Freeports: Wales

Stephen Kinnock Excerpts

Tuesday 21st February 2023 Westminster Hall

[Stephen Kinnock (Aberavon) (Lab)]

It is a pleasure to serve under your chairship, Mr Vickers, and to follow the hon. Member for Ynys Môn (Virginia Crosbie), who has been making this case very strongly throughout her time in this place.

The decision that the two Governments are set to make on the location of the Welsh freeport is right at the heart of the debate about what a future British economy will look like and of the ambition that the Government have for Britain in the world. It is clear that by backing the Celtic Freeport bid, both Governments would be sending a clear signal that they are not looking backwards or simply managing decline by seeking to make up a bit of missing post-Brexit trade here or restoring a bit of pre-covid demand there; rather, it would show that Britain is truly ready to become a world leader in the green industries of the future.

The Celtic freeport, situated in the ports of Port Talbot and Milford Haven, would bring with it initial business rates exemptions, capital investment exemptions and seed funding that would drive £5.5 billion of inward investment into the local economy. Perhaps even more importantly, it has the potential to bring £54 billion into the supply chain of the vital new renewable technology of floating offshore wind.

The Celtic freeport would sit at the heart of the emerging green ecosystem in south Wales, which is set to play a central part in providing the green, competitive and secure energy supply our country is crying out for. South Wales was the cradle of the first industrial revolution, and we can now be the cradle of the green industrial revolution. The Celtic freeport can drive forward the green technology that will power our domestic, sovereign and sustainable energy supply, drive down household energy bills, support green steel making and, of course, create up to 16,000 new local jobs. The new technology at the heart of this green manufacturing revolution will be floating offshore wind.

The UK has led the world on the mass deployment of offshore wind power generation. Across nearly 50 sites, offshore wind contributes about 13% to the UK electricity mix. No one country—even giants such as China—can touch our footprint, so we have a lot to be proud of. Britain can ill afford to let this new technology of floating offshore turbines pass by, because if we do, we risk falling behind.

Floating offshore wind is a technology whereby wind turbines are attached to floating platforms that are secured by mooring lines and anchored to the seabed to keep them in place. This modern science uses the same technology as wind turbines that are fixed to the seabed to generate electricity, but the floating platforms can be installed in deeper areas of the sea, which frequently have higher wind harvesting potential.

This modern manufacturing renaissance, which will bring a £54 billion supply chain  to the heart of Wales’s new economy, could drive forward a green ecosystem of sustainable growth and good jobs across Aberavon, Wales and the entire United Kingdom for future generations. Whether people are looking to become welders, electricians, data specialists or marine surveyors, floating offshore wind will create thousands of high-quality, high-skilled jobs right on our doorstep.

The Celtic freeport bid is about prosperity, but it is also about pride. It is, of course, about prosperity for our economy and people, but it is also about pride in our country and community. We can once again lead the world in tackling the major global challenge of the 21st century, namely climate change. For our local communities, it is about taking pride in the fact that their work will contribute to that national and global mission.

The new green ecosystem can also play a critical role in strengthening the backbone of our national economy. The covid pandemic and Putin’s barbaric invasion of Ukraine have turbocharged the need to build resilience into our supply chains. Floating offshore wind in the Celtic sea will be able to generate 24 GW of clean, green, renewable energy by 2045, which is a quarter—an enormous amount—of the UK’s total target.

To generate that amount of energy, we will need to build and deploy over 60 turbines a year. Tata Steel estimates that that would require 6 million tonnes of steel between now and 2045. The energy produced through floating offshore wind could then help to produce the green steel that Tata Steel plans to make in its future electric arc furnaces—which will replace the current blast furnace technology—at a lower cost per unit than is possible with the sky-high electricity prices that are currently holding our steel industry back.

The driving purpose of the Celtic freeport bid is to be a force multiplier, catalysing our green economy through floating offshore wind, building our energy security and strengthening our ability to stand on our own two feet by making, buying and selling more in Britain. The Celtic freeport offers one of the biggest opportunities of its type for Wales, which is why I and many hon. Members are backing the bid.

The cross-party support from Members in this place runs broad and deep, from the right hon. Member for Preseli Pembrokeshire (Stephen Crabb)—my fellow lead on the campaign, to whom I pay tribute—to hon. Members from Plaid Cymru. We also have support from a large number of businesses, ranging from Tata Steel to South Hook, from LanzaTech to SSE Renewables. They can see that the potential for the Celtic freeport bid will be as a platform for floating offshore wind, thus putting Wales at the forefront of the green industrial revolution. They understand that the Celtic freeport is a multi-port solution that builds on the strengths of two of the UK’s leading ports—Port Talbot and Milford Haven—to create a green investment corridor.

