BEIS Arm’s Length Body
Nick Hurd Excerpts(7 years, 7 months ago)
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The Minister for Climate Change and Industry (Mr Nick Hurd)
The Government are announcing today the sale of the UK Green Investment Bank plc (GIB) to Macquarie Group Ltd (Macquarie), with a £2.3 billion deal which secures a profit on the Government’s investment in the bank, provides value for taxpayers and ensures GIB continues its green mission, in the private sector.
GIB has been a real success story since it was created in 2012—the world’s first dedicated green investment bank, established to accelerate private sector investment into the UK green economy. It has fulfilled that mission, supporting almost 100 green infrastructure projects in the UK so far, and attracting £3 of third-party funding for every £1 it invests. It has shown, as it set out to do, that green investment can be both green and profitable. Having demonstrated its success, the Government decided to move GIB into the private sector where it can continue its success on an even greater scale.
The deal, secured through a competitive process as set out in a report to Parliament on 3 March 2016, will meet the objectives outlined by Government of securing value for money for the taxpayer while ensuring GIB continues its green mission, free from the constraints of public sector ownership. It has the backing of GIB’s independent board.
Under the ownership of Macquarie, one of the largest infrastructure investors in the world, GIB will invest more into the green economy than ever before, with £3 billion of new investment targeted over the next three years, exceeding GIB’s track record of committing £3.4 billion of investment over the four and a half years since it was founded. GIB will become the primary vehicle for Macquarie’s renewable energy investment in the UK and Europe, allowing GIB to expand internationally.
Macquarie has today published a series of commitments over the future of GIB under their ownership, including that GIB’s green purpose and green objectives will be maintained. This is in line with the “special share” in GIB to safeguard GIB’s green purposes, which will be held by five independent trustees who will have the power to approve or reject any proposed change to GIB’s green mission.
Macquarie has also committed to continue GIB’s investment approach, targeting investments across all areas of the green economy and across all stages of the project lifecycle, including the critical phases of development and construction. This will ensure GIB remains a specialist green investor supporting renewable energy investment and emissions reduction in the UK.
Macquarie is committed to maintain the GIB platform and brand, and to utilise the skills and experience of GIB employees in Edinburgh and London. GIB’s Edinburgh office will be home to a new revenue generating project delivery business providing services to the green energy portfolios of GIB and Macquarie in the UK.
The transaction value of around £2.3 billion ensures that on completion, all taxpayer funding invested in GIB has been returned with a substantial profit. This comprises proceeds from the sale of around £1.7 billion, with a further £0.6 billion of GIB’s current outstanding commitments which will be met by Macquarie and its partners, rather than by taxpayers.
As part of the transaction, a number of GIB’s offshore wind assets will be moved into a new offshore wind investment vehicle, which GIB will manage and hold a 25% stake. Investors in this investment vehicle will be long-term institutional investors Macquarie European Infrastructure Fund 5 (MEIF5) and the universities superannuation scheme (USS). This type of transaction structure matches GIB’s existing approach to asset ownership, providing a mechanism for long-term institutional investors to invest in low-carbon projects while ensuring GIB can recycle its capital into new green investments.
The Government will continue to hold a £130 million portfolio of a small number of GIB’s existing investments. This portfolio will continue to be managed by GIB until these investments can be sold on in a way which returns best value for taxpayers’ money.
The Government would like to put on record their gratitude to GIB management and staff, who have all played a key role in GIB’s success, and who have worked tirelessly and professionally to support the sale process while continuing to source and finance green projects across the UK.
The sale proceeds will be received on completion of the transaction, which is expected to take around two months. The transaction is conditional on certain regulatory approvals including EU merger clearance. Under the Enterprise Act 2016, the Government are required to provide a full report to Parliament on completion of the transaction.
[HCWS600]
Cavity Wall Insulation: Wales
Nick Hurd Excerpts(7 years, 7 months ago)
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Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
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The Minister for Climate Change and Industry (Mr Nick Hurd)
It is a great pleasure to serve under your chairmanship, Mr Nuttall. I start by congratulating the hon. Member for Arfon (Hywel Williams) on not only securing this debate but his persistence over many years on this subject on behalf of both his constituents and a wider population of people who feel their voices are not being represented clearly enough. In that context, I would like to place on record my appreciation for the work of the Cavity Insulation Victims Alliance, members of which I had the pleasure of meeting briefly before the debate started again. We must work towards a situation in which no one feels they are a victim, but we are clearly not there yet.
I would like to say something briefly about the context of the debate and the consumer protection that we think is in place and that should be working. I will also try to answer some of the hon. Gentleman’s questions about the scale of the problem as we understand it and perhaps give him some reassurance about the progress we think is being made and the Government’s commitment to continue to press for an even better response on something that is clearly causing a great deal of hardship, difficulty and distress.
The hon. Gentleman knows the context very well and alluded to it. This Government, like previous Governments, have been keen to make it easier for people to take insulation and other energy efficiency measures that will help to make their homes more comfortable, warmer and more environmentally friendly. He knows as well as I do that if cavity wall insulation is fitted appropriately—that is a big if—it can be very effective in reducing consumption and cutting people’s bills. We have therefore committed to the insulation of a further million homes in this Parliament through a policy tool known as the energy company obligation, which is increasingly focused on trying to provide support for the poorest and most vulnerable households. That is the policy context, which he understands well.
Given that ambition, it is incredibly important that a good level of trust underpins the supply of these services. That trust is what we are really talking about today, and in too many places it does not exist. Consumers need to feel confident that they can trust the quality of the advice that they receive and of the installation that takes place in their homes. We need consumers to have the confidence to make decisions about their properties to improve the energy efficiency of their homes. This will not work unless there is that element of trust in the system.
On consumer protection—I think the hon. Gentleman knows this, but it is worth briefly placing on the record—a lot of regulation is in place to give the kind of consumer protection that we all want to see for our constituents. The installation of all cavity wall insulation must meet the requirements of the Building Regulations 2000. Materials used in cavity wall insulation are subject to specific standards and must be certified by an independent technical approval body. All cavity wall insulations installed under the energy company obligation are subject to a survey prior to installation. I understand his point about independent services, but the requirement for a survey is in place, in part, to verify that the measure is suitable for the property; I think that that is one of his major points, particularly about the part of the country that he represents. All installers working under ECO must also comply with a PAS—publicly available specification—that sets out requirements for the installation of energy efficiency measures in buildings, including cavity wall insulation. Ofgem requires technical monitoring inspections of 5% of measures installed under ECO. It also requires, as the hon. Gentleman noted, that cavity wall insulation measures installed under ECO be accompanied by a 25-year guarantee. As ECO administrator, Ofgem sets out clear requirements for those guarantees as part of its scheme guidance: they must include assurances not only about the quality of installations and the products used, but that funds will be available to honour the guarantee, which must cover the costs of remedial and replacement works.
Those are the protections in place. We recognise, because the data show it, that sometimes things may not work out as expected for consumers. When that happens, it clearly causes a great deal of distress. If there is a problem, our advice is that consumers should initially contact the installer who carried out the work and see whether the problem can be rectified. If that is unsuccessful, they should contact the guarantee provider of the energy company that originally carried out the work. If a consumer’s claim is covered under the terms of a guarantee, either the guarantee provider or the installer will arrange for the necessary works to be completed at no cost to the householder. In many cases that should provide a solution to the problem. However, if for any reason there is no effective guarantee in place, consumers may wish to obtain further guidance from their local trading standards office or seek professional legal advice.
The hon. Gentleman asked about the scale of the problem—the number of insulations completed and the number of consumers who have reported concerns. According to CIGA—the Cavity Insulation Guarantee Agency, which is the largest provider of guarantees for cavity wall insulation, as he knows—since 1995, 330,000 cavity wall insulation installations have been completed in Wales and 3,663 consumers, or 1.1%, have reported concerns. Some may argue that that is a statistically relatively small number, but as far as I am concerned it is 3,663 consumers too many. We need to work towards a situation in which there are no victims and no problems with the quality and probity of insulation work, as he set out powerfully in his speech.
The important thing is that when problems are reported they are addressed. Of the 3,663 recorded cases, CIGA claims to have resolved 2,939 while installers have resolved 724. In answer to the hon. Gentleman’s question, that is what the statistics show. My concern—I will be candid with him because he alluded to this—is that the statistics may understate the problem because they cover people who have reported a problem. He told me anecdotally that in his constituency there may be a much higher number of people who have not reported a problem and who are passive in their misery about what has happened to their homes. The Government must be sensitive to that.
We are not remotely complacent, which is why, as the hon. Gentleman said, we commissioned a review of quality, standards and consumer protection across the whole domestic energy efficiency and renewable energy sector, including cavity wall insulation. I am glad he welcomed that. I know he thinks it may not be sufficient, but I thank him for welcoming it.
The “Each Home Counts” review published on 16 December 2016 recognises that there should be consistent, high quality work in this sector and has made a number of recommendations, which will be taken forward by the industry with the Government’s support. This work is enormously important to our constituents because it is about their homes and very little is more important to them. There should be no room for cowboys in this market and we must hound them out. The review engaged with a diverse range of stakeholders and demonstrates the potential for a new approach to increase consumer trust.
Ensuring a clear and robust standards framework, not just when work is undertaken as a result of Government policy but wherever it happens, is fundamental and that is one of the key actions that the industry is now taking forward, which we will monitor carefully. The review includes recommendations to improve the provision of advice to consumers, as well as for improving skills and training in the workforce. We expect to see implementation plans—words are not sufficient—and delivery proposals from the industry in the coming month.
The hon. Gentleman expressed concerns about CIGA that have been expressed before and those concerns and criticisms have clearly been valid. CIGA is the largest guarantee provider and an important institution in this context. I have been assured—I will follow this up after the debate to seek extra assurance—that it has taken steps to improve the service it provides to consumers. It is under new leadership, as the hon. Gentleman probably knows, and those steps include hiring additional technical inspectors, appointing a consumer champion and introducing access to an independent alternative dispute resolution service operated by a provider approved by the Chartered Training Standards Institute. I will not repeat what previous Ministers said about leaving an open file, but I will write to the chief executive of CIGA setting out clearly some of the reservations that the hon. Gentleman eloquently expressed in this debate, and I will seek an explicit response.
I assure the hon. Gentleman, other hon. Members, CIVALLI and all those out there who are concerned about the issue that we genuinely recognise their concerns. It is in everyone’s interest that the market operates efficiently and that there is trust between customers and service providers. We are focused on ensuring that consumers can choose the right energy efficiency measures for their homes to deliver carbon and bill savings. We share hon. Members’ concerns that the work should be done consistently well and, if not, that appropriate redress should be available.
I am assured that CIGA has listened to the concerns expressed in previous debates in this House—it would have been deaf if it had not—and that steps have been taken to make the organisation much more customer service-friendly, but it needs feedback from Members of Parliament and other representatives on how much progress is really being made. I hope that the details I have set out about the significant steps that have been taken to improve customer service are reassuring.
I assure the House that the Government will continue to work with the industry to improve further the standards and quality in the energy efficiency and renewable energy sectors so that, as we move forward and try to encourage more of our constituents to upgrade their homes to make them warmer, more comfortable and more environmentally friendly, they can do so with trust.
Question put and agreed to.
Resolved,
That this House has considered cavity wall insulation in Wales.
Fuel Poverty
Nick Hurd Excerpts(7 years, 8 months ago)
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The Minister for Climate Change and Industry (Mr Nick Hurd)
I beg to move,
That this House has considered fuel poverty.
I am delighted to open the first annual debate on the important issue of fuel poverty. The fact remains that far too many of our fellow citizens and constituents struggle to afford to keep their homes at reasonable, comfortable temperatures. As I will argue, we are making progress, with some 780,000 fewer fuel-poor homes in 2014 than in 2010, but there is a lot more to do to meet the demanding targets we have rightly set ourselves, as a country, for 2030. It is quite right that the Government of the day are regularly held to account for what they are doing, and encouraging others to do, in the face of this stubborn and complex social challenge.
The debate is important because it is an opportunity for Government and Parliament to hear directly from MPs from across the nation about their experience and insights. In our day-to-day work, we, as MPs, come across the consequences of fuel poverty, not least its impact on the wellbeing and health of our constituents.
Before we get into the discussion, I want to set out the context. Over the past five years, Government have taken action to overhaul the framework for tackling fuel poverty in England. At long last, we have a long-term strategic framework for action on fuel poverty, which is rooted in the 2015 fuel poverty strategy and the long-term statutory target. The journey began in 2012 with the independent review of fuel poverty led by Professor Sir John Hills. The review found that fuel poverty is a distinct issue, separate from income poverty.
However, the debate clearly links to other areas of policy, such as the action the Government are taking to improve living standards by means of the national living wage and by increasing tax thresholds for the lowest-paid. Likewise, we could not have made clearer our determination to make sure that the energy market works for all. Ofgem’s introduction of a prepayment meter tariff cap is a welcome first step. As the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman), indicated last week, a consumer Green Paper will be out shortly.
Today, I want to focus on the policy framework that is specific to fuel poverty. The journey to this point started with Professor Hills’s review, which reflected on previous activity and measures to tackle fuel poverty. The review highlighted the fact that although the 10% indicator that had, until that point, been used to measure fuel poverty was well-meaning, it was fundamentally flawed. In 2013, the Government confirmed that the findings of the Hills review of fuel poverty would be adopted, including the low income, high costs indicator. That measure finds a household to be living in fuel poverty if its income is below the poverty line and it has higher-than-typical energy costs.
In 2014 the Government introduced the fuel poverty target for England. The target is to ensure that, so far as is reasonably practicable, fuel-poor households are improved to a band C energy efficiency rating by 2030. In 2015 we saw the publication of “Cutting the cost of keeping warm: a fuel poverty strategy for England”, which set out the principles that the Government would apply and the approaches to be taken when making progress towards the fuel poverty target. The strategy set out the importance of effective levels of public accountability and the role that the Committee on Fuel Poverty, a non-departmental public body formerly known as the Fuel Poverty Advisory Group, will play in that. I welcome the insight and challenge that the committee brings as we look to tackle the serious and long-term societal issue of fuel poverty.
Recognising that 2030 is some way off, the strategy includes interim milestones to guide activity in the shorter term, helping to focus our attention on making progress as we move forward. The milestones are to ensure, so far as is reasonably practicable, that fuel-poor households are improved to a band E rating by 2020 and to a band D rating by 2025. That is the framework.
The fuel poverty target is certainly ambitious, and I have not heard anyone argue to the contrary. The band C target is set at a level that only 7% of fuel-poor households currently enjoy. We are aiming high, and it is right for us to do so. As the Committee on Climate Change reiterated in its report last week, the target is extremely challenging. However, we must be clear that meeting that challenge may provide huge benefits for households that need support. Improving those E, F or G-rated homes to band D can reduce energy costs by an average of £400. I am pleased to be able to say that although the challenge is significant, progress is being made.
Looking to our 2020 milestone, the percentage of fuel-poor households living in homes rated band E or higher has already improved from 79% in 2010 to 88% in 2014—the latest year for which statistics are available. Looking at the 2025 milestone, we see that the percentage of homes rated band D or higher has improved from 29% in 2010 to 59% in 2014.
