Energy-intensive Industries

Debate between Alex Cunningham and Ian Swales

Thursday 11th September 2014 Commons Chamber

[Ian Swales]

The hon. Gentleman makes an extremely good point, which I will return to later. When I see the UK’s attitude to these sorts of policies, I often feel like we are playing cricket, while other countries are playing rugby, boules or other sports that we do not recognise.

At the first meeting of the Energy Intensive Users Group, I was stunned not just by the number of outside attendees from industry, but by their seniority. We quickly realised that it was a huge issue that faced many industries, some of which have been mentioned. I do not think that paper has been mentioned. That is yet another industry that sent a representative from its trade body. As a result, there has been a great deal of representation to the Government. I am pleased to see at least some bending in response.

UK businesses that are involved in the generation and consumption of energy are saddled with up to seven different carbon taxes from the UK and Europe. Interestingly, even the senior executives of those businesses cannot always describe clearly what all the taxes are and what they do. Despite the action that the Government are taking, the trends are not great. It is estimated that political costs will increase the electricity bills of industry by a third by 2019-20. Policy makers do not seem to understand that if a company spends millions of pounds a year on energy, it already has quite an incentive to use less. It does not need to be beaten with a stick by the Government to persuade it to use less energy, let alone seven sticks. These companies know that they are spending a lot of money on energy, and are already doing a lot about it. They know that energy costs are a competitive issue, whether there are taxes or not. The irony of a heavy tax burden is that it removes cash from those companies that they could otherwise devote to energy-saving initiatives. Many companies work on thin margins or in commodity businesses that do not have high margins. The more taxes they pay, the less likely they are to be able to invest in reducing carbon consumption and generation.

A Minister from the Treasury rather than from the Department of Energy and Climate Change is responding to this debate, and I wish to ask about the attitude of the Treasury towards these taxes. Does it take the broad view about business competitiveness, look at the overall picture, and compare the taxes being rendered with those rendered from Europe, or is it just a way of raising money? These businesses are almost all competitive and traded internationally, so in this regard the UK is no more an island than the EU is. Our policy decisions affect these businesses on an international basis.

The hon. Member for Warrington South (David Mowat) mentioned the EU. The minute we want anything done, the standard response from civil servants is “State aid”. That is a perfect method of obfuscation and delay, which, in many areas, we as politicians are buying when we should instead be fighting a lot harder. I know there are specific issues with the steel industry and the EU, but many other industries are not as limited. Politicians should not allow state aid to be used as an excuse for delay or for no action, particularly given that some of the things we are talking about are, ironically, UK-only initiatives. I cannot see how the European Union can interfere with initiatives such as the carbon price floor, which are taken only in this country. I would like Ministers to be a lot more aggressive with civil servants, not just about whether state aid issues apply, but if they do, about how quickly they can be removed. Some of the issues I am thinking of have been washing around for most of the four years that I have been in this place.

Europe has the emissions trading scheme, which has not totally met its objectives, as the allowances originally given to companies were fairly generous but the tight market that was expected to lead to carbon trading has not occurred. Ironically, however, Sahaviriya Steel Industries in my constituency has a specific problem because it was virtually out of business during the reference period when the allowances were decided. It now pays $1 million a month in carbon cost to the EU, because it does not have enough allowances to operate. It is also expanding, so carbon costs are yet another handicap.

Businesses can do many things to reduce energy use, but as the hon. Member for Newcastle upon Tyne Central said, there are physical and chemical limits. I do not disagree with some of the EU moves on best available technology, or with new moves to look at what is technically feasible and ensure that companies in the EU move towards that best available technology. I hope that we do not get regulatory regimes that drive everybody else out of business if they are not the best, as that will not help anybody. However—I hope the Government will take notice of this—when the best available technology frameworks are established for different businesses, that will at least show what is possible with regard to reducing energy consumption and contribution to climate change. If a company is doing something in another country, we can do it here; if it is not being done anywhere, we must ask whether it is sensible to try to drive a company to use 50% less energy, for example. I would like to see constructive work with the EU on that, ensuring that we are as bold as we should be when dealing with its requirements.

