Wednesday 24th November 2021

(1 week, 3 days ago)

Westminster Hall

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HM Treasury
Caroline Nokes Portrait Caroline Nokes (in the Chair)
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I remind hon. Members that they are expected to wear face coverings when they are not speaking in the debate, in line with current Government guidance and that of the House of Commons Commission. I also remind hon. Members that they are asked by the House to have a covid lateral flow test twice a week if coming on to the estate, which can be done either at the testing centre in the House or at home. Please give each other and members of staff space when seated and when entering and leaving the Chamber.

Jack Brereton Portrait Jack Brereton (Stoke-on-Trent South) (Con)
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I beg to move,

That this House has considered energy intensive industries.

It is a pleasure to serve with you in the Chair, Ms Nokes. I am grateful to have secured this timely debate. As we continue to emerge from the economic hit of the covid crisis and as financial activity builds and grows, energy prices are noticeably higher and our constituents are feeling the pinch. We have seen domestic suppliers go bust, and jobs and product affordability have been threatened by the cost of energy to businesses. The short-term issue of price volatility is exacerbated by longer-term issues of energy production and energy efficiency.

Today, I will set out the issues facing industries that rely on the intensive use of energy, not least the ceramics industry, for which the Potteries are internationally famous. It is worth remembering that to be the world capital of ceramics, Stoke-on-Trent needed to be not just a city of pots and clay, but a city of pits. The energy requirements to fire ceramics at extreme temperatures are intense, and it was local coal—as well as clay—that fired kilns historically.

Times change and coal firing is now, thankfully, a thing of the past. The last such firing was literally a museum piece, organised by the fantastic Gladstone Pottery Museum in my constituency at the Sutherland works of Hudson & Middleton in 1978. It is a good thing that coal firing is a long-lost practice. We should not over-romanticise the scenes of smoke billowing from hundreds of bottle kilns, which came at the human cost of debilitating industrial illnesses such as miner’s lung and potter’s rot, but neither should we look to close the industry down or leave it to wither on the vine, as the last Labour Government did, when massive household names, including Spode, Tams and Royal Doulton, were lost during their time in office.

The ceramics industry was born out of the innovation of Josiah Wedgwood and, while some processes from that time survive, the industry has continuously been one of innovation, with producers often competing to deliver even greater efficiencies. Just as the ceramics industry has had to adapt and adjust from the use of coal to the use of gas and electricity, it is currently adapting and innovating to the ongoing shift from gas. We should support it and other energy-intensive industries in doing so.

As a whole, the energy-intensive industries of steel, chemicals, paper, glass, cement and lime, industrial gases and ceramics contribute £38 billion annually to UK GDP, according to figures from the Energy Intensive Users Group. The group notes that the industries provide 200,000 jobs directly and support 800,000 indirectly. Those are not jobs that we should lose to international competitors with lower environmental standards than our own, lower ambitions for carbon reduction or higher interventionism.

There is an urgency to ensuring that energy-intensive industries survive in the UK, due to the real and present danger of the volatility in world energy markets. It would be a tragedy if short-term price pressures were allowed to undermine British industry just at a time when order books are recovering strongly from covid and firms are looking to take on more skilled staff. Just as there is a need to keep industrial jobs in Britain, we need to make sure that the existing orders for goods stay on the books of British firms.

Competitor countries are providing support and are ready to seize the market share. Worryingly, that includes competitors with less exposure to world energy markets and scant regard for enforcing environmental protections. In ceramics, it is worth being clear what that risk is.

The renaissance of the ceramics industry since 2010 is a great British success story, with the sector’s gross value added doubling in real terms from 2009 to 2019, according to the House of Commons Library. Ceramics is particularly important in the midlands economy. Some 60% of direct employment in the sector is within the midlands engine, and most is concentrated in the Staffordshire Potteries, focused on Stoke-on-Trent. The sector’s products encompass everything from crockery to electrical components, bricks to agricultural filters, sanitaryware to armoured plating, tiles to prosthetic joints, and pipes to works of fine art.

I have previously visited Ross Ceramics in Newstead in my constituency, which has expertise in the manufacture of complex geometry ceramic cores, which are used in the casting process of jet engine components for aerospace and other industrial uses. It is world-leading engineering. Far from being an industry of the past, modern manufacturing in advanced ceramic technologies is securing the future of skilled employment on good wages in and around north Staffordshire, but firms that usually face one third of their total production costs from energy are suddenly finding that two thirds of costs are from energy.

The industry has long militated against price shocks by buying energy in advance, but many were stung by the pandemic, finding that they had excess energy at a time of restricted demand for ceramic production, and taking a loss on selling back that energy. Things have now boomeranged completely. Firms that had held off from buying energy early for this winter—for fear of further lockdowns hitting demand—now face severe financial difficulties. Firms with full order books operating at 100% capacity have none the less had to contemplate shutting down early in December, out of fear that it will be cheaper to pay employees not to work than to incur the costs of the necessary amount of gas and electricity to fire products at 1,000°C or more.

I note that Portugal, a direct competitor for tile manufacturers, has recently introduced a 30% reduction in the network access tariff for the ceramics sector. That is just one example. Many countries around the world have taken such steps to support energy-intensive industries that have high costs. The industry’s electricity prices in the UK are some of the highest in Europe and are becoming uncompetitive. Additionally, although many of our manufacturers use electricity to generate heat, others who could switch to decarbonise are deterred from doing so by the high cost of commercial electricity on top of the capital investment that would be needed.

I am encouraged that the Government’s industrial decarbonisation strategy of April this year recognises the dangers and undesirability of simply offshoring production, or ceding it to competitors, as a route to getting the UK’s overall emissions down. Of course, the Government have devised the energy-intensive industries exemption scheme, which is great for businesses that qualify for it. Unfortunately, many of the industries in Staffordshire are excluded at the first hurdle from what the Department for Business, Energy and Industrial Strategy has dubbed the “sector-level test”. Specifically, that means businesses within NACE codes 23.41, 23.42 and 23.43, which cover household ceramics and ornaments, sanitaryware and insulators. Those codes need to join other NACE codes in the ceramics sector that, thankfully, are within the eligibility criteria—namely 23.20, which covers refractory products; 23.31, which is ceramic tiles and flags; 23.32, which is bricks and so on in baked clay; 23.44, which is other technical ceramic products; and 23.49, which is other ceramic products.

If we see the industrial decarbonisation strategy as a herald of the Government’s intention for a serious investigation of the longer-term measures needed to support industry as it transitions to lower-carbon energy, we need to look at how the parallel doubling of public research and development investment can benefit energy intensive industries. That will be necessary to improve efficiency, to encourage a move towards more electric firing and to develop hydrogen as the solution for the larger high-powered kilns where electricity is not an option.

There is a pressing need for an investment strategy for R&D in the energy transition for the midlands engine ceramics cluster, which is just as important as those in London and the Oxford-Cambridge arc who have for far too long received disproportionately high public R&D funding. Public R&D funding is particularly needed in a sector such as ceramics, given the high number of small and medium-sized enterprises—as much as 97% of the sector, according to the British Ceramic Confederation. Even firms that do pass the sector-level test for the energy-intensive industry scheme have difficulty passing the business-level test, due to the smaller-sized enterprises typical of the sector—even firms with worldwide brand recognition.

When certain qualification thresholds for energy-related assistance are set at tens of millions of pounds per work site, the ceramics industry loses out. A sum of £1 million per site would be more realistic. The use of NACE codes could, as has already been demonstrated, target lower thresholds at the ceramics industry for its particular characteristics and configuration.

I know that the Government recognise their responsibility to step up to the plate. Only this Monday, the Government announced £9.4 million to back a trailblazing hydrogen-storage project near Glasgow, helping to create high-skilled jobs. Last week, the Royal Navy issued a market exploration notice to seek hybridisation of the fleet, seeking private sector expertise for a public sector commission to reduce emissions by 20% to 40% by 2030.

