Carbon Capture, Usage and Storage
Sarah Jones Excerpts(1 week, 1 day ago)
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The Minister of State, Department for Energy Security and Net Zero (Sarah Jones)
Today, I am pleased to have laid a departmental minute setting out the details of a series of contingent liabilities associated with the carbon capture usage and storage track-1 clusters. Carbon capture usage and storage is a critical component of the UK meeting its 2050 net zero commitment particularly via ensuring energy and supply chain security and enabling hard-to-abate sectors to decarbonise. Contingent liability Maximum exposure (£m) across both track-1 clusters Reasonable worst-case (£m) across both track-1 clusters 1 The Supplementary Compensation Agreement 9,034 400 2 The Revenue Support Agreement 9,804 5,739 3 Stranded Asset (discontinuation) 9,715 5,739 4 Decommissioning Shortfall 590 100-333 5 The Discontinuation of Capture Project contracts 5,302 2,055
The taking of these liabilities directly will address issues which have hampered previous attempts at a carbon capture usage and storage programme, in particular investor confidence and the risk of CO2 store leakage. This support and the rapid launch of the programme fulfils the Government’s aim to make the UK a global leader in carbon capture usage and storage, and ultimately creating a self-sustaining sector which supports not only UK business but also provides international opportunities.
Treasury approval has been granted and subject to satisfaction of conditions, we anticipate arrangements will begin to be implemented by the end of this month.
Context and rationale
Carbon capture usage and storage is the only feasible method for decarbonising many hard-to-abate sectors such as cement production, and is currently the most cost-effective method of decarbonising others, such as dispatchable power. While there is growing interest worldwide, a programme of this nature is first of a kind and consequently there are multiple market barriers which inhibit the development of a carbon capture usage and storage market in the UK.
Government support is necessary to address these challenges and enable carbon capture usage and storage deployment at scale. HMG is reducing investor risk in these technologies by bearing some of the initial risk inherent in developing a carbon capture usage and storage market, as well as the cross-chain risk existing across the participants in the network.
While the liabilities are in principle for the entire project duration, it is expected that in practice Government exposure will decrease as users come on to the system, insurers become more comfortable with the “first-of-a-kind” risks, and the depth of the market increases.
Details of the contingent liabilities
There are five contingent liabilities associated with the various track 1 contracts related to the following arrangements:
1. The supplemental compensation agreement is a long-term mechanism within the Government support package, which enables the management of leakage risks at the geological store during operations and the post closure period.
2. The revenue support agreement addresses demand-risks by providing for payments to CO2 transport and storage companies if their allowed revenue is not covered by user fees.
3. The discontinuation agreement provides a right for the SoS to discontinue support to the transport and storage companies and entitles investors to be compensated for their investment.
4. The decommissioning shortfall agreement covers potential decommissioning fund shortfall which might arise if decommissioning is required before the fund has been fully built-up.
5. The discontinuation of capture project contracts allows for payment of compensation to capture projects for any losses due to a qualifying change in law or prolonged CO2 transport and storage unavailability.
Exposure
The table below sets out the HMG’s maximum exposure for each of the programme-associated contingent liabilities. These concern the five projects that were part of the October announcement: two transport and storage networks, Net Zero Teesside, Protos, and EET Hydrogen. We will notify Parliament of additional contingent liabilities when other projects reach financial close. It is important to note that while the table represents the maximum possible exposure, the probabilised exposures and likely crystallisations are far lower. There are robust risk management frameworks in place. Our assessments indicate that there no liabilities that are likely to be realised and the vast majority are very remote.
The contingent liabilities are necessary as it provides confidence in this first of a kind sector. Carbon capture, usage and storage will enable us to accelerate to net zero while maintaining energy security and delivering growth to our industrial heartlands.
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Road Fuel Market
Sarah Jones Excerpts(2 weeks, 1 day ago)
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The Minister of State, Department for Energy Security and Net Zero (Sarah Jones)
I start by congratulating my hon. Friend the Member for Dunfermline and Dollar (Graeme Downie) on securing this debate, making such an excellent contribution and championing the needs of consumers, both in his constituency and across the UK, where so many people have the same struggles.
I welcome the opportunity to discuss the important matter of the road fuel market. This Government are committed to fixing the foundations of the economy, delivering change by protecting working people and rebuilding Britain. It cannot be the case that fuel retailers register record profits and do not pass on savings when the burden is being unduly felt by hard-working families and businesses. That is why I am so grateful for my hon. Friend’s story about Aimee. Her story is one that I suspect is familiar to many other MPs from their constituencies. We are committed to supporting people with the cost of living and the cost of fuel.
I agree with my hon. Friend that, for so many, vehicles are more than just a means of transport; they are a lifeline. They play an integral role in connecting working people, families, communities and businesses, especially in rural areas. In the case of young people, including Aimee, their car is a means to forge a career and earning meaningful, well-paid work. This Government are committed to delivering for drivers, but also providing a range of transport options to make it possible that people such as Aimee should not have to worry about how they get to work.
That is why this Government made the decision at last week’s Budget to freeze fuel duty for a further year, which I know my hon. Friend has welcomed. I commend his dedication to campaigning against high fuel prices and for families, working people and small businesses to get a fairer deal on fuel across his constituency and Scotland. It is imperative that we have a well-functioning, transparent and competitive road fuel market. We want to ensure that drivers can get a fair price for their fuel, and that fuel retailers remain transparent and do not overcharge. We expect all fuel retailers to pass on any savings at the pump.
As my hon. Friend set out, the Competition and Markets Authority published its road fuel market study in July 2023, and it found that competition across the retail market had weakened. The CMA found problems in relation to three aspects of the retail market: national, local and motorway.
At a national level, the CMA found that retail margins had risen significantly since 2019, with the supermarket retailers following a similar trend of increased margins on fuel. The historic price leaders in the market—primarily Asda, but also Morrisons to some extent—had taken a less aggressive approach to pricing and had significantly increased their margins over recent years. The rest of the fuel retailers took a passive approach and followed that trend.
At a local level, the CMA found significant price differences between local areas, with lower prices at a forecourt typically associated with having a supermarket competitor nearby. I know that my hon. Friend is concerned about that and recently raised it with the Leader of the House at business questions, as he has done today in this debate by sharing Aimee’s experience.
On motorway pricing, the CMA found that drivers without access to fuel cards, which account for 20% to 25% of fuel sales on motorways, were paying significantly more to fill up at a motorway service area than they would elsewhere, due to limited competitive pressure.
As a result of those factors, the CMA found that drivers have been paying more than would otherwise have been the case. It is estimated that the financial impact of the 3% increase in average supermarket fuel margin from 2019 to 2022 resulted in a combined additional cost of around £900 million for customers of the four supermarket fuel retailers in 2022 alone. That is equivalent to approximately £75 million a month for this period.
While fuel prices are now a lot lower than at the all-time peak in July 2022, weakened competition persists. The CMA’s latest monitoring update in July this year estimated that the increase in retailers’ fuel margins compared with 2019 resulted in increased fuel costs for drivers in 2023 of over £1.6 billion. Weak competition is still failing consumers; that is hugely concerning. The price of petrol and diesel is an important issue. When prices are high, the impacts are felt by everyone. We expect all fuel retailers to pass on any savings at the pump.
As my hon. Friend said, to address these issues, the CMA made recommendations for the Government to implement an open data scheme for fuel prices, requiring retailers to share their prices on a real-time basis and allow drivers to be better informed on prices and easily compare prices, and to launch an ongoing monitoring function for the retail market to assess how well competition is working. The Government accepted those recommendations.
On the CMA’s first recommendation, as part of the Budget last week, we confirmed that we will implement a statutory open data scheme called fuel finder. It will require all retail petrol filling stations in the UK to report prices and when a fuel becomes unavailable within 30 minutes of a change. The data will be shared openly and freely to third parties so that it can be incorporated into their price comparison websites or apps, sat-navs and other consumer-facing products that consumers can use. Fuel finder will empower drivers to compare prices more easily and make more informed decisions on where to buy their petrol and diesel. That will increase pressure on fuel retailers to compete strongly to attract consumers by lowering their prices or improving their services at the forecourt.
The Government are committed to implementing fuel finder as quickly as possible. We will begin procurement for the fuel finder aggregator in early-2025. The Data (Use and Access) Bill that the Government have introduced will provide the legislative basis to set up fuel finder. Subject to parliamentary timings, we aim to launch fuel finder by the end of 2025.
On the CMA’s second recommendation, it will receive statutory information-gathering powers through the Digital Markets, Competition and Consumers Act 2024 to undertake the permanent monitoring function. We are aiming to commence those provisions by January 2025. The CMA will be able to assess and monitor the state of competition in the retail market, both nationally and locally, provide ongoing scrutiny of prices and advise the Government if further intervention is needed to protect consumers.
The transition from fossil fuel to zero carbon vehicles is likely to lead to further risks of weakening competition in the remaining fossil fuel-based road fuels market. The transition is likely to be felt particularly by less well-off consumers and those living in rural areas. The CMA will be able to monitor the market through the transition and benefit consumers by ensuring that the market continues to function properly.
The CMA will therefore publish an annual report on the state of competition in the sector, three shorter updates on prices, costs and margins, and information on price trends across the UK and over time. Taken together, fuel finder and the CMA monitoring function will reinforce each other in providing a new source of competitive pressure in favour of greater competition in the road fuel retail sector.
Tom Gordon (Harrogate and Knaresborough) (LD)
One of the interesting things brought to my attention by residents in Harrogate and Knaresborough is that while we are quite rural, being on the periphery of North Yorkshire, there is an aspect about being an area with tourists, along with higher housing and other costs more generally. When we are talking about trying to reduce fuel prices, can the Minister give any further information on what consideration will be given to regional and inter-regional inequalities in pricing?
Sarah Jones
The hon. Gentleman makes a good point. That is why we need to start monitoring the situation properly. When we all have access to that real-time data and can understand exactly what is happening—the CMA can be monitoring that and reporting to the Government—the Government can say, “Actually there is a more systemic problem here that we need to tackle. We need to make more interventions.” The Government stand ready to look to do those things, but the first stage of having the data available so that we understand properly what is going on will help us to do that.
Fuel prices are inevitably uncertain and sensitive to wider global factors, but our published impact assessment estimates that increasing transparency and encouraging competition between petrol filling stations could result in fuel cost savings for drivers totalling £7.7 billion over 10 years. That amounts to savings of 1p to 6p per litre at the pump. I am sure that my hon. Friend and others will agree that that would be welcome.
In addition, at the Budget the Chancellor announced that the Government are extending the temporary 5p cut to fuel duty rates for a further 12 months, until 22 March 2026. Alongside that, the Government will not increase 2026 rates in line with the retail price index, or RPI. Taken together, that is a tax cut worth £3 billion in 2025-26. The freeze in fuel duty will save the average car driver £59 in 2025-26. These actions have been welcomed by stakeholders such as the RAC and the AA.
Let me assure the House and my hon. Friend that the Government are committed to delivering for drivers. Our ultimate goal is to increase the levels of transparency for consumers and encourage fuel retailers to become more competitive. That way, consumers will send the clearest signal to them that they will not pay extortionate prices when given a range of options to choose from. We are confident that these measures will help facilitate a competitive road fuels retail market, increase price transparency and protect consumer interests. I thank hon. Friend again for securing this important debate.
Question put and agreed to.
Oral Answers to Questions
Sarah Jones Excerpts(3 weeks ago)
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Joe Morris (Hexham) (Lab)
The Minister for Industry (Sarah Jones)
We have made significant progress in developing a new industrial strategy and I am delighted to report to the House that we published a Green Paper on 14 October, setting out our plans for a modern industrial strategy. We have set our sights higher than the previous Government, we have thrown off their ideological shackles and we have worked in partnership with business and our colleagues across the nations and regions to set us on a path to a credible 10-year plan, delivering the certainty, drive and ambition that businesses need to invest in the UK.
