Ceramics Industry

Angela Smith Excerpts

Tuesday 8th March 2016 Westminster Hall

[Steve Double (St Austell and Newquay) (Con)]

It is a pleasure to serve under your chairmanship, Mr Hollobone.

I congratulate the hon. Member for Stoke-on-Trent Central (Tristram Hunt) on securing the debate on a subject that is close to my heart. The motion is about Government support for the ceramics industry, and the starting point of any industry is the raw material—I am speaking about china clay. If we are to support the ceramics industry in the UK, we need to support the china clay industry as well.

I am incredibly proud to speak not only as a Cornishman who grew up surrounded by the china clay industry in and around St Austell, but as the Member of Parliament for the area, which has been at the forefront of china clay production for hundreds of years. The sky tips dominate the landscape of mid-Cornwall, reminding us every day of our great heritage and our history of clay production. Generations of Cornish families, including my own, have worked in the industry. Barely any part of my constituency has not been touched directly by china clay production.

China clay has long been big business in Cornwall. St Austell’s relationship with it, as the hon. Gentleman rightly pointed out, goes back more than 200 years, to when William Cookworthy first made the discovery in Cornwall. At the height of the trade, literally millions of tons of china clay were being exported to all corners of the world. Cornwall soon got a reputation for the highest-quality clay in the world, so it is no surprise that that was quickly recognised by the ceramics industry, establishing the connection with places such as Stoke-on-Trent.

A large proportion of Cornwall’s china clay production has moved overseas in recent years, but the industry remains extremely important to Cornwall. In fact, it is difficult to overstate its importance to Cornwall and, in particular, my constituency. Although employment in the industry has declined over the past 20 or 30 years, it is still the largest private sector employer in the area. The majority of the clay produced in Cornwall is exported. In fact, china clay contributes about £150 million a year to the UK’s balance of payments, and that should be preserved. The industry has also shaped our heritage in mid-Cornwall, and that is of great importance to us. As I said, every day we see the marks left on our landscape—for example, the Eden Project is built in a former china clay pit.

With the clay and ceramic industries so important, we should look at ways in which the Government can support the industries and the thousands of workers throughout the country employed in them. As producers in Brazil and China emerge, undercutting exports, there are fears that problems could be exacerbated if action is not taken and if the existing proposals for carbon leakage protection are pursued.

In my constituency, Imerys is the only remaining company that produces kaolin and ball clay. Such operations, by their very nature, are highly energy-intensive processes, and energy represents about 27% of production costs. Consequently, energy consumption has always been a major focus for the industry and is minimised by it wherever possible. Imerys has been at the forefront of energy efficiency and the use of alternative and renewable energy sources for many years. However, the fact remains that, given the international market for its products, further increases in production costs could result in it losing business to European Union and non-EU competitors.

That brings me to my key point: what will the Government do to support the ceramics industry and, specifically, the china clay industry? Kaolin and ball clay operations are deemed to be at risk of carbon leakage. They therefore received a free allocation of allowances. However, there are concerns that, under the UK’s preferred approach to carbon leakage protection post-2020, Imerys is likely to receive what it feels is an inadequate level of free allowances to remain internationally competitive.

The reduction in the free allowances will have a significant impact on the industry and force the company to purchase a significantly greater proportion—possibly all—of its allowances to cover future carbon emissions. That will obviously severely damage its global competitiveness and disadvantage the kaolin and ball clay sector against competing suppliers that may receive higher levels of carbon leakage protection.

[Angela Smith (Penistone and Stocksbridge) (Lab)]

Does the hon. Gentleman agree that when we talk about rebalancing the economy, we are talking not only about the midlands and the north of England, but about areas such as Cornwall, which desperately need to maintain this kind of economic activity? Surely it is incumbent on the Minister to remember that when thinking about the relevant policies.

[Steve Double]

I wholeheartedly agree. It is well known that the Cornish economy, and that of the south-west in general, fall way behind the UK national average. It is crucial to do all we can to bridge the gap, but I would say that the Government are doing a great deal, investing record amounts of money in the south-west and already supporting the Cornish economy in many ways.

I am, however, addressing the specific sector of the china clay industry in Cornwall. I do not want to see it put at greater disadvantage on the world market, so no decisions that make it less competitive on the world stage should be made. Based on existing emission levels and forecast prices of carbon, the proposed carbon leakage changes could add £1 million a year to Imerys’s production costs. We should, however, not only be proud that the UK produces the best-quality china clay in the world, but be doing all we can to protect and support the industry as a world leader.