The week before that, the RAF announced that it had secured a Guinness world record, no less, for the world’s first successful flight using only synthetic fuel, in partnership with Zero Petroleum Ltd. There was also confirmation this month of the highly significant £200 million Government investment in the Rolls-Royce small modular reactor—an exciting development that could create 40,000 jobs and secure many more in the supply chain, including at Goodwin International in Stoke-on-Trent, which leads the way in British precision engineering.

Sources of intense energy with low to zero carbon emissions are one clear way forward for heavy industries. Another is carbon capture and heat capture. The Minister will know that Stoke-on-Trent leads the way with a district heat network to use deep geothermal energy to heat our city and save thousands of tonnes of carbon dioxide annually, benefiting residents, education providers and businesses alike.

We can go further; I know that our local industries want to go further, but they need support to do so. Keele University, in our neighbouring borough of Newcastle-under-Lyme, has not only worked with EQUANS, part of the ENGIE Group, to generate and store energy from wind and solar on campus; it has also worked with Cadent Gas to demonstrate that hydrogen can be blended at up to 20% into the natural gas network, with no adverse effects for users. The consequent reduction in carbon emissions is obvious, but with hydrogen being six times as combustible as natural gas, public reassurance on safety will be paramount.

Fortunately, Keele and Cadent found in their year-long trial that it is safe to use a 20% hydrogen mix, saving 27 tonnes of CO2 emissions in the process. Rolling that out to the domestic market nationally could remove from the atmosphere the equivalent emissions of taking 2.5 million cars off the road, all without changes to current gas heating and cooking appliances. For any new fuel source tested in private homes and campus buildings, as happened with the Keele-Cadent trial, there is a need to research the effects on ceramic and other industrial production, not least because glazes can respond very sensitively.

Alan Brown Portrait Alan Brown (Kilmarnock and Loudoun) (SNP)
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The hon. Member is making a good speech. Does he agree that it is high time the Government changed the regulations on hydrogen blending to allow that to happen in the gas network? At the moment, the gas management safety regulations do not allow any blending above 2%, which is contrary to the Government’s own hydrogen strategy.

Jack Brereton Portrait Jack Brereton
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I thank the hon. Gentleman for that point. I know that the Government are looking at that. Further trials at scale are being looked at—in Newcastle, I believe—to be undertaken by Cadent. I am sure that that will lead to further changes and to developments of hydrogen mix within the industry.

As I was saying, it is important to do that testing for energy-intensive industries, not least because glazes can respond sensitively to firing conditions, such as temperature and humidity. For that reason, I am glad to say that certain offshore production lines have looked to return to Stoke-on-Trent from locations with different climatic conditions that simply do not create the pristine quality of ceramic goods one gets from Stoke-on-Trent. I have been pleased to discuss with Cadent the importance of fully scientifically trialling and testing the impact of hydrogen mix, and I know that Cadent has been looking into this further with Lucideon, which leads the industry in ceramics research and material science.

I have argued for several years that we need an international research institute—a ceramic park—based in Stoke-on-Trent to institutionalise the myriad projects and advances, not least the work of Lucideon, to develop hydrogen kilns, which I am pleased to say recently secured UK Research and Innovation funding. What we need now is a dedicated research facility as a base for those projects for the industry, with Lucideon as the anchor. Glass Futures in St Helens is one example of what might be achievable by learning from another energy-intensive industry.

I am sure that the British Ceramic Confederation will have engaged with the Minister about its ambition for a similar world-leading centre of excellence for the world capital of ceramics. Indeed, as the BCC will point out, the sector has been working on recycling waste heat for decades, such as by pre-heating spray dryers with exhaust gases or heating spaces via heat exchangers on tunnel kilns. This is not a sector that wants to waste anything, and where it is economically viable, energy and carbon efficiency has been invested in for decades.

I should note that one such improvement comes from switching from intermittent to continuous kilns. One of the dangers of today’s very high energy prices is that kilns may need to be shut down completely and then restarted, which is far more complicated and dangerous than it sounds, with wide-ranging consequences. However, innovation must continue. That means supporting the development of new technologies, providing incentives for large-scale investment in proven technologies, and creating a regulatory framework that supports decarbonisation alongside the international competitiveness of UK industry. Some of the new technologies are almost there, but there are issues to overcome. For example, we have to overcome tar build-up or moisture content, depending on the fuel innovation; resist corrosion for acidic kiln exhaust gases; and avoid emissions of nitrogen oxides.

The need to produce and distribute hydrogen on a large scale must be fully researched, not least because hydrogen is also being touted as a fuel of the future for everything from JCBs to trains, including the freight trains that will bring the fine white china clay into the Potteries and will hopefully take more products out in the future. The Government want demand for hydrogen to be high, so they must ensure that the market conditions are right for a ready fuel supply. Interestingly, I note that as part of the Government’s industrial fuel-switching competition, BEIS funded a £3.2-million project led by the Mineral Products Association and Hanson UK to trial a mix of 100% net zero fuels, including hydrogen, meat and bone meal and glycerine, for commercial-scale cement in Lancashire for the very first time this September. Let us see more of those sorts of trials covering more of our energy-intensive industries.

In conclusion, I am happy that we have a Government who have enabled manufacturing to resurge in the UK, particularly the British ceramics sector. Modern and advanced manufacturing is a key provider of high-skilled, well-paid employment across Stoke-on-Trent—not just in ceramics, but emblematically so, as it is the world capital of that industry. We are on the cusp of very big advances in low-emission energy, and we need to seize the opportunities without taking our eye off the ball of the short-term dangers of price volatility in traditional fuel markets. Energy-intensive industries are spread right across the country, and are crucial to realising the higher-skill, higher-wage economy that will level up opportunities. I look forward to the Minister’s response detailing how the Government will meet the challenges ahead.

Caroline Nokes Portrait Caroline Nokes (in the Chair)
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It looks like we have in the region of seven Back Benchers wanting to contribute, so if Members could do the maths and work out how many minutes they have, that would be much appreciated.

Jessica Morden Portrait Jessica Morden (Newport East) (Lab)
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I congratulate the hon. Member for Stoke-on-Trent South (Jack Brereton) on securing this debate and on a very good opening speech, in which he has talked about the ceramics industry. I hope that his speech demonstrates the call for greater Government support for energy-intensive industries, including steel, which I will be talking about today, representing Llanwern steelworks and Liberty Steel in Newport East. I hope that shows that this is a truly non-partisan, cross-party campaign that we can all agree with.

I declare an interest today as a proud member of the Community and GMB trade unions, which—along with Unite—so ably represent steelworkers in my constituency and across the UK. Those campaigning unions, along with the industry trade body UK Steel and hon. Members of different parties, have long banged the drum about the need to reduce eye-watering energy prices, which hold back our steel sector. I make no apologies for doing so again today, as this is an issue that has not gone away; in fact, it has got much worse over the last year.

Even before the pandemic hit, industrial energy prices were hitting our steel producers to the tune of £50 million a year. In the five years that UK Steel has been monitoring the costs, they have cost the UK sector £0.25 billion more than what is paid by French and German producers. UK steel producers—we always quote this fact, but it is worth doing so again—still pay 86% more than German competitors and 62% more than those in France. As the hon. Member for Stoke-on-Trent South said earlier, wholesale prices are now at record highs, with electricity costs peaking in October. To put that into context on the ground, energy costs for medium-sized steel rolling mills in south Wales and across the UK have almost quadrupled over the past year. One manufacturer said to me that it was paying £130,000 a week, which has now gone up to over £500,000 a week in some cases.

There is nothing inevitable about this, as my hon. Friend the Member for Merthyr Tydfil and Rhymney (Gerald Jones) said in Wales questions last week. Other countries have acted swiftly to ensure that energy costs are less of a burden on steel producers. The hon. Member for Stoke-on-Trent South mentioned the Portuguese Government. The Spanish and Portuguese Governments have taken decisive steps, including reducing the extraordinary profits made by energy companies, cutting special electricity tax rates for steel, and introducing a minimum 30% reduction in network charges for industrial users. Although every economy and every country is different, such steps represent Governments making a tangible show of support for their steel sectors—an example that the UK Government should follow.

