Exiting the European Union (Energy Conservation)

Alan Brown Excerpts

Wednesday 18th November 2020 Commons Chamber

[Kwasi Kwarteng]

I think there are two different issues. Clearly, there are labelling issues, but the question that the hon. Gentleman is asking relates to market access. There is no reason, once the SI is on the statute book, that there should be any impediment to trade.

Amendments to retained EU ecodesign and energy-labelling legislation are required to ensure that that legislation can continue to operate legally within the UK from 1 January 2021. Amendments are also made to our 2019 EU exit SI to ensure that that continues to function as intended. New energy-labelling regulations for some products have come into force in the EU, and they require that suppliers of the relevant goods provide rescaled energy labels with their products from 1 November 2020. Retailers, however—this should be stressed—do not need to display those labels until 1 March next year. This SI ensures that the March 2021 requirements that would otherwise not become retained EU law still come into force in March, as intended.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

On retailers needing to display the new labels, does the retailer just swap one label for another, or is there some other process they need to go through come March?

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[Dr Whitehead]

I agree that the public are concerned about that, and we in this House should be concerned about it, because in a number of instances we can see that the period between the lapsing of the EU regulation and its replacement by UK-based provisions has been used, either accidentally or purposefully, to lose some of the protections in transition. Part of our job today is to make sure that what was there for our protection prior to EU exit remains there and continues for future purposes. On this occasion, I think—this SI is 118 pages long, so it is quite a read—

[Alan Brown]

It is 116 pages.

[Dr Whitehead]

The hon. Member quite rightly corrects me; it is substantially shorter than I thought.

The provisions appear to be consistent with what was there before and what is there for the future, but that does not cover all the issues, important though it is that we get that right. It was not just a question of checking that the original SI had done the job of making the transition safely into UK law. There was a period during which we were effectively bound to EU law, and a number of changes took place that were to be implemented during that period between the passing of the first SI and this SI being introduced. This SI therefore had to do a number of additional things, to incorporate those changes into UK law for future purposes.

In so doing, a number of issues have arisen, particularly in relation to Northern Ireland. The Northern Ireland protocol comes into question as far as those changes are concerned, as well as how Northern Ireland and Great Britain would be incorporated into the changes for exit on 1 January. The two things that have happened in the intervening period seem to throw up some difficulties, and I would be grateful if the Minister could comment on them.

The first is that the question of the status of the regulations has arisen as far as Northern Ireland is concerned, because Northern Ireland will now continue to be in the EU regulatory system for the purposes of the two directives and will continue to eco-label on EU badging. That appears to present a problem for the marketing of Northern Ireland-manufactured products in Great Britain. In the SI, those products have effectively been given leave to market in GB on EU labelling and efficiency bases, but with a clear marking of their origin, which is tracked into GB.

That issue may well have been resolved by this SI, but there also arises a problem the other way round. If goods are being marketed from Northern Ireland with EU eco-labelling on it and are subject to ecodesign regulations, it is important that those labels and the ecodesign standards are compatible within the UK. The UK Government have effectively provided an internal solution to that problem by ensuring that the new regulations on UK eco-labelling apply only to GB and not to Northern Ireland, and what comes in from Northern Ireland can be marketed in Great Britain without further additional labelling.

However, what about the marketing of Great Britain-manufactured and labelled goods into Northern Ireland? The SI mentions a possible solution to this, which I would like the Minister to comment on. It has been agreed that there should be a mark on the GB certification to allow those goods to be sold in Northern Ireland. I am not clear what that mark is, how it will be distinguished for the purpose of selling in Northern Ireland and how it will differentiate goods that are being sold from the EU in Northern Ireland, as opposed to being sold from Britain. That is particularly important because of goods from the Irish Republic.

As for the marketing of UK-manufactured goods in the EU, I expect that the UK will have to produce separate agreements on conforming to EU standards to market, and that the existence of a UK mark will not be sufficient to secure marketing arrangements. Can the Minister clarify that position and say whether the eco-labelling UK label will be sufficient for goods that are manufactured in the UK, but marketed in the EU, if those arrangements are in parallel? Would that be acceptable for marketing purposes, or will UK companies have to agree on an additional EU label, over and above the UK label, to secure those marketing opportunities? That is the first additional problem with which we must get to grips.

In addition, some of the changes in the directives issued between March and January are not due to be implemented until 2021. Although those measures should have passed into UK law between March and January, the UK Government opted not to include them in this SI, because they are not due to be implemented before we have left the EU. We may ask whether that is of any significance. Indeed, there is a question mark in my mind about whether or not it is significant, because one change that was made in the regulations prior to this period, and which therefore should have been implemented but will not come in until 2021, relates to lighting standards. It looks as if those who manufacture lighting products in Northern Ireland will have to apply further changes in lighting standards and eco-labelling in 2021, which will set Northern Ireland at odds with GB standards. As far as the UK is concerned, in Great Britain that element of EU law will not yet have been passed on at all, and it may or may not be in the future.

What plans does the Minister have subsequently to incorporate those changes into UK law, so that those standards will be the same? He will agree that this is not an academic point. There could be divergence between Northern Ireland and Great Britain on those standards, and that might take us further away from the simple question of putting on a mark, or providing a way leave.

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[Alan Brown (Kilmarnock and Loudoun) (SNP)]

I presume from your guidance, Madam Deputy Speaker, that you do not want me to try to push this to the full 90 minutes.

[Madam Deputy Speaker (Dame Eleanor Laing)]

Correct.

[Alan Brown]

I will do my best.

This sounds all very grand—"Ecodesign for Energy-Related Products”. I look forward to scrutinising and getting stuck into this legislation, but will it be about a cleaner, greener UK, or taking back control and leaving the EU? Well, no. There are actually 116 pages of legislation, nearly 100 pages of which are nice pictures of labels. Rather than taking back control, this is all about putting a Union Jack over what was formerly the EU flag on the labels on our appliances, which we all recognise, that tell us how energy efficient they are. The explanatory notes, at 10 pages, are nearly as long as the text in the regulations, which, again, says it all.

Noting what you said, Madam Deputy Speaker, about other important business coming later on, we have to ask: why is this legislation being debated in the main Chamber and not where SIs are usually done, which is in a Committee Room? It prompts the question of why the Government are bringing this legislation here anyway.

Will the Minister tell us whether a consultant was used to design these new labels and specifications included in the 100-odd pages, or was he able to do it in-house with civil servants? Did they come up with the new specification and the colour coding all by themselves, or did they have to go to someone external? Can he tell us what the advantage is of removing the EU language from the labels? Is that really necessary? In paragraphs 2.12, 2.15, 2.26 and 2.27 of the explanatory memorandum, reference is made to “fixing deficiencies” in retained legislation. Will the Minister confirm that no improvements or alterations have been made to coding and regulations other than, as has been already said, substituting references to EU legislation and EU bodies for references to UK bodies and adding a Union Jack to the labels, and that the measure just mirrors other regulations that have been incorporated, such as the power transformer amendment regulation? Does that mean there are no actual deficiencies in EU legislation to be fixed and that it is just about sorting UK legislation out before leaving the EU? If the Minister could confirm that, it would be good.

Can the Minister explain why there is just a one-year transition period for CE marking? As I tried to ask in my intervention earlier, for goods that arrive in the UK during that transition period but are not sold until later, when the regulations kick in for the new labels that must be displayed, will it just be a matter of the retailer swapping the label over to the new label without doing anything else, or will some other process have to be followed to provide certification?

Paragraph 10.1 of the explanatory memorandum states that stakeholders

“raised concerns about the limited timeframe being granted to implement the required”

changes. What has been done to help stakeholders with the timeframe, and what additional stakeholder engagement has taken place?

Paragraph 12.3 of the explanatory memorandum gives an estimate of the total cost to business under de minimis self-certification of £1.95 million. What is the total of all the various de minimis assessments that have come through the Minister’s Department? That £1.95 million cost itself is small, but if we keep adding up all these de minimis estimates, what is the estimated total cost to business of changes as a result of our leaving the EU?

Paragraph 2.25 of the explanatory memorandum gives details on compliance with the Northern Ireland protocol, which is good, but ironically, the UK Government seem to want to rip up that protocol, which was the whole point of the urgent question earlier today. Unfettered access for goods in Northern Ireland—for goods coming from Ireland and the EU, and for getting GB goods into Northern Ireland—would seem to be a really good advantage for distributors in Northern Ireland. Does that give Northern Ireland distributors an advantage over their GB mainland counterparts in business overheads and the checks and scrutiny they need to do?

Going forward, if there is a divergence in standards between the EU and the UK, how will the declaration of conformity for goods coming in and out of Northern Ireland to GB be implemented and checked? What discussions has the Minister’s Department had with counterparts in Northern Ireland?

It seems to me that even this simple replacement of labelling and updating of references to standards to comply with the EU—to make UK law valid and compliant as we exit the EU—is being left to the last minute. How are we supposed to believe that the UK is ready and okay to handle a no-deal exit, which the Government say will cause no problems whatsoever to business and transactions going forward?

As the hon. Member for Southampton, Test (Dr Whitehead) asked, what is the reality for GB goods being exported to the EU on exit? What arrangements are in place so that, going forward, these GB regulations that are coming into place will be accepted by the EU once the UK is a third country? Have any discussions taken place? Are any agreements in place, or is this all at the mercy of whether we get a deal or no deal? We do not have long left for that to be sorted out.

Let me conclude by asking the Minister this. Given that he is introducing legislation today that swaps flags and changes references from EU legislation to UK legislation while possibly missing key export issues that we need to understand, is he not embarrassed to be doing that from the Dispatch Box rather than in a Committee Room?

[Madam Deputy Speaker (Dame Eleanor Laing)]

Before I call the Minister, I thank the hon. Member for Kilmarnock and Loudoun (Alan Brown) for having pointed out what an interesting piece of legislation this is. Very rarely do we get a fully illustrated instrument like this before us. I have never understood energy labels, but I have a much better idea now than I ever had before. I hope that many people will go to the Vote Office and pick up this draft statutory instrument.

Alternative Fuelled Vehicles: Energy Provision

Alan Brown Excerpts

Tuesday 6th October 2020 Westminster Hall

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

I hope that I will not disappoint given that you were so keen to get to me earlier, Mr Betts.

I, too, congratulate the hon. Member for Warwick and Leamington (Matt Western) on securing the debate, as well as those who have contributed to it. It is quite clear that topic is important and needs a lot more time than the hour we have today. 

