RT HON ALISTAIR DARLING MP, LORD TRUSCOTT, MR DARON WALKER AND MR PAUL MCINTYRE

21 JUNE 2007

  Q40  Mr Weir: You mentioned the expense and that is something we are coming onto. Obviously whatever carbon capture goes ahead will be expensive. What financial support do you envisage for the eventual developer given that it falls outside the existing mechanisms for supporting low carbon generation?

  Mr Darling: The whole point of having a competition which I described is to see what people are offering, what they are willing to contribute and that allows us to reflect on what help we might be able to give. I think in any negotiation the government to put its cards on the table before you start probably would be unwise.

  Q41  Mr Weir: You mentioned that you had been to visit BP three years ago. As I said earlier, it seemed to be the most advanced. When do you think, at the point the competition is launched, anybody will get to the stage they were already at?

  Mr Darling: I did visit it three years ago and it was not ready to go then at all.

  Q42  Mr Weir: They had been working on it for three years.

  Mr Darling: BP had spent something like £50 million on it. We are talking about hundreds of millions of pounds on top of that. It was not as though it was waiting for the government to say switch it on.

  Q43  Mr Weir: That is not the point. It was advanced three years ago.

  Mr Darling: Other companies are also doing work on it. I quite accept for political reasons you cannot accept this, certainly your boss cannot but it is not open to any government, or even an executive, to hand over a contract to one company when they know there is somebody else in the field. Never mind the probity of doing that, you would be in court very quickly.

  Q44  Mr Wright: How do you expect the current consultation on new nuclear build to address the concerns set out in the February High Court judgment? Do you think there is a different approach this time?

  Mr Darling: Clearly we studied the judgment in February and we have tried to take on board the findings of the court. The current consultation is more extensive. It asks many more questions. It specifically asks people if they think there are other matters we ought to take into account and what are they so we can consider them. It covers all the aspects that were of concern. On financing I repeat the point that the government is not going to build a single nuclear power station. If they are built, they will be built by generators not by individual governments. We deal with the question of waste. We deal with all these matters. The consultation process is set out in the White Paper; indeed it is far more extensive than anything we have attempted before. All I say to people is let us have your views but as a country we need to come to a decision this year. We cannot let this go on and on and on.

  Q45  Mr Wright: You mentioned the point about the waste and that was one of the main points that the judge found against the government in the review, they did not really consult on the question of what to do with the waste. As I understand from the report, you are going to shortly publish a consultation on the waste process. Surely it would be far better to do the consultation in conjunction with the Energy White Paper. Some of us have concerns about the issue of energy powered by nuclear because of the concerns of what to do with the waste. We really need to have a decision on what the long-term decisions are going to be in waste first so surely you need to address those together.

  Mr Darling: The consultation paper, which must be read in parallel with the White Paper, does deal with the question of waste. You are right there is a consultation being published next week which follows on the Committee of Radioactive Waste Management CORUM Report that was published last July and David Miliband said that he would publish it. The consultation period will run concurrently so that people will be able to comment on both of them. People can be in no doubt that we are putting forward proposals in relation to waste. They will no doubt have counterproposals. Some people will disagree with it, others will agree but that is the whole point of consultation. There is sufficient there to enable people to make their minds up.

  Q46  Mr Wright: Is not the CORUM Report going to be based on the legacy waste rather than the future waste?

  Mr Darling: CORUM was asked to look at the legacy waste but the Government has looked at the CORUM Report and concluded that, firstly, it is right in relation to legacy but we have also concluded that the same form of disposal would be appropriate in relation to new waste. If I remember rightly—and because this is important Paul will correct me if I am wrong—the estimate we have is that if, for example—and this is only an example—you had ten additional nuclear power stations it would probably produce 8% more waste than we have at the moment. That is right. How many, if any, new nuclear plant we will have to wait and see. What I would say is this. I came to this as a sceptic when I sat down and looked at it. The things that changed my mind were the two things: climate change, but we must get more low carbon energy; secondly, security of supply. The one thing about electricity is you can generate it in this country but if you have to import the fuel that creates all sorts of uncertainties. In relation to any form of generation, waste is something you have to deal with. It is a problem that needs to be solved but then so too is pumping carbon into the atmosphere, so too, for example, is the visual impact of a wind farm or something like that. If there was a form of energy that nobody could see, did not cost very much and did not damage the environment and had many, many other advantages I am sure we would all seize on it. There is none that are problem free.

  Q47  Mr Wright: You understand the point about finding a solution, if there is a solution, prior to taking the decision on the future of nuclear energy.

  Mr Darling: I do understand that. That is why the government has put forward the proposals it has. I understand the point you are making. In relation to nuclear generally, sometimes people will point to all sorts of problems when they are actually entitled to take this decision that they do not want the thing full stop. There is a solution and a solution can be made to work but that is why I want to consult on it.