Lady Hermon
There is a competition going on here over who will intervene. It is kind of the Minister to give way. I am sure he is aware that fuel poverty is particularly acute in Northern Ireland. Many households are still dependent on heating oil, the cost of which is increasing. Will the Minister pledge that if, as I optimistically forecast, a devolved Administration is restored in Northern Ireland next week, he will liaise very closely indeed with his counterpart in Northern Ireland to develop a strategy that benefits all households across the United Kingdom—not just those in England—rather than leaving Northern Ireland to fend for itself? That is an optimistic forecast, but we have to live in hope.
Mr Hurd
We do indeed. The hon. Lady is entirely right; the fuel poverty statistics for Northern Ireland are particularly striking and stubbornly high. As she indicates, she hopes for better times. Although this is, as she well knows, a devolved matter, the Government are ready and happy to co-operate with the Administration when it is formed.
Jonathan Edwards
What consideration have the Government given to developments in currency levels? We live in an age in which sterling is devaluing. The harder the Brexit, the more sterling will have to devalue. The US dollar, on the other hand, is likely to strengthen as a result of Trump’s expansionary fiscal policy, and the Fed has increased interest rates. Oil is traded in dollars, and the gas price is pegged to oil, so those two developments inevitably mean that energy prices in the UK will increase significantly. What are the Government going to do to mitigate that?
Mr Hurd
As I said earlier, I do not think that anyone can be under any illusions; the Government are very serious in their intention to make the energy market work more effectively for all. We are all clear that it does not work effectively for all, and the steps that the Government will take will be set out in a consumer Green Paper very shortly.
I was talking about the Government’s performance against the 2025 milestone that we have set, and I stated that the percentage of homes rated band D or higher has improved from 29% in 2010 to 59% in 2014. That represents approximately 780,000 fewer fuel-poor homes rated E, F or G in 2014 compared with the position in 2010. I hope that the House will welcome that. In terms of the trajectory of improvement, there were 174,000 fewer E, F or G-rated homes in 2014 than there were in 2013, which shows that existing policies are making a difference. As an example, since the scheme started in 2013, approximately 700,000 measures have been installed in 500,000 low-income households as a result of the energy company obligation. That is part of a total of 1.6 million homes that have been improved under ECO.
Alberto Costa (South Leicestershire) (Con)
My constituents in South Leicestershire want to know that the Government are doing everything they can to ensure that the energy market works for all of us, whether we are in South Leicestershire or across the United Kingdom. Does my hon. Friend share my view that energy companies should be expected to treat all their customers fairly, not just those who decide to switch?
Mr Hurd
I agree with my hon. Friend. We all know from our constituents about the stress that is caused by anxiety about fuel. I represent a relatively affluent constituency in London, but the statistics show that 8% of my constituents qualify as fuel-poor. This issue affects constituencies across the country. I certainly give my hon. Friend that assurance, and I hope that he will be very satisfied by the material in the consumer Green Paper that will be published imminently.
Recognising that improving household energy efficiency is the most sustainable long-term solution to tackling fuel poverty, we are not complacent, and we are going further to take action. Today, the Electricity and Gas (Energy Company Obligation) (Amendment) Order is being debated in the House of Lords. It will extend the scheme from 1 April 2017 to 30 September 2018. Should the scheme proceed as planned, we expect more than 500,000 homes to be improved over the coming 18 months. The order will also reform the energy company obligation so that 70% of the support available under it will be directed at low-income homes. That represents a real-terms increase from £310 million to £450 million per year, which will be invested in improving the energy efficiency of homes that most need support.
Caroline Lucas (Brighton, Pavilion) (Green)
I have no doubt about the Minister’s personal commitment to this agenda, but I wonder why the Government will not make energy efficiency into a national infrastructure priority. Why is energy efficiency not part of the national infrastructure assessment? That would be the way to scale up and meet the ambition he claims the Government have.
Mr Hurd
It is not a claim about ambition; the ambition is set out in long-term statutory targets. The figures I have given show that these are substantial investments. As I will come on to clarify, there is some £770 million of support for low-income and vulnerable consumers in the financial year 2017-18, so there is no shortage of ambition or of investment. The hon. Lady and I share a strong belief in the importance of energy efficiency. I am trying to stress that what we are doing will increasingly focus on the most vulnerable, and, with public finances constrained, that must be the right priority.
James Heappey (Wells) (Con)
May I welcome the efforts that the Government have made and their clear success in improving energy efficiency? My hon. Friend is so right to highlight the fact that making the obvious saving of getting people to spend less on energy through using less is much more important than the amount we give people to subsidise their energy costs or any intervention we make in the market to cap energy costs.
Mr Hurd
I could not agree more with my hon. Friend. As I have said, previously, he is one of the most thoughtful Members of the House on this subject. He will know that we are on the cusp of something very interesting in our relationship with energy and our ability to manage it more intelligently. Such an opportunity must be just as much available to well-to-do people as it is to those struggling with their bills, and that must be a priority for us. That is partly why I stressed the point that the reforms we are making to the existing policy instruments will increasingly focus on the most vulnerable and the poorest in our communities.
However important it is to improve the energy efficiency of people’s homes, it will inevitably take time, and Government recognise that people also need immediate support with energy bills. We therefore have in place the second pillar of the strategy, the warm home discount. This scheme now provides over 2 million low-income and vulnerable households with a £140 rebate off their energy bill each winter, when temperatures are lowest and bills are highest.
Together the schemes mean that, as I have said, there will be at least £770 million of support for low-income and vulnerable consumers during the financial year 2017-18. This is a significant level of support for households across the country. Other policies will also make a contribution, such as the prepayment safeguard tariff, which I hope the House welcomes, and the roll-out of smart meters. Smart meters are regularly debated in this place, and the evidence is already showing the consumer popularity of this technology and its ability to help people save money and manage their energy use in a smarter way.
Making progress cannot be just about subsidy; regulation will play an important role as we take action to ensure that tenants can live in a home that keeps them comfortably warm. The private rented sector regulations will target the least efficient F and G-rated properties from 2018 by requiring landlords to improve those properties to at least a band E, unless a valid exemption applies. The Department is currently considering options for the implementation of the regulations, with a view to ensuring that they can be implemented effectively by April 2018.
Of course, there is more work to be done. One key area will be to improve targeting on the households most in need. The Digital Economy Bill, which is currently going through Parliament, will be important in that regard, as it will make available better data on householders and properties. We believe that that will in turn reduce the costs that energy suppliers face in identifying the households most in need, and allow more measures to be installed for the same cost.
The actions I have described are all led by the Government. However, fuel poverty is a problem for all of society, and the Government cannot tackle it alone. That is why partnership is a key theme of the fuel poverty strategy. It is important for the Government to play a leadership role, but also to work in partnership with local government, businesses and the charitable sector. Only by making the most of the varied skills and resources of each of those partners will we, collaboratively, be able to tackle fuel poverty.
Caroline Lucas
According to the Government’s own statistics, the EU ecodesign directive has helped households, small businesses and industry to save thousands on the cost of energy. Indeed, the average annual saving from ecodesign policies for homes is expected to be £153 by 2020, which is 20% of the average annual energy bill. Will the Minister assure us that such rules on energy efficiency will continue to be implemented and updated both during and after our renegotiation with the EU?
Mr Hurd
I certainly agree with the hon. Lady about the importance of good design. In fact, some of the most important progress we have made as a country on energy efficiency has been through building regulations and standards for the quality of our homes and offices. The Government remain ambitious in that respect, and she will know how important that is. She will know that I obviously cannot at this stage clarify our intentions post-Brexit, because that is tied up in a series of wider issues, but I hope I can reassure her that we understand completely the importance of continued ambition in this area. We are very clear that there remains considerable scope for harnessing creativity and innovation in using design to improve standards, which will in turn reduce costs.
Lady Hermon
The Minister is commenting on the need to work in partnership, and I absolutely agree. May I just point out that the warm home discount scheme does not apply in Northern Ireland, which makes fuel poverty there even worse? In partnership with the incoming Administration in Northern Ireland, will the Minister pledge to prioritise the need to introduce the warm home discount scheme in Northern Ireland, even if that means that the Government in Westminster have to provide additional funding to the Northern Ireland Executive?
Mr Hurd
I listened very carefully to the hon. Lady, but the bottom line is that this is a devolved matter. I am more than happy to discuss the fuel poverty strategy with counterparts in Northern Ireland, but it is categorically a devolved matter.
I was talking about partnerships, and I am glad that the House has filled up a little—when we started it was a little bare—because I am looking forward to hearing from hon. Members about their experience of what is happening with partnerships in their constituencies, including what is and is not working, and more widely about what is going on in their constituencies to help bring about change to support households that need support.
Matthew Pennycook (Greenwich and Woolwich) (Lab)
The Minister is talking about partnership at the local level. A huge variety of organisations in Greenwich and Woolwich are working on this very issue, not least South East London Community Energy. Is the Department giving any thought to how such organisations can link up with local authorities to avoid the fragmentation that can exist at the local level, and ensure they work in partnership to target people who need their help the most?
Mr Hurd
I am very sincere in what I say about partnerships—when I was the Minister for Civil Society, it was absolutely core to our approach—so we are very keen to get good information about what is working and what is not working with partnerships, because they are easy to talk about, but they are actually quite hard to implement in practice. We are doing some work with local authorities, but the hon. Gentleman has made an important point about the sharing of knowledge and information so that we can get a better understanding of what works. Some of this stuff is quite complex in relation to breaking down the social barriers to people accepting help when it is offered.
James Heappey
The hon. Member for Brighton, Pavilion (Caroline Lucas) quite rightly said that we must be ambitious in the way we design buildings, and I could not agree more, although I am not sure that this is really connected to Brexit. The fact is that it is not merely the affordability of purchasing or renting a building that is so important, but the affordability of the operation of that building thereafter. By having good design principles for energy efficiency and insulation in its design process, we can make a building more affordable to live or work in, rather than simply making it more affordable to buy in the first place.
On co-operation and partnerships, what are the Minister’s plans for using the data owned by the Data Communications Company from smart meters not only to nudge people to switch tariffs, but to make the data available to other organisations that could advise people on emerging technologies, such as demand management, so that they can load shift to minimise their bills in that way?
Mr Hurd
My hon. Friend makes important points not only about the importance of good design and the opportunities attached to it, but about the potential for data to make us more efficient in targeting support and to help us develop the smarter system that he talks about so eloquently. He will know that there are tremendous sensitivities around the sharing of data, towards which the Government have to take an extremely responsible attitude, but he is right about the opportunities. What he talks about is under active consideration, as he knows.
I ought to bring my remarks to a close so that colleagues can contribute to the debate, but I want to bring us back to why we are here today. Fuel poverty affects households in all our constituencies and it is a problem that we should work together to solve collectively. The fuel poverty strategy made it clear that the Government are committed to ensuring that there is sufficient parliamentary scrutiny of fuel poverty through the means of this annual debate, so I welcome the views of the hon. Members who are in the Chamber.
As I have suggested in my opening remarks, it is clear that we have made progress, not least in setting up, after too long, the much-needed strategic framework and statutory targets that will drive progress and ambition through successive Governments. The numbers show that since 2010 this Government and the previous Government have made progress, but the social challenge we face is very stubborn indeed. I reassure the House that the Government remain extremely committed not just to delivering on our manifesto commitment, but to keeping the country on track to meeting the 2030 target, however challenging.
Oral Answers to Questions
Nick Hurd Excerpts(7 years, 8 months ago)
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Dr Paul Monaghan (Caithness, Sutherland and Easter Ross) (SNP)
The Minister for Climate Change and Industry (Mr Nick Hurd)
Between 1990 and 2015 the UK’s emissions have fallen by over a third while our economy has grown by over 60%. Since 2010, Government policy has contributed to a trebling of renewable electricity capacity and encouraging the take-up of low-carbon heating and ultra-low emission vehicles.
Deidre Brock
I thank the Minister for his answer. Businesses in the Scottish renewables sector predict that one in six jobs is at risk over the next six months due to changes in UK Government support. Will the Minister take action now to reverse those changes, to make sure we grasp the opportunities that our fantastic national energy resources provide?
Mr Hurd
Few countries, certainly in Europe, have done more than we have to expand renewable energy electricity capacity since 2010, and the low-carbon economy sector now employs over 220,000 people. The hon. Lady questions our continued commitment to renewable energy; I refer her to the public commitment to forthcoming auctions to support the less mature renewable technologies.
Alan Brown
A recent Chatham House report as well as the Department for Business, Energy and Industrial Strategy’s own following study on North American woody biomass both concluded that the use of these pellets for energy production in the UK is high-carbon. Given that and that a review was promised of bio-energy policies in 2012, will the Government conduct an urgent review and impose a moratorium on new subsidies for biomass?
Dr Monaghan
Given that Scotland’s renewable energy will be cheaper than that produced at Hinkley by the time it is complete and that Brexit is already pushing up the build costs of these reactors in an environment where the UK Government have unilaterally decided to abandon the protection of Euratom, will you scrap the costly and inefficient nuclear obsession in favour of a low-carbon future?
Mr Speaker
The hon. Gentleman invests me with powers that I do not possess; that is very good of him.
Mr Hurd
Frankly, previous Governments neglected their responsibility to this country to invest in upgrading its power infrastructure, but this Government are grasping that challenge. As I have said, few countries have done more to make the transition to cleaner energy, with a trebling of capacity in renewable electricity, and the commitment to Hinkley offers us the potential for 7% of the country’s electricity—low-carbon based power.
Mr Andrew Turner (Isle of Wight) (Con)
Colleagues in both Houses have signed an offshore blade made by MHI Vestas on the Isle of Wight, which is also arranging a schools outreach programme. Does my hon. Friend agree that this sort of initiative raises awareness of how low-carbon renewable energy technology can ensure that the UK reaches its potential of exporting its first-class engineering and advanced manufacturing worldwide?
Mr Hurd
I thank my hon. Friend for his question and wholly endorse what he says. The Secretary of State and I saw at first-hand when visiting the new Siemens offshore wind blade turbine factory in Hull just what this technology and engineering can do to inspire, in particular, young people in the area about opportunities for employment in this exciting sector.
Antoinette Sandbach (Eddisbury) (Con)
Nuclear power is an important part of the transition to a low-carbon economy. Will the Minister update us on the small modular reactor competition?
Mr Hurd
I congratulate my hon. Friend on her election to the Select Committee, and she is absolutely right: energy innovation is critical to both our future ability to reduce the cost of decarbonisation and unlocking the industrial opportunities inside the low-carbon energy sector. We are reviewing our plans in relation to our energy innovation portfolio. The nuclear industry is a very important part of those plans, and I hope we will have something to say very shortly.
Kevin Foster (Torbay) (Con)
The Minister will be aware that we in the south-west do not share the Scottish National party’s negative view of the Hinkley Point power station project, but will he reassure me about what work the Government will do to ensure that young people have the skills to take the jobs that will become available in these industries?