Combined with the supporting infrastructure, heavy engineering, industrial clusters and skills base along the M4 corridor, as well as the immense connectivity we have along the M4 corridor, our bid has what it takes to be a genuine game changer for our economy and security and in the battle against climate change. The prize is clear: the creation of a new long-term industry, where high-value manufacturing has “Made in Wales” firmly embossed on the tin.

Our ports are playing their part too. Associated British Ports and the Port of Milford Haven have committed to invest £710 million in their green energy-focused ports, while the first phase of construction at Pembroke Dock is already under way, as I am sure the right hon. Member for Preseli Pembrokeshire will illustrate in his remarks. That port infrastructure will act as a launch pad to help leverage a further £700 million of investment in factories to build the massive renewable sub-structures and turbines.

The decision about the selection of the Celtic freeport is the next vital step to secure this industry for Wales. It will provide the signal to global markets that will be needed if we want to lever in the high-impact private sector investment we need to take us forward. I will continue to make the case, and I hope that local businesses and residents across the Celtic freeport area and beyond will join me in making it. At the stroke of a pen, British and Welsh Ministers can unlock this new industry and repurpose our strengths for a green future. I hope that the UK and Welsh Governments will seize this opportunity. Wales was at the forefront of the first industrial revolution. With the right investment, commitment and decisions, we can put ourselves at the forefront of the net zero revolution.

[Stephen Crabb (Preseli Pembrokeshire) (Con)]

It is a pleasure to serve under your chairmanship, Mr Vickers, and to follow the hon. Member for Aberavon (Stephen Kinnock). I agreed with pretty much everything he said; thankfully, there is no rule against repetition in this place, so I will proceed with my remarks.

First, I would like to put on record my respect and appreciation for my hon. Friend the Member for Ynys Môn (Virginia Crosbie) for securing this important and timely debate, and for the articulate and energetic way she has championed her constituency and a freeport for Wales. In all seriousness, I do not think Ynys Môn has had a stronger voice in the House of Commons in its history as a constituency. I encourage my hon. Friend in the work she does.

Welsh ports have a long history in helping to shape the economic, social and cultural fabric of Wales, as one would expect from a nation with a coastline in the north, west and south. It is three years since the Select Committee on Welsh Affairs examined the proposal for a freeport in Wales. In our report, we noted the positive response from ports around Wales in the written evidence they gave, often citing the potential role of a freeport in regeneration. However, we argued that to make a lasting contribution to the regeneration of the poorest regions and nations of the UK, including in Wales, freeports should be assessed on the economic and social gains they are forecast to bring to local communities. In our view, freeports could help to revitalise the Welsh economy only when they fit with other policies that help Welsh ports and their local communities to thrive.

We noted that many areas of port policy and supporting infrastructure are either devolved to the Welsh Government or are shared responsibilities between the Welsh and UK Governments. We urge the two Governments to work together constructively, especially if a freeport bid is successful in Wales. Crucially, in our report we urged the UK Government not to cap artificially the number of potential freeport sites in Wales, nor to create a Welsh freeport purely for optical or political purposes.

I am pleased we have got to this hopeful and expectant point to hear the outcome of the bidding process for a freeport in Wales. I congratulate the Wales Office on its role in working with the Welsh Government and Ministers across Whitehall to bring us to the point where there could be agreement. There were moments, certainly three years ago, when some of us on the Welsh Affairs Committee were concerned that we might not get to this point, and that the differences in opinion between Welsh and UK Governments would be so great that the freeport policy would not happen in Wales. I am pleased we are at this point; the role the Wales Office played in that was extremely important.

I obviously have a constituency interest. Pembrokeshire is home to the port of Milford Haven, which is one of the UK’s leading energy hubs, hosting a wide range of conventional energy companies such as the Valero oil refinery, the Dragon liquefied natural gas import terminal, South Hook LNG import terminal, the RWE gas-fired power station and the Puma fuel storage site, among others. Those are all located on the Haven waterway. The port of Milford Haven is strategically one of the most important energy hubs in the UK, and the infrastructure it hosts plays a critical role in our national life. Undoubtedly, that port has played an integral role in shaping Pembrokeshire’s local economy through the high-quality job opportunities that those energy companies have provided to local people for many generations.

