Energy-intensive Industries

Stephen Kinnock Excerpts

Wednesday 24th November 2021 Westminster Hall

[Stephen Kinnock (Aberavon) (Lab)]

My hon. Friend is giving an excellent speech. It appears that some Members on the Government Benches seem to see steel as a sunset industry. In fact, nothing could be further from the truth. It is at the cutting edge of innovation. New alloys are being developed all the time. We need to emphasise the fact that this is a future-facing industry.

[Jessica Morden]

I thank my hon. Friend. It is absolutely true to say that steel is a future-facing industry, which will help us build back the economy after the pandemic and help us power a green industrial revolution. That is as true now as ever.

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[Stephen Kinnock (Aberavon) (Lab)]

It is a pleasure to serve under your chairship, Ms Nokes. I congratulate the hon. Member for Stoke-on-Trent South (Jack Brereton) on securing this very important debate.

Manufacturing is the backbone of the British economy, but it is a backbone that has been dangerously damaged in recent decades. By failing to back our manufacturing sector, successive Conservative Governments since 2010 have only succeeded in offshoring jobs. As a result, they are ripping the heart out of our local communities, while also offshoring our carbon emissions. The Government’s No.1 priority should be to do whatever it takes to support and regenerate our manufacturing sector.

Steel is the cornerstone of that manufacturing sector, and it will continue to be so for decades into the future. Steel is the homes that we live in, the vehicles that we drive and the offices that we work in. Steel will build the smart cars and the wind turbines that power our economy forward. The Government appear to believe that steel is a sunset industry, but nothing could be further from the truth. The steel industry is a hotbed of innovation and pioneering technology.

Tata Steel is the largest private sector employer in my constituency, and the company is absolutely determined that there should be a future for UK steelmaking, while also recognising the importance of decarbonisation. It recognises that for UK steelmaking to enjoy a prosperous future, the industry needs support and partnership from the UK Government, first by working with the industry to manage a pathway to net zero on both public and private investment, but also by the Government levelling the playing field in order to ensure that the industry is competitive against its European counterparts.

Let us be clear—the current energy spike has played havoc with energy-intensive industries.

[Sir William Cash (Stone) (Con)]

The hon. Gentleman is making a first-class speech. I was brought up in Sheffield and lived there for 20-odd years. I know what he is talking about and he is completely right. I am not going to make a speech, but I want to congratulate him.

[Stephen Kinnock]

I thank the hon. Member for his kind words.

Let us be clear—the energy spike has played havoc. November 2021 prices peaked at 50 times the 2020 average, at £2,000 per megawatt hour. The monthly average wholesale costs are 50% higher than in Germany. These extraordinary electricity prices are leading to smaller or completely eliminated profits, and thus to less reinvestment and even pauses in production for some companies. Higher electricity prices also act as a disincentive for investment from international steel companies, with the UK being seen as a less favourable investment environment than other places.

The potential for a widening price gap between the UK and our European competitors means a loss of market share, both in the UK and in key export markets. That is why it is utterly self-defeating for Ofgem to recommend that network energy prices rise even higher. The Business, Energy and Industrial Strategy Committee has rightly called for the steel industry to be exempt from this price hike; let us hope that Ofgem, the Secretary of State for Business, Energy and Industrial Strategy and the Minister, who is in his place today, will take heed of the Committee’s recommendations.

Other European countries have taken quicker and more expansive action than the British Government by offering support to energy-intensive industries. As has already been mentioned, the Portuguese Government have announced a minimum 30% reduction in network charges for industrial users. The Italian Government have pledged over £4 billion to eliminate renewable levies on gas for industry and electricity for small and medium-sized enterprises. In Spain, we have seen tax cuts and the temporary reduction in extraordinary profits made by energy companies, including extending the existing suspension of a 7% power generation tax through year end. They will also cut their special electricity tax from the current 5.1% to 0.5%.

What we need to see in this country now is the provision of 100% compensation for costs of carbon in electricity bills, through a carbon price floor and a UK emissions trading scheme, up from the current 75% allowed for under EU state aid rules. We need to provide 85% compensation for the capacity market fee and an 85% reduction in network costs, in line with France and Germany, as well as full exemptions for the renewable levies or the introduction of additional compensation.

The Minister will point, of course, to the energy-intensive industries compensation fund, but that was half a decade ago, and the gap I have just described exists after that fund is taken into account. We have had enough of warm words; we must now commit to levelling the playing field for our steel companies. It is the least British workers in industrial communities deserve. What a contrast between the Government’s dithering and Labour’s bold and ambitious £3 billion steel renewal fund. In that fund, we pledge serious investment while the Chancellor had absolutely nothing to say about steel in the Budget. It is a dereliction of duty and makes a mockery of the Government’s so-called levelling-up policies. Tragically, successive Conservative Governments have failed to support our steelworkers and their families and communities. What a contrast with our party and our steel unions, which truly grasp the central importance of the steel industry to the past, present and future of our country. Let us hope that the Government will at some point recognise the need to unleash a modern manufacturing renaissance, with steel at its heart.