Rolls-Royce Redundancies

Alan Brown Excerpts

Thursday 14th June 2018 Commons Chamber

[Greg Clark]

My hon. Friend raises an important point. The company has a firm commitment to apprenticeships, and I will emphasise the importance of continuity in the training offered to apprentices.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Any job losses are clearly a concern, so the potential loss of 4,600 jobs is a huge worry. I have constituents who work at the Inchinnan Rolls-Royce plant, so will the Secretary of State advise us of whether the restructuring will have any impact on jobs in Scotland?

While people often talk in general terms about having too many chiefs and not enough Indians, does the Secretary of State share my worry that it seems counterintuitive that Rolls-Royce says it will employ more engineers, continue to increase investment in R&D and expand massively while it is restructuring and downsizing the management? That does not sound quite right to me. Will the Secretary of State confirm that the Government will work urgently with Rolls-Royce, the unions and staff affected by the job losses to ensure that they can find alternative employment, if required, and that they get suitable retraining to find other jobs?

Will the Secretary of State advise the House on whether Brexit will have an impact on Rolls-Royce, in terms of the customs union? The company has already said that it is thinking about relocating the jet engine design approval process to Germany from the UK, so could that have an impact on jobs? What impact will the rules of origin have on the company’s manufacturing? What discussions has the Government had about the potential impact on Rolls-Royce’s aspirations for small modular nuclear reactors?

[Greg Clark]

I am grateful to the hon. Gentleman for his questions. It is too early to know the distribution of the proposed redundancies across the United Kingdom. As I said to the right hon. Member for Derby South, the management headquarters is obviously in Derby, so the expectation is that most of the UK job losses will happen there, but the company and I will keep Members up to date as the consultation takes place.

As for the combination of an intention to expand the production of aerospace engines and a growing order book with the need for fewer managers, that is not uncommon across competitive industries, and most industries are becoming simpler in their internal processes. That is not to say that the skills, commitment and loyalty of those who are affected are not extremely high and that they will not be in strong demand elsewhere, and it is important that we support that. We will provide all the help and assistance we can if retraining is needed.

The hon. Gentleman asks about Brexit, and Rolls-Royce has been clear that this is about making the company more efficient. It has no relation to Brexit, although it is fair to say that the continued ability to operate a just-in-time production system once we leave the European Union will, of course, be very important to the company.

Oral Answers to Questions

Alan Brown Excerpts

Tuesday 12th June 2018 Commons Chamber

[Mr Gyimah]

As I said, we have the biggest increase in science and innovation in this country for 40 years. As for the UK-EU science collaboration, the EU Commissioner himself said:

“It is very important for the UK and it is very important for the EU to have a relationship in science and innovation. We’ve had this relationship for so long”.

On Galileo, negotiations are under way and we have made it very clear not only that it benefits the UK but that EU member states stand to lose skills and other important issues without the UK’s involvement.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

12. What steps he is taking to support the oil and gas sector in Scotland.

[The Minister for Energy and Clean Growth (Claire Perry)]

This Government have provided unprecedented levels of support to help this incredibly important sector—that is something on which we do agree. The Government announced the transferable tax allowance, the sector’s No. 1 ask; established the Oil and Gas Authority; invested in the Aberdeen city deal, including the excellent £90 million Oil and Gas Technology Centre, which I was pleased to visit; and put together a fiscal package worth £2.3 billion. It is working, with 16 new final investment decisions this year.

[Alan Brown]

That all sounds very good, but the reality is that in 2016 the Budget measures on support for the oil and gas industry were only a third of the measures on inheritance tax. The measure on transferable tax history has been delayed further, so when will that come forward? Why can the Government find billions and billions of pounds for nuclear but not for the oil and gas sector?

[Claire Perry]

The hon. Gentleman and I usually talk about the sector in very positive terms. We have delivered the things that the sector has asked for and it is working. It is fantastic to see investment happening in the North sea basin. The fact that the sector has gone through a time of building resilience given the oil price decline means that it is now starting to invest and grow again.

Nuclear Power

Alan Brown Excerpts

Monday 4th June 2018 Commons Chamber

[Greg Clark]

My right hon. Friend takes a great interest in this issue. When I made my statement on Hinkley he advised that we should consider using the Government’s balance sheet in that way, and we will consider that as part of the discussions. As for the contracts that are entered into, one of the requirements of the state aid regime is that any contracts have to be on a non-discriminatory basis, which will guide the letting of any such contract.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

I thank the Secretary of State for early sight of his statement but, to be truthful, it did not tell us any more than we have been able to glean from the media today. I find the Government’s nuclear obsession mind-boggling. When Hinkley was first proposed all those years ago it was on the basis that it had to be commissioned by December 2017 or there would be a risk of the lights going out. All these years later, it will not be generating at full capacity until something like 2030, which seems to undermine the need for new nuclear.

Hinkley is shocking value for money, with a 35-year megawatt-hour strike price of £92.50, whereas recent offshore auctions have returned bids of £57.50 per megawatt-hour over a 15-year period. That is the real cost benchmark that the Government should use. Considering that the National Audit Office concluded that it would be impossible to know for decades whether building Hinkley represented good value for money for UK taxpayers, it is utterly incredible that we are diving headlong into another costly venture. The Secretary of State has said that he wants to do a sector deal, but we do not know what value for money that will provide. It has been reported that the strike price for the new power station will be something like £15 per megawatt-hour cheaper than at Hinkley, but how much of that cost reduction is due to the billions of pounds of direct investment from the taxpayer?

Given the company’s questionable track record on safety, will the Government confirm that Hitachi will be financially liable in the event of any accidents? Given the unprecedented level of taxpayer investment, how will the Government demonstrate that they have met the Public Accounts Committee’s demand for a full value for money assessment before they finally sign off the deal, and how will Parliament be able to scrutinise that? When will we know the level of the financial commitments?

If the Secretary of State is so willing to commit taxpayers’ money directly for stakes in projects, will he consider paying for national grid upgrades to further facilitate the deployment of renewables, instead of tagging such upgrades on to the costs of renewable projects? As bad as the Government’s obsession with nuclear is, this is also about their attacks on renewable investment. When will they have a coherent energy policy and proper investment in future technologies rather than a technology that has had its day?

[Greg Clark]

I thank the hon. Gentleman for his comments. On statements to the House, I think all Members would recognise that I have come to the House at the earliest possible opportunity. It was today that the decision was taken to enter into negotiations. Members will know that I always keep the House updated and always will.

It is a bit rich of the hon. Gentleman to complain that new nuclear power will come online later in the 2020s, given that he and his colleagues have resisted the replacement of our nuclear fleet, which we have known needs to be replaced for all this time. It is an act of responsibility on the part of this Government that we are planning ahead for the replacement of the 20% of our electricity that is currently generated from nuclear power. It is important for consumers in Scotland and in the rest of the United Kingdom that we do that.

The hon. Gentleman criticised what he regarded as the value for money of the Hinkley project. He will have heard me say at the time that that represents the highest price we will pay for new nuclear. I expect future new nuclear power stations to come in at a lower price. I have made it explicit today that that is a requirement of the negotiation. However, this is the beginning of a formal period of negotiation.

The recommendations of the Public Accounts Committee and the National Audit Office have shaped the approach we are taking. The value for money test has to be met, and at all the key milestones I will ensure that Parliament has the opportunity to scrutinise the progress of the negotiations.

Domestic Gas and Electricity (Tariff Cap) Bill

Alan Brown Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Monday 30th April 2018 Commons Chamber

[Dr Whitehead]

The hon. Lady is, I think, under the impression that the new clause seeks to introduce a relative price cap. It does not seek to do that at all, or indeed during the period when an absolute price cap is in place. When the absolute price cap has come to an end, which could happen on various dates, there should be a mechanism in place to ensure that tariff differentiation is within certain bounds—I mentioned having a piece of elastic on tariffs—so that companies cannot return to the practice that unfortunately exists today whereby they can take people on board on one particular tariff, and even introduce a discount tariff for a certain period to entice people on to it, and then place people on one of their highest tariffs when that one comes to an end. It is a long piece of elastic in that case. That disadvantages the customer and is not what they thought would happen when they first went on to that tariff, and it seems thoroughly laudable to prevent that.

We need to ensure that market mechanisms are in place to prevent us from returning to where we are at present and to the situation that got us into this position in the first place. We believe that the mechanism for a relative tariff differential has a different function entirely from the relative price cap being suggested in some quarters. I think we would all agree that a relative tariff differential is not a price cap in its own right, as the Select Committee concluded strongly, but a strong mechanism for ensuring that the market works better in future.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

One concern about a relative cap is that there could be a bit of floor-raising, with some of the cheaper tariffs disappearing. Although there might not be a cap in future, what is to stop the same thing happening with a relative tariff system, where we lose the bottom tariffs in the market?

[Dr Whitehead]

The hon. Gentleman makes an important point about the possibility that within a relative tariff range arrangement, a company could put forward a very high tariff as a starting point and then put customers on an even higher tariff subsequently, if that tariff is within the piece of elastic keeping the tariffs within reach of each other. If an energy company were to do that outside a price cap, it would be a sure way of losing a large number of customers, because it would have put its initial tariff way above that of any competitors. If it was agreed that market circumstances were such that those sorts of arrangements should be able to return, companies would have to be kamikaze-inclined to pursue that way of doing things.

[Alan Brown]

I appreciate what the hon. Gentleman is saying, but is that not why we are introducing an energy tariff Bill in the first place—because people have been on standard variable tariffs that are too expensive, but they are not moving? It is the same with a relative tariff differential; people will not necessarily move, and that is what we really need to sort out in the market.

[Dr Whitehead]

We have to bear in mind that people will be introduced to a new tariff. Indeed, we hope that by the time the market returns, the issue of people remaining on SVTs for years and not switching will be a thing of the past and there will not be SVTs in the system, but also that there will be other tariff arrangements that effectively prevent SVTs from playing the role they have played before.

--- Later in debate ---

[James Heappey]

It is a pleasure to follow the right hon. Member for Don Valley (Caroline Flint), with whom I agree on the risk to green tariffs and on making sure that we do not perpetuate the belief that green tariffs are a premium product. We want them to become the universal norm.