Investment has been mentioned, and the manufacturing industry has been declining. During the previous Government, it went from being 19% of the economy to 10%, although some growth is occurring. I worry about these businesses because there is capital investment inertia. It is not about whether company A is operating today, tomorrow or next year; it is about what investment decisions are being taken. Are the plants being kept up to date and maintained? Above all, would the company concerned re-invest in such a business?

I remember my experience as a financial director in the chemical industry. We decided to get out of a business, but 24 years later that business is still running. It has never been renewed, but it has been patched up and sold three times since then. Those are the types of decisions taken. If we have an unattractive climate for investment in this country, things will close down not overnight but steadily, and we are seeing some of that.

The Engineering Employers Federation, which covers all the businesses we are talking about, says that energy costs are its No. 1 issue for growth and investment. Many of these companies are foreign owned. The biggest employers in my constituency are Singaporean, Thai, Indian, Saudi Arabian and Korean. Decisions are being taken not in the north of England or London, but in Seoul, Riyadh, Bangkok and so on. If our energy infrastructure costs do not look competitive and sensible, companies do not need to come here or re-invest.

Despite sounding somewhat critical, I welcome the Government initiatives. The mitigation moves that they have mentioned are helpful for big energy users in my constituency. I hope the initiatives will take place with due speed—that has been an issue—that there will be certainty and that they are not a one-off. We are talking about long-term businesses taking long-term decisions. If the Government believe that throwing a carrot towards a business for 12 months makes a difference—well, obviously it makes a difference to its cash flow in those months, but it will make no difference to its strategy. Uncertainty does make a difference in the wrong direction.

I welcome the fact that the UK Green Investment Bank is majoring in investing in industrial energy reduction, as well as renewable technology, and I welcome the renewable heat incentive, which should help. The regional growth fund has put money into such businesses—most recently, £9 million went into a huge project at Sabic in my constituency, which will result in the petrochemical cracker being able to crack gas. I am pleased about the Tees valley city deal, which I helped to push for and even construct. It will get carbon capture and storage around Teesside, which I still regard as the No. 1 location for investment in carbon capture and storage for industries outside the energy sector, although we have the energy sector as well.

[Alex Cunningham]

I am grateful to my new hon. Friend for giving way, and I believe that that is the central issue on Teesside. Will he join me in congratulating the industrialists on Teesside who, despite being competitors, have come together because they know that the future is about investment in carbon technology?

[Ian Swales]

I agree with the hon. Gentleman. Such a technology will create an infrastructure that will benefit all those sectors, and they do not compete that much with one another. The Tees valley can be a hotbed of competitive steelmakers, chemical producers and so on. Strategically, the country should get on with that.

All hon. Members have mentioned the importance of energy-intensive industries. They are important to the economy, to the development of green industries—let us think of the amount of steel involved in tidal power—and to the security of the country. We should not kid ourselves when we count carbon. In a debate a while ago, the hon. Member for Warrington South asked, “Is the carbon for my Volkswagen car mine or the Germans’?” We are kidding ourselves if we think we are doing the right thing by de-industrialising this country, exporting jobs and importing carbon. That is one point on which I depart from the hon. Member for Newcastle upon Tyne Central.

Energy Bill

Debate between Alex Cunningham and Ian Swales

Wednesday 19th December 2012 Commons Chamber

[Ian Swales]

I thank the Minister for that clarification; that was my understanding too.

I raise this issue because of the importance of the proposed Teesside carbon capture and storage network to my constituency, the local economy and, I truly believe, to the national economy. I was delighted by the recent announcement that placed the project in the UK shortlist of two for the European competition and the shortlist of four for the UK competition. I am obviously disappointed that it seems that the UK projects will not be supported in round 1 of the European competition. It was notable that the UK announcements—and, indeed, the European ones—simply listed the technology and electrical output of each project, whereas the Teesside project included the potential to bring back International Power’s mothballed 1.8 GW power station at Wilton. However, power is not the main driver of the project. Teesside has 18 of the top 30 carbon emitters in the country, excluding power stations.

[Alex Cunningham (Stockton North) (Lab)]

Will the hon. Gentleman give way?

[Ian Swales]

I will, although I am now in my own time.