The reasons why we support our steel sector fall into even sharper focus following COP26. Indeed, there was welcome acknowledgement at the summit that the world cannot decarbonise without steel—whether it is for use in wind turbines, electric cars, energy-efficient buildings, infrastructure and much more. That is why it was all the more disappointing that nothing of note for steel was in the Budget, which UK Steel rightly called a “missed opportunity” and a “triumph of complacency”, particularly on support to help the industry to decarbonise. For example, there was nothing on industrial energy costs, even though we know that the move towards decarbonisation will require even more energy-intensive methods of steel production.

I asked the Prime Minister about this last week but did not get much of an answer, so I will put the question to the Minister: what is happening with the clean steel fund that the industry was promised? It was absent from recent announcements and last month’s net zero strategy paper, and when my hon. Friend the Member for Blaenau Gwent (Nick Smith) raised the issue in the main Chamber recently, he was referred to the industrial energy transformation fund, which is two years older than the proposed clean steel fund. It really feels like the Government do not know what is happening to it, and its absence risks adding to the growing gap between what is needed to decarbonise the sector and what is available in support.

We have also heard little from the Government on improving the procurement of UK steel—a move that would support jobs and livelihoods, benefit our economy, provide value to the taxpayer, and lower our carbon footprint. The latest Government data on how much steel is sourced for the UK includes only 160 tonnes of British steel, which is somewhat lower than the estimated 800,000 to 900,000 tonnes that the forward-looking pipeline indicated. It is not good enough, and it is about time the Government took steps to ensure the maximum economic value of public money to be spent on steel in the coming years.

It is worth saying again that the Government talk the talk on net zero and industrial strategy, but it is really not worth anything if steel is not at its core, as my hon. Friend the Member for Aberavon (Stephen Kinnock) will agree. When the Community union launched the “We Need Our Steel” campaign, the “We” it referred to was not just our world-class, highly skilled steelworkers, or communities such as mine, with industry at their heart, and all those in the supply chain. It also referred to government at all levels harnessing the potential of steel and using it to build back the economy after the pandemic, and to power a green industrial revolution.

Stephen Kinnock Portrait Stephen Kinnock (Aberavon) (Lab)
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My hon. Friend is giving an excellent speech. It appears that some Members on the Government Benches seem to see steel as a sunset industry. In fact, nothing could be further from the truth. It is at the cutting edge of innovation. New alloys are being developed all the time. We need to emphasise the fact that this is a future-facing industry.

Jessica Morden Portrait Jessica Morden
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I thank my hon. Friend. It is absolutely true to say that steel is a future-facing industry, which will help us build back the economy after the pandemic and help us power a green industrial revolution. That is as true now as ever.

Jamie Wallis Portrait Dr Jamie Wallis (Bridgend) (Con)
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It is a pleasure to serve under your chairmanship for the first time, Ms Nokes. I pay tribute to my hon. Friend the Member for Stoke-on-Trent South (Jack Brereton) for opening this very important debate.

On top of fierce international competition, the recent volatility of energy prices means that energy-intensive industries are facing significant challenges to remain competitive in the global market. That is putting thousands of jobs and livelihoods at risk. That is why we need to take action now.

UK electricity prices for extra large industrial consumers in the second half of 2020 were higher than for any European Union member state. My hon. Friend will be aware that the steel industry, much like ceramics, is heavily reliant on vast amounts of heat to produce high-quality consumer goods and materials. With China now dominating the market, accounting for 53% of production, more needs to be done to protect the quality British steel we make here from crippling high costs, which will potentially exclude us from the very industry that we created.

The British steel market needs the Government to remain committed to it. The hon. Member for Aberavon (Stephen Kinnock) is absolutely correct to say it is a future-facing industry. We need the Government to remain committed to this future industry to protect the generations of families who have worked in and around it. Sadly, the number of people working in steel has already declined by half since 1990. We need to buck that trend if we are to deliver on our 2020 mandate. Sectors such as steel are vital to the Government’s levelling-up agenda, with modern technology and infrastructure increasingly dependent on steel for components for everything from wind turbines to electric cars. Consequently, it is essential that we support these industries as they struggle to respond to higher energy prices.

The Port Talbot steelworks is located in the constituency of the hon. Member for Aberavon, just on the doorstep of Bridgend and Porthcawl, and hundreds of my constituents are employed there, much like their families before them. The jobs, and the people, need to be safeguarded.

The Government currently provide compensation to energy-intensive industries for higher electricity costs associated with low-carbon energy emission reduction policies. Between 2013 and September 2020, that provided the steel sector with £480 million. Nevertheless, the steel sector is calling loudly for further support from the Government. The hon. Member for Newport East (Jessica Morden) highlighted the UK Steel electricity price report of February 2021, which estimated that electricity prices would cost UK steelmakers an additional £54 million, compared with production costs in Germany. For the past five years, the cost is £254 million. These are clear danger signals. We are teetering on the edge and we need urgent action.

I would strongly welcome more targeted Government support for hydrogen technology within the steel sector, to help our green transition to cleaner and more affordable energy. I was delighted to see the Chancellor’s announcement in the autumn Budget of £140 million to establish the industrial decarbonisation and hydrogen revenue support scheme, and the £240 million in the net zero hydrogen fund—but more needs to be done, working in conjunction with the steel industry.

I would welcome a commitment to work with international partners that are world leaders in exploring hydrogen technology, such as Sweden and the United States, to explore potential areas of co-operation. Investment in the green hydrogen-based steel demonstrator project via the clean steel fund requires more clarity, which I hope can be provided today. We ought to prioritise green hydrogen in the net zero hydrogen fund, with the goal of commercialisation.

Looking ahead, I firmly believe hydrogen is key to achieving the Government’s ambitious net zero strategy and to building a green economy, and that such technologies will be crucial for the future development and protection of our steel sector. Now that we have taken back control of our own laws, including those on state aid, we can and we should go further. Finally, more support for transition to a hydrogen-steel economy should be considered as vital in how we respond to the current major challenges to the steel sector.

Stephen Kinnock Portrait Stephen Kinnock (Aberavon) (Lab)
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It is a pleasure to serve under your chairship, Ms Nokes. I congratulate the hon. Member for Stoke-on-Trent South (Jack Brereton) on securing this very important debate.

Manufacturing is the backbone of the British economy, but it is a backbone that has been dangerously damaged in recent decades. By failing to back our manufacturing sector, successive Conservative Governments since 2010 have only succeeded in offshoring jobs. As a result, they are ripping the heart out of our local communities, while also offshoring our carbon emissions. The Government’s No.1 priority should be to do whatever it takes to support and regenerate our manufacturing sector.

Steel is the cornerstone of that manufacturing sector, and it will continue to be so for decades into the future. Steel is the homes that we live in, the vehicles that we drive and the offices that we work in. Steel will build the smart cars and the wind turbines that power our economy forward. The Government appear to believe that steel is a sunset industry, but nothing could be further from the truth. The steel industry is a hotbed of innovation and pioneering technology.

Tata Steel is the largest private sector employer in my constituency, and the company is absolutely determined that there should be a future for UK steelmaking, while also recognising the importance of decarbonisation. It recognises that for UK steelmaking to enjoy a prosperous future, the industry needs support and partnership from the UK Government, first by working with the industry to manage a pathway to net zero on both public and private investment, but also by the Government levelling the playing field in order to ensure that the industry is competitive against its European counterparts.

Let us be clear—the current energy spike has played havoc with energy-intensive industries.

William Cash Portrait Sir William Cash (Stone) (Con)
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The hon. Gentleman is making a first-class speech. I was brought up in Sheffield and lived there for 20-odd years. I know what he is talking about and he is completely right. I am not going to make a speech, but I want to congratulate him.

Stephen Kinnock Portrait Stephen Kinnock
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I thank the hon. Member for his kind words.