          We keep hearing about a green recovery in the UK being “world leading”, but for that to be a reality, we need coherent, interlinked strategies, and the policies to achieve them. That means the publication of the overdue energy White Paper, the national infrastructure plan, a heat decarbonisation plan, and a possible update to the transport decarbonisation plan. I hope that the Minister will provide an update on those and how they will be implemented, now that the Budget and spending review have been cancelled.

Although I will concentrate my speech on land transport, there are, as Members have said, opportunities for the production of sustainable aviation fuels—SAF—so will the UK Government provide the support that is needed to top up the private investment that is actually available so that we get a number of production plants up and running in the UK? Will the Government look at the renewable transport fuel obligation to further incentivise the use of SAF?

With road and rail, the main choices are electricity and hydrogen. Hydrogen is an obvious solution for HGVs, and it is part of the mix for trains and buses. That requires coherent hydrogen production policies. The Prime Minister’s announcement today about increasing the deployment of offshore wind is welcome, but that needs to be aligned with the production of green hydrogen. Blue hydrogen also needs to be part of the mix in the short term, which requires the implementation of carbon capture and storage. Will the Minister tell us when Peterhead will finally be given the proper backing to get up and running?

In the north-east of Scotland, Aberdeen has led the way with the introduction of 15 of the world’s first hydrogen-powered double-decker buses. The Scottish Government invested more than £3 million in that project, but another £8.3 million actually came from the EU. Where will the replacement funding come from for that type of scheme? For Aberdeen, another 10 hydrogen-fuelled buses will be procured, and they will be constructed by Wrightbus, protecting jobs in the UK. The Transport Secretary promised hydrogen bus-only town trials, but we are still waiting for the outcome. Where has he been, and when will the UK Government catch up with what is happening in Scotland? Will there be alignment with the manufacturers of hydrogen buses in the UK?

The Scottish Government have awarded £7.4 million to bus operators through the Scottish ultra low emission bus scheme. That will result in the manufacture of 35 electric buses by Alexander Dennis Ltd. Again, the UK is lagging behind on a proposed electric bus town. When will that go live, and will it result in orders for Alexander Dennis Ltd, too?

I welcome the fact that the UK Government are trialling the first hydrogen train in the world. That might make up for their dereliction of duty on electrification and the previous Transport Secretary’s obsession with hybrid diesel trains. The Scottish Government have published a real decarbonisation strategy with an end date of 2035, but Network Rail has only an interim programme in the UK targeting 2050. When will we get a final determination that is ambitious enough?

One simple ask on a hydrogen strategy is a starting point of £11.4 million for a clean fuel metrology centre in East Kilbride. Although we do not think about it, we actually need a measurement and calibration centre. That East Kilbride proposal would be a world first. Will the Minister update us on when BEIS will give the go-ahead for that centre?

We have heard about the UK being world leading on domestic electric vehicles but, in fact, it is not. As my hon. Friend the Member for Paisley and Renfrewshire North (Gavin Newlands) said, the UK needs to match the Scottish Government’s ambition. We really need to move on this. We need large investment. As hon. Members have said, we need a greater roll-out of the charging infrastructure network. I will tell the Minister how that can be paid for: cancel the plan for two nuclear power stations that is going to cost £40 billion. That will allow the upgrade in infrastructure, greater investment in renewables and a bright and green future, with a proper green industrial revolution.

[Mr Clive Betts (in the Chair)]

I now call Dr Alan Whitehead to speak for the Opposition—five minutes again, please.

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[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Nadhim Zahawi)]

It is a pleasure to serve under your stewardship, Mr Betts. I thank the hon. Member for Warwick and Leamington (Matt Western) for initiating this important debate, as well as other colleagues present: my hon. Friends the Members for Gedling (Tom Randall), for Bracknell (James Sunderland) and for Rother Valley (Alexander Stafford), and the hon. Members for Ceredigion (Ben Lake), for Paisley and Renfrewshire North (Gavin Newlands) and for Bristol East (Kerry McCarthy). Of course, I also thank my hon. Friend the Member for South Cambridgeshire (Anthony Browne) for his eight-point plan. I also thank the shadow Minister, the hon. Member for Southampton, Test (Dr Whitehead), for the collegiate way in which he tackles this important national endeavour.

The transport sector is a vital part of our future prosperity. As we recover from the coronavirus pandemic, we have an outstanding opportunity to speed up the development of clean technology, which I guess is the theme of today’s debate. For decades, we have talked about the phasing out of fossil fuels from motoring, and now that is actually happening as we make the transition to alternative-fuel vehicles. This country has led the way in developing clean growth. Between 1990 and 2018, our economy grew by 75% while carbon emissions fell by 43%, faster than any other G7 nation, so anyone who says that it cannot be done is wrong. We followed that by making an ambitious commitment in 2019 to end our contribution to global warming by 2050, making that the law of the land, and countries around the world then began to follow suit. Of course, none of us here underestimates the scale of that challenge. Although battery electric vehicles represent nearly 5% of the new car market in the year to date, transport is still the sector in the UK that emits the largest amount of greenhouse gases, accounting for 28% of emissions in 2018.

It is clear to me that we need to go much further and faster to decarbonise transport. Throughout 2020, we have been working on a new, overarching transport decarbonisation plan, covering all modes of transport, which we expect to publish by the end of this year. That plan will set out the path that we need to take to deliver our net-zero objectives, together with our partners across the transport sector. The need for rapid renewal of the road vehicle fleet with zero-emission vehicles is well understood and will deliver substantial emissions reductions over the long term. We are already investing £2.5 billion to support the transition to zero-emission vehicles, with grants for plug-in vehicles and funding to support charge point infrastructure, which many colleagues from across the country have mentioned today.

If we are to meet our targets, there is no time to lose. That is why we have consulted on bringing forward the end of the sale of new petrol and diesel cars and vans from 2040 to 2035, or earlier if a fast transition appears feasible, as well as including hybrids for the first time. As part of that consultation, we asked for views on what package of support will be required to enable the transition and to minimise the impact on both consumers and, of course, manufacturers—businesses that have invested so much in the United Kingdom. The consultation closed on 31 July, and we will announce its outcome in due course.

Our approach to delivering our transport decarbonisation ambitions is technology-neutral—my hon. Friend the Member for Rother Valley quite rightly reminded us of the need to remain technology-neutral. As the market develops, it is becoming clear that it may be favouring different technologies for different applications. Today, electric vehicles are a small but fast-growing percentage of cars and vans on the road. Such vehicles are being adopted as a key technology for decarbonising road transport, particularly light vehicles, and over 300,000 ultra low emission vehicles are now registered in the UK. A fit-for-purpose infrastructure network is required for the mass uptake of electric vehicles—that is the message I will take away from today’s debate. Many more charge points will be needed, and we want improvements to the consumer experience when using the network.

In fact, our vision is to have one of the best electric vehicle infrastructure networks in the world. That means a network for current and prospective electric vehicle drivers that is affordable, reliable, accessible and secure. The Government and industry have supported the installation of more than 18,000 publicly available charging devices, as colleagues mentioned, including more than 3,200 rapid charging devices, giving us one of the largest networks in Europe. Our home, workplace and on-street charging schemes, and the £400 million charging infrastructure investment fund, will see thousands more electric vehicle charge points installed across the UK.

[Alan Brown]

Will the Minister give way?

[Nadhim Zahawi]

I do not have the time; I have so much to try to get through and to share with the hon. Gentleman. I apologise.

In May, we announced our vision for a rapid charging network. Today, a driver is never more than 25 miles away from a rapid charging point anywhere along England’s motorways and major A roads. By 2023, we aim to have at least six high-powered open-access charge points at motorway service areas—open access is an important aspect of this in England—with some larger sites having as many as 10 to 12 charge points by 2035, which was the challenge that the hon. Member for Warwick and Leamington gave to us. We expect the number to increase to around 6,000 high-powered chargers across the network. This vision will be supported by the rapid charging fund, announced in the March Budget by our excellent Chancellor, as part of a £500 million investment over the next five years.

It is vital that consumers can charge efficiently and safely. We will consult on using powers under the Automated and Electric Vehicles Act 2018 to mandate minimum standards, such as requiring contactless payment for rapid charge points, to improve the consumer experience. While the electrification of transport will increase demand for electricity, we are confident that energy networks will support this transformation. Hon. Members heard from the Prime Minister today about our ambitions for offshore wind. The Government are working with the energy industry to plan for future electric vehicle uptake, to ensure that the energy system can meet future demand efficiently and sustainably. We have set a clear ambition for almost all cars and vans to be zero emission by 2050, in combination with the recent consultation on bringing forward the end-of-sale date. Setting long-term targets ensures that there is enough time to ready the electricity system for the mass transition towards cleaner, more efficient vehicles.

Colleagues mentioned the opportunities of hydrogen. We see a real opportunity, so we will follow up the energy White Paper with an ambitious hydrogen strategy, because hydrogen is a game changer. Hon. Members have referred to the Prime Minister talking about the Tees Valley announcement today. We have a much bigger ambition for both blue and green hydrogen going forward. The role of green hydrogen in transport will be set out in full in the transport decarbonisation plan, which is due for publication at the end of the year.

On low-carbon fuels, which are important to colleagues, we are clear that our transition to zero-emission vehicles does not mean that we can ignore measures to reduce emissions from conventional road vehicles in use today. Increasing the supply of low-carbon fuel will continue to help us to reduce the environmental impact of every journey. It is equally clear that we should not ignore the potential for low-carbon fuels to decarbonise those transport modes that are harder to reach through electrification. Low-carbon fuels have played an important role in reducing emissions already. Through the renewable transport fuel obligation—the hon. Member for Kilmarnock and Loudoun (Alan Brown) asked about this—we have seen average greenhouse gas savings through biofuels increase from 46% in 2008-09 to 83% in the latest available statistics.

The hon. Member for Warwick and Leamington asked about incentives for electric vehicle drivers. We are considering long-term future incentives for zero-emission vehicles alongside our consultation on bringing forward the end-of-sale date. In the meantime, the Chancellor announced in the Budget a further £530 million of extra funding to keep the plug-in vehicle grant for another three years.

The hon. Gentleman also asked what we are doing to ensure that people can access and pay for public charging points. That is a big focus for this Government. The system that we deliver—the system of systems, if I can describe it that way, as someone who was an engineer in a previous life—is important and will ultimately deliver on something that we both want to see happen rapidly.

Oral Answers to Questions

Alan Brown Excerpts

Tuesday 29th September 2020 Commons Chamber

[Alok Sharma]

The Vaccine Taskforce, which is part of my Department, has made incredible progress in securing access to the most promising vaccine candidates. We have invested to build our manufacturing capacity in Oxford, Essex, Scotland and north Wales, and we will continue to work with the UK bioindustry to determine how further to develop our vaccine capabilities across the whole country.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Of the Government’s planned six nuclear sites, so far we have the most expensive plan in the world at Hinkley, Toshiba has walked away from Moorside, and now Hitachi is giving up on Wylfa and Oldbury. Instead of relying on a Chinese state company to deliver the remining two nuclear sites, is it time for the Government to follow the private sector and ditch that outdated technology?