Those industries are changing, and need to change. The hon. Member for Aberavon made the point that recent events have highlighted the need for our energy mix to diversify, and our demand for home-grown renewable energy has never been greater. Right now we have a unique opportunity to build on that heritage and the excellent skillset in Pembrokeshire to use vacant brownfield sites for the new and exciting energy revolution that is just in front of us.

The port of Milford Haven is in prime position to shift from being one of the UK’s leading conventional energy hubs to being one of the UK’s leading renewable energy hubs. The decarbonisation of Wales’s primary industrial cluster, which stretches from Milford Haven all the way to Port Talbot and further east across the south Wales coast, is the prize in front of us. That decarbonisation has already begun, as we have already heard this morning, and will make a significant contribution to helping the UK meet its net zero targets.

In 2019 the Conservative party stood on a manifesto to deliver at least one freeport in Wales. Fast-forward four years and the necessary steps have been taken to ensure that that ambition becomes a reality. The Welsh and the UK Governments will jointly evaluate bids and select a freeport for Wales in early spring. As we know, for politicians “early spring” can mean anything, but I hope that it means in the days and weeks ahead. We have a prime opportunity, if the Government want to take it with St David’s Day just around the corner, for a really significant announcement that would make a difference for people and communities across Wales. We therefore expect to receive confirmation of the winning bid imminently.

I want to briefly put on the record why I think the Celtic freeport bid should be the frontrunner in this race—it is a competitive process. The Celtic freeport bid is a private-public sector partnership led by Associated British Ports, Neath Port Talbot Council, Pembrokeshire County Council, and the port of Milford Haven. The bid has been backed by prominent businesses across Wales as well as numerous MPs from all parties and Members of the Senedd as well, demonstrating the evolution of a collective consensus that is necessary to drive forward the Celtic freeport vision. The bid goes far beyond party political lines, with a broad recognition of the wide-ranging benefits that the Celtic freeport will bring to Pembrokeshire, Port Talbot and the whole of south Wales. That is why I have been working so closely with the hon. Member for Aberavon to help build momentum behind that important bid.

It was encouraging to see so many MP colleagues from across different parties attend our recent drop-in event to hear more about the exciting potential of the bid. I was delighted that so many of my colleagues put pen to paper that day to confirm their backing for it. If we are awarded freeport status, more than £5 billion of new investment will be unlocked, potentially creating more than 16,000 new high-quality green jobs across the south and west Wales economy. Furthermore, securing freeport status across the key sites of Milford Haven and Port Talbot will enable them to begin their journey towards energy diversification through, as we have already heard, the emergence of the new floating offshore wind technology.

As I explained in my debate on floating offshore wind in this Chamber last October, offshore floating wind represents a major, exciting new opportunity for the UK to tackle pressing issues: jobs and skills regeneration, wholesale energy prices, energy security, levelling up and, as I have said, net zero targets. The UK Government have set ambitious targets to deliver floating offshore wind in the years ahead, and both Milford Haven and Port Talbot have already been identified by leading developers as key locations for the early development of this new industry for Wales. Hopefully Milford Haven will be a hub for operations and maintenance, with Port Talbot at the forefront of assembly and manufacture.

The potential to unlock a UK market in the construction, maintenance and operations of floating offshore wind projects could be worth more than £54 billion in the decades ahead. That is the prize in front of us. It is clear that the establishment of a freeport across the sites at Milford Haven and Port Talbot will enable this exciting renewable vision to flourish. The war in Ukraine, coupled with rising energy prices, has underlined the urgent need for the UK to become less energy dependent. The need to diversify our energy mix has never been more apparent as the dial shifts to the development of green, sustainable energy. Floating offshore wind represents the next big renewable opportunity for Wales. With the expertise and heritage in the Milford Haven waterway, and the skillset and industry in Port Talbot, these two locations at the heart of the Celtic freeport bid are ideally suited to supporting the industrial-scale deployment of floating offshore wind.

Freeport status would be hugely advantageous in that process as it would allow this new green vision to flourish, with the tax breaks, simplified customs procedures and streamlined planning processes helping to ease the transition from conventional to renewable energy. In turn, there is a potentially enormous investment to be unlocked in the supply chain, and that is the prize here. The UK has made enormous progress in the fixed-bottom offshore wind industry and has taken strides in expanding that deployment, but the one thing that did not happen in was we did not create strong domestic content for the UK. We did not capture a bigger share of the full economic value of offshore wind as we should have done. We now have the opportunity with floating offshore wind to get it right and to deploy these structures to give us clean energy in a way that creates long-term jobs and training opportunities in our communities.

