Oral Answers to Questions
Jesse Norman Excerpts(7 years, 11 months ago)
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Jake Berry (Rossendale and Darwen) (Con)
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)
My Department is working closely with the Department for Exiting the EU to understand the impacts that leaving the EU will have on businesses, consumers and other economic actors across the UK, including in east Lancashire. As the Prime Minister has said, we will work hard to get the best deal for Britain.
Jake Berry
Although not quite as eye-catching as the motor industry, the construction products, furniture-making and chemical industries, represented by Crown Paints, J & J Ormerod and others in my constituency, employ more people. Will my hon. Friend ensure that these strategic industries to east Lancashire can trade on no less favourable terms than any other industry following Brexit?
Jesse Norman
As my hon. Friend will know, I am closely involved with the construction products sector, and the construction industry in general, through the Construction Leadership Council. It would be premature to comment on any deal to be struck, but he can take it from me that it has my closest attention, as does the future of the construction industry itself.
Graham Jones (Hyndburn) (Lab)
As a fellow MP for Rossendale, I echo the comments and concerns about leaving the EU and what the tariff framework would be if there was a hard Brexit. When I visited Simon Jersey, which did the formal wear for our Olympic team, I was told that the cliff-edge tariffs on textiles are between 9% and 12%. This is a real concern. What assurances can the Government give to companies that they will not be taxed out of business through leaving the EU?
Jesse Norman
As I have said, it is premature to give any kind of assurance. What is striking, though, is the amount of new investment that has been taking place in this country, irrespective, one might think, of any concerns about Brexit. That includes investments in BAE Systems, Nissan, Jaguar Land Rover, Honda, Associated British Ports and many other large industrial players.
Mr Steve Baker (Wycombe) (Con)
Will my hon. Friend explore how World Trade Organisation-compliant tariff drawback mechanisms and inward processing measures can ensure that the objectives of my hon. Friend the Member for Rossendale and Darwen (Jake Berry) are met?
Jesse Norman
That is a formidably technically sophisticated question, for which I thank my hon. Friend. I think that it probably lies to be answered between ourselves and the Department for International Trade. We will certainly consider it carefully.
Kate Green (Stretford and Urmston) (Lab)
Food production and food processing is an important part of the north-west economy that is not necessarily susceptible to export beyond the European Union because of different consumer tastes and preferences in the rest of the world. What negotiations are the Government considering or already undertaking to protect this important industry? Can the Minister confirm that specialist negotiators who understand the industry are in place to carry out those negotiations?
Jesse Norman
That question is really as much for the Department for Environment, Food and Rural Affairs as it is for us. Nevertheless, it is true that tastes are expanding around the world, and therefore one sees every opportunity for British food producers to expand their world markets in the days to come.
Philip Davies (Shipley) (Con)
Given that we have a massive trade deficit with the European Union, surely it would be economic suicide for the EU not to agree a free trade deal with us. However, Civitas has calculated that if it did go down that line, British business would have to pay about £5 billion a year in tariffs under WTO rules to access the EU market, and EU businesses would have to pay about £13 billion in tariffs to access the UK market. Given that, could we not agree to cover all tariffs for British businesses exporting to the EU, so that they do not have to pay anything, and still be quids in?
Jesse Norman
Alas, long experience has taught me to distrust some of these speculative estimates of cost and benefit, so I will not comment on that.
Danny Kinahan (South Antrim) (UUP)
We are all aware that the cross-border trade between Ireland and Northern Ireland is absolutely vital, and if tariffs are put in place, it could be a complete disaster. Can we please make sure that the Northern Ireland voice is heard and embedded in any negotiations?
Jesse Norman
I assure the hon. Gentleman that that question is being taken extremely seriously in my Department. Northern Ireland is an area for which I have a ministerial responsibility. I have met, on several occasions, Northern Ireland Economy Ministers and senior figures in industry there. We will continue to look at this question very closely.
Adam Afriyie (Windsor) (Con)
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)
To turn from Marley’s ghost stalking the Labour Front Bench, the number of businesses in the UK continues to grow: at the start of 2016, there were a record 5.5 million private sector businesses, which is an increase of 97,000 since 2015 and 1 million more than in 2010.
Bob Blackman
This weekend, small businesses in my constituency held a Christmas market in Belmont Circle to celebrate the 10th anniversary of Eye 2 Eye opticians, which is doing a brilliant job locally. What more can my hon. Friend do to ensure that small and medium-sized businesses prosper and grow in this country?
Jesse Norman
My hon. Friend is right to recognise the central importance of small and medium-sized businesses to our economy. The Government have been supporting that vital sector of our economy through: the extension of small business rate relief; our support for the British Business Bank, which has dealt with more than 51,000 small businesses; the new productivity council, which was announced in the autumn statement; and the new patient capital review.
Geraint Davies (Swansea West) (Lab/Co-op)
Given the number of businesses, will the Minister ensure that there is a level playing field so that the level of subsidy for tariffs applied to the motor industry is applied equally across all exporters? Will he publish the total amount of subsidy before 31 March?
Jesse Norman
There has been no special deal for Nissan or any other part of the motor industry. Whatever arrangements are made to support different sectors of the UK economy are fully transparent. The general picture is that we are proceeding vigorously and with some care towards a rather attractive destination.
Lucy Frazer (South East Cambridgeshire) (Con)
Jesse Norman
My hon. and learned Friend is right. She will know that I have been a pretty tireless campaigner for superfast broadband, especially in relation to BT and Openreach. I agree with her about the importance of broadband. The autumn statement announced a £1 billion package for fibre and 5G connectivity, prioritising business connections across the UK. That follows the superfast broadband programme, which is due to deliver 91% coverage in South East Cambridgeshire by mid-2017 and a new universal service obligation.
Bill Esterson (Sefton Central) (Lab)
Fifty thousand businesses die unnecessarily every year because of late payment. Some £31 billion is owed and small firms alone spend £10 billion chasing outstanding invoices. While the duty to report and the small business commissioner have been much delayed, just 378 of the largest 55,000 businesses have signed up to the prompt payment code. When will the Conservative Government start doing something about the scourge of late payment? Put some teeth into it, so that small businesses can act.
Jesse Norman
The hon. Gentleman is right to point the finger squarely at the issue of late payment. It is a serious matter that we will continue to press forward on, but one must see it in the context of the thriving small business economy that I have outlined.
Nusrat Ghani (Wealden) (Con)
Emma Reynolds (Wolverhampton North East) (Lab)
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)
We have held a wide range of discussions with businesses, their representatives, investors, workers and local leaders in all four home nations. We expect that to continue in the coming months to secure UK interests in any exit negotiations.
Emma Reynolds
There is concern among business about a potential cliff edge in March 2019 if we leave the EU and fall back on World Trade Organisation rules and tariffs. Does the Minister agree with the Chancellor, who yesterday told the Treasury Committee that there is
“an emerging view among businesses…that having a longer period to manage the adjustment between where we are now as full members of the European Union and where we get to in the future as a result of the negotiations…would be generally helpful, would”
help smooth the transition and would help to reduce disruption for business?
Jesse Norman
It is a tempting invitation to offer a running commentary on our exit arrangements, but since we are not going to do that as a Government, I will not do so now.
Tom Pursglove (Corby) (Con)
Last week’s news from Port Talbot was hugely welcomed in steel towns such as Corby. It came about because of constructive work not only in the House, but involving Ministers, the unions, the workforce and the industry. As we move towards reaching final agreement, what role does my hon. Friend see the industry playing in the industrial strategy, and what discussions has he had on that in the EU context?
Jesse Norman
That is more a matter for my colleague, my hon. Friend the Member for Uxbridge.
The Minister for Climate Change and Industry (Mr Nick Hurd)
Not Uxbridge—my constituency is Ruislip, Northwood and Pinner.
Jesse Norman
I stand corrected. We will leave the Foreign Secretary out of this.
The Minister for Climate Change and Industry, the Secretary of State for Business, Energy and Industrial Strategy and other ministerial colleagues have had a series of meetings with steel companies across the production and supply chains, and have been able to give them the support and structure needed in that context.
Justin Tomlinson (North Swindon) (Con)
Jeremy Lefroy (Stafford) (Con)
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)
National Grid’s electricity capacity report for this year was published in July and includes a forward look on electricity security. Through competitive capacity auctions, we have already secured capacity from 2018-19 to 2020-21, and in January we will hold a further auction to secure capacity for 2017-18. Our most recent gas security analysis was published in October and shows that our diverse and flexible gas supply can meet demand even under severe weather conditions.