Let us be clear—the energy spike has played havoc. November 2021 prices peaked at 50 times the 2020 average, at £2,000 per megawatt hour. The monthly average wholesale costs are 50% higher than in Germany. These extraordinary electricity prices are leading to smaller or completely eliminated profits, and thus to less reinvestment and even pauses in production for some companies. Higher electricity prices also act as a disincentive for investment from international steel companies, with the UK being seen as a less favourable investment environment than other places.

The potential for a widening price gap between the UK and our European competitors means a loss of market share, both in the UK and in key export markets. That is why it is utterly self-defeating for Ofgem to recommend that network energy prices rise even higher. The Business, Energy and Industrial Strategy Committee has rightly called for the steel industry to be exempt from this price hike; let us hope that Ofgem, the Secretary of State for Business, Energy and Industrial Strategy and the Minister, who is in his place today, will take heed of the Committee’s recommendations.

Other European countries have taken quicker and more expansive action than the British Government by offering support to energy-intensive industries. As has already been mentioned, the Portuguese Government have announced a minimum 30% reduction in network charges for industrial users. The Italian Government have pledged over £4 billion to eliminate renewable levies on gas for industry and electricity for small and medium-sized enterprises. In Spain, we have seen tax cuts and the temporary reduction in extraordinary profits made by energy companies, including extending the existing suspension of a 7% power generation tax through year end. They will also cut their special electricity tax from the current 5.1% to 0.5%.

What we need to see in this country now is the provision of 100% compensation for costs of carbon in electricity bills, through a carbon price floor and a UK emissions trading scheme, up from the current 75% allowed for under EU state aid rules. We need to provide 85% compensation for the capacity market fee and an 85% reduction in network costs, in line with France and Germany, as well as full exemptions for the renewable levies or the introduction of additional compensation.

The Minister will point, of course, to the energy-intensive industries compensation fund, but that was half a decade ago, and the gap I have just described exists after that fund is taken into account. We have had enough of warm words; we must now commit to levelling the playing field for our steel companies. It is the least British workers in industrial communities deserve. What a contrast between the Government’s dithering and Labour’s bold and ambitious £3 billion steel renewal fund. In that fund, we pledge serious investment while the Chancellor had absolutely nothing to say about steel in the Budget. It is a dereliction of duty and makes a mockery of the Government’s so-called levelling-up policies. Tragically, successive Conservative Governments have failed to support our steelworkers and their families and communities. What a contrast with our party and our steel unions, which truly grasp the central importance of the steel industry to the past, present and future of our country. Let us hope that the Government will at some point recognise the need to unleash a modern manufacturing renaissance, with steel at its heart.

Holly Mumby-Croft Portrait Holly Mumby-Croft (Scunthorpe) (Con)
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It is a pleasure to serve under your chairmanship on this debate, Ms Nokes. I also thank my hon. Friend the Member for Stoke-on-Trent South (Jack Brereton) for securing the debate. I know he is as passionate about the ceramics industry as I am about the steel industry.

I want to lay my cards on the table and make three clear points. First, steel uses a lot of energy; we understand that. That means we are on the frontline of the energy price rises. Secondly, we will never not need steel. I am sorry to anyone who has heard me say this a hundred times already, but no one in this country can go a single day without steel. We need it for everything we do, from infrastructure to defence and from healthcare to the wire in the tyres of my trusty old Škoda parked underneath Parliament. Thirdly, of course we must find ways to make steel that consider the environment, but we must never completely rely on other countries to make steel for us. We will have no control over the quality or the environmental issues that come with that, and it would be foolish and immoral to ship steel from other countries.

Between 5 o’clock and 6 o’clock last Monday, steelmakers in Scunthorpe paid an eye-watering £2,080 for a megawatt-hour of electricity. The average cost of electricity prices in 2020 was £35 per megawatt-hour. That volatility is crippling our daily operations. Site managers have to shut down or delay key processes to cope with the spikes in energy prices. It is unfortunate and I know this is a collective challenge for energy-intensive industries, but the cost of energy is now higher than the cost of labour and this is not merely a market blip that will come and go.

I recognise that this is in great part caused by global circumstances beyond our direct control. I believe in a free market, but when it comes to steel a free market does not really exist. Steel is made in every G7 country and, quite bluntly, one way or another those countries have consistently found creative measures to support their steelworks because they want to maintain a steel-making capacity. We were already at a disadvantage when the energy price spikes hit us and that has highlighted the extent of other nations’ support for their energy- intensive industries.

I also want to directly challenge anyone who has the incorrect view that steelworks constantly need bailing out. They do not; they need a level playing field, but it could not be any more firmly the other way round. Steelmakers in Scunthorpe are survivors and thanks to our local talent, we have kept our heads above water for decades. We need to be on a fair footing with our European competitors and we will thrive. The Treasury has said it wants

“an attractive and internationally recognised ecosystem across both regulation and tax”

for financial services. I want the same for steel. That is why I was delighted to hear the Prime Minister in his speech on Monday acknowledging that we must end the unfairness that UK energy-intensive manufacturing pays so much more than our competitors overseas. The Prime Minister has historically been supportive of steel. I know for a fact that he has a keen understanding of the industry and clearly understands the threat of high industrial energy costs and the burden of the incredibly high policy costs that UK energy-intensive industries continue to face. So I ask the Government and my hon. Friend the Minister to continue the conversations they are having with the steel industry in these really tricky times, to help it to step forward into a greener and more sustainable future.

I know that since taking over his brief my hon. Friend the Minister has engaged regularly with our steelworks, which I thank him for, and I also know that he has been assiduous in understanding this issue. So I hope that he will agree with me that as a sovereign nation we have the ability to legislate and support our steel industry in a number of ways. Our neighbours and competitors in Europe have started taking action. As the hon. Member for Aberavon (Stephen Kinnock) outlined, in Italy the Government are temporarily removing renewable levies; in Spain, the Government have suspended power generation and consumption-related taxes; and in Portugal, the Government have put forward a minimum reduction in energy charges.

Meanwhile, our policy and network charges still continue to be much higher than those of our main competitors, so I urge the Minister to look urgently into abolishing the carbon price support mechanism, which is a tax that is not faced by our competitors; cutting down the network costs and capacity market fees; providing support for emissions trading scheme costs; and reassessing existing renewable levies applicable to steel. I understand that the renewable levies are there to encourage businesses to move towards environmentally friendly practices, and to some extent they have succeeded, but the cure should not be worse than the disease. Of course, we also need a green steel deal, as businesses transition to better, greener technologies, and British Steel has laid its cards on the table with its low-carbon road map announcement. I remain hopeful that my hon. Friend the Minister and the Business Secretary will be the ones to seal that historic deal.

There are few industries in this country that are more closely associated with an area than ceramics is with Stoke and steel with Scunthorpe. As fellow MPs in manufacturing constituencies, I am sure that many of my regional colleagues share the sense of duty to protect those industries and the communities built around them. I genuinely hope that my hon. Friend the Minister will be able to make some progress on this issue.

Jim Shannon Portrait Jim Shannon (Strangford) (DUP)
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First of all, I thank the hon. Member for Stoke-on-Trent South (Jack Brereton) for securing this debate and I commend him on his frequent contributions on energy-intensive industries. We are very fortunate that we now have a formidable group of Stoke MPs who work as a team and bring forward issues, and get results as well, which I have noticed in the main Chamber. I commend them for that.

Sustainable energy and greener energy debates are becoming more regular and I believe that it is important that we move with the times, which can start with ensuring that energy-intensive industries have the correct means to progress. Just this morning, probably coincidentally, but none the less importantly, I had the opportunity to meet the independent networks association. Its chief executive is Nicola Pitts and it is one of the UK’s leading independent utility network owners and operators, driving industry collaboration and innovation to shape the future of the UK’s energy and water sectors. It is in the business of ensuring that we can be more energy-efficient with electricity and the use of water, both for the industrial sector and for healthy homes—I chair the all-party parliamentary group on healthy homes and buildings. I commend that organisation.