[Stephen Kinnock]

The right hon. Member is making an excellent speech. Does he agree that it is vital that the Crown Estate sets up a licensing process that guarantees localised supply chains and that there should be penalty clauses in the process, so that developers will be held to account?

[Stephen Crabb]

The hon. Gentleman makes a crucial point. He is absolutely right that the Crown Estate must ensure those contracts have teeth. That will be crucial to ensuring that developers deliver on their commitments because, as he knows, it is one thing for them to speak to us politicians and tell us about all the good things they will do in our communities, but actually making sure they do them when push comes to shove is another.

The other part of the equation is ensuring that we get the contracts for difference right and ensuring that the financial architecture around floating offshore wind is the right one to enable that investment in the UK and Welsh economies. Of course, there is a potential first-mover advantage waiting for the nation that makes the biggest and earliest strides to deploy floating offshore wind at an industrial scale. The Welsh Affairs Committee was recently in the US and met with a floating offshore wind developer there who was also looking to develop in the Celtic sea. They have secured seabed leases off the coast of New York and in California. There is a global race to be the first nation to see serious industrial-scale deployment of offshore wind, and I believe it should be Wales and the UK that does that.

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[Dr Davies]

I take that point on very much board and thank my right hon. Friend for all his efforts in that regard.

Let me take the opportunity to outline other core elements of the Government’s levelling-up agenda. Wales is front and centre of our plans to level up the whole of the UK, and areas across Wales are already benefiting from more than £1.7 billion of local growth funding. From large-scale transport improvements to regenerating town centres and refurbishing cultural assets, the levelling-up fund will deliver lasting improvements in local communities across Wales, giving people renewed pride in their local areas. Ynys Môn alone is receiving £17 million from the levelling-up fund for the cultural regeneration of Holyhead town centre. I was pleased to visit a few weeks ago and see the efforts being made to ensure that people who use the port see all that Holyhead has to offer.

In total, the Government are investing more than £208 million in 11 projects across Wales through the second round of the LUF. That is almost 10% of the total UK allocation and builds on the £120 million that the Government invested in Wales in the first round of the fund. It is far more than Wales would have received through a Barnettised formula and is testament to the dedicated work of local authorities across Wales, which developed high-quality applications. The Government are also investing more than £790 million in Wales’s four city and regional growth deals. The deals are starting to deliver real change on the ground, from the Swansea Arena to investment in the digital signalling processing centre at Bangor University.

Furthermore, £2.6 billion has been allocated to places across the UK through the UK shared prosperity fund. Of that, £585 million has been allocated to Wales, including more than £126 million for north Wales. This trailblazing new approach to investment and the empowerment of local communities to level up and build pride in place will see direct investment in three local priorities: communities and place; support for local businesses; and people and skills. The funding is now in the hands of Wales’s four regional partnerships, through which local leaders are empowered to decide how best to invest the funding to better promote local growth, help to regenerate local economies and build a better future.

[Stephen Kinnock]

We are in danger of going down an SPF rabbit hole rather than discussing freeports, but as the Minister raised the SPF, I cannot resist. May I ring an alarm bell? As we head towards March 2025, when the long tail of European funding will tail off, there is going to be a cliff edge. Organisations that are delivering what is currently a sort of hybrid of EU and SPF funding are terrified that their projects will collapse, and have not had enough lead time to plan. Can I mark the Minister’s card in respect of the ticking time bomb with regard to the SPF? If he could look at a more flexible way of conducting the comprehensive spending review that does not have the arbitrary March 2025 deadline, that would salvage the programme. If he does not do that, we are in danger of seeing some difficult decisions having to be made in the very near future.

[Dr Davies]

I thank the hon. Member for raising his concerns about the shared prosperity fund. He will know that very large sums of money are being allocated through local authorities, and I hope he is having some input into that process in his own area, as I am in mine, and articulating his concerns, to ensure that projects that he feels are in need of support and protection in that respect get the hearing that they need.

I will move on from the SPF to conclude this excellent debate by again thanking my hon. Friend the Member for Ynys Môn for securing it. She is a champion for Ynys Môn on issues from the freeport bid to nuclear and green energy and transport connectivity. I know how important it is to her to see well-paid jobs on the island and to provide good reasons for young people to stay on Anglesey. I would welcome the opportunity to have further conversations with my hon. Friend about freeports in Wales once the competitive process concludes. Of course, that invitation extends to all right hon. and hon. Members.