Jeremy Lefroy
The importance of substantial gas storage to electricity generation and avoiding damaging price hikes was highlighted by the partial closure of the Rough storage facility. What are the Government doing to tackle the question of increasing gas storage for the future?
Jesse Norman
That is a proper and important question. Our gas supply arrangements are quite diverse, and we have more than 30% spare gas capacity even on a cold winter’s day. The system has been tested, and has responded well in the past to shocks, including higher than expected demand for heating or power and restrictions to supply infrastructure, but it is certainly something we keep under constant review.
Steven Paterson (Stirling) (SNP)
Jesse Norman
All I can do is refer the hon. Gentleman to the earlier remarks of my hon. Friend the Member for Ruislip, Northwood and Pinner (Mr Hurd) on this topic.
James Heappey (Wells) (Con)
Will the Minister join me in congratulating Avalon community energy on completion of its solar PV installation at Brookside school in Street? Does he agree that such schemes create a greener and cheaper energy system and afford us greater security of supply?
Jesse Norman
I certainly do, and I am very glad that my hon. Friend has brought that to the attention of the House.
Dr Alan Whitehead (Southampton, Test) (Lab)
After the latest capacity auction, the overall scores for the procurement of new combined cycle gas generation plant stand at one small buildable plant over three auctions, at a total cost so far of £3 billion and £12 a year on customer bills. Does the Secretary of State have any other good ideas up his sleeve to secure the procurement and building of new capacity up to 2020?
Jesse Norman
As the hon. Gentleman will know, the gas capacity market auction was an enormous success. It secured a widespread diversity of supply at low cost and in higher amounts than ever before, and it included some innovative new technologies. The Department should be celebrated for managing this.
Chris Elmore (Ogmore) (Lab/Co-op)
Implementing Geological Disposal: Annual Report
Jesse Norman Excerpts(7 years, 11 months ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)
I am pleased to announce today the publication of the sixth annual report of the Government’s implementing geological disposal programme. The programme is focused on implementing the geological disposal of higher activity radioactive waste.
The UK Government remain firmly committed to geological disposal as the right policy for the long-term safe and secure management of higher activity radioactive waste, and continue to favour an approach that is based on the willingness of local communities to participate in the siting process.
The publication of the “Implementing Geological Disposal” White Paper in July 2014 set out the policy framework for the future implementation of geological disposal in the UK. Government have been progressing the “Initial Actions” set out in the White Paper, and formal discussions between interested communities and the developer will begin once the “Initial Actions” are complete.
The sixth annual report can be found at: http://www.gov. uk/beis. I have also written to the Chairs of the Business, Energy and Industrial Strategy Committee and the House of Lords Science and Technology Committee, and I have made available copies in the Libraries of both Houses.
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Tidal Lagoons and UK Energy Strategy
Jesse Norman Excerpts(7 years, 11 months ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)
Thank you very much, Mr Paisley. Members have already widely noted the honour it is to serve under your chairmanship, and I add my support to that sentiment. I congratulate my right hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb) on securing this important debate. It is testimony to him and the importance of the issue that he has generated such cross-party support and so many interesting speeches. The sentiment in the room has been so evident.
My right hon. Friend has long been a proponent of the economic benefits that tidal lagoons could bring to his constituency and to south Wales as a whole. Naturally, he and other Members here today are keen to understand better how the development of a tidal lagoon at Swansea specifically and a fleet of tidal lagoons around the UK coastline—were they to go ahead—would benefit their local economies. However, as he acknowledged, this is a difficult and complex question. The technology is new and untried, and the development warrants due care and consideration before decisions are taken. That is why in May the Government commissioned Charles Hendry to undertake an independent review of the strategic value of tidal lagoons in the UK. Among other things, the review was intended to consider whether and in what circumstances tidal lagoons could play a cost-effective role as part of the UK energy mix, to examine the potential scale of the opportunity, including in the supply chain, and to consider different sizes of projects as the first of a kind.
Contrary to what some Members have said, building a tidal lagoon in Swansea is not a manifesto commitment of the Conservative party, but it is mentioned in the manifesto. There is a commitment to explore the lagoon as a source of affordable energy, and that is exactly what Charles Hendry is being asked to do in his review. We are expecting him to deliver his report to Government very shortly. Colleagues may know better than me how shortly, but whenever that is, this debate is a timely opportunity to discuss the issues. Apparently, drafts have been sent to or discussed with officials—certainly in one case—but it is important to note that the review is not about Swansea as such. Rather, it is a general review of the costs and benefits of tidal energy. As it has not reported, it is irrelevant that the autumn statement has occurred, contrary to what some colleagues have tried to insist. It would be wrong for Government to announce anything while a review we had commissioned was under way. We look forward to receiving it and reading it with great interest.
The question has been raised as to whether, as my right hon. Friend said, there will be a timely and purposeful decision. Members asked when the Hendry review would be published and whether there would be a decision before the end of the year. Colleagues will understand that any decision before the end of the year would be unrealistic at this late stage, and my right hon. Friend acknowledged that. We will give this matter thorough and careful consideration. There will be no dragging of heels.
Geraint Davies
Is the Minister willing to set a target deadline that he will not go past? Will he say, “By June next year, we will try to do better,” or will he set no deadline at all?
Jesse Norman
The fairest thing to do is to see what the report says before we come to a view about an appropriate timetable. It would be quite wrong to prejudge the report and its conclusions.
For all the enthusiasm of my right hon. Friend the Member for Preseli Pembrokeshire for tidal lagoons, I note that he has taken a measured approach, respecting the complex issues that are being raised, for which I thank him. As he said to the House when he was Secretary of State for Wales,
“The Swansea tidal lagoon proposition is very exciting and commands wide support across the business community in Wales, but we also need to recognise that the project is asking for a very significant level of public subsidy and intervention. It is absolutely right that”
the Government
“should conduct very robust due diligence in making sure that such projects will deliver value for the taxpayer.”—[Official Report, 13 January 2016; Vol. 604, c. 842.]
That is precisely what we will do. We will take the time necessary to look at the review’s findings in relation to tidal lagoons, particularly in the context of a wider assessment of the nature of the UK’s future energy mix and our plans to reduce carbon emissions.
Last month, the Secretary of State set out his vision for how the energy sector should develop, in the context of our new UK industrial strategy. He recognises that the Government’s role must be to create the right framework for growth, harnessing both existing and new technologies, to deliver more secure, cleaner energy at a lower cost. That is our goal: a reliable, clean and inexpensive energy system.
Of course, new technologies such as tidal lagoons may have a role to play, but not at any cost. My hon. Friend the Member for Eddisbury (Antoinette Sandbach) rightly raised several issues, and we look to the energy review and other discussions to resolve them. She raised not merely the issue of cost, but her concerns about the lack of intellectual property, planning uncertainty and delays. The Government should properly consider those issues as part of a wider decision-making process.
As colleagues know, the contract for difference allocation round, which we announced last month, is under way. Overall, our energy policies and priorities have not changed. It is worth saying, in relation to the remarks of the hon. Member for Aberdeen South (Callum McCaig), that it is not true that CfDs do not include tidal stream technologies, although it is true that there is no ring-fenced allocation for them within the auction. That is because our responsibility is to bill payers. Tidal stream, which is not a technology that we are specifically discussing in the context of tidal lagoons—it is a different technology—has a strike price about three times higher than that of offshore wind. Until those prices fall, it may be difficult for it to compete. When they do, it will come within the policy horizon.
Callum McCaig
In fairness to myself, I do not believe that I said it was excluded; I said it is effectively excluded, which the Minister may have touched upon himself. Ignoring the potential first mover advantage for tidal stream technology, how does he expect its price to come down if it does not have the support to deploy and develop a downward price trajectory?
Jesse Norman
That is a perfectly reasonable question. Historically, the expectation has always been that technologies have to demonstrate that they are capable of benefiting from support. Given that the distance in the range of cost is so high, a judgment has been made that that technology has not done so at the moment, but other technologies have succeeded in doing so.
Other colleagues raised issues such as the rate at which costs might fall with other lagoons, the degree to which different projects could inspire different learning, and the first mover advantages, all of which should be resolved and discussed in the context of the Hendry review.
Jim Shannon
In my contribution, I mentioned the SeaGen project in Strangford lough in Northern Ireland—a pilot scheme sponsored by the Government to get results in relation to the environment. Perhaps the Minister is going to tell us what the results of that pilot scheme are so that we have some idea of what we are doing now.
Jesse Norman
I am sorry to have given up time for that intervention, because I was coming to that point. SeaGen, as the hon. Gentleman recognises, was a research test bed, and it is being decommissioned now. It received a £10 million grant from the Department, and those conclusions are being carefully assessed. It is a project in which there has already been public investment. [Official Report, 14 December 2016, Vol. 618, c. 6MC.]
