Government warned off secret nuclear subsidies

Chris Huhne has been warned that the Energy Department, which he runs, needs to be "upfront" about whether the Government proposes to subsidise new nuclear power stations. The Coalition plans 10 new reactors, although before the election it was Liberal Democrat policy to oppose them. Maintaining and cleaning up after Britain's older nuclear stations cost billions, and the Government said that the new ones must pay their own way.

However, a report out today by the Commons Energy and Climate Change Committee warned against hidden subsidies that could distort the electricity market.

When the Cabinet meets today, it is expected to endorse an ambitious plan by Mr Huhne to put the country on target to cut carbon emission by 2030. To encourage other forms of energy production, the Government is proposing contracts under which there would be a fixed price for electricity from non-carbon sources.

The MPs say this would work for nuclear power, but might not for environmentally friendly forms of electricity generation such as offshore wind farms, which would make the concession a hidden subsidy for nuclear power.

Tim Yeo, the committee's chairman, said: "Ministers believe that nuclear could play a key role in keeping the lights on and meeting our climate change targets – but they don't want to own up to supporting it.

"This is understandable given the promise they made not to subsidise nuclear, but it would be deeply irresponsible to skew the whole process of electricity market reform simply to save face. The Government must be upfront about the support it is giving to nuclear and not hide subsidies in a one-size-fits-all design for long-term energy contracts."

Doug Parr, policy director for Greenpeace, said: "The committee has exposed the truth about Government energy plans – it's about subsidising nuclear. Nuclear power has always needed taxpayer handouts to make it profitable."

A Department of Energy and Climate Change spokesman said: "The Government's position that there will be no specific subsidy for nuclear is absolutely clear. Electricity market reform will provide support to all forms of low-carbon generation, not just nuclear."