[Alex Cunningham]

I am grateful to my Teesside neighbour for giving way. He talks about carbon capture. Does he share my concern about the lack of detail in the Bill on which companies will be exempt from the cost of contracts for difference? For example, it would appear that the Sahaviriya Steel Industries works in his constituency were not operating throughout the 2005 to 2011 period to quality for an exemption. What will happen to them? Will we need amendments to protect the steel works on Teesside?

[Ian Swales]

The hon. Gentleman makes a good point. There are issues about how some of the calculations have been made, given that companies were coming and going through the reference period, and he raises an obvious example.

The SSI steel works in Redcar alone account for around 1% of the UK’s carbon emissions. Supporting the Teesside project with an oversized network will therefore not only be good for decarbonising energy generation, but have the potential to decarbonise energy-intensive industry. In doing so, the project will protect existing industry—that includes steel, fertilisers and petrochemicals—and make it more competitive, and also make the area a magnet for future investment in both energy generation and industry. May I therefore gently remind Ministers that their Department is responsible not just for energy, but—the clue is in the name—for climate change? I also ask that the definition of CCS be reworded to ensure that it covers the wider opportunities that the technology represents. Meeting our carbon reduction goals requires action on all major emissions.

The Energy Bill and the move to a low-carbon economy are welcome on Teesside. In fact, the area is already something of a Disneyland for green technology. We have Ensus running Europe’s largest bioethanol plant, a £60 million anaerobic digestion power-generation unit run by Northumbrian Water, SembCorp’s Wilton biomass power station, SITA’s waste-to-energy plants, the pyrolysis of waste plants being constructed by Air Products, and 27 wind turbines being constructed just off Redcar by EDF, which I can see from my bedroom window.

The Energi Coast consortium in the north-east, consisting of more than 20 companies, has already invested £400 million, and is ready to exploit the offshore wind and marine energy sectors. I should also mention Redcar and Cleveland college, one of the first colleges in the country to be accredited for the provision of green deal training. Future plans include a biomass power station at Teesport, which has attracted Korean investment; a new community power station based on aeroplane engines; a plant for the pyrolysis of tyres, generating energy and fuel oil; more anaerobic digestion plants, one of which received money from round 3 of the regional growth fund; and sub-stations to deal with half the output of the proposed giant offshore wind farm at Dogger Bank, which are likely to be in my constituency.

I am pleased that we appear to have reached the end of the consultation period, and that there seems to have been an outbreak of agreement between DECC and the Treasury, because it is important for us to move quickly. There are many opportunities for business growth and technical leadership, but the rest of the world is not standing still. It is time to be bold and clear, and to get going. I welcome the Bill, and I hope that the Minister will note my comments on the clauses relating to carbon capture and storage.

Economy (North-East)

Debate between Alex Cunningham and Ian Swales

Tuesday 13th November 2012 Westminster Hall

[Ian Swales (Redcar) (LD)]

It is a pleasure, Mr Hollobone, to serve under your chairmanship. I congratulate the right hon. Member for South Shields (David Miliband) on securing this debate and on bringing his outstanding talents to the issue. As we all do, I see the difficult economic situation in our area, and it was brought home to me even more last year when I appeared on “Newsnight” to explain why the economy of Redcar and Cleveland was rated by the BBC and Experian as the weakest of 324 areas in the country. Middlesbrough and Hartlepool were 323rd and 322nd. Is that really the legacy that Labour wanted after 13 years of complete freedom to deliver their vision?

An entire sub-region was forgotten and neglected, not just in jobs and growth, but in many other ways. It struggled with an education system that was not delivering what employers wanted. It breaks my heart that the outstanding technical training provider, TTE, at South Bank in my constituency has 57 funded engineering training places for 16 to 18-year-olds that have not been taken up. Those opportunities are available in an area of high youth unemployment, but too many young people have left our education system without basic skills or aspiration.

That legacy came after a period of investment and growth from 1987 to 1997. After Margaret Thatcher’s famous walk in the wilderness at Stockton, the Teesside urban development corporation delivered some important projects. There were issues with the corporation, and I am far from being a Thatcherite, but I welcomed the state intervention that brought Teesside retail and leisure park, Hartlepool marina, the Stockton campus of Durham university, Stockton and Middlesbrough riverside developments, the Tees barrage and the Teesdale business park. The list went on, but suddenly it all stopped, and for 13 years very little happened.