Mr Hurd
I thank my hon. Friend for correcting the impression that investment in new jobs in the nuclear industry is somehow bad news, given the commitment that 65% of the content of Hinkley should be supplied from this country. Just as important is the contribution it makes to upgrading our power infrastructure and making sure this country has the ability to access reliable low-carbon energy in the future.
Barry Gardiner (Brent North) (Lab)
Last week, the Budget failed to stop the 800% rise in business rates for companies that have installed solar panels. This week, research published in the journal Nature Energy states that to achieve our targets set out in the Paris agreement we need to set out longer-term plans beyond 2050, yet the Government have now dithered for five years and still refuse to publish their own implementation plan, even up to 2030. How does the Minister propose to increase our low-carbon exports when he cannot even set out how we will achieve our medium-term climate targets?
Mr Hurd
The hon. Gentleman accuses us of dithering, but our performance on emissions during the last Parliament was one of the most successful since 1990. He talks about delaying the emissions plan but he will know that the fifth carbon budget was set only last July. This country, and this Government, have a proud record of proving that we can reduce emissions while growing our economy, and we will continue to build on that.
Mr Philip Hollobone (Kettering) (Con)
With more than 30 large wind turbines in the borough, Kettering is coming close to generating more green electricity than it consumes, but what incentives are there in the business rates and planning systems to reward housing developments and business start-ups that are low carbon?
Mr Hurd
I thank my hon. Friend for pointing out how much progress we are making at the local level as well as nationally on the transition to green power. This has been facilitated by substantial investment through public subsidies and, as we look to encourage the deployment of renewable energy through competitive markets—preferably subsidy free—we are looking at what else we can do to facilitate that using the tools available to the Government.
Callum McCaig (Aberdeen South) (SNP)
Our concern on Hinkley is that the Government appear to be stacking the deck in favour of nuclear power over the much cheaper renewable energy. The strike price for Hinkley was £92.50 in 2012, compared with a much lower £82.50 for onshore wind in 2015, yet in the value-for-money assessment the Government assume a £90 strike price for onshore wind. Why are they inflating the price for renewables in comparison to Hinkley?
Mr Hurd
I hope that the hon. Gentleman does not want to give the wrong impression. He knows from his experience that one of the keys to a successful energy policy is diversity of supply. That is the key to energy security, which is the primary responsibility of every Government. Ensuring diversity of supply is absolutely evident in what we as a Government are trying to do.
Callum McCaig
The Minister has completely missed the point of my question, which was about comparisons. The Government commissioned Frontier Economics to look at the whole systems impact of electricity generation models, yet despite repeated parliamentary questions and freedom of information requests the report has not been published. If the Government have nothing to hide, why are they hiding things?
Mr Hurd
I am not aware of hiding anything. I am trying to make a point about diversity of energy supply. I would make a further point about prices, in answer to the hon. Gentleman’s question. One of the most encouraging things is the progress we have made in our policy structure on driving greater competition, through contracts for difference, in order to get better prices for consumers and for the taxpayer from the public subsidies that are available. I hope that that will be evident very soon in the results of the forthcoming auctions.
Andrew Bridgen (North West Leicestershire) (Con)
Richard Arkless (Dumfries and Galloway) (SNP)
The Minister for Climate Change and Industry (Mr Nick Hurd)
I have already emphasised in earlier answers the importance of a diverse energy supply, which is at the root of energy security. There is no question about this Government’s commitment to ongoing investment in renewables.
Mr Alan Mak (Havant) (Con)
Many of those focused on driving forward the fourth industrial revolution are in new sectors such as robotics and 3D printing. Can the Minister ensure that the industrial strategy’s sector engagement includes new, innovative challengers, not just incumbents?
Mark Pawsey (Rugby) (Con)
Diesel-powered generators add to poor air quality. Will the Minister welcome the contribution of Off Grid Energy, a small, innovative business in my constituency, whose mobile hybrid units provide green energy to the construction and event sectors?
David Simpson (Upper Bann) (DUP)
What positive impact will the Government’s plans to improve the energy infrastructure have on small businesses when it comes to electricity costs?
Smart Metering: Electricity and Gas
Nick Hurd Excerpts(7 years, 9 months ago)
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The Minister for Climate Change and Industry (Mr Nick Hurd)
It is a great pleasure to serve under your chairmanship, Mr Turner. I hope that you have got something out of the debate. At the very least, we have had an introduction to Gaz and Leccy, courtesy of my hon. Friend the Member for St Ives (Derek Thomas).
I congratulate the Chairman of the Science and Technology Committee, my hon. Friend the Member for South Basildon and East Thurrock (Stephen Metcalfe), his Committee and its previous Chairman for an extremely useful report and debate. He described our commitment to ensure that every household and small business is offered a smart meter by the end of 2020 as a “major project”. I think he rather underestimates it, and we need to bear that in mind.
It is absolutely right and a central part of a functional democracy that Select Committees and Opposition parties probe, prod, ask tough questions and even, in our view, tip over the line into spreading alarm. That is how we operate, and it is entirely right, particularly when we are faced with a project on this scale, not least as the past is littered with good intention and bad execution, as the hon. Member for Blackley and Broughton (Graham Stringer) pointed out. I therefore entirely welcome the challenge that we have heard during the debate, but I urge hon. Members not to lose sight of the context.
We are talking about an upgrade of a significant part of our infrastructure—a 100-year-old technology that means that far too many people receive bills on which their consumption is estimated. We do not tolerate that in the supermarket, so why on earth, in 2017, should we tolerate it at home? Our energy system is absolutely functional to a smart and prosperous economy, so why should people continue to be dependent on a technology that is so out of date? That is the context: it is about upgrading out-of-date infrastructure as part of a bigger transformation and transition process in our energy system.
I think there is cross-party agreement about the opportunity and need to move to a smart system that is more flexible and ultimately cheaper, and which our constituents feel they have more control over. I do not think there is any real resistance to the direction of travel, but the debate sits in that important context. Hon. Members have posed tough questions and challenges, which I will do my best to respond to, but those who know anything about system change and consumer behaviour change should recognise that some of the momentum is genuinely encouraging, and we must not lose sight of that. Almost 5 million customers now have smart meters, and the economic analysis continues to suggest that they will have a net benefit of £5.7 billion. We do not obfuscate about that in any way, and that analysis is regularly updated.
[Robert Flello in the Chair]
The Chairman of the Select Committee talked about the benefit to consumers. I know the point he was trying to make, but we are all aware that consumers are concerned about costs. Evidence from British Gas surveys suggests that consumers with smart meters save 3% or so on their energy bills, which, in my experience, is material, and I think he also knows that those savings will grow as we move towards 2030.
One important piece of information that has been missing from this debate is that consumers like smart meters. Surveys suggest that something like eight out of 10 people with smart meters would recommend them to their friends. There are of course big challenges around implementing them—how could there not be?—but we are driving hard a process that our constituents like and which is an important part of upgrading the country’s infrastructure.
I will do my best to address the issues that have been raised, particularly by the Chairman of the Select Committee, whose points were valid. He quite rightly presses us on the need to tackle the technical limitations, which are real. A conscious decision was taken to proceed with SMETS 1, because first-stage smart meters do deliver some benefits and were an essential part of the process of getting a supplier system moving and helping to prepare for installation. Of course, we do not want our constituents to trade off the opportunity to get a better tariff against the opportunity to retain smart functionality. That is clear.
I assure my hon. Friend the Member for South Basildon and East Thurrock that the DCC has begun the project to enrol the SMETS 1 smart meters from 2018 in order to make them usable by all energy suppliers rather than just the one that initially installed them. This is an issue I feel strongly about and the Government will be watching extremely carefully. There has been a consultation. Nothing I have heard gives me cause for alarm at this stage but it is extremely important that we end up at a destination where the early smart meters are usable by all energy suppliers and constituents do not face trade-offs between tariff and functionality.
My hon. Friend pressed me on national benefits and the need to make a broader case than the simple proposition, “This will save you money.” That is an interesting debate, and it is the same kind of debate and challenge that I am wrestling with, as Minister for Climate Change, in engaging people with climate change. Do we try to frame it in language that talks simply about things that are closer to home and more relevant to our constituents, or do we try to put it into a bigger picture of public good? Most of the advice suggests that when trying to propose something to a consumer or our constituents, it is better to focus on the issues and concerns most directly relevant to them.
I would draw a distinction between, as it were, a marketing proposition to a consumer and our constituents and the need for this place, with its processes of accountability, transparency and scrutiny, to be clear about what we are trying to do and what the wider benefits are. That is entirely valid. My hon. Friend wanted more information about the system benefits, which are a clear part of the net benefits analysis, and I think they are real. They fit into the broader strategic thrust that the Department is now leading on, in moving towards a smarter system. He may be aware that we put out a call for evidence recently and we are receiving information on that. That information about how smart meters fit into a broader strategic thrust to make the system more smart and flexible will be transparent and open to accountability and scrutiny.
My hon. Friend asked about consumer engagement. He is entirely right about that, because ultimately smart meters must be a fantastic consumer experience; otherwise, these things will sit in drawers and get ignored—everything that the contributors to the debate have rightly pointed to. That is why we mandated the setting up of Smart Energy GB and mandated energy suppliers to engage with their consumers before, during and after installation. Smart Energy GB is working with trusted third parties, including Citizens Advice, National Energy Action, the National Housing Federation and Age UK, among many others, to ensure that customers can access advice about the roll-out. I should add that we are conducting our own research into consumers’ experience about the service they get after installation, which is a point he made specifically.
Dr Mathias
I am concerned about the exaggeration of the benefit for customers. In the Select Committee we found that we have one of the smallest variations between peak and standard demand of almost any country in the world. I put it to the Minister that we should be honest with consumers and say, “No, it is the companies and the Government, in policy making, who will benefit from this most.”
Mr Hurd
I am not sure that is entirely right. My hon. Friend is right that the benefits are not restricted entirely to consumers, but that has been made public; we have been open about that. Missing from the debate is an acknowledgment that suppliers face costs associated with installing the meters, which need to be recovered. Yes, there are system benefits, but this is not something that does not benefit our constituents and consumers. We want less cost in the system and a smarter system, and if the meters contribute to that, that is good. I come back to—not estimates, but actuals, if we believe it—the large British Gas survey of their customers, who are achieving 3% savings. That is not immaterial, particularly because, as she well knows—she is close to her constituents’ concerns—we are in a climate where people are concerned about rising energy costs, as we saw the other day.
Dr Mathias
This is not what we investigated, but, as the Minister knows, the direct debit monthly bills for customers with smart meters still use estimates.
Mr Hurd
We need to move on from estimates—that is part of the point. We do not make purchases or pay estimated bills in other areas, so why should we in this area? The whole point is to move to a system where we can pay for what we use. The point I am labouring is that the actual data, not the estimates or predictions, suggest that people are saving money now, and not in an immaterial way. If the projections are right, that will grow.
I want to say something briefly about privacy and reach, which I know from having tackled this in a previous debate is a particular concern for many communities in Scotland. Suppliers must take all reasonable steps to reach all households in Great Britain, islands included. Privacy has been an important issue from the start; in fact, I remember constituents raising it with me. Let me assure the House that a robust privacy framework is in place. The central principle of the framework is that consumers have control over who can access their consumption data and only authorised parties can access consumption data through the Data Communications Company.
I hope that I have addressed some of the principal concerns. Let me address a point made by my hon. Friend the Member for St Ives and others, questioning the ambition and pace. We hear that point, not least from suppliers, and we tend to hear it from those suppliers who are performing less well than others. I think the House is savvy enough to know that some of the motives behind such questioning and challenge may be mixed. Our position is that we recognise that the situation is challenging, but we are driving system change and it needs to be driven hard. We review the situation and will continue to do so and to listen.
I do not see any argument at this stage that the Government should send a signal of weakening ambition. Far from it. Actually, given the prizes attached to this, if we want to get it right—a lot is work in progress in tackling some of the thorny, difficult issues that underlie it—it is not right to send any signal of slipping ambition. For that reason, I come back to my main point, Mr Flello —it is good to see you in the Chair. This is not a trivial issue; it is a fundamental piece in the broader picture of how we upgrade our critical energy infrastructure to deliver a better system for our constituents.
Steel: Preserving Sustainable Jobs and Growth in Europe
Nick Hurd Excerpts(7 years, 9 months ago)
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The Minister for Climate Change and Industry (Mr Nick Hurd)
It is a pleasure to serve under your chairmanship, Mr Wilson, I think for the first time. I thank the hon. Member for Aberavon for setting out his stall in such a typically clear way.
I genuinely welcome this debate. The hon. Gentleman is right: this is arguably a pivotal moment in the evolution of steel-making in our country, for all sorts of reasons, not just Brexit. It matters a lot, not least because, as he was right to say, the steel sector is extremely important. It is right to describe it, as Members on both sides of the House do, as a foundation sector. It is important to the general economy, but also matters a great deal in certain parts of the country, and in constituencies where communities and livelihoods depend on it. The Government understand and respect that.
The hon. Gentleman regrets not having an earlier debate. I think he knows, because he is a reasonable man, that quite a lot has happened since the beginning of 2016, but there has been no shortage of debate about the steel sector in the House. In fact, many of us were convened not that long ago in Westminster Hall to address exactly this issue.
Let me start by setting out some of the background to the Commission’s communication on steel, published in March 2016. During the past two years, the steel industry has faced very challenging global economic conditions. A combination of low demand in markets such as Europe and the US—demand has not recovered to pre-recession levels—and a slowdown in the rate of China’s economic growth and investment created surplus production capacity on a huge scale, which caused steel prices to fall dramatically. It also led to an increase in the volume of steel products dumped on world markets, which had damaging effects on European steel producers.
Collectively, the EU is the second largest steel producer after China, with significant production in a number of member states, including the UK. Steel production accounts for over 1% of EU GDP and employs more than 300,000 workers, mainly in skilled technical jobs. Taking account of that European interest in the steel sector, the Commission communication was intended to set out what a response at EU level could be, and also what member states could do to support their steel sectors and ensure that they were competitive and sustainable.
The communication identified several areas for action at EU and member state level. At EU and international level, those included trade policy and tackling global steel production overcapacity. Within the EU, they included creating innovative and sustainable steel producers through investment in research and development, skills and energy efficiency, and clarifying the state aid rules on support for them. It also encouraged efforts to make the industry more sustainable, and in particular to encourage the recycling of raw materials and waste, as well as steel scrap.
With your permission, Mr Wilson, I will set out what action has been taken by the EU and the Government in those areas. First, on trade policy, which the hon. Member for Aberavon opened with, the communication identified the importance of protecting European steel producers from unfair trade practices. The Government have worked with the Commission and EU member states to do that. There are now 41 trade defence instruments relating to steel in force within the EU. They have been effective in reducing the level of dumped products significantly, with reductions ranging between 70% and 90%.
The UK has worked with the Commission to accelerate the process of investigation and the imposition of provisional duties. That has been achieved in the two most recent investigations into hot-rolled flat products and heavy plates. In addition, the Commission proposed taking forward the modernisation of the EU’s trade defence instruments first proposed in 2013. The UK is fully supportive of the modernisation of those instruments and we continue to work constructively with the Commission, member states and the European Parliament, because global production overcapacity is a challenge faced by all steel-producing countries and requires a global solution.