Joe Morris
For 14 years, businesses in rural communities such as my constituency were ignored and neglected by the Conservatives in government. Will the Minister elaborate on how the industrial strategy will allow rural communities to share in the proceeds of growth?
Sarah Jones
The difference between a Labour Government and a Conservative Government is that we believe that growth needs to be felt in our communities, not just measured on a spreadsheet. I know that my hon. Friend is working hard in his constituency and is already campaigning on issues such as banking services, which are so important for our rural communities. He is right: the industrial strategy needs to be designed and implemented in lockstep with local leaders, mayors and devolved leaders across the country, alongside our wider plans for housing and skills, which of course will be part of the picture. I look forward to working with him on identifying the barriers to growth in rural communities so that we can break them down.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
The development of marine renewable energy is getting close to commercial deployment. If we are able to get it across the line, it will bring with it a supply chain that we can build and hold in this country, with a view to exports across the world. That would surely be a great result for any industrial strategy. What will the Government do to ensure that their industrial strategy helps marine renewables reach full commercial deployment?
Sarah Jones
The right hon. Gentleman makes a really good point, and I would be happy to have a proper conversation with him about it. Marine renewables are a huge opportunity for us. We can build the supply chains across the country and, of course, Scotland is uniquely placed to take advantage of that. I would love to have a conversation about it.
Greg Smith (Mid Buckinghamshire) (Con)
When it comes to an industrial strategy, in the Labour Government’s first few months they have effectively shut down UK virgin steelmaking capacity, with no commitments to primary steel in yesterday’s Budget of broken promises. Unlike the United States and the European Union, the Government have failed to protect our car manufacturers against Chinese state aid. They have massively increased the costs to the very drivers of industry—real businesses—of employing people. Should the Government not call it their deindustrialisation strategy?
Sarah Jones
The challenge we have is that we have inherited the worst living standards growth during a Parliament in modern history. We have inherited huge challenges that we have to overcome, but we are looking to the long-term with our industrial strategy—[Interruption.]
Sarah Jones
I do not know whether the hon. Member for Mid Buckinghamshire (Greg Smith) has been paying attention, but we are developing a steel strategy, which the previous Government failed to do, with £2.5 billion of funding. We put a boost of £2 billion into our car industry only yesterday in the Budget, alongside £1 billion for the automotive sector and money for life sciences. We are developing an industrial strategy for the long term for the first time and we will not follow the Conservative party, which let our industries suffer and get to the crisis point that we are now having to deal with.
Greg Smith
The Minister mentions the car industry. Yesterday, after the Budget of broken promises, talking about the industrial strategy, Mike Hawes of the Society of Motor Manufacturers and Traders said:
“Delivering that strategy depends on the UK being globally competitive. Additional National Insurance Contributions will put massive pressure on the automotive supply chain which is predominantly SMEs.”
He described the lack of substantive measures to support the new car market as “hugely disappointing”, concluding that,
“the cost will soon be felt in reduced UK investment, economic growth and jobs.”
With such dire warnings so early on, is this not more evidence that Labour just does not get business and that its industrial strategy is in tatters before it has even begun?
Sarah Jones
For a Government who do not get business, it is surprising, is it not, that we got £63 billion of investment through the international investment summit—twice what the previous Government managed after two years of planning it? The Government are working very closely with the automotive industry. We know that the global situation is very difficult and I talk to Mike Hawes very often, which is why we put £2 billion of funding into the Budget yesterday. It is also why we are working very closely with the sector to create the conditions we need to transition to electric vehicles and to protect our industry in a way that the previous Government, frankly, failed to do.
James Asser (West Ham and Beckton) (Lab)
The Minister for Industry (Sarah Jones)
We held, as we have said, an international investment summit on 14 October, 100 days after we formed the new Government. We secured £63 billion of investment, which is twice the level of the previous Government’s investment summit. The investment will create high-quality, high-skilled, well-paid jobs across the country, and represents a huge vote of confidence in this new Government.
Bill Esterson
As my hon. Friend quite rightly said, the Labour party is now the party of business without any question. Does she agree that the measures committed to in yesterday’s Budget on clean energy, carbon capture and storage and hydrogen—which were backed up, by the way, with a commitment from a Canadian investor of another £1.8 billion in offshore wind—show how much this Government are in tune with the business community? We are attracting investment and building on the investment summit, and we will deliver jobs for our constituents and our communities up and down the country.
Sarah Jones
I agree wholeheartedly with my hon. Friend. I also agree with the former Chancellor, Kwasi Kwarteng, in his article yesterday. I quote:
“Conservatives, like myself, should be honest”
and
“Reeves is cleaning up our mess”.
Mr Paul Kohler (Wimbledon) (LD) [R]
Bell Ribeiro-Addy (Clapham and Brixton Hill) (Lab)
The Minister for Industry (Sarah Jones)
In little more than 100 days in government, this Department and its Secretary of State, who is flying to Doha today, have set about delivering on the promises made in our manifesto. We have turned up the dial on growth and published our Green Paper on the modern industrial strategy, which will channel support to key sectors, work across our nations and regions with the private sector, and deliver the conditions for investment and good jobs. We have delivered a huge vote of confidence in the UK by securing £63 billion of investment at our international investment summit, boosted by investment ploughing into our aerospace, automotive and life sciences sectors, as announced in yesterday’s Budget. We have also kept our promises by publishing the Employment Rights Bill, which represents the biggest upgrade in workers’ rights in a generation. We are a pro-innovation, pro-worker and pro-wealth creation Government, and are investing all our time in growing the economy for the long term and turning round 14 years of failure.
Bell Ribeiro-Addy
A four-day week with no loss of pay has proven to have benefits for employers and employees alike, and a recent report by the Autonomy Institute and Alda suggests that it can have a hugely positive impact on the economy. The report concludes that Iceland’s economy has outperformed most of Europe since adopting a shorter working week, and now has one of the lowest unemployment rates. With even more UK businesses beginning a four-day week trial on Monday as part of the 4 Day Week Campaign’s autumn pilot, what assessment has the Department made of the Icelandic report and of the potential impact that a four-day week could have on UK businesses and our economy?
Sarah Jones
The Government have no plans to undertake any trials on a four-day week for five days of pay. It is for employers and employees to reach agreements that fit their specific circumstances, but we want to get the balance right and make sure that we work with employers and employees. That is why the Employment Rights Bill will support both parties to reach agreements, where they are feasible.
Sarah Jones
The hon. Gentleman oversaw the worst Parliament for living standards in modern history. We did not choose that inheritance, and we have made choices. Would he rather we did not compensate for the infected blood scandal? Would he rather we did not compensate the Horizon victims, for whom there was no money in the Budget, on his watch? Would he rather we did not invest in the health service? Would he rather we did not increase the minimum wage? Would he rather we did not support carers? Would he rather we made the choices that he made, such as cutting national insurance for workers when there was no budget for that? This Government are fixing the foundations, so that we can have a bright future for all our country.
Kevin Hollinrake
The Government’s choice was to hit businesses, and that is because there is not an ounce of business experience among them. Labour’s death taxes will hit farms and businesses. Families with a typical farm will have to find hundreds of thousands of pounds or see their farms broken up and sold. The Environment Secretary said 10 months ago that he had no intentions of putting death taxes on businesses. That was a broken promise, was it not?
Sarah Jones
I will not take any lectures from the Opposition, who said “eff business”. Conservative Members have some cheek to come at us when we are clearing up the £22 billion black hole that we inherited, and setting in train stability. I spent quite a lot of yesterday, as the hon. Gentleman would expect, talking to and having meetings with businesses about the Budget and its implications. We talked about the potential for growth, long-term stability, and changes that this Labour Government are making.
Steve Witherden (Montgomeryshire and Glyndŵr) (Lab)
Martin Vickers (Brigg and Immingham) (Con)
Although yesterday’s announcements may dampen businesses’ expansion plans, many businesses in my constituency and elsewhere find it difficult to expand because of national grid connections. What are Ministers doing to engage with the Department for Energy Security and Net Zero and National Grid to ensure that connections are available?
Sarah Jones
I am glad that the hon. Gentleman asks what we are doing to engage with the Department for Energy Security and Net Zero, because I sit across that Department and the Department for Business and Trade. The entire point of my role is to make sure that we join up the two Departments, so that we can crack some of these problems. The grid is No. 1 on our list.
Ian Lavery (Blyth and Ashington) (Lab)
Sarah Jones
I agree with my hon. Friend. It is essential that local communities see the benefits of landmark investments. I am pleased that Blackstone is investing £110 million in a fund to support local skills training and transport infrastructure. I am happy to have a conversation with my hon. Friend about what more can be done.
David Mundell (Dumfriesshire, Clydesdale and Tweeddale) (Con)
Farming and agricultural businesses employ thousands of people in my constituency, and they make a huge contribution to the local economy. Can the Minister set out exactly how yesterday’s Budget will help them to develop and grow?
Becky Gittins (Clwyd East) (Lab)
Sarah Jones
Yes, I will work with my hon. Friend. We are delighted with the £1 billion investment secured to transform the Shotton mill site. I think that a Labour Government in Westminster and a Labour Government in Wales can work together to deliver great things.
Josh Babarinde (Eastbourne) (LD)
Some 29% of jobs in Eastbourne, the sunniest town in the UK, are connected to the hospitality sector, but many businesses in that sector have expressed concerns about yesterday’s Budget, which UK Hospitality has described as the “latest blow for hospitality”. Will the Minister meet me and local hospitality businesses to discuss those concerns? I declare an interest as the patron of the Eastbourne Hospitality Association.
Lincoln Jopp (Spelthorne) (Con)
We have an anomalous situation in Spelthorne whereby people can use an oyster card to pay for six different red buses, but not the train. That is crippling small businesses and people going into London. Will Ministers in the Department use their combined might to lobby on my behalf and get me a meeting with the Minister for Rail, so that we can get Spelthorne into the correct zone?
Sarah Jones
I admire the hon. Gentleman’s ability to shoehorn in a question on a subject that is not in the Department for Business and Trade’s remit, but we are of course happy to help with his endeavours to talk to Ministers in the Department for Transport.
Marsha De Cordova (Battersea) (Lab)
Kit Malthouse (North West Hampshire) (Con)
We should all welcome the work of both Governments that resulted in the announcement of £63 billion of inward investment into the UK. However, since then, as a number of Members have pointed out, we have had significant new regulation in the labour market and massive new taxes on businesses. If any of those investors now change their minds, will the Secretary of State come to the House and inform us, please?
Sarah Jones
We will of course keep the House updated on the results of the investment summit, but the £63 billion, as I said earlier, was a massive show of confidence in this new Government.
Torcuil Crichton (Na h-Eileanan an Iar) (Lab)
I am grateful to the Minister and the Secretary of State for the work that they have put in to secure a future for the Harland & Wolff yard at Arnish in my constituency, and indeed at Methil, Appledore and Belfast. I understand that talks are commercially sensitive, but, as workers are anxious about their future, can the Minister update us on how the talks are going?
Sarah Jones
I thank my hon. Friend for his question and for the work that he is doing to represent his community. We are working extensively with all parties to find an outcome for Harland & Wolff that delivers shipbuilding and manufacturing in Belfast, Scotland and Appledore in Devon. I cannot comment further, as he says, due to commercial sensitivities, but we are working extensively with everyone to get the right deal.
Chris Law (Dundee Central) (SNP)
The International Court of Justice judgment from 19 July this year ruled that it is the duty of third-party states not to aid or assist Israel’s “unlawful occupation” of Palestinian territory. In the light of this, will the Minister tell us whether the Department for Business and Trade has obtained legal advice, or whether it is in the process of doing so, on the legality of the UK’s existing trade relations with Israel, and if it has, will he share it with the House, please?
Melanie Onn (Great Grimsby and Cleethorpes) (Lab)
Will the Minister meet me to discuss how the Government could further develop an industrial strategy to bring up to 10,000 jobs in the offshore wind supply chain over the next 10 years?
Sarah Jones
I would be delighted to meet my hon. Friend often and regularly, as we do, to talk about these matters. Of course, the offshore wind supply chain is incredibly important. We have two big announcements to that end, which she mentioned, in relation to Orsted and Greenvolt, and there is much more that we can do through the industrial strategy to keep that area growing.
