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Whatever China says, we need to dump Hinkley Point

Why lock in the next generation to a power station whose commercial logic has already fallen apart?

13 August 2016

9:00 AM

13 August 2016

9:00 AM

The Chinese government is unlikely to give Theresa May a panda in the near future. This week the country’s ambassador to London, Liu Xiaoming, left no one in any doubt that President Xi Jinping takes a dim view of Mrs May’s decision to review the deal for a new nuclear power station at Hinkley Point in Somerset — a deal through which China General Nuclear, the state nuclear-energy company, would have a one-third share. The Prime Minister was told that Anglo-Chinese relations are at a-‘critical historical juncture’. So she’d better play-nicely and approve that power station — or risk the wrath of Beijing.

This is a far cry from the prevailing atmosphere last October, when Xi Jinping shared a pint of Greene King with David Cameron and, with human rights protestors kept at bay, was treated to a banquet at Buckingham Palace. China, in the eyes of Cameron and Osborne, was the answer to many of Britain’s infrastructure shortcomings. Cameron had erred in meeting the Dalai Lama, not realising how badly this would go down in Beijing. So Osborne embarked on a penitential tour of China, and returned promising that money from the Far East would build our power stations and railways. It might even fill the hole left by austerity in Whitehall.

Osborne did have a point. There are some critics of China’s human-rights record who would not want Britain to do business with Beijing at any price: a respectable, but extreme position. If we refused to trade with any country with a less-than-perfect human rights record, our imports would be restricted to Norwegian cheese — and even that would be questioned by anti-whaling protesters. What matters is that Chinese human rights are moving in the right direction, as has the whole country since its economy opened up to the West in the 1990s.

But that doesn’t mean it is right to fling open the doors to Chinese money as if the country were a western-style democracy. China is a dubious ally. Just as the Ministry of Defence needs to war-game against Russia, the government now feels compelled to protect Britain from a Chinese cyber-attack on Britain’s nuclear components. As Home Secretary, Theresa May will have visited GCHQ and seen the large computer map showing cyber attacks as they happen. She has probably met the team tasked with protecting our nuclear plants and other vital infrastructure from possible Chinese hacking. And she may have found it odd that the Treasury had a unit dedicated to encouraging the Chinese to help run our nuclear programme.


Security issues aside, the whole Hinkley Point project could end up being a disaster for Britain. There is the serious question as to whether EDF, the French state energy company which would lead the project, can deliver the power station Britain needs. The most serious point is economic: how can May justify the absurdly generous energy price agreed with EDF of £92.50 per MWh (more than double the current price) for 35 years? The size of the taxpayer subsidy for the project has quadrupled to £60 billion since the deal was signed. She would be proceeding with the costliest electricity scheme ever invented.

Would Britain’s economic relations with China be harmed if Hinkley Point were abandoned? Probably. Beijing quite often likes to punish countries that displease it. Economists refer to the ‘Dalai Lama effect’, whereby any country that receives him soon finds Chinese investments are stopped. After the Chinese dissident Liu Xiaobo was given a Nobel prize in 2010, China cold-shouldered the government of Norway. At a time when so many western nations are wrestling with gargantuan deficits, it’s a-tactic that seems to work. It’s a fair bet that the Dalai Lama will never again be received by the prime minister of any country with a large deficit.

But as Britain comes to define itself in the Brexit era, it’s important to behave with decorum — rather than embark upon a desperate pursuit of other people’s money. The free-trade deals that Liam Fox has been sent out to agree will come to define British foreign policy and our values as a nation. Cameron was too keen to pack off businessmen to foreign capitals to sign deals: that was corporatism, not capitalism. Studies suggest that, in today’s globalised era, such trade missions are useless. If Theresa May wants to improve trade with China she should hurry up and approve airport expansion — because air routes, rather than diplomatic missions, are the greatest enablers of trade.

Hinkley Point should be judged on its merits as a power station, and nothing else. If Theresa May decides that she cannot justify spending tens of billions of pounds subsidising someone else’s bad idea, than she’d be performing a national service. The energy market is changing all the time: why lock in the next generation to a deal whose commercial logic has already fallen apart? The-Chinese government ought to understand and respect this basic point. Anglo-Sino relations are defined by the excellent and strengthening links between the British and Chinese people: the students, the travellers, the immigrants, the businesses.

The vote for Brexit has increased our need to look beyond Europe for trade and investment. But it has also increased the opportunities to do so, now that the negotiation of trade deals will be back in British hands. China will, we hope, be a big part of that — but the good relations between our two countries ought to depend on far more than Hinkley Point.


Podcast – Lara Prendergast narrates this article: 


 

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