Energy-Intensive Industries: 10th March 2016

The Minister for Small Business, Industry and Enterprise (Anna Soubry)
It is, as always, a pleasure to serve under your chairmanship, Mr Chope. I congratulate my hon. Friend the Member for Weaver Vale (Graham Evans) on securing the debate. This is an important issue and, as other hon. Members observed, it is not the first time this week that we have debated the subject, because we discussed the future of the ceramics industry on Tuesday.

I am a little confused about why the Opposition were confused about who was to respond to this debate, because we in BIS were in no doubt at all. EIIs are very much within our responsibility, so I was always going to be responding. I think that my hon. Friend the Member for Warrington South (David Mowat) said, “Do we have a Minister for energy-intensive industries?” He was berating the fact that we do not have one. I do not know whether it is good or bad news from his point of view—I hope he will be happy—but I am the relevant Minister, because I am the Minister for Small Business, Industry and Enterprise, and at the heart of that industrial brief are these great EIIs, these great manufacturing industries, which many would say form the absolute hard core of our economy, are certainly at the heart of our manufacturing sector and are incredibly important to our economy.

No one should be in any doubt as to the huge value that we place on the steel industry. I do not want to dwell too much on it, because I think we want to talk about other sectors, notably chemicals, but my right hon. Friend the Prime Minister has made it clear that steel is a vital industry. I obviously have repeated that. My right hon. Friend the Secretary of State has also repeated it. It is not just that it is a vital industry; in relation to steel production, not just the electric arc way of making steel but the blast furnaces, notably at Port Talbot and Scunthorpe, we have no doubt; we are determined to do everything that we can to secure their future.

Kevin Brennan
On a point of clarity, it is not a matter of being confused. The Minister may not realise this, because I do not think she has been a shadow Minister. How this works is that we receive a notification from the Government through the usual channels of who is speaking in a debate, and the information received from the Government said “To be confirmed”.

Anna Soubry
Well, I do not know. It does not really matter, does it? We were not in any doubt; we knew we were doing it. I knew I was doing it as soon as my hon. Friend the Member for Weaver Vale secured the debate and, as I said, I congratulate him on that.

As we know, our manufacturing industries face difficult times, and EIIs face those pressures perhaps more than most, given their considerable consumption of energy—something like 20% of all UK energy as heat. However, these sectors play an essential role in delivering the UK’s transition to a low-carbon economy, as well as contributing to economic growth and the rebalancing of the economy.​

My hon. Friend the Member for Weaver Vale used a different set of measures from the ones that I have, which were kindly supplied by my officials, but here are some facts. EIIs employ about 2% of the UK’s workforce and contribute an annual £50 billion to the economy, approximately 4% of the UK’s gross value added. With Inovyn and Tata Chemicals in my hon. Friend’s constituency, he will know at first hand the significant contribution that these industries make to our national and local economies and the impact that is felt by the local community and industry supply chains when sites reduce their operations.

I want to say a little about the chemicals sector. The Chemical Industries Association has pointed to real confidence in growth across the UK’s chemicals sector. Since 2010, the UK chemicals industry has seen the strongest growth of the major EU chemical producers, with the exception of France, and has grown more than twice as fast as UK manufacturing as a whole. That is the trajectory we want to retain and grow, particularly given the sector’s strategic importance in underpinning UK manufacturing and supplying raw materials and inputs to a range of sectors. I am happy to meet that group, as I do regularly, and I was delighted at our previous meeting to hear of the progress that the sector is making. I am not saying for one moment that there is not more to be done, and of course we know the problems with the high cost of energy, but I was delighted to hear about some of the progress on exports, for example. I am pleased that the sector has an excellent working relationship with UK Trade & Investment—it has a new form now. I am keen to ensure that we continue that strong working relationship and continue looking into increasing our contribution to exports.

It is a challenging time. There is a shift in the emerging economies from importers of chemicals to being producers and exporters. China accounts for roughly a third of the current global chemicals demand, but is expected to generate more than half the global demand growth for chemicals for the rest of the decade. As such, the Chinese economy has slowed down. It is still growing, but not quite as fast as we thought. That will have a greater impact on chemicals than perhaps any other sector.

With these economic backdrops, it becomes even more vital to create the right environment for maintaining manufacturing capacity and attracting new investment. I went to Brussels a few weeks ago for a summit on energy-intensive industries, where various representatives of those industries spoke without fear or favour, and very frankly. Their asks were interesting. They do not ask for any subsidies or for anything particularly special. All they ask for is a fair playing field so that they can compete in a difficult global situation. They just want that level playing field and I completely agree with them, which is why I will now turn to energy costs.

I pay tribute to the excellent speech of my hon. Friend the Member for Warrington South, who is becoming a delightful thorn in my side. I make no complaint if he hunts me down to come to every debate we have on this matter. He can continue to ask his questions, to make his points and to probe. I agree with much, although not all, of what he says. He made a point about getting the balance right and I absolutely agree with him about ​that. We want our children to inherit a world that is in a better state than the world we inherited from our parents, and that includes being cleaner and greener.