Jim Shannon (Strangford) (DUP)
What discussions have there been with Invest NI in relation to supporting small Northern Ireland businesses in the digital evolution, to help them adapt and make improvements with digital technology to ensure the smooth running of their businesses?
Sarah Jones
Yes, indeed. I can reassure my hon. Friend that, on this Front Bench, there are Members, including me, who do have private sector experience, and who have run businesses. Of course we have had very strong relationships with businesses, both in the run-up to the election and now, and we will continue to build on those strong relationships for the benefit of all the people across our country.
Steel Industry
Sarah Jones Excerpts(1 month ago)
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Richard Tice (Boston and Skegness) (Reform)
I beg to move,
That this House has considered the steel industry.
It is a pleasure to serve under your chairmanship, Mrs Harris. I want you to imagine that you are standing at a railway station in deepest rural India. You look down at the tracks on the ground and you see those immortal words “Sheffield Steel 1895”. That happened to me six and a half years ago. It sent a complete shiver down my spine—a shiver of pride in what we have given to the world, what we have created, what we have achieved. For 130 years, those railway tracks have been there, yet fast-forward to today and we face what I believe is a potential catastrophe.
Let us just take stock of where we are. I think we are potentially within six to 12 months of having zero general steel-making capacity in the United Kingdom. Just think about that. I fear that the blast furnaces at Scunthorpe, owned by British Steel, part of the Chinese group Jingye, are very likely to close, and that would be an absolute disaster. Steelmaking, manufacturing, in the United Kingdom has halved in the last 10 years or so. We would be left as a complete rump. Think about it: we would be the only G20 nation without a blast furnace except Saudi Arabia and the only G20 nation with no general steel-making capacity whatever. I think there is a lesson in that.
Perhaps it is not so smart to lose all our steel-making capacity at a time when 71% of all steel manufactured around the world is made in blast furnaces. Even if all the electric arc furnaces that have been announced are built, which of course they will not be, we will only get to a balance, in 2050, of about 50-50. The majority of all new steel-making capacity around the world being built as we speak comes from blast furnaces. There is a reason for that. And here in the UK, imports of steel from the likes of China, India and Vietnam are soaring. Hang on—I thought we were supposed to be world leaders in steel, but 66% of all steelmaking around the world happens in nations that either have no net zero targets or have targets that are general and way beyond 2050.
Now that the truth has been told to us, which is that electricity prices in the United Kingdom are the highest in the developed world—in the House of Commons the other week, the Secretary of State for Business and Trade admitted to me that there was an issue with industrial electricity prices—my real fear is that the electric arc furnaces that have been promised down at Port Talbot, and potentially promised in Scunthorpe if the blast furnaces there close, will not actually be viable. If something is not viable and we are asking a firm to invest hundreds of millions of pounds in it, they will not build it—and that is before National Grid informs us, “Oh, in Scunthorpe we can’t get you a grid connection for the electricity that you need to run an electric arc furnace.” You genuinely could not make some of this stuff up. Because our electricity prices are so high, these electric arc furnaces are quite likely to be less viable than is the case when it comes to concerns about the viability of blast furnaces.
Five and a half years ago, I gave a press conference in Scunthorpe. I said back then that the Conservative Government should not sell British Steel to the Chinese. They ignored my advice—not for the first time and probably not the last—but we are where we are. We face catastrophe, for three critical reasons. The first is that steel is a strategic national interest. After food and water, steel is the third most important component of a modern civilisation. Without steel, we would have no internet, no cars, no buildings, no infrastructure—nothing. We would be back to mud huts; I do not call that progress. It is strategically important to be able to make the strongest steel. There are genuine concerns that if we have no blast furnaces, we will not be able to make primary steel. Some say that with new technology and direct reduced iron, the strength of steel produced in electric arc furnaces may, give or take, equal what can be produced in blast furnaces, but we cannot take the risk. We must have that capacity.
Hon. Members may say, “Well, why not have a bit of each?” My late grandmother, when faced with a choice of desserts, would say, “I’ll have a bit of each.” There is nothing wrong with that, but we cannot have nothing. For someone who likes desserts, there is nothing worse than having no dessert at all.
Four years ago, in the middle of 2020, we nearly ran out of paracetamol, which is pretty important. Why? Because it is all made in India. We make no paracetamol in the United Kingdom and the sun was not shining in mid-2020, as we all remember. It is all very well those who believe in free markets and globalisation to the detriment of everything saying, “Well, you can just buy it from elsewhere,” but what happens if the sun is not shining? What happens if there is some terrible event in the world and we cannot buy steel elsewhere? That exposes us, because steel is strategically important, so we must be able to produce it here in the UK.
The second reason why I think a potential catastrophe is facing us is the economic interest. There is a thing called the multiplier effect: if we make and manufacture things here in the United Kingdom with our own jobs and money, the wealth we create circulates around the economy. I call it bubble-up economics: when we create and make things, it bubbles up from the lowest point, and the money circulates around the economy. That is hugely powerful at a time when everyone is desperately talking about the need for growth. We will not get growth if we export all our jobs and money. We might buy the good that arrives here, but we do not benefit from the multiplier effect, and therefore we lose the power of growth.
Some will say, “Hang on. Tata lost lots of money over the last 10 years or so. It’s not viable.” Well, let us just take a look at its losses, shall we? Leave aside the one-in-100-year event of 2020, cumulatively, in the overall scheme of things—relative to the multiplier effect—its losses frankly amount to a decent round of drinks. Let us call it £100 million a year, give or take. Compare that to the size of the economy and the importance of the multiplier effect.
I would suggest to the House that it is vital that we keep steel manufacturing going in a sizeable way in the United Kingdom. Not to do so would cause a self-inflicted wound, driven by the main two political parties’ obsession with net zero. That is the reality. Net zero, and the increase in renewable energy capacity, is directly linked to the increase in our electricity prices, and to the fact that we are becoming ever more uncompetitive. The Tories started it, and now under the new net zero zealot-in-chief—the new Secretary of State for Energy—it is being accelerated.
We are promised that the bills will come down, but I was at an event last week with someone who is advising the World Economic Forum and the G20 nations about renewable projects, and he admitted—in a defining moment for me—that without subsidies and Government intervention, renewables cannot be viable. That means, by definition, that they are more expensive and that those who are obsessed with them in this country will not bring the bills down. At some point, there will be a day of reckoning.
The third reason why this is a catastrophe is what I call the community interest. We saw the devastation in the coal-mining communities in the 1980s; when I have been campaigning, I still hear people talk about that. That was absolutely devastating. The oil and gas industry is under huge threat at the moment because of net zero, which is again devastating. There is a huge loss of the multiplier effect, skills are disappearing and families are concerned.
In Port Talbot and Scunthorpe, there are not thousands but tens of thousands of jobs directly and indirectly dependent on this industry, which could disappear within 12 months. It is not just the jobs; it is the families, the partners, the spouses, the wives, the children. That makes hundreds of thousands of people devastated by this. These are seriously well paid jobs: the average value of a steel job is about 50% more than the average salary in the local area.
It is all very well saying that people can retrain, but if someone earning up there retrains and all of a sudden is earning down there, I do not call that progress—I call that going backwards. The truth is that this issue will have a devastating impact on those communities. I feel that the unions have let down their members and betrayed them.
A year ago, I wanted to go and talk to more than a thousand steelworkers in Port Talbot. I met a couple of brave union leaders in secret in a quiet room. I said I wanted to talk to everybody and tell them about the madness of what is going on but, oh no. The union leaders banned me from talking to the steelworkers and telling them the truth.
Here we are today, with thousands of jobs sacrificed on the altar of net zero in Port Talbot, with the risk facing Scunthorpe in front of us. Lots of people say, “Don’t worry, Richard. We’ll be a world leader in this stuff.” Really—a world leader? I suggest that the only things we will be a world leader in are naivety, stupidity and negligence. The truth is that behind our backs, other countries making steel, growing their economies and enjoying cheap energy are laughing at us. They cannot believe how foolish we are. They cannot believe that we are serious about destroying some of our finest manufacturing industries, but they will take it. They are benefiting and we are losing.
This is an absolute disaster. One might ask, “What can we do about it?” I have a plan and most of it is achievable by this Government. The first thing is that the Business Secretary has promised us a new steel strategy next March. I happen to know that that strategy is basically drafted and written, with just a few i’s to dot and t’s to cross. I have been told that that draft is very much there.
Richard Tice
The Minister indicates that I may be wrong. This is urgent and we cannot wait six to 12 months. We cannot run the risk of civil servants saying, “I’m sorry, but we haven’t got it done by March; it will be the summer.” I urge the Minister and her team to say, “Let’s get this out before Christmas.”
My five-point plan is first to take a strategic stake in British Steel to guarantee that the blast furnaces in Scunthorpe will not close. We cannot run that risk. Otherwise, if the electric arc furnaces are not built, we have nothing—niente, zip. The second part of my plan is to scrap the carbon taxes and the potential carbon border adjustment mechanism.
The third thing is to stop the dumping of cheap imports from nations such as China. That requires, if necessary, appropriate tariffs and protectionism. America is doing it to protect its own steel industry and we should do the same. Unbelievably, according to the House of Commons Library, which helpfully produced a 50-page report yesterday, just two weeks ago, far from increasing tariffs we had to reduce tariffs on imported steel because Port Talbot has closed. Seriously, you couldn’t make this up. It is absolute insanity that we are now reducing tariffs in order to import steel. With the long-term planning that should have happened under the Conservative Government, we could have worked out that if we shut Port Talbot we would be short of rolled steel. What are we going to do about it? That is what has gone on. So that is the third part of my plan.
The fourth part is to buy British. The Secretary of State for Energy Security and Net Zero wants more and more wind turbines, but as I understand it not a single bit of British steel is used in all those turbines, which all come from overseas. If we want more turbines—some people do; some do not—maybe we should make it a condition that we use British steel to grow our own economy with more jobs and more money. Those four things plus the fifth thing are all deliverable by this Government. That is what I urge the Minister to consider.
The fifth thing is the right thing to do. I accept that it is not going to happen, but if we want cheaper electricity and to be more competitive, the fastest way to do it is to scrap net zero. That would bring down prices. It would stop us wasting tens of billions of pounds and stop blighting our countryside with thousands and thousands of pylons, including in my constituency. The first four components of my five-point plan the Government can and should do to protect our steel industry, which is strategically vital. Not to do so is negligent to the point of criminality.
Lee Anderson (Ashfield) (Reform)
It is a pleasure to serve with you in the Chair, Mrs Harris. I thank my hon. Friend the Member for Boston and Skegness (Richard Tice) for securing the debate, and for making probably the best speech so far of this Parliament—it was absolutely fantastic. Government Members are harping on about the steel strategy. I can assure them that steelworkers will be frightened to death of that strategy, because it will cost jobs and destroy our steel industry and our communities. I fear the steel strategy.
In the 19th century, this great country of ours was the world leader in steel production. Over 40% of the world’s steel was made right here in this country. I do not live a million miles away from Sheffield—15 minutes up the road—and not far away from Scunny. They were great industrial towns that drove our economy and provided hundreds of thousands of jobs, including in the wider community. They built up communities, and it is a shame that the Labour Government seem intent on destroying even more of the few communities that we have left.
Our country was built on coal and steel. Throughout the midlands and the north, we drove the industrial revolution. We used to export steel and coal, and now what are we doing? We have gone backwards. China is making over 1 billion tonnes of steel a year; we are making about 5.6 million tonnes. China, by the way, is a world leader in renewables, yet it is still opening coal-fired power stations to make steel, which it can export all around the world.
If we think about it, we are actually carbon emission nimbys. We are quite happy to import steel and products made from steel that have been made with blast furnaces from 60 or 70 countries around the world, but we say that we cannot do it here. That is hypocrisy of the highest level. I have friends who work in the steel industry and they are seeing a real downturn at the moment —they are struggling. They are struggling to pay the bills and to make their business work. The industry is in terminal decline, I fear.