Generally, the Bill is a necessary evil. Interference with the market is not our first choice of action, but it is the consequence of a market that has stopped working and is exploiting customers, especially those who are least engaged in it. The Bill’s key point is its temporariness. I know that the Minister shares my strong belief that temporary should be as temporary as it absolutely can be. It therefore becomes essential that once the Bill is passed—it is good to see the Opposition’s continued support—Ofgem moves very quickly not only to come up with a mechanism for price capping, but to consider what sort of market transformation it can deliver as it changes the regulatory framework in the market, so that we end up with something that is markedly better than what we have now. The big savings come not from a cap that cuts bills by £100 or more, but from the delivery of an energy market that is digitised and cheaper because we have facilitated the disruptive powers of all the new suppliers that are coming in, which in turn will encourage the current large suppliers to change their ways to do business better.

I intervened on the shadow Minister, the hon. Member for Southampton, Test (Dr Whitehead), about his amendment 5, so I will not say anything more about that. The purpose served by amendment 6, as we discussed in Committee, is to say to the energy companies that all they need to do is save customers £100—so they will just save customers £100. I passionately believe, therefore, that we should not tell them just to save customers £100. Instead, we should deliver the biggest saving that we reasonably can through whatever device Ofgem delivers, but the moment that we put a figure on it, lo and behold, that is exactly what all the energy companies will deliver.

The hon. Gentleman has made some changes to amendment 7 since Committee stage. He knows I share his concerns about vulnerable customers and possible unintended consequences from the Bill, and I know the Minister will be keen to reassure us that the Government have got this covered, but I prefer amendment 9, tabled by the hon. Member for Leeds West (Rachel Reeves), which has the support of many on the Select Committee and is well worth considering. The Government have looked at the vulnerable customer issue since Committee stage, and I wonder, given today’s very sensible amendments, if they might run one more lap on this between now and consideration in another place.

On amendment 8, which we also discussed in Committee and which the hon. Gentleman has also come back with, my concern is that the list could be much longer. If we are to specify all the circumstances, why not designate another dozen or two dozen things that we could legislate for, if we absolutely had to? I am not convinced it is necessary.

I also have a problem with new clause 1, because the Bill needs to be temporary. As I said either on Second Reading or in a Westminster Hall debate, it needs to be a raid into the energy market, not an occupation. New clause 1 is a raid with a few troops left behind thereafter, which I am not sure I like very much. We want to ensure that Mr Nolan and his team at Ofgem can, in delivering the price cap, facilitate a transformation in the market that makes such legislative provisions redundant. The consumer-friendly, disrupted, digitised market that awaits will be so much cheaper that we will be glad to have made this slightly un-Conservative, temporary raid into the market, to deliver something on the other side that is much better for consumers.

[Alan Brown]

The Bill is designed to intervene in the energy market and correct market failure, which is why it has cross-party support, but not surprisingly, because it is a reaction to market failure, there are nuanced differences in how people think that can best be dealt with. One good thing is that everybody seems keen to protect the most vulnerable customers. The question is: what do effective competition and a fairer market look like?

One fundamental still being debated is whether the cap should be a relative or an absolute cap. The hon. Member for Weston-super-Mare (John Penrose), who has been absolutely consistent in his belief that it should be a relative cap, should be commended for sticking by that, although obviously that does not mean I agree with him. As I mentioned in an intervention, one concern about a relative cap is that, because of the bunching effect, we might lose the competitive tariffs at the bottom end. We heard evidence of that in Committee. Some of the newer energy companies argue that they could deliver the lower tariffs even if there were a relative cap, but these companies appeal to those who switch regularly. He says the switching market works really well. Well, it does for those who switch regularly, but we are trying to protect those who do not switch and are stuck on these rip-off tariffs, which is why I agree with an absolute cap.

That brings me to new clause 1, tabled by the Labour Front Benchers. I am struggling to get my head around this. Labour says it does not believe in a relative cap but it believes in a relative tariff, and it would not be a cap but somehow it would work better being relative. It is too big a contradiction for me. I am not sure new clause 1 would work in the way suggested, and for that reason, if it goes to a Division, I will not support it, although I appreciate what the hon. Member for Southampton, Test (Dr Whitehead) is trying to achieve.

Let us look at who supports a relative cap versus an absolute cap. Ofgem, the regulator that will have to implement it and Citizens Advice are in favour of an absolute cap. Citizens Advice is a third sector organisation that works for the most vulnerable in society on a daily basis and often has to deal with those bearing the brunt of the Government’s austerity agenda, and if it says it is in favour of an absolute cap, I think we should listen. Now let us look at the company the hon. Member for Weston-super-Mare keeps. Signatories to his amendments include the hon. Member for North East Somerset (Mr Rees-Mogg) and the right hon. Member for Wokingham (John Redwood)—two of the most right-wing, free-market capitalists in this place. That helps me to make up my mind.

--- Later in debate ---

[Alan Brown]

I will be really brief. Clearly, we all support the Bill, so there is no point in over-debating it and delaying things much further. As the Secretary of State said, an overpayment of £1.4 billion was collected from customers in 2016. Some £650 million of that was effectively excess profits that customers were paying to the energy companies. That proves the need for the Bill. We can argue that it should have been introduced before, but at least it is here now, so let us get on with it.

I welcome the Secretary of State’s comments about ensuring that there are safeguards for vulnerable customers. That is really important; it is the whole ethos of the Bill. I hope that vulnerable customers get the protection that they need. I know that the Conservative party and the Government really hope that the provision will be temporary and that there will be no further state interventions in the market. It would be fantastic if that were the case, but I am not sure whether that will happen—we will wait and see. That is the whole point of Ofgem having the correct measures and of ensuring that we understand how the markets and the companies work. It was interesting that the mere threat of the Bill was enough to make companies change their behaviour and start reviewing their standard variable tariffs. At the very least, we need to be willing to threaten further state intervention if the market is not working as it should.

If we really want customers’ bills to come down, we will need further state intervention, including home energy efficiency schemes. I will finish with my usual plea about getting onshore renewables back on to the market because they are the cheapest form of energy at the moment. We know how successful the bidding process has been for offshore renewables, so let us get the cheapest form of energy back to market and help to bring down customers’ bills. I commend the Bill and look forward to its implementation.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Dieter Helm Energy Review

Alan Brown Excerpts

Tuesday 24th April 2018 Westminster Hall

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Mr McCabe. I congratulate the hon. Member for Blackley and Broughton (Graham Stringer) on bringing forward the debate. I was glad that we cleared up, right at the start, the pedantic point about the title and that we were not going to be debating whether Professor Helm should have been paid £500 or £400 a day.

The hon. Gentleman set out his stall with respect to the potential value of the overpayment by consumers. Obviously, we need to realise, going forward, that the issue is about getting the best value for consumers. I was a wee bit alarmed when he said that he was a scientist. I am a civil engineer, and I am always aware of how scientists like even more evidence-based detail. Funnily enough, one of the criticisms of Professor Helm’s report by some parties was that there was perhaps not enough evidence to back up his assertions. However, as other hon. Members have touched on, it certainly provides a good debating point, and throws down a few markers for the Government to consider.

The hon. Member for Blackley and Broughton mentioned a potential 1,600 new coal plants coming in around the world, while we are decarbonising and, correctly, eliminating coal-fired plants, so the UK impact on overall world reductions is pretty minimal. I do not think that that is the correct attitude. We must continue to lead by example on decarbonisation and to lobby and negotiate for others to do so. The hon. Gentleman was correct in pointing out that complexity is an issue—a theme that Dieter Helm brought out in his report.

A recurring theme of the hon. Gentleman’s remarks was the correctness or otherwise of the information presented by lobbyists for what he sees as vested interests. There is no doubt that it is a challenge for the Government and for all politicians when someone sets out how good their technology might be and how it might change the world. As I get more involved with the energy sector, it is a challenge to get to grips with the terminology—the buzzwords and abbreviations.

Most of the hon. Members in the Chamber seem to agree that the review is a good thing, but there has been debate on aspects of it. The hon. Member for Blackley and Broughton seems to question the value of the reductions in respect of offshore wind and how much is through cost reductions or efficiencies. I suggest that, at the very least, there has definitely been an increase in the efficiency of the manufacturing supply chain from going bigger and better. There is obviously an initial up-front cost. Cost reductions can be seen all around Europe. Given those similarities, I think there are genuine reductions in connection with technology.

In a relatively brief speech, the hon. Member for Ayr, Carrick and Cumnock (Bill Grant) touched on smart meters and the progress of the Domestic Gas and Electricity (Tariff Cap) Bill. He mentioned the Rubik’s cube, which is another thing I never got to grips with, and overpriced standard variable tariffs. At least in terms of the tariff cap and overpriced SVTs, cross-party working and political pressure are bringing the energy companies to book at last. I welcome that.

The hon. Gentleman talked about reducing fuel poverty. That is certainly important. I suggest that it is not just energy policy that leads to fuel poverty; austerity clearly feeds into it—if people do not have enough money coming into their household, they will, by default, almost certainly experience fuel poverty. So other Government policies have an impact.

My hon. Friend the Member for North Ayrshire and Arran (Patricia Gibson) gave a characteristically laid-back and chilled speech. I am tempted to go down that route, but I certainly agree with all the points she made. She concluded that consumers need to be at the heart of considerations. She is a champion of consumers, and I echo that sentiment. She correctly highlighted the issue of Hinkley Point. I shall come back to that and the fact that the cost of decarbonised energy is equivalent to 20% of bills; perhaps there is a better way of paying for decarbonisation.

Finally, we heard from the hon. Member for Wells (James Heappey). I congratulate his children on the high standard of their art work. The hon. Gentleman echoed Dieter Helm’s assertion that the auction system may be imperfect, but, as he said, it has clearly led to decarbonisation and the introduction of low-carbon technologies. There may be faults, but it has moved things in the right direction.

When the hon. Gentleman spoke of lobbyists and of losers backing Governments, I thought he might mean losers in government—but perhaps that is just a cheap shot by me. Electric vehicles are perhaps an offshoot of the debate, and although he said that there is increased uptake because people see them as the technology of the future, I am not sure we are quite there yet. Electric vehicle uptake is still too low, and we need to do more to get people to use them.

