The Government’s Productivity Plan

Dan Poulter Excerpts

Tuesday 28th February 2017 Commons Chamber

[Amanda Milling (Cannock Chase) (Con)]

It is a real pleasure to follow my hon. Friend the Member for Horsham (Jeremy Quin), with whom I sat on the joint Committee inquiry, and so many colleagues from the Business, Energy and Industrial Committee including: the hon. Member for Edinburgh West (Michelle Thomson) who, as ever, demonstrated she is a strong voice for Scotland on the Committee; our excellent Chair; and my hon. Friends the Members for Derby North (Amanda Solloway) and for Warwick and Leamington (Chris White).

Many Members have mentioned that the Government’s focus on productivity is very welcome. While many economic indicators are good—we have debated the fall in unemployment this afternoon—productivity remains stubbornly poor, and the word “stubbornly” has been mentioned several times this afternoon. If we are to ensure a sustainable economic recovery—one that is resilient to potential economic challenges—we really do need to address the issue of productivity. Let us be honest: that is not something new, and it is an issue that successive Governments of all political parties have struggled to tackle.

The Government’s focus on improving our productivity was first introduced with the publication of the productivity plan back in 2015. As other members of the Committee have outlined, we conducted an inquiry into the plan, and I want to pick up on a number of the points and concerns the Committee raised. One was about the lack of real focus—more specifically, the lack of measurable objectives—in the plan, and I want to come back to that. There was also the lack of a real plan in terms of implementation, milestones and timeframes. To be honest, there was a sense that, in some ways, the plan was a bit of a basket of different policies, rather than necessarily a strategic plan for the future. Some of those issues are relevant when we look at the industrial strategy—the Green Paper on it was published earlier this year.

I think it is fair to say—I am looking to the Chairman of the Committee for a nod at this point—that the fact that the Government response provided some measurable objectives was welcome. The Committee did not necessarily agree with all of them, but we were pleased that there were some measurements and metrics in there.

As everybody has mentioned this afternoon, the focus on productivity has been central to the Government’s energy since the new Prime Minister took office. She has been very clear that she wants to create an economy that works for everyone. A key part of delivering that will be developing this new, modern industrial strategy, and, as I said, we saw the publication of the Green Paper in January. I want to pull out something that was in the Secretary of State’s introduction to the industrial strategy Green Paper:

“the Government is committed to a modern industrial strategy. Its objective is to improve living standards and economic growth by increasing productivity and driving growth across the whole country.”

In short, the industrial strategy has productivity at its heart.

I am sorry to repeat the same point, but many Members have already mentioned that our productivity is poor, and we underperform compared with international counterparts—we are equal fifth with Canada among the G7 countries. Our productivity is 18 percentage points below the average for the rest of the G7. However, there is also a significant disparity regionally, and the Chairman of the Committee made the same point. As the Chancellor said in January:

“The challenge before us is to work out how to spread across the economy the best practice in productivity…so that all regions, and all corners and sectors of our economy, can share in this productivity performance and thus deliver the higher real wages and living standards that that implies.”—[Official Report, 24 January 2017; Vol. 620, c. 236.]

It has already been mentioned that London has the highest productivity of any region or country in the UK—let us be honest, that is not necessarily surprising. The only other region above the UK average in 2014 was the south-east.

What was really worrying to me, as a Staffordshire MP, was the position of the west midlands. We are the worst-performing English region. The question I have been asking myself is, why are the west midlands performing so poorly relative to other regions? More specifically, what do we need to do to address that? My hon. Friends the Members for Derby North and for Warwick and Leamington talked about some of the excellent manufacturing businesses we have in the west midlands. We have Jaguar Land Rover, JCB, Toyota and Rolls-Royce to name just a few. Is the issue the make-up of our businesses, or is it, as my hon. Friend the Member for Halesowen and Rowley Regis (James Morris) mentioned, transport? The M6 is not a million miles from my constituency.

[Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con)]

My hon. Friend makes a good point about transport connectivity, but does she agree that as well as road connectivity, rail and freight rail connectivity are particularly important? The Felixstowe to Nuneaton freight rail link is essential to ensure that freight and goods can get out through Felixstowe port, and improvements to the line are essential if we are to deliver the improved productivity in her region that she talks about.

[Amanda Milling]

I am grateful for my hon. Friend’s intervention, and some Members might hope that I do not start to talk about rail in too much detail, because I have spoken about it a lot in the House. My hon. Friend makes an incredibly important point, and one of the issues with the west coast main line is capacity in terms of not only passenger trains but freight trains. That is a key part of the transport infrastructure piece we need to look at. This is about road and rail, among other things.

One question I want to ask the Minister is: what is being done to look at the drivers of this regional disparity so that the different regions can understand what they need to do to address it?

--- Later in debate ---

[Robert Jenrick (Newark) (Con)]

It is a pleasure to speak in this debate. I congratulate the Chair of the Business, Energy and Industrial Strategy Committee and its other members, most of whom are here, on their success in pursuing tenaciously Philip Green. I have heard during the course of the debate that he is making a payment equivalent to four of his super-yachts, and that will be on the way as soon as possible. That shows that tenacious and persistent Select Committee questioning can yield results.

I do not intend to speak for long, having spoken in at least two similar debates on this topic over the past year or two. During that time, as a result of a management change, productivity plans have become industrial strategies, but I hope that most of the salient points will remain from the previous approach. The first point I want to make is one that my right hon. Friend the Member for Wokingham (John Redwood) and I made earlier: that we have to proceed with some caution before we are too blasé about the incredible job creation record of this Government and their predecessor. In my constituency, unemployment is now about 0.5%. The average wage in my town remains pretty low, at about £22,000 or £23,000 a year. Like other right hon. and hon. Members, I would like to see wages rise and none of my constituents stuck in poorly paid, low-skilled jobs. I want everyone to have not just the dignity and security of a job but the fulfilment of a career path to better-paid, better-skilled employment. However, we have to be careful before wishing away these jobs. One piece in this country’s productivity puzzle that is perfectly explicable is the fact that we have had extremely high levels of employment while some of our competitors have not. I am sure that none of us in this House would wish to replicate the levels of employment in countries in continental Europe such as France, Spain and Italy.

Immigration has certainly played a part in this. In my constituency, the fact of very high levels of migrants coming into my community has led to very little pressure on wages. Local employers I have met, particularly in the low-skilled or even unskilled areas of food production, agriculture and the care sector, have seen no demand on them to increase wages in the past five years or even more. That will of course change with Brexit. It will be a major challenge to my local economy, as to the whole country, to maintain this level of employment in those circumstances. Having said that, we obviously all share the objective of becoming a country in which people are not just employed, but well paid.

[Dr Poulter]

My hon. Friend makes some good points about productivity challenges and those of stagnating and low wages in certain sectors. I caution him, however, on the care sector, because workers from the EU and from further overseas fill those jobs. The care sector faces huge challenges in finding enough people to do that work, be they from overseas or from Britain, and, in the long term, the issue of wages is not going to be solved by Brexit.

[Robert Jenrick]

I apologise if I chose my words poorly, but the point that I was trying to make is that we need to exercise great caution, because two things have had an effect. The first is that high levels of immigration have meant that wages have been supressed, but as we leave the European Union we also need to ensure that people continue to do those jobs, whether they be in the care sector or, indeed, in the food production industry in my constituency. There is a challenge ahead for the Government not only to maintain employment levels, but to ensure that there is a better-paid workforce.