The collapse of the Port Talbot steelworks means that we are now the only advanced nation in the world that cannot make its own virgin steel. It is absolutely ridiculous. We have Russia at war with Ukraine, and we are living in uncertain times. Over the past few years and during the last Parliament, we saw the problems that we had with energy supply and our dependence on foreign states for it. Now we are doing more of the same with our steel. It is beyond comprehension; it is absolute madness. We are killing off our steel communities just like we did the coalmining communities back in the ’80s—I know because I was there. I saw the impact that it had, and it still has devastating consequences 40 years later. Those communities were killed off and they are still struggling. I live there and I see it day in, day out, yet we are going to get more of the same from this Government.
Look at the coal mine in Cumbria that we want to—and should—open to produce metallurgical coal that will then help in the production of steel, which we could blend and use in blast furnaces in this country. But we seem reluctant to do that. That coal mine would produce millions of tonnes of metallurgical coal and provide 500 to 600 well-paid jobs in an area that needs them, as well as more jobs in the wider community. However, we are quite prepared to import 3 million or 4 million tonnes of coal a year into this country, rather than produce it, use it in this country and hopefully export some as well. It is absolute madness.
My hon. Friend the Member for Boston and Skegness spoke about the high electricity charges that will mean high production costs for making steel. Look at Drax power station in North Yorkshire. The electricity prices coming from there are astronomical. That is a power station that burns wood. It used to burn coal from a coal mine just a few miles down the road, but we had this great idea in this country to import wood from trees chopped down in North America. We stick them on to diesel-guzzling cargo ships, send them over the Atlantic and then set fire to them in a power station in North Yorkshire. It is absolute madness, and it will drive up the price of electricity and subsequently drive up the price of steel production. It is beyond madness.
China is getting it right; not only is it a world leader in renewables but it is making steel from blast furnaces. China is right and we should be copying its so-called steel strategy. It seems to have got it right. I agree with the five-point plan proposed by my hon. Friend the Member for Boston and Skegness but I feel that it will probably fall on deaf ears. The madness will continue. Steelworks will continue to close down and we will continue to lose jobs. We will continue to destroy communities in our great country.
The Minister for Industry (Sarah Jones)
It is a pleasure to serve under your chairmanship, Mrs Harris. I congratulate the hon. Member for Boston and Skegness (Richard Tice) on securing this important debate, which I am glad that we are having. Let me be clear at the outset: the new Government were elected on a mandate to invest in the UK steel industry and turn around its decline, and that is exactly what we will do.
As Members on both sides of the Chamber have echoed, the UK has always been a proud steelmaking nation; it has a rich heritage stretching back to the industrial revolution. My grandad worked in the tinplate factory fed by the steelworks of Port Talbot, and I think most of us in this place have connections, one way or another, to steel manufacturing. Yet, as has been said, steel has been a neglected industry for many years, with crude steel production declining by more than 50% in the last decade alone. Of course, that decline was brought into sharp focus when it was announced under the last Government that the blast furnaces would be closed at Port Talbot.
This Government do not believe that decline is inevitable. The decline we have seen in recent years has been due to a lack of care from previous Governments, who did the bare minimum only when it was too late. We saw the insolvency of SSI—Sahaviriya Steel Industries—steelworks in Redcar in 2015 and the insolvency of British Steel in Scunthorpe in 2019, and we saw how close Tata came to closing its UK steel operations. That pathway risked jobs and emissions being offshored for the long term and risked making us heavily dependent on steel imports for our vital infrastructure and our energy and manufacturing sectors.
This Government are taking a very different approach. This week, we launched a Green Paper on our industrial strategy. For that to have the greatest impact, we must be clear-eyed about the sectors that offer the highest growth opportunities for the economy and businesses, but steel is a foundational industry for practically every other important industry, from energy to infrastructure. We know that it is a vital component of our economy and our ambitions for growth, which is why we also need a steel strategy to determine the best steps forward to rebuild this hugely important industry.
We need to lay out long-term policies and plans to ensure that the UK steel industry is not left behind as the world decarbonises, so last month the Government announced that we will bring forward a new steel strategy next spring. I hear the House’s impatience for that strategy and I understand it: there has been a long period of decline, and we need to turn that around. Given the £2.5-billion investment that we have committed to the strategy, however, it is right that we talk to experts and to politicians around the country, particularly those who have steel in their areas.
James McMurdock (South Basildon and East Thurrock) (Reform)
I thank my hon. Friend the Member for Boston and Skegness (Richard Tice) for securing this debate. If I may, I will read a message that I received from someone I know:
“This Westminster Hall debate in infuriating. Talk is cheap!”
I highlight that because we all seem to agree how important the steel industry is. I acknowledge the past and that not all of that lies squarely on the Minister’s shoulders. I ask her to include in her response the steps that the Government will take to secure that future.
As the hon. Member for Newport East (Jessica Morden) eloquently put it, there are advantages to the more advanced technologies, but, as clearly laid out by my hon. Friend the Member for Boston and Skegness, there are practical reasons why they may not become reality—and we need to deal with reality. We all seem to accept and agree—
James McMurdock
Apologies. We all agree that this is vital; will the Minister please lay out how it will become practical?
Sarah Jones
I thank the hon. Gentleman for his intervention and for reading out a message from somebody watching the debate. We all agree that it is time for action and that is exactly what the Government seek.
I will expand on our plans. The steel strategy will be developed and delivered in partnership with the steel sector and the trade unions, of course. It will work in lockstep with the Government’s industrial strategy. Our intention is to increase our UK capabilities, so that we can create a more vibrant, competitive steel sector. That will turn around the situation we inherited, where— I want to emphasise this—under-investment had resulted in dated infrastructure.
My hon. Friend the Member for Stockton North (Chris McDonald), who knows so much about the steel industry, made the point about the efficiency and economy of the new technologies, and why blast furnaces have struggled to make money for the businesses that own them in this country. British Steel’s blast furnaces were built in 1938 and 1954. Both the blast furnaces at Port Talbot were built in the 1950s. They have become incredibly unproductive because they have not been invested in. The new technologies are simply more productive. If we do not keep up with what the rest of the world is doing, we simply will not be able to compete in the market.
We inherited an industry on the brink. Nevertheless, within 10 weeks of coming into Government, we negotiated a better deal with Tata with better safeguards for workers and more money invested in their future. Our £2.5-billion fund for steel will ensure that we have a steel industry for the future. The Government’s ambition is to ramp up investment, strengthen our supply chains and create more well-paid jobs in the places they are needed.
We talk of primary steel. With the help of experts, we will review the viability of technologies for the production of primary steel, including direct reduced iron.
Greg Smith
The Minister just said that she will review the options. I hope this is a binary yes/no question: is there a ministerial direction in the upcoming steel strategy to include a commitment to virgin steel production in the United Kingdom?
Sarah Jones
I think I was fairly clear. We have been in opposition. We want to produce primary steel in this country; the previous Government got us to a point where that is almost impossible without huge investment. We are supplying £2.5 billion of investment and looking, quite rightly, at the best way to spend that to create a viable steel future for this country. We are looking at direct reduced iron as part of our steel strategy, which the previous Government did not do.
The UK’s ambition is to ramp up investment. Many hon. Members talked of the need to procure British steel in this country, and we are now in a situation where 95% of the steel procured by the UK Government for infrastructure is British, if the necessary type of steel is made in the UK. The issue is that we do not produce all the different and right types of steel, so we need to ensure that we use the Procurement Act 2023 as much as we can to drive economic growth in steel.
I disagree with the hon. Member for Boston and Skegness on whether the green agenda can drive up jobs—we think that it can. For example, the Korean company SeAH is building a factory in Teesside that will build monopiles, which are the big structures that go into the ocean and anchor wind turbines. It is currently building that structure with 30,000 tonnes of steel from British Steel. We want to get to a point where we are not only building those kinds of factories in this country but using British steel where we can to make the infrastructure.
At the moment, we do not have a factory that makes turbines on the scale that we need for floating offshore wind, but SeAH is building that factory because it has an agreement with RWE, which will be running the turbines that it builds in future. That green job development into wind and renewable energy is driving our ability to build a factory in Teesside to create hundreds of jobs to build those monopiles, and we are using British steel. That is the kind of future that we want to see through the steel strategy; we are looking at those opportunities to bring new steel companies into this country and to find ways to drive up production in this country.
I should address the issues holding us back, as they were mentioned in the debate. China and excess capacity is a huge issue that we should not underplay. China is now the biggest steel producer in the world and its unfair subsidies have led to massive steel over-production, which fuels global overcapacity and drives down prices. That is a global issue with local consequences that makes profitable steel production here in the UK much harder. That key global situation is helping to shape our future steel strategy and we will need to tackle that problem through things like the carbon border adjustment mechanism—CBAM—and ensure that we are working with a level playing field.
Energy prices were mentioned by many Members, and for too long British energy-intensive industries, including the steel sector, have been held back by high electricity costs. Again, I disagree with the hon. Member for Boston and Skegness: electricity prices are set by global gas prices and the problem is our dependence on fossil fuels, as well as the fact that we did not mitigate for that situation in this country at all. When all the prices shot up with the war in Ukraine, we were in a worse position than many countries around the world.
The British industry supercharger that the previous Government developed, which the hon. Member for Brigg and Immingham (Martin Vickers) mentioned, will bring down electricity costs for the UK’s most energy intensive industries, but we know that we need to go further. It brings down only 60% of costs and there is still a disparity. We believe that, in an unstable world, cheap home-grown green energy is the future. That is what will drive down prices, reduce our exposure to the volatile fossil fuel market, protect bill payers and strengthen our energy independence. Fundamentally, that is what will bring down costs in the long term.
Members also mentioned the challenges of decarbonisation. Tata and British Steel’s plans to invest in electric arc furnaces are driven by market conditions and the desire to reduce their carbon footprint—customers want greener steel. The UK is going to have a CBAM. If we were producing steel in the UK with blast furnaces, we would be massively inhibited because the EU is bringing in a CBAM, so the cost of exporting to the EU would be much higher. We have to deal with the world as we find it, which again is where we disagree with the hon. Member for Boston and Skegness. We cannot look back and try to re-create the past; we have to deal with the world as we find it, which means that we have to move towards those more efficient and greener energies.
The EU, where 78% of our steel exports went in 2023—that is worth pointing out—will bring in its carbon border adjustment mechanism in 2027. We rely on exporting a lot of the steel we produce to the EU, and we would be at a massive disadvantage were we to carry on producing steel from blast furnaces. We have committed to a UK carbon border adjustment mechanism, which will give UK businesses the confidence that, when they invest in decarbonisation and electrification, they will not be at a disadvantage. That is important.
On other issues mentioned by hon. Members, I should touch on Scunthorpe, because that is at the forefront of everyone’s mind. No one wants to see any job losses, and everyone wants to see the steel industry thrive. Through our strategy, that is what we want to do. For commercially confidential reasons, which I am sure hon. Members understand, I cannot talk about our conversations with the owners, but I reassure Members that we are having conversations all the time and that we are working unbelievably hard to get a solution for Scunthorpe and to give the certainty that the hon. Member for Brigg and Immingham talked about. I completely understand the issue with the instability of the current situation, but all I can say to him is that we are doing all we can to work with the company on what the future will be.
Martin Vickers
The Minister and I share a desire to see a thriving steel industry. On a couple of occasions in her reply, she mentioned wanting to halt its decline, as well as the production of the steel strategy in the spring. Can she give any sort of assurance that there will be no job losses at Scunthorpe until the strategy is produced? Then we can then work together to plan the way forward.
Sarah Jones
The hon. Gentleman will understand that I am not in a position to define what commercial companies do. While we are trying to do what we can, I cannot do anything other than say that we are working incredibly hard with the owners to ensure that we get to a point that we want to get to.
The hon. Member for Strangford (Jim Shannon) mentioned Harland and Wolff, and the same situation is true there. We are working hard to understand the situation and we are hoping for a resolution relatively soon.