It is clear that we cannot allocate subsidies to every technology that asks for them. We have said that our focus will be on key technologies that have the potential to scale and deliver long-term cost savings, in which the UK has a comparative advantage and whose costs to consumers are acceptable.
Jesse Norman
I am very short of time. I am so sorry. I have taken an awful lot of interventions, and I want to make progress.
I note the enthusiasm of my right hon. Friend the Member for Preseli Pembrokeshire for the proposed Swansea bay project, but it is the Government’s job to consider the advantages and disadvantages and to scrutinise the evidence to ensure that decisions are taken in the longer-term interests of the UK and consumers. It is worth focusing on the significant uncertainties associated with the project—in particular, the use of a new and untried technology in a marine environment, the length of time over which the commitment would be made, and the planning issues, which have already been mentioned.
Since the debate on the economic impact of tidal lagoons in March, the Department has continued to have discussions with the developer of the Swansea bay lagoon. I cannot comment on those discussions, given their commercial nature, but the most recent proposal put forward by the developer would be a very significant deviation from current Government policy. It would not be impossible, but it would require careful consideration. We have always been clear that we will consider the findings of the independent review of tidal lagoons and all other relevant factors in deciding whether to proceed with negotiating a CfD on this project. The developer is aware of that.
The issue of value for money quite properly remains at the forefront. I mentioned the concerns about consents and leases, decommissioning and the supply chain. I note that the China Harbour Engineering Company is no longer working with the developer. There is also an issue of state aid approval. The point is that, even under ideal circumstances, it will take some time to resolve those issues, and the Government will need to take our time to consider the review and make a judgment in a proper and effective way.
As this important debate draws to a close, let me say that I expect a copy of the review’s report to be on my desk and those of colleagues very soon, and we will give it careful consideration. I assure hon. Members that the Government will strike the right balance between responding in a swift and timely way and taking the time required to consider this complex issue in the detail it deserves.
Ian Paisley (in the Chair)
Mr Crabb, given that the Minister has been generous in giving up a bit of time, you have the opportunity to accept a bouquet and take a bow, but not much more, before I put the Question.
EU Energy Council
Jesse Norman Excerpts(7 years, 11 months ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)
The Energy Council is taking place in Brussels on 5 December. I will be representing the UK, and below are the agenda items to be discussed.
The Council will hold a policy debate on the proposal for a regulation of the European Parliament and of the Council concerning measures to safeguard the security of gas supply and repealing regulation (EU) No 994/2010. This will focus on possible alternative approaches for regional co-operation, exchange of information on commercial contracts and solidarity. The Council will consider the structure of core regions or groups of countries working together to address specific risks. The debate will also cover the role of competent authorities and the Commission in accessing contract information on security of supply issues and whether a solidarity mechanism should be harmonised or reflect member state specificities.
The Commission introduced the “winter package” on 30 November. As expected this is comprised of legislative proposals for the update of the energy efficiency, energy performance of buildings and renewable energy directives together with new legislative proposals on electricity market design and governance of the energy union.
The Commission will update the Council on progress on developing the external dimension of the EU energy policy. This will be followed by an exchange of views on whether progress has been made on strengthening the common voice of the EU in relations with partners beyond its borders; which countries or regions are the most relevant for the EU; and the tools to be used to enhance mutual cooperation. It will also cover how the EU should best approach the ongoing transformation of the global energy system, and respond to reform processes within international energy organisations.
The presidency will provide an update on the “state of play” on the proposal for a regulation of the European Parliament and of the Council, setting a framework for energy efficiency labelling. This will focus on the delays in the trilogue negotiations between European Parliament, Council and the Commission.
The presidency will also provide a short “state of play” update on the proposal for a decision of the European Parliament and of the Council on establishing an information exchange mechanism with regard to intergovernmental agreements and non-binding instruments between member states and third countries in the field of energy.
The Commission will update the Council on recent developments in the field of external energy relations.
Finally, Malta will inform the Council of the priorities for their presidency in the first half of 2017.
[HCWS313]
South-west Growth Charter
Jesse Norman Excerpts(8 years ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)
Thank you, Sir Roger, for that incendiary opening remark. It is a pleasure to serve under your chairmanship and it is an absolute delight to take part in such a generally wise, good-natured, warm and constructive debate. It is a particular delight for me to look round Westminster Hall and see the serried ranks of Conservative MPs from the south-west, and even the conservative Member from the Opposition, the excellent right hon. Member for Exeter (Mr Bradshaw), who in so many ways shares so many of our inclinations.
I congratulate my hon. Friend the Member for South West Devon (Mr Streeter) for calling this debate on a very important area and set of issues. We have already heard reference to Boadicea and Sir Alan Sugar from my hon. Friend the Member for Taunton Deane (Rebecca Pow), but I like to think of my hon. Friend the Member for South West Devon as a kind of Abraham—a patriarch of the south-west, bringing his wisdom to bear and providing moral and spiritual, as well as parliamentary, leadership.
We have heard some excellent contributions. Not everyone is still in their place for reasons we perfectly understand. I have heard strong support for the area, the skills and the genius of the south-west; concern about infrastructure and connectivity; recognition of the Government’s achievements to date; and a desire for Government to step forward and do more. I will not run through all of the excellent contributions we have heard, Sir Roger. It is testimony to your brilliant chairmanship that the imposition of a self-denying ordinance, an interesting contradiction in terms, has had the excellent effect of enlisting so many outstanding and brief contributions.
Let me just point to one or two wider considerations in response to the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) and pick out some aspects of the industrial strategy, before turning to where we are with the south-west. It is fair to say that there is not a Member of this House who does not believe in the importance of economic growth. If there are any, let us invite them to consider the alternative, which is not only painful but regressive. Economic growth is a very important part of our lives and is likely to always remain so. It is also important to attend to the kind of growth that that implies, which is not always the same. We have seen boom and bust over the last few years nationally and that is not attractive. What we are looking for, and what I know colleagues across the south-west are looking for, is a sustainable basis for long-term economic development—and rightly so. That must be development that enhances the genius of the people involved to create higher productivity and greater real wealth.
If we look at the industrial strategy, the hon. Member for Newcastle upon Tyne Central suggested that somehow it is some great failure. The Government have talked about industrial strategy almost continuously since they were appointed and are undertaking a very careful, considered process of framing a consultation document to be launched in the next few weeks, which will invite every section of our society, not just businesses and corporations, to contribute and reflect on what could be the source of that long-term economic growth.
Rebecca Pow
On my point about AgustaWestland and other businesses, will the Minister ensure that we are investing enough money in business-oriented innovation and science, so that we can build a solid future, not a one-off industrial strategy, for our young people in particular?
Jesse Norman
It would, I think, be injudicious of me to anticipate announcements to be made over the next few days and, in some cases, already trailed. There has certainly been widespread speculation in the press about great support for research and innovation, including the development and technology side of the equation. We have already seen that. The structure of the Government being focused on trying to concert better relationships between sources of research, be they industrial or commercial, and the development and commercialisation of those technologies, makes that very clear. We will see a lot more of that over the next few weeks.
Mr Bradshaw
The Minister talks about the Government bringing forward a consultation document. We do not need a consultation document. That is what Governments say when they are going to do absolutely nothing and kick something into the long grass. Clear and specific promises were made by the Conservative party in the run-up to the last general election, with money behind them, which all the Conservative MPs speaking in the debate today have referenced. When will those promises be delivered? Where is the plan to deliver them?
Jesse Norman
I detect a slight faux indignation on the other side, and I am sorry about that. The industrial strategy of this country is a serious, long-term matter. It needs to be agreed in a bipartisan spirit. It needs to include the whole country, including the devolved Administrations and nations. It is not something to be decided and cut off. That, if I may say, is an expression of Blairite, Napoleonic Government. We are looking for a consensus and a stable basis for future development, which can be shared by all and can survive a change of Government—it is essentially long term in character.
An industrial strategy has been attempted at various points in our past in this country, not always with great success. In the 1940s and 1950s, we had models of industrialisation based on the armed forces and people in Whitehall yanking levers that steered the ship of state. We had the corporatism of the 1970s. I suspect that we are looking to something somewhat different. If hon. Members doubt the necessity, let me remind them of two things. First, those who say they do not have an industrial strategy almost invariably have one without knowing it. Secondly, no company or charitable organisation would dream of attempting to take money from investors or donors and use it over a period of time without having a strategy for how to do so. Nor should the Government.
Neil Parish
I am encouraged by that, but is part of the strategy broadband? When we talk about superfast and extra-superfast, can we make sure that the rural areas of this country are connected with some form of broadband?