[Kwasi Kwarteng]

The hon. Gentleman and I have different views on that issue. It stands to reason that as we go towards net zero, we will need dispatchable power and a source of firm power. Most of the analysis we have seen suggests that nuclear has a part to play in that net-zero future.

Business, Energy and Industrial Strategy: Departmental Spending

Alan Brown Excerpts

Tuesday 7th July 2020 Commons Chamber

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

A few minutes cannot cover a Department that has responsibility for business recovery, energy, industrial strategy, climate change, net zero, getting the carbon budgets back on track and leading on COP26. It is not credible that one Secretary of State has all those responsibilities under his belt, as well as leading in the Cabinet on climate change.

If we look at covid business support, we are supposed to believe that only by being in the UK was Scotland able to access support for businesses. It is an absurd proposition that if Scotland were an independent country, somehow it would be the only independent country that could not access borrowing and fund support schemes to support its businesses.

It is no wonder that the Higgins report concluded that additional borrowing is required, rather than the financial straitjacket that Scotland is currently held in. Scotland can only borrow a maximum of £450 million of capital a year, limited to £3 billion overall, yet not that long ago we were hearing the Prime Minister promise us a £20 billion bridge to Ireland—a bridge that we do not want or need. We would far rather have control and have an £8 billion stimulus package for a green industrial recovery.

The business loans that have been administered by BEIS were welcomed initially. They were a good move at the start of the covid outbreak, but more needs to be done. Some of the loans need to be converted to grants, because businesses will not be able to afford to repay the loans, especially when the interest-free period ends. The Chancellor said that up to £330 billion would be available, but only £43 billion of loans have been accessed. That tells us that the scheme has not worked as it was designed to and some major rethinks are needed. The Government could use the outstanding moneys to further the green recovery.

A green recovery will need investment and commitments on a greater scale than anything we have seen to date, and it is shocking to think that BEIS only spends £1 billion a year on tackling climate change, yet spends £2 billion a year on nuclear waste at Sellafield. The nuclear waste liability is estimated to be £131 billion. What a legacy that is, yet the Government and BEIS are still infatuated with nuclear, despite the failing business models. Hinkley has a strike price of £92.50 per MWh for a 35-year concession, yet offshore wind is now at less than £40 per MWh for a mere 15-year concession. It is crazy, and it is time to abandon the nuclear sector deal, which is sucking another £190 million out of the Department’s budget. The nuclear fallout needs to be ended and there needs to be greater investment in renewables. If the Government are still arguing that we need a baseload, I would argue that they should be finding a route to market for pumped hydro storage, which would give the required baseload, rather than nuclear energy.

The contracts for difference scheme operated by BEIS has been welcome and has helped drive down the cost of onshore and offshore wind and solar. To make up for the period when the Government reneged on allowing those technologies to bid in the CfD process, I suggest they look at annual auctions. They also must remove the capacity cap on auctions going forward.

I also suggest that the Government should provide a ring fence for early-stage technologies within the CfD mechanism, to support Scotland’s wave, tidal and floating offshore wind sectors. That would allow Scotland and the UK to become true world leaders. We all know that the UK lost out in the manufacturing of onshore wind because of a lack of Westminster support, so lessons must be learned. Such technologies really do offer a green industrial revolution.

The same is true carbon capture and storage and hydrogen production: the funding of such projects at scale is required in order for us to become world leading. It is critical that funding is provided for the Acorn CCS and hydrogen-production project at St Fergus. The Committee on Climate Change recommends that a funding mechanism must be in place this year.

Support is also required for the oil and gas industry so that it can have a just transition to renewables and the net zero target for 2050. When are we going to see some of the £350 billion of Treasury revenues that came from oil and gas coming back to Scotland to support the sector?

To assist the green recovery, the CfD process should also be refined to incentivise the use of UK supply chains. It is ridiculous that BiFab has made redundancies when so much work could be fabricated at its yards. CS Wind in Campbeltown should also see greater benefits from the UK Government procurement system.

Another simple ask on which the Government have dithered is the installation of energy efficiency measures. It is cost-effective and can transform housing, both inside and out. It creates jobs and could reduce future energy demand up to 25%. The required funding has to be a minimum of at least the £9 billion that was pledged in the Conservative manifesto. We really need to see a programme and it needs to be greater than the rumoured £3 billion.

On facilitating green investment in infrastructure, there also need to be upgrades to national grid pinch points and a resetting of transmission charging, which right now punishes renewable projects in Scotland. We need greater investment in electric vehicle infrastructure, and to have a coherent strategy for a green recovery, we need to see the energy White Paper. We need a national infrastructure strategy to come forward. The heating building strategy, transport decarbonisation plan and net zero review all have to align and come together. The options for investment are massive; if the UK Government will not grasp them, they should give Scotland the powers so that we can continue on our green journey.

Electricity

Alan Brown Excerpts

Monday 15th June 2020 Commons Chamber

[Kwasi Kwarteng]

I think it is achievable, but what the hon. Gentleman is talking about is way outside the scope of this statutory instrument. As I have said, we are talking about flexible pricing; we are talking about the growth of renewables. This Government have committed to 40 GW of offshore wind power by 2030, which is a marked increase on the 30 GW ambition that we had. We are talking about nuclear as well—we have Hinkley Point. There are all sorts of generating power on the system. As I have said, we have a White Paper coming up, which talks about all these issues. Once again, with respect, I have to say that this is a very specific SI regarding the operation of the capacity market. The House will have plenty of time to debate other forms of electricity and power generation in the weeks ahead.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Is it still not the point, as the Minister has said, that there needs to be greater flexibility, that the market needs to evolve and that he could therefore still be more ambitious with these regulations? If he is tying changes to state aid in the regulations to effectively temporary measures regarding coronavirus, it is quite clear that that is about flexibility and how he could approach that. Could he not have been a bit more ambitious with what is in these regulations?

[Kwasi Kwarteng]

All I can do is repeat the answer that I have given. These regulations reflect our past discussions about the operation of the capacity market. He and I and others in this Chamber will have plenty of time to debate a new system. I ask the hon. Gentleman to have a little patience. We have a White Paper coming up and it would be precipitous to have an extensive debate about these issues in legislation ahead of the publication of the White Paper. He has asked many questions about that, and I advise him to wait for the debate on the White Paper.

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[Alan Brown (Kilmarnock and Loudoun) (SNP)]

The Minister is keen to keep reiterating that the capacity market is integral to the security of supply and that these regulations allow the capacity market to continue to operate, thereby providing that security. That is fine and I agree with that sentiment, but I think that also means that there is a reluctance to look at the wider issues. If we are talking about the security of energy supply and how important the capacity market is, there is an argument that we should look at some of the bigger pictures.

I welcome the fact that the changes result in compliance with state aid and allow the capacity market to function. On another positive, I welcome the move to reduce the minimum capacity threshold in the capacity market from 2 MW to 1 MW. The chief executive of the UK’s REA—the Association for Renewable Energy and Clean Technology—stated that this will

“make it easier for cutting-edge clean technologies to compete.”

That endorsement is clearly very positive. However, will the Minister explain what measures are in place to ensure that we do not get more diesel generators bidding into the capacity market with the lowering of the threshold? What we want is more reliable renewable energy.

Has an assessment been undertaken as to whether grid pinch points could cause any restrictions for these potential newer forms of renewable generation, particularly in Scotland? That is also critical, given that these regulations allow for multi-year contracts, in terms of the demand-side response. We need to make sure that there are no pinch points preventing new renewables coming on-stream.

Paragraph 7.3 of the explanatory memorandum details changes from the regulations with respect to capacity market units not getting paid by simply not charging batteries. In terms of managing demand, does the Minister think that it is acceptable that EDF was recently paid a reported £50 million to halve output from Sizewell B for four months? Surely there is a better way to manage long periods of low demand for energy. Has he assessed how fit for purpose the energy market is for future pandemics or long periods of low demand? It is not just about security of supply at the upper end—we need it at the lower end as well.

On the bigger picture, what is the Minister doing to facilitate the co-location of large-scale storage alongside renewable energy sources such as offshore wind? This and the removal of the capacity cap in contracts for difference options would complement the capacity market. That needs to be reviewed as well. I stress that pumped hydro-storage is a perfect way to manage fluctuations in high and low demand and thereby provide security of supply. When are the Government going to assist in a route to market for the big projects that are in the pipeline in Scotland? Pumped hydro-storage is much more effective than nuclear and it is much more cost-effective, so we need to forget the white elephant of nuclear and in particular the desire to get small modular reactors up and running.

I turn back to the demand-side response, which, as outlined, is an accepted use within the capacity market, and there are some changes in the regulations in this regard. What assessment has the Minister made in the reduction of overall energy demand if the Government set and implemented a proper energy efficiency programme to ensure that all properties achieve energy performance rating C by 2030? Does he accept the research findings of the UK’s energy research institute, which said that this could reduce energy demand by 25%? That 25% reduction in demand is the equivalent of six Hinkley Point C stations, so why, again, is there the obsession with nuclear? A reduction in demand would make a massive difference and minimise the need for the over-reliance on the capacity market to keep the security of supply.

On energy efficiency and reducing demand overall, the Committee on Climate Change stated that the UK Government should match the ambitions of Scotland, and the Business, Energy and Industrial Strategy Committee reports that as well, so energy efficiency is critical to lower demand.

[John Redwood]

I was interested by what the hon. Gentleman was saying about pumped-storage schemes, which are crucial to flexibility. I was interested that he also thinks they can be very good value. Has he got some in mind? How are the Government responding to his idea of pumped storage?

[Alan Brown]

There is an extension at Cruachan, and I forget the name of the other one up in Scotland that is in the pipeline. SSE is bringing them forward. The difficulty is with getting an agreement on a pricing mechanism, a bit like the stumbling block that has happened with tidal lagoons and talk about a regulated asset base for nuclear, even though I am against nuclear. It needs a review of that kind and a long-term support mechanism for supply. Clearly pumped-storage hydro provides security of supply over a long period of time, rather than, say, 15 years for renewables. I am asking the Government to look at finding that support mechanism.

[John Redwood]

Pumped storage is also very important for the short term, because, as the hon. Gentleman knows, it can be switched on very quickly when there is a short-term peaking issue, as with the Dinorwig scheme. It has a lot to recommend it in that respect.

