Draft Energy-Intensive Industry Electricity Support Payments and Levy (Amendment) Regulations 2026

Gareth Snell Excerpts

Wednesday 4th February 2026 General Committees

[Greg Smith (Mid Buckinghamshire) (Con)]

As ever, it is a pleasure to serve under your chairmanship, Ms Vaz.

Energy-intensive industries have long been the backbone of our industrial economy. From steel and chemicals to ceramics and refining, these sectors provide skilled jobs, anchor local communities and guarantee our economic security, yet they are operating in an increasingly hostile environment driven largely by the cost of energy.

The draft regulations will make limited but important amendments to the energy-intensive industry electricity support payments regime. Specifically, as the Minister says, they will increase the compensation available under the network charging compensation scheme from 60% to 90% from April 2026 and will extend the application window from one month to two. The changes are made using powers under the Energy Act 2023 and are intended to strengthen the British industry supercharger package. The stated aim is to lower electricity costs for the most energy-intensive sectors, reduce the risk of carbon leakage, and help retain manufacturing investment and jobs in the United Kingdom.

The Opposition will always welcome measures that provide greater clarity and modest additional support for industries under pressure. However, it is impossible to consider this instrument in isolation from the wider context. Britain’s industrial electricity prices are among the highest in the world. On a per-kilowatt-hour basis, our electricity costs are the most expensive in the G7 and the European Union—around 46% higher than the median. Industrial electricity prices here are around four times higher than in the United States, and roughly 50% more than in France and Germany.

As my hon. Friend the Member for West Aberdeenshire and Kincardine (Andrew Bowie) has rightly said in other debates, Government policy risks accelerating the deindustrialisation of this country, from Stoke in the Potteries to the Prax Lindsey oil refinery in Lincolnshire.

[Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)]

I never miss an opportunity to talk about ceramics. When the hon. Gentleman listed the sectors that the scheme helps, he mentioned ceramics. Given that the supercharger scheme was set up by his Government, he will surely know that it does not cover the ceramics sector: the product standard industrial classification codes that were specifically listed when the scheme was set up excluded ceramics. Can the hon. Gentleman tell me why his Government decided that ceramics were not entitled to the level of support that they put in place for other energy-intensive industries?

[Greg Smith]

The hon. Gentleman is right to raise that point; I have always been impressed, on a cross-party basis, by the passion with which he speaks for industry in his constituency. My point is that we need to talk to those industries that do not currently have the support. I noticed that the hon. Gentleman bobbed to try and catch your eye, Ms Vaz, so perhaps he will have some helpful comments for the Minister on that front when he is called.

I am making a point about the wider context in which we have to see the statutory instrument. The most glaring omission is the oil and gas industry in the North sea. Energy-intensive industries are not just struggling; they are being driven overseas by costs that they simply cannot absorb. The very thing that the Minister said he was trying to prevent is happening. Since Labour came into government, more than 15,000 manufacturing and industrial jobs have already been lost, largely because of astronomical energy costs combined with unnecessary green levies and carbon taxes. When manufacturing moves abroad, we do not eliminate emissions; we simply offshore them, often to countries like China with weaker environmental standards and far greater geopolitical risk.

We have also heard clear warnings from industry leaders. Sir Jim Ratcliffe has been explicit that high taxes and energy costs have left sites such as Grangemouth unable to compete with overseas rivals. These are not abstract concerns, but real decisions affecting real jobs. Against that backdrop, while the draft regulations make proportionate and technical changes, they do not address the fundamental problem. Increasing compensation within a flawed system is not the same as fixing the system itself. The best way to reduce electricity prices for energy-intensive businesses is to tackle costs at source by scrapping the energy profits levy and removing punitive carbon taxes that undermine competitiveness.

I would be grateful if the Minister could clarify how this statutory instrument fits into a broader long-term strategy for energy-intensive industries. Does he accept that compensation schemes, while welcome, cannot substitute for the structural reform of energy pricing? Can he assure the Committee that the Government are developing a plan that genuinely restores Britain’s industrial competitiveness? Ultimately, energy-intensive industries know that their future depends on predictable affordable energy. If we are serious about growth, resilience and security, the Government must ensure that the policies of this country enable those industries to survive and thrive at home, not drive them abroad.