Recently, we have seen the impact of uncompetitive production costs, driven in particular by energy costs, on a major industry: our steel industry. We cannot allow the same fate to fall on the china clay industry. We cannot sacrifice the china clay and ceramics industries in order to save other sectors. I simply urge the Government to look carefully at their approach to the carbon leakage allowance and not to make any decisions that will reduce the competitiveness of an industry that is vital to Cornwall.

--- Later in debate ---

[Ruth Smeeth]

I very much agree with my hon. Friend and would suggest that one reason we need to protect our industry is the quality of what comes out of our factories as well as the design and investment.

[Angela Smith]

My hon. Friend is illustrating perfectly why MES for China would be damaging to our ceramics industry. Our steel industry, which is already under severe stress, would also be threatened by such a move. Does she agree that the Government ought to think again about their support for MES for China, given the risk it poses of potentially permanent damage to two of our important foundation industries? As parliamentarians, we need to support both industries in their bid to create a level playing field in terms of both cost and competitiveness.

[Ruth Smeeth]

Of course I agree with my hon. Friend, who speaks with authority as one of the few Members who represents both the steel industry and the ceramics industry, both of which could be heavily damaged by China’s market economy status.

China currently meets just one of the five criteria required for market economy status, a fact that has been confirmed by the Minister. However, simply to say that China does not meet the criteria is to grossly underestimate the extent to which the Chinese economy is rigged in its own favour to the detriment of British and European industry. A recent report by the European Parliament—those may be words to avoid—concluded that state-led distortions in the financial sector are rife, that bankruptcy systems are malfunctioning and that political influence can be seen in close to 100% of China’s biggest firms. Far from being anything resembling a free market, 38% of China’s industrial assets are state owned.

Yet while the EU recognises the threat posed by granting MES to China, the Government appear to be supportive of the bid. The effect of that would be catastrophic for British ceramics and devastating to the British economy as a whole, affecting about 3.5 million jobs and up to 2% of GDP in the first two years. Import-sensitive sectors such as tiles and tableware would be especially hard hit, as they have no defence against Chinese dumping. Companies such as Johnson Tiles, based in my constituency, are at the forefront of modern production, but if we are not careful, their reward for innovation will be to be undercut in a market that they have pioneered.

It should come as no surprise that the Government have been equivocating on this issue. Their approach to China has resembled less of a negotiation than a fire sale. From steel to real estate and our nuclear reactors, the message coming out loud and clear is “Everything must go.” When it comes to supporting ceramics specifically, the Government talk a good game, but a significant proportion of the tableware used in the Department for Business, Innovation and Skills is made in China. Far from celebrating “Britain is GREAT,” the Minister eats from tableware at the Department—

--- Later in debate ---

[Anna Soubry]

As you might imagine, Mr Hollobone, I do not have time to go swanning off around the world; I am far too busy. I can barely get out of my office where, I can assure you, I do not have food on plates.

We will move on, because there are some seriously important issues to be discussed and debated—I am going to cut the next part of my speech, because I want to get to the real heart of this debate. As we have heard from a number of hon. Members, including my hon. Friend the Member for St Austell and Newquay (Steve Double), there is very serious and real concern about the high cost of energy. Like many industries that rely heavily on using a lot of energy, the cost of energy is of serious concern, as is carbon leakage, tiering and a number of other issues that look as though they are coming down the track, if I may put it that way.

On the positive side, it has to be said—if I may say this to Opposition Members— that the Chancellor of the Exchequer should be congratulated on announcing, in the November 2015 spending review, the exemption of energy-intensive industries from indirect costs of the renewables obligation and small-scale feed-in tariffs. We have made all those advances over in the EU, with compensation coming forward. In fact, we have now said that from 2017, EIIs will have an exemption from those particular obligations—those particular taxes.

Hon. Members then say, “Well, that’s all great, wonderful and brilliant, but unfortunately, it doesn’t affect the ceramics industry enough.” I absolutely hear that message and understand that that is deeply concerning for all those who work in the industry. However, we have something called the industrial 2050 road map—that is a very good example of Government using dreadful language. “What on earth is a road map in the ceramics industry?” I asked, and my brilliant officials, as ever, helped to tell me. I went to a conference yesterday in the Department for Business, Innovation and Skills, which was attended by the equally brilliant British Ceramics—I cannot remember the next part of its name. Somebody will tell me in a minute, but anyway, it is brilliant. It is basically the industry’s group, which gets together all the businesses involved in the ceramics industry and represents them extremely well. Its representatives have been to see me, and I am more than happy to see them on a regular basis.