[Alan Brown]

I think we are in agreement across the Chamber for once. Obviously the pumped aspect can use electricity when there is low demand, so electricity can be taken at a cheaper price and used to pump water up to fill the hydro, and then the hydro can be used when there is peak demand, so it works both sides of the equation.

Paragraph 8.1 of the explanatory memorandum references the European Union, but then is silent on the issue of leaving the EU, because it states:

“This instrument does not relate to withdrawal from the European Union”.

However, I would suggest that the operation of the capacity market does relate to withdrawal from Europe. Paragraph 7.1 confirms that capacity is also provided by “interconnection with other countries.” The right hon. Member for Wokingham (John Redwood) has given his view on that interconnection. The regulations do still relate to leaving the EU. Will the Minister tell us what the current position is? Once again, it looks as though there will be a possible no-deal crash-out on 31 December. How will the UK participate in the single energy market?

Today, I checked the UK Government guidance on trade and energy from 1 January 2021 onwards. It was last updated on 6 November 2019, but basically it puts all the onus on the energy operators. The Government advise:

“Although it is a matter for individual businesses to work out what steps they need to take, the government anticipates these may include…interconnector owners/operators will need to continue to work with their stakeholders and regulators to prepare alternative trading arrangements and updated rules…interconnector owners/operators will need to continue to engage with the relevant EU national regulators to understand their processes for the potential reassessment of their Transmission System Operator certifications.”

Given how important energy is for us and that interconnectors are an agreed integral part of the capacity market, why is the latest UK Government guidance still effectively saying that traders are left to their own devices looking ahead to this critical deadline of 31 December 31/1 January? What discussions has the Minister had with energy suppliers? Where are we on a free trade agreement for energy, looking forward?

It seems to me that the regulations are yet again part of a drip-feed approach to energy policy. This has been touched on by the shadow Minister, and the Minister alluded to the White Paper coming forward, but we need definitive timescales for when we are going to see the White Paper. It would be good to get a better feel for what the White Paper is going to be. Given that year delay, it would be nice to at least have a forewarning or an understanding of what is going to be in it.

We know that the economy has taken a massive hit because of coronavirus. Despite the title of the regulations, they only skim the effects of coronavirus. It has been rumoured that the White Paper will cover that, so it would be good if the Minister could say, “The White Paper will cover the effects of coronavirus and how we are going to re-stimulate the economy.” Hopefully, that will be with a green industrial revolution. I suggest that will need to include more onshore wind, more offshore wind and greater support for floating offshore. I have mentioned pumped hydro storage, hydrogen production and carbon capture, which are all vital strategies that we need the Government to get on with. I hope that we hear a bit about that and that the Minister can answer some of the questions I have raised. There is effectively nothing wrong with what has been brought forward, but it is just not enough; we want to see more.

[Kwasi Kwarteng]

We have had a very wide-ranging debate—far more wide-ranging than any I can remember on secondary legislation. I suggest that many of these subjects would be better discussed in a fuller debate, of which we will have many ahead of legislation in the autumn. The White Paper I hope will come soon. I had not realised it was the first birthday of its putative publication, but I am sure that it will come soon, and we will witness many debates about energy policy.

Let me touch on a few things that hon. Members raised. I do not share the fear expressed by my right hon. Friend the Member for Wokingham (John Redwood) about interconnectors. Going from 4% interconnector capacity to 9% is not indicative of an encroaching EU superstate or anything of that nature. Any Energy Minister who wanted to hit those net zero targets would be looking at interconnector infrastructure. He will know, as will my hon. Friend the Member for South Thanet (Craig Mackinlay), that Germany does have a problem with coal, but the majority of our interconnector capacity comes from France, Ireland and Norway, which are actually doing very well in terms of clean power generation.

With respect to the remarks by the hon. Member for Southampton, Test (Dr Whitehead) about T-1 and suspension, it will not be 12 months de rigueur; it will be up to 12 months. Each and every exemption will be looked at on a singular, case-by-case basis. It is not true that year-long extensions will be given without regard to the circumstances. On emissions, I think we are going to have separate legislation—potentially secondary legislation—regulating or capping emissions, so again, I ask him to be forbearing and patient in respect to legislation regarding emissions.

The hon. Member for Kilmarnock and Loudoun (Alan Brown) talked about the demerits of nuclear, about hydropower storage and about floating offshore wind, all of which are fascinating subjects but I am afraid are outside the limited scope of this statutory instrument on the capacity market. However, I would be very happy to engage him in debate about many of those fascinating and interesting opportunities and innovations in the energy sector.

The Government continue to believe that the capacity market is the right mechanism for delivering security of supply at the lowest—

[Alan Brown]

rose—

[Kwasi Kwarteng]

I happily give way.

[Alan Brown]

One point I raised that was specific to the regulations was about ensuring that we do not get more diesel generators bidding into the capacity market. I mentioned the reduction in the minimum threshold from 2 MW to 1 MW. Will the Minister address that point?

Rolls-Royce (Redundancies)

Alan Brown Excerpts

Wednesday 10th June 2020 Commons Chamber

[Gavin Newlands]

Yes, I could not agree more with my hon. Friend. I will touch on NMIS later in my speech, so I do not want to give too much away now.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Obviously, we must focus on the long term, but there is an immediate and short-term issue. Does my hon. Friend share my concern that some companies seem to have rushed to make decisions on closures when the furlough scheme has been on the go and available for a while now? I have a company in Kilmarnock, Wabtec, which has announced it is closing its plant, ending railway works at the site after more than 100 years. It refuses to consider the furlough scheme, and I do not understand why. It seems to me that Rolls-Royce might be having the same knee-jerk reaction. It could utilise short-term support, then look at the long-term future and see whether it could get long-term Government support.

[Gavin Newlands]

My hon. Friend makes a good point, but I would have preferred it if the Government had not signalled their intention to end the furlough scheme in October, because for many businesses, it will just push redundancies from earlier in the year to later. Perhaps the Government should look at extending it and phasing it out a bit more gradually than they have said. However, the scheme exists and is here until October, and too many businesses are not utilising the scheme to the maximum.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Nadhim Zahawi)]

I thank the hon. Member for Paisley and Renfrewshire North (Gavin Newlands) for securing this important debate today. I note that my hon. Friend the Member for Pendle (Andrew Stephenson), whose two sites in Barnoldswick are impacted—I know that some of those workers actually live in your constituency, Mr Deputy Speaker—and my right hon. Friend the Member for Sherwood (Mark Spencer), the Chief Whip, have both made representations to me on behalf of their constituents.

I would like to begin by stating that Rolls-Royce is one of our most important manufacturers in the United Kingdom. It is the world’s second largest manufacturer of large civil aerospace engines and our largest civil aerospace company, and it accounts for about 2% of all UK exports of manufactured goods. On 18 May, the Business Secretary spoke to Warren East, the chief executive of Rolls-Royce, who advised that he would be making an announcement on restructuring plans involving job reductions globally. Warren East explained that this latest restructuring was a difficult but necessary decision to respond to the changed medium-term market conditions for civil aircraft resulting from the covid-19 pandemic and, of course, to ensure the long-term sustainability of the company. Although still uncertain of the number of job reductions at any particular location, he indicated that all of its civil aerospace sites were likely to be impacted, and assured us that Rolls-Royce would notify the MPs in the constituencies that would be affected. Warren East was grateful for the Government’s covid-19 business support measures, which are helping the company in the short term. However, he made it clear that no Government support could replace the lost global customer demand and reduced flying hours. Rolls-Royce made a public announcement on the restructuring plans on 20 May. It said that it would reduce its global workforce by at least 9,000, and that about two thirds of the job reductions would be in the United Kingdom.

[Alan Brown]

Did the Minister challenge Rolls-Royce on why the UK is losing workers so disproportionately, what the reasons are for that and what it could do to reverse that decision?

[Nadhim Zahawi]

I am grateful for the hon. Gentleman’s question, and I will come to that a little later in my speech. Essentially, the number reflects the proportion of civil aerospace jobs here compared with Rolls-Royce’s global footprint.

Rolls-Royce has now commenced its statutory consultation process, and on 3 June it opened a voluntary severance scheme that will reduce the number of compulsory redundancies. The Government fully appreciate that this news will come as a crushing blow—a crushing blow—to the Rolls-Royce workforce. We understand what a worrying time this is for its proud and talented workers who, through no fault of their own—and we heard the hon. Member for Paisley and Renfrewshire North eloquently describe the workers in his own constituency—will now be affected by this decision.

We now know that reductions are planned across all Rolls-Royce’s UK civil aerospace sites, and last week Rolls-Royce confirmed that at least 700 workers will be affected in Inchinnan in the hon. Member’s Paisley and Renfrewshire North constituency. The site in Inchinnan currently has about 1,300 employees, who manufacture compressor blades for civil aerospace and defence products, as well as performing maintenance, repair and overhaul services. I would like to use this opportunity to assure the hon. Member that my officials are in regular dialogue with colleagues in Scottish Enterprise, and will continue to work with them to support not only the Scottish Government’s effort to help those affected, but the broader aerospace industry that he spoke about in Scotland.

--- Later in debate ---

[Nadhim Zahawi]

With respect to the hon. Lady, I completely disagree. At the beginning of this epidemic, when we were in the contain phase because the number of incidences was low, we had a triage at ports and airports for passengers coming from hot countries and places such as Wuhan and the rest of China, northern Italy and then the whole of Italy, Japan and of course Iran as well. But as we moved from contain to delay, because the virus began to spread in our communities, the scientific advice was very clear that having that sort of triage at airports was making very little difference. Now that we have the virus under control, and the numbers are reducing every single day and the spread in our communities is becoming very low, it is dangerous not to have a quarantine, because we could easily import the virus from other countries. We are reviewing this every 21 days, and, of course, working on the air bridges that we have heard the Prime Minister and the Secretary of State for Transport talk about for the future. That is important; lives are incredibly important, but so are livelihoods.

[Alan Brown]

Will the Minister give way?

[Nadhim Zahawi]

I will try to make headway, without abusing your patience, Mr Deputy Speaker. I have given way before, so now let me try to make some headway with my speech.

We will do all we can to support every worker affected at each location, including through the Department for Work and Pensions, Jobcentre Plus and, of course, the Partnership Action for Continuing Employment in Scotland.

Rolls-Royce has confirmed that it will work with those bodies and other regional organisations, such as local enterprise partnerships, local authorities and the unions, to help those who will be affected to get back into employment as quickly as possible.

