View from City Road: Nuclear fantasies demolished

Whether intentional or not, yesterday's contribution to the nuclear review from Professor Stephen Littlechild, the electricity regulator, was as expert a demolition job on the fantasy world of nuclear power privatisation as they come.

It is now common ground that no new nuclear power stations are likely to be built if the industry stays in the public sector, both because of the cost to the Exchequer and the political risk for the Government of taking such an unpopular step.

Most of those involved, including Nuclear Electric, also agree that privatisation will not work without a substantial government subsidy as a pump-primer for private investment. Ergo, privatisation can happen only if the Government agrees a subsidy.

Professor Littlechild's evidence to the nuclear review made a compelling case against subsidy in all its forms. Though he concedes that nuclear provides a powerful competitive challenge for others he is religiously against anything that distorts the market place.

Even the nuclear levy, he believes, should be steadily scaled back. If he is right - and he has probably caught the mood of this government - we can forget privatisation for good.

The industry's basic case for subsidising new stations is that the national interest requires diversity of power sources including a continued high level of nuclear output. In its purest form, the argument suggests that without nuclear power as a competitor gas and oil companies will one day be able to hold the consumer to ransom.

With nuclear now providing a quarter of Britain's capacity, that day seems rather a long way off. Certainly the need to keep a competitive force argument is incapable by itself of sustaining the case for subsidy.

Like shipbuilding in the 1960s, steel in the 1970s and coal in the 1980s, this seems to be another case of producers claiming precedence over the consumer and taxpayer.

Another argument is that without subsidy Britain's capacity to build nuclear power stations will be lost. If the expertise is maintained, exponents argue, then there could be large export orders.

Neither case bears much analysis. The power station at Sizewell is an adaptation of an American design. As for nuclear exports, it has been promises, promises for decades past.

In the unlikely event that the Government goes along with the case for subsidies, it is important they are made utterly transparent so that the cost to the taxpayer and the electricity consumer of keeping a strategic presence in nuclear power can be seen. Either way, nuclear privatisation still seems as far away as ever.