Tough time for nuclear plan in the real world

The trouble is that, as a colleague on another newspaper recently remarked, Government strategy - or business strategy for that matter - is too much like a New Year resolution, and often lasts about as long.

It is not that difficult to frame a resolution or a strategy because it is often quite easy to see what in an ideal world ought to be done. The hard part is actually doing it when confronted by the real, not the ideal, world. When the Prime Minister made great play of how his Government was "taking the tough decisions", it was in fact doing no such thing. The announcement is easy. The tough thing will be making it happen.

If someone had wanted to build a nuclear power station in Britain these last 30 years, there was no law that said they could not. They have not, of course, because no private-sector company could contemplate such a project where the financial risks of construction are colossal, the planning and regulatory hurdles daunting and the rewards seriously uncertain.

Unfortunately, that is still very much the case - the Prime Minister has repeated promises to make planning and regulation easier, but that on its own is unlikely to be enough. There needs also at the very least to be some guaranteed floor price for the electricity generated, which is slightly at odds with the Government's stance that it will provide no subsidies to nuclear developers.

Another problem is so much nuclear expertise has been lost that one wonders whether the industry has the capacity to gear up. According to Tom Burke of climate-change pressure group E3G, the build rate for nuclear power stations round the world has been one gigawatt a year since 2000. Simply replacing the existing reactors as they become obsolete means building 14 gigawatts a year for the next 23 years, before anyone actually adds capacity.

But there is already a six-year waiting list for reactor coolant pumps, and only two places in the world now produce the specialist forgings required for nuclear reactor vessels. These and other supplychain pressures have precipitated a 300% rise in the cost of a new nuclear power station in just two years, which is in part why the much-vaunted new Finnish reactor many have said is the model for the future is two years behind schedule, more than £1 billion over budget and grappling with construction costs 25% greater than forecast.

So Brown's announcement on nuclear should fool no one. Without Governmentmoney, the tough bit will be making any of it happen.

ONE of the major problems with old age is that pensions rarely keep pace with inflation, savings gradually run out and the older people get, the more they decline into poverty, genteel or otherwise.

It has always been like this - it is reckoned that of the 11 million people currently retired in the UK, a third are outliving their finances - but with people living much longer, it could get a lot worse. From today, however, there is a solution, or at least an insurance policy that could mitigate the worst effects of increasing age coupled with declining income.

New company Life Trust, which has powerful backers in Royal Bank of Scotland, JPMorgan and DE Shaw, has devised a product where the payouts increase the older you get. The company has not gone completely mad, however, for there are some rules. You have to be at least 75 when you begin to draw on the income, and the maximum length of a policy is 20 years. But if you really think you will live beyond 95, you can start the policy a bit later, or presumably take out a second one, staggered to start when you are 80.

Though the mathematics behind the Longevity Income Plan are quite complex, the concept is simple. First, the customer invests a lump sum at least 10 years before the age when drawdown is planned to start. This is invested in a range of funds with the usual choice of aggressive growth, middle of the road or safe but boring, the aim being to bulk up the capital pot ready for the drawdown.

The trick of increasing payments is based on the fact that the insurance company will have a lot of customers in the plan, and a predictable number will die each year. With an annuity, when this happens the insurance company hangs on to all the unused capital. With this plan, a proportion of the deceased's money is redistributed among the survivors, so that it is possible each birthday to give them a bit more.