I have also kept in close contact with my counterpart in the Scottish Government, Fiona Hyslop and Ken Skates in the Welsh Government, and Diane Dodds and the Northern Ireland Executive. During these challenging times, we have a weekly call as a team looking at the shocks of covid-19. I will be meeting with the Minister for Business, Fair Trade and Skills next week to have an in-depth discussion on the Scottish aerospace sector. At a national level, we are working closely with the aerospace industry, particularly through the Aerospace Growth Partnership. My colleagues were asking what support we will be delivering to assist companies through the pandemic and into recovery—

--- Later in debate ---

[Nadhim Zahawi]

I hope to address the hon. Gentleman’s point in my concluding remarks. Suffice it to say that the most valuable resource in any organisation—I have spent more years being in business than I have as a Member of Parliament and a Minister—is the human resource and that any leader, and chief executive, would be minded to think long and hard before behaving in a way that makes their people, the family who make up their business, feel as though their leadership are not listening to them.

In addition, we are supporting investments in new green aviation technologies, which will not only help us to deliver on our net zero commitments, but keep the UK at the forefront of the aerospace sector globally. We continue to back Rolls-Royce’s export campaigns, including, where needed, through UK Export Finance. The recovery of the aerospace sector is, of course, dependent on the wider aviation sector, as has been mentioned in this debate, and on getting aircraft flying again. The Government are committed to getting this crucial sector restarted. Led by my right hon. Friend the Transport Secretary, we are in active discussions with industry through an expert steering group, as part of an international aviation taskforce. The group has been instrumental in the development of the health measures guidance for passengers and operators, which my Department for Transport colleagues will be publishing as soon as possible. The border health measures that we spoke about earlier will be subject to review—currently this will be every three weeks—to ensure that they are in line with the latest scientific evidence, and remain effective and necessary. We are examining the possibility of alternatives to the international passenger self-isolation rules, including air bridges, where countries have managed the virus and we are confident in their measures for departing passengers—I spoke about that earlier. We will continue to work with industry on this concept and, ultimately, we will be guided by the science. I am sure the House will appreciate that the health of the public will always come first.

[Alan Brown]

I thank the Minister for giving in and giving way. Let us go back to the welcome support he outlined, which he is saying the Government are putting in for the future of aviation and cutting-edge technology, and being ahead of the world. If the UK is going to be so far ahead of the world and the Government are providing all that long-term certainty, can he explain why Rolls-Royce is still laying off so many workers in the UK? That still does not square. Let us go back to back the earlier intervention about small modular reactors. This is an unproven technology and good money is being thrown after bad. If we are looking at diversification, should it not be into green renewable energy? Should we not be looking to throw money into this in that way, to help sectors diversify, instead of looking at more nuclear energy?

[Nadhim Zahawi]

The hon. Gentleman makes a powerful point, but I did address it earlier in my speech—I hope he will read it in Hansard tomorrow morning.

I know that workers at Rolls-Royce who risk losing their jobs will be in a state of shock at the way events have unfolded. Just a few months ago, the sector was thriving. Apart from the financial impacts and worries, this news will take its toll on the overall wellbeing and health of individuals and families. I know that Rolls-Royce will act in a responsible way—colleagues mentioned corporate social responsibility—in assisting those affected and, as I have committed, we will also do all we can to support them.

I started by speaking about the importance of Rolls-Royce to the UK. Although this restructuring is hugely painful, it is intended to make sure that the company remains competitive and can return to growth in civil aerospace as we come out of the covid-19 challenge. Rolls-Royce remains committed to the UK, evidenced by their investment of over £2 billion in UK infrastructure over the past five years. We will continue to support the company and the wider UK aerospace industry to get back on its feet and back it into a position of growth, protecting high-paid jobs across the length and breadth of the United Kingdom.

The workforce was mentioned. The leadership at Rolls-Royce have made it very clear to us that they are being sensitive to their workforce, which is why they have introduced the voluntary scheme first of all. I will end by saying that we continue to look at what other countries are doing around the world in supporting aerospace and aviation, and we will review our support in the light of the global environment.

Oral Answers to Questions

Alan Brown Excerpts

Tuesday 3rd March 2020 Commons Chamber

[Amanda Solloway]

Yes, absolutely. We need to do that for research and development in all technologies, and I will welcome the opportunity to meet the hon. Gentleman in the future.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

The Minister says the UK is a world leader in offshore wind, but the reality is that too many manufacturing and supply chain jobs go abroad following the award of contracts for difference. Will she look seriously at including a quality assessment mechanism in the bid process to incentivise companies to use UK firms such as CSWind and BiFab?

[Amanda Solloway]

We are making sure that we get to 60% UK employment in manufacturing by investing in R&D. We are committed to doing that.

Construction Industry: Cash Retentions

Alan Brown Excerpts

Thursday 27th February 2020 Westminster Hall

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

I beg to move,

That this House has considered the use of cash retentions in the construction industry.

It is a pleasure to serve under your chairmanship, Mr McCabe. We all know the procedure for Westminster Hall—you know it better than I do, Mr McCabe. I move the motion and, at the end, everybody agrees that this House has considered the matter. In this case, however, the subject matter has been considered several times, yet for some reason the Government choose to do nothing about it, which becomes ever more frustrating. Small companies continue to suffer cash-flow issues because of late payment by retention or, even worse, non-payment, often because of insolvency of the larger company.

I intend to focus on the lack of Government action, but I should first explain what a cash retention is. An October 2017 report by the Department for Business, Energy and Industrial Strategy and Pye Tait Consulting defined a cash retention as

“a sum of money withheld from the payments of a construction sector project in order to mitigate the risk that such projects are not completed…to the required quality standard.”

Effectively, a retention is a cash bond withheld by the main contractor to cover any snagging defects in an agreed maintenance period of one to two years, and is intended as a lever to hold subcontractors to their legal contractual obligements to make good any defects in a set timeframe. The typical value is 5% of the works, which can create significant cash-flow issues.

At any one time, it is estimated that in England alone, between £3 billion and £6 billion of retention money is withheld. There is a logic to the origin of cash retentions, however, as an insurance policy or bond to ensure that work is completed to the desired standard. Of course, at one time, the only way to operate contracts was the use of cash, so there is a historical logic.

I fully understand, having worked in the construction industry, that retaining half of the retention money until the works are initially completed, and then releasing it, is a good incentive to ensure that work is done without leaving odds and ends. I also realise that during the snagging period, it can be hard to get a subcontractor back on site immediately to rectify snagging issues, because they have moved on to other projects and their resources are allocated elsewhere.

On the whole, however, the subcontractor will always return to remedy defects at their own cost, as per the contractual terms and conditions. As the retention money is seldom required to pay for snagging issues, it is due to be paid to the subcontractor at the end of a defect period. That is when subcontractors expect the money owed to them to be released.

History also shows us problems with cash-based retentions. Too often and for various reasons, the retentions are not released in a timely manner, or even worse, are not released at all. The most common reason for non-release is a company going into liquidation, but if the subbies fully comply with the terms and conditions in their contracts, why should their money not be released in a timely manner? Why, in the 21st century, are we dealing with unprotected cash retentions?

The worst recent high-level example of the effects of lost retentions was the collapse of Carillion in January 2018. Estimates of lost cash for companies are in the region of £250 million to £500 million. Just think how many small and medium-sized companies went bust as a consequence? How many training opportunities were lost because of the resulting cash-flow issues? How many subcontractors just decided that enough was enough, packed up and got out of the game?

[John Spellar (Warley) (Lab)]

The knock-on effect is even worse than that. The great long chains of subcontractors mean that a company that was not even involved on the site may be dependent on getting payment, for a completely different project, from the company in liquidation. The ripple effect, which basically undermines the ecosystem of our construction industry, has been considerable over many years.

[Alan Brown]

I fully agree with the right hon. Gentleman; that ripple effect can go all the way down to builders’ merchants and those who supply goods. It has a massive effect and we need the UK Government to do something about it.

I highlighted Carillion, and a further disparity is that for public sector contracts, for which tier 1 contractors are engaged, retention money is safe because the public sector will not go bust. Retention might cause tier 1 contractors some cash-flow issues, but their money is protected. In the case of Carillion, however, public sector clients will have retained Carillion’s retention money, which effectively included the subcontractors’ retention money. The subcontractors cannot get that money because they are legally creditors of Carillion. That shows an imbalance in the procurement process, because there is no regulation or guidance on how retention moneys are held or protected. If an employer enters into insolvency before the retention money is paid, the money is used to pay off creditors first—that is why changes are required.

In addition to the potential £500 million Carillion retention loss, the Specialist Engineering Contractors Group estimates that, in the last four years, £670 million of cash retentions has been lost to upstream insolvency, so for small and medium-sized enterprises, more than £1 billion has been lost in the system in that time. That highlights the need for Government action.

A micro-sized electrical business in the west of Scotland, which held a subcontract with Carillion, lost £40,000 in retention money when Carillion collapsed. Carillion’s client was the Ministry of Defence, which, ironically, did not hold retention money from Carillion. Carillion, however, took retention from the guys working for it. That subcontractor was lucky to survive, but could only do so by using reserves to plug the shortfall, cutting back on training, and cancelling plans to take on an apprentice. That single example shows the current imbalances in the procurement system and the impracticalities of using cash retentions.

The research paper “Retention in the Construction Industry”, published by BEIS and Pye Tait Consulting, found that 44% of the contractors surveyed had experience of retentions not being paid in the previous three years due to insolvency. In addition, 50% of contractors had their cash flow affected over the previous three years when their retentions were held, while they did not hold retention money themselves. Looking at the issue in the round, half of solvent contractors still suffer cash-flow issues because cash retentions are withheld. It should be noted that in more extreme cases, retention money is withheld for years. Why, in the face of such blatant evidence of those harmful effects, have the UK Government not taken action?

To illustrate the scale of the problem, the credit management company Creditsafe recently reported that 22 construction companies went bust in January 2020 alone. A further 158 firms were involved in varying stages of liquidation. Creditsafe predicts 4,000 construction insolvencies in 2020. That underlines the need for action.

Beyond the cash-flow issues, additional effects of withholding retentions include further insolvencies; job losses; cuts to training budgets and the inability to take on new apprentices; resources being wasted to chase up late payments, which leads to higher overheads for the company, an impact on productivity and unpaid hours for a non-chargeable activity; a possible inability for some companies to bid for other retention-based contracts or to expand because of cash-flow issues; and, if pressure bites, a desire to cut corners in other jobs to try to claw back money. Following the Grenfell tragedy, Dame Judith Hackitt’s “Building a Safer Future” report said

“Payment terms within contracts (for example, retentions) can drive poor behaviours, by putting financial strain into the supply chain. For example non-payment of invoices and consequent cash flow issues can cause subcontractors to substitute materials purely on price rather than value for money or suitability for purpose.”

