Cleaning up the sites of Britain's ageing or defunct nuclear power stations will cost "significantly" more than the £70bn estimate drawn up by the agency responsible, a committee of MPs says. Its findings are a setback for Tony Blair, whose energy policy relies on persuading people to accept a new generation of nuclear power plants.

Each time inspectors have looked at sites such as Sellafield, they have found new problems that have pushed up estimated costs.

In 2002, when the Government was considering setting up a new agency to handle nuclear waste, it was thought the taxpayer was facing a total bill of £48bn over the long term. When the newly created Nuclear Decommissioning Authority looked at the issue in 2004, it raised the figure to £56bn. Earlier this year, it revised that figure to £70bn, but MPs on the all-party trade and industry committee are convinced even that figure is too low.

The committee chairman, the Tory MP Peter Luff, said: "At a time when the Government is committing to increasing nuclear power it seems very unfortunate indeed there is this uncertainty in dealing with the existing waste. It's not going to do anything for public confidence in nuclear power."

The NDA's estimate of £70bn derives partially from its belief that costs can be offset by running a sideline reprocessing and selling spent fuel. But reprocessing fuel costs more than mining new uranium, and groups such as Greenpeace have said an agency whose job is to clean up nuclear waste should not be creating more of it.

The first contracts for clearing up sites are being negotiated and when work begins it is almost inevitable the contractors will find more nuclear waste that has been stored and forgotten for decades, the report says.

During the committee's investigation, it heard from angry neighbours of nuclear sites, worried about the secrecy of any clean-up.