Uncharacteristically, I want to commend the Government for commissioning the review of energy policy. It may have been an admission that household energy bills are too expensive. As we have heard, that point has been reinforced by the announcement of the intended energy price cap—the Bill has its Third Reading on Monday. In October 2017 the Secretary of State said:

“Over the past 15 years energy prices have risen by over 90% in real terms.”

He added that there were bill increases

“on prices the CMA had already concluded were too high.”—[Official Report, 12 October 2017; Vol. 629, c. 473.]

The cap is intended to be temporary—until 2023—which does not give the market too long to become truly cost-effective and competitive. That means that we need longer term, consistent, logical energy strategies in place by then. Hopefully we shall see the butterfly come out of the chrysalis, as the hon. Member for Wells said.

It is therefore not surprising that Dieter Helm obviously agrees that the cost of energy is too high

“to meet the government’s objectives and, in particular, to be consistent with the Climate Change Act”.

Another key finding was that

“energy policy, regulation and market design are not fit for the purposes of the emerging low-carbon energy market, as it undergoes profound technical change.”

Those aspects of the matter, as the hon. Member for Blackley and Broughton said, are the result of a combination of successive Government failures to remedy matters.

The review highlights the fact that the investment strategy of picking winners is not necessarily efficient, and suggests that interventions should be radically simplified. No doubt the latter point will appeal to a Tory Government, but it is also the case that simplification should not happen to the detriment of emerging technologies. I have sympathy for a Government trying to support particular technologies. However, it should not be done on too much of an ad hoc basis. The way the Government have tackled the matter has not always been logical. My hon. Friend the Member for North Ayrshire and Arran mentioned Hinkley Point C, with a price of £92.50 per megawatt-hour, compared with £57.50 per megawatt-hour in the latest auction for offshore wind. That is only half the story. As Dieter Helm correctly reminds us, Hinkley is sucking those costs out for a 35-year contractual period. Meanwhile offshore wind gets only a 15-year contractual period. As he says:

“The nuclear plant will always run, reducing the market available to newer technologies until mid-century or possibly longer. This could act as a brake on technical change”.

Will the Government heed that warning and pull back from other nuclear projects such as Sizewell?

On my recurring theme of onshore wind, we need to find it another route back to market. It has been excluded from contracts for difference auctions, cannot bid for the flexibility market under current arrangements, and is not allowed to bid for the capacity auctions. We need to find a way to get onshore wind and photovoltaics or solar back to market so that we can capitalise on the reduced prices.

Dieter Helm also recommends that the legacy costs for renewables obligations certificates, feed-in tariffs and contracts for difference should be separated, ring-fenced and placed in a legacy bank. It will be interesting to hear the Minister’s recommendations on phasing those out.

Dieter Helm highlights the fact that the “revenue = incentives + innovation + outputs” framework for Ofgem, which covers the transmission and network operating regime, needs to be changed, and is resulting in higher than necessary prices. We have long argued that the current transmission system is outdated and disincentivises the construction of appropriate generation in the correct locations. Of course, it also disadvantages Scotland—particularly the north of Scotland.

Dieter Helm suggests that the Government should establish an independent national system operator and regional system operator in the public sector, with relevant duties to supply and take on some of the obligations of the relevant licences from regulated transmission and distribution companies—again, it would be good to hear a ministerial response on that. Such a provision might be slightly different, but to me it vindicates the SNP Government’s proposals to develop a not-for-profit energy retail company, and further changes that Dieter Helm suggested would complement that venture. It would also reduce Ofgem’s role in network regulation, which would be good.

Dieter Helm highlights that capping the supply margin would be the best way to meet the objectives of new legislation, and that the Government should issue an annual statement to Parliament, setting out required capacity margins and guidance for system operators. That would give parliamentarians greater scrutiny and input, which I would welcome.

Energy costs are a function of two things—the cost of energy and the amount of energy households use, which is linked to a property’s energy efficiency. Other hon. Members have touched on that issue, and I think the Government need to make more direct investment in energy efficiency policies. The SNP Government are doing that, and there is no doubt that the cost of energy then becomes less of a burden on those who might be fuel poor or struggling with their energy bills. If the money comes from direct taxation—especially in Scotland, where we have a more progressive tax system—that is clearly a much better way of paying for such initiatives and creating a fairer society.

As other hon. Members have said, this is a great starting point for debate. In the long term, we look forward to a proper Government response after their call for evidence, and I would certainly welcome a response from the Minister on the matters raised today.

--- Later in debate ---

[Claire Perry]

My hon. Friend has anticipated my speech; I was also going to mention the very dramatic, large roll-out of smart meters. We know we need to move to SMETS2 and make sure that that is done as seamlessly as possible for consumers who already have a SMETS1 meter—I am happy to take that offline.

[Alan Brown]

On the point I made, does the Minister agree that there is also scope for direct Government investment in energy efficiency, rather than relying on the likes of ECO, which still makes the consumers pay for it in their bills?

[Claire Perry]

I do; things such as the warm home discount are part of the long-term commitment that we have made to ensuring that there is better energy efficiency. We are working hard to take out costs wherever possible.

The hon. Member for Blackley and Broughton represents a manufacturing and industrial constituency; we have reduced the policy impact of energy bills on our most energy-intensive industrial consumers by up to 80%. He mentioned the relative costs of energy in Europe, where we tend to do very well in terms of gas costs and not so well in terms of energy. That is often because of political choices that countries make about where they will allocate their network costs. That is exactly why we commissioned the Helm report, to understand what it is we need to do better to ensure that our cost of energy for both households and businesses is as low as it can be.

I heard a lot of conversations about not wanting Government meddling in the design of the energy system, but somehow the terms of reference were too broad and Government should have been involved in setting them, and that the report was too short. Professor Helm is one of the world-leading experts on energy markets and design. It is fantastic that he has come out with some incredibly far-reaching recommendations; it is a no-holds-barred look at how we deliver more affordable energy, keep the lights on, decarbonise, create innovation and build relationships between the market and the public sector. I will not even answer the criticisms about his remuneration; he did a great report and it was good value for money.

We have had a very vibrant debate about the report; we will not rush to respond to it. This is an opportunity when we are at a tipping point on how we generate and deliver our energy. We need to take a very sensible, sober look at what we want to do. Much of that was covered in the report—questions about the importance of energy to our economic success, the disruptors that are going along, the move from passive to active demand, zero marginal low-cost clean generation, and the need to access lower cost, effective storage technologies. The market is changing, regardless of what the Government do. All the analyses of the report benefit strongly from hindsight, which is a wonderful thing, but the hon. Gentleman’s point about complexity, and Government layering intervention on intervention, are really well made. We need a response that is sober and sensible, that sets out an energy policy or strategy for the future that can survive successive political cycles and can respond quickly to what I have no doubt will be enormous technological changes.

The job of Government is to set ambition. We are among the most ambitious Governments in the world—we are the first developed country to ask for advice on what a zero-emissions economy would look like in 2050. It is great to see other countries joining us. We are also responsible for setting a balanced budget, so that all our decisions can be made secure in the knowledge that we will have a stable financial framework. Our job is not to respond to customers who lobby loudest, but to look to work with companies that create value for consumers, so we have frameworks and stability that will stand the test of time. If we get that right, this trilemma that we always talk about of cost, carbon and security, would be solved, at least for electricity.

I thank all the Members who have spoken; it is always a pleasure to talk about this very important subject. I look forward to repeating the debate when we bring forward the response to the Helm review, but I am extremely grateful to Professor Helm for his report and for challenging us to think about these vital issues for the future.

Draft Renewable Heat Incentive Scheme Regulations 2018 Draft Domestic Renewable Heat Incentive Scheme (Amendment) Regulations 2018

Alan Brown Excerpts

Monday 23rd April 2018 General Committees

[Claire Perry]

It is a pleasure as always to serve under your chairmanship, Mr Hanson. If I may add one moment of levity, I congratulate two members of the Committee on their fine performance in the London marathon yesterday—I am sure they were cursing renewable heat at the time. I am sure my hon. Friend the Member for Berwickshire, Roxburgh and Selkirk and the hon. Member for Blaenau Gwent are enjoying the chance to sit down; hopefully it will not be for too long. Congratulations to them.

The purpose of the draft orders is to implement reforms to the renewable heat incentive. The reforms will deliver changes that will strengthen the focus on long-term decarbonisation, offer better value for money for taxpayers, increase protection for consumers and further support supply chain growth in the renewable heat sector.

Heat for our homes, businesses and industries accounts for around half of the UK’s energy use and around one third of total carbon emissions. Increasing the share of heat derived from renewable sources is a critical challenge, both to meet our renewable energy targets and to deliver the Government’s long-term carbon goals. Renewable heat can also make a valuable contribution to our fuel poverty ambition, and it is my intention to use this scheme and the energy company obligation scheme to deliver on our manifesto commitment.

Building a vibrant renewable heat sector is a key objective of the clean growth strategy and the industrial strategy, and the RHI is the main programme to deliver those goals over the spending period. The non-domestic RHI scheme was launched in 2011, and there are now more than 18,000 installations with a total capacity of 4,000 MW. The scheme produces enough renewable heat for more than 1 million homes. The domestic RHI was launched in 2014, and more than 60,000 homes are now using it to make the transition to low-carbon heating. Before the RHI started, only 1% of our heat came from renewable energy sources. That figure is now around 7% of total heat.

This type of tariff-based support for renewable heat installations is the first scheme of its kind in the world. Inevitably when pioneering something, there are lessons to be learned, and these reforms are a response to some of the lessons from the early years. We consulted extensively on this package of reforms in 2016. The draft regulations will complete the delivery of those changes, as well as implementing elements from two smaller consultations in 2017.

The National Audit Office published a review of the RHI in February this year, which we were very pleased to receive. However, many of the comments related to the draft regulations that are now before us and which we now have the opportunity to discuss. I hope they will go some way towards addressing some of the issues covered in the NAO’s report.

The draft orders will deliver 12 important changes in total. Those will deliver a series of important reforms that will ultimately help us to deliver a more strategic mix of technologies and improved value for money over the next three years. I will highlight a couple of the main ones.