Jesse Norman
As my hon. Friend understands, I am not the Minister for Culture, Media and Support. He also knows that when I was Chair of the Culture, Media and Sport Committee, I took an active interest in that issue, and we commissioned a very reputable report from a group of academics and industry experts, which found, among other things, that BT Openreach was under-investing in its network by hundreds of millions of pounds a year. It was accretive to investors and was not down to its cost of capital. I do not want to speculate on the reasons for that, but its effect has been massively to penalise people—particularly those in rural areas. I am sure my hon. Friend supports today’s announcement of a new fund to support other players in fibre through balance sheet-matched funding, which will enable fibre roll-out, particularly in rural and suburban areas, to proceed much faster than hitherto. That is a very welcome development.
James Heappey
The Minister is being very generous in giving way, and I am grateful. The long-term economic plan, to which I referred during the shadow Minister’s speech, was delivered 18 months or so ago. In its analysis of the region’s infrastructure and our sectoral opportunities, it is not a thousand miles away from an industrial strategy. Will the Minister commit to making that long-term economic plan, which was delivered by the previous Prime Minister and Chancellor, the foundation for his industrial strategy for our region? Our region widely welcomed it at the ballot box.
Jesse Norman
The idea is not to slow the process of investment—as has been recognised today, there has been considerable investment across the south-west, in the form of city deals, enterprise zones, expansions and local growth funding—but to incorporate it within a more nuanced national consensus about what the future will look like, out of which we should get a shared view of how the south-west and other parts of the economy can grow.
I draw my hon. Friend’s attention to the Prime Minister’s early words: she pointed out that there are no privileged areas of the country. Some might have had deals in the past, on the basis of areas coming together, but that model can be embraced by everyone. One of the interesting things about this debate is that the unity of Members of Parliament is so evident, but it is not absolutely evident that that unity is shared all the way down the tree of local government. It might be worth reflecting on whether that might have an impact on the region’s long-term development.
Sir Hugo Swire
My hon. Friend the Minister is doing a magnificent job at a time when it is impossible to get from Exeter, the capital city of Devon, to London because we have no trains. Can he communicate our frustration to the Government? If that were the case on the lines from Leeds to London, from Bradford to London, or from Manchester to London, there would be merry hell. We will not continue to put up with this sort of neglect for much longer.
Jesse Norman
I welcome my right hon. Friend’s point. I need not say it myself, because he did so much more eloquently than I could. I recognise the issue that he and my hon. Friend the Member for Torbay (Kevin Foster) referred to, which was mentioned in the Peninsula Rail Task Force report, and on which campaign work has been done. I congratulate them on that.
I am conscious of the passage of time, notwithstanding your incendiary words, Sir Roger, so let me proceed. The key themes of the industrial strategy will be those that have been flagged up in this debate. There will be an emphasis on sectors, the commercialisation of research and development, and innovation, and there will be a particular focus on infrastructure, skills and abilities, and the embedded institutions in particular regions. Those issues have been brought out very well today.
As the hon. Member for South West Devon said, this is a relatively tightly defined debate in terms of place, but an industrial strategy has to reflect the fact that places are very different from one another. Defining what the south-west is and where it ends can be a challenge for the Government, even if it is not a challenge for those who live there. It is an extraordinarily diverse, beautiful region, which has extraordinary assets to be cherished and developed. It is home to world-class universities, very skilled people and hundreds of thousands of growing businesses, many of which are in advanced, high-tech areas. The development at Hinkley Point C, which has already been mentioned, will give the region a major boost. The counterpart to that is the need to invest in smaller pieces of infrastructure.
An awful lot of people’s happiness, certainly in rural areas —I speak as a Member of Parliament for Herefordshire, which can only gaze at the quality of the south-west’s infrastructure and its access to higher education—depends on small-scale road and rail infrastructure, as well as large-scale connectivity. I certainly hope, as I know colleagues do, that that aspect of infrastructure development will be reflected in the plans to come.
Jesse Norman
I am afraid I am running out of time, owing to your excellent work, Sir Roger.
Chi Onwurah
He has not said anything; it was a totally content-free speech.
Chi Onwurah
Before the Minister finishes, he said that the industrial strategy will take some time and that it will take allowance of skills and sectors. Will he give a concrete indication of how long the consultation will last and when the industrial strategy will be published? During that time, will he give a running commentary on what is in the industrial strategy so business can make appropriate plans?
Jesse Norman
It is difficult if remarks one has already made have not been heard. I have already said that the industrial strategy will be launched in the form of a consultation paper in the next few weeks. It is not a thing in and of itself. The Government anticipate that there will then be contributions and a further refinement. At some point, it will be published, and it will then be a reference document from which regions and businesses can take comfort and refer to when making their own plans.
That is the structure of the industrial strategy. It is fair to say, in that context, that the south-west has made its voice heard in a way that few other regions have succeeded in doing. It has done wonderfully well in flagging up the advantages of that part of the world. It is a pleasure for me to work with the two LEPs that have been mentioned. I salute the work of the south west growth summit and the charter. We can only hope that that work will continue to be transferred into local energy and further Government investment.
draft Contracts for Difference (Allocation) (Excluded Sites) amendment regulations 2016
Jesse Norman Excerpts(8 years ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)
I beg to move,
That the Committee has considered the draft Contracts for Difference (Allocation) (Excluded Sites) Amendment Regulations 2016.
It is a pleasure to serve under your chairmanship, Mrs Moon. The regulations amend a statutory instrument made under the Energy Act 2013. The instrument makes some technical amendments to the current regulations in respect of the so-called non-delivery disincentive, or NDD, mechanism—that is to say, the mechanism designed to disincentivise people who fail to deliver—found in those regulations.
As the Committee will be aware, last Wednesday, the Department for Business, Energy and Industrial Strategy announced the details of the second contracts for difference allocation round. The announcement reconfirmed our commitment to provide £730 million of support per year to new renewables projects and that we would be open for applications for the first auction, worth £290 million a year, in April next year. That should deliver enough new renewable energy to power around 1 million homes.
By making those announcements, the Government have given developers and the supply chain the certainty they need to move forward with bids. Continued investment in renewables drives forward our commitment to move to a low-carbon energy mix, help tackle climate change and meet our carbon budget requirements. It also shows that Britain is open for business, driving investment in green technology for decades ahead and bringing jobs and investment into communities up and down the country.
The draft instrument makes technical changes to support the flexible operation of future allocation rounds. I will outline those changes. The key change will extend the period of exclusion, by which I mean the period before which projects that have failed to fulfil their commitments having been awarded a contract in one round can apply for the next round. Currently, the exclusion period runs out 13 months after the notification date of the round when the exclusion was imposed. That is changed in the regulations to an exclusion from any round in the first 13 months after that notification date, plus the first of any rounds run in the following 11 months to a 24-month backstop date. That allows the flexibility to run rounds less frequently, while still having the protection that companies that fail to deliver on contracts awarded through the allocation process cannot just enter a future round without penalty. That was supported by respondents to a consultation run in connection with the proposed rule change.
In addition, we propose some relatively minor changes. First, the regulations clarify the description of the site to which the exclusion will apply to make it clear that the site to be excluded is limited to that of the main generating structures of what is referred to as the contract for difference unit that failed to deliver its project. A CfD unit includes part of an eligible generating station, hence the NDD may be applied, for example, to a project for a wind farm extension, so that the site of the extension only—not the site of the entire wind farm, including the extension—would be excluded in the event of a failure to deliver the project.
Secondly, the changes will encompass an emendation of the non-delivery case to bring the point at which a site becomes excluded by reason of non-delivery into line with the point at which a site becomes excluded by reason of failure to sign the CfD contract. The failure to deliver is a separate matter from the failure to sign the CfD contract, to make it simpler to understand how the mechanism works.
Thirdly, following changes to the change in law termination events in the CfD terms and conditions, the regulations will extend the exemption of protection to projects that have terminated due to a sustainability change in law. That allows for important protection for developers and was supported in the consultation.
The instrument was publicly consulted on between 26 May and 22 June 2016. There were 21 responses from a range of stakeholders, including independent renewables generators, trade associations and large integrated energy suppliers, as well as from an environmental group. The vast majority of respondents agreed with the changes, although a couple called for still more stringent powers.
I welcome the views received as part of the consultation. We will continue to consider them as part of our wider work to evaluate and monitor the CfD scheme to ensure that the measures put in place remain effective and continue to represent value for money to the consumer. On that basis, I commend the draft regulations to the Committee.