Secondly, as has already been said, a major contributor to our loss of, or stagnating, productivity in recent years has been the decline in the financial services sector since the financial crash of 2008. That has happened not just in London, but across the country, including Edinburgh in Scotland, Manchester and my own city of Nottingham, where the related company Experian is based. There are fewer jobs and less productivity. Nobody is a friend of investment bankers, but they are highly productive members of the economy and we need to be careful about how we accommodate the financial services sector post-Brexit. Personally, I am fairly optimistic about the future, given that those investment bankers and lawyers to whom I have spoken will not follow the entreaties of Mr Macron and move to France, with its sclerotic, socialist economy, any time soon.

We need to be careful, however, about how we proceed in tackling the productivity gap. I am particularly cautious about spending more money and getting the country into further debt. The national debt, of course, is £1.8 trillion and it is increasing at a rate of £5,000 per second. Levels of austerity have been grossly overstated: public spending has fallen by only 5% or 6% in real terms since 2010. Although it has fallen as a percentage of GDP, it remains a major problem, and I am particularly concerned that fewer and fewer right hon. and hon. Members even mention the debt and the deficit as part of our national dialogue. That needs to change, because the greatest threat to our economy and productivity is the debt we are leaving to future generations.

Green Investment Bank

Dan Poulter Excerpts

Wednesday 25th January 2017 Westminster Hall

[Michelle Thomson]

I am extremely happy to acknowledge that point, and I agree; I suspect the hon. Lady may have read the next section of my speech. She has absolutely hit the nail on the head.

I was discussing what reinvestment would be made in the UK economy after any asset sales. How much influence fundamentally would the so-called golden share have if much of the activity is controlled outwith the UK? I am not expecting the Minister to answer all those questions, but they are part of wider consideration of what we are doing when we invest our UK taxpayers’ precious money and build the bank, then sell it without looking under the covers at what is happening as part of the commercial process.

Finally, on the preferred bidder, there are justifiable concerns about the company’s intentions. Concerns have been raised about its approach to refinancing and debt, particularly in former public companies such as Thames Water. Jonathan Maxwell, the chief executive of Sustainable Development Capital, makes a case for his consortium, which includes the state-backed Pension Protection Fund, as the best alternative to meet the Government’s goals for the GIB. Would that be a better fit for our wider concerns about the green agenda and to encourage the growth of green, particularly in the light of the threat that Brexit poses to the wider economy?

The UK Government have used a smokescreen of commercial confidentiality, so that proper scrutiny by this Parliament cannot take place. However, it is the UK taxpayer who provided the capital to set up the bank and who could lose out in a sale, without proper scrutiny. We, the UK taxpayers, currently own the GIB and we, the hon. Members from across the House who represent our constituencies, need to assure ourselves that the sale represents real value at present.

The concerns were succinctly summed up by Nils Pratley, writing for The Guardian:

“But what if Macquarie thinks GIB is worth more dead than alive? What if it pays £2bn for GIB, liquidates most of the assets at a handsome profit and then decides the capital is better deployed elsewhere?”

What assessment has the Minister made of a sale making it more likely for the UK to meet its Paris climate change obligations? If he has made that assessment, will he make it available?

[Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con)]

I congratulate the hon. Lady on securing the debate; her last point was key. Under the Paris climate change agreement, a pan-European solution was being looked at for this country to meet our climate change commitments and reduce our carbon footprint. Given the consequences of Brexit, is it not all the more important that we preserve the assets in this country that will help us independently to meet the commitments under the Paris and previous climate change agreements?

[Michelle Thomson]

I absolutely agree, and I sum up by asking: is this the right time for a sale to anybody in the light of Brexit, when the focus fundamentally must be on innovation and positioning ourselves to take advantage of key growth sectors?

UK Decarbonisation and Carbon Capture and Storage

Dan Poulter Excerpts

Tuesday 24th January 2017 Westminster Hall

[Philip Boswell]

Thank you, Mr Betts. I will continue with my quotation from Matthew Bell:

“We have a 15 to 20-year time horizon with reasonable certainty for the role of gas, then we have an uncertain period—is that enough for investors to decide to go ahead with their projects? There is a way of clarifying that uncertainty, and that is for the government to be clear on CCS.”