Jim Shannon
Will the Minister be generous and kind enough to let us know about the situation now and what she hopes progress will be over the next few weeks, if she does not mind?
Sarah Jones
The process of selling the company is going through. That is a market situation, being dealt with in that way, so Government are not providing funding or anything such as that at this point. We are allowing the process to take its course, but we are obviously talking to all parties to do what we can to ensure that we get the right outcome. I have been talking to politicians from all four of the Harland and Wolff sites, as can be imagined, and there is uncertainty in each of those areas, whether that is in Scotland, Devon or Belfast. We are working hard to ensure the right outcome.
To close my remarks, in steel, not to mention the wider economy, the inheritance of this Government from the previous Government was nothing short of a travesty. We had more than a decade of lurching from crisis to crisis, with no clear plan to safeguard the future of a competitive domestic steel industry. This Government are determined to change that, making the steel industry in this country fit for the future so that it is not left behind in a decarbonised world.
The Government are on the side of Britain’s thousands of steelworkers. We have not talked about the other parts of the country where we also have steel production. Marcegaglia, which is in Sheffield, announced a couple of weeks ago that it is investing £50 million in a new electric arc furnace in Sheffield, so we have incumbents here in the UK that are doing well.
The Government are determined to ensure the future of British steel. We are on the side of Britain’s thousands of steelworkers and we are working closely with our trade unions, experts and others to develop our steel strategy. We believe that steel will forge our future, not just our past, and I look forward to working with all hon. Members in this place to develop a steel strategy that sets us up for the next 10, 15 or 20 years to come.
Draft Contracts for Difference (Electricity Supplier Obligations) (Amendment) Regulations 2024
Sarah Jones Excerpts(1 month ago)
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The Minister for Industry (Sarah Jones)
I beg to move,
That the Committee has considered the draft Contracts for Difference (Electricity Supplier Obligations) (Amendment) Regulations 2024.
As always, Sir Edward, it is a pleasure to serve under your chairship. This statutory instrument, which was laid before the House in draft on 30 July 2024, forms an important part of the Government’s commitment to accelerate the deployment of carbon capture, usage and storage. CCUS is critical to deliver clean energy and accelerate our net zero journey. As the Government recently announced, CCUS is vital as we enter into a new era of clean energy investment and jobs. By boosting this tried-and-tested technology, the UK has the potential to become a global leader in CCUS, delivering good jobs and economic growth for decades to come.
A critical element of the CCUS mix is the successful deployment of power CCUS—gas-powered electricity generators fitted with carbon capture technology. [Interruption.] It is a bit more complicated than I just tried to indicate, but that is the gist. Power CCUS will complement the roll-out of renewable energy, providing the secure, flexible, non-weather-dependent, low-carbon electricity that is critical for a reliable energy system and for achieving our mission of clean power by 2030.
The Government are committed to incentivising the deployment of power CCUS, and this statutory instrument will enable future payments to power CCUS plants under a business model called the dispatchable power agreement. The DPA is the contract framework to support power CCUS. It has been designed especially to incentivise investment in and the deployment of power CCUS in the UK.
Dispatchable power agreements are a type of contract for difference. Like contracts for difference, they use the electricity supplier obligation to fund support payments. The levy is calculated and managed by the CfD counter-party—the Low Carbon Contracts Company—and collected from electricity suppliers such as Octopus or British Gas, which can pass the costs on to their customers if they choose to do so.
In addition to the existing renewable CfD contract design, the DPA business model will provide an alternative payment based on a power CCUS generator’s availability. This availability payment is based on a generator’s availability in respect of electricity generation and carbon capture, and associated carbon dioxide transport and storage network costs. Under the DPA terms, payments will reduce proportionately to reflect any reduction in a generator’s CO2 capture availability—in other words, its capture rate—or generation.
A payment is made whether a generator dispatches power or not. This ensures that a CCUS power plant will run in response to market signals, ahead of unabated gas plants, but will not surpass cheaper renewables. This arrangement will strengthen our security of supply and ensure that a source of reliable low-carbon energy is available, but only when the wind does not blow and the sun does not shine.
This statutory instrument enables only certain types of payments under the renewable CfD and DPA contracts to be funded by the supplier levy. Any future support offer to a project will be subject to rigorous negotiations with partners. Any decisions to award support will be subject to value for money and subsidy control tests to ensure the best value for money for consumers.
The statutory instrument amends the Contracts for Difference (Electricity Supplier Obligations) Regulations 2014. The changes will allow the payments made under the DPA to be funded by the supplier levy by changing how the supplier levy rate calculation works in the regulations.
First, regulation 4 relates to the way that an electricity supplier’s daily contributions paid to the CfD counter-party are calculated. The statutory instrument amends regulation 4 to change the definition of “generation payments” so that the supplier obligation can be charged for payments relating to the activities of a dispatchable power plant fitted with CCUS technology—I hope everyone is still with me.
The statutory instrument includes amendments to take into account the electricity generation capacity made available by a generating station on a given day; a generating station’s achieved carbon dioxide capture rate or capture capacity on a given day; the CO2 transport and storage capital costs incurred from transporting such captured carbon dioxide; and, if required, the associated carbon dioxide transport and storage network shortfalls, proportionate to a DPA-supported generating station, that arose on that day.
Secondly, regulation 7 of the 2014 regulations sets out how the CfD counterparty estimates the quarterly obligation payment that electricity suppliers will be required to provide to the counterparty. The statutory instrument amends regulation 7 to ensure the consideration of matters related to a DPA-supported generating station, including the carbon dioxide transport and storage network capital costs and, if required, revenue shortfalls, and the amount of carbon captured.
Together, the changes allow a CfD counterparty to estimate and raise funds, and ultimately to pay a DPA-supported CCUS-enabled power plant. The existing payment calculation, based on the amount of electricity generated by renewable CfD-supported generating stations, is retained and unaffected.
In summary, the statutory instrument represents a positive step forward in the delivery of the Government’s ambitious CCUS programme and 2030 clean power mission. It will lay the regulatory groundwork to encourage the deployment of power CCUS and begin to unlock the great economic and jobs opportunities. I commend the draft regulations to the House.
Sarah Jones
I have a couple of points to make. The first carbon capture and storage commitment was made in 2009, I think, but cancelled in 2010. It was then set up again at some point in the mid-2010s and cancelled again. The shadow Minister referred to the explanatory notes; the key word there is “intention”. The intention was announced, but whether the actual funding behind it was available is a different point. That is where we disagree, so I say very strongly that the Secretary of State certainly did not mislead the House. I am glad to clear that up.
On track 2, we are working at pace to get things done. The costs of carbon capture are significant, as the shadow Minister knows, and we need to make sure that we spend money in exactly the right way and are as careful as we can be with what is public money. We are working with both projects—indeed, we are working on expansion in the existing track 1 allocations and on track 2—and trying to get to a point at which the cost of carbon capture comes down and we have a market that becomes self-sustaining over time. But that will take some time.
I thank the shadow Minister for his comments and hon. Friends and other Members for being here. The statutory instrument before us will incentivise the deployment of power CCUS and make a significant contribution to our CCUS programme and 2030 clean power mission. I commend the draft regulations to the Committee.
The Chair
Sorry, I should have asked the Liberal Democrat spokesperson whether she wished to contribute.
Draft Carbon Dioxide Transport and Storage (Determination of Turnover for Penalties) Regulations 2024
Sarah Jones Excerpts(1 month, 1 week ago)
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The Minister of State, Department for Energy Security and Net Zero (Sarah Jones)
I beg to move,
That the Committee has considered the draft Carbon Dioxide Transport and Storage (Determination of Turnover for Penalties) Regulations 2024.
It is a pleasure to serve under your chairmanship, Mr Mundell; it is also a pleasure to be on this side of the Committee Room for the first time.
The regulations were laid before the House on 30 July under the affirmative process. These are technical but important regulations that form part of the implementation of the economic regulation framework for carbon dioxide transport and storage established in the Energy Act 2023. Carbon capture, usage and storage—CCUS, as we call it—is critical to delivering this Government’s mission to make Britain a clean energy superpower and to accelerating our journey to net zero.
Last week was a historic week, as 142 years of coal-fired electricity generation came to an end. As one era ended, a new one began, as we announced £21.7 billion over 25 years for five carbon capture, usage and storage projects across two clusters. There are two transport and storage clusters: one in HyNet, in the north-west and north Wales, and one in the East Coast Cluster, in the north-east.
Given the potentially monopolistic characteristics of carbon dioxide pipeline, storage and transport infra-structure, it is appropriate to have a framework of economic licensing and regulation to prevent anti-competitive behaviours by infrastructure operators and to ensure protections for users and consumers of the networks. Under this framework, an operator of a carbon dioxide transport and storage network requires a licence, which allows the operator to charge users of the network a fee for delivering and operating the network. The licence will determine the allowed revenue that a transport and storage operator may receive, which should reflect its efficient costs and a reasonable return on its capital investment. The economic regulator, Ofgem, has oversight of charges and will determine whether costs are allowed to be passed on to users, in line with the agreed economic framework.
To ensure that the economic regulation framework operates as it should, Ofgem has powers of enforcement to ensure that licence conditions are adhered to and that there is appropriate redress for any regulatory breaches. Such redress includes the imposition of financial penalties by Ofgem on licence holders for licence contraventions, up to a maximum amount of 10% of company turnover. The regulations provide for how a company’s turnover is to be determined for the purposes of calculating the maximum amount of penalty that can be imposed.
The amount of financial penalty will not automatically be set at the maximum; the maximum penalty of 10% of turnover is a cap, not a target. Any penalty imposed should be at a reasonable and appropriate level, taking account of all the circumstances of the case. Ofgem is required by primary legislation to prepare and publish a statement of policy setting out its approach to enforcement and penalties in the carbon dioxide transport and storage sector. This statement of policy should include the factors and circumstances that would be considered in deciding whether to impose a financial penalty and in determining the amount of any financial penalty. Ofgem has consulted on documents outlining how it will conduct its enforcement activities. The consultation closed in early July; Ofgem issued its consultation response and published the final version of those documents in September.
To conclude, these are technical but important regulations, which provide clarity on what is meant by turnover when determining the amount of a financial penalty not exceeding the cap. The regulations represent an essential part of the economic regulation framework for carbon dioxide transport and storage—a regulatory framework that has been designed to overcome market barriers to deploying CCUS infrastructure in the UK and delivering our mission to accelerate our journey to net zero, while at the same time protecting the interests of users and consumers of this infrastructure. I commend the regulations to the Committee.
Sarah Jones
I thank both hon. Members for their comments. On how this is regulated and how it works, I should say that the two transport and storage models that we have agreed to this week are collaborations involving quite large companies—for HyNet it is Eni, and for the East Coast Cluster it is BP, Equinor and Total. They have each set up their own separate companies as a group, and the turnover will be determined according to the revenue made within that, rather than, say, the whole of BP’s revenue, so it will be related to the transport and storage.
If we have any concerns, there will be a process of engagement with the company at the earliest stages. It will not be that something terrible suddenly happens and there will be mitigation; there will be engagement between Ofgem and the transport companies, and there are ways for that to happen, so that we see can problems as they arise.
The 10% financial penalty is a cap, but that is not the full amount; there will be a decision on what the percentage should be—it might be less than 10%, or it might be 10%. The level will be set according to lots of different factors—for example, whether there are mitigations will be one determining factor in deciding how much the costs are. There is a framework within which this will be set, which I hope will reassure the hon. Member for South Cambridgeshire, although we can happily send more details about that.
I commend the regulations to the Committee.
Question put and agreed to.
Oral Answers to Questions
Sarah Jones Excerpts(2 months, 2 weeks ago)
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Yuan Yang (Earley and Woodley) (Lab)
The Minister for Industry (Sarah Jones)
I thank my hon. Friend for her question, and welcome her and her expertise to this House. As she knows, investment by private corporations was the lowest in the G7 for almost all of the last Parliament, and the new Government are determined to reverse that decline. That begins with economic stability, something every business we talk to is crying out for. It involves the development of our industrial strategy, the levers to encourage investment, the national wealth fund, the British jobs bonus and the Industrial Strategy Council, which will provide the infrastructure that investors can understand and deal with. Next month, we will host the international investment summit with 300 industry leaders, demonstrating our mission of long-term growth, and because there is not a moment to lose, I am going to Italy tomorrow to meet key Italian investors to the UK and show that Britain is back.