Jesse Norman
I thank the hon. Gentleman for his two questions and for the constructive spirit in which he has welcomed the changes we have announced today. He asked whether there is greater latitude for interpretation or contestability within the CfD framework as a result of the changes. He also asked about the unfreezability of frozen CfDs.
To take the first question first, in general, the criteria and milestone arrangements that have been put in place are not affected by the regulations as regards length. The process remains, broadly speaking, as robust as before. There are exemptions available to the NDD and, indeed, there are five grounds on which exemptions can be provided and exclusions mitigated. The first is when an applicant can demonstrate that a new site for which an application is intended is not materially the same as an excluded site, and those limits are set out in legislation.
The second ground for exemption is where an applicant can demonstrate that it held a property interest in a site prior to 14 October 2014, that being the date on which stakeholders ought to have been aware of the detail of NDD policy. The third is where an applicant can demonstrate that it agreed a relevant property interest in a site prior to that date.
The fourth ground for exemption is in relation not to a non-delivery case, but to a non-signature case, where an applicant can demonstrate that relevant court proceedings as defined in the instrument were ongoing at the time of the CfD signature, and that an applicant’s ability to comply with the terms of the CfD would have been materially adversely affected.
Finally, the fifth exemption ground is in a non-delivery case only, when the generator’s CfD is terminated as a consequence of a qualifying change in law. That, in this case, has been extended to recognise a sustainability change in law—again, a relatively well defined concept in the relevant law. Those are the circumstances and they remain well defined.
On the second question, about unfrozen CfDs, in general, as the hon. Gentleman will know, exclusions are time-limited. That is not to say that it is not an open and interesting question whether there may be some scope to recycle budget from one side to another. It may be worth pointing out that so far, where there have been exclusions, some bids have clearly been pitched at levels so low that it would not be possible to use any benefit even if the CfD were unfrozen. One other case was turned down in a judicial review process. However, the point is a proper and sensible one for us to consider further, and I thank him for raising it.
Question put and agreed to.
Oral Answers to Questions
Jesse Norman Excerpts(8 years ago)
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Rob Marris (Wolverhampton South West) (Lab)
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)
The safety of operating nuclear reactors in the UK is regulated by the independent Office for Nuclear Regulation, which is satisfied that Hunterston B is safe to operate. The issues referred to by the hon. Gentleman are addressed transparently in the ONR’s most recent annual report to Parliament. The ONR will continue to oversee these issues closely and will permit a nuclear plant to operate only if it is satisfied that it is safe.
Rob Marris
My thanks to the Minister for that. Nuclear safety is important. The blueprint for Hinkley Point C is the Flamanville European pressurised reactor in Normandy, yet in 2015 it was discovered that Flamanville’s steel reactor vessel was faulty and at risk of splitting. The French company Areva is to be a major supplier to Hinkley Point C, yet in May the independent French nuclear safety authority discovered that more than 400 of Areva’s reactor components were dodgy and Areva admitted that it may have falsified hundreds and hundreds of its safety assessments. What assurances can the Minister give the House that Hinkley Point C, if built, will be safe?
Jesse Norman
I am grateful to the hon. Gentleman for raising that point. As he may know, the issue of the anomalies and inconsistencies associated with the Areva components has been the subject of an independent review by the ONR. The ONR has made it perfectly clear that learning from the EPR under construction in Flamanville must be taken into account in the manufacture of components to be used at Hinkley Point C.
Andrew Bingham (High Peak) (Con)
Ian C. Lucas (Wrexham) (Lab)
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)
The Government are committed to providing significant infrastructure investment across the UK. Through the first two rounds of growth deals, the Government have allocated close to £5 billion to local enterprise partnerships outside London and the south-east to invest in their priorities for growth. With matched funding from the private sector, that is helping to deliver billions of pounds of investment in infrastructure throughout England. City and devolution deals have also committed more than £8 billion to areas outside London and the south-east through long-term investment funds; £1 billion will be in the midlands engine and £3 billion across the northern powerhouse.
Ian C. Lucas
Global businesses such as Kellogg’s, Airbus, JCB and Toyota have sited themselves in north-east Wales and have prospered, making the area one of the most successful industrial areas in the UK. We would love to see the hon. Gentleman there. Will he bring with him the investment that these businesses deserve for their confidence in north-east Wales as an area?
Jesse Norman
I am grateful to the hon. Gentleman for that question and mourn the collegiality of the Select Committee on Culture, Media and Sport now that I have crossed on to the Front Bench. I share his admiration for the work of those companies; I had the great pleasure of visiting Airbus only a week or so ago. I would be delighted to visit his area in due course. The Government support those strategic industries in many different areas.
Geoffrey Clifton-Brown (The Cotswolds) (Con)
In view of the announcement made by the Department for Transport this morning that parts of the west coast main line might not be electrified until 2024, does my hon. Friend not agree that it is essential that each infrastructure project dovetails with another? The third runway at Heathrow might well be built before the west coast main line is fully electrified.
Jesse Norman
I absolutely take my hon. Friend’s point, but these issues need to be considered in the round and there are provisions in the current structure for local funding to allow areas to share visions and investment potential.
Jenny Chapman (Darlington) (Lab)
The Government know how important the energy sector is to the north-east and in the past have made commitments about insisting on local content in projects such as offshore wind. What are they doing to assess, monitor and, if necessary, impose penalties when promises of local content are not met?
Jesse Norman
The Government have a rigorous assessment process for local content. Most recently, the Hinkley Point C station was subject to provisions for more than 60% local content. If the hon. Lady knows of any instances in which the Government are not following up on this, she is welcome to write to the Department.
James Heappey (Wells) (Con)
Further to the question asked by my hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) about the west coast main line, may I ask about parts of the Great Western railway that have similarly been deferred this morning, which is not great news for our region? As the Secretary of State develops an industrial strategy for the south-west, will he agree to meet MPs from that region and perhaps support us in changing the mind of the Department for Transport?
Jesse Norman
I cannot speak for the Secretary of State, but the hon. Gentleman will know that several of the LEPs are my responsibility. I meet them regularly, and will continue to champion their interests.
Ms Margaret Ritchie (South Down) (SDLP)
Will the Minister outline what discussions about infrastructure investment have taken place with devolved regions and with the Chancellor in advance of the autumn statement?
Jesse Norman
I have had the opportunity to meet both Invest Northern Ireland and the Minister for the Economy in Northern Ireland, and those conversations continue. I cannot speak for colleagues, but they also have a responsibility for the devolved Administrations.
Mr Philip Hollobone (Kettering) (Con)
In last night’s Adjournment debate led by my right hon. Friend the Member for Loughborough (Nicky Morgan), the Under-Secretary of State for Transport, my hon. Friend the Member for Blackpool North and Cleveleys (Paul Maynard) failed to tell the House that he would honour the Government’s pledge to electrify the midland main line north of Kettering. There is cross-party support for this scheme, which has the best ratio of investment to benefits in the whole country. This is the third question we have had this morning about rail electrification. Will the Minister liaise urgently with the Department for Transport to get these schemes back on track?
Jesse Norman
Of course the Government recognise the concern that has been raised. This is a matter for the Department for Transport, but I have no doubt that it will be attending closely to today’s proceedings.
Carolyn Harris (Swansea East) (Lab)
Mr Mark Williams (Ceredigion) (LD)
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)
We will consider the findings of the independent review of tidal lagoons, due to report by the end of this year, before deciding how to proceed on the proposed Swansea bay tidal lagoon project. We hope that the review will contribute to and help develop the evidence base for that technology. That will ensure, with luck, that all future decisions made regarding tidal lagoon energy are in the best interests of the UK and represent value for money to the consumer.
Mr Williams
I thank the Minister for that response. He knows, I am sure, how important the project is to Swansea bay and Wales, and its potential for very good news for the renewable sector across the UK. Despite the somewhat gloomy timetable—the end of the year, the Minister says—does he anticipate that the Hendry review will give the Government the assurances that they need to deliver their manifesto promise and proceed with a pioneering project that is critical to the south Wales economy and the future of the UK energy mix? In short, can we get on with it?
Jesse Norman
I am grateful to the hon. Gentleman for that helpful clarification at the end. It is widely understood that there is support for the project among many colleagues. The Government have received an early draft, but we await receipt of the final report, which is due by the end of the year. We will give it the careful consideration that such an important issue deserves.
Stephen Crabb (Preseli Pembrokeshire) (Con)
We have a tremendous opportunity in front of us if we are ambitious to create the world’s first tidal energy industry here in the United Kingdom. Does my hon. Friend agree that key to making this work is recognising that the Swansea project is essentially a pathfinder and that the future lagoons, which will all be larger, will bring down the costs very significantly?
