George Osborne’s 2012 budget announcement is a week away, and one of the hottest questions being debated within the Conservative-Liberal Democrat coalition is what to do with the new 50% top marginal tax rate introduced in the last days of the previous Labour goverment.

Liberal Democrat Business Secretary Vince Cable acknowledged last week that the fate of the 50% rate was under discussion, but insisted that it should be scrapped only if replaced by some other form of wealth tax—either a mansion tax or some other type of upper-income property tax increase.

The main argument one hears for taking half of all income above £150,000 a year is that it’s only “fair” for the wealthy to pay more at a time when unemployment is near all-time highs and there’s a gaping budget deficit to close. Yet preliminary figures suggest the rate may have actually reduced tax revenue, leaving the budget in no better shape and certainly not helping those further down on the income scale.

What’s more, many Britons seem to labor under a misapprehension about just how progressive the U.K.’s income-tax system really is. According to the Institute for Fiscal Studies, the top 1% of tax payers (who are, roughly, those subject to the 50% rate) paid 28% of all income taxes in the tax year just ending. The top 10%, who mostly pay the 40% rate, paid 58% of all income taxes, while the top half of earners accounted for 90% of income-tax receipts.

Compare that with the 1978-79 tax year, when the top rate was an eye-watering 83% (yes, eighty-three percent), and yet the top 1% accounted for just 11% of taxes paid, and the top 10% just 35%. Back then, before Margaret Thatcher’s first election, the U.K. sported no fewer than 11 different tax bands, a number reduced to seven in the first Thatcher-era budget and eventually down to two brackets, at 25% and 40%, by the time Mrs. Thatcher left office. Labour under Tony Blair and Gordon Brown eventually brought the basic rate down to 20%, while simultaneously introducing a tax-free personal allowance on income that the present government has committed to raising to £10,000 a year by 2015.

The result of all this is that the U.K.’s income-tax system has become more and more top-heavy even as the top rates have fallen. Those with the “broadest shoulders,” in Prime Minister David Cameron’s words, already bear far and away the heaviest tax burden.

In his last budget, Mr. Osborne said he would evaluate the effect of the 50% rate on the merits. He should do so, without bowing to Lib Dem pressure to find yet another way to soak Britain’s better off. Down that road lies more economic stagnation, for which Messrs. Osborne Cameron will ultimately be held responsible in the next election.

Printed in The Wall Street Journal, page 11

By REBECCA SMITH

If there ever were a time that seemed ripe for nuclear energy, it’s now.

For the first time in decades, popular opinion is on the industry’s side. A majority of Americans thinks nuclear power, which emits virtually no carbon dioxide, is a safe and effective way to battle climate change, according to recent polls. At the same time, legislators are showing renewed interest in nuclear as they hunt for ways to slash greenhouse-gas emissions.

The industry is seizing this chance to move out of the shadow of Three Mile Island and Chernobyl and show that it has solved the three big problems that have long dogged it: cost, safety and waste. Researchers are working on reactors that they claim are simpler, cheaper in certain respects, and more efficient than the last generation of plants.

Some designs try to reduce the chance of accidents by automating safety features and minimizing the amount of hardware needed to shut down the reactor in an emergency. Others cut costs by using standardized parts that can be built in big chunks and then shipped to the site. Some squeeze more power out of uranium, reducing the amount of waste produced, while others wring even more energy out of spent fuel.

“Times are exciting for nuclear,” says Ronaldo Szilard, director of nuclear science and engineering at the Idaho National Lab, a part of the U.S. Energy Department. “There are lots of options being explored.”

But nuclear is far from a sure thing. Yes, the plants of tomorrow some of which could enter construction as soon as 2012 go at least part way toward solving some of the problems of yesterday. But they are still more expensive than fossil-fuel plants, and they still generate waste that must be stored safely somewhere.

And while the industry is winning converts, plenty of powerful enemies remain. Many scientists and environmentalists still distrust nuclear power in any form, arguing that it can never escape its cost, safety and waste problems. What’s more, critics say, trying to solve the problems in one area, such as safety, inevitably lead to more problems in another area, such as costs.

Here’s a closer look at how the industry says it’s addressing its longstanding problems and where skeptics say nuclear energy is still coming up short.

MAKING IT SAFER

For many people, talk of nuclear power conjures up memories of two accidents: the partial meltdown at the Three Mile Island plant in Pennsylvania in 1979 and the more extensive power surge that destroyed the reactor at Chernobyl, Ukraine, in 1986.

As a whole, though, the U.S. nuclear industry has a solid safety record, and the productivity of plants has grown dramatically in the past decade. The next generation of reactors so-called Generation III units is intended to take everything that’s been learned about safe operations and do it even better. Generation III units are the reactors of choice for most of the 34 nations that already have nuclear plants in operation. (China still is building a few Gen II units.)

“A common theme of future reactors is to make them simpler so there are fewer systems to monitor and fewer systems that could fail,” says Revis James, director of the Energy Technology Assessment Center at the Electric Power Research Institute, an independent power-industry research organization.