Yuan Yang
I thank the Minister for her remarks, and wish her the best of success on her trip tomorrow. One of Europe’s best-performing sites for foreign direct investment in the life sciences is the Thames valley, including my constituency of Earley and Woodley, and our local hospital trust—the Royal Berkshire NHS foundation trust—recently became the first in the country to be awarded for world-class excellence in its clinical research. Will the Minister meet with me, local life science businesses and hospital staff to discuss how to accelerate investment in our life sciences industrial cluster?
Sarah Jones
I thank my hon. Friend for championing such a vital sector—our most recent data shows that UK life sciences employs over 300,000 people, generating a turnover of over £100 billion. With the NHS back on its feet under this new Government, working hand in hand with life sciences, research institutions and others, we can drive the development of new treatments and help grow our industries. Of course, I would love to meet with my hon. Friend.
Robin Swann (South Antrim) (UUP)
The Minister has expressed the importance of life sciences. Can I seek her assurance that Northern Ireland is part of that trade mission as well, especially as it relates to my constituency? Also, regarding the Minister for Trade Policy and Economic Security’s statement about removing barriers to trade, can I ask this Government to ensure that there are no EU barriers to trade when it comes to promoting businesses in Northern Ireland? Those businesses want to thrive, flourish, and be part of this United Kingdom’s outreach in regards to business and investment across the United Kingdom and, indeed, the world.
Sarah Jones
Of course, Northern Ireland is incredibly important to our plans and to us. In opposition, many of us went to Northern Ireland and met with businesses. I certainly did: I met with the Chamber of Commerce and talked about the opportunities for the future in Northern Ireland. I will meet with the Secretary of State for Northern Ireland next week to talk about some of these issues, and I hope the hon. Gentleman will be reassured that we will do what we can to grow jobs, skills and investment and make sure there are no barriers to trade.
Adam Jogee (Newcastle-under-Lyme) (Lab)
Gregory Stafford (Farnham and Bordon) (Con)
The Minister for Industry (Sarah Jones)
China’s role in the automotive industry is growing, and that invites risks and opportunities. We are working closely with other Government Departments, as the hon. Gentleman would expect, to analyse how this impacts the UK. Where we need to act, we will do so, and any action taken on Chinese electric vehicles has to be the right one, including for our UK industry.
Gregory Stafford
I thank the Minister for her response, but could she outline the Department’s wider strategy on challenging China’s global monopoly on critical minerals, including lithium, much of which is extracted by forced labour?
Sarah Jones
I thank the hon. Gentleman for his supplementary question. As I said, we are working closely with our colleagues across Government to make sure we have the right intelligence and can make the right decisions where we need to act. He will be aware that other countries are introducing tariffs and taking a range of measures. Our sectors are very different from those of other countries—we are not the same as the US or the EU—and we need to respond in the right way when it comes to electric vehicles. For example, 80% of the vehicles we manufacture in the UK are exported, so our challenges are different.
However, the hon. Gentleman is right to raise these important issues, including the need to look at critical minerals and supply chains, and at how we can ensure we are getting as many parts as possible from countries with which we want to have a different relationship. That is why we have set up things such as the solar taskforce to ensure that when it comes to solar panels, for example, we are using the supply chains as best we can to make sure there is not a global monopoly and that we are economically secure as a country.
Greg Smith (Mid Buckinghamshire) (Con)
What we have this morning is another chapter in the growing theme of what the Government said before the election and what they are doing after the election being entirely different things. The Chancellor of the Exchequer talked in May about reliance on Chinese EVs undercutting British workers and leaving us exposed, but by July she was talking about the benefits of trade with China. What we have seen in this Chamber this morning is that, while the rest of the world—the United States, Canada, the European Union—is acting on Chinese dominance in the EV market, the United Kingdom Government continue to dither. What is it to be: clear action on behalf of the UK automotive sector, or continued dither and failing to make a decision?
Sarah Jones
I do not know whether the hon. Gentleman is aware that until recently his party was in government, and inward investment from China grew over four times since 2014, so I will take no lessons from him on these issues. The automotive industry, which I work with closely and meet regularly, has not asked for what he suggested—
Sarah Jones
No, it has not. The hon. Gentleman is chuntering again from a sedentary position. It has not asked for that. This is something we are monitoring. We will work closely with the industry and do the right thing, and if we need to intervene we will intervene. As I said, the UK’s economy and industry differ very much from those of other countries, and 80% of UK auto production is exported. It is not that we have the risk of EVs in the other direction. The hon. Member for Mid Buckinghamshire (Greg Smith) needs to recognise the part that his Government played in the development of these matters over many years, and be reassured that we are working closely with our colleagues to make sure we do the right thing.
Patrick Hurley (Southport) (Lab)
UK Steel Manufacturing
Sarah Jones Excerpts(2 months, 2 weeks ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Martin Vickers (Brigg and Immingham) (Con)
(Urgent Question): To ask the Secretary of State for Business and Trade to make a statement on the future of steel manufacturing in the UK.
The Minister for Industry (Sarah Jones)
The inheritance the Government received from the Conservative party was nothing short of a disgrace on steel: over a decade of lurching from crisis to crisis, with no clear plan to safeguard the future of a competitive domestic steel industry. This Government are determined to change that. We have been working hard over the summer to set a clear forward direction on steel and resolve a number of complex issues that were only made worse by the indifference of the last Government.
Steel has been one of my Department’s priorities since our first day in office. We are standing by our commitment to spend £2.5 billion to rebuild the steel industry. That is in addition to the £500 million for Tata Steel. The funding will harness public and private investment to secure jobs and boost growth. We will take action to improve the wider business environment for the sector, including reducing energy bills and enabling more green UK-made steel to be used in our infrastructure projects. The Government are clear, as the Secretary of State for Business and Trade, my right hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) has made very clear, that decarbonisation must not mean de-industrialisation.
Discussions regarding the transformation of Port Talbot have continued at pace over recent weeks, involving the company, the workforce and the Welsh Government. We are also in ongoing talks with British Steel in a similar vein.
More widely, in our first days in office we hosted steel union leaders to join us around the table and discuss our shared commitment to achieving a sustainable, profitable UK steel industry. The Secretary of State and I also met regularly with key industry stakeholders.
We know that this is not easy, but we are determined to create a brighter future for steel than the one we inherited.
Martin Vickers
I thank Mr Speaker for granting the urgent question. I will ignore the Minister’s political comments and focus on what is more important: the future of thousands of workers, in particular at the Scunthorpe works, part of which falls within my Brigg and Immingham constituency and where many hundreds of my constituents work.
There have been widespread media reports suggesting that coke will stop being imported from October, which would mean production would stop in Scunthorpe by Christmas. There are rumours concerning the fact that employees will be given notice very soon. That is obviously creating great anxiety among those directly employed by British Steel and those in the supply chain, which in northern Lincolnshire extends to many thousands of people and many businesses.
I accept that much of this is media speculation, but if you and your family are reliant on an income from British Steel or a business that supports the sector, it is a very worrying time. Many people who have worked in the steel industry all their lives, and people who know about the market for steel, have a genuine concern that turning off the blast furnaces would see the end, or at least the beginning of the end, of steel manufacturing, certainly in Scunthorpe and possibly more widely. If we allow Scunthorpe’s furnaces to close, we will become more dependent on world markets, and effectively the best outcome that can be delivered from that is Scunthorpe ending up rolling steel produced in countries across the world, which would leave this nation vulnerable to price and supply volatility. Unions have said that that would be devastating. Charlotte Brumpton-Childs, a GMB national officer, has been quoted as saying:
“Early closure of the blast furnaces at Scunthorpe would be devastating for the community and workforce”
—and so it would.
“Unions have been assured throughout the process that the blast furnace operations would continue throughout the construction of an electric arc furnace. There has been no consultation over an early closure.”
Indeed, when the Minister visited Scunthorpe earlier this year, she said—according to the Scunthorpe Telegraph, so it must be true—that the UK needs to maintain capacity to produce primary steel. Is that the Government’s policy?
Martin Vickers
I will bring my remarks to a conclusion, if I may, Madam Deputy Speaker, by saying that if the UK is to maintain a domestic steel manufacturing capacity, the Government must accept that there will always be a burden on the taxpayer.
Sarah Jones
I thank the hon. Gentleman for his questions. Let me say a couple of things in response.
First, the hon. Gentleman talked about being political. It is not being political to say that the last Government allowed the steel industry to decline; it is a statement of fact. It is also a statement of fact to say that they left a £22 billion black hole in our finances, and a statement of fact to say that the money they committed to Port Talbot came from the reserves that they had spent three times over. I am ashamed to tell the House that the £500 million was not real money: it was in the reserves that the last Government had spent three times over in the first three months of the year. In contrast, there will be real money for our investment in steel, drawn from the national wealth fund.
Secondly, the hon. Gentleman is, of course, right in his analysis of the concern and unease that people are feeling given the importance of these jobs, and about the worry they must be experiencing as a result of what they are reading. All I can say to him is that we are talking regularly to the trade unions, as he would expect us to, and to British Steel and the local community. I am sure he will understand that I cannot comment on those commercially confidential conversations. He also made a point about virgin steel that we made regularly in opposition. We are looking into how we can secure primary steelmaking in this country through our £2.5 billion investment in UK steel.
Greg Smith (Mid Buckinghamshire) (Con)
Thank you, Madam Deputy Speaker.
“British steel is integral to growth and prosperity”.
Those are not my words, but the words of the now Prime Minister less than a year ago.
“The drive for green steel must mean more jobs, not fewer.”
Again, those are not my words, but those of the now Secretary of State less than a year ago. During the election campaign, he said:
“We cannot…lose the ability to make primary steel.”
But now we see, quite clearly, that Labour’s plans for decarbonisation do in fact mean de-industrialisation, and that the drive for green steel will mean fewer jobs, not more. Under the last Labour Government output fell by 47%, and, similarly, the promises that this Government made just weeks ago to steelworkers in Scunthorpe, Port Talbot and Teesside, and across the country, have been broken.
For weeks the Government have allowed rumour and speculation about the future of British Steel to run rife, while thousands of workers question whether they will have jobs by Christmas. Contrary to what the Minister has said, when we were in government we worked to deliver a more sustainable, long-term future for the steel industry across the United Kingdom, including Wales, through our £500 million commitment to building an electric arc furnace in Port Talbot. Now we risk being the only G7 economy without the ability to produce virgin steel.
I ask the Minister the following questions. Has British Steel indicated to the Government that it will halt its import of coking coal later this year? If so, when did the Government become aware of that? Are they committed to seeing electric arc furnaces in Scunthorpe? What discussions has she had with the owners of British Steel about the possibility that it will switch to foreign imports from China to fulfil its supply chain obligations here in the United Kingdom? What meetings has she had with stakeholders, including Ben Houchen and the Welsh Government, regarding the impact of future announcements on other steelworks across the United Kingdom, including on primary steel production? Communities and supply chains across the United Kingdom need certainty from this Government.
Sarah Jones
It is hard to know where to begin in responding to that. The previous Government allowed steel to run down. The previous Government did not believe in an industrial strategy. The previous Government did not believe in boosting our supply chains. The previous Government did not understand the importance of the steel industry to our national security and the communities we serve across the country. This Government do understand the importance of steel: that is why we are committing £2.5 billion from the national wealth fund, on top of the £500 million set aside for Port Talbot, and we will develop a strategy that enables the steel industry to grow.
The shadow Minister knows that I cannot comment on commercial and confidential conversations that we are having. I can reassure him, however, that we are talking regularly with British Steel, that we are talking regularly with Tata, that we are in deep negotiations with them, that we are talking with the local community, that we are involved with the trade unions—something that the previous Government did not believe in but suddenly seem to think important—and that we will get the best deal for workers and for the steel industry.
