SMEs and the Net Zero Target

Kwasi Kwarteng Excerpts

Tuesday 17th November 2020 Westminster Hall

[The Minister for Business, Energy and Clean Growth (Kwasi Kwarteng)]

I am very pleased to be conducting this debate under your eagle eye, Ms Ghani. I am also pleased to welcome my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), who did a terrific job in outlining the issues. He has long been a champion of small businesses in this House and a very effective advocate for those interests and businesses which, as many hon. Members have pointed out, are absolutely essential to our economy. I will address a number of his points and then turn to points made by other hon. Members in this debate.

We have to make clear our absolute 100% commitment to net zero as a Government. The Prime Minister has shown many times that this is at the centre of our strategy. We also feel that, given where we are with covid, it is absolutely necessary to build back better. As my hon. Friend the Member for Thirsk and Malton said in the first part of his speech, the 2008 crisis was extremely difficult, but one of its bad features was that we did not as a global community look at climate change and think about building back greener and better in the aftermath. People in this Government, in the Opposition and in Governments across the world are much more focused on building back greener and building back better as a consequence of this covid crisis.

As my hon. Friend said, SMEs are the backbone of our economy and will have a key role in driving economic growth. He described a headlong rush to net zero; others might take a different view. However, we cannot assume that the push to net zero will be imposed on businesses. We have to take our people and our SMEs along with us. I fully accept that we should engage with SMEs. I do this fairly regularly, as I am sure he and others do as local MPs. If he has SMEs in his constituency that he wants to talk to about net zero with me, I urge him to engage with me on that. It is a two-way street, and I look forward very much to engaging with many of the excellent businesses in his constituency. My hon. Friend the Member for North Cornwall (Scott Mann) gave us a flavour of the many SMEs engaged with net zero in his constituency. He said that net zero and the covid-19 crisis would “fundamentally adjust” our economy, which was an excellent and well-made point.

On SME engagement, we have a net zero small business engagement strategy that seeks to strengthen our approach to working with SMEs, which is particularly relevant in the context of COP26 in Glasgow in November next year. I have made it a specific cause of mine to make sure that SMEs can play a part in COP26. We are also developing a small business energy efficiency scheme, which is obviously related, in some measure, to the green homes grant that we are pioneering at the moment.

My hon. Friend the Member for Thirsk and Malton will know that finance is a huge area of development. Thanks in small part to my hon. Friend the Member for Grantham and Stamford (Gareth Davies), the sovereign green bond is finally something that we will engage with. I was delighted that the Chancellor of the Exchequer announced that, and I know that my hon. Friend will be particularly happy, given his background and the campaign for that development that he promoted. Along with the sovereign bond, that clearly creates a space in which green finance is something that we are all engaged with. I speak to bankers, people in the City of London and investors, and there is huge appetite for these sort of green assets.

The fear that my hon. Friend the Member for Thirsk and Malton raises about SMEs being shut out of the market is legitimate. We can try to create a culture in which SMEs are looked on more favourably, but we cannot, I have to say, buck the trend of the market. I am afraid, for people who are not adapting, that investors are voting with their feet. It was only a few weeks ago that the market capitalisation of Ørsted, a Danish offshore wind company, was bigger than BP. That is a case of investors voting with their feet; it was not Government legislation that gave it that value in the market. My hon. Friend is a great champion of market forces, although perhaps in another context, but he will understand that if banks are keen to look at the green credentials of companies, that can make the climate more difficult for companies that are slower to adapt. However, that is definitely something that we should look at.

My hon. Friend was right to mention the British Business Bank in this context. I am keen—I have been driving this within the Department—to get a net zero remit for the British Business Bank. He will remember that the British Business Bank was set up years before the net zero legislation, so we have to do a degree of reverse engineering to ensure that the net zero challenge is at the centre of the bank’s remit.

The hon. Member for Greenwich and Woolwich (Matthew Pennycook) gave us a number of challenges. I would like to say a few words about them all, starting with his third point, relating to skills. I am very proud to have announced a green jobs taskforce. This is the first time that I, as the Energy Minister sitting within the Department for Business, Energy and Industrial Strategy, have got together with the Skills Minister, my hon. Friend the Member for Chichester (Gillian Keegan) to create something. We have come together and created a forum in which we are discussing green jobs. I am sure that the hon. Member for Greenwich and Woolwich will be pleased to learn that we have not only academics, business people and one or two small business representatives but we have trade unions coming together to discuss the immense opportunities that we have, as a country, in this space. There are something like 460,000 jobs already in the green economy in Britain, which is a figure that we want to see increase up to 2 million by 2030, so there is huge opportunity and ambition in the context of green jobs and green skills.

In the second part of his remarks, the hon. Gentleman talked very well about the need for finance and for some sort of national institution. He, as well as others in the Chamber, will know that there is plenty of discussion about that within Government. As we leave the EU, we are leaving the European Investment bank. Hon. Members have mentioned KfW Development Bank and we also have our own UK Green Investment Bank.

There is clearly an appetite in certain quarters, as well as a wide debate, for a national institution that may emerge as a consequence of our leaving the EU, focusing particularly on net zero. These are ongoing discussions, but my hon. Friend the Member for Thirsk and Malton cannot believe that I would be so naive, even if I knew the answer, to blurt out our plans in the context of a Westminster Hall debate. He can rest assured that this matter is being debated and discussed very seriously at the highest levels of Government.

The first point that my hon. Friend the Member for Thirsk and Malton made was very pertinent. If we are to try to bring people along with us on the journey towards net zero, we have to engage. Engagement means supplying information, exchanging ideas and providing guidance, as he suggested. We do that all the time and, of course, we could do more. Debates like this, dare I say it, are excellent ways in which we can broadcast and encourage our engagement with SMEs on the vital question of net zero.

There were many other remarks that I have not been able to fully address one by one. Broadly, I would say that this debate is absolutely key. Within the debate there were slightly different voices. If he will permit me to say it, my hon. Friend the Member for Thirsk and Malton is a brilliant champion of local business, but he did stress the fact that we must take people with us. There is no point in our hurtling to a net zero endpoint and leaving vast swathes of the economy and business behind. The hon. Member for Greenwich and Woolwich stressed that there is urgency, and I fully agree; there is a real need for further impetus. These are balancing arguments, and I can assure hon. Members present that the Government are taking all their remarks seriously.

We discuss the issue all the time and we are open to ideas. Ministers do not often say that, but we are open to ideas about how best we can engage with local businesses and small and medium-sized enterprises in our quest to reach net zero by 2050.