The current generation of nuclear plants requires a complex maze of redundant motors, pumps, valves and control systems to deal with emergency conditions. Generation III plants cut down on some of that infrastructure and rely more heavily on passive systems that don’t need human intervention to keep the reactor in a safe condition reducing the chance of an accident caused by operator error or equipment failure.

For example, the Westinghouse AP1000 boasts half as many safety-related valves, one-third fewer pumps and only one-fifth as much safety-related piping as earlier plants from Westinghouse, majority owned by Toshiba Corp. In an emergency, the reactor, which has been selected for use at Southern Co.’s Vogtle site in Georgia and at six other U.S. locations, is designed to shut down automatically and stay within a safe temperature range.

The reactor’s passive designs take advantage of laws of nature, such as the pull of gravity. So, for example, emergency coolant is kept at a higher elevation than the reactor pressure vessel. If sensors detect a dangerously low level of coolant in the reactor core, valves open and coolant floods the reactor core. In older reactors, emergency flooding comes from a network of pumps which require redundant systems and backup sources of power and may also require operator action.

Another big concern is how well a plant can handle a terrorist attack, especially the nightmare scenario of someone flying a jetliner into the reactor area. The Evolutionary Power Reactor from France’s Areva SA, another Generation III design, guards against such an accident by putting the reactor inside a double containment building, which would shield the reactor vessel even if the outer shell were penetrated. The design also boasts four active and passive safety systems twice the number in many reactors today that could shut it down and keep the core cool in case of a mishap. Areva’s EPRs are being built in Finland, France and China and four are under consideration for construction in the U.S. The Union of Concerned Scientists, a group critical of nuclear expansion, considers this the only design that is less vulnerable to a serious accident than today’s operating reactors.

Further out, Gen IV reactors, which use different fuels and coolants than Generation II and Generation III reactors, are designed to absorb excess heat better through greater coolant volume, better circulation and bigger containment structures. Advanced research into metal alloys that are resistant to cracking and corrosion should result in more suitable materials being used in plants, too, and giving them longer useful lives.

Still, Generation III reactors are incredibly complex systems, requiring the highest-quality materials, monitoring and training of personnel. Critics say it’s unrealistic to think they can operate flawlessly. Corrosion of vital equipment remains a potential problem, especially if it goes undetected deep within parts of the reactor that are difficult or impossible to directly inspect.

What’s more, none of the Generation III designs have been cleared for construction by the Nuclear Regulatory Commission. Some Generation IV concepts haven’t even been presented to the NRC for review, and they still are years away from crossing that threshold.

“The designs are safer and the safety culture is better than 20 years ago,” says Tom Cochrane, senior scientist with the nuclear-analysis team of the Natural Resources Defense Council, an environmental-advocacy group. But he’s still not convinced reactors are safe enough to proceed. Critics remain concerned about possible physical breaches of security in the case of a terrorist attack.

Some researchers see the answer to the safety problem in revolutionary reactor designs that promise to be more “inherently safe” physically incapable of suffering a catastrophic meltdown. One such design, at least in theory, is the Pebble Bed Modular Reactor, being developed in China and South Africa. It’s powered with balls of uranium-filled graphite rather than the typical fuel rods. If the cooling system were to fail, the reactor temperature stays well below the balls’ melting point and then automatically cools down.

Westinghouse is working with the Department of Energy toward the possibility of getting a design certified by the NRC by 2017 or so. China currently has a small prototype pebble-bed reactor and plans to start construction this year on a 200-megawatt plant using the technology.

Most industry observers think the design is intriguing but faces big hurdles in this country because it uses a gas coolant, instead of water, and different fuel. The NRC would have to develop special processes for reviewing such a design because its expertise is in pressurized water or boiling water reactors.

Exelon Corp.,

which operates 17 commercial reactors in the U.S., was interested in the pebble-bed reactor in the late 1990s but is no longer involved. “There were technical problems such as fuel issues that made us decide we didn’t want to proceed,” says Amir Shahkarami, senior vice president of nuclear generation at Exelon.

CUTTING THE COST

While safety may be nuclear power’s biggest PR problem, cost is what killed development a generation ago, ultimately determining that only half the plants licensed by the NRC got built. And nuclear plants generally face an unfortunate trade-off: making them more safe can make them more expensive.

Makers of Generation III models are addressing the cost issue in a number of ways. For one, they claim the reactors will remain in service more years, so construction costs will be spread over a longer operating life. Today’s plants are being designed to last at least 60 years longer than any other plants except hydroelectric dams. Existing nuclear plants were expected to be retired after 40 years, though roughly half have gotten 20-year license extensions.

The new plants are also designed to be much simpler and quicker to build, reducing financing costs by potentially hundreds of millions of dollars. For instance, there’s the ABWR reactor, which has been built in Japan by GE-Hitachi and which NRG Energy Inc. hopes to build with Toshiba’s help in South Texas. The reactor is built in modules, vastly speeding construction time. GE-Hitachi, a joint venture of General Electric Co.

and Hitachi Ltd., says it has built the plant in 42 months in Japan, which is more than twice as fast as the Generation II reactors it built in the 1980s. The company compares construction methods to putting up a modular home versus constructing a stick-built house.