We will increase the tariffs available for biogas and biomethane technologies while introducing new restrictions on the feedstock that those plants use, which was one of the requests that we received from many campaigners in the sector. That will encourage the increased use of food and agricultural waste and will reduce the use of energy crops, making better use of farmland for food production. We will also revise the tariffs for heat pumps and biomass that were introduced through negative regulations last year, which will rebalance the deployment away from biomass and in favour of heat pumps, biogas and biomethane, which will all play a much stronger role in the scheme over the long term.

Another important change is that we will bring in tariff guarantees that cap the amount of heat covered to 250 GW per year. That will allow RHI applicants to secure their place on the scheme in advance of construction, and will support investments in larger plants, but not mega-plants, with long lead times that deliver better value for money.

In the domestic scheme, take-up to date has been dominated by owners of larger homes. To promote wider uptake, which is an important objective for me, we will introduce the facility for an assignment of rights. That will allow third parties, particularly those in lower-income housing, to finance renewable technology and be repaid directly from the RHI. Crucially, that will open up access to the scheme for those without the up-front capital to pay for a new heating system, and will avoid some of the allegations of dead weight that have been directed at the scheme.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

The Minister mentioned biomass and the 250 GW cap. In the oil and gas debate on Thursday, I raised the issue of the Grangemouth renewable project, which is in the pipeline and possibly due for commission. Will the cap affect that project, if it proceeds?

[Claire Perry]

If I may, I will make some progress and ask my trusty officials to scribble a note to me. If we cannot answer the hon. Gentleman during the debate, I will be happy to write to him.

Following last year’s consultation, we will also limit the eligibility of certain heat uses. One of the concerning criticisms of the scheme was that it was being used to dry wood for fuel and that it was being used for waste processing and drying, which were strongly felt to be inappropriate for the scheme. The regulations will change that and improve the value for money of the various projects. We will also remove the use of heat-drying digestate and anaerobic digestion facilities as eligible heat uses, because we consider them to be poor value for money. Those technologies would not exist without RHI support.

In addition, we will remove support for heating swimming pools on the non-domestic scheme, unless the pool is for commercial or municipal use. That brings us into line with existing regulations on the domestic scheme.

We are also introducing changes to allow more than one heat pump to use a common or shared ground loop, which should facilitate greater deployment of that important technology. The introduction of electricity metering for heat pumps across both schemes will allow participants to better monitor the efficiency of their plant and will build confidence in the technology.

Following the consultation, another change will increase the power efficiency threshold for combined heat and power technology from 10% to 20% to reduce the risk of over-compensation and to encourage plants to run more efficiently. There is also a whole series of mainly administrative changes to tighten cost control, reduce the risk of gaming and improve Ofgem’s delivery of both schemes, including by tightening its enforcement powers. The Renewable Heat Incentive Scheme Regulations 2018 also consolidate all previous revisions to the original regulations, as recommended by the Joint Committee on Statutory Instruments.

The RHI plays a central role in the Government’s programme to decarbonise heating, but it is not perfect. As Committee members will know, the scheme is scheduled to end in March 2021 in terms of access for new entrants—it will continue for many years thereafter in terms of financial support. However, until that time, we want to make the scheme as good as it can possibly be. These regulations are an important step in refining the scheme, so I recommend them to the Committee.

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[Alan Brown]

It is a pleasure to serve under your chairmanship, Mr Hanson. I apologise for being slightly late.

I support the RHI scheme and welcome anything that will help to enable low-carbon technologies and decarbonise heat. I do have a big “but”, however, which I raised in my intervention on the Minister. I also have other comments to make.

One of the briefing notes I got from Energy UK suggests that, alongside the measures and the continuation of the RHI scheme, there should be a comprehensive educational piece on options available for consumers and organisations. I would certainly support such a scheme, which would hopefully not only increase uptake, but alert people to the associated risks. A constituent purchased a biomass boiler and understood that it was eligible for RHI. An application was made and they started receiving RHI payments. It turned out that the boiler was not correctly installed and was not the correct boiler—the original installer was able to walk away with his accreditation, and after a legal fight my constituents now have a new boiler. However, Ofgem says that since it is a replacement boiler it therefore no longer qualifies for RHI and, even worse, that they must repay the RHI they have received.

That puts people at a huge financial risk and disadvantage. If other people heard about that, it might further put them off such a purchase. I have another example. A constituent had a boiler installed and the boiler went on fire. Hon. Members can imagine the distress that caused and the risks of a boiler going on fire. The constituent got a replacement boiler—they clearly needed to replace the boiler—and lo and behold they are no longer eligible for RHI. That is a fundamental failing of the scheme. I am speaking about only a few people, but there must be other examples. We need to find a way to ensure that people are not penalised for trying to do what the Government want them to do.

The NAO report highlighted that the original target was 513,000 by 2020, but by December 2017 only 78,000 were installed. We will be lucky to hit 20% of the 2020 target. Again, in terms of education and promotion, we need to make sure that there is sufficient uptake.

I appreciate that the Government have revised their uptake projection, but the NAO report highlighted that the Government have not back-filled the potential drop in RHI uptake with increased targets in other low-carbon technologies. The Government need to look at that. There is also an issue of cost-effectiveness. The NAO said that RHI is not delivering the value for money that the Government expected, which needs to be reviewed.

I will return to the big “but” that I highlighted. The Grangemouth renewable energy project has been in the pipeline for a number of years. It is a possible biomass and combined heat and power scheme that will replace the existing gas turbines at the Grangemouth refinery. The current owners of the refinery will have to make a procurement decision in a few weeks’ time on whether to go for the renewable energy project or to commission new gas turbines. The current renewable energy project is innovative and world leading and will reduce carbon dioxide emissions by 342,000 tonnes a year, and will need a £400 million investment.

The leader of Falkirk Council wrote to a BEIS Minister on 29 March. I understand that a response is still outstanding. The owners of the project also made representations to the Department and, as I said earlier, I raised it in the oil and gas debate on Thursday. Regulations 35(10)(a), 56(b)(iii)(aa) and 63(10)(a) of the draft Renewable Heat Incentive Scheme Regulations 2018 all to refer to the 250GWh cap. If that cap applied to this project—if it is procured in a few weeks’ time—the financial model would fall apart. The project qualified for a contract for difference in the last round of auctions, but we need to know the outcome of the RHI changes.

This is imminent, and my understanding is that it will put the project at risk. If I cannot get a straight answer, I will need to plough a lone furrow and put the draft orders to a Division, because too much is at stake for that project. I am obviously happy to hear from the Minister.

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[Claire Perry]

I sincerely thank all hon. Members for their contributions. As always, we improve legislation by scrutiny. I will try to respond to as many of those points as I can and will offer letters of assurance where I do not have the details.

First, the hon. Member for Kilmarnock and Loudoun raises an important point. My understanding is that, while the tariff cap is 250 GWh, bigger schemes can go forward. Effectively, part of the generation would be under a capped tariff and other parts would not. I appreciate the urgency in the commercial world. We might take months to make decisions, and sometimes developers do not have that. I will ask my team to write to him immediately and set out exactly what we know as it relates to Grangemouth. Hopefully that will give him assurance and he will not feel the need to divide the Committee.

As always, we like to work in the spirit of trying to do the best we can. It was important to set the threshold, because we have seen runaway budgets that have forced us effectively to curtail other schemes. The scheme will cost taxpayers £23 billion over its lifetime, even at the revised level, so it is a substantial investment of taxpayers’ money in driving us forward to a lower-carbon future.

[Alan Brown]

I appreciate that the Minister is looking to provide a full update and give assurances or otherwise, but my concern is about what happens if the letter comes back to me stating, “Your concerns are right. It is a 250 GWh cap. The scheme is way above that, so unfortunately the project falls.” The letter may not help. Things will be left in the air until we get an answer, by which point it may be too late.

[Claire Perry]

Obviously we consulted on the cap last year. Given the current scope, the scheme will be affected. Part of its output will have a guaranteed tariff, but perhaps the development team can come in to speak to officials and have a conversation. The hon. Gentleman mentioned that the scheme was bidding into CfD regulations as well. There are other routes and opportunities. Hopefully the people of Grangemouth whom he represents will be pleased that there is so much incentive. We want developers to bring forward the schemes to take us to a lower-carbon future. If a meeting would be helpful, I would be glad to arrange it.

I praise the hon. Member for Southampton, Test, who is almost my hon. Friend these days. He has brought his typically detailed level of scrutiny, and I will try to cover as many points as possible. On the question of the cliff edge, we are undertaking a lot of work. We published a call for evidence on 19 March. We are keen to develop cost-effective policies for the 2020s through to the 2030s and beyond, but we have a unique situation in this country. We have a centralised gas distribution network to which 85% of houses are attached, and 15% of us, including many in my constituency, live off the gas grid. It is about trying to work out cost-effective ways of delivering those low-carbon, cost-effective solutions on which we all agree. We have published a number of studies. Only last month, we published one showing initial findings on the options available for long-term heat decarbonisation, which are typically hydrogen, bioenergy and electrification. As promised, we will publish a full report of evidence in 2018. I look forward to discussing that with the hon. Gentleman.

The hon. Gentleman raised a challenge about reducing ambitions. It is important to recognise the size of the scheme—£23 billion of taxpayers’ money is committed over its lifetime, which is a substantial investment. Its goals were ambitious, but it is important that we have responded to some of the concerns.

UK Oil and Gas Industry

Alan Brown Excerpts

Thursday 19th April 2018 Westminster Hall

[Colin Clark]

Also, the trade unions and their representatives have to be very careful that they base what they are saying on science, not anecdotal evidence. I have heard one or two things said that made me very worried; I will not say that it was scaremongering, but they undermined people’s confidence in what is absolutely essential. The people who work in the oil and gas industry do not want to see helicopters grounded; they want to be safe and they want to be confident about how they get back and forward from the rigs.

I would like to mention two projects by the Oil and Gas Technology Centre. It has a great ambition for an underwater innovation centre, which is very important to the sub-sea sector. That is a very big part of the constituency of my hon. Friend the Member for West Aberdeenshire and Kincardine (Andrew Bowie), who is no longer in his place. It is also about to create the newly announced decommissioning centre in Newborough, in my constituency, which is trying to be the centre of decommissioning technology and ability, so that the UK plays a key part in it and we do not move it elsewhere.