It is a shame that we were not in government five years ago, because we are where we are with some of these conversations. The way the previous Government approached industry was to wait for things to get so dire that they had to spend millions of pounds of public money trying to booster something, whereas our approach is to build the industry up and put the right levers in place, and we will see success that way.
Liam Byrne (Birmingham Hodge Hill and Solihull North) (Lab)
President Biden has just vetoed the foreign acquisition of US Steel, because he understands that it is vital to have sovereign capability in ensuring the manufacture of virgin steel. The reality is that at the end of the last Parliament we were unable to establish clarity around that objective from the last Government. Can the Minister tell the House today whether it is the policy of this Government to seek to ensure that this country carries on with its ability to make virgin steel?
Sarah Jones
I thank my right hon. Friend for his important question. We believe very firmly that a successful steel industry is critical to a vibrant and secure future. Crude steel production in the UK has declined by over 40% since 2010; that is a great shame, and we will be trying to reverse it. Virgin steel is incredibly important, which is why we have the £2.5 billion fund. We are looking at direct reduced iron production and other possibilities for the UK. We are working on it at pace, and I am happy to talk further about our thoughts.
Madam Deputy Speaker (Judith Cummins)
I call the Liberal Democrat spokesperson.
Sarah Olney (Richmond Park) (LD)
The steel industry has been left in a mess after years of mismanagement. The abandonment of the industrial strategy by the previous Government has been a disaster right across our economy, but nowhere more so than in strategic heavy industries such as steel, which face many complex and interconnected challenges. We can all agree on the vital importance of steel production, whether that is in terms of national security or of providing the materials that we need for a green economy. It is equally clear that the steel industry needs to be supported to move towards greener methods of production and a more sustainable footing, while ensuring that jobs are protected.
The sector desperately needs the certainty of a new industrial strategy. Can the Minister give a clear timeline for exactly when we will see that industrial strategy? Can she confirm that when the Industrial Strategy Council is rebooted, it will be placed on a statutory footing through legislation so that it is properly empowered to support our industries in the long term?
Sarah Jones
I thank the hon. Lady for a very sensible and thoughtful list of questions. We will be putting the Industrial Strategy Council on a statutory footing, which is important. The points she makes about decarbonisation and support for the industry are really important. The previous Government supported the aims of dealing with the climate crisis and the need for decarbonisation, but they did not put in place any strategy to help anybody do anything on that front. We need a proper industrial strategy and, alongside that, a proper industrial decarbonisation strategy. How will our heavy industries decarbonise in a way that does not de-industrialise and does not mean that they shut up shop and go elsewhere? How will we make sure that we enable all these industries to thrive? The hon. Lady is right to say that it is not just about the steel industry. We are looking at a much broader range of industries by sector and by geography, to work out the best way to get this done in a way that protects jobs and protects our industry.
Bill Esterson (Sefton Central) (Lab)
Steel is a strategically important industry for this country, as my hon. Friend has made very clear, and I welcome her commitment that decarbonisation must not mean de-industrialisation. We must avoid the mistakes of the past. One of the mistakes made by the previous Government was the delay in developing grid capacity and grid connections. How are this Government working with British Steel and Port Talbot to make sure that the grid capacity and connections are in place to enable electric arc furnace production to be started as soon as possible?
Sarah Jones
My hon. Friend has hit the nail on the head, as I would expect him to. We face many challenges, but the grid is at the heart and soul of so many of them. When we met industry representatives in opposition, it was top of the list for everybody, and my hon. Friend knows that many companies are saying to us, “We’ve been told we can’t get a grid connection until the late 2030s.” This issue is a priority for us, and we are tackling it and working at pace. We have a whole range of policies to speed up the grid connections, to prioritise what we deal with first, and to work with the companies involved to make sure that we are going at pace. Steel is incredibly crucial, particularly in Scunthorpe, and we have to get it right.
Sir Gavin Williamson (Stone, Great Wyrley and Penkridge) (Con)
In order for most plants in the United Kingdom to make virgin steel, they need to be able to bring in coking coal. The Labour Government’s policy is to ban bringing in coking coal, which means that thousands of jobs will be lost. What is the Minister going to do to reverse that decision so that jobs can be saved?
Sarah Jones
I thank the right hon. Gentleman for his question. As I said, we are looking at DRI and other ways of making virgin steel that mean we can both—[Interruption.] I am happy to have further conversations with the shadow Minister, rather than shout across the House at each other. I am happy to have conversations about how we can make sure that we both retain virgin steel production and adhere to our climate commitments.
Torsten Bell (Swansea West) (Lab)
The steel industry is a cornerstone of the south Wales economy as a whole, and the Minister will know that there is concern right across the Swansea bay communities about these developments, and I am visiting the plant in Port Talbot tomorrow to hear more about them. Will the Minister give us reassurance that the hard work she is doing will continue to be hand in glove with the Welsh Government and local councils? They are working day in, day out to make sure that there is a future for the steel industry and all these communities.
Sarah Jones
I thank my hon. Friend and welcome him to his place. I can absolutely reassure him that we are working hand in glove with the Welsh Government and local leaders. I have talked to the Welsh Secretary, as has the Secretary of State, who is not able to stay for the whole of this UQ, because he has a meeting about steel. That is how important this issue is to us, and we will make sure that we keep those working relationships. I welcome conversations with my hon. Friend and will meet any other local people whom he thinks we should be meeting.
Sammy Wilson (East Antrim) (DUP)
I have some sympathy with the Minister’s comments about the last Government’s record. Of course, under previous Conservative Governments, tens of thousands of jobs were lost in aluminium, oil refining and steel as a result of the obsession with decarbonisation and net zero. Unfortunately, I do not think we will see a different approach from this Government.
The Minister promises an industrial strategy, but can she assure us that there will be provision for steel to have a supply of coking coal produced in this country and that damaging and expensive decarbonisation requirements will not further detriment the steel industry?
Sarah Jones
I thank the right hon. Gentleman for his question. Of course, if we do not take measures to decarbonise and tackle the climate crisis, the costs to this country will be infinitely higher. This is not a choice. [Interruption.] The hon. Member for Orpington (Gareth Bacon) disagrees, but we need to make sure we can decarbonise in a way that supports our industry to make that transition, which is exactly what we are doing.
The point of an industrial strategy is to lay out a plan so that the industry gets the support it needs, so that investors understand the plan and so that, by working together, we can make sure we decarbonise. The Government are supporting that where we can and pulling the levers we can. We are supporting the industry to do the opposite of what happened under the previous Government, which is grow.
Sarah Champion (Rotherham) (Lab)
It is a real pleasure to see you in the Chair, Madam Deputy Speaker. I thank the hon. Member for Brigg and Immingham (Martin Vickers) for securing this important urgent question.
Rotherham has a proud history of steelmaking, but I have been fighting against Governments for the last 12 years for it to have a proud future. Will the Minister commit to addressing the underlying issues, to making sure all Government procurement goes to British steel- makers, and to addressing the punitive business rates and high energy costs that are hampering our development?
Sarah Jones
I thank my hon. Friend for making those important points. Our energy-intensive industries are hammered by energy costs, which are at the heart of this. Although the previous Government provided relief, we need a longer-term solution. We need to bring down those energy costs. That is why we are pushing for clean energy by 2030, which will be cheaper, and why we want to produce more energy in this country so that we are not reliant on Putin or affected by international events.
I have talked about business rates, and my hon. Friend is absolutely right that we need to look at that. Government procurement is very important, so we are looking at our supply chains and all the levers of Government to see what we can do proactively to make sure that, where we can, we are making, building and using in the UK.
Nick Timothy (West Suffolk) (Con)
I do not think the Minister answered the question asked by the right hon. Member for Birmingham Hodge Hill and Solihull North (Liam Byrne), so let me repeat it. Do the Government consider the manufacture of primary steel to be a strategic domestic industry that must be protected, yes or no?
Sarah Jones
Well, the previous Government did not. We have a £2.5 billion fund and, as I said, we are looking at DRI to make virgin iron. To be clear, we are having to deal with a mess that we inherited. Virgin steel is important, and that is what we are looking at. I am not going to say to the hon. Gentleman right now that this is what we are spending our £2.5 billion investment on, because this is being worked on at pace. We will come back to the House as soon as we have something to announce.
Derek Twigg (Widnes and Halewood) (Lab)
The defence industry manufacturing base is, of course, vital to this country, not least in the engineering jobs it provides. We know that steel is crucial to building armoured vehicles and ships, for instance. It is very important that we have a regular and guaranteed supply of steel, and we want to see more UK steel used in defence manufacturing.
Sarah Jones
I completely agree with my hon. Friend, who has much expertise in this area. The Department is working closely with the Ministry of Defence and the Secretary of State for Defence to make sure we are maintaining our defence. We are building as much as we can in the UK, with as many contracts in the UK as we can. We are using the power of Government to deliver that.
Richard Tice (Boston and Skegness) (Reform)
The hypocrisy of this debate is utterly extraordinary. Everybody agrees that steel is of strategic national importance, yet the obsession with net zero of both main parties, led by the Conservatives, is leading to the removal of our blast furnaces by both British Steel and Tata. That obsession is killing our steel industry and steel jobs, and leading to our inability to produce primary steel. Over 75% of all new steel generating capacity in the world is in Asia, and over 90% of that is produced in blast furnaces. Our obsession with net zero—
Richard Tice
Given the obsession with net zero, will the Minister guarantee that if Tata is subsidised with more than £500 million to produce new electric arc furnaces, the money will be linked to the construction as opposed to Tata taking the money early and then not building the furnaces?
Sarah Jones
The hon. Gentleman talks about our obsession with decarbonisation and producing green steel, but we also have to go with the market. The market and big companies are now saying to us, “We want to buy green steel”. That is what they are demanding and what we will produce. If we do not, we will not be selling it on the same basis. We will use the money we are investing through the national wealth fund to develop a steel strategy that will enable us to bring new entrants into the UK, which the previous Government did not try to do, so that we can have a vibrant, competitive steel economy in the UK and create good, highly paid jobs in the green industries of the future. If we fall behind, others will come before us and take our jobs.
Matt Western (Warwick and Leamington) (Lab)
Everyone agrees that steel is a crucial strategic foundational industry for this country, but it suffers from very narrow margins. It is one of the least profitable sectors of all. In this country, we suffer from a real cost disadvantage because of energy prices. Other countries, such as France and Germany, have much lower energy costs. They have a lot of nuclear, which meets net zero requirements. Does the Minister agree that underlines the importance of why this country urgently needs an energy strategy?
Sarah Jones
My hon. Friend is absolutely right. We need to ensure we are producing cheap, clean energy in this country. As he rightly says, that means nuclear, as well as solar, wind, offshore wind and everything else in our armoury. This Government have been unbelievably proactive, with the Secretary of State for Energy Security and Net Zero ending the ban on onshore wind and agreeing to some of the solar panel installations we need. We had an enormously successful contracts for difference round that will allow floating offshore wind and other types of energy, and we are talking in detail about where we will take nuclear. Together, all those things mean that the country will have lower energy costs, that we can be more competitive and that our industry can thrive.
Mr Richard Holden (Basildon and Billericay) (Con)
The Minister was asked a question by the right hon. Member for Birmingham Hodge Hill and Solihull North (Liam Byrne), which was repeated by my hon. Friend the Member for West Suffolk (Nick Timothy), about whether this Government will commit to virgin steel making in the UK. At the third time of asking, will she commit to what the Secretary of State committed to before the general election?
Sarah Jones
I welcome the right hon. Member for Croydon South (Chris Philp) to his place.
As I have made clear, we have been landed with an inheritance in which steel has declined by 40% and we are in very late-stage negotiations in Scunthorpe and Port Talbot. We are dealing with the consequences of that, which the previous Government failed to do. We will be putting a £2.5 billion investment into steel, and we are working at pace looking at DRI, which produces virgin steel, and at other options. We are looking at how we can introduce competition and new entrants into the market. We will work a lot faster and harder than the previous Government, and we will ensure that the steel industry thrives.