Jesse Norman
Yes, that has been widely suggested. It is fair to say that the issues being addressed by the review are complex and relate to a new and untried technology—potentially, a place-specific technology. The Government will need to look closely at the review’s specific conclusions and how far they can be generalised as part of a wider strategy.
Stephen Kinnock (Aberavon) (Lab)
The future of the British steel industry depends on the approval of vital cutting-edge projects such as the Swansea bay tidal lagoon. Will the Secretary of State please now call time on the two years of prevarication, commit to a timely and positive decision, and ensure that that decision is included in the autumn statement on 23 November?
Jesse Norman
Of course, in the context of the steel industry, it is important to recognise the commitment that the Government have made to Hinkley Point C—a major industrial commitment of their own. I recognise the hon. Gentleman’s point, but we are not going to be railroaded into going beyond the timetable that has already been described. An orderly process is in place, a highly respected former Minister is running the thing, and we will be looking at the issue with the care and consideration that it deserves.
Michael Tomlinson (Mid Dorset and North Poole) (Con)
It is reliable, it is green, it would form an important part of our energy mix—and it would boost the south-west economy to boot: will the Minister support it?
Jesse Norman
I am tempted by my hon. Friend’s enticing fly, but I am not going to take it because the process must be given the proper consideration that it deserves. One of the key questions that the Hendry review and its consideration will need to address is whether the project offers proper value for money. I notice that that was not included in my hon. Friend’s list of enticing benefits.
Christina Rees (Neath) (Lab/Co-op)
Swansea bay tidal lagoon would power 155,000 Welsh homes for 120 years, sustain 2,232 construction and manufacturing jobs and safeguard our steel industry. Will the Government now give Swansea bay tidal lagoon the green light and trigger the new dawn of an industry worth £15 billion to Wales and the UK?
Jesse Norman
I am loving the rhapsodic language that the hon. Lady uses; to it I counterpose the boring bureaucracy of due process and proper consideration.
Carol Monaghan (Glasgow North West) (SNP)
Mark Pawsey (Rugby) (Con)
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)
I will not add to what we have already said about the Swansea Bay tidal lagoon, but I want to celebrate—the industrial strategy will celebrate—the work of world-leading companies such as GE Energy in my hon. Friend’s constituency and their capacity to benefit from opportunities arising from low-carbon technologies.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
Stephen Timms (East Ham) (Lab)
Jesse Norman
The right hon. Gentleman is absolutely right that our digital infrastructure is critical to this country and its long-term economic and industrial strategy. I draw his attention to the report of the Culture, Media and Sport Committee, which I used to chair, on BT’s under-investment in Openreach. If he thinks that there are specific questions to address, we should revisit them after he has seen the industrial strategy.
Fiona Bruce (Congleton) (Con)
Jesse Norman
My hon. Friend is absolutely right that this is a vital part of the economy. It is very important that more young people are brought into farming and given the chance to do this extraordinarily interesting and valuable pursuit. This country is highly food secure. The Government support new and young farmers through the increased basic payment scheme payments and are committed to increasing the number of apprenticeships in food and farming. I cannot resist adding that I hope that people will have a chance, in due course, to study agri-tech at the New Model in Technology and Engineering institute in Herefordshire.
Angela Smith (Penistone and Stocksbridge) (Lab)
Amanda Milling (Cannock Chase) (Con)
The planning process for building combined cycle gas turbines on sites where coal-fired power stations have historically been situated is complex and takes too long. Will my hon. Friend meet me to discuss the issue and how his Department and the Department for Communities and Local Government can work together to address this matter?
Robert Flello (Stoke-on-Trent South) (Lab)
Our wonderful resurgent ceramics industry, which produces high-tech cutting-edge ceramics for the future generations, is carefully watching the Government’s Brexit plans. What discussions is the right hon. Gentleman and his Department having with the Secretary of State for Exiting the EU about trade barriers, protectionist dumping by the Chinese and the wider needs of the ceramic industry?
Peter Aldous (Waveney) (Con)
As the hon. Member for Stretford and Urmston (Kate Green) has highlighted, Ofgem’s review of embedded benefits and grid changes is in danger of having unintended consequences. One of these is the roll-out of energy storage. Will my right hon. Friend agree to look into this particular problem?
Mr David Hanson (Delyn) (Lab)
Will the Secretary of State look urgently at today’s announcement by the Royal Bank of Scotland on its funding of repayments to small businesses? Will he produce a report on the Government’s response and place it in the Library, so that we can see the Government’s view of this approach by RBS?
Draft Contracts for Difference (Allocation) (Amendment) Regulations 2016
Jesse Norman Excerpts(8 years, 1 month ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)
I beg to move,
That the Committee has considered the draft Contracts for Difference (Allocation) (Amendment) Regulations 2016.
It is a pleasure to serve under your chairmanship, Mr Brady. The regulations amend a statutory instrument made under the Energy Act 2013. The instrument makes a simple amendment to the current regulations to extend the contracts for difference scheme. Under the current regulations, the Government have the power to run an allocation round and to allocate a budget for renewables projects commissioning—that is to say, generating electricity—up to 2020. The proposed amendment extends that date to projects commissioning up to 2026.
The instrument was publicly consulted on for a five-week period. That was an appropriate length of time, given the simple and technical nature of the change. We received 24 responses, all of which were in favour of the proposal. I welcome the wide reviews received as part of the consultation, which we will take into account when considering the further development of the contracts for difference regime.
As hon. Members will see, the regulations are short and—so far, at least—uncontroversial. They passed through the Joint Committee on Statutory Instruments and the Secondary Legislation Scrutiny Committee without note. The regulations do not come into force on one of the set dates for common commencement because they fall outside that scheme, with their impact on business, charities or voluntary bodies being negligible. However, it is right that attention is drawn to the cost to consumers and businesses of the broader operation of the contracts for difference scheme, which is why the draft explanatory memorandum includes the impact assessment for that scheme as a whole.
The contracts for difference scheme is designed to incentivise the significant investment required in our energy infrastructure—electricity infrastructure, in particular —to keep energy supplies secure, keep costs affordable for consumers and help meet our climate change targets, so that we can play our part in working towards the 2050 targets on climate change agreed in Paris and reinforced at the G20. We plan to run the next allocation round soon. Details have not yet been published, so I am unable to provide hon. Members with those today.
As hon. Members will be aware, the first CfD allocation round was held in October 2014 and led to contracts being signed with 25 large-scale renewable generation projects at a significantly lower cost than what those projects would have cost under the renewables obligation scheme. The Government will continue to evaluate and monitor the present scheme, ensuring the measures put in place remain effective and continue to represent value for money to the consumer.
Jesse Norman
I thank hon. Members for their questions. The hon. Member for Southampton, Test asked three questions: the first was about levels of funding under the contracts for difference scheme; the second was about whether there is an overspend relative to the levy control framework; and the third was about what is included.
The overall picture is that there is up to £730 million per year to be allocated in up to three auctions. This is the first auction, which is for £290 million a year of annual support. Each contract will be for 15 years and will begin, at a time to be announced, between 2020 and 2026. That leaves headroom of £440 million a year of support that could, in principle, be offered via other auctions.
Dr Whitehead
I understand from the Minister that £730 million is available each year over a number of years throughout the next delivery period. I assume he means that £730 million is available each year for new applicants and that each of those applicants will then get a 15-year tail on CfD from a successful application. The total amount of money for new applicants is therefore £730 million times three, or five, or however many pots are available, and the first auction is part of that overall pot. Have I understood the Minister correctly?
Jesse Norman
Unfortunately, there is an ambiguity in the phrase “new applicants”. The position is that £730 million is available under auctions. That money will be paid per year under the auctions. The first auction is £290 million; each contract period is 15 years long. I do not have the numbers to hand, but one can run the numbers out as to the total amount of money, in constant pounds, that will be paid out over those contracts in total and as they are announced individually. That is the position.
The hon. Gentleman asked whether there was some overspend under the levy control framework. The levy control framework, as he said, runs until 2020 and the Government are considering whether and how that framework will be extended. At that point, it will become appropriate to ask whether or not there could be any overspend. His third question was about what is included. The included technologies are offshore wind, wave and tidal stream, advanced conversion technologies— gasification and the like—anaerobic digestion, and biomass for combined heat and power. Those are the less established technologies.
Finally, I turn to the question from the hon. Member for Luton North. I am afraid he was telling such a beguiling story about the installation of solar PVs on his own property that I missed the central thrust of the question. I think he was asking whether the regulations were really focused on renewables, and I assure him that they are. There is an entirely separate framework, also known as a contract for difference, that applies to nuclear supply in the case of Hinkley. That is under a completely different scheme and is not the subject of the legislation today.