In monetary terms, Vision 2035 aims to create £1 trillion of revenue over the period to 2035 only. The Oil and Gas Authority has a potential upper level of 20 billion barrels of oil, and that expectation is based on barely a quarter of what there could be. We want to see the supply chain double to £500 billion over that period. That is an absolutely enormous part of the UK economy paying tax, contributing and investing in people. Through collaboration, the maximum economic recovery that has been developed by the industry could provide £400 billion. Again, that is just up to 2035. The collaborative effort between Her Majesty’s Government and the Scottish Government shows that when we work together, businesses and jobs benefit. That is pretty well what all our constituents would expect us to do.

The private sector is beginning to have tremendous confidence again in the oil and gas industry. In 2017, there was a staggering $8 billion of merger and acquisition activity in the sector; Chrysaor invested $3.8 billion to purchase Shell assets, and that was before transferable tax history. There was also activity in the supply chain that included Wood Group and Amec, which together are to become a FTSE 100 company, and GE and Baker Hughes, which plan to float on the New York Stock Exchange. They are mammoth businesses investing in a lot of people. The variety, size and type of M and A deals last year signal confidence in the UK continental shelf.

We live in a free market economy where Government must create the right conditions for growth, which is why we are here today to address the Minister. Anti-business rhetoric of demonising job creators, overregulation or punitive taxes all damage growth, as does demonising hydrocarbons by suggesting that they are somehow a thing of the past that we should not be getting involved in. Achieving inward investment requires a dynamic economy with flexible labour laws, hence our historically low unemployment. High taxes destroy investment and job opportunities.

Government must be very conscious of what they are doing. We need to grow the whole economy, not just take more slices out of bits of it. Past Conservative Governments have made mistakes on that very point, particularly in the oil and gas industry. Deirdre Michie said:

“We need more exploration if we are to get close to recovering the three to up to nine billion barrels”

of oil.

Whenever we speak of oil, the figures are absolutely enormous, as is its economic impact: as I said earlier, 1 billion barrels of oil is £50 billion of contribution to the economy.

The UK has signed up to significant carbon reduction. Hydrocarbon production is presented by parts of the media and politicians in this place—I have heard them on many occasions—as part of the problem. Renewables have become a large part of electricity production, but there is twice as much energy transferred by the gas ring than there is by electricity because, apart from on a hot day like this, this is a country that needs heating in our homes. Natural gas produces half the greenhouse gases that coal does. The UK continental shelf industry is part of the solution, not the problem. Each and every one of us gets up in the Chamber as often as we can to remind people that the industry is a very valuable part of the economy.

As the Minister mentioned, the Oil and Gas Technology Centre sees the future being hydrogen and carbon focused, with unmanned facilities and reusable structures. Already, BP in the Quad 204 is putting into practice sub-sea automated structures and vessels, as opposed to rigs. This is a rapidly changing industry—we are changing skills.

I would like to mention a Government elsewhere with a lot of Scots people who moved there many years ago: New Zealand has announced that it will not allow any new offshore development. They are simply offsetting their responsibilities to overseas. They are somehow going to oversee their responsibility for energy, so they are just moving it to a different jurisdiction, where they will have no idea what the ethical and safe practices will be. That is simply pushing away their responsibilities.

Oil and gas are part of the transition, but they are part of our economy, potentially for centuries. They are an incredibly important raw material. As somebody said to me, “You don’t make electric vehicles with wood”—not yet at least. Hydrocarbons, oil and gas and plastics are a major part of those industries. I want people to remember that it is our throwaway culture that polluted our seas, not the existence of hydrocarbons. Already, the UK has slashed emissions by transferring to gas.

I heard recently in a Committee that some would suggest that oil and gas should not be part of the so-called ethical pension funds, should not be considered for green finance, and that somehow we should just turn off the taps and stop using hydrocarbons. Not only is that unrealistic, it is a fairy tale and completely luddite. Hydrocarbons have driven the industrial and green revolution. We would not be where we are if it were not for our use of hydrocarbons. That does not mean that we did not mistakes.

Life would be a lot harsher and the population would be a fraction of what it is. I worry when environmentalists say that, because I wonder whether they are basically saying that there are too many people on this planet and we cannot sustain them. I do not quite know how they will work out which economies should carry on developing and using hydrocarbons, and which developing and third-world economies will somehow be deprived of the development that the western world has enjoyed. Oil and gas has been pivotal in transforming the carbon intensity of the power sector, with cost-effective emission reductions achieved through a significant switch from coal to gas.

I would like to briefly mention fracking, without being overtly political. Everybody should remember that hydraulic fractioning of rock formations has been used in the North sea for 30 years. It has been done very safely and under the jurisdiction of Governments of various parties, who have been very careful how it is delivered. I do not really want it to get into the general narrative that somehow that is not safe, because that would suggest that what we are doing offshore, perhaps thousands of feet below the rigs, is not safe.

Well construction and the UK continental shelf has been absolutely at the top of the industry. Directional drilling and hydraulic fractioning has been developed in the North sea, so we should not just discount it. I ask the Scottish National party and the Scottish Government to remember that there is a science and a very good background to what we have done in the North sea. However, I respect the right of communities to say that they do not want onshore fracking. I also respect the right of communities to say they do not want onshore wind. But let us be frank: it is about nimbyism. They do not want it in their backyards. That is what it is about, rather than a denigration of the science and technology of those sectors.

Deirdre Michie said recently:

“As we move to a lower-carbon economy, the UK needs to meet as much of its domestic demand for oil and gas from indigenous resources”.

I would like to thank UK Oil and Gas, Deirdre Michie, the Oil and Gas Authority, the Oil and Gas Technology Centre, and also local organisations and companies that have fed into what we are speaking about. We can see the importance and scope of the industry, which has the potential to produce more than £1 trillion of revenue for the Scottish economy and to all economies of the north-east and the rest of the UK continental shelf. That is absolutely enormous.

The industry has longevity and huge strategic importance. Particularly at these times in the world, when we consider where our energy is coming from, our own gas supplies are of incredible importance and we should be investing in them, if for no other reason than to give us energy security. We must remember that the basin still employs 300,000 people in highly paid and highly technical jobs that drive other areas of research in the economy.

Will the Department for Business, Energy and Industrial Strategy ensure that we have an energy policy that recognises that, on the Department’s own figures, oil and gas will still provide two thirds of total primary energy by 2035? Oil and gas must be a vital component of that policy, which should consider affordability, security of supply and environmental sustainability.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

I assume that the hon. Gentleman also supports the call for an oil and gas sector deal as part of the industrial strategy.

[Colin Clark]

The hon. Gentleman must have read my speech—ah, there is a camera behind me! Yes, there should also be a sector deal focused on transformational technology, underwater engineering and decommissioning that drives technology with spin-outs to the wider economy. That is so important with regard to STEM subjects alone. It worries me that young people—students and kids who are still at school—say, “Has the oil and gas industry got any future?” One young man said to me that he was going to work in the car industry, building cars with steering wheels. I said, “Nobody will be driving them in 10 years’ time, but we’ll still need oil and gas, so I would stick to the oil and gas sector.”

My third ask of the Department is to support the high-tech and highly productive supply chain, which has the potential to double its share of the global services market. I ask Departments more broadly to ensure that the UK continental shelf remains fiscally competitive and that we have UK frameworks that strengthen the UK internal market, which is essential to oil and gas.

BEIS has long supported the industry, and we appreciate that one of the Minister’s first visits in her current post was to Aberdeen.

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[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Sharma. I congratulate the hon. Member for Gordon (Colin Clark) on securing this debate and thank the Backbench Business Committee for granting it. There have been only three speeches by Back Benchers and several interventions by the hon. Member for Stockton North (Alex Cunningham). Perhaps it would have been better if more people could have been here to participate; I suspect that the fact that it is Thursday afternoon has something to do with it. However, the good thing is that that has allowed much more informed speeches to be delivered, without time constraints. That is to the benefit of what we have heard today. I never seem to get the luxury of speaking from the Back Bench without a time limit and not having to use my red pen.

First, we heard from the hon. Member for Gordon. There was not much that my hon. Friend the Member for Aberdeen North (Kirsty Blackman) and I would disagree with. Typically for a Westminster Hall debate, everybody spoke in unison about the importance of this sector and its bright future. However, I do not think the hon. Member for Gordon had to defend himself for using the phrase “the north-east”. He should not have to stand up and clarify that he meant the north-east of Scotland. If he wants to call it the north-east, he should stick with that and not defend himself.

The hon. Gentleman mentioned that there are 233 companies in his constituency alone working in the oil and gas industry. That is a fantastic statistic, which shows the importance of the sector to his constituency and the wider Aberdeenshire area. He correctly said that the oil and gas industry should not be seen as a stopgap measure while we decarbonise the economy and that it still has a bright future. I echo that sentiment. He highlighted the resilience of the industry, which is why it still has that bright future.

The hon. Gentleman also mentioned the skills gap and the need for training, so I am sure he will welcome the fact that the Scottish National party provided an apprenticeship guarantee while the industry was going through a hard time, as well as a £12.5 billion innovation fund. He and my hon. Friend the Member for Aberdeen North both mentioned the issue that people leaving school and looking into future careers might be concerned about moving into the industry. I echo what they said: there needs to be a drive for the educational understanding that there is still a bright future—an engineering future, with actual opportunities. That is true not just in the UK, but in other countries, as we heard from the hon. Member for Banff and Buchan (David Duguid), who undertook employment abroad and saw the different cultures and experiences that that brings.

My hon. Friend the Member for Aberdeen North and I disagree with the hon. Member for Gordon on fracking. I also clearly support the SNP Government’s taking the decision to ban fracking. It must be remembered that it was done on a cross-party basis. The Labour party and the Lib Dem party support it, and on a wider basis the Green party supports it as well. The hon. Gentleman said that our position is nimbyism, but I would suggest that it is not. The fracking ban has widespread public support in Scotland, and lobby groups elsewhere in the UK would like to see fracking banned. That is before it comes to their doorsteps, if it even does, so that is not nimbyism—it is about people who have concerns about fracking.

I understand that there are some similarities between fracking and the technologies used in the offshore oil industry, as the Minister highlighted, but they are not completely the same; I got a briefing paper from the Library when a constituent raised concerns about why we were banning fracking while still allowing offshore extraction. There are differences. The modern fracking technology was developed from 1999 onwards in Texas—that shows it is different from the offshore technology; they were developed at different times. Interestingly, it was developed in Texas, but Texas has now banned fracking. That tells us that there are widespread concerns across the world. The Minister said this is ideological, but it is not. The Scottish Government took an evidence-based decision, and they stand by it.

