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Taxpayers may still have to guarantee up to £2 billion in cheap loans for the Hinkley Point nuclear plant despite ministerial promises to the contrary, it has been claimed.
An artist’s impression of the Hinkley Point C power statio
The original plan for the exchequer to underwrite loans to build the power station in Somerset was announced by George Osborne when he was chancellor in 2015. EDF had sought the government guarantee to help to ensure that the project had access to finance.
Last September ministers suggested that it was no longer needed after Theresa May’s “pause” of the nuclear deal. At the time Greg Clark, the business secretary, told the Commons: “EDF has confirmed to me that it will not be taking up that £2 billion guarantee, so the taxpayer is fully insulated from the costs of construction.” A letter from EDF in September said that it did not “anticipate” using the guarantee.
However, subsequent government statements suggest the possibility that it will remain on the books.
In a written answer to MPs and peers in October, ministers said: “The government is confirming that it has approved the provision of a guarantee for up to £2 billion to the project for the construction of its new EPR nuclear plant in Somerset, backed by commitments from the shareholders.”
The support is offered through the UK Guarantees Scheme announced in July 2012, which is designed to help infrastructure projects to raise debt finance. It would mean that taxpayers could be liable for part of the loans repayment if the companies running the Hinkley project collapsed, even though British households are to pay more for their electricity in future as part of a deal in which EDF takes on the risk of constructing the plant.
In their answer in October ministers continued: “The guarantee will be available from 2018 to 2020 if necessary conditions are met and is at government’s discretion. Even if made available, and EDF have indicated to the secretary of state for the Department for Business, Energy and Industrial Strategy that it is not their current intention to take up the guarantee, I judge the likelihood of any call under the guarantee to be very low.”
The language of David Gauke, the chief secretary to the Treasury, and Lord Young of Cookham, the Lords minister, suggests the chance of it being used in future could not be definitively excluded. It then appeared in the document released by the Office for Budget Responsibility, the independent watchdog, alongside the autumn statement in November. Under “contingent liabilities”, the term for possible future payouts by the taxpayer, it says: “In October, the chief secretary to the Treasury confirmed the provision of a £2 billion guarantee, provided by the UK Guarantees Scheme, for the new nuclear plant at Hinkley Point C.”
Labour criticised the development yesterday. Barry Gardiner, the shadow international trade minister, said: “The assurance that Greg Clark gave me was categoric: EDF were not taking up the guarantee. Whilst I took him at his word, it appears that the Treasury were aware the secretary of state was suffering from baroque speech. That is why the guarantee is still marked as a liability on their books.”