I had a quick look through the early-day motions before the debate progressed and I noticed that three particularly promote the issue of heat pumps. I commend early-day motion 675, which the hon. Member for Bath (Wera Hobhouse) has put forward; early-day motion 677 on Home Energy Scotland; and early-day motion 681 on Invinity Energy Systems. That tells me that there is a great interest in the issue, not just from the hon. Member for Stoke-on-Trent South but from everybody else here in Westminster Hall today and perhaps even among those who were unable to attend the debate.

The UK should take great pride in our energy-intensive industries. Our main businesses of that kind are dedicated to food, pulp and paper, iron and steel, and basic chemicals. The UK’s manufacturing and industrial sector accounted for 60% of total consumption, along with another 16% for chemical manufacturing. The UK industrial sector is made up of some 35% electricity and 39% natural gas, according to Gazprom Energy.

I will give an example not from my own constituency, but of a company that many of my constituents work in. I refer to the recent work done by Bombardier Spirit AeroSystems in east Belfast. It received approval to develop a new £85 million project to develop energy from waste through an EFW gasification plant in the constituency of my Democratic Unionist party colleague, my hon. Friend the Member for Belfast East (Gavin Robinson). It is a tremendous idea and I am sure that it is one that the Minister is well aware of. If he is not, perhaps he can get more information on it. It gives an example not only of what we will do in Northern Ireland, in my neighbouring constituency, but of what can be done elsewhere.

That £139 million plant can process 120,000 tonnes of refuse-derived fuel, comprised of non-recyclable fractions of commercial and industrial waste per annum, to generate electricity and heat. Although I appreciate the extreme finance that firms will need to advance to this level, the benefits are much more energy efficient in the long term. When it comes to the net zero carbon targets, this is one that we should be aiming for. It is crucial that we take the future into consideration when discussing greener energy for our industrial firms. The Full Circle Generation facility in Belfast has aimed to process 140,000 tonnes of waste per annum, but it takes an initial 400,000 tonnes of rubbish for the facility to operate at full capacity. It is particularly exciting, innovative and futuristic; it is something we should be looking at.

The cost aspect is giving large firms little incentive to switch to cleaner energy strategies, but there must be more discussion between the BEIS Minister and the firms so that they can meet in the middle, because there needs to be a compromise sometimes. Perhaps the Minister could give us his thoughts on how that could be achieved. Additional funding must be allocated to help energy-intensive industries decarbonise. That is essential in ensuring that we meet our 2050 carbon zero promise set at COP26. As stated earlier, energy-intensive industries make a great contribution.

We must support our energy-intensive industries within the UK if we want to encourage global firms to come here. We want to see that happening, too. Perhaps the Minister, in his response, could give us some idea of whether we have attracted many firms to come here and invest. I think we have, but it is always good to put it on the record and say what we have done. I have recently been made aware that an industrial firm that set up in China is considering coming back to the United Kingdom because of the price of containers. That is a step forward, although we all know of small businesses in our constituencies—I have many—that are threatened with difficulties because of that price structure. However, we must do more to entice other firms to come back to the UK. One way we could do this would be by taking a lead role in green firms, giving them the funds they require to make this happen. That would also improve local job opportunities for those who aspire to work in the manufacturing industry.

I call on the Secretary of State to ensure that priority finance is given to large industrial firms to give them that jump start in creating greener energy-intensive industries. The cost is a crucial aspect, and I would argue that it puts firms off improving their energy efficiency. There are small but useful steps that the BEIS Minister can take and, given our recent promises at COP26, I do believe these should be taken accordingly.

Caroline Nokes Portrait Caroline Nokes (in the Chair)
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We have 11 minutes left, so that gives the remaining Members just over five minutes each.

Chris Green Portrait Chris Green (Bolton West) (Con)
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It is a pleasure to serve under your chairmanship, Ms Nokes. I congratulate my hon. Friend the Member for Stoke-on-Trent South (Jack Brereton) on securing such an important debate at such an important time. I wholly agree with and endorse much of what has been said so far.

One of the key starting points for energy-intensive industries—the focus of this debate—is having affordable energy, but we must have reliable energy too. One of my concerns is that the energy mix we get in the coming years must be reliable, not just in its provision—there are obvious concerns with wind turbines and solar panels—but in the costs. We ought not to be susceptible or vulnerable to these massive price fluctuations that can jeopardise businesses.

I do have a broad interest in the nuclear sector, as a north-west Member of Parliament. Much of the UK’s nuclear industry is based in the north-west of England, and the Springfields fuels centre, near Preston, is not too far away. Warrington is also a key centre. If we go down the small or advanced modular routes, the leadership scene in Rolls-Royce, in Derby, will also provide very powerful growth within the UK. If we can capture the market early on and have that manufacturing and intellectual property side in the UK, we can then sell further afield.

William Cash Portrait Sir William Cash
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Does my hon. Friend agree that the nuclear delivery group is doing an extraordinary job? In the last two months, we have moved, very substantially, down a strong, stable route towards getting better nuclear delivery.

Chris Green Portrait Chris Green
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I agree entirely. It is welcome that the Government have renewed their focus on nuclear organisations, and that groups of colleagues within Parliament are increasingly giving that focus to the nuclear sector. I appreciate that is not universally appreciated, but the narrative and strength of argument is building up for the sector. If we want to have energy-intensive industries, we need that strong foundation of reliable energy. Even if it is a little more expensive than some alternatives, that certainty of production is immensely important, because if a business is going to invest, it has to have that confidence in the first place.

When we discuss levelling up, we have to think about the energy-intensive industries in the north of England and the midlands from ceramics to the steel industry, glass and chemicals. We have to think of levelling up as focusing in a significant sense on manufacturing—and heavy manufacturing—that requires that intensive provision of energy. It would be a positive thing if the Government set out more clearly their support for those sectors. I was concerned with the Cumbrian coal mine, which was going to produce metallurgical coal for the steel industry, but that has been challenged, not because it is going to produce thermal coal, which is a different type of coal used for different reasons. We have to have that clarity and be able to support the industry when it needs it.

We have had a trend over many years of offshoring manufacturing and allowing other countries, perhaps with lower environmental standards than ours, to take our manufacturing industry. If we are looking at COP26 and the agenda that so many countries around the world focused on and championed, we have to recognise that in recent years we have been exporting manufacturing, therefore manufacturing jobs, carbon and other emissions for domestic consumption. We do not have the emissions in the UK, but we are still creating those emissions overseas.

My hon. Friend the Member for Scunthorpe (Holly Mumby-Croft) captured the sense very well when she talked about free markets. We all ought to champion and support free markets, but we ought to be cautious when other countries around the world do not champion free markets and do not have the same appreciation of a level playing field that we do.

I welcome the Government’s direction of travel. I wish they would be even more supportive. There will be many more ways, especially listening to my hon. Friend the Member for Stoke-on-Trent South, to make it more competitive to invest in energy-intensive manufacturing in the United Kingdom.

Jonathan Gullis Portrait Jonathan Gullis (Stoke-on-Trent North) (Con)
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It is a pleasure to serve under your chairmanship for the first time, Ms Nokes. I congratulate my hon. Friend the Member for Stoke-on-Trent South (Jack Brereton), who is a doughty champion of Stoke. He is Stokie born and bred and boasts regularly that nearly half of Stoke-on-Trent North was built with his family line, so I look forward to seeing Brereton Place soon when I am out campaigning on the trial.

[Clive Efford in the Chair]

I also want to give a shout-out to my hon. Friend the Member for Scunthorpe (Holly Mumby-Croft) who gave an absolutely outstanding speech; one of the best I have heard since I became a Member of this place. I hope that a lot of those asks are taken up by the Government and acted on.

The city of Stoke-on-Trent is absolutely steeped in its ceramics, not just in its history but in its future. My hon. Friend the Member for Stoke-on-Trent South talked about Lucideon, one of the leading UK advanced ceramic manufacturers which was recently awarded £18 million with the Ceramics Manufacturing Group, which is looking at how we can have new and exciting ways for this technology to work, alongside the traditional industries. I have companies such as Steelite, Churchill China and Burleigh, which are still making their world-leading products, which we can enjoy in this place if we go into Portcullis House or the Members’ Dining Room. It is a shame that when I go into Government Departments when I am turning or when I visit a Minister, I do not see a Stoke-on-Trent mug. I am absolutely dumbfounded when I visit a Minister and see that they do not have Stoke-on-Trent ceramics in their office.