My hon. Friend the Member for Aberdeen North agreed with most things that the hon. Member for Gordon said. She highlighted that one aspect we have seen with the dip in the oil price is that the fat in the system has been trimmed out, and that that needs to be captured. The hon. Member for Banff and Buchan touched on that as well, while also speaking about the work of the Oil and Gas Technology Centre.

My hon. Friend, like other hon. Members, highlighted the importance of Vision 2035 and of allowing developing companies to grow further and to retain their expertise and investment in the UK, rather than being sold off. That is a very important point. The hon. Member for Waveney (Peter Aldous) spoke about resilience in the supply chain. Helping these companies to grow would clearly help the supply chain and the industry’s sustainability.

My hon. Friend finished with what she said were a couple of asks of the Minister. I am a wee bit concerned that, as our economy spokesman, she miscounted the number of asks. It was more than couple! I counted that she asked for: support for a sector deal for the oil and gas industry, which every other hon. Member mentioned; the challenge fund decision; post-study work visas; and consideration of the right to stay regarding the residence of some people who are working abroad. She also highlighted the issue with customs. I think that was more than two asks, but I support her in them.

The hon. Member for Waveney said that there are still half a billion barrels to recover. He highlighted the importance of Vision 2035, and that there has been a drop in development drilling. We need to ensure that picks up for the future. He supported the sector deal and understandably focused on the East Anglian coast and what he called the “southern North sea”. It was a thoughtful contribution regarding the possible collaboration between the different sectors—oil and gas, offshore wind and transmission—and the co-location for generation. That should certainly be looked at. I like the concept of seeing that area as an energy basin and a resource. I would support that.

It was good to hear that the hon. Member for Banff and Buchan has experience of working in the industry. There is nothing better than parliamentarians who can share expertise and insider knowledge of an industry to help to do policy development in a more informed manner. He touched on Peterhead power station in his constituency and said that one of the issues with the carbon capture scheme was not having the surrounding infrastructure. To me, that suggests a policy deficiency. Allowing the development of a potential carbon capture and storage scheme in that location and then pulling the plug without getting to the end, capturing the knowledge and developing the technology that could be applied elsewhere, is a weakness of the Government. They should reflect on that. He highlighted the benefits of not returning to inefficient working practices. I am sure the industry wants to ensure it does not do that.

As other hon. Members have said, there is no doubt that oil and gas has been a success story for both Scotland and the wider UK. There has been a long history with onshore oil. It was first discovered and extracted in Scotland in 1851. Then in 1896, England discovered natural gas. I would just like to point out that, yet again, Scotland was ahead of the curve when it came to hydrocarbons. In fact, fracking was invented in Scotland. Towards the end of the 19th century, fracking was undertaken in the firth of Forth; but we have seen the light and changed our ways, and I support the Scottish Government’s ban.

I will concentrate my remarks on the offshore oil industry in the North sea and Aberdeen area. It has been developed since the 1960s and has been a great success story, which has turned Aberdeen into a global city. It has provided well-paid careers for people and has allowed many, such as the hon. Member for Banff and Buchan, to seek adventures and opportunities abroad. It has also allowed Scottish and UK companies to develop their expertise here and then move abroad. They then develop that expertise abroad, which channels money and resources back to the UK.

The oil and gas industry has been so successful that it has generated approximately £330 billion in production tax alone for the UK Treasury. However, at this point I will bring a bit more negativity to the debate. Some of that money has been frittered away. We do not have the legacy from it that we should. Aberdeen’s infrastructure is a case in point.

My hon. Friend mentioned the construction of the western bypass. That could have been done years ago. We could have channelled some of this money into that years ago. If I was to start with a blank sheet of paper and plan how to exploit the natural resources of the North sea using Aberdeen as a hub, a motorway network extending to Aberdeen would be built. That is money going to the Treasury that could be spent better. I am sure that Members from the north-east of England would say the same. The motorway network up the north-east of England took too long to develop. Meanwhile, while oil was generating significant money, we built the channel tunnel to France and a high-speed rail link from London to the channel tunnel. Yet the infrastructure in the north of England and in Scotland was sadly lacking. There was a deficiency, with the money going to the Treasury but not being distributed across the UK.

We should also have had an oil fund. The answer to that request has been a consistent no from the UK Government. Yet Norway’s oil fund, which was started in only 1990, sits at £780 billion. That is a fantastic legacy. Norway is also using and investing it wisely. It has the highest proportion of electric vehicles in Europe. It has invested massively in the renewables sector. It is decarbonising the economy while still wisely managing its oil and gas resources. That is forward planning that the UK Government could still do. We need to look at that.

[Colin Clark]

The hon. Gentleman has to recognise that the population of Norway is 3 million, 4 million or 5 million people. He also has to recognise that the economy is significantly smaller. The whole of the United Kingdom—the different parts of it—has benefited from the moneys that we have made from the North sea. Those have been invested, predominantly economically, and have paid for the downturns while the British economy was not doing so well. I think that it is a bit unfair to make that contrast. Blessed Norway has almost twice the reserves that we have, so there is a contrast in terms of population and investment.

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[Alan Brown]

I will come to the management of the downturn, but I think the hon. Gentleman has helped to make the case for an independent Scotland, so I thank him for that. I was not going there; I would not have touched on an independent Scotland, but I thank him. I still stand by the fact that, in my opinion, the money was going to the UK Treasury and was not distributed to the areas that were generating the wealth.

Interestingly, when it comes to fracking, in 2015 the UK Government promised a shale wealth fund of up to £1 billion for the north of England where fracking is proposed. Perhaps that is a lesson learned. It reinforces the omission of not setting up an oil fund for the benefit particularly of Scotland and other areas of the UK that extract oil and gas.

In Scotland we became used over the years to the scare stories about oil running out before yet again we discovered new oilfields. If we want to talk about not seeing it as a stopgap measure, we obviously need to watch how politicians talk about oil reserves. I certainly appreciate that everyone in this room has been very positive about the reserves that are there, the amount that could still be extracted and the future of the industry. However, other politicians sometimes try to exploit the concept that oil is running out, and we need to be careful about that.

[David Duguid]

It should be recognised, as I tried to point out in my speech, that it is fair to say that the easiest oil and gas low-hanging fruit to get has been got. There is a future for oil and gas, but, as I said, we cannot use the same behaviours and technologies as before, which is why it is important for Governments and industry to pursue the developments in technology and changes in behaviour required in future to exploit what is left, which is not so easy to get as what came before.

[Alan Brown]

I do not disagree. Clearly, the industry has shown a lot of innovation over the years and will continue to do so, and obviously it needs to do so to get additional extraction. My hon. Friend the Member for Aberdeen North gave the example of partial decommissioning to allow the technology to be input for enhanced extraction. That is something that industry is looking at now, and I am sure it will continue to innovate.

We know that prices can be volatile; we have had to deal with that over the years. Oil bottomed out at just under $12 a barrel in 1997 before rising rapidly to $91 a barrel by 2008. That was under a UK Labour Government. If I go back to legacy issues, I wonder what happened with that money, because there was no way oil projections at that time were going to be based on the oil price increasing dramatically. It was such a windfall with that massive increase in price, but I do not think we have seen the benefits of that, either.

On the point made by the hon. Member for Banff and Buchan about managing the downturn, we have been consistently told that we need the broad shoulders of the UK, but if we look at the support that the UK Government have implemented in the past few years, the spring 2016 Budget reduced the supplementary charge back to 10%, which was a welcome measure. The Red Book predicted that that would cost £1 billion, and yet nearly three times that was given away in inheritance tax to millionaires. That shows skewed priorities.

In the spring 2017 Budget, there was nothing specific for the oil and gas industry, except one paragraph promising another discussion paper. However, it did confirm the lowering of corporation tax. Despite what everybody says about how it grows the economy and creates more tax, the Red Book predicted that that would cost the Treasury £24 billion over the lifetime of this Parliament. That was the Government’s Treasury prediction. Let us think what could be done with that £24 billion in terms of infrastructure investment or additional support for the oil and gas industry. In my opinion, it was a lost opportunity.

In the November 2017 Budget, a measure was introduced: transferable tax history. As my hon. Friend the Member for Aberdeen North said, that was genuinely welcome. It is predicted to bring an additional £70 million in revenue to the Treasury, so it was not a difficult decision. That decision supports industry, but it helps the Treasury, so it should have been taken long before. We are still awaiting the appointment of the oil and gas ambassador first promised by David Cameron in January 2016, so the Government really need to provide additional support for the industry.

Yesterday I raised this matter in the debate on industrial strategy. The oil and gas sector deal has been supported by every colleague here today, but I was disappointed that the ministerial response from the Despatch Box yesterday never mentioned the oil and gas industry or Scotland and did not pick up on the point that I had made, along with my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry). I hope today’s Minister will respond. I am sure she is working on the oil and gas sector deal and is positive about it, but it would be good to have that confirmation.

I must repeat my disappointment about the pulling of the CCS fund. That must be a lesson for the Government going forward because it scared the industry and scares away other people trying to make private investment. Again, the Minister has spoken positively about the future of CCS, so it would be good to hear her reinforce that when she sums up.

I appreciate time is moving on, Mr Sharma, so I will try to hurry up, but I want to mention another renewable energy project that has been developed at Grangemouth and would support the Grangemouth refinery: the Grangemouth renewable energy project, which has been successful in the CfD auction. Because it contains biomass, the whole premise of the project is based on securing renewable heat incentive funding as well. The UK Government are looking at retrospectively capping the amount of RHI funding available to projects to 250GWh. That would put the Grangemouth renewable energy project at risk, so I urge the Minister to reconsider, because the project is so innovative. It is a world leader, it would support the Grangemouth refinery, and it could develop industry for export and help grow the UK economy.

We have heard some impressive contributions. All have concluded that the oil and gas industry has a bright future, and I certainly echo that. I look forward to hearing the Government’s response.

