Nuclear leaks bill will be paid by taxpayer

The private consortium that will manage the decommissioning of Britain's ageing Magnox nuclear reactors will not be held financially liable if they suffer a major radioactive incident – even if it costs billions of pounds to clear up, it has emerged.

The government will indemnify the private contractors, which means the taxpayer will be left to foot the bill for any leak, a similar arrangement to how things stand now. Critics complain that granting the multimillion-pound contract to a private consortium while freeing it of liability for a nuclear incident is such a poor deal for the taxpayer that it will render its new management unaccountable. The government has rejected this claim.

Confirmation of the indemnity was made at the start of this month, when the Department for Energy and Climate Change (DECC) slipped out a departmental minute relating to the Magnox reactors. Built in the 1960s, originally to produce plutonium to make nuclear weapons, the reactors include those at Sizewell, Hinkley and Dungeness.

They are now at the end of their lives and the government is preparing to fully decommission them, something that has never been done with such a reactor anywhere in the world. The minute reveals that private companies would refuse to bid for the decommissioning contract if they had to face paying out billions of pounds over a radioactive incident.

The minute explains that the firms "are not prepared to accept liability" and states that "because of the nature of nuclear activities, the maximum figure for the potential liability is impossible to accurately quantify". The minute, which was published before the parliamentary break, giving MPs only a week to debate its implications, says that there is only a "low probability" of a claim against the public purse.

Labour MP Paul Flynn, who is deeply critical of the use of the indemnity, attacked the way it had been presented to parliament for using "chicanery, subterfuge and secrecy". He accused the government of denying parliament a detailed debate on the costs of nuclear, which has become a major political issue given the coalition's enthusiasm for building a new generation of reactors designed to help the UK secure its own energy supplies.

"There have been major nuclear accidents about every decade since Three Mile Island," Flynn said. "More are very likely from technical failure, terrorism, human error or natural disaster. If risk is minimal, nuclear sites could be insured commercially."

The energy minister, Michael Fallon, insisted that there was "a very strong case" for the indemnity, which he said was "a prerequisite to awarding the contract and securing the benefits of the competition".

However, Flynn accused the government of taking a huge gamble. "The cost of the Fukushima cleanup and damages ranges from $250bn [£150bn] to $500bn and rising," he said. "Nuclear installations are uninsurable in normal commercial terms. Only gullible governments can bear the enormous risk. If operators paid for their own insurance indemnities, their case for economic production of nuclear electricity collapses."

Opinion is divided as to why the government is so keen on pressing for a private consortium to manage the decommissioning process. One argument is that it will allow the government to bring in world-class expertise in nuclear decommissioning. But similar arguments were made when Sellafield, Europe's largest nuclear site, was put under private management and this had mixed results, with senior executives pocketing multimillion-pound bonuses at a time when there have been concerns about missed performance targets.

Dr David Lowry, an independent environmental policy and research consultant, said coalition ministers were copying the example of their Labour predecessors. "DECC tried to pull the same scam six years ago when it deviously avoided proper parliamentary scrutiny to permit mainly foreign contractors to earn multibillion-pound profits from the management contract for Sellafield, but left the cost of covering liabilities to the taxpayer," he said.

A DECC spokeswoman said: "We have a responsibility to clean up the UK's existing civil nuclear legacy in a safe and cost-effective manner. The taxpayer will not pay any money towards decommissioning of new nuclear, as this will be funded by nuclear operators."