One of the things the Minister should take away from this is to ensure that we properly procure Stoke-on-Trent’s world-leading ceramics in every single Government Department, because it sends a message that a UK Government are backing UK production.

William Cash Portrait Sir William Cash
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I commend my hon. Friend on making an excellent speech, as they all have been today. With sovereignty we can stand on our own feet and insist on a level playing field in energy, which never existed in the EU, and promote our own manufacturing on a proper basis.

Jonathan Gullis Portrait Jonathan Gullis
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I am grateful to my hon. Friend for his intervention. As a co-Staffordshire MP, he has absolutely championed our world-leading ceramics manufacturing in Stoke-on-Trent and Staffordshire, as well as being a doughty champion for the coal industry. A lot of ex-miners in my community always wish to pay their respects to him for all the work he did for them.

Turning to covid-19 and the energy price rise, if we take Steelite International as an example, 99% of its turnover comes from the hospitality industry. In April 2020, as covid-19 forced us into our homes and away from pubs, restaurants and cafes, Steelite lost 95% of its turnover overnight. Despite that being hugely damaging to Steelite as a hospitality operator, it failed to qualify for the rates relief offered to hospitality businesses as part of the emergency package announced in 2020, and it was classed as a manufacturer.

The ceramics industry is crucial to the hospitality sector and should also benefit from the 50% one-year business rates discount announced recently by the Chancellor. As a company that depends on hospitality, Steelite was one of the businesses hit hardest by the pandemic, and now by gas prices. Gas prices have risen rapidly across Europe in 2021, but the UK has been exposed to considerably higher prices than elsewhere, with prices rising to five times what they were this time last year.

Many ceramic companies forward purchase their gas and electricity. However, during lockdown when demand for the hospitality sector drastically decreased, gas that had been forward purchased was not used. That meant companies had to sell it back at a loss, making many reluctant to forward purchase again due to uncertainty over future lockdowns and levels of demand. As a result, the ceramics industry has been left particularly exposed to the current exceptional gas prices. On average, gas is roughly 10% of the cost of manufacturing a plate. However, companies have been exposed to gas costs five times of what they were last year. Companies should, of course, aim to build in some resilience in their processes, but this kind of market fluctuation is beyond anything they could have reasonably planned for. For large manufacturers, it could add as much as £500,000 to £1 million per month to production costs. It is simply impossible for ceramics companies to continue to swallow these increased costs, especially at a time when orders from the hospitality sector are still not up to the previous levels in 2019.

Costs will need to be passed on to customers. However, while we are still recovering from the hangover effects of the pandemic, customers are looking to cut costs, not increase them. Passing on extra costs to customers risks encouraging them to turn to cheap imports from abroad, where Governments have taken decisive action to support intensive industries. Spain has introduced tax cuts, including extending an existing suspension of a 7% power generation tax until the end of the year and cutting the special electricity tax from 5.1% to 0.5%. At the end of the day, we must take action and protect these industries. I hope the Minister will take away everything that has been said, and I congratulate my hon. Friend the Member for Stoke-on-Trent South for securing the debate.

Alan Brown Portrait Alan Brown (Kilmarnock and Loudoun) (SNP)
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It is a pleasure to serve under your chairmanship, Mr Efford. I congratulate the hon. Member for Stoke-on-Trent South (Jack Brereton) on bringing forward the debate. At the outset, he rightly highlighted the energy supplier crisis. I am sure he agrees that the Government need to do more about this crisis. He highlighted coal and the bygone days of coal, and certainly that should be a reminder to Government in terms of the lack of support that was given when the coalmines were shut down. It still has a legacy, and it is a legacy that lives on in my constituency. It is something that cannot be repeated, and that is why we need a just transition commission for the UK Government, like the Scottish Government have. We need that support as we move from a reliance on fossil fuel towards renewable energy.

The hon. Member for Stoke-on-Trent South is a vocal advocate for the ceramics industry, and he should be commended for that. I hope the ceramics industry has a strong future because we need to retain all the manufacturing that we can. Support like that is welcome, and hopefully the Government will listen. The key thing is that there needs to be support for decarbonisation. Other Members spoke about tariff reductions and reducing energy costs. Energy is too high at the moment, but the Government really need to be helping industry decarbonise, and proper investment and support from Government is required. That should put some of these industries ahead compared to those elsewhere. That is where, for me, the investment needs to come from Government to help them decarbonise.

We heard from the hon. Member for Newport East (Jessica Morden), who is clearly a big advocate for the steel industry. I was pleased to visit the works in her constituency, and I repeat: investment is needed to help the steel industry decarbonise. That is the future. We talk about clean green steel, and that is where Government investment is needed.

The hon. Member for Bridgend (Dr Wallis), who is not in his place, also spoke about the steel industry and highlighted the fact that there is not enough money in the UK Government’s hydrogen strategy by comparison with members of the EU. I agree with him that more needs to come from the UK Government in terms of the hydrogen strategy.

We heard from the hon. Member for Aberavon (Stephen Kinnock), who has also always been a strong supporter of the steel industry and a strong advocate in this House. His key message to the UK Government seemed to be that it is not a sunset industry, and I agree. In fact, that message was so strong that he said it twice—in an intervention and in his speech—and I agree: the UK Government need to support the steel industry.

The hon. Member for Scunthorpe (Holly Mumby-Croft) is another advocate for the steel industry—I am kind of repeating myself here, but investment in clean green steel and decarbonisation is important. I commend her for being the only one who got something out of the Prime Minister’s speech on Monday other than Peppa Pig, so congratulations on that.

We heard from the hon. Member for Strangford (Jim Shannon), who always turns up at these debates and always makes a useful contribution. Again, he highlighted the importance of manufacturing and Government support for decarbonisation.

What I took out of the speech by the hon. Member for Bolton West (Chris Green) was that nuclear energy is indeed more expensive. He is an advocate of nuclear energy, but it is more expensive. We are talking about taking away tariffs for renewable energy, but nobody is talking about taking away tariffs for nuclear energy or addressing the eye-watering costs.

Chris Green Portrait Chris Green
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Energy costs are clearly important, but reliability and stability of supply is also a key feature, which nuclear power would provide. Does the hon. Gentleman think that that is an important feature that we should have?

Alan Brown Portrait Alan Brown
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That inflexible reliability that comes from nuclear energy means that, while we talk about the wind not blowing, the amount of base-load it pumps on to the grid means having to curtail other, renewable energy sources, because nuclear is so inflexible. So no, I do not agree. That is the problem: nuclear is the wrong energy to mix with renewables, and it really is not the future.

I was talking about tariffs and the cost of nuclear energy. There is £1.7 billion in the Red Book just to develop Sizewell C, before we get to the final investment decision. Think what that £1.7 billion could do for the steel industry, the ceramics industry or decarbonisation—and that is only to get to the final investment decision, before the Government then rush to spend £20 billion on the capital investment for Sizewell C. Then that will be added to our electricity bills under the RAB—regulated asset base—model, for the 10 to 15 years of construction of the nuclear power station, and then a 60-year contract thereafter. So do not let us talk about taking away levies for renewable energy; let us look at what nuclear energy will cost us. I urge the Government to spend that money more wisely, rather than on nuclear energy.

Finally, the hon. Member for Stoke-on-Trent North (Jonathan Gullis), who is obviously another advocate for the ceramics industry, made an interesting point about the lack of ceramics from Stoke-on-Trent in this place. I suggest to him that he make an investment: buy a lot of mugs and pottery and donate it to this place. That will help the industry and promote it here.