Yesterday, by way of example, we had a conference in which we looked at what we are doing as a Government and how to improve, such as by achieving more compensation, perhaps, and by looking at how we get cheaper energy, because that is the real solution—ensuring that we have an abundance of cheap energy. However, it is also about ensuring that we do everything that we can to reduce the amount of energy that these industries use. The road map is basically a plan—it is a strategy—that looks at how we can reduce the burden of high energy prices through the reduction of usage and through better usage, and so on and so forth, for ceramics and others.

I attended that excellent event only for a short time, unfortunately, but that is the sort of work we are doing, because we certainly get that there is a problem, and I am absolutely determined to do all I can to be a champion for this excellent part of our manufacturing sector, to achieve a better deal and to ensure that we indeed achieve that level playing field. In that respect, I think the hon. Member for Stoke-on-Trent North and I absolutely agree, as I think the hon. Member for Makerfield (Yvonne Fovargue) does, that all this industry asks for is a level playing field—not subsidies or special treatment—and I agree with it.

Opposition Members and I are now going to have a falling out, because they make much of the market economy status and China. I do not intend to use a pun, but that is a complete and total red herring, because Russia has market economy status but it is not precluded from tariffs being imposed on it—and rightly so—by the European Union. Therefore, the idea that tariffs cannot be imposed on China if it were to receive MES is not true—it really is not the case.

[Angela Smith]

Surely the issue is that the tariffs will not be of a sufficiently high rate because of the market economy status that is enjoyed by those countries.

[Anna Soubry]

No, I do not know of any reason why not. Russia does not at all have a lower tariff because it has MES, so this is a red herring.

I think, however, that we can find some common ground on dumping. The critical point with dumping—there are many examples from the steel industry and two recent examples in ceramics, although when I say “recent”, I mean from the last five years or so—is getting the balance right. If the tariff is too high, it is not a question of the British Government being difficult; it is actually people in the industry who often do not support the tariffs being put on, and there will be other sectors of the British economy that are against tariffs—

--- Later in debate ---

[Anna Soubry]

I was about to come on to that issue, so that is good timing. We did a study on mandatory country-of-origin marking, which was published on 2 March 2015. I have to tell the hon. Gentleman that the majority of companies that took part did not believe that compulsory origin marking would enhance product safety or tackle counterfeiting. However, I do not doubt that more work can be done, because there is marking that is misleading. There are all sorts of things that I will not go into now, Mr Hollobone, because that really would have me here all night, but I am not happy about the markings on lots of products that make out that they are British when actually they are largely made somewhere else. More work can be done on that, and I am very happy to do it.

We are looking at catapult status for the Materials Processing Institute. I am in all sorts of discussions with other hon. Members, notably from Redcar and the north-east, and that will continue. It is something that we are revisiting and looking at, and we will judge it on its merits.

Hon. Members asked about the European Union. It is undoubtedly the case that we are stronger, safer and considerably better off by remaining within the EU. We are making huge strides by ensuring that on dumping, for example, the EU is acting much more quickly and also reducing regulation, and ensuring that it, too, is getting the message on energy. I will finish on this very strong line, if I may. When I went over specifically for the energy intensive industries competitiveness meeting two or three weeks ago, the various sectors did not hold back in making it absolutely clear that we have to have sensible energy prices. We must not overly burden people with taxes. We must create a level—

[Angela Smith]

Will the Minister give way?

[Anna Soubry]

What do you think, Mr Hollobone? He says yes.

[Angela Smith]

Mr Hollobone is being very generous, and so is the Minister. On energy prices, I completely agree with her that we are better off in the EU and we need to keep working with the EU on those prices, but surely the unilateral imposition of the carbon floor price is doing as much damage as anything that the EU has introduced in terms of energy taxation, and surely the Minister ought to be lobbying the Exchequer to do something about that.

[Anna Soubry]

As you might imagine, Mr Hollobone, I do not just lobby the Exchequer. I also—and actually it is a genuine pleasure—work with my right hon. Friend the Secretary of State for Energy and Climate Change and other Government colleagues, because we absolutely get that there is a problem. As I keep saying and as is absolutely the case, all the industry asks for is a level playing field, and that is what I will seek to achieve, as their ministerial representative, to ensure that we do the right thing. On that hopefully more positive and happy note, thank you for your generosity, Mr Hollobone, and if I have not answered all hon. Members’ questions, I will write to them.