The new Labour Government scrapped the urban development corporation and showed their obsession with regionalisation. Teesside became a fiefdom of Tyne and Wear. The regional referendum made no difference, and on it went. Even the ambulance service was moved. Three quarters of a million people were deemed not capable of running their own ambulances. The ludicrous regional fire control project followed, as did ONE. In the north of the region, it was One North East, but in my area it was known as “only Newcastle exists”. Shortly after being elected, I was at a meeting in the north-east discussing the fate of One North East assets. I was asked how that would affect my area, and I replied, “I don’t think there will be a problem; there aren’t any.”

Teesside is a proud and distinctive area, with a unique heritage, unique problems and unique opportunities. As far back as the 1960s, it was described by Redcliffe-Maud as a “functional economic market area.” That is why, with my hon. Friend the Member for Stockton South (James Wharton), I fought for a Tees Valley local enterprise partnership. I am delighted to see how well it is working, and congratulate it on its clarity of purpose, strong local links and powerful advocacy.

Although the north-east is the only UK region with a trade surplus, the Government know that a lot of help is still needed to clear up Labour’s mess. That is why they have done a huge amount since 2010. Enterprise zones throughout the region include three in my constituency alone—at Wilton, Kirkleatham and South Bank. There is a city deal in Newcastle and new offers of deals for Sunderland and Tees valley; ultra-fast broadband for Newcastle; education changes, including the pupil premium; huge growth in apprenticeships, which have doubled in my constituency; investment in rail and buses, enabling Teesport to put modern containers on the rail network; support for innovation with technical innovation centres, including the Centre for Process Innovation in my constituency; chemical and automotive supply chain initiatives; and, above all, the regional growth fund—a total of £284 million and 102 projects in the north-east, with 26,000 direct jobs and 47,000 indirect jobs. That represents the most projects in the country from all three rounds, and one third of the projects in the country from rounds 1 and 2.

[Alex Cunningham (Stockton North) (Lab)]

I am sorry, but I take issue with the hon. Gentleman’s opinion of the regional development agency, which delivered big time for the Tees valley. On the regional growth fund, does he regret, as I do, the Government’s decision not to back our regional airport in the south of the region to create a new hub that would expand industry throughout the Tees valley?

[Ian Swales]

Clearly, the regional growth fund could not support every project, and I will be bidding for an extra round. I believe that my hon. Friend the Member for Stockton South will talk about the airport.

Two thirds of rounds 1 and 2 projects have been approved, and the money has already gone out or is ready to go out. The statistics that the right hon. Member for South Shields gave come from the Public Accounts Committee, of which I am member, and date from about nine months ago. Large parts of the country, including London and the south-east, have received virtually nothing from the regional growth fund. It is a serious regional policy to try to repair our manufacturing sector, which was ravaged during the past 13 years.

Business Rates (North-East)

Debate between Alex Cunningham and Ian Swales

Tuesday 25th October 2011 Westminster Hall

[Alex Cunningham (Stockton North) (Lab)]

Thank you, Mr Amess, for calling me to speak this morning on a subject that has far-reaching implications for my constituency and the north-east as a whole. I congratulate my hon. Friend the Member for Sunderland Central (Julie Elliott) on securing the debate.

The Government’s ambition to “incentivise” councils to boost local economic growth by linking it to a meaningful increase in funding for local services is laudable in its aims. However, I feel strongly that their proposals will have a raft of unintended consequences which will have a damaging effect on the north-east and other less developed areas of the country, such as Yorkshire. They will not encourage strong, sustainable growth in local areas but rather undermine the manufacturing companies that are so vital to the north-east’s economy. There is no doubt in my mind that the Association of North East Councils is correct when it says that wealthy areas could grow stronger and poorer areas weaker if business rates are localised as proposed. The 12 councils warn that wealthy parts of London and the south-east, led by Westminster and the City of London, could have resources reallocated to them while poorer areas lose out. The new system must take account of local needs, including cost pressures resulting from deprivation.