I am coming to the end of my remarks, and I do not want to be too flippant, because this is a very important debate. We need to see support for ceramics and manufacturing, and we need to look at how we decarbonise. Carbon capture has been mentioned. I urge the Minister to reconsider the disgraceful decision to make the Scottish carbon capture cluster a reserved cluster. That should have been given the go-ahead and it should have been one of the track 1 clusters. It incorporates carbon capture, hydrogen production, which has been mentioned as part of the future of decarbonisation, and direct carbon capture from air. It is a really important, innovative cluster and it should have been given the go-ahead. Why was it not selected? I want the Minister to answer that. Equally, I would like to hear what proper investment will be made available to help and support the manufacturing sector to decarbonise.

Alan Whitehead Portrait Dr Alan Whitehead (Southampton, Test) (Lab)
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This has been an excellent debate, involving Members on both sides of the Chamber. It has focused on the two things that are absolutely essential for energy-intensive industries. The first is how we deal with the present spike, as it is called—although it is, in fact, a dome—in energy prices, how they affect energy-intensive industries and what action might be taken to alleviate their suffering as they attempt to cope with, and continue to plan their activities on the basis of, those unprecedented price rises. This time last year, gas was 39p a therm, but it is now well over 200p a therm. That is an enormous, fivefold increase in the price of gas, and that of course runs through into electricity prices. It is absolutely crucial for energy-intensive industries to have a stable price environment, and it is essential for their future plans and competitiveness that they have knowledge of what the future environment might be.

Secondly, the biggest challenge for the future, as mentioned by hon. Members, is how we decarbonise those vital energy-intensive industries so that they continue to produce in and for the purposes of the UK. We should not export energy-intensive production but decarbonise it, so that it continues to operate in the UK as effectively as it has done in the past. In that context, my hon. Friend the Member for Aberavon (Stephen Kinnock) pointed out that steel is not a sunset industry but very much an industry of the future. Our efforts to decarbonise such industries should not be seen as a means of closing them down or of removing elements of their activities because they are sunset industries and others can decarbonise. Our energy-intensive industries need to be decarbonised so that they continue to play a central role in future production.

We have heard excellent advocacy this morning. I congratulate the hon. Member for Stoke-on-Trent South (Jack Brereton) on securing the debate. He is one of several Members present from Stoke, home to the crucial ceramics industry. I also congratulate Members on both sides of the Chamber on their strong advocacy on behalf of the steel industry and on their clear understanding of what we need to do about energy-intensive industries.

It falls to me to remind Members that energy-intensive industries are not just about ceramics and steel. A little while ago, the Government helped energy-intensive industries with energy prices by exempting them from some levy costs. There was a list of 70 different sectors that are energy-intensive industries, including the manufacture of malt, the weaving of textiles, the casting of iron, the manufacture of batteries and accumulators, the manufacture of corrugated paper, rubber products, plastic products, technical ceramic products, cement, metal packaging and electronic wires, and metallurgy. Those are all energy-intensive industries across the country, not just in certain parts of the country, and they need our support on current prices and the need for decarbonisation. What I can say about prices right now—I think everyone present will agree—is that we absolutely have to tackle the harm that they are doing to energy-intensive industries, and the difficulties that such industries are experiencing.

One thing that we should all be clear about is that absolutely nothing has happened so far in this country in relation to the price rises. The Government appear to be caught like rabbits in a headlight and waiting for the price spike to go down the other side, so that they do not actually have to do anything. As I have mentioned, this is not a price spike. It is a possible future sea change in energy prices, and it needs to be approached on that basis. It is not sufficient simply to hope that this will go away in a while and things will return to normal, because they probably will not do so, and we need to have Government action to ensure that there is a regulated price arrangement for energy-intensive industries that protects those industries from high prices and the volatility that we are seeing on world markets. There are several ways in which that can be done. As far as I can see, however, the Government have not even looked at any of those things. Indeed, as hon. Members have mentioned, a number of other European countries are doing things in order to combat the price spikes, or price dome, that we are seeing at the moment, none of which are being followed by the UK Government.

There are also issues arising from the fact that a number of energy-intensive industries had a bad deal with energy prices before the present price spike. From my frequent conversations with my hon. Friends the Members for Aberavon and for Newport East (Jessica Morden), I know that UK steel has a cost price far greater than comparable steel production in France and Germany. That is partly because those countries do different things to assist their industries that we do not do in this country, concerning things such as distribution costs and the joint commissioning of procurement of energy packages. The Government would be well advised to look at such things, both now and in the long term, in order to get the stable environment for energy prices that we really need for energy-intensive industries.

At the same time, we also need to get serious about the support that we need to provide for the decarbonisation of energy-intensive industries. My hon. Friend the Member for Aberavon mentioned Labour’s £3 billion steel renewable fund, which is a fund not just to stabilise prices but to take steel well down the road towards decarbonisation by changing things such as electric arc furnaces, hydrogen production for the introduction of energy for steel generally, and a host of other things. They need to be replicated in those other energy-intensive industries with Government support, so that they can decarbonise in good time and good order and keep their production going across the country in a way that we need for the future.

That is a substantial task for the Government, both in the present and in the future, and very little has been achieved so far. I am sorry to have to say that, because it is so important that we get our act together right now and for the future, given the absolutely vital role that energy-intensive industries play in our country’s economy. I look forward to hearing from the Minister whether his Government have had a change of heart and are, perhaps even at this late stage, deciding to do something about price rises and the decarbonisation of energy-intensive industries for the future.

Lee Rowley Portrait The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Lee Rowley)
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It is a pleasure to serve under your chairmanship, Mr Efford. I am grateful for the opportunity to contribute to the debate today. I congratulate my hon. Friend the Member for Stoke-on-Trent South (Jack Brereton) on an important and timely debate. I have already spoken to Members about the issue. We have had a good, constructive debate that has got to the heart of the challenges. Members have recognised the challenges that we face both globally and domestically, as well as the long-term and short-term objectives that we are trying to meet, and they are right to highlight the issues on behalf of their areas and the companies and organisations in them. My hon. Friend the Member for Stoke-on-Trent South eloquently articulated the challenges. They are noted and we in the Department continue to work through what might be possible. I hope everyone in the Chamber acknowledges that there has been a substantial amount of support for energy-intensive industries in recent years.

We accept that energy-intensive industries are important, as all manufacturing is, for the United Kingdom. They are hugely important to the regions represented in this room, from the north-west to Lincolnshire, from my neighbouring county of Staffordshire—so ably represented by many of its MPs here today—to Scotland and Wales. We know that hon. Members here today attach great importance to the issue, whether it be steel, paper, cement, lime, chemicals, or any of the nearly 70 sectors that the hon. Member for Southampton, Test (Dr Whitehead) read out a number of.

I cannot avoid pointing out ceramics, given that that is the genesis of this morning’s debate. Colleagues in Stoke-on-Trent South and beyond have been eloquent champions for the future of the ceramics industry. We are glad to see its continued renaissance and we hope that will continue in the years ahead. It is a great British success story and we want to ensure that that continues.

More broadly, it is vital that we put energy-intensive industries, and manufacturing as a whole, on a sustainable, resilient and reliable footing—a point made by my hon. Friend the Member for Bolton West (Chris Green). That is important for the communities represented here and for levelling up in general.

The hon. Member for Aberavon (Stephen Kinnock) has been extremely welcoming and helpful to me in my first few weeks as a Minister, and I am grateful for his time. However, I will gently disagree with him on the point about manufacturing. Although I accept that manufacturing has had challenges for many decades—I have seen that in my own part of the world—we have seen an increase in jobs over the past 10 years, and it is important to note that. Energy-intensive industries and manufacturing have faced a particular set of circumstances in the last year with the real challenge of coronavirus. We are very glad to see that moving on, but a set of new challenges, as articulated by colleagues, face those industries. We can overlay that with the long-term transition plan to try and ensure that we walk more lightly on this earth and that the industries leave less of a legacy on this earth.

We know that the industry faces a set of unique challenges. As my hon. Friend the Member for Scunthorpe (Holly Mumby-Croft) highlighted, we cannot get far without needing steel. We need ceramics and many of the important high-tech industries that we rely on. Glass has a hugely important part to play in our transition. Those are the key building blocks that we need to understand and then formulate policy around in the coming years and decades.