The World Steel Association estimates that, in 2016, about 70% of production capacity was utilised and 30% was surplus. That is why the G20 chose to act and created the global forum on steel excess capacity at the Hangzhou summit last September. The UK said clearly that we will actively participate in that with G20 and OECD partners to take forward the commitment to exchange information on capacity and to take effective action to tackle the problem.
The hon. Gentleman talked about investment. The communication identified the need for the steel sector in the EU to be sustainable and competitive, an objective the Government share. To support that, the communication sought to clarify the operation of state aid rules in relation to the steel sector. As hon. Members are aware, the steel sector is subject to specific rules, which preclude it from receiving regional or restructuring aid. However, it can receive other forms of aid, including support for research and development, skills development, and energy and environmental projects. The Government have already provided such funding, with significant investment at Warwick and Swansea Universities, funding provided by Innovate UK through the high-value manufacturing catapult centres, and by supporting research and development projects.
We are also able to assist the UK steel sector to access European funding opportunities, whether the research fund for coal and steel or the Horizon 2020 programmes. In addition, I am aware that European structural funds have been used to support projects that will benefit the steel sector in the UK in south Wales and south Yorkshire.
The communication highlighted the fact that state aid rules allow member states to compensate energy-intensive industries for the indirect financing costs of renewable energy support schemes. The Government have already taken action to compensate energy-intensive industries in the UK, including the steel sector. To date, the Government, on behalf of taxpayers, have paid £133 million in compensation to the steel sector for energy-intensive industries.
We fully understand the importance of the steel sector becoming more sustainable. I would go further than that. As the hon. Gentleman knows from previous debates, the Government are interested in helping to move the sector along from a story of survival and hanging on to one of growth and being a dynamic member of the supply chain in the UK. At the request of the UK steel sector, we have commissioned a future capabilities study to map the capabilities the sector will need to be competitive and to exploit new market opportunities. One aspect will be to consider technological innovation in steelmaking processes and product life cycle management, which will help to improve the long-term sustainability of the sector.
Our industrial strategy, the first stage of which was published last week, provides a great opportunity for the steel sector to share its vision of a sustainable future with us. We are actively asked it to share its post-Brexit plans and we will work with it, as we have said in public and in private, to ensure a long-term and sustainable future.
In conclusion, the Government have taken action to support the steel sector and respond to the requests made by the industry. We have taken action on trade through 41 trade defence instruments; provided £133 million to compensate for the costs of energy and renewables policy; and given an additional four and a half years for the sector to adapt to secure flexibility in the introduction of EU emissions regulations. We have issued new guidelines on the public procurement of steel, which I hope the hon. Member for Aberavon welcomes, and a pipeline of forthcoming opportunities for which UK steel producers can tender.
The Secretary of State and I will continue to work with the steel sector, the devolved Administrations and other stakeholders such as the all-party parliamentary group on steel and metal related industries, which recently published its report and of which the hon. Member for Aberavon is a distinguished member, to ensure a sustainable and competitive future for the UK steel industry.
The Chair
We now have until 3.37 pm, which is one hour after the start of the statement, for questions to the Minister. I remind Members that questions should be brief. It is open to a Member, subject to my discretion, to ask related supplementary questions.
Gill Furniss (Sheffield, Brightside and Hillsborough) (Lab)
It is a pleasure to serve under your chairmanship, Mr Wilson. First, I thank my hon. Friend the Member for Aberavon for his helpful and insightful introduction. I also take this opportunity to congratulate him and his colleagues in the APPG on steel and metal related industries for their recent “Steel 2020” report, which has no small relevance to our discussions. I am sure the Minister has read it thoroughly.
In Yorkshire, the Royce Translational Centre at the Advanced Manufacturing Park in Rotherham will be delivered with £4 million of European regional development fund money. That is expected to support growth and innovation in companies employing more than 13,800 people and is estimated to generate £668 million in the Sheffield city region. Is it the Minister’s opinion that EU funding is still underused and suffering from low take-up and a lack of strategic use? Have the Government reduced their enthusiasm for directing industry towards EU funding?
We would welcome a commitment to match EU funds granted before Brexit. On current timescales, EU funds are set up to 2022, while the Government’s pledge is only up until 2020. Will the Minister confirm that the total funding available post-Brexit will be significantly reduced due to the lack of access to EU funding programmes, including Horizon 2020?
Mr Hurd
I thank the hon. Lady for her question. The Chancellor of the Exchequer has made public statements about honouring EU funding commitments. Beyond that, in terms of support for things such as technical innovation and research, which she rightly talked about—it is fundamental to a more dynamic future for the sector—she will be well aware that the Government have made it extremely clear that we see innovation as the cornerstone of the industrial strategy. In fact, this Government have made the largest commitment since 1979 to science, research and innovation.
Through the industrial strategy, we are creating an environment in which sectors—as we have said, we fully expect the steel sector to be towards the front of the queue—come to us and say, “This is our vision of the future in terms of both sustainability and growth. This is how we think we can contribute to what you need in terms of productivity, jobs and better wages, but this is what we need from you in terms of unlocking that potential.” That is the kind of conversation we expect to have with a number of sectors, including the steel sector.
I do not know enough about the specific facility that the hon. Lady mentioned, which I am guessing is in her constituency.
Mr Hurd
Okay. I am certainly interested to know more about that. It seems part of an ecosystem that we need to nourish in the future, because access to innovation and new ways of making and doing things will be critical to the sustainable future that we all want for this foundation sector.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
I have a number of questions for the Minister, some of which stem from the dialogue we had with his predecessor back on 6 July 2016 in a joint sitting of the European Scrutiny Committee, the Business, Innovation and Skills Committee and the Energy and Climate Change Committee. The main issue still outstanding for me is on trade defence measures. I asked the Minister’s predecessor about China playing by the rules and wishing to acquire market economy status. I asked whether it was
“the Government’s policy, whether we are in or outside the EU, to grant China market economy status. At the moment, China, of course, loses $35 per tonne of steel it produces.”
Of course, we are talking about the Chinese state, because it owns the Chinese steel industry, which is unlike the case of any of our other competitors. I said to the Minister:
“You support the Commission’s strategy for bilateral and multilateral discussions to tackle overcapacity in the market. What specific measures so far”
could she give as evidence to demonstrate that China was
“playing by the rules and reducing that overcapacity”,
or was it playing by its own statements? All the evidence showed that it was ramping up capacity.
Mr Hurd
I thank the hon. Gentleman for that question. Indeed, may I pay tribute to him for his persistence on this subject? There is rarely a moment when we discuss steel when he does not raise this issue personally. Since the referendum, the Government’s objectives have not really changed: our priorities are to maximise the benefits to the UK from international trade, honour our international obligations, and take effective and proportionate action to tackle unfair trade where it arises.
The hon. Gentleman has followed more closely than I have over the years the conversations at EU level about China and market economy status. Clearly, there continue to be major misgivings about that and the continued actions of the Chinese, which is why they do not have the status, which is why they are in dispute. He will know as well as I do that before Christmas, the Commission published a proposal for a new anti-dumping methodology that will cover countries with market economy status and those without it. That proposal is well worth serious consideration, and that is what we are giving it. We want to understand the associated impacts of that. We are looking at that seriously, because it looks like a sensible response to the issue we face.
I come back to the point I made in my statement: overcapacity is a global issue. It is a major issue for the EU, but it is a global issue, which is why I think the initiatives through the G20 steel forum are important.
Tom Blenkinsop
I thank the Minister for that response. At about the time of that conversation with his predecessor, it was the Government’s policy to support market economy status for China. Is that still the case? Will we support that, through European channels, while we remain a member of the European Union, and until Brexit? Will we support Chinese requests for market economy status, post-Brexit? Following on from that, European funding will obviously no longer be available post-Brexit; what are the Government’s plans on trade defence mechanisms? While we remain a member of the European Union, we are subject to mechanisms that we have, in the main, opposed. What do the Government intend to have happened by this time in 2019, as regards those mechanisms?
Mr Hurd
On China’s market economy status, I do not have much to add to what I said. Our focus is on examining the Commission’s proposal, which we think is a sensible response to the situation. That is not without its difficulties, because there are different views in the European Council and in the Parliament, so that politically will be a challenge. However, that is where our focus is.
As for the future, post-Brexit, it is difficult/impossible for us to give the forward visibility and certainty that I understand Members want. We are where we are on that. My colleague the Secretary of State for International Trade is leading the work on future trade protection plans, and those will become clearer as we go through the Brexit process.
As I general point, I hope that we have made it clear through the industrial strategy, which is very much interlinked with the Brexit strategy, that this is fundamentally about how we strengthen the competitiveness of the British economy and important sectors within it. The hon. Gentleman knows from the conversations we have had that, within that, the steel sector is extremely important.
As I said in my statement, we have taken active steps to try to help the competitiveness of the sector through a difficult situation. There is more to be done, not least on energy costs, which I am sure we will get to, but I want to try to give the hon. Gentleman some reassurance. As we look to the post-Brexit future, although, naturally, I cannot give him the certainty and visibility he is pressing for, I hope that he takes some reassurance from my saying that we will not do anything stupid to undermine the competitiveness of the economy at this pivotal time. We have to get this right, which is why we need more time to think it through.
Tom Blenkinsop
One last question, if the Committee allows. On the Minister’s predecessor’s comments about outright opposition to any changes to, or retraction of, state aid rules in respect of rescue and restructuring regional aid for the steel sector, what are the Government’s views on those issues, given the debacle at Redcar only two years ago?
Mr Hurd
While we are a member of the EU, we play by the EU rules, and we try to be as creative and intelligent in playing that system as anyone else. As I said in my statement, we have managed to release funds in quite a strategic way. I make no comment on the past, because I was not involved in that process. Looking beyond Brexit and at the Government’s approach to using public money to support the competitiveness of key industries, that is work in progress, but the industrial strategy Green Paper is the first step.
Richard Fuller (Bedford) (Con)
Of course, the question is not only what gets done, but how speedily those actions are taken. One problem with the EU is that it is lamentably slow. The document that is the source of the debate talks about
“Additional efforts to accelerate the process”.
May I ask the Minister some questions on progress? Will he advise us of any progress that he and the Commission have made? For example, the document says:
“The Commission will further optimise its internal procedures, follow a stricter approach when dealing with requests for deadline extensions of questionnaire responses”
and
“streamline hearings by grouping them together.”
Those are all very obvious things.
The Commission also says that
“additional reforms need to be considered, taking into account the inter-institutional debate”.
Will the Minister advise us on what progress there has been on streamlining inter-institutional debate to assist the steel industry in the EU since May last year?
The document also talks about
“intermediary deadlines such as those for sampling of interested parties or parties’ reaction to the disclosure of the essential facts”.
Again, that refers to efforts to speed up any progress that is being made. Finally, the document says that
“the Commission will propose a prior surveillance system on steel products.”
I ask those questions because an important consideration during the debates was that the EU had been slow off the mark compared to the United States, and it is obvious that that is recognised in the document. It sounds to me that some fairly basic, fairly sensible steps were meant to be taken, but quite a few months have passed. Will the Minister update us on any progress that has been made on those issues?
Mr Hurd
I thank my hon. Friend for his questions. I do not think it is any secret: anyone who has dealt with the EU emerges from that process frustrated about the pace of action. That is perhaps not surprising, because getting agreement between 28 countries is convoluted. That is the reality of it; it is slow. The UK has played an honourable role in putting pressure on the system to improve. I would make a couple of observations in response to his questions. Whether the EU has been slow or not in responding, I am reasonably satisfied that we have made significant progress within that response. I cited the 41 trade defence measures that have been put in place, but more important is the impact of those measures, in terms of reductions of 70% to 90% in the level of dumped products. Slow or not, what has been put in place has clearly had an impact.
There has been some suggestion from Members on the Opposition Benches that the UK has been a drag anchor in the process, but that is not the case. We were in the lead in pointing out that provisional duties on products such as rebar and cold-rolled flat products were too low. We pressed for higher definition on that and got that. Higher duties were put on rebar from China. On 29 July, an increase from 9% to 13% was announced.
My hon. Friend talked about pace. Again, we were instrumental in pressing the Commission to conduct its investigations into cases more rapidly than usual, and there is some evidence of response to that. Driving pace continues to be a challenge for any UK Minister involved with the EU, but let us be clear about the context. There is widespread recognition across the EU, not least by the UK, that the sector has a deep structural problem with overcapacity, and it is no secret where most of the problem comes from. In that context, I doubt the EU scores anywhere near 10 out of 10, but it is certainly not at the lower end of ones and twos. There has been significant progress, and the policies put in place have had an impact.
Marion Fellows (Motherwell and Wishaw) (SNP)
It is a pleasure to serve under your chairmanship, Mr Wilson. I wanted to ask the Prime Minister—[Laughter.] I apologise, but I hope I have woken everyone up by making them laugh. I think we are all rather more tired than normal today. The Prime Minister has said that we will be outside the EU customs union and the single market. In that scenario, we will not be part of anything that the EU is doing to deter Chinese dumping of steel in the UK. Can the Minister confirm that when the UK leaves the EU, the UK tariff on Chinese steel will be consistent with the strong common tariffs that EU states are trying to set at the moment? Is he aware of any World Trade Organisation rules or regulations on tariffs that may restrict the UK’s ability to set a tariff on Chinese steel imports to deter dumping?
Mr Hurd
I thank the hon. Lady for that question, although it contained an announcement that might have career-limiting implications for me. I think we call it an alternative fact. She represents a constituency in which a mothballed plant is coming back to life, and I hope she welcomes that. I congratulate Liberty and all the team involved. It is a good, positive sign for the UK steel sector.
In response to the hon. Lady’s main point, which is a fundamental one, I frustratingly cannot give her the exact clarity and visibility that she and colleagues want, because we are about to embark on a complex negotiation, in parallel with which we have to work through a whole set of deep and complex policy responses to the implications of UK independence from the EU, which includes duties and future participation in the emissions trading scheme.
I come back to the point that I made to the hon. Member for Middlesbrough South and East Cleveland: we are acutely aware that we have to do everything we can in this country to maintain the competitiveness of the key industries on which many communities rely for income, jobs and skills. That has arguably never been more important as we take this big step of independence from the EU. That is our great challenge and responsibility as a Government.
Marion Fellows
I thank the Minister for his response, which did not give me the answers I was seeking, as he indicated. I thank him for mentioning the plant in my constituency, which was saved by a work party set up by the Scottish Government. It worked very hard in conjunction with the UK Government, and we managed to save the steel plant, for which I am eternally gratefully. It is important that we know that UK steel will be protected if and when we leave the EU.
Another issue that really affected the plant in my constituency was high electricity and power charges. The devaluation of sterling has had a big impact. We are tied to dollar prices, which makes things very difficult. Has the Minister made any assessment of the effect of that on energy costs for businesses? What support might the UK Government provide after we exit the EU?
Mr Hurd
I thank the hon. Lady for that question and, through her, congratulate everyone involved in what sounds like a very positive process and outcome in relation to the plate rolling mill in her constituency.