There is a consensus from watchdogs and experts alike. They agree that the Government have the opportunity to get this right. Getting it right, including carbon capture and storage, will be more economical for the UK in achieving our climate change targets, while simultaneously creating CCS as a leading, technologically advanced industry within the UK.

What of the costs of meeting our climate change commitments without CCS? The National Audit Office’s report of 20 January 2017, “Carbon capture and storage: the second competition for government support”, found that carbon capture and storage “formed an important part” of the Department for Business, Energy and Industrial Strategy’s role in reducing carbon dioxide emissions. The report goes on to state:

“Given its potential to decarbonise different sectors, many stakeholders still regard CCS as being critically important to the UK achieving its decarbonisation target. It is currently inconceivable that CCS projects will be developed without government support.”

That support would enable investment in CCS, creating a large-scale demonstration of CCS technical and commercial viability, and leading to further-improved CCS schemes in the UK and the development of CCS as a successful industry. Although the report is constrained by the very specific NAO brief, which was to assess how the Department ran the second competition before its cancellation, it is none the less unequivocal in its support for CCS as the least-cost route to decarbonisation.

What of the most detailed report focused on the determination of whether CCS offers the solution of lowest-cost decarbonisation? I am referring to “Lowest Cost Decarbonisation for the UK: The Critical Role of CCS”, which is cited as Oxburgh 2016, a report from the parliamentary advisory group on carbon capture and storage to the Secretary of State for Business, Energy and Industrial Strategy. The report was requested by the then Secretary of State for Energy and Climate Change, the right hon. Member for Hastings and Rye (Amber Rudd). Its terms of reference were to assess the potential contribution of CCS to cost-effective UK decarbonisation and to recommend accordingly to the Secretary of State by the end of summer 2016.

The report was delivered by Lord Oxburgh and his team in September 2016. The group comprised some of the most qualified and experienced representatives of politics, industry and academia. They did not carry out primary research but instead, given the substantial volume of work already published on the subject, focused on synthesising experience and knowledge into an optimum recommendation. They also considered walking away from CCS as an option.

The report found six core recommendations that are worth repeating in full:

“1. Establish a CCS Delivery Company…A newly formed and initially state-owned company tasked with delivering full-chain CCS for power at strategic hubs around the UK at or below £85/MWh on a baseload CfD equivalent basis. Formed of two linked but separately regulated companies: ‘PowerCo’ to deliver the power stations and ‘T&SCo’ to deliver the transport and storage infrastructure, the CCSDC will need c.£200-300m of funding over the coming 4-5 years.

2. Establish a system of economic regulation for CCS in the UK…The government will establish a system of economic regulation for CCS in the UK which is based on a regulated return approach. This will draw heavily on existing regulatory structures in the energy system and hence include: a CCS Power Contract based on the existing CfD or capacity contract to incentivise CCS for power…

3. Incentivise industrial CCS through Industrial Capture Contracts…The Industrial Capture Contract, will be funded by the UK government and will remunerate industry for capture and storage of their CO₂. It will be a regulated contract which will have a higher price in the early period in order to deliver capital repayment in a timescale consistent with industry horizons…

4. Establish a Heat Transformation Group…The Heat Transformation Group will assess the least cost route to the decarbonisation of heat in the UK (comparing electricity and hydrogen) and complete the work needed to assess the chosen approach in detail. The HTG has a likely funding need of £70-90m.

5. Establish a CCS Certificate System”—

this is completely self-explanatory—

“Government will implement a CCS Certificate System for the certification of captured and stored CO<sub>2.

6. Establish a CCS Obligation System…Government will also implement a CCS Obligation from the late 2020s as a means of giving a long-term trajectory to the fossil fuel and CCS industries. This will put an obligation on fossil fuel suppliers to the UK to sequester a growing percentage of the CO2 associated with that supply.”

