Energy Intensive Industries

Andy Sawford Excerpts

Monday 25th March 2013 Commons Chamber

[Andy Sawford (Corby) (Lab/Co-op)]

I had not anticipated this number of Members attending the debate at this late hour. I am delighted to see them, as it shows the level of interest in this subject. Many other Members have raised the same issues, and there were some welcome announcements in the Budget last week, but I hope to press for more detail and more information on how this issue will impact on my particular constituency. If I am not able to take all the interventions that Members wish to make, I am sure they will understand.

Corby is a town built on steel: the steelworks and the tubeworks. In 1980 thousands of men were put on the dole, including my own dad, when Corby stopped making steel, but the tubeworks continued, and my granddad worked in the stores there. Today it is still incredibly important to our local economy. Six hundred and fifty people work there. These are good jobs that pay well, and in which people learn great skills. This year, Tata took on 13 apprentices at Corby. It dispatched 250 kilotons of tubes, and exported 40% of the product around the world. It contributes more widely to our local economy. I am told that there is a multiplier effect.

[Sarah Champion (Rotherham) (Lab)]

As my hon. Friend knows, Tata Steel in Rotherham employs more than 2,000 people, and the effect that they have on the economy is considerable. That is why I think that the Government should introduce practical measures to support the industry.

[Andy Sawford]

My hon. Friend is right, and I know that she will continue to champion the steel industry in Rotherham. Steel is, of course, incredibly important to many communities around the country. I am particularly proud of Corby’s steel tubes, which can be found in Wembley stadium, in the Olympic park and in the millennium wheel. The red tubes can be found in buildings across the country.

I am pleased that, since becoming a Member of Parliament, I have been able to be active in the all-party parliamentary group for the steel and metal-related industry, which is chaired by my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) and supported by many other Members. I have also been involved with the trade unions, particularly Community but also Unite. Together, we are concerned about the impact of rising energy prices, both because of rising wholesale prices generally and because of European Union and United Kingdom Government policies, especially those that rightly seek to reduce carbon output but, in my view, have wrongly had an impact on a set of vital industries which we need as a nation, and which are part of our sustainable future.

I am not talking just about steel. We have world-class energy-intensive companies that make a huge contribution to our employment, tax revenues and exports. The Environmental Audit Committee estimates that energy-intensive industries account for 4% of gross value added, and employ 125,000 people in the United Kingdom. Concern is shared by a number of industries. The hon. Member for Rugby (Mark Pawsey) has expressed concern to me about the cement industry, and companies such as INEOS Chlor which are part of the Energy Intensive Users Group have given me helpful briefings.

Last week the ceramics industry was very much in the public eye when the Chancellor made announcements about it in his Budget statement. In my constituency, Morgan Technical Ceramics employs 200 people. It makes an incredible variety of products which are exported to more than 100 countries, but in the process it uses large amounts of gas, as do all ceramics manufacturers.

Three areas of climate policy are having a particular impact on industrial energy prices: tax, carbon prices and renewable subsidies. Of course, those apply in other European countries, but the United Kingdom Government have not listened to the calls from energy-intensive industries in the UK for help of the kind that the German and French Governments give their industries. That has two effects. First, it makes it very difficult for our companies to compete now, and secondly, when it comes to investment decisions and securing the long-term future of these industries, the global companies of which they are part are increasingly opting to move elsewhere. Morgan Ceramics, for example, tells me that it recently moved 300 jobs from the UK to France.

We have an urgent problem. Climate policies have added about 21% to current electricity prices, and the Energy Intensive Users Group estimates that the figure will rise to 58% by 2020. New extra climate-related taxes are likely to exceed current profits for many of our energy-intensive companies within the next few years, which means that their viability is in question in the medium term. Let me give two figures that illustrate the problem. The wholesale price of electricity in Germany in 2014 is forecast to be €40 per MWh, while the price in the UK is forecast to be €60 per MWh—and that is before taxes have been taken into account. That should be contrasted with the help that is being offered by Governments. The UK Government have provided a £250 million mitigation package to protect industry from the cost of the carbon prices floor and the EU emissions trading scheme. Of course, that mitigation is welcome, but the German Government are offering €5 billion in energy tax rebates to their energy-intensive industries, so we can immediately see that the concerns about a level playing field are very real.

[Nic Dakin (Scunthorpe) (Lab)]

I congratulate my hon. Friend on securing this debate. In addition to that disadvantage, is there not also a lack of clarity about how much money will be available to support energy-intensive industries, and when? That certainty is needed to secure jobs into the future, as has been mentioned.

