficult. The private sector disciplines to be introduced may bring about a less automatically compliant attitude to regulation and a greater resistance to requirements involving significant non-productive expenditure, balanced by swifter decision-making on required investment (paragraphs 38 to 41).
Environment Agency
(l)	We gained the strong impression from our June 1999 visit to Sellafield and from subsequent evidence that the relationship between BNFL and the Environment Agency is not as constructive as it should be. Preparations for the introduction of a PPP offer an opportunity for a fresh start by both bodies (paragraph 43).
Security and PPP
(m)	We have no reason to believe that the PPP represents any threat to the integrity of security at BNFL's sites, but would welcome in response to this Report a clear exposition of the Department's view of any implications (paragraph 44).
Foreign ownership
(n)	Given BNFL's holdings of plutonium and other sensitive nuclear materials, and its relationship with MoD, we would welcome an early indication from Ministers of any proposals to restrict overseas participation in the proposed PPP (paragraph 45).
Reprocessing: Japan
(o)	BNFL will have to restore the confidence of Japanese utilities in the company if it is to win reprocessing contracts for the post-2004 period, against competition from France (paragraph 51).
Reprocessing: British Energy
(p)	It is an unhappy state of affairs where BNFL feels obliged to insist on carrying out work for its largest single customer against its expressed preference (paragraph 54).
Reprocessing: Germany
(q)	If Germany does not want spent fuel to be reprocessed at Sellafield, for whatever reason, it must pay the costs of any breach of contract. It must also accept back as soon as can practically be arranged any delivered material not reprocessed and the products of past reprocessing, at least radiologically equivalent to that originally delivered (paragraph 58).
Reprocessing: general
(r)	BNFL should address in its Corporate Plan the prospects of reprocessing over the next four years to the end of the baseload contract period in 2004, and identify the commercial implications of any shift in policy from reprocessing to storage. If a PPP were to proceed, one of the first tasks for a new Board would be to examine the question of reprocessing at THORP from a fresh and more commercially-oriented perspective. The Government should clarify in the course of this year its policy on reprocessing of oxide fuels at the Sellafield THORP plant, particularly in the period after 2004: and the extent to which the Government remains committed to the policy enunciated by Mr Benn in 1976 that BNFL should actively seek reprocessing contracts from overseas, subject to return of radioactive wastes (paragraphs 61 and 62).
Mox data falsification
(s)	The weaknesses revealed in the management and workforce in the Demonstration Facility, which have been identified in the HSE Report and duly rectified, have no immediate significance for operations in the main plant, although they do raise wider questions on the safety culture at Sellafield. The evidence we have procured confirms that the falsification of data casts doubt not on the safety of the fuel elements supplied but on the process of quality assurance management at the Sellafield Mox Demonstration Facility (paragraphs 66 and 67).
Sellafield Mox Plant
(t)	The delay in deciding on whether to permit full commissioning of the Mox plant has gone on long enough. A decision should be made before BNFL submits its Corporate Plan to Ministers later this year (paragraph 70).
Magnox
(u)	BNFL is unlikely to be a significant generator beyond the end of the present decade. We recommend that Ministers ensure that BNFL provide in its Corporate Plan a clear vision on the way ahead for Magnox up to the introduction of a PPP and beyond, based on thorough analysis of the economics of the whole Magnox cycle and that targets be set for BNFL's Magnox generation business (paragraph 73).
Liabilities
(v)	We would welcome early confirmation by Ministers that they intend BNFL to establish an independently managed and segregated liabilities fund. We recommend that the Corporate Plan include a detailed account of BNFL's liabilities and an indication of the basis of current costings, and that the new targets to be set be extended to cover the decommissioning of Magnox facilities (paragraphs 76 and 77).
Management
(w)	We recommend that the regular progress reports to "key stakeholders" [on management] be made available to the Committee, as are the comparable reports from UKAEA on Dounreay, so that Parliament can also be assured that progress is indeed being made (paragraph 80).
US business
(x)	We recommend that DTI's target on US business be more closely focussed on the constituent parts of that business. As a British-owned business successfully operating in a difficult US market, BNFL is entitled to expect vigorous and visible support from those tasked with protection and promotion of British commercial interests in the United States and from British Ministers. While the US authorities must of course satisfy themselves on BNFL's qualifications as a contractor, we would be disturbed were commercially damaging actions to be taken as a knee-jerk reaction to press reports (paragraphs 82 and 85).
Fuel
(y)	While most attention has been focussed on BNFL's clean-up operations in the US, it is essential that Ministers and the Department's advisers also focus on the expansion of the fuel services business as a result of the Westinghouse purchase (paragraph 86).
Transparency
(z)	We look to BNFL to review the transparency of its Accounts and the content of its Report, so that they can become the principle vehicles for conveying an objective picture of the company's performance (paragraph 90).