NRG hopes to build two ABWR reactors in Texas, next to its existing South Texas Project nuclear plant. Each plant will employ 190 modules, which NRG believes will cut field labor costs by 30%. Faster construction also will reduce the length of time it will have to rent a heavy crane at $400,000 a month.

Still, nuclear plants will remain very expensive. Recent estimates put Generation III plant costs at $4,000 to $6,700 per kilowatt of capacity, or $4.4 billion to $11 billion, for plants ranging from 1,100 megawatts to 1,600 megawatts in size. In comparison, a recent Massachusetts Institute of Technology study estimated the price of a coal plant at about $2,300 a kilowatt of capacity and a gas-fired plant at about $850 a kilowatt of capacity.

In fact, only a handful of U.S. utilities are big enough to build Generation III reactors alone, without being part of a consortium. As a result, some see nuclear power’s future in small reactors that could be manufactured in factories instead of on site and cost only $3,500 to $5,000 per kilowatt of capacity, or millions of dollars instead of billions.

Babcock & Wilcox, a unit of McDermott International, has designed a small 125-megawatt reactor that would be built at its U.S. factories and then delivered to power-plant sites by rail or barge. This would eliminate a bottleneck and the associated higher costs for ultra-heavy forgings that are required for large reactors. Small reactors could be built at a number of domestic heavy-manufacturing sites. The Lynchburg, Va., company has been building small reactors and other key components for Navy ships for decades, at plants in Indiana and Ohio.

Another plus of small reactors: They’re designed to be refueled less frequently, reducing the number of refueling outages. Instead of every 18 months to two years, they could go four or five years, reaping a saving from having less down time. Another feature of some reactors is the ability to do more maintenance while plants are running, again reducing idle time.

Babcock & Wilcox hopes to apply for certification of a design for its mPower modular reactor in 2011. It’s too early to seek orders, but it’s working with Exelon and the Tennessee Valley Authority on a preliminary design, to make sure it would meet the needs of utilities. It’s unlikely any could be built in the U.S. before the middle of the next decade.

Critics say there’s not enough practical experience to know if any of the U.S. designs, big or small, will function as proponents say. Only one, the ABWR, has completed the review process at the NRC and completed the detailed design that would be used as the basis of actual construction.

What’s more, critics say that the economics of small plants simply don’t work: The licensing costs are so great for nuclear plants, somewhere between $50 million and $100 million per site, and security and construction costs are so high that the economics work only for big plants, with lots of output, so costs can be spread over many kilowatt-hours of electricity. Proponents hope factory-like construction techniques and a wider availability of suitable sites will help them overcome that drawback.

PRODUCING LESS WASTE

It’s one of the most contentious issues surrounding nuclear power: Where do you put the spent fuel?

Tens of thousands of metric tons of nuclear waste mainly spent fuel rods are sitting at power-plant sites while the federal government struggles to come up with a site to store it all. No nation has yet built a permanent waste site, although the current situation can continue for some time: Even critics say storage methods in place now should allow fuel to be stored safety for 50 to 100 years, while permanent plans are worked out.

The big problem with controlling waste: Today’s reactors capture only about 5% of the useful energy contained in uranium which means lots of radioactive leftovers once the fuel is used. Some Generation III reactors promise to address this problem by squeezing more electricity out of their fuel, reducing the total amount of waste produced, but it’s only by a relatively small amount. In short, it does nothing to solve the looming waste issue, though it does produce more megawatts of electricity in the short run.

Some Generation IV reactors, known as fast reactors, may offer a breakthrough in the future because they’re designed to burn previously used fuel.

GE-Hitachi, for example, is developing a fast reactor called Prism that would take spent fuel or weapons waste, sitting in storage today, and use nearly all of it as fuel, leaving little waste. What’s left would also be less radioactive than current waste, and would need to be stored for hundreds of years instead of thousands of years, scientists say. Fast reactors are able to unlock energy in waste because they can burn plutonium, neptunium and other materials that Generation II and Generation III reactors leave behind.

GE-Hitachi estimates there’s enough energy sitting in nuclear storage sites in the U.S. to completely meet the nation’s energy needs for 70 years, if fast reactors were used to convert waste into electricity.

The company hopes to apply for NRC certification of its Prism design in 2011 and build a prototype reactor at an estimated cost of $3.2 billion within the next decade. The cost is enormous for a reactor that would be only 311 megawatts in size, amounting to $10,000 per kilowatt of capacity, but the company says costs for subsequent units should drop.

Critics point out that the U.S. tried to develop fast reactors in the past, but dropped its efforts because the technical hurdles and cost appeared too great. The NRDC, in a recent report, said that fast reactors would be “expensive to build, complex to operate, susceptible to prolonged shutdowns…and difficult and time-consuming to repair.”

–Ms. Smith is Wall Street Journal staff reporter in San Francisco. She can be reached at rebecca.smith@wsj.com.