The current system recognises the systemic inequalities in Britain, providing different councils with different levels of resource to meet different needs and ensuring that the service needs of the poorest areas are met. That is fundamental, as there is substantially greater need in the north-east in terms of pressures on local services and the smaller commercial and business areas. One example is children’s services. Proportionately, several times more children are on free school meals in my Stockton North constituency than in the affluent areas of the south-east, so our local authority’s costs are proportionately much higher on children’s services alone. Some may claim the Stockton borough will benefit marginally—it would only be marginally—from the changes, but any small benefit will be dwarfed by the total loss across the north-east. This is about the north-east region and not about individual authorities—it is about a regional, shared economy.

Despite the diversification of the region’s economy and considerable action over the 13 years of Labour Government on health and poverty, the region sadly still has the largest percentage of its population—around 33%—living in some of the most deprived areas of England. The proposals will make it much worse. If the Government’s proposals were applied to the 2011-12 or 2012-13 grant settlements for the north-east, it would result in grant losses above the national average in percentage terms and substantially above average reductions in cash grant. That significant reduction means that councils would inevitably have to make deeper cuts in their budgets, thereby putting greater pressure on the delivery of the most essential local services.

The Government should realise that not only do different areas of the country face different levels of need and dependency on public services, but they have different business and economic structures. The north-east is very proud of its manufacturing sector, which currently, as my hon. Friend the Member for Sedgefield (Phil Wilson) pointed out, contributes £7.5 billion to the regional economy. However, the sole focus on business rates as a means on incentivising local business growth will hugely undermine that sector.

Business rates from retail or commercial developments are significantly higher, as others have pointed out, than from manufacturing and, under current proposals, it is likely that manufacturing developments will be seen as less attractive propositions, despite the wider economic benefits such as exports, supply chain industries, jobs and skills, compared with retail developments which have the capability to secure greater levels of business income.

[Ian Swales]

Does the hon. Gentleman believe that his area of Stockton has unlimited potential for more and more retail development, which would thereby stop manufacturing investment, which seems to be his proposition?

[Alex Cunningham]

One of the things that I have fought for over the years is to restrict the growth of retail outside our town centre, which, as with so many town centres throughout the country, is suffering. We will not get anything extra for the empty properties sitting in our high streets; I want to see them filled up with new businesses and contributing to our economy.

There seems to be a contradiction between the Tory-led Government’s rhetoric and their actions. When the Tory leader first became Prime Minister, he claimed that he wanted to give manufacturing “another chance” and sang the praises of small businesses by saying that they were the “lifeblood” of the economy. During the general election campaign, he—not then Prime Minister—told the north-east media that the region would be safe in his hands. Sadly, he has failed to keep any promise in that direction, delivering less investment, a laughable growth fund that has yet to achieve any single thing of note, enterprise zones without any real, up-front, hard cash to support them and a banking sector that ignores his pleas for loans to businesses. Now his proposals for business rates fail our north-east region.

I also have strong reservations, as does my local Stockton borough council, about the lack of a clear mechanism for adjusting to changes in the needs of local authorities. I was encouraged that the hon. Member for Stockton South (James Wharton), who has now left his place, agreed that that is a major issue. Under the present formula grant system, needs are adjusted every year through changes in data and every three years by considering changes to the actual formulae. To move to a much more infrequent reassessment of need in the proposed rates retention scheme would be a worrying move, particularly in such uncertain economic times. It is therefore of the utmost importance that the Government forecasts of business rate yield are realistic, and that updated estimates are based on adjustments arising from continuing economic indicators.

I started with how the Government want to incentivise local authorities, but it is important to emphasise that the notion that local authorities in the north-east do not promote economic growth in their area because they do not benefit from increased business rates is fundamentally flawed and, I would go so far as to say, deeply insulting. People in the north-east are working extremely hard to develop, to grow our local economies and to create jobs. Local authorities, including those in the north-east, have embarked on economic development in their area for countless years because they will attract jobs and benefit their area. The Government reforms are not only likely to hinder the prospect of a strong business sector in the north-east but very likely to worsen public services when they are needed most. That “survival of the fittest” model is simply the wrong policy, with the north-east again paying the price.

