When Labour came to power in 1997, it was already obvious that Britain urgently needed to make decisions on future energy supply. It was known that gas supplies from the North Sea would decline rapidly after the year 2000, that there would be a similar rundown in North Sea oil, that Asian demand for oil would be rising. The problem of electricity generation was particularly acute, with the prospective obsolescence of most of Britain's nuclear power stations by 2015 and similar obsolescence of a number of big coal fire stations.

The Government also knew that new energy supplies could only be developed over a period of about ten years. That applied to new oil or gas deals, to oil refineries, and to conventional or nuclear power stations. In 1997 there was therefore a window of about 15 years to secure the energy supply Britain would need in the decade 2010 to 2020. The Conservative governments of the 1980s and 1990s had themselves failed to place orders for new power stations. As a result the first-class British engineering teams for building such stations had been dispersed or had retired.

The new Labour Government after 1997 failed to develop an energy policy. The past 11 years have been largely wasted, partly because of environmental concerns, but partly because of the Government's failure to address a critical requirement of the national economy. The energy prospect deteriorated further after 9/11 and the invasion of Iraq, which destabilised the politics of the Middle East. Demand for oil rose, with India joining China as a growing economy. It also became apparent that peak oil - the period when oil supply would cease to grow - was likely to come sooner than anyone had thought. This year oil prices, which have subsequently fallen back somewhat, reached new record levels.

The argument for a nuclear power programme to replace our ageing nuclear stations has been accepted by the Government, if very belatedly. As a result of the delay there is a real risk of a shortage of electrical power in the middle of the next decade.

As the British teams were no longer available, the decision seems to have been taken to have the French build the new nuclear stations. It seems likely that there is some secret understanding between Britain and France; the French have been behaving as though they had a done deal. This deal would have involved the French nuclear power company EDF taking over the largest British nuclear generating company, British Energy, and building on its sites.

The British and French Governments seem to have assumed that the shareholders of British Energy would fall in with this plan. EDF planned to make a bid of £12 billion, which amounts to £7.65 for each British Energy share. For the cash-strapped British Government this would have been a godsend, valuing an asset of 35 per cent of British Energy's shares at about £4 billion. It is eager to accept.

This transaction would have provided Britain with a nuclear power programme. The French Government, which controls EDF, would effectively have nationalised the British nuclear industry, and a large part of the British electrical industry would be under French control. That seemed to the British Government to be a neat way to solve its nuclear problem, with a nice bit of cash on the side.

One can assume that our Government foresaw that this would be controversial. The announcement of the deal was scheduled for August 1, a traditional day for concealing controversial decisions. There are indeed a number of different groups who might be expected to object. Economists would be critical of the creation of a French state monopoly in the middle of the British energy market. Euro-sceptics might argue that France has too much bargaining power in Europe already. Anti-nuclear campaigners object to the whole project.

There was, however, one group that had possession of the key to the nuclear door - the shareholders of British Energy. Two investment companies, Invesco and M&G, thought that the price offered was too low. They control 21 per cent of the shares. I know one of the principal fund managers, Michael McLintock, the chief executive of M&G. He is doing the right thing in refusing to sell the shares that belong to his investors for less than he judges them to be worth.

M&G runs long-term funds to produce long-term values. The monopoly of the British nuclear industry in a period of growing energy shortages must be worth more than £12 billion. I am on the side of the M&G fundholders, as I would be. Fifteen years ago, I was a non-executive director of M&G and Michael McLintock was a rising young executive. I would have backed his judgment then, and I would support him now.

Nevertheless, the Franco-British deal that has come unstuck had certain merits. It meant that at last somebody was going to do something. And I would not question that EDF knows how to build nuclear power stations or that the French Government is better than the British at building grands projets.

For the present the EDF takeover of British Energy is stymied by the resistance of the shareholders. It should also be deferred until Parliament has had a chance to examine the monopoly aspect of the proposed deal. Few British people would regard a French public-sector company as a desirable monopoly provider of nuclear power in Britain. Perhaps there are further safeguards that could be introduced, but we need to know what they are, and that they are in place. Without this deal, does the Government have any energy policy at all?

The final question is this: How did British Energy, EDF, the British Government, the French Government and their highly paid advisers think they could bounce Mr McLintock into selling shares below what he thought they were worth? I could have told them that would not work.

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