  Q48  Mr Wright: You mentioned earlier the fact the government is not going to build these and it would be down to the generators to build the new build. If, for whatever reason, they decide not to build any, maybe because of the cost, maybe because the energy costs are falling at the present time, what effect will that have on the Energy White Paper f the private sector are not going to build?

  Mr Darling: If the energy generator will not build them then there will not be any. I repeat the point the government is not proposing to build any itself. It is our job to make sure there is a market. It is our job to make sure there are clear price signals. It is our job to make sure there is the right regulatory environment so the companies can make their choices and if they decide to build nuclear plant the regulation regime is there, the planning regime is there, the environmental concerns are met. Thereafter, it is for the companies to make their decisions, just as they would make a decision about a wind farm or a gas-fired power station. Our concern is to make sure that we have the right framework to enable them to make those choices. When you say suppose there is no nuclear at all, it does mean that you have to do more in other areas. That could be problematic. It could well be more expensive because renewable energy is not cheap, it is subsidised through the renewable mechanism at the moment. What we believe we should do is to make sure that people have as wide a choice as possible. I believe it would be a big mistake to say whatever you do you cannot even consider nuclear. To rule that out as an option seems to me to be short sighted. I recognise it is a controversial issue and that is why the government is consulting. We will listen to what people have to say and make a decision later in the year.

  Q49  Mr Wright: Will there be any intervention from the Department if there were questions about planning issues, for example, and also about the cost and the fact that the government said clearly there will be no subsidies for new build. If the industry was to come to you in 12 months time and say the figures do not stack up, we cannot get the finance, we are getting difficulty in terms of the planning regime, how can you help us out?

  Mr Darling: There are two separate issues there. No, we are not going to contribute to the cost of it. I have said they will build, operate and be responsible for their share of the disposal costs at the end of the day. In relation to planning, that is a slightly different matter. Whether it is railway lines, roads, power stations and large housing developments, I believe the present planning system is not functioning for the benefit of anyone at the moment which is why we published a White Paper in May. I would say to you it is quite right you put these questions to me. At the moment there is quite a lot of interest in the possibility if we gave the go ahead to building a nuclear plant and we have not been overwhelmed with people coming through the doors saying "This is all terrible. What you have laid down is impossible" or anything like that. What people are waiting to see is what happens in the consultation and they will look to our final decision later in the year.

  Q50  Chairman: Applications for pre-licensing are going on now. Is quite a lot of interest being shown?

  Mr Darling: We are looking at the pre-licensing contingent on that consultation. There is quite a lot of work to be done which you can do without getting to the stage where you have gone too far. In relation to licensing, we think there are probably three, maybe four, different designs which need to be looked at. The nuclear inspectorate need to be satisfied they would work. There is a whole justification process you have to do in terms of EU standards in relation to types of plant. Then there is the question of site assessment and so on. There are a whole lot of things that need to be done. There is actually a remarkable number of hurdles to be crossed before you get to the stage where you get the first JCB on a site.

  Q51  Chairman: I imagine one of the major triggers for your review of possible UK supplementary action on the Emissions Trading Scheme could be an indication, from those who might build nuclear power stations that the price of carbon is not sufficiently certain for them to go ahead with their investment.

  Mr Darling: That has not been said to us yet. It was certainly before the phase two was in place and they could see the carbon price beginning to become significant and in fact above the level where you might take the decision to seriously consider nuclear. Going back to our earlier series of questions, one of the things that an investor wants to know if he is going to build a new plant is what is the carbon price going to be and do the figures stack up. They would ask that question in relation to any plant.

  Q52  Chairman: That is a very articulate way of saying yes.

  Mr Darling: It was a comprehensive answer I hope.

  Q53  Chairman: I think you meant yes.

  Mr Darling: To make it even more comprehensive, as Mr McIntyre has pointed out, the point about the carbon price that it is beneficial to all low carbon technology.

  Chairman: Nuclear is a low carbon technology this Committee has concluded.

  Q54  Rob Marris: I want to take you back a portfolio, and I suppose it is a Steve Martin question in terms of cars, planes and trains in terms of transport, which is responsible for about a quarter of UK CO2 emissions. You will of course be aware that CO2 emissions from domestic aviation, for example, increased 7% between 2004 and 2005. I understand the UK government is in agreement with the European Union Commission proposals on bringing aviation into the Emissions Trading Scheme by 2012. Given what was said in the Aviation White Paper which you are very familiar with I am sure, is there an incompatibility between the Energy White Paper and the government's airport expansion plans?