We have to get the balance right in our country by reducing our carbon emissions and playing our part in all that, but not at the expense of these vital manufacturing industries. It is difficult. It is not all about green taxes, if I can use that expression. Such is our concern in the Department for Business, Innovation and Skills that only today I spoke to one of my officials about the high cost of electricity. We talked about why, as my hon. Friend the Member for Warrington South explained, it is higher in this country than in Germany and France. One of the reasons, as well as the reasons my hon. Friend mentioned, is the higher cost of transmission. We want and need to look at that, and we will work with our colleagues in the Department of Energy and Climate Change to ensure that we are doing the right thing by industries throughout the UK.

I pay tribute to my right hon. Friend the Secretary of State for Energy and Climate Change because, in her, we have somebody who can combine these twin drivers: ensuring that we play our part in reducing carbon emissions and keeping our planet cleaner and greener; and, at the same time, not doing so at the price of undermining and having an adverse impact on our excellent manufacturing sector. I wanted to put that on the record and make it clear.

We understand the concerns about the need to compensate our EIIs. Of course, we have now won the compensation that had been long argued for and sought from the European Union for those EIIs that are particularly high consumers of energy. We have achieved that and we have gone further. From April next year, it is our intention to move from a compensation model to an exemption model. Instead of taking money away from industry only to give some of it back, which I always thought was a rather bizarre way to go about things, we are now doing the right thing, which is not to put those burdens on industry in the first place.

The exemption model means that the industries will no longer have to pay the renewables obligation and the small-scale feed-in tariff. However—and I am going to say it because it is true—that does not include all those industries that have a very high consumption of energy. Other schemes are being looked at. There is more work to be done in the EU, and we will continue to do that. Hon. Members can be sure that, in this Minister, they will always have a champion for great manufacturing industries, particularly the EIIs.

I will continue to do all I can, notably over in the EU where we are making great progress. I am one of those who firmly believes that we will be stronger, safer and better off remaining within the EU. I think a wind of change is blowing through it and I am proud of my Prime Minister for leading that change. I am drifting off so I will come swiftly back to this debate because it is important.

I pay tribute to what we have. The hon. Member for Cardiff West (Kevin Brennan) says that we need to have an industrial strategy. It is all very well and good having bits of paper, strategies and all the rest of it, but what matters is what we are doing about it. We have the 2050 road maps that we debated earlier this week, in which we work with the industries to look at how they can improve the way that they go about getting and using ​their energy. We want to ensure that we do everything we can to help them to reduce their carbon emissions and that they do everything they can to keep their energy costs down. It is great work that includes: industrial carbon capture and storage; clustering and value chains collaboration; heat recovery; access to finance; and removing barriers to industry using renewable resources such as biomass and the biogenic materials in waste as energy and feedstock.

I thought that the hon. Member for Cardiff West made the most bizarre speech from a Member of Her Majesty’s Opposition—not giving us any clue about the Opposition’s policies on this and what they would do. Instead, he read out a series of questions, helpfully provided by the Manufacturers Organisation. That was quite peculiar.

Kevin Brennan
Will the Minister give way on that point?

Anna Soubry
No, not yet. Perhaps that perfectly explains and is an example of the exact point made by my hon. Friend the Member for Warrington South. The Labour party is now led by, almost, the Islington intellectual left elite, compared with the days when it was led by people from those great chunks of the industrial north. It is not fair to look around the Chamber and think that the Members present are the only ones interested in the debate. Many will read it in Hansard or watch it in their offices, as they cannot be here. However, the three people here who represent the Conservative party—well, they represent their constituents, who happen to be Conservatives—all come from the north of England. However, the hon. Member for Cardiff West is the only person on the Labour side. He is now going to intervene and, no doubt, say something very interesting.

Kevin Brennan
I am sorry that the Minister does not like my asking those questions but would she be so good as to answer them?

Anna Soubry
I did not say that that I did not like the questions. I just thought that it was rather perverse that Her Majesty’s Opposition could not make a speech telling us what they would do if they were in Government and what their policies are, and actually challenge us.

Kevin Brennan
Is the Minister going to answer the questions?

Anna Soubry
I will answer the questions. If I do not, the usual rules apply—I will write to hon. Members.

I will go through some of the points that have been raised. The EU will decide whether to give China market economy status, as I have said many times. I am aware of the arguments against it as much as the arguments in favour. I keep on saying this and I will say it again: the ability of the EU to impose tariffs on China is not precluded if it acquires market economy status. There is a very good argument that ensuring that China stops dumping things could be an important part of any negotiation in relation to MES. Russia enjoys MES, but it does not stop the EU imposing tariffs on it. The debate will continue in the EU about whether China should have that status.​

My hon. Friend the Member for Warrington South suggested that we have a different trajectory to decarbonising from the rest of Europe. I am told that the UK’s trajectory is in line with the emissions reduction trajectory set by the EU and applied in other member states. That does not mean that I will not take that important point away and make further inquiries.