Chris McDonald (Stockton North) (Lab)
The global steel industry is investing many billions of pounds in new green technology that is more productive than current steel technology. Does my hon. Friend agree that our plan for steel will allow us to attract that private sector investment here, in great contrast to the previous Government’s policy that saw our steel industry decline to a size smaller than that of Belgium?
Sarah Jones
My hon. Friend, who is an expert in this area and with whom I have talked many times, will know that I agree with him. We need to introduce new entrants into the market, to stimulate the market and to encourage competition. The previous Government had a hands-off approach until an industry was about to collapse, and then they suddenly had to intervene with hundreds of thousands of pounds of taxpayers’ money. That was completely the wrong approach. As it turns out, the hundreds of thousands of pounds of taxpayers’ money that the Government put aside for Port Talbot came out of their reserves, which they spent three times over and was not real money. This will be real money. We will develop a proper steel strategy, and I very much look forward to working with my hon. Friend on devising it.
Jim Shannon (Strangford) (DUP)
I thank the Minister for her answers. Whether we like it or not, we have to deal with the reality before us. She may be aware that KME Steelworks in Lisburn has reduced costs and its carbon footprint by introducing a new, on-site nitrogen generation system. What financial aid is available to other companies to help to meet their environmental goals when they are facing costs like never before and there is pressure on the industry?
Sarah Jones
I thank the hon. Member for that question. We need to be technology agnostic and look at what the new industries, the new developments and the new research are telling us. We are doing that, which means some companies taking risks, with the Government needing to intervene when we see a new market in need of support. We will have that approach in Government. We are technology agnostic—we need to look at what will work, what will make our country thrive, and also what other countries are doing.
Joe Morris (Hexham) (Lab)
The previous Government’s plan for steel was to pay half a billion pounds to Tata Steel to not make any steel for years, while placing thousands of highly paid and highly skilled workers at risk of redundancy with no guarantee of jobs in the future. Can the Minister reassure me that she is taking steps to secure the future of our strategic industries?
Sarah Jones
I thank my hon. Friend for that question. Steel is an incredibly important strategic industry for the UK and it will be saved under this Government from the decline that we saw under the previous Government. The £2.5 billion that we are investing alongside the £500 million for Port Talbot will ensure that our industry thrives. We are working closely with industry, the unions and local communities, and we will work with our regional metro mayors and others, to make sure that we have the right industries in the right places and that we see success where previously we have seen decline.
Aerospace Industry: Northern Ireland
Sarah Jones Excerpts(4 months ago)
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The Minister of State, Department for Business and Trade (Sarah Jones)
I thank the hon. Member for Strangford (Jim Shannon) for introducing this debate tonight. I had wondered who was going to intervene on him as he could not intervene on himself. I am grateful that several hon. Members did the job for him. I also want to thank him for his dedicated support for Northern Ireland’s remarkable aerospace industry, which is founded on strong engineering heritage and is rich in knowledge, skills, experience and technology. Indeed, as this is my first time at the Dispatch Box since I was given this ministerial appointment, I am delighted that it is to discuss and highlight the Government support for the Northern Ireland aerospace sector.
I can absolutely assure the hon. Member and the whole House that this Government will work tirelessly to deliver economic growth in Northern Ireland and across all corners of the United Kingdom, so that we can drive inward investment, enable British industry and businesses of all sizes to grow and prosper, and give working people more secure employment.
Gavin Robinson
I am grateful to the Minister for giving way. I congratulate her on her appointment and wish her incredibly well.
May I encourage the Minister to access the Royal United Services Institute report into defence spending in Northern Ireland? When she reads it, she will recognise that Northern Ireland to date has received one fifth of the UK average spend on defence per region around the United Kingdom. There is a huge opportunity for her to increase support and investment for Northern Ireland and for the industry at the heart of this debate.
Sarah Jones
I thank the right hon. Gentleman for that intervention and for adding to my reading list, which is already quite substantial, as I am sure he can imagine. Our wonderful civil servants are keeping us very busy with all the things that we need to read, but, indeed, I will look at that report, as he suggests, and am happy to do so.
Delivering an industrial strategy is at the centre of the Government’s growth mission alongside our goal of becoming a clean energy superpower. We want to create the right conditions for the green industries of the future to flourish, enabling those key sectors not only to transform the UK economy, but to become world leaders in their own right.
Aerospace is crucial to this growth mission, with investment in research and development key to delivering the next generation aircraft for sustainable flight. That is why I am very much looking forward to attending the Farnborough International Airshow tomorrow for the first time as a Minister. I will be meeting UK aerospace companies and see for myself the vast array of pioneering products and services being sold across the globe. I am hoping to see all the partners involved in the Spirit discussions tomorrow and to talk to them about this topic.
Jim Shannon
I understand that there is a tent at the Farnborough show that has a Northern Ireland section. I am sure that the Minister will attend that show, and have a chance to interact with the companies there. Sometimes people say that if Ministers go there, they get them for about 15 minutes. I suggest that she spends a wee bit longer there.
Sarah Jones
I am delighted that the hon. Member has intervened in his own Adjournment debate. I will be there at the UK stand tomorrow, and we will see what Northern Ireland has on display. I will spend as much time there as I can. I am there for the whole day, so I hope that I will spend some good time there.
As Members will be well aware, Northern Ireland has a long and impressive history in the aerospace industry. This Government are in lockstep with the sector’s ambitions to grow, compete on the world stage, and ease the transition to net zero flight. Today, the aerospace sector supports nearly 240,000 jobs, with almost half of those employees directly employed by aerospace companies. Some 5,000 of them are in Northern Ireland. The sector as a whole is worth some £30 billion. Despite all the achievements, we recognise that the past years have been challenging for the sector, with the chaos and uncertainty of the previous Government, and the global shocks of covid, the war in Ukraine and the disruption in the Red sea. We know that the impact of those issues persists.
Adam Jogee
I know that in a previous life the Minister spent a lot of time working in and on Northern Ireland, so we are listening very carefully indeed. Labour Members are rightly very proud of devolution, and what it has meant for all parts of our United Kingdom. What engagement has she had, and will she have in the months ahead, with the Northern Ireland Executive on this and associated issues?
Sarah Jones
I welcome my hon. Friend to his place in this House. A really important aspect of the way that the Prime Minister has set about government is his telling us all that we must work together much more closely on issues that affect the United Kingdom as a whole. That means working across Government Departments and across the nations and regions. We are setting up structures to do that. The Under-Secretary of State for Northern Ireland is already talking at length to colleagues, and we have had conversations across Government on these issues already.
Alex Easton (North Down) (Ind)
Thousands of people in my constituency of North Down work in the industry. Will she consider a visit to my constituency to visit those factories? It would be a great honour for us, and she would see at first hand what is going on. It would be greatly appreciated by the hon. Member for Strangford (Jim Shannon) as well.
Sarah Jones
I thank the hon. Member for his intervention. I am of course happy to visit whatever I can. One of the best ways of understanding the issues is to go and see things for myself, and I would certainly like to do that. The Under-Secretary of State for Northern Ireland has been in Northern Ireland frequently, and we went there a few weeks before the general election was called. It was incredibly powerful to see the ambition in the business community in Northern Ireland to get things moving and growing.
The industry faces resourcing constraints, and shortages of materials and capacity. That situation is forcing some major manufacturers to slow down their planned production rates. Given all those challenges, it is only right that we support aerospace manufacturers in Northern Ireland and across the UK, and the industrial strategy will be the cornerstone of that work. We believe that the strategy will grow our share of the global aerospace manufacturing market, unlock huge investment opportunities that will fuel research and development, and create new high-skilled, high-paid jobs across the economy, including in aerospace. The Government will work in close partnership with the aerospace sector, support clean growth and continue to develop joint Government and industry strategy through the aerospace growth partnership sector council—a partnership that reaches businesses and the research base in every part of the United Kingdom.
I am aware that the hon. Member for Strangford’s debate is focused on Northern Ireland, so let me turn to Northern Ireland in greater detail. First, I recognise his reference to Harland & Wolff. As he will be aware, my right hon. Friend the Business Secretary gave an update to the House this morning via a written statement, stressing the fact that we are working with Members, the Northern Ireland Executive, trade unions and other partners to support a positive outcome for all affected sites across the UK and for its workers.
Moving back to aerospace, as the hon. Gentleman said, there are at least 120 companies in Northern Ireland supplying to every major commercial aircraft programme, boasting expertise in everything from composite design and manufacturing to precision machining and more. As he also said, one third of global aircraft seats are made in Northern Ireland, as of course are the advanced composite wings of the Airbus A220 aircraft.
It is the week of the Farnborough international airshow, and a week in which we have announced over £100 million for cutting-edge new green aerospace technologies, so the hon. Gentleman’s debate has touched down with excellent timing, particularly as I recognise—we need to cover this—that there is of course concern about the expected change in ownership of the region’s largest advanced manufacturer, Spirit AeroSystems’ Short Brothers. Short Brothers is best known for its award-winning advanced composites technology, developed and deployed on the A220 wing. The innovative design and manufacturing technique received recognition in 2019 from the Royal Academy of Engineering, the highest honour awarded to an engineering project.
Shorts employs 1,500 people on the A220 programme, supported by £113 million through a repayable funding partnership with the Northern Ireland Executive and the previous Labour Government in 2009. The ability to manufacture a complete wing in one facility is a credit to those who work there. That builds on the legacy of more than 100 years of Northern Ireland aerospace. Airbus is now working on ramping up production, and announced in April this year that it would be increasing the production rate per month to 14 aircraft by 2026. With more than 550 orders to deliver, and the likelihood of further orders to follow, this provides great certainty for the company, its employees and the Northern Ireland economy.
On the acquisition of Spirit and Shorts, Boeing and Airbus announced on 1 July that they will acquire parts of the Spirit AeroSystems global business. Boeing plans to take nearly all of Spirit’s Boeing-facing business, mostly those parts located in the United States. That sale is, however, subject to the sale of certain other Spirit operations to Airbus. Airbus and Spirit have agreed, subject to final terms, that Airbus will acquire the A220 wing and mid-fuselage. These are built by Short Brothers at its A220 wing production facility and its other Northern Ireland sites.
Spirit plans to sell its remaining Belfast operations—the non-Airbus programmes—alongside its facility in Prestwick, to another company. These advanced manufacturing sites offer engineering centres of excellence with engineering-backed capabilities, which Spirit assures us will prove to be an attractive proposition for potential buyers. Commercial negotiations are continuing as the parties work through the details of the acquisition and work towards finalising terms, with an expectation that the transaction will close in mid-2025.
The Government are working with the Northern Ireland Executive to help to ensure the best outcome for Short Brothers and all its highly skilled and hard-working staff. We have a keen interest in seeing that any acquisition includes a commitment to develop Short Brothers and its supply chain and provides the best possible opportunity for growth in Northern Ireland. That is because the Government have a clear vision for the future of aerospace across the whole UK.
We are providing support for technology development for the next generation of aircraft and engines through the Aerospace Technology Institute programme, which provides collaborative funding to companies based in Northern Ireland and the rest of the UK. That includes the isothermal variable-volume infusion, or IVI, project that we announced earlier today at Farnborough international airshow—a £10 million project led by Short Brothers to produce lighter, more structurally efficient aerostructures, enabling the transition to new sustainable aircraft. The Government will also continue to work in partnership with the Northern Ireland Executive on opportunities for growth and investment.
In summary, the UK has a vibrant and hugely pioneering aerospace sector. It is a central cog in our manufacturing economy and will play a hugely important global role in decarbonisation and net zero, nurturing some of the highest-skilled jobs and most advanced technologies in the world. UK aerospace companies and their supply chains will be at the heart of our transformative industrial strategy, and I know the Northern Ireland aerospace sector will play a pivotal role in the success of the UK sector as a whole, and in the growth and success of UK manufacturing and industry.
Question put and agreed to.