Leading Article: Privatising the nuclear industry

MINISTERS are split over whether to privatise the nuclear industry. Advocates of a sell- off have clashed with colleagues who fear that the private sector will take its profits and leave the state to clean up the nuclear mess.

This difficult debate has apparently delayed an announcement detailing the Government's nuclear review. But the two sides are surely locked in the wrong argument. They should instead focus on whether Britain needs such an industry at all. For if the country is to continue generating electricity using nuclear power, the Government has little option but to privatise the industry. Given the budget deficit, this is the only course likely to yield investment for building reactors to replace output lost when Britain's Magnox plants close.

If, on the other hand, nuclear generation is judged out-of-date, privatisation would be pointless. A state enterprise could just as easily run down existing plants, which will all have been decommissioned in a matter of decades.

There is a persuasive economic and strategic case for maintaining some nuclear-generating capacity. New plants can reasonably be expected to be profitable, producing electricity at competitive prices. Tight safety standards already exist following Sir Frank Layfield's public inquiry into the construction of the pressurised water reactor at Sizewell B. Two additional reactors planned for the Sizewell C site would inevitably raise environmental concerns. But given that dozens of such plants already exist in Europe, the development would involve a relatively small additional risk to keep nuclear generation alive in Britain.

Maintaining this capacity is desirable to guarantee energy supplies. The dash for gas may make economic sense today, but excessive reliance on it may leave Britain hostage to a 21st-century equivalent of the oil sheikhs. When North Sea gas is depleted, those who control the Trans-Siberian gas pipeline may wield unacceptable power.

These arguments point towards investing in Sizewell C. But the Government is in no position to provide the capital costs. Nor, at the moment, is the City convinced that nuclear power represents a wise investment. So if ministers want the industry to survive, they must create conditions conducive to private capital.

The Government will have to accept responsibility for decommissioning existing plants, using the billions of pounds set aside for this purpose. It will have to guarantee sales of electricity from new stations so that private investors feel confident enough to inject long- term capital. Finally, for the sake of future taxpayers, strict rules should require a privatised nuclear industry to make provision for decommissioning new plants.

The devil is in the detail. At present, detail threatens to obscure the case that Britain should keep its nuclear-generating industry. Given the fragility of government finances, that conclusion seems inevitably to require a measure of privatisation.