Climate change bodies, politicians and industry alike almost all agree that CCS is the optimum low-cost option for decarbonising the UK, but it is generally accepted that only Government intervention will stimulate it in the UK. I therefore ask the Minister please to consider carefully carbon capture and storage as part of the Government’s new, hands-on, interventionist industrial strategy for Britain.

What is the way forward? The way to a greener industrial future and lowest-cost decarbonisation for the UK without doubt includes carbon capture and storage. The proven technology continues to improve and we should not be frightened to embrace the new technologies that continue to spring up around CCS, such as Toshiba’s new 25-MW-gross electric turbine, the headline for which reads:

“Toshiba Ships Turbine for World’s First Direct-Fired Supercritical Oxy-Combustion CO2 Power Cycle Demonstration Plant to U.S.”.

That supercritical CO2 power-cycle system achieves the same level of generating efficiency as a combined-cycle power plant. It separates and collects CO2 at high pressure, eliminating the need for separate carbon capture equipment or processes, and secures full CO2 capture—I repeat: full CO2 capture—without any increase in the cost of electricity, using supercritical CO2 as a working fluid to generate low-cost electricity while eliminating emissions of nitrogen oxides and other pollutants. We must embrace such technology or risk falling further behind or completely missing out on a unique opportunity.

Where should we develop the first CCS project? We already have some shovel-ready projects.</sub>

[Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con)]

I congratulate the hon. Gentleman on securing the debate. He is making some good points. Has he considered the impact that leaving the European Union might have on Britain’s ability to deliver on its climate change obligations? Previously, we looked towards a European-wide solution at the Paris climate change summit, so what more do we now need to do in Britain to meet those carbon-reduction obligations?

[Philip Boswell]

The hon. Gentleman makes a good point. Now that we have chosen this path for the country, I hope that Brexiteers and remainers alike will make the best fist of it and work collectively with our European neighbours for the best, but he is right that we should do more in Britain and should focus on that. His point is well made.

--- Later in debate ---

[Peter Aldous]

I agree that CCS has an important role to play in the regeneration of coastal communities and perhaps areas that have been forgotten over the last few years. That includes the area that the hon. Gentleman represents, many areas in Scotland and the area that I represent.

The report contains six recommendations for how CCS can perform that crucial role. I believe that we reached the right conclusions, for three reasons. First, the UK has made commitments, through the Climate Change Act 2008 and international agreements, to reduce carbon emissions. Those were most recently reconfirmed in Paris in autumn 2015. As a result, we have a duty to put in place measures that will enable us to get on with meeting those targets at the lowest possible cost to the country’s consumers and taxpayers.

It quickly became apparent to the group that we cannot get on with that without CCS. The great advantage of CCS is that it is a highly strategic technology that can deliver emissions reductions across many sectors, including, as we have heard, power generation, energy-intensive industries, heat and transport. It should also be pointed out that CCS has the potential to safely store 15% of current UK CO₂ emissions by 2030 and up to 40% by 2050.

There is a cost associated with inaction on CCS. Last summer, the Committee on Climate Change highlighted that if we take no action on CCS, the cost to UK consumers will be £1 billion to £2 billion per annum in the 2020s, rising to £4 billion to £5 billion per annum in the 2040s.

[Dr Poulter]

I endorse all my hon. Friend’s points. Does the history of renewable energy not show that those who invest early not only reduce their carbon footprint much more rapidly, but save money downstream? It will become much more difficult to invest and much more expensive to the UK taxpayer if we leave this decision for five or 10 years.

[Peter Aldous]

I agree. There is a compelling case for us to get on with this now.

