Some pension funds are doing well…..

I spoke in the House last week in the report stage of the finance bill. Report stages of bills are a little disjointed – you can wander into the chamber (if you have timed it right), say your piece on a particular clause or amendment that is up for final examination before the third reading and vote, and clear off. Not at all like the bum-numbing five hour endurance test of trying to say something in, say, a Second Reading debate.

This disjointed debate concerned the Carbon floor Price, about which I posted a while ago [here] – specifically about the difference imposed on the floor price as a ‘float’ above whatever the European Emissions Trading price might be between the consultation period and the budget. It was suggested to be not more than an initial one pound difference: now it is to be a starter for five pounds and rising rather rapidly afterwards, and confirmed in the finance bill. It rather knocks sincere supporters of a floor price sideways in its cynicism, to be frank.

I can’t quite get over the ease and lack of reporting that has accompanied this lurch in policy. For it does two things: it nets exchequer about £800 million per year because it effectively extends the climate Change Levy (which the government said was a bad, bad thing when in opposition) for upstream energy production. A tax, pure and simple. But it also, by relating the tax to averaged out carbon emission levels,  effectively hands free money (in this instance five times as much as originally proposed) to low carbon producers. Not a subsidy for nuclear, you understand, because wind will get it as well. But compare the output last year from all renewables and nuclear – something like 70% of the free money goes to nuclear.  Estimates of what that free money might be worth – for doing nothing more than turning up for work and keeping your power station going for that day (I can’t even say ‘just for switching it on’ in the case of nuclear) – vary from an official Government line of at least £50 million per year  for the next ten years to over a billion pounds over the next twenty years.  And, in case you hadn’t noticed, this free money goes not to nuclear in general, but to one company; EDF. For after the closure of the last two Magnox reactors in 2012, EDF will own ALL of the remaining UK nuclear power stations.  I called it a ‘gold plated pension fund for old nuclear’ in my contribution to the debate. One of the few commentators to pick its implications up, Geoffrey Lean in the Telegraph opined that ‘You don’t have to be against new reactors to see that this is outrageous’. Quite so Geoffrey. There should be windfall tax on this outrageousness at the very least.

But of course, it’s not a subsidy. Oh no. Just mildly helpful to EDF as they advance their plans to build four new reactors on the four sites set aside for them in the Nuclear National Planning Statement. And since it is becoming apparent that they are likely to be the only new nuclear developer, it will probably be more than mildly helpful. But no, it’s not a subsidy.

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