  Mr Darling: No, because I wrote them both. I do not think there is. If you go back to the Aviation White Paper, which was published after a very thorough investigation as to what was likely to happen over the next 20 or 30 years, it was a fairly long-term view. We came to the view we thought there would be a requirement for possibly four additional runways in the whole of the UK between then and 2030. We did not say definitely but we thought there was. We did think there was a need for one in the South East. As you know, there is a planning process under way in relation to Stanstead. In relation to Heathrow we said that provided the environmental impact could be dealt with, and it would need to be dealt with anyway because of existing operations at Heathrow, there might be a case for a third runway there. The other two were Birmingham and maybe Edinburgh. Those two were some way off. The reason we did that was it is not as though there was plenty of capacity now in the system and we were building in more in anticipation. Certainly anyone who has ever used any of the London airports will know that we are at capacity. In Heathrow's case you are at capacity all the time which is why if anything goes wrong there are huge delays because there is no recovery space there. The two are entirely consistent. In that White Paper we said we believed that aviation should be in the Emissions Trading Scheme. We have worked hard with the Commission and with other countries to get it included because we think that is the best way of dealing with the problem. We think rationing people's flights or some crude mechanism to price people off the airways is not the right thing to do.

  Q55  Rob Marris: Is aviation definitely included for Phase three?

  Mr Darling: It is still something that is being discussed in the European Union. There are a whole lot of things still being discussed but we think it is essential that it is. Let us be blunt about it, while we have a number of allies here there are some people who do not think it is a problem. I do think it is a problem which is why I think we need to deal with it and the best way of dealing with it is putting it in the Emissions Trading Scheme.

  Q56  Rob Marris: Speaking of problems, if we turn to road transport that is responsible for something like 93% of transport emissions of CO2 in this country. Since 1980 the real cost of motoring has stayed about the same or fallen slightly whereas in real terms rail travel has increased 39% in cost and buses 42% in terms of cost increase since 1980. Everywhere outside London bus usage, which accounts for the majority of public transport usage, has been falling. It seems there is a potential conflict there with the sorts of emissions and energy we have been discussing. I wondered if you could give an indication of how you think that is going to be sorted out. Is it going to be sorted out, bearing in mind your Ministerial career, by the Secretary of State for Transport, the Secretary of State for DTI or the Chancellor of the Exchequer?

  Mr Darling: If I cast my mind back to transport first of all, you are right that in real terms the cost of motoring has been falling. The cost of buying a new car has gone down and the cost of running a car has come down. Of course car use has gone up partly because of that but other factors are at play as well. People now commute much longer distances than they used to. One of the reasons we have introduced the Biofuels Obligation, the 5%, is that it would be equivalent to taking 1 million cars off the roads. We said we would go to 10% provided we are sure it is sustainable and that is very, very important. There is no point in trying to solve one problem when you create another problem. There are other measures too if we go ahead with the road pricing and so on. Although that is primarily something designed to deal with congestion, it will have an environmental impact. In relation to buses, if you look at the general picture you may be right but there are many other areas outside London where bus usage has actually gone up, usually when you have a very good council and a good busy company, like Brighton, York, Edinburgh and Leeds, where you have a proper transport policy. In relation to trains, there are two things I would say to you there: one is I know that people often look at the headline walk on first class prices which have gone up but there are actually a lot of people travelling on trains who are not paying those prices but lower prices. The second thing is there has been a huge investment in British railways making up for decades of under-investment. The result of that is there are now record numbers of people using our trains. There are now more people using the trains than when the industry was nationalised at the end of the Second World War. That suggests to me that whilst there is a great deal more to do on transport I would say we arrested the decline in some of these things, we have begun to turn it around but there are more things we need to do.

  Q57  Rob Marris: Bringing it full circle to where we started this morning, you mentioned that you did not anticipate there would be a need to publish a further White Paper.

  Mr Darling: Except on nuclear. I said we needed to conclude that process.

  Q58  Rob Marris: You said a short paper following the nuclear consultation.

  Mr Darling: It might even be the 29 pages that the Chairman was on about.

  Q59  Rob Marris: "Undoubtedly there are other things we will need to do", bear in mind the policy backdrop you put it against in terms of climate change and security of supply, have you got some other policies up your sleeve and, if so, are you prepared do disclose them?

  Mr Darling: What I meant by that, and I said this in my statement in the House of Commons, the Energy White Paper will make substantial progress in dealing with climate change and security of supply but the things I had in mind were the things I referred to earlier. One of the big issues that has got to be sorted out by Europe is how you make sure that the commitment to have a 20% renewable target for all of energy is actually implemented and how does that fit with your ETS. We have been engaging very constructively with the Commission on this. The starting point is whatever you do not damage the Emissions Trading Scheme because it is getting going. It has had its problems but that needs to be the spine on which you build things. That is an area we will have to keep under review. The Climate Change Bill will be making recommendations from time to time. The point that Julie Kirkbride made about insulation and energy efficiency is important because new things will be coming along all the time. I think the direction of travel, the central thrust of the policies that we set out in the White Paper in May, are right and they will continue and they are good for many years to come. It makes sense in any policy as and when new things come along that you take advantage of them if you can do that.