--- Later in debate ---

[Gareth Snell]

I thank the Minister for his engagement on the issue, particularly with the sector in Stoke-on-Trent and around the country. I talk about ceramics quite a lot, because the increasing cost of energy is a real impediment to us. I welcome the scheme, and I welcome the changes that will give greater relief to energy-intensive industries, but we face a perverse situation in which it is funded not by taxpayers’ money, in the traditional sense of the Government handing out a grant, but by a levy on licensed electrical suppliers that is used to compensate other sectors of energy-intensive industry.

This is about consumers in one sector paying higher bills to subsidise the cost for others. From a redistributive perspective I can see why that would work, but the wording of the regulations means that the product SIC codes under which a sector or industry can access the supercharger scheme are incredibly narrow: they are restricted to steel, cement and other things that are foundational to successful manufacturing in this country.

The perverse thing is that those who are not in the supercharger scheme are paying a slightly higher bill to help those who are in the scheme. Every month, those in energy-intensive industries such as ceramics have bills that are slightly higher than they would otherwise be, to allow other energy-intensive industries to have lower bills. That is an anomaly in the system that I do not think was intentional, but it means that places like Stoke-on-Trent are, essentially, subsidising steel mills in Scunthorpe and cement and brick manufacturers elsewhere.

I hope that the Minister will take away the point that extending access to the scheme and lowering the threshold of deductions that can be made would be an incredibly useful and powerful way to demonstrate support for foundational manufacturing sectors such as ceramics, which are key to our national defence, our house building programme and our gift and tableware exports, which provide a balance of trade in favour of the UK because of what we produce and where we send it. That would also support producers of advanced ceramics that are used in telecommunications and bioindustry, the refractories that are needed for glassmaking and ceramic making, and the emerging ceramic technologies that will be used in small modular reactors and for plating turbine blades at Rolls-Royce. There is a whole sector of industry that is not getting enough support. Will the Minister share any thoughts that he may have about extending the scheme?

A further point is that to access the support, businesses have to demonstrate through the business level test that 20% of their gross value added is taken up by electricity. Some energy-intensive industries will never reach that, because gas is a component of their energy costs. The ceramics sector, for example, is massively energy-intensive but predominantly gas-based. I suggest to the Minister that he needs to change how he applies the energy cost calculation for GVA to access the scheme so that it includes both gas and electricity, even if the discount comes only on electricity.

There are producers in the ceramics sector who would dearly love to move towards the electrification of kilns and other products that are currently gas-powered, but the disproportionately high cost of electricity makes that uneconomical. Even if they did so, they would still fall foul of the business level test, because so much gas would still be needed. They face a double whammy, with a higher electricity bill while they still have to pay for gas.

As costs increase in a variety of other areas, not least the raw materials, I know that for some companies in the supercharger scheme the 20% threshold is getting closer and closer to 19%, because it is a proportion of the overall costs. In future amendments, will the Minister consider the 20% threshold to make sure that we do not inadvertently see companies falling out of the supercharger scheme as energy becomes a smaller proportion of their overall cost, not because their electricity costs have come down but because their other costs have grown?

I understand that the Government will be using genuine public money to make up the difference between the 60% and the 90% threshold. If it transpires that the demand for the scheme is such that the money available does not cover the additional costs for companies with the new 90% reduction, is there any mechanism to stop electricity suppliers putting up their tariffs on other energy-intensive users to make up the difference between what they are receiving from the Government to compensate their loss and what they are passing on to their customers? We could end up with a perverse system in which a greater discount is being given to some energy-intensive suppliers, while ceramics companies in Stoke-on-Trent are paying an even larger electricity bill.

Overall, the intention behind the draft regulations is good, but there are some nuances that we can work on. If the Minister is willing to extend the scheme to include the ceramics sector, there will be a lot of happy potters in Stoke-on-Trent.