Energy costs have been front and centre of every conversation that I have had about the steel sector with leading management in the sector, trade unions and Members of Parliament who are passionate advocates of the steel industry in their constituencies. We recognise two things very clearly. First, I mentioned the £133 million, but even though we have gone a huge way to compensate the industry for policy costs, we still have not reached a point where we have the kind of competitive, level playing field that the sector and others—not just steel—are asking for, quite reasonably in the circumstances. We take that very seriously. If there were an easy answer, we would have pulled the lever, but we have removed something like 85% of the policy costs. We are now in a residual situation where the premium industrial electricity price in the UK reflects wholesale energy prices, network costs and a bit of policy cost. It is not a straightforward situation. We have said—I am sure that this is right—that we need to move on from a sticking plaster-type situation and look at the issue strategically and long term to ensure that our heavy, energy-intensive industry can compete on a level playing field.
As there is not a simple, straightforward solution that I can announce today, we announced in the industrial strategy—in case the hon. Lady missed it—that we are committed to publishing a road map later this year showing how we intend to reduce and control business energy costs. An external review looking at the opportunities to reduce the costs of decarbonisation in the power sector and heavy industry will feed into that road map. There is a very serious piece of work under way that I know from the conversations I have had with representatives of the steel sector is welcome. We are absolutely serious about it; we just need a bit of time to work through it properly, because there is not a silver bullet that we can fire today that will address the issue in a sufficiently strategic and long-term way. We take the issue very seriously, and I hope that the process we have set out reflects that.
Marion Fellows
Finally, will the Minister commit to contacting the Scottish Government, Skills Development Scotland and all the agencies that were involved in the steel taskforce that took part in saving the Dalzell works in my constituency? A lot of good work was done and a lot of innovative ideas were brought forward. If, as the Minister says, the Government are looking at different strategies, I think it would be useful to him to consult with people who have already applied some of those strategies.
Stephen Kinnock
I thank the Minister for his comprehensive answers. The question that needs to be addressed is about the impact of Brexit and what sort of Brexit we are looking at. The Prime Minister said in her Lancaster House speech that she thinks that no deal would be better than a bad deal. That seems to indicate an openness to a WTO-type of Brexit, in which we resort to WTO rules. That is combined with an apparent ambition to get the article 50 negotiations and the future comprehensive trading relationship done within a two-year period, which seems to be a heroic assumption, to say the least.
In that light, does the Minister agree that the impact of a WTO type of Brexit would be catastrophic for the British steel industry, not so much because of the tariffs on steel, which at WTO levels look to be about 2% to 3%, but because of the automotive sector, whose fundamental role as the customer base of so much of this country’s steel industry would be wrecked by a 10% tariff on every car we are trying to export into the European Union? Will he assure us that he will press the Prime Minister and other key colleagues as hard as possible to ensure we do not have that form of Brexit?
Mr Hurd
I thank the hon. Gentleman for his question, which I will answer in two parts. First, although I do not blame him for this, the situation we are in precludes any Minister responding to speculation about what the outcome is likely to be. We are embarking on a negotiation, which has to play out. The Prime Minister made it clear in her speech that we are aiming to maximise access and minimise friction—the friction point has been important in the conversations I have had with the industry.
That leads me to my second point. I represent the Department for Business, Energy and Industrial Strategy. A large part of our job is to listen to business and ask two questions, the first of which is: what are your priorities and concerns in relation to Brexit, in terms of both risk and opportunity? The second question, in relation to the industrial strategy, is: what is the most pressing and important issue supporting and underpinning the competitiveness of your sector, and your ability to create good jobs and pay better wages? Those are the conversations we are having at the moment.
It is no secret that tariffs are fundamental to the auto sector, which the hon. Gentleman rightly identified as being extremely important to the dynamic growth potential that we want in the steel sector. It was absolutely fundamental to the conversations that the Secretary of State and I had with Nissan. He knows that, and it is entirely clear why. It is our job as a Department to do two things: first, to ensure that that is properly understood by those leading the negotiations—it is—and, secondly, to reassure large, important companies such as Nissan and give them confidence in the fact that we are going to do everything we can to support the competitiveness of the car industry and the industries that supply it. Nissan made its decision, which everyone welcomed, and there is a series of ongoing conversations with other companies in the same vein. Their concerns are understandable. It is our job to listen to them and do what we can to reassure them, because significant jobs are at stake as a result of the investment decisions they make.
Stephen Kinnock
I thank the Minister for that response. I have one humble suggestion, which is that a push for an interim deal—a transitional arrangement—to smooth the transition into the new form of our relationship with the EU will be absolutely critical to avoid the cliff edge.
I have a specific question on energy and some more generic points. The specific question is this. The Minister rightly pointed out that the Government agreed to provide compensation to energy-intensive industries. That was cleared by the European Commission, in terms of state aid, which was very welcome. We also know that the period of time for that energy-intensive industry compensation package expired last month. The Government put in place no contingency measures, and nothing has been done to secure a permanent exemption for our energy-intensive industries, in terms of being able to provide that aid without having to keep going back to the Commission for approval. Will he give us a specific assurance that our steel industry will not face a cliff edge in April, when the compensation package ceases, with no transition to a new arrangement, which would be disastrous? That is the specific point.
On the more general point, the APPG report was mentioned earlier—I am sure that the Minister has read it closely. I encourage him to accept our recommendations, such as publishing an annual comparison of UK steel industry energy prices with those of our competitors; completing the energy-intensive industry compensation exemption package I just mentioned; looking at wholesale costs and developing mechanisms for UK steel producers to access lower-price wholesale energy, which is a critical issue; looking at network and transition costs, which are far too high in this country; and considering aid to energy efficiency—there are fantastic opportunities, such as the off-grid generator in Port Talbot, which would use gases from the blast furnace. What are his views in that context?
Another recommendation was to do with reform of the EU emissions trading scheme, because there is a real problem around what happens in 2021. What will we do to get long-term reform? There is also the broader issue of the remodelling of our energy model. Far too much pain seems to be concentrated in our manufacturing sector. There must be a better way of distributing the costs under climate change policy, which we all welcome. The costs are far too concentrated in our manufacturing and energy-intensive industries. The Minister has said that the Government are looking to reform the energy industry, so I suggest he uses our APPG report as a starting point for that process.
Mr Hurd
I thank the hon. Gentleman for his suggestions. He opened with a humble suggestion—experienced Ministers know that those are the most dangerous. I will, in the same spirit, take what he said on board and feed it to my Secretary of State, whom I am seeing after this Committee, because we have a meeting with the steel sector trade unions. I make that undertaking.
On the energy costs, the assurance the hon. Member for Aberavon is seeking is one that I gave on the Floor of the House at departmental questions the other day. As he knows, we have made a commitment on compensation. We have made it quite clear that we want to move to an exemption-type scheme. He knows because he is well informed, but that process is taking longer than we expected and wanted. We will therefore continue with compensation until that is worked through. I have made that undertaking on the Floor of the House and it stands, because we totally understand the need for consistency and visibility. I hope that that is reasonably clear.
On the broader challenge, I genuinely welcome the APPG report. As the hon. Gentleman knows, it feeds into what I hope is quite a deep collaborative set of conversations between Government and leaders of the steel sector about its future. Those leaders have embraced the challenge we have set, which was that we need to move on from the language of survival, sticking plasters and muddling through, to a situation in which we have politicians and society recognising the steel sector for what it needs to be, which is an incredibly important foundation sector and part of a dynamic and valuable national supply chain. They bind to that, and the process that we are working through is informed by the capability study we funded and input such as the APPG report. That will all feed into, I hope—if the right spirit and rigour are in place—some form of sector deal in which Government and industry can set out their mutual commitment to some form of agreed common goal. That is an exciting process and I hope he welcomes it. We welcome his contribution.
In that context, and going back to what I was saying, the hon. Gentleman and the report are quite right to identify that the issue of energy costs is now a complex one. We have to move from where we are now. After a lot of sticking plasters have been applied, we still have a gap. As he said, the factors determining that are complex and relate to wholesale energy costs, our energy mix and network costs. They also relate in part to ongoing policy commitments. We need to take a bit of time and work with people who have an interest and expertise in this area, so that we thoroughly investigate all our options.
As the hon. Gentleman might expect, the Department has done a lot of work in this area, but it needs to be sweated a bit harder. Our commitment is to publishing a road map later this year to show what our strategy is. That will be informed by the review that we are setting up, which is, in part, an external challenge relating to our processes and work. This issue is of such importance that it requires a structure and process around it that leads to a strategy that is more long term than the sticking-plaster approach we have taken until now. That has not got us to where we need to be, in respect of having a level playing field for this sector and others—this is not just about the steel sector—that are, quite rightly, pushing us hard.
Michael Tomlinson (Mid Dorset and North Poole) (Con)
I want to pick up the point about the automotive sector specifically and the 10% tariffs. The hon. Member for Aberavon said that our Prime Minister—not this Minister—said that no deal was better than a bad deal. However, does the Minister agree that the best way to get a worse deal is by saying that we want a deal at any cost? Specifically on tariffs, the value of the pound has dropped by some 15% since 26 June. Therefore, in the automotive industry there is still a 5% net even on 10% tariffs. Nobody wants tariffs—we all want free trade—but we can surely go into negotiations in the knowledge that we are already 5% better off.
Mr Hurd
I agree with my hon. Friend. The only thing I would add is that currencies move. Therefore, this is not necessarily a structural shift that we can rely on. It has provided some relief and some offset not only for the auto sector, but for the steel sector, as hon. Members who represent steel seats, if I can put I that way, are well aware. The message that I get from chief executives of steel companies is, “Yes, it is helping.” The picture is complicated because some input prices have increased, but either way, we cannot rely on that completely as the long-term solution for the steel sector. The sector is facing other big, structural issues, not least the massive, deep-seated problem of structural overcapacity, which we have to address. Arguably, that is even bigger and more fundamental than the issues raised by Brexit.
Tom Blenkinsop
Added to that, before I get to my question, there is an assumption—this was implicit in the previous question—that an object passes across a national boundary once, but of course, a tariff could be added multiple times depending on how many times the product has to go over national boundaries.
I want to revisit a question I have asked before—I asked this question to the Minister’s predecessor—on the Government’s opposition to any relaxation of state aid rules in respect of rescue and restructure and regional aid for the steel sector in the interim before we get to a change of situation in 2019. The Government said that they have
“reconsidered the arguments for relaxing the rules for steel in respect of both rescue and restructuring and regional aid. However, we are concerned that, in the context of global excess capacity”—
which is still there, of course—
“if Member States were able to offer rescue and restructuring aid, this would simply depress prices and allow inefficient plants to continue to the detriment of all.”
Of course, in that window of time, the second most efficient plant in the European Union closed—namely, Teesside Cast Products in Redcar. Does the Minister believe that that position is still logical, given the results?
My second point relates to previous rescue plans, which have worked, of course. Redcar was saved once before. Dalzell was saved as a result of Scottish Government and national Government action. There is also an argument about the saving of Scunthorpe steelworks. A mill is a lot easier to save than an integrated steelworks, but without any slab to squash at a mill, there would not be any product to squash. That shows exactly the integrated nature of steel, or rather, its British nature—rather than English or Scottish.
What lessons have the Government learned from those plans? We have seen Greybull come in and save the old long products division of Tata; Tata itself has changed its position through good interaction with the Government and trade unions, and Liberty, of course, has stepped in in a number of plants across the UK. What model have we learned from them? What lessons can we learn for a post-Brexit Britain that we can take forward and build on? What processes are the Government putting in flow to make sure that we have a materials strategy to develop a UK steel industry and attract further investment around our expertise, which is widely known across the world?
Mr Hurd
I thank the hon. Gentleman for a typically thoughtful intervention. On my predecessor, I think she was always logical, at least in her own mind. As for the state aid strategy, I come back to what I was saying before: we have to work through the whole set of complex, challenging Brexit issues and see where we come through, in terms of our ability to make funds available, and our strategy to support the competitiveness of our industries. That is clearly work in progress.
On Redcar, I recently had the privilege to visit the site. It was one of the most memorable and impressive ministerial visits I have ever been on. I was enormously impressed by the scale of the site and the industrial landscape that it sat in, and the clear sense of opportunity that still resides there, as well as by the people I met—not just their resilience in coping with a seismic shock, but how they had moved on from that into a determination to secure an attractive future for the site and the area.
The hon. Gentleman knows that my Secretary of State was born and bred in that area. We are determined to play what part we can in supporting a cost-effective regeneration of the site. There is clearly plenty of potential there, and plenty of players who are looking at that site and saying, “We want to be part of that. We have a vision for that site. We can see how we can regenerate it.” There are deep complexities associated with it, in terms of the costs of cleaning it up—the hon. Gentleman knows that—and there are complexities relating to charges that the Thai banks have on that, but there is a group of people who have our support and who are determined to work through all those issues. That visit simply further galvanised me into making sure that we play our full part in that process, however difficult the challenge. The site has enormous potential to be reborn as a generator of great jobs.
Motion made, and Question proposed,
That the Committee takes note of European Union Document No. 7195/16, a Communication from the Commission on Steel: Preserving sustainable jobs and growth in Europe; and notes the action taken by the Government to secure a sustainable and competitive future for the steel industry in the United Kingdom.—(Mr Hurd.)
Mr Hurd
I thank all hon. Members who have contributed today—I genuinely welcome all their contributions.
A point that I omitted in my response to the hon. Member for Middlesbrough South and East Cleveland, but that was picked up by the hon. Members for Sheffield, Brightside and Hillsborough, and for Aberavon, was the need to support the industry in research, innovation and the exploration of material development. The Government have made a very big commitment and statement of intent with our support for innovation. It is generally recognised that we look to the future of steel making in the UK.
There is a fundamental issue about supporting the competitiveness of primary steel making, but there is a big challenge with the value that we add in this country. Most commentators on the industry think that that has to be a large part of the future, and the process of research and innovation is a large agent of it. That is certainly part of the conversation that I expect to have with the sector as part of the construction of a sector deal. We want to hear from many organisations within the steel ecosystem, such as the Materials Processing Institute, on the sector’s needs, and we expect their views to be reflected in the capability study that we have commissioned on behalf of the sector.
I do not want to leave Members in any doubt about the importance that we attach to that agenda or to the steel sector. The hon. Member for Sheffield, Brightside and Hillsborough spent a lot of time trying to check how many references there were to the steel sector in the industrial strategy. She rather misses the point, because we want to move on from the past where the industrial strategy was about picking a few sectors that the Government threw everything at. Some Opposition Members may regret that. Our challenge to sectors is this: here is what we want to achieve and this is what the strategy is about—improving productivity, securing better quality jobs in areas that need them, helping young people to get the skills they will need to take the jobs of the future—so how can they help us? What is their vision and strategy for growth and adding value, and what role can we play in helping to unlock the potential that they seek? We have made it very clear to the steel sector—it has embraced this—that we expect to hear from it because it is a foundation sector, as we have described. I do not use that word lightly because we want to move on from the process of picking winners, but we recognise that the steel sector is a foundation sector and our challenge to it is to work with us to move it on from a story of survival to one of growth.