I am two months into this role. On a personal level I have tried to take an interest in the role—of course I have tried to take an interest. I should have taken an interest in the role, given the amount of paperwork that I have had to read in the last two months! I have met users of the energy-intensive sectors. Last week I was with the chemicals sector and I visited a steel location. I look forward to coming to see ceramics in Stoke-on-Trent at the earliest possible opportunity.

Jim Shannon Portrait Jim Shannon
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In my contribution I referred to Shorts Bombardier—Spirit as it is now—and the £85 million project it is trying to develop in Belfast. Has the Minister been to see that project or talked to Shorts Bombardier Spirit to ascertain what it is doing and what could be replicated elsewhere in the UK?

Lee Rowley Portrait Lee Rowley
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I am grateful for the hon. Gentleman’s intervention. He anticipates some of my speech. To pick that up now, there is an incredible amount of work going on across the four nations of the United Kingdom. I am looking forward to coming to Northern Ireland as soon as I am able. We are currently trying to organise a visit, and I am keen to talk to him further about the example that he highlights.

Alan Brown Portrait Alan Brown
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The Minister mentioned the chemical industry. Does he understand that INEOS at Grangemouth is part of the Scottish carbon capture cluster, and at the moment INEOS is one of the biggest emitters of carbon dioxide in Scotland? The Scottish CCS would obviously alleviate that problem. Will the Minister look into that, promote the Scottish carbon capture cluster and take it away from being reserved, as it is classed at the moment?

Lee Rowley Portrait Lee Rowley
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I am grateful for the hon. Gentleman’s intervention. I do acknowledge the challenge of the Grangemouth plant and the excellent work that goes on there. I have spoken to INEOS on several occasions since taking up my post. He and his colleagues have contributed to the carbon capture and storage debate actively and noisily over the past few weeks. He knows that an initial two sites have been announced and the intention is to have four by 2030. The Minister of State, Department for Business, Energy and Industrial Strategy, my right hon. Friend the Member for Chelsea and Fulham (Greg Hands) has articulated that we want to continue to work with the Scottish cluster to see what is possible there.

I want to touch on a number of points that individual Members made. My hon. Friend the Member for Stoke-on-Trent South rightly highlighted—along with many Members—the challenge of energy prices. We acknowledge and accept there are challenges with energy prices. My hon. Friend the Member for Scunthorpe highlighted price spikes noted in just the past few days. From conversations I have had, this debate and wider discussion within industry, we know that there are challenges. I thank colleagues, unions, industries and trade bodies for articulating that in recent months.

There is significant price volatility, which it is important to acknowledge. Prices have spiked and started to float down over recent weeks. I hope all Members would accept that in the past two years alone we have had very low prices and very high prices. We are at a particular place in the market at the moment.

Holly Mumby-Croft Portrait Holly Mumby-Croft
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Will my hon. Friend comment a little more on those lower prices? Although we might have seen lower prices, we are still at a significant disadvantage in the steel industry compared with competitors in the EU. Although he has made an important point, it does not negate the issue we are talking about.

Lee Rowley Portrait Lee Rowley
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I am grateful to my hon. Friend for her intervention. She is right to point out that there two factors here. One is the volatility and how the price has moved and the second is the compactor. The latter point is well made by colleagues from all parties. I know hon. Members will acknowledge that we have provided more than £2 billion of support in under a decade in price-release schemes for energy-intensive industries. I accept that there are significant concerns about the position we are in and where we are seeking to go. I hope that that will be acknowledged and contextualised within that reality.

When formulating where we do or do not go in future, I hope hon. Members will accept that the situation is extremely complicated. We have a very diverse group of energy-intensive industries—more than 70 sectors—as the hon. Member for Southampton, Test highlighted. We have a range of exposures, challenges around efficiencies and hedging strategies. My hon. Friend the Member for Stoke-on-Trent North (Jonathan Gullis) pointed out the challenge of hedging strategies in recent months. Other forms of mitigation might be possible.

William Cash Portrait Sir William Cash
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Will the Minister give way?

Lee Rowley Portrait Lee Rowley
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If my hon. Friend does not mind, I have to make progress. If I have a moment at the end, I will happily give way. This is a diverse sector, but we are seeking to see what may be possible. Announcements will be made in due course, should they be possible.

My hon. Friend the Member for Stoke-on-Trent South made a very good point about eligibility criteria. He is aware—it has been referenced already in the debate—that a review is under way at the moment. A consultation ran between June and August. There were more than 30 responses, and we will make further announcements in due course. He is absolutely right to highlight the longer term, as other hon. Members have done. The Prime Minister mentioned that point in his speech on Monday. He highlighted the importance of manufacturing, of energy-intensive industries and of making sure that electricity prices over the long term are in place, so that the viability and competitiveness of those industries are ensured. He highlighted nuclear. I know there are a range of views in the room about nuclear, although happily the majority of us seem to be in favour of making progress. I hope we can do so in the months and years ahead.

I want to give my hon. Friend a couple of minutes at the end of the debate to wind up, but I have a couple of points on the long term. Obviously, we are in a long-term process of decarbonising our electricity grid. That continues and will have a real impact over the long term for energy-intensive industries, and elsewhere. There is a lot of work under way, a lot of schemes, a lot of funding and a lot of Government subsidy that has already been announced, such as the £315 million industrial energy transformation fund, £40 million of which has already been awarded, including to steel companies such as Celsa, to brick manufacturers, to glass and to metal casting. The second stage will close on 6 December.

Chris Green Portrait Chris Green
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With the £96 billion investment in the railways—we have a debate on the headquarters of the Great British Railways to come—will the Minister do all he can to ensure that Severfield steel in my constituency gets its fair share of the contracts, whether that is for bridges or other infrastructure projects?

Lee Rowley Portrait Lee Rowley
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I thought I was about to be asked about the headquarters of Great British Railways. We are of course seeking to find an equitable distribution of support across the country.

On ceramics, my hon. Friend the Member for Stoke-on-Trent South will be aware of the establishment of a global centre for advanced technical ceramics, which is good news. We are also supporting some transformation in glass and there is extensive ongoing work on decarbonisation options, including in steel. We are working with trade bodies at the moment and look forward to announcements in due course.

I am grateful to my hon. Friend for bringing this debate to the Chamber. I am grateful to all Members for their constructive contributions. The Government are aware of the strength of feeling in the communities represented here and more broadly. We acknowledge the importance of those industries for the regions and for our country as a whole. We look forward to working with you all in due course over the coming months to see what is possible on these important issues for our country.

Jack Brereton Portrait Jack Brereton
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I thank the Minister for the great interest he is taking in these sectors. I hope to welcome him very soon to Stoke-on-Trent.

These jobs are so important for levelling up across the country. They are skilled, well-paid employment opportunities. As a number of Members have said, it is vital that we see a level playing field on energy. We have seen huge competition from Europe, which subsidises a number of markets, and from China, which puts huge subsidies into many of these sectors. We need support to make sure we have a level playing field. As my hon. Friend the Member for Scunthorpe (Holly Mumby-Croft) noted, there is no level playing field at the moment—there is not a free market in these sectors—and we need to address that.

As my hon. Friend the Member for Stoke-on-Trent North (Jonathan Gullis) said, the costs are beyond what many of these industries can reasonably plan for. We need action and support to make sure that we have a level playing field, so that these sectors continue to build on their strengths and that we continue to see these important jobs and industries in the UK. I particularly thank the hon. Member for Strangford (Jim Shannon) for his kind words about Stoke-on-Trent, which is ably represented here.

I also want to touch on the importance of levelling up in R&D investment. There is increased investment in R&D now, with a doubling of R&D spending in the UK. We need to see more of that being spent in the midlands, in the north and in Wales. A huge proportion of R&D spending has been in the south and other parts of the UK. We need to spread it out across the country, particularly for the energy-intensive sectors such as ceramics, which need that support to transition and to decarbonise, to secure those jobs for the future.

Question put and agreed to.

Resolved,

That this House has considered energy intensive industries.