Kelvin Hopkins
To explain, I should say that I was expressing some disappointment that the Government had chosen to cut back on feed-in tariff support for domestic solar PV. It does not affect me, but it may have affected others and dissuaded them from investing in solar PV, which would be very disappointing.
Jesse Norman
I understand. I am glad that has not affected the hon. Gentleman, but he is certainly right that it has affected other people. This technology is rapidly falling in price and the sector is continuing to show its resilience in the face of the changes, so we must hope and expect that it continues to do so. The fact remains that it is separate from the subject of this debate, because it comes under the feed-in tariff regime and not under the contracts for difference regime, although I am happy to take the hon. Gentleman’s point. The key thrust of what is being said today is that the regulations are about renewables contracts for difference in these so-called “Pot 2” less established technologies, and not in nuclear.
Question put and agreed to.
Renewable Heat Incentive Scheme (Amendment) Regulations 2016
Jesse Norman Excerpts(8 years, 1 month ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)
It is pleasure to serve under your chairmanship, Mr Owen. I welcome the contributions of the hon. Members for Southampton, Test and for Aberdeen South and my right hon. Friend the Member for New Forest West. I, too, welcome the hon. Member for Southampton, Test back to his place. He has great expertise in this field, and the hon. Member for Aberdeen South is also demonstrating a burgeoning expertise. I recognise that I am very much the new guy on the block.
I will address all the issues that have been raised today and talk a little further about the regulations, as the Committee properly demands. Where there is a demand for both heat and electricity, combined heat and power offers the most energy-efficient use of fuel, with the potential to deliver savings of up to 30%. The renewable heat incentive offers support for the deployment of CHP plant, including that using solid biomass fuel, recognising the role that that technology can play in decarbonising heating and power production. The Government introduced a dedicated biomass combined heat and power tariff into the non-domestic RHI scheme in May 2014. That tariff is approximately double the tariff for large biomass heat-only plants. The biomass combined heat and power tariff is 4.22p per kilowatt-hour, compared with the large biomass heat-only tariff of 2.05p per kilowatt-hour.
The higher support tariff offered to biomass combined heat and power plant, when compared with biomass boilers producing only heat, reflects the higher capital costs generally faced by these plants and also the benefits that biomass combined heat and power plant can deliver for the efficient use of fuel. Given that the biomass CHP tariff is more than double the large biomass tariff, it is important that CHP plants deliver the efficiency benefits that the tariff exists to incentivise. Recently, my Department became aware of some types of combined heat and power system that could qualify for the higher RHI biomass CHP tariff of 4.22p per kilowatt-hour. Those types could be used for all eligible output despite delivering only a relatively small amount of power, or having relatively low levels of power efficiency—in some cases as low as 1%. Plant with very low power efficiency does not necessarily face significantly higher capital costs, or deliver the comparatively efficient use of biomass that the biomass CHP plant tariff is design to incentivise. That is part of the answer to the question that the hon. Member for Southampton, Test raised—there are higher capital costs associated with such plant, as well public benefit from the combined heat and power.
Dr Whitehead
Can the Minister fill us in a little more on the distinction between plants that have reduced overall efficiency as a result of their design, which he has mentioned, and those that do not have that reduced efficiency but have a differential deployment of electricity and heat production? If he makes that distinction, would not a better route have been to target the less efficient plants specifically, rather than catch all plants that vary in their output, as the regulations do?
Jesse Norman
Of course, in retrospect there are many ways in which the system could have been designed. However, the system is well established, in ways that I will describe, and it is important to recognise that the regulations are designed to incentivise combined heat and power. A plant that overwhelmingly provides heat and produces very small amounts of power may not require the same capital costs as another plant, and it may not discharge the purpose for which the combined heat and power tariff is intended, let alone the much higher rate. I think that speaks for itself. The point is that plants with low efficiencies do not necessarily face capital costs.
Not targeting the group that was intended to be included in the original proposals for the tariff represented a potential risk of significant overcompensation, and therefore a risk to the value for money of the RHI scheme, particularly if a large number of plants such as I have described were to come forward. The regulations took action to address that issue, adding a new requirement, as the hon. Gentleman described, for biomass combined heat and power plants to achieve a minimum power efficiency of 20% to qualify for the higher tariff for all their eligible heat use. That change safeguards the value for money of spending through the scheme and protects the interests of the taxpayer.
The Government carried out a consultation on reforms of the RHI schemes in March. That consultation asked whether any types of CHP plant would be overcompensated by the current tariff arrangements, and the responses supported action to ensure that heat incentive support is focused on installations offering value for money.
The hon. Gentleman asked why there was no impact assessment. The answer is relatively straightforward: regulatory impact assessments are produced in cases where a policy imposes regulatory burden on business. Their purpose is to assess the impact of a change—that is why they are called impact assessments. The renewable heat incentive, by contrast, is a voluntary subsidy scheme. The impact on industrial, commercial, public sector and not-for-profit organisations applies only if they are owners of eligible renewable heat installations and choose of their own account to apply for the RHI.
Dr Whitehead
Which was the case for the poultry plants that the Government had previously encouraged to apply for RHI, which were assured by the Department that their arrangements were perfectly satisfactory for that purpose but found out subsequently that they were not. That appears, to go by the Minister’s own words, to be within the definition of something that should have been the subject of an impact assessment.
Jesse Norman
The RHI is a voluntary scheme for those who qualify for it and choose to apply for it. It is not imposed on business. The point about an impact assessment is when the Government use their sovereign power to burden business. In this case, we are not doing that; we may be changing the terms of the tariff arrangements, but we are not burdening business.
A decision was taken at that time not to carry out a further consultation on the specifics of the change. That was due to the significant financial risk to taxpayers’ money that could have been involved. It was judged that further consultation would raise awareness of how the regulations could be exploited to enable high returns. That would increase the risk that more plants of that type would apply to the RHI before a change could be made.
It is true that CHP projects can have quite a long delivery period—a point raised by the hon. Member for Southampton, Test. Even so, there was a substantial risk of a potential rush of applications in the three weeks between the publication of the regulatory change and its coming into force. During that period, the Department saw 11 new biomass CHP applications come to the RHI for support. Although that may not sound like many, it was more full biomass CHP applications than have been received since the renewable heat incentive started in late 2011. The issue was live and serious, and posed a genuine threat to value for money. In some cases, mechanisms were rising in the market that enabled non-qualified heat plant to qualify for the higher combined tariff, without necessarily any further significant capital investment being made.
Following the introduction of the regulations, my Department indicated that it was happy to listen to the views of stakeholders who felt they might have been affected by the change. It received information from individual projects, as well as from trade associations, about the impact of the change on potential biomass CHP applications to the renewable heat incentive. Having examined that information, the Government still hold to the point that the higher biomass CHP tariff is in place in recognition of the higher capital costs and the additional efficiency benefits, which biomass CHP—including power—can deliver, compared with the separate generation of power and heat.
It is right that the higher biomass combined heat and power tariff is available to those installations with higher capital costs that deliver additional efficiency benefits and value for money for the taxpayer. It is also reasonable to limit additional payments to installations that do not deliver those additional benefits.
The hon. Member for Aberdeen South spoke about goalposts moving. Government policy plays an important role in this fast-moving, technologically-enabled area, so it can occasionally be necessary, in the taxpayer’s interest, to accommodate changing circumstances. The Department remains concerned about the value for money of giving the full biomass CHP tariff to projects with very low power efficiencies. Some projects have power efficiencies as low as 1%, which would deliver low efficiency gains even against separate heat and power generation.
However, we very much recognise the impact of the change on a number of companies with projects under development, in particular smaller biomass CHP plants that may be delivering higher power efficiencies but are still below 20%. Some businesses have invested in various types of CHP projects in good faith. If the hon. Gentleman has specific evidence of misleading information, he is welcome to write to me; I would be interested to see it. The Department has always had a very close relationship with the Scottish Government and I would be very surprised if there were any genuinely misleading information, but I would be happy to look at any evidence.
Richard Arkless (Dumfries and Galloway) (SNP)
The incomplete information that my hon. Friend the Member for Aberdeen South referred to was the assertion from the Government that there were two applications with Ofgem, which did not include the number of companies within the 18-month pipeline that needed certainty about their business investment. We did not get the full picture. Had we had the full picture about the 18-month lead-in time, we could perhaps have made a more accurate decision.
Jesse Norman
I am grateful for that clarification and am happy to look at the facts of the case. I make a wider point that relations between the two Governments on this issue have traditionally been very close.