Question put and agreed to.
Oral Answers to Questions
Nick Hurd Excerpts(7 years, 9 months ago)
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Martin Vickers (Cleethorpes) (Con)
The Minister for Climate Change and Industry (Mr Nick Hurd)
The UK is the world’s largest market for offshore wind, and the Humber energy estuary is, in my hon. Friend’s own words, “ideally positioned” to serve that sector. The Secretary of State and I saw that when we visited the new £310 million Siemens turbine blade factory, which has created more than 1,000 very valuable new jobs in the area.
Martin Vickers
This afternoon the Humber local enterprise partnership and Humber MPs are staging a showcase event to highlight the assets of the energy estuary. Can the Minister assure business leaders that the Government will continue to support the offshore centre, which is based in northern Lincolnshire, and the wider Humber region? Will he or one of his colleagues find time to visit the event this afternoon?
Mr Hurd
Yes to the event, and yes to the assurance that my hon. Friend seeks about continued support. On top of the growth deal, the city deal and the enterprise zone programme, he will be well aware of the very significant Government commitment to future contract for difference auctions worth £730 million for less mature renewable technologies, including offshore wind. I hope he welcomes that.
Nic Dakin (Scunthorpe) (Lab)
What steps are the Government taking to ensure the highest possible UK content in the steel used to build the energy infrastructure in the Humber?
Mr Hurd
That is an extremely important point, and it is part of our calculation of the return on the investment made by the British taxpayer. Good progress is being made, and analysis shows that aggregated lifetime UK content in operating windfarms is 43%, against a track target of around 50%, and the proportion is higher for the value of operations and maintenance contracts, which run at about 70% of value at the moment. This will be a key area of our focus as we go forward with the industrial strategy.
Chris Davies (Brecon and Radnorshire) (Con)
Christina Rees (Neath) (Lab/Co-op)
The Minister for Climate Change and Industry (Mr Nick Hurd)
Of course it will continue. We are in discussions about the mechanics of that, as part of a broader conversation that the Secretary of State and I are having with senior management of the steel industry and trade unions about securing a sustainable future for the industry.
Richard Arkless (Dumfries and Galloway) (SNP)
Mr Hurd
This country and this Government are on track to invest in excess of £8 billion a year by 2020 in continuing the transition to a clean energy system. We are talking about a low-carbon economy that is generating, at the last count, at least 450,000 jobs. As I made clear in an earlier announcement, there are new commitments to contract for difference auctions for less mature renewable technologies, so the Government’s commitment to clean energy is not in doubt.
Stephen Metcalfe (South Basildon and East Thurrock) (Con)
Kerry McCarthy (Bristol East) (Lab)
Mr Hurd
Yes I can, and I take a strong personal interest in those matters. The hon. Lady says they are not mentioned in the industrial strategy, but they are. One of the clear pillars of the industrial strategy is a commitment to clean growth, within which are some explicit references to our desire to explore the opportunities attached to higher resource and energy productivity.
Dr Sarah Wollaston (Totnes) (Con)
Mr Hurd
As the Prime Minister said in Prime Minister’s questions last week, this country is fully committed to the Paris climate change agreement—as are all the countries that endorsed the Marrakech proclamation—and we hope that all parties will continue to ensure that it is put into practice.
Kelvin Hopkins (Luton North) (Lab)
Green Investment Bank
Nick Hurd Excerpts(7 years, 10 months ago)
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The Minister for Climate Change and Industry (Mr Nick Hurd)
It is a great pleasure to serve under your chairmanship, Mr Owen. I sincerely congratulate the hon. Member for Edinburgh West (Michelle Thomson), who represents her constituency in a robustly independent way, on securing the debate. She drew on her clear business experience to frame the debate, set it up in the right way and built on the exchange that we had on the urgent question last week.
However, I must say that when the hon. Lady dismisses commercial confidentiality as a smokescreen, she lapses into political rather than business matters. She knows the reality of the situation, however frustrating that is for the House—and, frankly, for me. I will not be drawn into any discussion about the character or values of any potential preferred bidder, or any of the more sensitive aspects of what is a commercial negotiation that has not concluded. I think she knows that, but let me make that quite clear.
Mr Hurd
May I make a little more progress?
This has been a good, well informed debate. There is clearly disagreement about whether it is right to sell the GIB, and I respect that, but there is clearly common ground—this is worth restating—that the GIB has been a fantastic success story. In fact, exactly that language has been used by Members on both sides of the House. That success has been achieved in very short order by a relatively small group of people who were given a very challenging mandate. That is genuinely impressive. The Government are therefore keen, as I am sure the House is, to place on the record our appreciation of the work of not just the GIB’s senior management team but everyone who works in that organisation. It is particularly important to show our appreciation for the professional approach of the GIB’s staff, because as those who have been in the commercial world know, these kinds of transactions drag on and create uncertainty and anxiety.
The GIB has been a success story. It was set up to accelerate private investment in green infrastructure. It has a fantastic success record of turning every £1 of public money committed into £3 of matched private sector commitments. It has achieved a series of firsts—not least the first ever offshore wind fund, which has now reached final close having raised more than £1 billion of capital, making it the UK’s largest renewable energy fund. There is also agreement that if we do sell the bank—there is disagreement about that—the Government will be responsible for securing best value for taxpayers and getting a deal that we can justify to the public, whose money has been invested in this institution. It is important that Parliament holds the Government firmly to account for that.
I think something has been missed in this debate. There has been a lot of assertion about the motives of any potential preferred bidder or even the motivations of the Government. There has even been the suggestion that this sale represents a sapping of green ambition on the part of the UK Government, but that could not be further from the truth. I meant what I said on the Floor of the House yesterday.
I will come on to the criteria, which we will be very robust in sticking to when it comes to reviewing any proposal before us. However, one of the things that we are looking at most closely when considering a proposal from a preferred bidder is their forward commitment, not only to people—particularly in Edinburgh, which I hope will reassure the hon. and learned Member for Edinburgh South West (Joanna Cherry), in whose constituency the HQ of the bank is located—and to an ongoing institution with a clear identity in the future, but, critically, to forward investment. That is because hon. Members are right: we need more funding and we need more private capital coming into our green infrastructure. That is obvious; every country needs that.
Part of our starting premise, which has not been reflected in this debate at all, and part of the motive for privatisation, is to confront the reality that the GIB, however successful it has been, is constrained at the moment by the framework in which it operates. I do not think that people get up in the morning thinking, “Thank God I’m working for an instrument of public policy”—I do not think that is quite how people see things—but they are constrained in what they can do by state aid rules and the number of restrictions that come from being a public sector organisation. We feel that this organisation, when liberated from all that, can do more and we want it to do more. We need to be reassured by any future owner that they share that vision, are committed to it and are prepared to back up that commitment. That will not be just the evaluation of Ministers or officials in Government—
Mr Hurd
I will just finish this point. I want to reassure Scottish Members of Parliament, and I have already told the hon. and learned Member for Edinburgh South West this in our meeting, that when it comes to making any final judgment we will be led by the judgment of the chairman—Lord Smith of Kelvin, who is highly respected—and the board about the credibility and integrity of future commitments made by a bidder, and the degree to which they can be bound into contractual arrangements.
Mary Creagh
I thank the Minister for his generosity in giving way and I apologise to colleagues and to you, Mr Owen, for turning up late; I was anxious to listen to the opening speeches in the education debate.
I echo what the Minister has said about the patience of the staff, who have been undergoing this process for 18 months amid considerable uncertainty. Am I right to infer from the point that he has just made about the good will of the potential purchaser that there are potentially some issues around that? Can he say when he became aware of the fact that these various other new companies had been set up by the GIB just before Christmas? There has been a little bit of confusion, with Ministers first saying that they did not know about those new companies and then saying that they had been established to “facilitate the privatisation” of the bank. Is that normal behaviour? It does not strike me as normal at all.
Mr Hurd
Regarding the first point, the conversations with the preferred bidder about their future commitment are ongoing. That just reflects the fact that we take that matter very seriously. This is not a case, as I think was suggested, of the Government simply wanting to raise some money, getting the bank off the balance sheet and then off into the hills we go. The issue of the future commitment of any new owner to future investment that will help us to move further and faster along in the transition to the low-carbon economy—a transition that is central to the industrial strategy—is a very important part of the consideration of the bid. That is why, working through Lord Smith and the board, we are taking time to look each other in the eye and say, “Is this enough?” That is the situation we are in.
On restructuring, I think I was pretty clear when answering the last parliamentary question. We agreed some reorganisation in partnership with the GIB to facilitate private capital into certain assets. I make the point—which, again, is a point of principle and needs to be asserted—that there was almost a suggestion during the urgent question debate that the GIB should somehow not be free to sell anything or to bring in private capital. That is completely wrong, particularly when the evidence is that there are buyers for assets that are reaching some maturity. Given what the GIB was set up to do, I do not think that it should be in the business of competing with private capital to invest in assets. It serves no policy purpose to hold on to assets that are valuable to others if that money can be recycled into new investments. That is the critical thing.
Lots of assertions have been made about asset stripping. The Government have no interest in selling to an asset stripper. We want to know about investment in the future; it is okay to sell, so long as there is a commitment to reinvest in future. The GIB portfolio—under any ownership, including public ownership—should not be preserved in aspic forever. It has to be a dynamic organisation, and it should be free to realise capital from packaging assets and to do things that a nimble entrepreneurial organisation, which is what it is, should be free to do.
Michelle Thomson
I thank the Minister for his comments, but I need to press him on my specific comment about the risk appetite and the nature and type of projects. I fully accept and understand increased access to capital, but I made a specific point about the risk appetite that I hope the Minister will move on to.
Mr Hurd
I am happy to address that point, because it is important. The hon. Lady needs to reflect on the motivation of anyone wanting to buy the GIB. It is a special organisation; there are other vehicles that people can buy if they simply want to invest in clean energy or strip assets. The GIB was set up for a special purpose. We put in place governance frameworks—the hon. Lady calls it the golden share; we call it the green share—that we think are robust and that Parliament approved.
Why bother if the only intention is to do easy stuff? The GIB has proven that it can do difficult stuff and make a return. We therefore come back to the motivation of a bidder, and to our doing our job in making sure that we test any proposal against the criteria we have set. One of those criteria is about not just the volume of future investment commitment to the UK, but the degree to which any buyer buys into the ethos and purpose of the organisation.
To draw things to a close, the central point is that the Government set out our case for privatisation and set out the criteria—value for money, declassification, but also a desire to see a credible commitment to the ongoing organisation and to increased levels of investment in the UK’s low carbon economy. We ran a competitive process, we received a proposal from a preferred bidder and we are now evaluating that against those criteria. No decision has yet been taken, because this is a very serious decision.
The debate, and the urgent question debate, have been very helpful—not only in sending a message about the importance of getting this right, which had already been received by Government, but, critically, in sending a message to anyone looking to buy the organisation about the importance that Members from both sides attach to getting the transaction right: it must be seen to deliver value for money, but also show a commitment to the ongoing organisation.
Dr Whitehead
The Minister has been very generous in giving way. Before he concludes, will he briefly categorically deny that the story in the Financial Times has any truth in it at all?
Albert Owen (in the Chair)
The hon. Member for Edinburgh West (Michelle Thomson) has one minute to sum up.
Green Investment Bank
Nick Hurd Excerpts(7 years, 10 months ago)
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Caroline Lucas (Brighton, Pavilion) (Green)
(Urgent Question): To ask the Secretary of State for Business, Energy and Industrial Strategy if he will make a statement on the sale of the Green Investment Bank.
The Minister for Climate Change and Industry (Mr Nick Hurd)
The Government set out their plans for the sale of the Green Investment Bank in the document “Green Investment Bank: Sale of Shares” laid before Parliament on 3 March 2016. The Government intend to move the GIB into the private sector, so that it can increase its access to private capital and increase its green impact free from the constraints of Government ownership. Potential bidders are interested in the GIB precisely because of its green specialism. We are asking potential investors to confirm their commitment to GIB’s green values and investment principles, and how they propose to protect them, as part of their bids for the company. In addition, the Government have approved the creation of a special share, held by independent trustees, to protect GIB’s green purposes in future.
As I am sure the House will appreciate, the sale is commercially sensitive, so I cannot comment on the identity of any bidders or the discussions taking place between the Government and potential bidders. All parties have been required to sign confidentiality agreements that place strict restrictions on the disclosure of information. The restrictions apply both to bidders and the Government.
Caroline Lucas
I thank the Minister for his reply, but it gives very little reassurance, given that everybody knows who the preferred bidder is. The preferred bidder, Macquarie, has a very, very worrying and dubious track record. I am putting this question today with support from across the House.
This week, we heard that the Green Investment Bank stands on the brink not just of being flogged off but broken up, with its green purposes discarded. Founded in 2012, the GIB has been widely recognised as a true success story, kick-starting truly innovative low-carbon projects across the UK, yet the preferred bidder—Macquarie—not only has a dismal and terrible environmental record but an appalling track record of asset stripping. So why have the Government given preferred bidder status to this company? What assessment have the Government made of Macquarie’s record, given that in 2005 the board of the London stock exchange deemed Macquarie unfit to conduct a takeover?
Furthermore, research this week uncovered changes to the GIB’s corporate structure. Between 22 November and 1 December, 10 new companies were incorporated and registered to the GIB’s London offices. The changes suggest that Macquarie is planning to fundamentally hollow out the GIB. Why have the 10 new companies been set up? Will the Minister confirm whether the changes made at the end of last year were made at the behest of Macquarie? Why are the Government setting up a structure to invite in a property asset stripper? If the GIB has been restructured in such a way as to allow it to be stripped of its assets, how can the Government guarantee that the special share, supposedly introduced to protect the future of the GIB, will have the intended effect?
Is this not exactly the wrong time to be selling off the GIB, given that the Government have decided to embark on a new industrial strategy, which must, to be in accord with our own climate change commitments, have low-carbon projects at its core? Finally, will the Minister admit that this selling off could lead to the bank being fatally undermined as an enduring institution? Will he stop the killing off of the Green Investment Bank? Will he halt the sale process with immediate effect?
Mr Hurd
As I think the hon. Lady knows, she has asked a stream of questions to which I cannot give direct answers. She will also know, being an experienced Member, that I cannot comment publicly on the identity of bidders or the process under way, for the reasons I elaborated at the start. She draws a lot of conclusions from media speculation, on which it would be irresponsible for me to comment, but I will try to give her some reassurance, flowing back to the objectives behind the sale that I set out in my answer. It is precisely because we want the GIB to be able to do more, unfettered by the constraints of the state, that we are seeking to put it into the private sector.
The objectives that we set out in the sale could not have been clearer and have been discussed in the House, and they include clear objectives around securing value for money for the taxpayer, which must be our primary responsibility. We want to ensure that the GIB can be reclassified to the private sector, but we have also been clear that we want to move it into the private sector to enable the business to grow and continue as an institution that supports investment in the green economy. We are selling it as a going concern, and potential investors would have to buy into the company’s green business plan and project pipeline. These are the criteria that we have set and against which we are evaluating the proposals before us.