David Mowat
The Climate Change Act 2008 mandates a far steeper decline in emissions than any equivalent European legislation. I am sure of my ground on that point, so it would be good if the Minister chatted with her officials about that afterwards.

Anna Soubry
I absolutely will. I want to do so for my own benefit, as well as for my hon. Friend, who raises on important point. I certainly need to know about it, and we need to address it properly.

Returning to the points raised by my hon. Friend the Member for Weaver Vale, he is right to raise the question of shale and whether we will continue fracking, as is my hon. Friend the Member for Warrington South. Two licences have been issued for shale gas exploration in my constituency, and even if that exploration is successful, the next stage will not come until at least 2020, which is still a long time. The Labour party in my constituency is absolutely opposed to fracking, rather bizarrely because the Labour party has quite a good policy on fracking, which is that there is nothing inherently wrong with it. So long as fracking is done properly, going through the right processes and procedures, and is safe, it seems eminently sensible. We have to realise and understand what is going on in the real world, because I have no doubt that shale gas is an important source of energy that must not only be explored but exploited for all the undoubted benefits that it would bring.

We are delivering on the asks made in relation to the steel industry. As we know, it is not just about steel but about aluminium and all the metals, the processing of which uses a great deal of energy. We worked with the Metals Forum on a metals strategy, and we are considering how else we can help it to ensure that metals also have a sustainable future.

My hon. Friend the Member for Weaver Vale rightly spoke about the brick industry, which, perversely, faces challenges from increased home building. As we have heard, we continue to import bricks, which is pretty barmy. We are already doing a lot of work on improving supply and ensuring that we meet the need with British-made bricks, rather than having to rely on imports. That work will continue because, with a few exceptions, it is always better if we can buy British. The general picture on brick supply is one of continued readjustment. We are pleased to see the general increase in capacity, but I do not doubt that we can do more and that we will continue to do so.

I have not answered the questions of EEF, the Manufacturers Organisation, but I will write to the hon. Member for Cardiff West. In any event, I will write to EEF to answer its very good points. I hope that hon. Members will take from this debate that the Government understand the problem and are determined to get the right balance and do the right thing by our energy-intensive industries, wherever they are on the scale—not just the ones at the very top but the ones all the way through the scale—to ensure that we do not shift the burden ​from one part of EIIs to another. We have to do this fairly, and we have to do it right, but we really need to ensure that we have not just a continuing and regular supply of energy but cheaper energy in our country. If we start to do that, whether by ensuring that we do not overly burden people with green taxes or by getting the prices down in the ways suggested, we will create the level playing field for which this excellent part of the British economy asks. EIIs are hugely important, and I pay tribute to everyone who works in that sector. They are usually very highly skilled and absolutely devoted and dedicated, and they have a champion in me.

Graham Evans
I thank the feisty Minister with responsibility for energy-intensive industries. She is doing a great job, and I urge her to carry on with her good work. Locally, it is all about jobs. My hon. Friends the Members for Warrington South (David Mowat) and for Thirsk and Malton (Kevin Hollinrake) and I represent the north of England, but the situation is the same in south Wales, Scotland, the north-east and the other regions of the country. One reason why there are no Labour Members here is that it is Thursday afternoon, which is not a great time for such a debate. They are busy in their constituencies, but they sent their apologies and wished us well.

For me, it is about jobs—well paid, long-term and greener, cleaner jobs. As Members of this House, we have a duty to future generations, who should be able to work in such industries. It is about competitive advantage. We have spoken at length about fracking. I was determined not to mention it, but there is nothing new in it. I believe that fracking is safe, so long as it is done safely. As my ​hon. Friends mentioned, the industry is being transformed on the east coast of America, with good-quality, well paid jobs being created. I want that for the north of England, Weaver Vale, Wales, the north-east and Scotland. I want a slice of the action. It must be done properly and safely, but I am sure that we can all agree that we need competitive energy prices.

It is also about rebalancing the economy. When this Government came to power with the coalition in 2010, they mentioned rebalancing the economy away from London and the south-east, and away from the financial industries. My hon. Friend the Member for Warrington South asked whether the strategy and policy was to benefit the banking industry. We are in the business of ensuring that industry keeps providing good-quality jobs in the north of England.

We are currently the second largest economy in Europe. If we are to be the biggest—we could well be, because Germany has some structural issues—we need these foundation industries, the energy-intensive industries. The future is bright for Great Britain, but it is not guaranteed. We must work together to ensure that we provide good-quality, highly paid jobs in manufacturing and the energy-intensive industries that are so important to our constituencies: chemicals, steel, paper, glass, ceramics and others. I am in the business of the future and providing good-quality jobs for a future that is brighter, greener and more prosperous for our children and our children’s children.

Question put and agreed to.