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[The Minister for Energy and Clean Growth (Claire Perry)]

Thank you for your chairmanship, Mr Sharma. I also thank the members of the Backbench Business Committee and its Clerks, who have provided us with an opportunity for an excellent debate. I agree that this was a quality debate, not a quantity one, and perhaps if we had more of those we should all be the better for it. I heartily congratulate my hon. Friend the Member for Gordon (Colin Clark)—and he is a friend—on securing the debate, and on an exemplary speech. It was thoughtful, detailed, clear and extremely well informed. Clearly he and other hon. Members in the Chamber have a strong constituency interest, and we debate the issue frequently because we are all passionate about the oil and gas industry and agree about the great value that it brings to the local and national economies.

I asked for and was able to keep the oil and gas brief when I became the Minister for Energy and Clean Growth because I think it is an integral part of the transition to a lower-carbon economy, as well as an enormous provider of productive employment and benefits to the economy, historically and in the future. It was striking to hear the comments of my hon. Friend the Member for Waveney (Peter Aldous), who perfectly combines those two interests, given his chairmanship of the all-party parliamentary group for renewable and sustainable energy and his frequent strong support for the industry.

We also heard excellent speeches from the hon. Member for Aberdeen North (Kirsty Blackman), who cares passionately about the issue and speaks up for it frequently; from my hon. Friend the Member for Banff and Buchan (David Duguid), who I was delighted to hear, because it is always wonderful to hear from somebody who actually knows what they are talking about—we all know what we are talking about, but some of us know more than others—from the hon. Member for Kilmarnock and Loudoun (Alan Brown), who gave a typically doughty defence of Scottish independence and managed to slip in some telling points that I will respond to; and from the hon. Member for Southampton, Test (Dr Whitehead), who I seem to spend a lot of time debating such matters with.

I will not detain hon. Members too long, because it is a lovely sunny afternoon, but I will make a couple of important points. I and the Government fully recognise the importance of the industry to the UK, historically, currently and in the future. It has been an enormous provider of revenue to the Treasury, of centres of excellence in terms of innovation, and of hundreds of thousands of jobs.

It is striking that in the past few years, we have stopped talking about the industry as a declining force, and started to talk again about the opportunities for it in the North sea and other areas. We have now realised that we can integrate those fuels into a lower-carbon economy. There are also incredible opportunities, such as decommissioning, which we in the UK can own as the world faces the same questions about the future of the industry.

There are encouraging estimates of what is left. Vision 2035 has led industry to say that there are between 10 billion and 20 billion barrels of oil equivalent left in the continental shelf, which could be worth up to £1 trillion. If we continue to responsibly explore and extract those hydrocarbons, use them in the most economically effective and responsible way, and work on decarbonisation, there is a great opportunity for north-east Scotland and the whole of the United Kingdom.

The challenge of the security of supply has been interesting in the past few months. The beast from the east, the changes to storage facilities in the UK and the discussions about diplomatic relations with other major gas-producing nations have led to conversations about the security of supply that we have not heard in the past few years.

In fact, indigenous gas production meets 46% of our gas demand and contributes to the balance of trade. We are clear that we have robust gas security for the future, but we may be able to increase the effective extraction of gas from the UK. I do not want to make the debate about hydraulic extraction, but I am convinced that we must soberly test the science, as we are doing through the exploratory phrase, to understand the size of the opportunity and whether it can be extracted, not in a wild west, Texan sense—that is not how we do business in the North sea base or anywhere else—but in the most environmentally responsible manner in the world. We want to test that. We have to be clear that that makes an important contribution to our energy security and our future economic prosperity.

As has been mentioned, I jumped on a plane as soon as I could and went straight up to Aberdeen—I did not drive up the motorway network, because it was not there, and it would have been a long way from Devizes even if it was. Aberdeen is a wonderful city and an amazing place to visit. Looking at the productivity map of the UK, the contribution that fishing, originally, and now this extraction have delivered is clear.

It was heartening to sit down with people from the Oil and Gas Technology Centre at the Oil and Gas Authority and talk to them about what they have been through. It has been a very tough time. They would say that they perhaps took decisions a little hastily—unfortunately, there have been job losses in the local economy—but as a result of going through that trial, the industry is in a better place than ever. It has the resilience to face any future changes in oil prices and an understanding of what it needs to do to build a more sustainable supply chain, and the co-investment that is coming together around the technology institute is very exciting.

It was also heartening to talk to the people from the OGTC about operational decisions, such as how they pulled together through the Forties pipeline interruption to deliver that back on stream more quickly. Of course they will always be competing, but the recognition of what co-working can mean is incredibly impressive.

The OGA has been a driving force for that. I pay tribute to its work, and to that of the offshore petroleum regulator for environment and decommissioning, which never gets enough credit. It is a superb operation with lots of civil servants from the Department for Business, Energy and Industrial Strategy working extremely hard and doing a very good job of regulating and ensuring the safety of the industry. We are aware of the painful losses that have been suffered and we are determined to work together to make the industry more resilient.

Hon. Members have spoken about the uptick in mergers and acquisitions activity, some of which predated the transferable tax history. I am told by industry that that has been such an important part of getting assets out of the hands of those for whom it might not be economically effective to extract, because they have global interests, and putting them into the hands of smaller operators.

Related to that, there has been an interesting surge in technological investment in things such as reusable tiebacks that enable companies to extract reserves in a more nimble way. That innovation and technology is really exciting. It is excellent that those lobbied-for tax changes, which were passed by a Conservative Government, are delivering. As the hon. Member for Aberdeen North said, there is renewed investment in innovation and drilling—people are getting out there and exploring.

Some of those changes will unfortunately lead to further restructuring and there may be job losses. We all want to build up a healthy ecosystem for the industry that will extend to a broader region and offer additional employment opportunities, particularly in new technology.

The Wood review, which we commissioned, suggested that we should establish a strong independent regulator. That is working well. We are committed to the driving investment principles that have underpinned that success, and we now have a globally competitive tax regime, which places the UKCS in the top quartile globally in terms of post-tax returns.

In total, the Government have provided £2.3 billion of fiscal support to the sector so far. We also committed another £40 million for new seismic acquisition, which has been managed by the OGA, and we co-funded the Oil and Gas Technology Centre through the Aberdeen city deal. I echo the point that the hon. Member for Aberdeen North made about that; it was a brilliant example of co-working. When we put aside our national, local and political boundaries, it is incredible what we can deliver in local areas. That has been a real success.

In response to the debate, I will announce three further things. First, I understand the comments about an ultra-deep water port, which we talked about in our manifesto. We are immediately commissioning a UK-wide scoping study, which will work closely with my Scottish Government counterparts, because they have kicked off a piece of work in Scotland and we want to ensure that we incorporate it. It is important that we look across the UK. If we can get an ultra-deep water port that is economically effective, it could have a material impact on our ability to attract decommissioning business.

Secondly, not for the first time, I listened with concern to the issues about helicopter safety. I understand that it is the only way for people to commute to work, as my hon. Friend the Member for Gordon said. I will write to the Civil Aviation Authority to ask it for reassurance that the measures it introduced on helicopter safety are working, and for what further assurances it can give.

Thirdly, on the issue that the hon. Member for Aberdeen North and others raised about customs treatment, I will instruct my officials to seek clarity immediately from their Treasury colleagues and to write to the industry and to all hon. Members present by the end of the month, so there can be no lack of clarity about what is required.

We have talked a lot about the industrial strategy. Trevor Garlick has done a fantastic job in getting the sector together and pulling together a series of interesting proposals. As I have said before, we must not define a Government’s willingness to work with an industry on the basis of there being a big-bang sector deal landing on people’s desks. Much of the financial and fiscal support that we have given to the sector is part of a broader sector partnership that we are committed to taking forward. However, there are some very interesting specific proposals in that deal. One that strikes me is for the decommissioning opportunity, which I am very keen to explore quickly and to bring forward. The House has my commitment that we will do that.

I believe we all share the view that environmentally rigorous extraction of oil and more particularly gas, and the use of that fuel, absolutely has a place in our low-carbon transitions. Our current assumptions are that we will continue to use gas. I understand the question of carbon capture and storage; we have debated it before and I will not run through the debate again. I will only say that we now have private sector partners with very deep pockets who are prepared collectively to invest in that technology through the oil and gas climate initiative; we did not have such partners before.

We also understand that we not only need to decarbonise generation; we also have to put that work within a cluster, so that dealing with industrial emissions can be put into the same infrastructure and framework. There are only five places in the world where CCS plants associated with generation are running purely on subsidy alone, which is effectively what we have been asking for. The other 16 places rely on enhanced oil recovery as a revenue source. Even the Norwegians, who have the sovereign wealth fund that we have talked about, find it very difficult to get pure subsidy for CCS through their Parliament. That is why I have set up the carbon capture council, which is headed by the best brains, including some of our friends from north of the border, to try to work out how we improve the technology in a cost-effective way. What is the irreducible core of cost and risk that Government have to take in order to move this technology forward?

The CCS cost reduction task force is specifically looking at cost reduction proposals and also committed £100 million for innovation, because without that technology we will not decarbonise either generation or industrial emissions, and I want us to lead on CCS.

In conclusion, this is a vital—

[Alan Brown]

I thank the Minister for giving way, especially when she is just winding up. I raised the Grangemouth renewable energy project and the possible application of a retrospective cap on the amount of renewable heat incentive money that the project can claim. Is that something that she can reconsider? We do not want to put this project in jeopardy.

[Claire Perry]

I would be very grateful if the hon. Gentleman wrote to me about that, so that I can consider that question and give him a more detailed reply. By the way, if I have missed out any points that were raised during the debate, Members should please feel free to raise them with me and I will try to respond to them.

It has been wonderful to have this debate on such a sunny day. It is 18°C in Aberdeen—I have just checked—so it is a slightly more balmy place than usual for people to head home to. This has been a really fantastic opportunity to reiterate all of our collective support for this industry, which has delivered so much, not only to the north-east of Scotland but to the United Kingdom. I want people to be in no doubt that we are committed to making sure that, yes, we do the economic extraction—I think that I have described it as being down to the last drop—but that we also think carefully about how we use this fuel in a low-carbon economy, and make the appropriate investments in the future. And once again, I commend my hon. Friend the Member for Gordon for raising this matter in the House.