Peter Aldous (Waveney) (Con)
The GIB is a tremendous Conservative success story. It was devised by the Conservatives pre-2010, probably by my hon. Friend the Minister, and was introduced by a Conservative-led Government, and it has been a great catalyst for investment in the green economy—I am thinking, in particular, of the Galloper wind farm off the East Anglian coast. There is a concern, however, if the press stories regarding asset stripping and job losses are to be believed, that it will not be able to perform that role in the future. In that light, will he consider a pause in the process, so that we can ensure that the GIB continues to perform the great role it has played since 2012?
Mr Hurd
I agree with my hon. Friend’s opening comments about saluting what has been a great success story of the coalition—let us maintain the season of good will—but Conservative-led Government. It was the right thing to set up; it was we who did it; and it has been a great success, having mobilised £8 billion of private capital into a critical area of infrastructure, according to the last figures. I can, however, assure him—he is far too experienced to be drawn or influenced too much by media speculation—that we are not being naive in this process. We have set clear criteria for the sale. We have run a genuinely competitive process, and we are now evaluating the proposals before us, through the lens of the criteria we have set, which include value for money and reclassification. We are selling a going concern, and what we want to hear about are forward plans for a dynamic, ongoing concern seeking to mobilise more private capital into the green economy. He knows as well as anyone in the House that we need to mobilise a lot of private sector capital to get the clean energy we need.
Clive Lewis (Norwich South) (Lab)
I hope the Minister would agree that the GIB is a great British success story—he has already said as much—but let us put the record straight: it is also a Labour success story, having first appeared in our 2010 manifesto, and I am glad that the coalition Government took it up. If it is a success story, however, why are they selling it off? Is it simply a case of “public good, private bad”? That is what we think on the Opposition Benches, but Conservatives think it is “private good, public bad”. I am telling the House, quite simply, that from the assessment of Macquarie and what we have seen of it, we see that it has a history of asset stripping, so how exactly will the Minister protect this valuable public institution from having its assets sold off? That is a very fair question.
We know that the Government had planned to hold a share in the bank, which would have helped to maintain its green purposes, but new evidence has shown that Macquarie has already set up new companies that will control the GIB’s major assets. Will the Minister elaborate on the purpose of those companies and what oversight the Government will have of them once the sale goes through? The Prime Minister told us that the industrial strategy would be at the heart of her Government, yet the Government are now selling off an institution that has succeeded, from scratch and against the odds, in attracting capital for our green infrastructure on commercial lines. The Minister has already been outmanoeuvred by Macquarie bank and, frankly, we do not have much confidence that it will not happen again. Will the Government agree to stop the sale of the Green Investment Bank today until such time as its green purpose and core assets can be genuinely protected? If the Minister will not, does he accept that the GIB’s fate rests on his shoulders?
Mr Hurd
I will pass over the bizarre claim that the GIB is a Labour success story by virtue of its simply being mentioned in a 2010 manifesto, with nothing done for 13 years in government prior to that. This meant that in 2010, we started with far too low levels of clean energy in this country—a situation transformed by the coalition Government.
Again, I caution Members against making assumptions on the basis of speculation in the media, and I am not going to comment on that or identify any bidders.
The hon. Gentleman reflects the different view across the House about the benefits and values of the private sector. He should be aware, holding the position that he does, that we need to mobilise a huge amount of private capital. It is private capital, not public capital, that is going to make the difference when it comes to the big shift in infrastructure. What he misses is the critical role that the state has played in setting up the GIB to correct a market failure.
The fact that we have run a competitive process and that private sector bidders have come up and said, “We want to buy this as a going concern because of its green specialism,” indicates that the market failure has, to a large extent, been corrected. The fact that this institution has mobilised billions of pounds of private capital into this critically important area of infrastructure is a success story. Our whole instinct now is that because we want it to do more, it will do more and be an even more successful institution in the private sector as a going concern.
Rebecca Pow (Taunton Deane) (Con)
The Government have always been clear that the GIB was designed with a view to a possible transfer to the private sector, so will the Minister assure the House that the purpose of the GIB is, and will remain, green investment? I know that the Minister is dedicated to environmental issues, so will he also assure us that we will stick to our laudable manifesto pledge of leaving the environment in a better situation than we found it?
Mr Hurd
I thank my hon. Friend for her positive observation, and I pay tribute to her record and her absolute integrity and authenticity on protection of the environment and climate change, which are well respected across the House. I can give her this assurance. We have put before Parliament the whole procedure for protecting the green purpose of the GIB through the special share arrangements. It will be held by an independent company and it will have the power to approve or reject any proposed changes to the GIB’s green purposes. This is going to be set in company law. The five trustees were announced on 31 October 2016, selected through a genuinely independent process. If my hon. Friend looks at the names, she will see that they are independent and extremely credible. That is the mechanism that we have set out. I return to the point about the objectives of the sale. We want this to go into the private sector, so that it can do more of what it is doing—unfettered by the inevitable restrictions that the state has to put on it at this stage.
Callum McCaig (Aberdeen South) (SNP)
I thank you for granting this urgent question, Mr Speaker, and I thank the hon. Member for Brighton, Pavilion (Caroline Lucas) for putting it. We support it wholeheartedly. The Minister has repeatedly said that he wants to see more money raised through this, but it will not happen if the assets are stripped from the company and taken abroad. Also, this is happening at precisely the worst possible time. There are reports that we will see a 90% fall in renewables investment. That must be addressed, and the GIB should be the vehicle for doing that.
What assurances can the Minister provide that capital from existing assets will be reinvested in green projects in the UK? How will the golden share work when it comes to subsidiaries and, in particular, to having a say over asset sales? What reassurances can he give us that the headquarters in Edinburgh will continue? How will the Government ensure that the shortfall in investment in renewables will be met? Finally, in the light of the forthcoming industrial strategy and emissions reduction plan, will the Minister pause this sale, so that Parliament can properly look at these and see what role the GIB can play in that process?
Mr Hurd
The hon. Gentleman quite rightly talks about the need for investment in renewables, but it would be nice if he could give more recognition of the extraordinary progress this country has made in respect of the profound transition to clean energy and the fact that we have generated more electricity from renewable energy than from coal this year, which is a pivotal moment in our history. Investment continues to flow, and the GIB has played and I am sure will continue to play a very important role as a catalyst for all that.
I understand that the hon. Gentleman seeks reassurances and share his sentiments, but this is part of our process of evaluating the proposals before us against the criteria transparently set out and agreed through the House. It is through that lens that we now evaluate the proposals, which obviously includes attitudes to the workforce and sensitivities around jobs in Scotland. This is all part of the criteria and is, as I say, the lens through which we look at the proposals. Beyond that, I cannot say much because of confidentiality, and I hope the hon. Gentleman will respect that.
Huw Merriman (Bexhill and Battle) (Con)
For the Opposition business spokesman to make the sweeping generalisation that “private is bad” is, I find, an appalling indictment, which provides evidence of why millions of private sector workers cannot rely on the Opposition. When the Minister looks at the golden share, will he consider whether some guarantees could be provided for future investment and in relation to the existing portfolio, perhaps for the first couple of years during the transfer to any bidder?
Mr Hurd
I thank my hon. Friend for that constructive observation. He is quite right in his first point—“public good, private bad” could not have been clearer from the Opposition Front Bench. That will have been noted in the business community and across the country, reinforcing the question mark that the country’s business community has about the Labour party’s attitudes towards it.
On the green share and the maintenance of assets, I have set out the mechanisms; I think they are robust, and Parliament agreed that they were. As for so-called asset stripping and the freedom to sell assets, let us not get ourselves into a position in which we view holding assets for ever as a good in itself. I do not think we would want that for the GIB under its current structure. The management of the organisation has to be free to manage a portfolio. As a Government, we have to be practical about the limitations we would place on a private sector bid. I come back to the point that we have been very clear about the criteria we are setting for this sale, and we are looking at proposals by taking a holistic view of those criteria, which include the need for reassurance about the forward plans for the organisation and the level of ambition for mobilising private sector capital into this critical area of clean infrastructure.
Edward Miliband (Doncaster North) (Lab)
In the interests of consensus, we can agree that there was cross-party support for the Green Investment Bank right from the get-go. I would say to the Minister that there is also cross-party concern about this sale—and I could mention Lord Barker, who was a Minister in the last Parliament, Vince Cable and of course people on the Labour side. Is not the key question for the Minister and the Secretary of State this one? They promised a new approach to industrial strategy with a new Department, by contrast with their predecessors who did not even use the phrase “industrial strategy”. The question to the Minister is: what has changed since they took over? If there is a moment to prove commitment to the new industrial strategy, it is this one in respect of their plans for the GIB.
Mr Hurd
The right hon. Gentleman may be right about the cross-party agreement on the need for a GIB; the difference is that we did it, and he did not. His party had plenty of opportunity to do it. He talks about the need for a continued commitment to investment in renewables, and I think we have shown that. In fact, one of the most decisive steps this Department has taken in the short time we have been in power is the announcement of the new contract for difference auctions, which will be the next stage of support for the more mature renewable tech choice. There is no issue about this Government’s commitment to the low-carbon economy and the green infrastructure that needs to underpin it. The Secretary of State could not have been clearer about that. Where I think there is a divergence of view is that the Labour party seems to think that state ownership is a good in itself, whereas in this situation we feel we have moved on from that. When it comes to this very important organisation, which has done a great job, we want to liberate it so that it can do more in future. It is partly through that lens that we are looking at the proposals before us.
Sir Oliver Letwin (West Dorset) (Con)
Does my hon. Friend agree that the test—the proof of the pudding—lies not in how many existing assets of a given kind are owned, but in whether there will be a greater or smaller amount of investment in renewable and other green energy projects in the future? Does he agree that this privatisation will prove to have been a success if investment in new projects increases as a result?
Mr Hurd
I am delighted to respond to that question from my right hon. Friend, who was, in many respects, the guardian angel of the coalition Government, and who was intricately involved in the deliberations that led to the establishment of the Green Investment Bank. He is absolutely right, and he has made a fundamental point. We should not necessarily judge the bank on the basis of what it is at the moment; this is about what it can become, about levels of future investment and about commitment to the green purpose of the organisation. I do not think that the Government could have been clearer about the priority that we attach to those considerations. This is about the future.
Mr Iain Wright (Hartlepool) (Lab)
May I give the Minister another opportunity to answer the question that I asked him in the Select Committee yesterday? How can he reconcile insisting on preserving the green purposes of the bank and preventing asset stripping from a new buyer with satisfying the classifications of the Office for National Statistics in respect of public sector control and balance-sheet requirements post disposal?
Mr Hurd
I have great respect for the Chairman of the Business, Energy and Industrial Strategy Committee, and we had a useful exchange about this issue yesterday, but he is again making assumptions about asset stripping. He is aware of the structure that we have established, having doubtless been involved in the parliamentary debate about it. There is a great deal of concern on both sides of the House about protecting the integrity of the green purpose of the GIB, which is why we have gone through the process—which I think is robust—of setting up what is effectively a green share, along with the mechanism for its governance. That system was, I think, agreed to by Parliament and was introduced formally with the protection of corporate law.
I return, however, to the human motive of those who want to buy this organisation, which is to enable it to grow and do more. It is the authenticity, sincerity and integrity of those proposals that we are now evaluating.
Kevin Foster (Torbay) (Con)
I am sure the Minister shares my slight amusement at the Opposition’s argument that we can believe everything we read in the press about the Green Investment Bank, given that they spent all yesterday afternoon arguing that we cannot believe everything we read in the press. Does he agree that the Green Investment Bank was set up to deal with a market failure, that the fact that private investors are now keen to come in demonstrates the purpose it has served and, in particular, that without the restrictions imposed by EU state aid it can deliver more investment, not less?
Mr Hurd
My hon. Friend has made—much more eloquently than I have so far succeeded in doing—exactly the fundamental point that we are trying to convey. The test of an organisation that was set up to correct a market failure is whether that failure has indeed been corrected. We believe that it has, and our view is supported by the large amounts of private sector investment that are flowing into green infrastructure in the United Kingdom and around the world. What we must do now is ensure that the GIB is free and unfettered by the state, so that it can do more.
Mary Creagh (Wakefield) (Lab)
The Environmental Audit Committee’s report on the sale of the bank stated that Ministers had rushed to privatise it without consultation or proper consideration of the alternatives, and that either it should continue to exist as a low-carbon investor or its sale should not proceed. Taxpayers do not want a repeat of the Royal Mail debacle, when a public asset was sold off at £1.4 billion below its true value, and they do not want this landmark British institution to be sold off to an asset stripper.
Is it not extraordinary that the bank’s assets were restructured in November? Can the Minister tell us whether that was done at the request of the UK Shareholder Executive, to facilitate its sale to the preferred bidder?
Mr Hurd
I do not believe that that was the case at all, although I understand the points that the hon. Lady has made. Like any other Government, we have a responsibility to deliver value for money to taxpayers, and we are very conscious of the need for this deal, if it materialises, to present itself well to the public whom we serve and represent. That is why, as one would expect, value for money is at the top of our list of criteria. We are embarking on a very good process, and we are setting ourselves very high standards for the presentation of the deal.
Kevin Brennan (Cardiff West) (Lab)
I remind the Minister that during the passage of the Bill that became the Enterprise Act 2016, the Government rejected a Labour amendment that would have guaranteed the green purpose of the bank. Will he give an assurance today? After privatisation, will the bank be free to invest in fracking projects?
Mr Hurd
Let me respond to the hon. Gentleman’s substantive point about the protection of the green purpose. If he doubts the integrity of the mechanism that we have established, that is fine, but I think Parliament has recognised that it is a robust mechanism, whereby the green purpose is set in the articles of association and any change must to be given effect by an affirmative resolution of the trustees. It is worth our noting the integrity of those people: James Curran MBE, Trevor Hutchings, Tushita Ranchan, Robin Lord Teverson—a very public sceptic of this process—and Peter Young. That is a very good group of people, selected by a rigorously independent process to safeguard the integrity of the green purpose, which is a priority for the Government.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
We were told that we were to have the greenest Government ever, but the failed green deal collapsed, investment in renewable sources has been slashed, and we have slipped in the world rankings for investment in the low-carbon economy. If the Minister is not persuaded by the moral and environmental reasons why supporting the green economy is vital, will he consider, as a matter of urgency, the financial and economic reasons why it is crucial for us to invest in it, and will he then reverse his decision on the Green Investment Bank?
Mr Hurd
The hon. Lady is flogging rather an old horse, and, if I may say so, that is completely misplaced. Significant investment is being made in clean energy in this country and around the world. Indeed, with the Hinkley deal, the Government made one of the biggest commitments in the world to low-carbon energy. There is no question about our commitment to the transition to a low-carbon economy and a clean energy structure, and we are well along the track. I would add that we inherited an arrangement whereby we were operating on far too low a base in terms of renewable energy. It was a coalition Government led by Conservatives who changed that.
Alex Salmond (Gordon) (SNP)
The Minister refused to name the bidders for the Green Investment Bank, but went on to tell us that private companies were saying that they wanted to buy the bank because of its success. Will the Minister tell us which private companies were saying that, or did he make up the quotation?