There is of course a human element to this, because cash pressures bring personal stress. An industry survey before Christmas revealed that 90% of SME owners and senior managers were experiencing mental health issues, ranging from stress and anxiety to suicidal thoughts. Cash-flow issues clearly contribute to that stress.

[John Spellar]

Is there not an additional factor here? We have seen this: in any upsurge in demand, the construction industry has to go abroad for companies and skilled labour. The United Kingdom economy suffers a real loss in capacity, which impacts on private and public contracts, so the Government and in particular the Treasury should have a real interest in resolving this. Unfortunately, there does not seem to be much of a sense of urgency about solving it.

[Alan Brown]

Again, I agree with the right hon. Gentleman’s intervention, and I thank him for it. Apart from the skills issue in the UK, it is another reason why we use labour from abroad, as he said. Also, we have relied on EU labour, but now the UK Government are ending free movement, so that will cause another issue and certainly underlines why we need to resolve the matter.

If the late release of retentions is such an issue, why do the sub-contractors not do something about it, such as adjudication or arbitration? They are caught between a rock and a hard place—they need their money, but they are often frightened to rock the boat, perhaps losing a vital pipeline of work from the contractor they are in arbitration with. That was the case for a local contractor in my constituency who approached me, as the MP, on the issue of cash retentions.

The processes also cost money in terms of resource time, often valuable resource. Therefore, it is not as easy a process for sub-contractors to follow as Ministers have suggested in the past. According to the recently published Government response to a consultation, the average cost borne by firms in adjudication over the past five years is £28,000, which is cost-prohibitive for small companies.

[Mr Philip Hollobone (Kettering) (Con)]

I congratulate the hon. Gentleman on securing this debate and on his superb speech. Brian Griffiths of Griffiths Air Conditioning in Burton Latimer wrote to me on exactly that point:

“When monies are held for long periods (often years), SMEs simply do not have the time, resources or legal skills to chase or recover, and have to take it as loss.”

Is Mr Griffiths not spot on?

[Alan Brown]

He is absolutely spot on—I thank the hon. Gentleman for his intervention, which illustrates the point that I was making. For the record, I think it is the first time ever that he has said he is enjoying the speech I am making.

I stated that there is a historical logic to the origins of cash retentions, but there is no logic—and plenty of history—to UK Governments ignoring evidence and recommendations that time is up for the use of cash retentions. As long ago as 1964, the Banwell report, published through the Ministry of Public Building and Works, stated that:

“Where sensible methods of selecting contractors are used, the entire elimination of retention moneys could…be accomplished without any unreasonable risk”.

The report also suggested as an incentive that this

“might well lead to a reduction in tender prices.”

That possible carrot was not enough for the industry and the Government to take action.

A further 30 years down the line, in 1994, we had the Latham report. This was a joint construction industry and Government report that recommended that cash retentions should at least be protected in a trust account—recommendation 27 of the report. We have a tenancy deposit scheme to protect individuals in the private renting sector, and yet for some reason there has never been the will to do something with the deposits, in effect, in construction.

Why have delays continued for nearly another 30 years since the Latham report? In 2002, the Trade and Industry Committee looked at the matter of retentions, compiling the report, “The Use of Retentions in the UK Construction Industry”. It concluded that the use of retentions in public procurement should be phased out by 2007. That deadline came and went, so it is no surprise that in 2008 the Business and Enterprise Committee produced a report called “Construction matters”, which looked at cash retentions. That report noted that the system undermined team working, damaged the cash flow of small companies and impacted on training and innovation, and that it should be ended at least in all parts of the public sector. The theme is consistent, but we are still waiting for action.

Moving forward to 2016, the industry again hoped for action. In a Westminster Hall debate on 27 January, the then Business Minister Anna Soubry assured us that the matter would be addressed following a review by Andrew Wolstenholme, to be completed by the end of that year. Due to cynicism in the Chamber, she confirmed that

“this Government”

will not

“prevaricate in any way or seek to knock things into the long grass.”—[Official Report, 27 January 2016; Vol. 605, c. 149WH.]

The following month, when the Enterprise Bill was going through its stages in the Commons, the same Minister said of cash retentions:

“I think they are outdated and I do not think they are fair. They are particularly unfair to small businesses.”

Yet the Government still defeated amendments proposing to eliminate the use of cash retentions, including one that I tabled on Report. When I expressed concern in Committee about timescales, the Minister also stated that

“the hon. Gentleman can be assured that this Minister gives absolutely her word that this matter is not going to be kicked into any long grass. In fact it is very short grass, which has only just grown, because the review will be completed by March and then recommendations will go out to public consultation. If legislation is required as a result of that consultation, I will be happy to be the Minister to take that through.”––[Official Report, Enterprise Public Bill Committee, 9 February 2016; c. 47-48.]

We now know that the consultation process did indeed end up in the long grass. In 2017, I tried to take through a private Member’s Bill on the subject. Although the election killed that Bill, it is fair to say that the Government would have blocked it anyway, given that they did not back the Bill of the hon. Member for Waveney (Peter Aldous) in the last Parliament. We had both had considerable cross-party support for our Bills, so it was disappointing that neither made any progress.

The only action taken by the Government since were the BEIS consultations on “Retention payments in the construction industry” and on “2011 changes to Part 2 of the Housing Grants, Construction and Regeneration Act 1996”, undertaken between October 2017 and January 2018. To be fair, three meetings with industry and stakeholders were held, and those groups agreed that the status quo and doing nothing were no longer regarded as a viable option.

With the last consultation closing in January 2018, I have been getting frustrated—two years later, and no sign of anything happening. Then mysteriously, the day before this debate, the Government magically publish the responses to the consultation. Who would have thought it? Luckily for the thrust of my debate—I had already written some of this speech—that did not change what I planned to say, because we only have publication of the consultation responses. There is no hard evidence for what the Government will do next. Sadly, I fear for industry and the SMEs that the long grass is once again being prepared.

One of the just published documents on cash retentions states:

“Our aim is to work with the construction industry and its clients to achieve a consensus within the industry on how to resolve the problems associated with cash retentions. Several policy options are under consideration, a possible retention deposit scheme, and phasing out of retentions completely, and work continues to assess the viability and potential impact of these.”

It feels like we are going in circles, but will the Minister at least confirm that the status quo is no longer an option?

Why was there no acknowledgement in the consultation publication that a deposit retention scheme is the preferred option of respondents? Separately, the Scottish Government are consulting on retentions, including the possibility of introducing a deposit retention scheme. Their consultation closes on 25 March, but a key premise of the consultation is based on Pye Tait research, which states:

“The research particularly noted that retention money held in trust in a separate, ring-fenced account until it is either used to rectify defects or becomes due for payment or in some form of retention deposit scheme would meet almost all of the serious criticisms of the current retention system.”

That would allow a statutory solution to help prompt payments and deal with problems with cash flow. It has certainly given hope to SMEs that action will be taken in Scotland, and I urge the Scottish Government to follow through on that. Given their early adoption of project bank accounts, I expect them to be more receptive. It is fair to say that their consultation is a stage ahead of the UK Government’s.

The thing is that a working deposit retention scheme solution is at hand. Industry bodies and a major tier 1 contractor have been working collaboratively with academics, banking and financial experts, insurers and software developers to develop an IT platform as a digital solution to ring-fencing cash retentions. The key features in the proposed retention deposit clearing house scheme are that the aggregate of the retention moneys handed over to the client will held in a bank account and ring-fenced by a trust, and allocated to all supply chain firms as is relevant to their deductions. Also, firms will be able to use an app for online checks of the amount of their retentions held in the scheme. An insurance policy will be made available to the client to cover any shortfall in the scheme in case there is non-compliant work that is not rectified, because of insolvency, for example. The scheme will be regulated by the Financial Conduct Authority. The costs of administering the scheme are estimated at just £23 per £10,000 of main contract value, so cost is clearly not a barrier to introducing it.

It transpires from the responses that have just been published that the retention deposit scheme is the preferred option. Additionally, as I am sure the Minister is aware, the BEIS roundtable meeting of client and industry stakeholders in May 2019 voted for work to begin on the feasibility of a retention deposit scheme. I want therefore to ask the Minister what Government progress there has been to date, in relation to that work. What is the Department’s timetable for taking action on protecting cash retentions? Those are the key issues on which I am looking for an answer from the Minister—but by way of a conclusion there are some other questions I should like to put to him. Why did it take so long to publish the responses to the consultation? Does he agree that tier 1 contractors should not use subcontractor retentions for their own cashflow purposes? Will he definitively rule out the status quo? I have outlined Scottish Government recognition of the need for legislative measures on retentions, so what plans does BEIS have for legislative solutions? What is the Government position on retentions within their own projects? For example, will BEIS confirm that retentions will be removed from all Government-funded projects, as has been recommended for decades?

I genuinely hope that the Minister can give positive responses. Maybe he will be the one to cut through the long grass that cash retention has been hiding in for a long time. I assure him I would be happy to work with him to help him cut that grass, and help companies to get the money they deserve.

--- Later in debate ---

[Nadhim Zahawi]

The hon. Gentleman makes a powerful point. He is right that we have to make a decision, but it is complex and we do not want to create perverse incentives in a different direction. Consensus is necessary, as costs are driven by the extent to which industry adopts or resists change. If the industry does not adopt it, one sees a perverse incentive. It is clear that cash retentions in construction are a complex issue. I may be new to this job, but I spent many more years in business than I have spent being a Member of Parliament or a Minister. Sometimes the wrong decision can create a perverse incentive.

[Alan Brown]

As the right hon. Member for Warley (John Spellar) pointed out, are the Government not incentivising companies to dig their heels in and keep saying no? If the Government wait for consensus, that incentivises the wrong behaviour for contractors. As has been outlined in this debate, this situation has been going on for decades. We are not getting anywhere because the Government are waiting for a magic, 100% consensus.

[Nadhim Zahawi]

I opened by saying that the Government are committed to tackling the problem of late and unfair payments, so I hope that answers the question whether we are going to do something about the issue.

To respond to other points that were raised, the hon. Member for Kilmarnock and Loudoun and my brilliant hon. Friend the Member for Waveney both mentioned their private Members’ Bills. It is important that any action we take is robust, proportionate and evidence based, which is where we are at the moment. Several policy options are under consideration, including the retention deposit scheme. It would be premature to commit to anything at this stage while several policy options are under consideration.

--- Later in debate ---

[Nadhim Zahawi]

I do not agree. I hope I have built a reputation over the past decade of being someone who is evidence led; it is important that we do that. My hon. Friend the Member for Kettering talked about the inability of small firms to pursue unpaid moneys because they do not have the time or the resources. The 2011 amendments to the Housing Grants, Construction and Regeneration Act 1996 were introduced to ensure fair and prompt payment through facilitating better payment, adjudication and arbitration processes, particularly for small businesses. I wanted to put that on record as well.