Industrial Strategy

Alan Brown Excerpts

Wednesday 18th April 2018 Commons Chamber

[Greg Clark]

We are getting better at it. Most colleagues will have experience of their local universities and others, and most research universities have active programmes to spin out discoveries and reap the benefits. Again, through the industrial strategy challenge fund, funding is available on a match basis to universities to pursue that implementation of good ideas. My hon. Friend is absolutely right.

Let us take the future of mobility. The hon. Member for Coventry South (Mr Cunningham) and I have had many conversations about this country’s reputation not only for the efficient manufacture of vehicles—that is a proud record—but for innovation, whether in the west midlands or the world-beating cluster of Formula 1 businesses around Oxfordshire and Northamptonshire. The world comes to the UK for the next generation of technologies. Forty-year veterans of the automotive industry say that this is the most exciting time in their career, when not only the powertrain but the way in which vehicles navigate is undergoing a revolution. Around the world, there is increasing demand for that set of technologies and we have a strong capability in them. Again, setting a grand challenge is crucial.

We have set the Faraday challenge to be a world leader in the development and application of new battery technology. It is already attracting great interest around the world, and the hon. Member for Coventry South will know that the national battery manufacturing development facility will be located in Warwickshire at the heart of our cluster there.

On the ageing society, whether in Glasgow and Edinburgh or Cambridge, we have some of the best researchers in the world looking at medical breakthroughs that will be in increasing demand around the world. I make it clear that now and long into the future, we will invest in the facilities and the people to make us the place to come to research new innovations. As Members from Scotland will know, the Glasgow city deal had a big medical component to build on our success there.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Clearly, medical innovation and continued investment are welcome, but when dealing with an ageing population and workforce, we need not just innovation but immigration. We need immigration in the healthcare sector to support an ageing population. Does the Secretary of State agree that the Government should review their immigration policy, especially tier 2 visas, which are putting a block on experienced healthcare workers coming to the UK?

[Greg Clark]

As the hon. Gentleman knows—the industrial strategy is clear about it—we benefit from the contribution of workers, scientists and engineers from all over the world. There is no successful future for an economy that does not engage with the world. That means that we should be open to talent from around the world. We need to make sure, as every responsible nation does, that we have an orderly system for managing immigration from around the world. That is what we are achieving and what we will continue to achieve. It is very clear, on every page of the strategy, that this is a vision for an international Britain, rather than one that is moving towards a kind of national self-sufficiency.

--- Later in debate ---

[Kwasi Kwarteng]

Forgive me. I am pleased that the hon. Gentleman has picked me up on that.

It is right that we look at these measures in the round. Reductions in corporation tax from 28% towards 18% have been of huge benefit in trying to create a culture of entrepreneurship and in trying to create growth.

[Alan Brown]

The hon. Gentleman will be aware that the Government’s Red Book at the 2017 spring Budget predicted that cuts to corporation tax would cost the UK Treasury £24 billion. How does that equate to growth?

[Kwasi Kwarteng]

The hon. Gentleman talks about predictions, but let us look at the past. We have cut corporation tax in every single year since 2010, but revenues from that tax have gone up. That shows exactly that the Government’s strategy is right.

Let us consider ideas about investment in our people and their education. When I go around schools in my constituency, I am struck by the fact that everyone is talking about STEM subjects—science, technology, engineering and maths. These subjects are being fostered and encouraged by the Government. The message is very much going out, right through the educational establishment and across schools, and it is very encouraging that that is happening. In my constituency, a number of schools are looking in particular to increase STEM participation among female students, which is very exciting. All these things are part of an industrial strategy. All these things will make the country more prosperous and more productive—they will drive future productivity growth. The Government are to be commended for taking an unusually medium to long-term view of the UK economy. Far too often in this House, we sling insults, with lots of abuse and all that, and we are very focused on the short term. It is exciting that in this industrial strategy we can think in terms of the medium and longer term.

On that note, infrastructure spending is very dear to my heart, as the Member for Spelthorne. Heathrow—the “H” word—is something that this Parliament will have to decide on, hopefully in the next few months, but certainly in the next couple of years. I have always been clear about my support for the third runway—or rather, I should say, the expansion of Heathrow. That is vital to drive forward the economy, productivity growth and prosperity, so we will have to tackle that.

On the broad range of infrastructure issues, investment in human capital with regard to STEM subjects, and research and development—

--- Later in debate ---

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

The Secretary of State, in his opening remarks, made several mentions of UK success in terms of Nobel prize winners, so I just want to remind the House that Kilmarnock Academy, in my constituency, is one of the few schools in the UK that has educated two Nobel prize winners.

I welcome the publication of the industrial strategy and the fact that the original consultation document recognised some of the failings in UK industry, particularly on productivity. However, the strategy has a glaring omission regarding the challenges—Brexit. The industrial strategy seems to pretend that Brexit is not happening, even though the UK Government’s own analysis shows it will have an impact on the UK economy. We need to know what is going to happen to R&D collaboration and to R&D funding, and we need to take action to mitigate any impact.

We also need to know what is going to happen to other funding streams, such as European regional development fund moneys. In my constituency, industrial engineering units are constructed with the aid of the ERDF moneys. What is going to plug that gap in future? What are the UK Government going to do to provide that assistance to the areas that need that development money? I welcome the industrial strategy’s principles, including the sector deals, but as my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) said, the Scottish Government need to be involved and properly consulted on them. They were not consulted on the advanced life sciences sector deal. If they were properly consulted, I am sure we would already have an oil and gas sector deal.

Let us look at what the UK Government have done in recent years to support the oil and gas industry. In the spring 2016 Budget, they reduced the supplementary charge to 10%. That was welcome, but the £1 billion that that cost the Treasury was only a third of the inheritance tax giveaway to millionaires. That shows the Government’s real priorities. In the spring 2017 Budget, there was a paragraph promising another discussion paper. We are still awaiting the appointment of an oil and gas ambassador. In the November 2017 Budget, the transferable tax history mechanism was a welcome measure for the oil and gas industry, but it is predicted to bring an extra £70 million into the Treasury, so it is hardly a concession; it is actually a positive move. Actions are always stronger than words, and so far the UK Government have failed to provide the broad shoulders that we were told about. In the same period, they pulled £1.5 billion from the carbon capture and storage scheme in Peterhead.

Another innovative and possibly world-leading energy project is the proposed renewable energy plant at Grangemouth to replace the existing end-of-life gas turbine station. The new proposals include biomass, which means the project needs access to renewable heat incentive funding and contract for difference funding. Right now, however, the UK Government are seeking to cap the RHI funding available to any scheme at 250 GWh, which would make the project completely unviable. I urge the Secretary of State to do everything he can to make sure that the project goes ahead.

The industrial strategy rightly highlights offshore wind development via the Catapult, which is welcome. With onshore wind currently at £57.50 per MWh, we clearly need to continue in this direction, because that provides much better value for money than Hinkley, at £92.50 per MWh. I repeat the plea for onshore wind projects to be allowed to bid in future CfD auctions. That would reinvigorate the industry and provide a boost to engineering and fabrication companies throughout the UK.

Another sector deal that I welcome is the one for the construction industry, which will provide high-paid jobs, but, as I highlighted earlier, the £24 billion giveaway in corporation tax would be better used in the construction industry and would double the money available for the national productivity investment fund over this Parliament. I have one more plea: we really need to see the Ayrshire growth deal happen.

Draft Electricity Supplier Payments (Amendment) Regulations 2018

Alan Brown Excerpts

Monday 19th March 2018 General Committees

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Paisley

I was on a Public Bill Committee last week where I made a joke about being a man of few words, and I will not say too much tonight. We are interested to hear the Minister’s response on the operational costs. It makes a change to hear the Labour Opposition lecturing a Tory Minister about cost controls. We will see where that goes. The point raised is important: in the big scheme of things, if the impact on people’s bills is 0.1%, as reported, I am certainly supportive of the draft measure getting through.

The Minister reminded us in her opening remarks of how costs for offshore wind have come down to £57.50 per MWh. If we really want to minimise the impact on people’s bills in the future, onshore wind operations need access to future contracts for difference auctions as well.

[The Chair]

Everybody else seems to be able to contain themselves and to not wish to speak, so I call the Minister.

Unpaid Trial Work Periods (Prohibition) Bill

Alan Brown Excerpts

2nd reading: House of Commons
Friday 16th March 2018 Commons Chamber

[Stewart Malcolm McDonald]

Forgive me, but I did not say that the case was resolved. I said that I do not know the outcome, because the then Minister told me that she would not actually get told the outcome of such cases.

After blocking Members of Parliament on social media who highlighted the issue and then unblocking them all later that day, Mooboo Bubble Tea sent me a letter to say that the activity carried out in my constituent’s case was actually training. Training is actually covered by the National Minimum Wage Act, so Mooboo was still in breach of the law if that were the case. The company did, however, tell me that it had changed its practice as a result. Now, I have not found any available positions that I could perhaps have applied for myself, under cloak and dagger, in order to work out what happens. I do, though, understand that Aldi opened a big new store in the north-east of Scotland, advertising 150 unpaid trial shifts. This cannot go on, and today we have a chance to end it.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

I congratulate my hon. Friend on bringing this Bill forward. He just mentioned training, which I know about from personal experience. My son Dylan undertook unpaid training with a company that is employed by charities. It was to be a week’s unpaid training with a view to a job at the end. Does my hon. Friend agree that it is terrible that charities, which are supposed to exist to raise money for the greater good, are exploiting people in this way?

[Stewart Malcolm McDonald]

My hon. Friend is absolutely right. I did not even know that he had a son called Dylan.

[Alan Brown]

He doesn’t admit it to me!

[Stewart Malcolm McDonald]

I am sure that is untrue.

I mentioned retail and hospitality because those were the industries that came up most in my consultation. Amazingly, the British Retail Consortium refused even to discuss the issue with me because it thought there was not a problem. That is news to a young man from North Lanarkshire who was abused by the retail store, B&M Bargains. I used to love going into B&M Bargains, perhaps to pick up some toothpaste and then spending 25 quid because it is the kind of shop where people buy things they do not need. I was horrified to learn that it had had a young man with autism, in the hope of securing work, stacking shelves for three or four days, only to dismiss him at the end of it, saying, “You’re not required any more—off you go”, with no pay and no chance of a response.