[Andy Sawford]

My hon. Friend is absolutely right. Like him, I am concerned about the lack of clarity, and particularly the time it has taken the Government to sort out the compensation package.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

My hon. Friend is being extremely generous in giving way, and it is fantastic that he has been able to secure this debate. Was he, like me, concerned to hear the Secretary of State for Business, Innovation and Skills admit to the Welsh Affairs Committee in January that the package was very slow in coming? He was almost admitting to a failure of his Department. Does my hon. Friend agree that the Business Secretary needs to do a lot more to push that along?

[Andy Sawford]

I was conflicted in preparing for this debate because, as so often with these things, the Ministers who are called to respond to the pressure we put on the Government are the very people who are listening and seeking to help. The Business Secretary has indeed acknowledged that progress has been slow. I was told in a ministerial reply on 25 February that the Government are analysing the responses to their consultation on the mitigation package, and are exploring the issue further. I hope the Minister will understand when I say that, given the vital importance of these industries, which employ 125,000 people, this uncertainty is not good enough and we need to hear the detail soon. I hope he can say when the Government will tell us how the mitigation package will work and explain the details.

The overall level of compensation is not adequate—neither the scale of financial compensation nor the duration of the scheme, which covers only the current spending review period. The Chancellor announced in last week’s Budget that there will be further support in the next spending round, which is welcome. However, on the long-term investment decisions, the scale and duration of support during the next spending round has not been made clear. Can the Minister give us further details today?

The Budget proposes a one-year extension to the current mitigation package, taking us through to 2015-16. Does that mean stretching the existing £250 million further, involving a thinner spread of money across the period, or will there be additional money? That was not made clear in the Red Book.

The announcement in the Budget of a 100% exemption from the climate change levy is good, and I am sure the Minister will remind us of that, but we must remember that it was already at 90%. The Chancellor made much of the specific exemption for the ceramics industry, which did not previously qualify for mitigation. That has been hugely welcomed and we should welcome it tonight. I pay particular tribute to my hon. Friend the Member for Stoke-on-Trent Central (Tristram Hunt) for his campaign, in which I know other Members are involved. I hope the Minister will not mind me describing the situation in these terms, but all those measures put together look like a sticking plaster. He must acknowledge that our energy-intensive industries have a long-term problem, certainly a long-term challenge.

To secure the future of France’s energy-intensive industries, the French Government brokered the Exeltium deal, through which energy-intensives have signed long-term power supply deals for low-carbon energy. That is the kind of measure we need in the UK.

Ofgem has already raised concerns about a 2015 electricity supply crunch. We know there is a lack of gas reserves stored in this country, and gas prices are highly volatile. Last Friday, the Bacton interconnector failed for several hours. Prices opened at £1.25 per therm and rose to £1.50 during the day, which shows the huge volatility within the industry. The ceramics industry is concerned that it could be the first in line if there are gas shortages. If production has to be turned off with two hours’ notice, which is a risk, given the uncertainty of supply, that could seriously damage the kilns. In the long-term we need more storage and the requirement to use it through a public service obligation, as is common in other European countries, to ensure energy security and reduce price volatility.

I have spoken about the importance of our energy-intensive industries, and how vital they are to my constituency and many others around the country, so I urge the Minister to maintain an ongoing dialogue between the Government, industry and the trade unions, which have played a helpful role. Will he commit to visit my constituency to meet Tata, with me and work force representatives, and to visit Morgan Technical Ceramics so that we can discuss the issues for that industry in more detail?

[Nia Griffith (Llanelli) (Lab)]

Does my hon. Friend recognise that many energy-intensive industries are keen to make significant investment, which will result in energy efficiency, but are hampered because the enhanced capital allowance system is not broad enough to encompass much of that investment and a lot of it is not eligible? Will he therefore join me in calling on the Government to re-examine this area to see whether they could expand the scope of enhanced capital allowances?

[Andy Sawford]

My hon. Friend makes an incredibly important point. I have received a great deal of helpful briefing from industries on how they hope to secure their industry for the long term, and I hope we will hear from the Minister about the enhanced capital allowances. If he would commit to visit my constituency, that would be incredibly welcome. I ask him to provide much more detail on the various measures that have been announced and how we might go further, so that when companies look at their operations in this country, as Tata regularly does, they can be confident that they will be able to operate in a viable way in the future because of the policies that we have advocated and that the Minister has acknowledged.