The second reason why CCS is important is cost. That was why the previous pilots failed. The Oxburgh report established that the high costs revealed by earlier approaches in the UK were attributable to the design of the competitions, not the underlying costs of CCS itself. Analysis by the CCS Reduction Task Force and for the Committee on Climate Change, which was confirmed by Lord Oxburgh’s group, showed that CCS can be delivered at approximately £85 per MWh. That is competitive with other large-scale low-carbon energies such as nuclear and offshore wind.

CCS also has what I regard as a unique selling point. Some people might say, “Why us? Why the UK? Let other countries, such as Norway, do the hard legwork to get the technology off the ground. We’ll join the party later.” Such comments are wrong and misplaced, and out of context with what Britain should be doing in this post-Brexit world. The UK has a unique selling point that means that we must be pioneers in the vanguard of the CCS movement. This USP—what unites me in my Waveney constituency in East Anglia with the hon. Members from Scotland and the north-east—is the North sea, the United Kingdom continental shelf, where we have our own large safe and secure CO₂ storage vessel offshore in the rocks in this country’s territorial waters. As a result of the development of the oil and gas industry in the North sea over the past 50 years, the UK has developed an enormous expertise of experience that we can harness to deliver carbon capture and storage.

Yesterday the Government published their Green Paper, “Building our Industrial Strategy”. CCS and implementing the recommendations of the Oxburgh report fit well with the Government’s ambitions and directions of travel. When I go through the pillars underpinning the industrial strategy, CCS ticks all 10 boxes. If the Government accept the six Oxburgh recommendations, they will invest in science, research and particularly innovation. Investing in CCS goes hand in hand with developing skills, boosting science, technology, engineering and maths skills, and raising school levels and lagging areas. I could go through all 10, but I sense my time is pressing, Mr Betts, so I will cut to the chase—to the final pillar of creating the right institutions to bring together sectors and places.

The strategy states:

“We will consider the best structures to support people, industries and places.”

That is a ringing endorsement for the six Oxburgh report recommendations.

On that note, I will conclude. Lord Oxburgh has provided the right framework for an exciting new industry and now is the right time to invest in CCS.

--- Later in debate ---

[Dr Poulter]

Is not there also a case in respect of fuel poverty? Improving insulation and taking other demand-side measures to reduce the demand for electricity is a very good thing in which to invest. It decarbonises, but it also saves people, particularly those on fixed incomes, money on their heating bills.

[Callum McCaig]

The hon. Gentleman is absolutely correct: the cheapest fuel that we will ever use is the fuel that we do not use at all. Investing in such measures will save money and reduce fuel poverty. The coal-fired power stations to which the hon. Member for East Antrim made reference will be coming off the system anyway. They will have to be replaced, and they will be replaced by something that will not come free. It will be expensive, but it can be expensive in a way that is good for the environment and good for our industrial base, or it can be expensive in terms of its fuel and its production and the cost to the environment.

There are two ways to go about this. We can be at the front of the queue; we can be a leader and we can have first-mover advantage. That protects our business, allows us to export and allows us to save money for our consumers and industrial producers. I hope that the Minister and the Government will take that course and back CCS for the long-term future of the UK and our energy industries.

Oral Answers to Questions

Dan Poulter Excerpts

Tuesday 8th November 2016 Commons Chamber

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Margot James)]

Marks & Spencer has a good record of consulting its staff. It has a regional, a local and a national body, and it consults them widely on all its plans for any changes in terms and conditions. I would add that it is rather unfair on Marks & Spencer to put it in the same bracket as BHS.

[Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con)]

Many people in Suffolk welcome plans for a Sizewell C power station, but would the Minister not agree that it is vital that with those plans come the requisite improvements in rail and road infrastructure? Importantly, that includes looking at the pinch points on the road around the four villages of Stratford St Andrew, Farnham, Little Glemham and Marlesford.

[Greg Clark]

My hon. Friend is absolutely right. One of the changes that we have made, through the growth deals and local enterprise partnerships, has been to bring major investment in line with major infrastructure improvements.