Energy Intensive Industries

Julie Elliott Excerpts

Wednesday 4th December 2013 Westminster Hall

[Julie Elliott (Sunderland Central) (Lab)]

As ever, it is a pleasure to serve under your chairmanship, Mr Robertson. I add my congratulations to my hon. Friend the Member for Newcastle-under-Lyme (Paul Farrelly) on securing this very important debate.

The Minister has been asked a number of questions, and a number of comments have been made to him by Members on both sides. Many have been from those who represent constituencies where these issues are very important, so I shall limit my contribution to give the Minister enough time to reply. There is no point in repeating all the arguments that have been made very well. Many key concerns are coming through regarding the tax system for energy intensive industries. I want to highlight one of the comments made by my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith): she called for clarity and pointed out that energy intensive industries support a well designed system of taxation and understand the need to decarbonise. I do not think the two things are contradictory, but one issue that most speakers have mentioned is the complex nature of the tax system and related issues. I would be very pleased if the Minister commented on those things.

[Robert Flello]

I want to make a very brief point—I am sure you would pull me up if I did otherwise, Mr Robertson. Are we not missing some of the wider implications? Germany has been mentioned time and again, but the way in which Germany is operating its system, getting rid of the monopolies and concentrating on local, not-for-profit providers, is completely different. That is the issue, really. It is about a fundamental root-and-branch review of how we do things, so that we do not have the six monopolies, but actually have a different way of doing things.

[Julie Elliott]

We can always learn from how other countries do things, although one of the things about Germany that is not publicised much is that it imports much of its nuclear energy from the Czech Republic, which is what sometimes leads to its cheaper prices.

I would like to comment on some of the things that have been said about the importance of our manufacturing industry, because manufacturing is a key part of our coming out of recession and moving into economic growth. It is not only something that this country should be very proud of historically as, moving forward, we are at the cutting edge of some of the best manufacturing in the world. I personally feel very strongly about that and I am pleased that a number of hon. Members have talked about its importance to our economy.

There are concerns that the carbon floor price, which was introduced by the Chancellor of the Exchequer, imposes an additional burden on energy intensive industries and hampers our competitiveness. It is also on an upward trajectory: it is going up year on year. It was increased again in last year’s Finance Bill. The hon. Member for Tiverton and Honiton (Neil Parish) is no longer present, but he talked about the carbon floor price being a green tax. It is important to state on the record that the carbon floor price tax is entirely a revenue-raising tax; it goes to the Chancellor.

We cannot afford to end up in a situation in which the carbon floor price damages energy intensive industries while at the same time achieves a weak carbon-abatement effect. It is important to take a sector-by-sector approach. The issues inherent in and the support required by the ceramics industry, for example, may not be quite the same as those in the steel industry.

I am particularly pleased that the Minister of State, Department of Energy and Climate Change, the right hon. Member for Sevenoaks (Michael Fallon), will provide the response on behalf of the Government, because I am sure that he will be able to provide some clarity on where he stands on the carbon floor price. Earlier this year, before he became an Energy Minister, he called the carbon floor price

“a fairly absurd waste of your money”,

before going on incidentally to announce that it had been introduced by Labour, although as I have said, it was introduced by the present Government in 2011. I would be interested to know where the Minister stands now on that statement. How can he square it with his support for the carbon floor price?

It is vital that we keep British industry competitive, while decarbonising its activity. Much more work is needed, in conjunction with energy intensive industries, to develop a plan for how to achieve that.

--- Later in debate ---

[John Robertson (in the Chair)]

Order..

[Julie Elliott]

I thank my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) for his comments. He gives another example of how missed the regional development agency is in the north-east—in our region.

It is right that the Government are taking steps to help energy intensive industries that must adapt to the EU emissions trading system and the carbon floor price. We do not want to see the UK’s carbon emissions just shifted overseas. However, if we are to meet our emissions targets and avoid catastrophic climate change, we need to reduce those industries’ carbon emissions.

Energy intensive industries are an important part of our economy, accounting for 4% of gross value added, and 125,000 people are employed by them directly or in their supply chains. Many energy intensive industries are at the forefront of the low-carbon economy, producing the mechanisms that we need to develop our low-carbon industries. That was set out in great detail by my hon. Friend the Member for Penistone and Stocksbridge. However, like all sectors of our economy, this one must decarbonise if we are to meet our crucial emissions targets. The transition to low-carbon power generation will keep energy prices down in the long run. The alternative is to remain at the whim of unpredictable yet ever rising gas and electricity prices.

As the EEF, which was formerly the Engineering Employers Federation, has pointed out, if the Government were serious about the transition to a low-carbon economy, with innovation and green jobs at the centre of that transition, they would be supporting research and development. We question why research and development on energy as a percentage of Government R and D spending is comfortably less than the OECD average. However, the bigger problem is the Government’s counter-productive, counter-science and counter-business decision not to adopt a 2030 power sector decarbonisation target, which was supported by the EEF, which represents many companies in this area. That decision, or rather non-decision, is scaring away investment, costing green jobs and jeopardising our future energy security.

[David Mowat]

The hon. Lady mentions that the 2030 decarbonisation target was supported by many companies in this sector. Could she name the energy intensive companies in this sector that support that target?

[Julie Elliott]

Actually, I did not say that; I said that the target was supported by the EEF, which represents many companies in this sector.

The Government need to be clearer on how they will provide support for energy intensive industries. In his autumn statement, in November 2011, the Chancellor announced that measures would be introduced to reduce the impact of the Government’s electricity market reform policies on energy intensive industries. My hon. Friend the Member for Scunthorpe (Nic Dakin) set out many of the issues in this area. That announcement was made almost two years ago, yet energy intensive industries still have very little detail on how that will work in practice. Perhaps the Minister can enlighten us on that today.

I understand that the Government concluded their consultation on the exemption eligibility for contracts for difference costs in August. What progress has been made since that time? Exemption costs for contracts for difference will be collected through the supplier obligation. Can the Minister provide some more detail on that obligation?

I would not dream of asking the Minister to pre-empt what might be revealed in the autumn statement, but if it is the Government’s intention to introduce further compensation, could he provide an update on the Government’s negotiations with the European Commission, when he or his officials last met representatives of the Commission to discuss this matter, when he expects to receive a final decision, and whether there is a plan B in the event that state aid is not granted?

To conclude, I hope that the Minister understands the difficulties that many energy intensive industries are facing with the current tax regime and that he will listen to the concerns raised by hon. Members. I am sure that he will be acting to make changes in the near future. I also hope that he would agree with me that the single best way to reduce energy costs for intensive users is to give further support to low-carbon technologies, which provide the best solution to keeping costs down in the long run.