[Alan Brown]

Going back to timescales, the Minister is not willing to commit to a month—forget that—but surely to goodness he could give us an idea of a programme and also explain why it took two years, following the responses to the consultation, for them to be published? That does not give confidence that there is any clear programme for the Government.

[Nadhim Zahawi]

I refer the hon. Gentleman to the answer I gave earlier. We are absolutely committed, but it is a complex issue. My hon. Friend the Member for Waveney rightly asked the Government to agree that action should be taken. It is important to remind ourselves that we have now published the summary of responses to the consultation on the practice of cash retention. We will continue to work with him, with others and with industry on these issues and on policy options to address the problem. We are committed to addressing it.

My hon. Friend’s final question was about a pilot scheme. My officials have met with representatives of Pay2escrow on several occasions to discuss the proposal for a deposit retention scheme, and the meetings have been helpful in clarifying and understanding its work. We remain in dialogue with industry to try to build consensus on the future policy. As I said, given the complexity, it is important that we make the commitment when we think it is the right thing to do. I want colleagues to understand that we are committed to that process.

--- Later in debate ---

[Alan Brown]

Thank you again for your chairmanship today, Mr McCabe. I thank all hon. Members who have contributed. This is an important matter, but unfortunately, having the 3 pm slot on a Thursday afternoon has probably prevented other hon. Members from taking part, given that they will be back in their constituencies.

In terms of Back-Bench contributions, we had fantastic interventions from the right hon. Member for Warley (John Spellar) and some key examples from the hon. Member for Kettering (Mr Hollobone). I pay particular tribute to the hon. Member for Waveney (Peter Aldous), not only for his contribution today, but, more importantly, for the work he has undertaken with his Bill and in making progress on finding consensus on a deposit retention scheme. I am beginning to think that it is his willingness to get things done that keeps him on the Back Benches rather than the Government Front Benches.

We have heard, and we know, that cash retentions are costing jobs, training, opportunities and productivity, and ultimately—maybe the Minister should think about this—when companies go bust, it costs the Government in tax take. Yet today I am disappointed. I must say it is very disappointing. I know that the Minister is new in his post, but we are still hearing about options, about how complex the issue is and about how we need to find consensus on the way forward. He seems to be finding the long grass that his predecessors grew. I ask him to try to take hold of this situation.

There is a solution: a deposit retention scheme. There is a Bill there, and we can go on and get this done. As a minimum, at the very least, let us get a pilot up and running and let us get it done. The Government mantra that we keep hearing is about levelling up. Let us level up for the wee guys in the construction industry and sort this problem.

Question put and agreed to.

Resolved,

That this House has considered the use of cash retentions in the construction industry.

Energy Efficiency Measures: Net Zero Buildings

Alan Brown Excerpts

Wednesday 26th February 2020 Westminster Hall

[Philip Dunne]

I am grateful for that example. The Minister should be willing to show some flexibility and consider the councils that want to make progress, because it could have an impact on builders’ inclination to develop to a higher standard within a particular area. In my view, these matters should be determined by self-regulating local authorities.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

There are ambitious councils, but is the right hon. Gentleman not concerned that, were regulations determined by councils, developers would be drawn to the councils that do not impose higher standards, where their profit margin would potentially be higher?

--- Later in debate ---

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is pleasure to serve under your chairmanship, Mr Pritchard. Like everyone else, I congratulate the right hon. Member for Ludlow (Philip Dunne) on bringing forward the debate. I also congratulate him on his new role. He is clearly passionate about the environment. I wish him well in holding the Government to account, which I am sure is more fun than being an actual Minister. It was interesting that he started with five green pledges for Lent. Similar to the saying about puppies, those pledges could be for life and not just Lent. We can reflect on that.

The right hon. Gentleman set the scene very well, including the scale of the issue that faces us in achieving net zero for domestic buildings, and fact that the decline in emissions has stalled in recent years. It certainly struck home to me that about 20 million of 29 million homes have an EPC rating, and of those more are rated D than A, B and C combined, although I suggest that those figures are not reflected across the UK. I will give some statistics later.

I agree completely about the need to decarbonise our heating system. The bigger picture there goes hand in hand with the need for the UK Government to invest in carbon capture and storage and hydrogen production, with projects such as the Acorn project up in Peterhead. The right hon. Gentleman rightly highlighted the big challenge of rural off-gas-grid homes. That is a big challenge for the Government and I, too, look forward to hearing the Minister’s response on that and on the issues about the renewable heat incentive coming to an end. Looking at the bigger picture, that ties in with the loss of the feed-in tariffs for solar. There is now a 20% VAT uplift in solar. All those measures are prohibiting energy efficiency measures that would reduce energy demand and therefore the carbon emissions from homes.

There was a good statistic about the fact that if we achieve the EPC band C overall, that would be the equivalent of the removal of six Hinkley Point C power stations. We should bear in mind that the Hinkley Point C capital cost alone is about £22 billion. That shows how much money could be saved with direct Government investment to bring the entire housing stock up to spec. In the long run it provide value for money. The right hon. Gentleman highlighted the critical issue with the EPC regime, and favouring lower costs over carbon emissions. The hon. Member for Strangford (Jim Shannon) touched on that as well, so it is clearly something that needs to be resolved. It would be good to hear what the Minister says on that and the five recommendations that were made.

The hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) spoke about lighting fires, which took me back to my childhood when we had coal fires in the house and there would be ice on the inside of the single-pane windows when I got up. There is one blessing: things have moved on in the last 30 to 40 years. We also heard from the hon. Member for Henley (John Howell) on the big issue of cancelling the zero-carbon homes initiative and the fact that retrofitting will cost five times the original capital outlay. That again shows that changing decisions costs more money in the long run. The Government should look at the bigger picture. Of course, no debate would be complete without the hon. Member for Strangford giving us the Northern Ireland view within the UK context. He made some critical points.

It really is a no-brainer that greater energy efficiency measures can only assist in reducing carbon emissions at the point of use, as well as generation demand, further reducing overall carbon emissions. Energy efficiency can help to reduce fuel poverty and can be part of the green industrial revolution, creating additional jobs in various insulation techniques. Obviously, it is needed to get to our net zero target by 2050, so I must ask why the UK Government are not doing more in that field.

One simple positive measure that the UK Government could pursue is removing the 20% tax threshold on energy efficiency home improvements. Independent research by the Federation of Master Builders demonstrates that cutting VAT on energy efficiency improvements will not only improve the housing stock and generate thousands of jobs but significantly boost the UK economy by bringing empty properties back into use and reducing the incidence of fuel poverty. I suspect that it is too much to hope for that measure to be included in next month’s Budget, but the Minister should be talking about it with Treasury colleagues.

Others Members touched, implicitly or directly, on the fact that direct Government investment in energy efficiency is crucial. The UK Government need to follow the lead of the Scottish Government. Now, I would say that, but organisations in the sector say it as well. The energy companies say it, as do many third sector organisations. The BEIS Committee said it in its 2019 report, “Energy efficiency: building towards net zero”, as did the Committee on Climate Change in its 2019 progress report to Parliament, titled “Reducing UK Emissions”. The BEIS Committee report stated:

“We note that Scotland’s investment of four times more than England cannot be explained by a less efficient dwelling stock: the latest housing survey data demonstrates that homes in Scotland actually have greater insulation levels than in England. For example, in 2017, 49 per cent of homes in England had insulated walls, compared to 60 per cent of homes in Scotland… Scotland has made much faster progress in improving the energy efficiency of its fuel poor homes than England, where in some bands, progress has stalled.”

It was good to hear the hon. Member for Caithness, Sutherland and Easter Ross acknowledge the work of the Scottish Government on that.

Statistics show Scotland’s relative success: 44% of Scottish homes were rated as EPC band C or better in 2018, compared with just 34% in England, and only 20% in Wales. In Scotland, the proportion of properties in the lowest EPC bands of E, F and G has more than halved since 2010, going from 27% to 12%. In England the figure is higher, at 16%, and in Wales it is 20%—although the Scottish figure is measured slightly differently. It is therefore little wonder that the BEIS Committee concluded:

“The Government appears indifferent towards how public per capita spend in household energy efficiency in England compares to other parts of the UK”

and

“the governments of the devolved nations treat energy efficiency as a much higher priority than the UK Government.”

The Committee’s description of the UK Government as “indifferent” is particularly damning. I would like to hear what the Minister has to say about that, and how the Government will address it going forward.

The Committee on Climate Change confirmed that policies are not currently in place to deliver the UK Government’s ambition to improve all homes to at least EPC band C. The CCC stated that regulations for the private rented sector prioritise costs for landlords over the costs for tenants to operate their heating systems, and that minimum standards for social housing are required. It then observed that the Scottish Government, by contrast, are demonstrating how an effective policy package for energy efficiency improvements in buildings might be delivered by setting out a comprehensive framework of standards, backed by legislation. That legislation includes private rented sector regulations, phased to set a date for when new tenancies have to comply, and a backstop date for all private rented properties. The Scottish Government also set a higher cost that landlords in the private sector might have to shoulder. There are proposals for all owner-occupiers to be required to meet EPC band C by 2040, with incentives to try to do it by 2030. In the social rented sector, the revised standard published in June 2019 requires all social housing to meet EPC band B by the end of 2032, and sets a minimum floor of EPC band D from 2025, below which no social house can be re-let.

It is time for the UK Government to follow suit and put in place a proper framework covering the private rented sector, social housing minimum standards and owner-occupiers, as the Scottish Government have. The Scottish Government backed those measures up by spending from 2009 to 2021 what is predicted to be more than £1 billion, and £145 million this year. If the Government invest in a long-term energy efficiency investment programme, it will create jobs, allow the programme to be delivered at best value, avoiding spikes in cost, and be part of the green industrial revolution.

Some 27 million homes need their heating systems decarbonised, so it is crucial that they are as energy efficient as possible. The Government have one live scheme for home insulation measures: the energy company obligation scheme. Yet the Committee on Fuel Poverty states that those measures do not target the right people, so that needs to be reviewed as well.

Another spin-off of energy efficiency measures can be the regeneration of social housing stock. We tend to think of energy efficiency measures as internal insulation, but they include external cladding. When external cladding is installed and re-rendered it can transform the appearance of housing schemes—I have seen that first hand in my local authority, where I was formerly a councillor.