As I said, we recognise the impact of the change on companies that have invested in projects under development in good faith and therefore the Government will introduce amending legislation to the House, as soon as is practicable, to reduce the 20% power threshold to 10% for a transitional period, to be applied to all plant that has qualified for the scheme since 1 August 2016.
James Heappey (Wells) (Con)
I agree very much that the Government have a responsibility to ensure that subsidy is in the taxpayers’ interest, and they are right to insist on a certain level of efficiency. I welcome the change that the Minister has just announced, but the Energy and Climate Change Committee’s report on investor confidence, already mentioned once, emphasised that it is important that we move away from any sort of retrospective changes. Now that energy policy is within business policy, can the Minister reassure us that this is a new beginning for energy policy?
Jesse Norman
I absolutely give my hon. Friend that reassurance. I simply direct him to the recent announcements on Hinkley, on offshore wind and on the contracts for difference that will shortly be coming forward. Funding for the renewable heat incentive is due to rise from £430 million in 2015-16 to £1.15 billion in 2020-21. Those are hardly the signs of a Government who do not take these issues seriously or are unwilling to make plans on the lengths of time suitable for investment or licence.
I want to pick up the point, en passant, raised by my right hon. Friend the Member for New Forest West. He is a classical liberal and made a wonderful intervention on the importance of avoiding subsidies. I remind him that any classic liberal of a modern slant would recognise two things: first, that markets can perform not very effectively or efficiently—in some cases in the environment area, pollution is a classic externality generated by market behaviour—and secondly, that markets are instruments of public policy, so it is perfectly proper for a Government on behalf of the public interest more generally to seek to blend objectives in how they treat markets.
Sir Desmond Swayne
I would argue that markets are marginally more efficient than Governments in that respect. I hope the Minister will bear that in mind as we move forward to an industrial strategy. Traditionally, that is something that Governments have not done well —so the less we expect of them, the better.
Jesse Norman
My right hon. Friend makes a wider point, and I enjoy the move to head off the Government. Two things: first, whether markets perform more effectively than Government depends on the question we are seeking to answer. I certainly do not accept the claim that they are always more effective. [Interruption.] I am afraid I cannot hear the hon. Member for Aberdeen South chuntering from a sedentary position. He is welcome to make the point in an intervention, if he wishes.
The second point to my right hon. Friend is that although in some cases industrial strategy has been done badly, in others it has been done rather effectively. Parts of Scandinavia have seen effective industrial policy, although I am not suggesting for a second that the industrial strategy that this country develops will necessarily model that. I am sure it will take the best of all thinking on this topic. It is perfectly proper for Government to seek to decarbonise industry, given that industry has an intrinsic market-driven tendency to burden the environment with costs that it need not meet itself through what economists call “externalities”.
Dr Whitehead
I am grateful to the Minister for giving way again on this issue of the announcement he just made on the grace period or dampening period, perhaps, that he is envisaging. I recall him saying that schemes that applied after 1 August for an unspecified period—he has not specified a period—would be eligible for the higher rate if they were more than 10% efficient so far as electricity production was concerned. Is that the situation? I have two questions on that. First, what is the period? Secondly, why is it from 1 August onwards? That makes no difference to the schemes that were previously under way and now find themselves in difficulty as a result of the changes.
Jesse Norman
I thank the hon. Gentleman for his comments. In my enthusiasm to oblige the Committee, I took a series of interventions before I could finish the point I was making, so allow me to do so now. The enabling legislation will reduce the 20% power threshold to 10% for a transition period. That will apply to all plant that has qualified for the scheme since 1 August 2016. The intention is that that threshold will revert to 20% after 31 March 2017. That is the period he asked about. With something of this kind, a date has to be struck at some point, and that is the date the Department has settled on. As I said, it allows for a significant degree of recognition of concerns that have been raised by those affected.
Indeed, based on the information we have received, the change should allow the vast majority of existing projects to gain RHI accreditation under the lower 10% power efficiency provision. May I just add one other point? It is described as a threshold, but of course it is pro rata, so those running up to that threshold will be enabled to take value from the higher rate for whatever percentage they have up to the threshold. It is not a cliff edge.
It is important to note that, as before, the 10% power efficiency provision, far from being a cut-off, will operate, as I have mentioned, on an incremental basis. So projects with a power efficiency near 10% will get more heat paid at the higher biomass CHP tariff than those with lower power efficiency.
We recognise that this revised approach will not remove all the impacts of the change from all projects, but we feel it achieves the right balance between delivering value for money and ensuring the efficiency benefits that CHP is supposed to deliver, and making sure that those benefits are indeed delivered, while also reducing the impact on projects that are under way. In particular, it reduces the impact on those projects that aim to deliver higher power efficiencies rather than lower ones.
I think I have addressed all the questions that have been put, so I will leave it there.
Competitiveness Council
Jesse Norman Excerpts(8 years, 1 month ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)
My noble friend, the Minister of State for the Department of Business, Energy and Industrial Strategy has made the following written statement:
I represented the UK at the recent meeting of the Competitiveness Council in Brussels on Thursday 29 September.
The Council started with the regular competitiveness check-up. The Commissioner for Internal Market, Industry, Entrepreneurship and SMEs, Elzbieta Bienkowska, outlined the challenges faced by start-ups and scale-ups in Europe, particularly in comparison to businesses in the US. In the subsequent exchange of views, the key themes were the need to advertise available sources of funding for start-ups; the lack of access to risk capital; and the importance of providing effective support at regional and national levels. A proposal for a joint meeting of competitiveness and ECOFIN Ministers to discuss this issue was met with broad support. I intervened to express support for the focus on scale-ups and shared an example of UK best practice through the British Business Bank.
The next item was the collaborative (sharing) economy. A Commission presentation was followed by discussion in which several member states stressed the need for collaborative economy businesses to respect existing legislation and tax compliance. I intervened to support the Commission’s vision, as outlined in the recently issued guidance. As part of my intervention I highlighted initiatives by organisations such as Sharing Economy UK (SEUK) to promote responsible growth within the sector.
The next item was a presentation on the standardisation package. The core element of the package is the voluntary joint initiative on standardisation, which brings together all the actors of the standardisation community. A large number of standards-setting bodies and industry representatives signed it in June. The majority of member states signed it in the margins of the Council. I signed on behalf of the UK.
Over lunch, Ministers were joined by Jean-Louis Marchand, President of the European Industry Construction Federation (FIEC) to discuss the construction sector. There was agreement on the importance of the construction industry to the EU economy and the need to increase investment in the sector, including through the use of existing financial instruments. The role of digitisation was recognised, as was the need to remove barriers in the internal market. I highlighted a number of UK initiatives, such as building information modelling (BIM) and smart meters, where digitisation has been used to support innovation in the sector. I also cited the forthcoming services card (formerly known as the services passport) as an important mechanism to support the provision of cross-border services. Commissioner Bienkowska said that the card needed to tackle both regulatory and administrative barriers if it was going to add real value.
The afternoon session started with a discussion on the European steel industry. It focused on EU action since the start of the steel crisis in 2014. Commissioner Bienkowska said that she had been working closely with the Commissioner for Trade, Cecilia Malmstr?m to alleviate the impact of the pressures faced by Europe’s steel industry. She said that a level playing field was needed to make the industry fit for globalisation and highlighted the problems caused by global overcapacity and dumping. Many member states called on the Commission to bring forward its proposal on market economy status for China as soon as possible, with reform of the EU emissions trading system, energy costs and the circular economy also recurring themes. I intervened to welcome the establishment of the global forum on steel, as agreed at the G20 in September 2016.
The next item was a discussion on industrial policy in Europe. Several member states called on the Commission to commit to an ambitious and proactive industrial strategy in its forthcoming 2017 work programme. The Commission welcomed the initiative by highlighting all the work that was on-going to support industry. This was followed by an item focused on Europe’s transition to a low-carbon economy, on which no member state intervened.
The Slovak presidency then introduced the item on the unitary patent and the Unified Patent Court (UPC). The Commission noted that only two further ratifications were needed to bring the UPC into effect, and highlighted the urgency with which this was awaited by business. I intervened to commend the work that has gone into the UPC and said that the UK was actively looking into resolving the legal and practical challenges quickly and would provide a further update at the next Competitiveness Council.
The penultimate item was an update on a May conference on the challenge of balancing plant breeders’ rights with patent rights. The Commission noted that any solution should not re-open the biotech directive, but was working on guidance to clarify its effect.
Finally, the Commission presented on the proposed review of the supplementary protection certificate (SPC) regulation, specifically the introduction of the SPC manufacturing waiver. While some member states intervened to highlight the importance of the waiver, others outlined their misgivings, arguing that the right balance already exists between the rights of brand-name and generic pharmaceuticals manufacturers.
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