Energy Intensive Industries

Nicholas Dakin Excerpts

Wednesday 4th December 2013 Westminster Hall

[Nic Dakin (Scunthorpe) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Robertson. I congratulate my hon. Friend the Member for Newcastle-under-Lyme (Paul Farrelly) on securing this timely and important debate. The contributions so far have shown that this issue is important outside this place, for the communities that we serve and the future of our nation.

There has been a kind of renaissance in the cross-party consensus on the importance of manufacturing over the past few years. The current Government should share some of the congratulations on that renaissance, as should all politicians. However, when we look at how our energy intensive industries are being treated, it is ironic, because their treatment undermines that consensus. The hon. Member for Warrington South (David Mowat) has drawn attention to many of the dichotomies that we need to act on in that regard.

Foundational industries such as steel, glass and chemicals are crucial to a modern, balanced economy, and very much dominate the industrial scene in the part of the world that I represent. In Scunthorpe, Tata Steel, the UK’s largest steel maker, has just announced 500 more job losses, after announcing 1,800 in May 2011, so the issue of jobs is a live one. What Tata has said is exactly what my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) reported earlier: a comparison shows that UK energy costs are 70% higher than in Germany, and 45% higher than in France.

For someone sat in Mumbai making decisions about where to place investments, those figures are going to have an impact. It is crucial to take urgent action to ensure that that impact is not negative for the UK. Furthermore, as Member after Member has said, if we displace industry from the UK to places that are less energy efficient and less carbon friendly, we will increase the global carbon impact. That would be negative not just for the UK, but for the globe.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

The hon. Member for Warrington South (David Mowat) spoke about the explosion of fracking in America leading to an increase in manufacturing there. My great fear is that the traditional gas markets in the middle east, particularly Qatar, will start making overtures to industry to move to the middle east to produce there, rather than wait for the west to import their gas.

[Nic Dakin]

My hon. Friend makes an important point, which reminds us that we live in a global world with global decision makers and global impact. Tom Crotty, a director of INEOS, said:

“We are at a crisis point. We will not have an energy-intensive sector in this country in 20 years’ time”

if action is not taken. Karl Koehler, chief executive of Tata Steel’s European operations said:

“Our…manufacturing plants face electricity costs that are… 50 per cent higher than our key competitors in France and Germany…If the chancellor wants an industrial recovery and to rebalance the economy he must show real commitment to fair energy costs for foundation industries such as steel.”

The carbon floor tax is an interesting case study. It is a unilateral tax on manufacturing introduced by the coalition Government. They announced in 2010 that it would be introduced in 2013, and in 2011 gave a commitment to a package of support for energy intensive industries. In October 2012, the Department for Business, Innovation and Skills consulted on it, and it has now come into effect, but there is still no time scale for when compensation or mitigation will be in place because the carbon floor tax mitigation proposals are stuck in Europe. One would have thought that that would be checked out before we went down that route. Industry needs to be confident about when that mitigation will come into effect.

I have the highest regard for the Energy Secretary because he is on the side of manufacturing and wants the foundation industries to succeed, but in a written answer the Minister said that

“£16 million has been paid to 17 companies.”—[Official Report, 5 November 2013; Vol. 570, c. 142W.]

However, in a later written answer, he said that applications were still being considered, implying that nothing had been paid out. Last week, he said in answer to a question that 20 companies had had moneys paid out. There is still a bit of confusion about what exactly is happening. He is brandishing sheets of paper, which are probably complex but clarify the matter.

That demonstrates the fact that the landscape is confusing and complex. The carbon floor tax has been unilaterally imposed. There is no sign yet of any mitigation there. The mitigation of the European trading scheme seems to be trickling out. However, as my hon. Friend the Member for Penistone and Stocksbridge said, the issue of most concern to steel makers involves the renewables obligation and we need to ensure that that is addressed. The danger is that, if mitigation is not put in place, the current renewables obligation will be catastrophic to foundational industries in the UK.

What needs to happen next? We must maximise efforts to achieve state aid clearance on the carbon floor tax, to move to compensation or to implement quickly interim measures to give confidence to investors and our manufacturing base. We must extend the time horizon of the package, which is currently three years. Investment horizons in industries such as steel extend for decades. The principle of long-term certainty is accepted by the Government and Opposition for support schemes for low-carbon generation. We need the same sort of long-term certainty for these investments.

[Robert Flello (Stoke-on-Trent South) (Lab)]

I pay tribute to my hon. Friend and parliamentary neighbour the Member for Newcastle-under-Lyme (Paul Farrelly) for securing this debate. In terms of the long-term vision, energy issues are important, but it was not that long ago that jobs, particularly in the ceramics industry in north Staffordshire, were being lost abroad not because of energy costs, but because of labour costs. Should we not look at the issue in the round and take all aspects into account?

[Nic Dakin]

Absolutely. I am aware, Mr Robertson, that other hon. Members want to contribute to the debate, so I will close by reinforcing the need for urgent action now. The autumn statement tomorrow provides a real opportunity for the Chancellor to deliver support for our foundational industries, so that they are here today, here tomorrow and can be a confident part of our future.

[John Robertson (in the Chair)]

Order. I thank the hon. Gentleman for that. I am sorry that I must reduce the time for the last two speakers to six minutes each. I call Neil Parish.