Regional Development (North-East)

Debate between Alex Cunningham and Ian Swales

Tuesday 22nd March 2011 Westminster Hall

[Ian Swales (Redcar) (LD)]

I congratulate my hon. neighbour—as I suppose I should call him—the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) on securing the debate and on his powerful and very well-researched speech. He has done excellent work.

As we know, the north-east economy is largely founded on the historic industries of coal mining, ship building and steel manufacture. For decades, we have had issues with both the run-down of those industries and the run-down of employment in those industries, even those that continue. Although the news of the revival of the steel industry is very welcome in my constituency, I do not think it will employ 10,000-plus people again, which it did not so long ago. There has been a long history of assistance being given to the north-east in relation to various coal and steel closure areas and regional development grants. In the 1980s, I remember filling in the forms for regional development grants in a former life. There has been a long history of needing to do something about the north-east, and various Governments have continued that.

I accept the points made about the RDA. RDAs around the country have had patchy success. However, I think that even the other RDAs would recognise that One NorthEast was probably the best and most successful. I pay tribute to the former Minister for the North East, the right hon. Member for Newcastle upon Tyne East (Mr Brown), for his passion and advocacy both of RDAs and the region. Something we should all recognise in this place is that what divides us politically is far less than what joins us when it comes to regional issues.

The RDA did good work but, as I said in the recent debate in the House led by the right hon. Member for Newcastle upon Tyne East, we need to consider the study done last year by Experian and the BBC. They looked at 324 areas in the country in terms of economic strength and rated Hartlepool as 314th, Redcar and Cleveland as 319th and Middlesbrough last at 324th. Whatever else has happened, we have not driven the Teesside area up the economic league. The only time we had any significant urban renewal in Teesside was from 1987 to 1998, when we had Hartlepool marina, Stockton riverside and university campus, Teesside barrage and waterpark, Teesside retail and leisure park, and Middlesbrough riverside. That was the period of the flawed but, nevertheless, energetic and focused Teesside development corporation, which was scrapped by the Labour Government when they came to power. Much less has happened since in that regard.

I shall turn to transport. The Tees valley is the birth place of passenger railways. If someone were to ask in a pub quiz where the first passenger railway was, most people would say that it was Stockton to Darlington, which runs along the Tees valley. So where are we today with our railways? We still have a railway that runs from Darlington, almost touches Stockton and goes all the way through to Saltburn. It passes very close to the Riverside stadium, but does not stop there; it passes very close to Teesside retail and leisure park, but does not stop there; and it passes within half a mile of Teesside airport, but does not stop there. Is there another airport in the country that has virtually no public transport? The failure to even allow a railway that already exists close to Teesside airport to be part of the transport structure in the area shows that there is an awful lot to do. Middlesbrough is the largest town in the country without a direct link to London, which is another example of what is left to do. We have some real issues to deal with and real work left to do.

In business, I always used to say that one could tell whether a committee was any use, first, by how it was formed—did it form itself?—and, secondly, whether people attended it. Teesside Valley Unlimited formed itself as a private-sector led, private-public partnership about five years ago, because of the perceived needs of the Tees valley and the difficulties there. It is no surprise that that organisation was very quick out of the traps when it saw the opportunity to have a local enterprise partnership for the area. I know that that enraged some people further north and that it was felt to be a fragmentation of effort that may lead to outcomes that are not as good.

[Alex Cunningham]

I have always been a one region person. Although I congratulate the people of Tees valley on putting together the first LEP in the region, does the hon. Gentleman not agree that it is important that the north-east—the smallest region in the country—works closely together and has a tremendous partnership with our local authorities and other organisations in order to drive the region forward? We should not simply try to plough our own furrow, as some people would have us do.

[Ian Swales]

I was about to come on to that matter. I thank the hon. Gentleman for his question. Absolutely, we need one regional voice on a number of issues. This Government perhaps differ from the previous Government in that we do not see the need for such an approach to be prescribed in detail for every region. I hope that the existing structures can make decisions, create what they think they need and make it work. If there are two LEPs in an area, the Government are not prescribing that they cannot talk to each other and say, “Okay, let’s jointly work on this.” A good example is European funding. The Government have already decided to retain a regional focus for European funding, because that is what is necessary.