The BEIS Committee also said in its report that the UK Government must not only match Scottish levels of funding but create a joined-up strategy, and that the

“weight of stakeholder evidence suggests that Scotland designating energy efficiency as a national infrastructure priority has helped to improve its policy impact, making energy efficiency policy better designed and funded, longer-term, as well as more comprehensively governed and targeted, than in England.”

Hopefully the Minister will acknowledge that, and step up to the plate by following suit.

--- Later in debate ---

[The Minister for Business, Energy and Clean Growth (Kwasi Kwarteng)]

It is a pleasure to take part in this debate under your chairmanship, Mr Pritchard. I thank my right hon. Friend the Member for Ludlow (Philip Dunne) for bringing forward this important and timely debate, and congratulate him on his election as Chair of the Environmental Audit Committee. My first outing in this role was in front of his Committee—under a different Chair, who sadly was not re-elected. However, I am pleased to see that my right hon. Friend has taken her place.

I have taken part in a number of debates about these issues. This one covered many policy areas, including power generation, which is not really what the debate is about, but I will start with my right hon. Friend’s specific points about heat and the energy efficiency of homes. He presented five challenges, and I will address each individually.

First, my right hon. Friend mentioned zero-carbon heating beyond the RHI. We are absolutely committed to seeing how we can support the renewable heat incentive beyond the date on which it expires. He also mentioned the future homes standard. My hon. Friend the Member for Henley (John Howell) raised the fact that the zero-carbon homes target was scrapped. The Government feel that the future homes initiative is much more realistic and better in terms of reducing carbon emissions in houses than the initial zero-carbon scheme. That scheme allowed for offsetting, whereas the future homes standard will concentrate on lowering absolutely levels of emissions. I think that is a much better way of approaching the problem, but I am happy to discuss that with him later.

The third item mentioned by my right hon. Friend is really key to the debate: incentives for householders to contribute in some way to upgrading the energy efficiency of their homes. When we look at the totality of buildings in the UK in terms of their carbon emissions, the vast majority—about two thirds—are owner-occupied homes: those inhabited by people who have either paid off a mortgage or currently have one. It is a big challenge to raise the energy efficiency of those homes. Drawing on his professional background, he spoke about the ability to have consumer finance and incentivise people to make such large investments. On that note, the Government have already started: we have a £5 million green finance initiative, working with banks to provide finance for precisely the reasons he mentioned.

[Alan Brown]

Surely the £5 billion of green finance is a bigger package that will not be going to individual householders. If it was, it would be like the green deal scheme, which the Government had to terminate because it was not working right.

[Kwasi Kwarteng]

It is an initial step. In Germany, KfW has a consumer finance piece that gives small loans for green initiatives. We had a green deal; my personal view and, I think, the Government view is that it did not work principally because the interest rate was too high. However, that does not discredit such initiatives.

I was struck that the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) mentioned the Labour party manifesto and its commitments on houses. It was extraordinary but unsurprising that although she mentioned all the jobs that would be produced and carbon emissions, she did not say how much the policy would cost. That is a critical part of the debate. As my right hon. Friend suggested, a huge amount—in the order of £65 billion—needs to be invested in the next 10 years. That will not all come from the Government; some will come from consumers, who will rightly invest in making their homes more secure. Investments in those houses are not lost money; they will enhance property values, so they make commercial sense in many ways.

[Mr Virendra Sharma in the Chair]

The fifth specific point mentioned by my right hon. Friend was the EPC scheme. It is not a perfect measure, but it does capture something about what we are trying to do. It has an indicative value in forcing up the standards we expect not only of the Government but of private sector landlords, as was mentioned in the debate. In that space, I can announce that we are already consulting on tightening standards in the private rental sector. We aspire for private landlords not to get properties to EPC band E but to make investments to improve their properties to band B or C by 2030. That is a significant improvement and a step in the right direction.

The debate has shown that we still have a big task. The hon. Member for Kilmarnock and Loudoun (Alan Brown) highlighted the achievements of the Scottish Government, but he will appreciate that of the 27 million homes in the UK, 24.2 million are outside Scotland, in England, Wales and Northern Ireland. While I appreciate the successes of the Scottish Government, we cannot see it simply as a competition. In fact, colleagues of his in the devolved Administration are always telling me, “We have got to work together and co-operate.” They want negotiations, discussions and policy evolution in partnership with the Government in Westminster. That is a welcome development. I have meetings and calls with Ministers in the devolved Administrations and I have just spoken on calls to Diane Dodds and Edwin Poots, the newly appointed Ministers in Northern Ireland. This cross-UK approach is the best method.

There are so many other issues we could talk about. We clearly need joined-up policy in this area. We cannot improve the energy performance of our buildings without engaging with our friends at the Ministry of Housing, Communities and Local Government. I was struck that that Department, which has responsibility for the performance of local authorities, was barely mentioned, which led me to believe that BEIS has the sole answers to all these questions. I wish that were true, but we do have to participate and engage with colleagues across Government in Treasury and MHCLG.

--- Later in debate ---

[Kwasi Kwarteng]

If she will not barrack me, I can say that we do have policies addressing fuel poverty. We have the energy company obligation, which we are completely committed to, and we committed billions of pounds in our manifesto to address fuel poverty specifically.

[Alan Brown]

Will the Minister give way?

[Kwasi Kwarteng]

I have two minutes in which to wrap up and allow my right hon. Friend the Member for Ludlow time to conclude the debate, so, with due courtesy and respect, please allow me to finish my remarks.

I am pleased that we had the debate and I am sure we will have more of them. This will probably make too much work for me and my officials, but I suggest we could debate specific issues raised this afternoon such as EPC standards, widening consumer finance and publicly owned building strategy—there are so many issues. Salix, the finance company focused on providing funding to upgrade public buildings, was not mentioned in the debate. There are many different avenues and I am sure that hon. Members in the Chamber will come to subsequent debates to discuss them more fully.

UK Oil and Gas Industry

Alan Brown Excerpts

Tuesday 25th February 2020 Westminster Hall

[Andrew Bowie]

I was not aware that no major companies were involved in the project; I think it is important that they should be. If we are to try to engage Government and get governmental support, the industry must lead the way, to show that it has confidence in the technology first.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Far be it from me to override what the hon. Member for Stockton North (Alex Cunningham) says, but I have just come from a breakfast briefing on carbon capture and storage, and BP is involved in the Teesside cluster. Hopefully that addresses that concern.

On the vital need to develop carbon capture and storage, does the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie) agree that the UK Government cannot pick just one project? At least a few clusters must be given the go-ahead in the forthcoming couple of years.

[Andrew Bowie]

I thank the hon. Gentleman for his intervention and for enlightening Members about BP’s involvement in the Teesside carbon capture and storage project. I agree with him. He has foresight, because what he said was exactly where I was going next in my speech. We need at least five projects across the UK if we are going to come anywhere near reaching our target in the next few years.

--- Later in debate ---

[The Minister for Business, Energy and Clean Growth (Kwasi Kwarteng)]

It is a real pleasure to take part in this debate under your chairmanship, Mr Robertson. I thank my hon. Friend the Member for West Aberdeenshire and Kincardine (Andrew Bowie) for securing it. I was surprised to hear that we had not debated these issues since April 2018.

[Alan Brown]

Far be it from me to try to correct the record again, but there was a debate in this Chamber in October 2018, which was secured by my hon. Friend the Member for Falkirk (John Mc Nally). I spoke in that debate as well.

[Kwasi Kwarteng]

I am glad to hear we have debated these issues more recently. Certainly in my recollection, we have discussed this issue many times in this forum and in the main Chamber. The sector is vitally important. It has been for many decades now, and the Government take it extremely seriously.

My hon. Friend the Member for West Aberdeenshire and Kincardine used a phrase that struck me: “quick-changing expectations”. That is clearly what has happened. Where we are today is very different from where we were when we had the debate in April 2018 and where we were even last year. Some people have kindly observed that we have a new Government. We had a general election at the end of 2019, and we now have a new Government with a new mandate who are very much concerned with this issue.

Oil and gas is an important sector not only for energy security but, crucially, for the economy and jobs. It has contributed something like £340 billion in production taxes over the past six decades, and it has added £570 billion of gross value added to the economy since 1990. Many speakers in the debate observed that in excess of 250,000 jobs across the UK are dependent on the sector, so there is no question but that the oil and gas sector is vital.

However, we have to deal with the conditions that we find ourselves in. As the hon. Member for Southampton, Test (Dr Whitehead) pointed out, the UK continental shelf is now a highly mature basin. We are looking to reduce our fossil fuel use, which is inevitable, given that in June 2019 we made the very significant commitment to achieve net zero carbon by 2050. It is important to stress that, as of today, we are the only nation in the world—certainly among the advanced economies—that has enshrined that aspiration in law, meaning that it is no longer an aspiration but the law of the land to reach that target by 2050.

One very useful phrase that came out of the debate and that we need to think about was from my hon. Friend the Member for Waveney (Peter Aldous), who suggested that the oil and gas industry could act as “a bridge” to a low-carbon future. That is exactly the right sentiment and expresses succinctly how the Government think about the sector and our future as a low-carbon economy.

[Alan Brown]

One of the key themes in the Just Transition Commission and the moves towards net zero has been carbon capture development. There have been requests that the Government support far more than one cluster. The suggestion from the Member for West Aberdeenshire and Kincardine (Andrew Bowie) was for five clusters. Can the Minister outline where the Government are going on that issue?

[Kwasi Kwarteng]

With permission, Mr Robertson, I will address carbon capture later in my speech. There is plenty of food for thought and actual policy that I would like to address, but I want to talk about the transition. It is important, as the hon. Member for Southampton Test suggested, that we get the message out that we do not see the end of the oil and gas industry in this energy transition. Oil and gas has a crucial part to play in that transition, not least because of some of the carbon capture issues I want to address later.

Let us be clear where we are today. Currently, 70% of primary energy demand in the UK is met by oil or gas. Some 85% of houses—I suspect this includes the houses, apartments and dwellings of most people in this room—rely on gas central heating. The Committee on Climate Change has said that there will be a continued need for oil and gas as we make our transition to net zero emissions. That is extremely important, and on that basis I would like to talk about some of the announcements we have made, particularly in regard to carbon capture, usage and storage.

We made a public commitment in the Conservative manifesto to invest £800 million in carbon capture, usage and storage. It could not be clearer than that. I am very hopeful that we will be able to make a significant announcement along those lines in the Budget, to honour our manifesto commitment. It is important for my Department. However, Members will appreciate that I am not the Chancellor of the Exchequer, and that the Budget is a matter for him and the Treasury. In a former capacity, I served as the parliamentary private secretary to the Chancellor of the Exchequer for 18 months, which in the context of the political climate was a very long time.