Mr Hurd
The right hon. Gentleman is extremely experienced, and I am not sure what part of a confidentiality agreement he does not understand. As I have said, the Government’s criteria could not be clearer: we are selling a going concern, and we are not interested in proposals that do not respect that.
Mr Dennis Skinner (Bolsover) (Lab)
When are the Government going to learn the lessons of the past when it comes to selling off public assets? I was here when Mrs Thatcher decided to sell off not only electricity but gas, and then, finally, water. She said we were going to be a British share-owning democracy: that was the phrase. If we look at the list now, we find that some of those companies are owned in Germany and some are owned in France—and Macquarie, in Australia, bought the Birmingham toll road in a flash under a Tory Government.
Today we are being given another lecture on how the Minister will preserve the identity of the Green Investment Bank. History tells us that that is not possible. The bank will go to those who are bidding for it, and they will not be just in Britain. We are in the process of leaving the EU, and the chances are that somebody in the EU will be buying up British assets—although maybe not this one. Why don’t you learn the lessons?
Mr Hurd
Of course, one of the lessons of privatisation can be seen in the record levels of investment that have flowed into those organisations since they were privatised. I respect the hon. Gentleman’s experience, and I respect his sincerity and integrity, but I think he is totally wrong. All I will say is that I have a strong instinct that he would like British Telecom still to be a public company. I will leave it at that.
Kerry McCarthy (Bristol East) (Lab)
The Minister is being very dismissive about speculation in the press. However, in the Financial Times the former Business Secretary, Vince Cable, has expressed concern about asset stripping, which he thinks was Macquarie’s objective, and Ed Davey, the former Energy and Climate Change Secretary, has said he considers it unlikely that the golden share would give Ministers enough clout to influence the bank’s investment strategy. Does the Minister not think that those two people—who, after all, were very much involved in the setting up of the bank—should be taken seriously and that we should act on their concerns?
Mr Hurd
Let me assure the hon. Lady that I take seriously all the concerns expressed by politicians past and present. It is important that through this urgent question the concerns that people have go from this House to potential bidders. I absolutely respect that and the individuals she mentions, but she says I am dismissing media speculation. I am not; I am just not commenting on it, because Ministers should not.
Mr Mark Williams (Ceredigion) (LD)
I thank the hon. Member for Bristol East (Kerry McCarthy) for reminding the House of the involvement of Liberal Democrats in initiating the Green Investment Bank. Can the Minister address the point raised by Sir Vince Cable in a letter to the Secretary of State that he remains unconvinced that the golden share will prevent the asset stripping of the company and therefore the original intentions of the green bank at its inception will be under threat?
Mr Hurd
There was a whole set of arrangements under which the special share solution was reached. It was debated through Parliament and settled through that process. My personal view is that it is a robust mechanism in itself, given its legal underpinning and the integrity and independence of the people selected to be the trustees and guardians of the process. I also come back to the fundamental point about the motivation of people who might want to buy this organisation, and the lens, criteria and disciplines we will have in evaluating their proposals and deciding whether or not to go ahead.
Ian Murray (Edinburgh South) (Lab)
I, along with many colleagues, fought for the headquarters of the GIB to come to Edinburgh, where it now has more than 50 staff. Can the Minister tell us how many of those 50 staff will remain in Edinburgh after privatisation?
Many people have mentioned Vince Cable, but the legacy of Vince Cable as Business Secretary is the botched privatisation of Royal Mail, and that is why people have concerns about the GIB. The reason why we have concerns about the sale of assets is that by its nature the GIB invests in projects that the market will not touch, and therefore when those projects come on-stream they are much more profitable than normal projects, and if a preferred bidder then sells them off, they will sell them at great profit at the taxpayer’s expense.
Mr Hurd
I recognise the importance of the GIB to Edinburgh and have agreed to meet with the Members of Parliament for that area to discuss this process. It was entirely the right decision to locate part of the organisation there, and jobs are a part of what we want to hear from bidders; we want to hear about commitment to staff and the ongoing organisation.
As the hon. Gentleman has mentioned staff, let me place on record—I hope this is shared by Members across the House—the Government’s admiration and respect for the senior management team and all staff at the GIB, led by Lord Smith and Shaun Kingsbury, not just for what they have achieved in a relatively short period, but for the professionalism with which they have conducted themselves during this process.
Hywel Williams (Arfon) (PC)
The GIB has made substantial investments in Wales, most recently at Parc Adfer on Deeside in partnership with five local authorities. That model works pretty well. What guarantees can the Minister give that the new owners will continue to invest in that sort of way, and invest in the regions and nations of the UK rather than abroad, or possibly even in the golden south-east?
Mr Hurd
I return again to the main point about the questions we ask of bidders and the criteria we set. We want to achieve value for money; we are selling an ongoing concern, and we are determined to protect the integrity of the green purpose of the organisation, so we want to hear plans for the mobilisation of future investment and future capital. If models are working, I am sure that any bidders that are professional organisations that view the GIB as a business will have regard to them. That is what we want to hear from bidders, and we are at the point in the process where we are evaluating that. I am afraid I cannot say a great deal more beyond that.
Jenny Chapman (Darlington) (Lab)
For the sake of transparency, can the Minister tell the House whether the GIB will be able to invest in fracking in the future?
Mr Hurd
The GIB will be required under this process to continue to respect the green purpose of the organisation, as set out in the articles of association. The degree to which investment proposals fit those criteria is a judgment to be made by management and the trustees that we have set up to be independent guardians of this process.
Mark Durkan (Foyle) (SDLP)
When Vince Cable was legislating for the GIB, we got assurances that it would operate throughout the UK and support projects in Northern Ireland, and, importantly, would not be precluded from supporting cross-border projects. In fairness, one of its first investments was in Northern Ireland, and indeed in my constituency. However, many of us are concerned that the quality of its investments, reach and support will be lost in this sell-off. The Minister talks about integrity but that is not something people associate readily with the preferred bidder.
Mr Hurd
I am not going to comment on either the identity, character or values of any bidder at this stage, but I join the hon. Gentleman in recognising the good work done and the approach taken by the GIB in making sure its investments are spread across the country. I come back to the point that the motivation for our wanting the GIB to be in the private sector is to enable the business to grow and continue as an institution supporting investment in the UK green economy—the reference to the UK there is important.
Julie Elliott (Sunderland Central) (Lab)
I have been listening to the Minister rewrite the history of this Government’s appalling record in this area since 2010, but the GIB is the one success story, and it did have cross-party support. It does a magnificent job in supporting risky businesses that the rest of the market will not invest in. Without breaking any confidentialities around the ongoing negotiations, what guarantees can he give to this House that such risky investments will continue and that green investment will be in as good a state as now, or even better, in five years?
Mr Hurd
I am forced to repeat myself again. We have set up, in a process agreed through Parliament, a mechanism for protecting the integrity of the green purpose of the organisation. Beyond that, because we are serious about selling the bank as a going concern and want to see positive proposals for growth and future investment, we are evaluating proposals from bidders through that lens. We are, and will continue to be, influenced in that process by the attitudes of the senior management team and what they feel about the proposals.
George Kerevan (East Lothian) (SNP)
Last year, Macquarie—to cite a company at random—made its largest ever profit, and it did so, as the markets will tell the Minister, by selling off Moto, Britain’s largest motorway service company, taking the cash out of the company and giving it to shareholders. Will the Minister tell us what in the current safeguards will prevent the future buyer, whoever they may be, from doing what Macquarie has always done: selling assets, taking the money out of the company and using it to pay its shareholders?
Mr Hurd
Again, I must repeat myself. The hon. Gentleman has chosen a company at random, but I am not going to talk about any companies. What I have tried to labour is the seriousness of purpose behind this process and the safeguards we have set up, which are protected in law and also by the criteria we have set in evaluating any bids. An important part of that is the forward intention and the intention to mobilise private capital in future.
Diana Johnson (Kingston upon Hull North) (Lab)
Given Brexit and the uncertainty around it, is it not risky to sell the GIB at this time? How does the Minister envisage the Government ensuring that money will be available for the new innovative technologies that will be very important for areas such as mine in Hull and the Humber?
Mr Hurd
With respect to the hon. Lady, I am not entirely sure why Brexit is relevant to this process or to the decisions underpinning it. I agree 110% with her fundamental point about the need to invest in energy innovation, which is why our Department has a £500 million spending review portfolio dedicated to energy innovation that sits in a wider system of budgetary support for energy efficiency. The point she makes is entirely the right one: if we are to achieve what we want to achieve in decarbonisation and the transition to abundant sources of affordable low-carbon energy, we have to continue to innovate. The Government have a role in that, which is why budgetary support is available for it.
Joanna Cherry (Edinburgh South West) (SNP)
The Green Investment Bank employs 55 people at its head office in my constituency. When it was set up in 2012, the then Business Secretary, Vince Cable, said:
“Edinburgh has a lot going for it, both in terms of it asset management and finance sectors…also its proximity to green energy activity”.
He also said that choosing Edinburgh supported what he described as the “wider narrative” of binding Scotland into the UK in the run-up to the independence referendum. Will the Minister meet me to discuss how such promises can now be delivered to those 55 employees who work in the head office in my constituency?
Catherine West (Hornsey and Wood Green) (Lab)
My question relates to the bidding process. What is the Minister’s view of the Macquarie bank, the potential bidder also known as the “cuff-linked buccaneers”? What is his opinion of the bank’s recent activity as the owner of Thames Water when it shipped off hundreds of millions in dividend payments to investors, paid minimal taxes and made disappointing investment in the network?
Sammy Wilson (East Antrim) (DUP)
Does the Minister agree that, if green investments are as profitable, sound and attractive as their supporters have claimed in the House today, there should be no concern about the introduction of private finance for such projects? Indeed, given the pressure on the public purse at the moment, is he not surprised that the House is not welcoming another source of funding for these activities?
Mr Hurd
The hon. Gentleman makes an important point about the increased attractiveness of investment in renewable energy and low-carbon infrastructure. Governments in the UK and around the world have helped to facilitate that investment over the years and have seen dramatic falls in the cost of those technologies and the cost of the capital attached to them, making them a more investable proposition. This helps to reinforce our argument that this is the right time to liberate the GIB from state control to enable it to play a bigger part in the market.
Margaret Greenwood (Wirral West) (Lab)
The Aldersgate Group has highlighted the fact that the strength of the Green Investment Bank is that it has supported innovative projects throughout the UK that help us not only to tackle climate change but to drive down costs in the NHS and local government through energy efficiency. Will the Government heed the warning of the former Conservative Energy Minister, Lord Barker, that the bank is heading for break-up? Will they halt the sale to ensure that the bank remains a single public institution that is one step ahead of the market in the green projects that it backs?
Mr Hurd
Lord Barker is a good friend of mine for whom I have great respect. I would like to reassure him and, I hope, the House that the Government are not being naive. We are very clear about the criteria we have set, and we are in the process of a robust and rigorous evaluation of the proposals against those criteria.
Matthew Pennycook (Greenwich and Woolwich) (Lab)
The Minister has been very clear that the creation of a special share in the governance arrangements will protect the integrity of the bank’s green purpose and future investments, but may I press him for a little more detail on precisely how that special share would prevent successful bidders—Macquarie or others—from offloading current projects?
Mr Hurd
I want to make two points on that. First, the special share is being set up to protect the integrity of the green purpose, which is set out in the articles of association. It is there for all to read. Any proposed changes would need to be approved by the trustees, who have been selected independently. That is the mechanism involved. Secondly, I made the point earlier that I do not think it is sensible for investment institutions to hold on to assets forever. Part of their role is to manage a portfolio, and if they get attractive offers to divest assets we expect them to look at those offers seriously. We are interested in the plans for future investment, and in what this organisation could become under private ownership. That is what we are evaluating.
Hannah Bardell (Livingston) (SNP)
The Minister was right to say that there was cross-party support for the Green Investment Bank. There was, however, no such cross-party support—or support in Scotland—for the removal of support for carbon capture and wind energy. The fact that his party’s policies have been so disastrous in Scotland might explain why it does not do so well with the electorate there. Will he absolutely commit to all the projects that the Green Investment Bank has invested in—totalling hundreds of millions of pounds in Scotland—and assure us that, regardless of who the buyer is, they will continue?
Mr Hurd
I dispute the hon. Lady’s analysis. This country has made enormous progress in the shift to clean energy, and Scotland has been a big part of that. I point her to the recent commitment to the next round of contract for difference auctions and to the fact that last year I think we generated 25% of our energy from renewable sources. If she looks at the starting point of 2010, I think her argument falls away. On her point about continued investment in Scotland, I repeat what I have already said to colleagues.
Ms Margaret Ritchie (South Down) (SDLP)
When taken alongside the cuts to renewable energy and the abolition of the Department of Energy and Climate Change last year, does not the sell-off of the Green Investment Bank show that the Government are no longer committed to being a world leader on climate change and sustainability?
Mr Hurd
No. I am afraid that that is total nonsense. If the hon. Lady wants proof points on that, I can tell her that one of the first actions of this Department, within days of the new Government being formed, was to put into law the fifth carbon budget. I am sure that she knows the detail of that, so she will know how ambitious it is. That was not the action of a Government who are shirking their responsibilities in relation to Britain’s role in mitigating climate change.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Is the Minister seeking assurances that 100% of the return on any sales of existing assets will be reinvested in green energy in the UK?
Renewable Heat Incentive
Nick Hurd Excerpts(7 years, 11 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Minister for Climate Change and Industry (Mr Nick Hurd)
Today my noble Friend the Minister of State for Energy and Intellectual Property has made the following statement:
In March 2016, the Government set out their proposals to reform the renewable heat incentive (RHI) scheme in the consultation “The Renewable Heat Incentive: A reformed and refocused scheme”. The consultation ran from 3 March to 27 April 2016 and received 370 responses from individuals, businesses, trade bodies and other organisations. I am pleased to announce that the Government response to the consultation has been published today.
Heat accounts for almost half of UK energy use and a third of UK carbon emissions. Decarbonising how we use heat in our homes, businesses and buildings is therefore an essential part of how we transition to a low-carbon economy. It can also in time help to make heating homes and other buildings more efficient and affordable.
In November 2015, the Government renewed their commitment to the transition to a low-carbon economy by confirming a continued budget for the RHI out to 2020-21. By confirming the available budget and setting out a number of reforms for how the scheme will operate, the Government intend to provide the level of certainty needed for consumers and industry to invest in renewable heating and for the market to transition towards being sustainable without Government support in future.
It is vital that the scheme delivers value for money for taxpayers and supports the development of technologies that will be important for the long term. That is why we will be reforming the scheme to ensure it:
Focuses on long-term decarbonisation: promoting the deployment of the right technologies for the right uses, while ensuring the RHI contributes to both our decarbonisation targets and to the UK's renewable energy target.
Offers better value for money and protects consumers: improving how costs are controlled, giving consumers more confidence in the performance of particular technologies and addressing potential loopholes in the scheme.
Supports supply chain growth and challenges the market to deliver: driving cost reductions and innovation to help build growing markets that provide quality to consumers and are sustainable without Government support in future.
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