Advanced Research and Invention Agency Bill (Third sitting)

Jerome Mayhew Excerpts

Tuesday 20th April 2021 Public Bill Committees

[Dawn Butler]

I think the Minister has just described an MOU. A framework document that is agreed by UKRI and ARIA, not by the Government, is an MOU, I believe.

[Jerome Mayhew (Broadland) (Con)]

In earlier comments, the hon. Lady referred to the evidence obtained offline. When she asked, “How would this occur?” Professor Dame Ottoline Leyser replied, “Naturally.” The Lady’s response is to ask, “Why would we rely on that, if we can put something on the statute?” I suggest that it should be the other way around. In this country, we legislate only where we have to, not where we can.

[Dawn Butler]

The Government are creating a new agency and spending £800 million. They are saying that this new agency should not be subject to the Freedom of Information Act 2000. They are saying that it will fail, a lot, and we need to accept that failure happens in science. That is fine—I used to be a computer programmer, and I know that sometimes you try things and they do not work—but this is very new. We should not put it in a silo by itself, with no proper link to UKRI. I do not believe the hon. Member believes that there will be no link, because the Minister has just described this document as a memorandum of understanding by another name. I do not think there are actually any disagreements about having the memorandum of understanding.

Advanced Research and Invention Agency Bill (Fourth sitting)

Jerome Mayhew Excerpts

Tuesday 20th April 2021 Public Bill Committees

[Chi Onwurah]

I thank the hon. Member for the second Newcastle for that contribution. I will make a couple of points in response. Let me gently say that Government members of the Committee are trying somewhat to have it both ways, in saying that ARIA will be like UKRI while not putting in place any of the measures, systems or processes of accountability to require it to be like UKRI, building on the fact that ARIA is, as I understand it, meant to fill a gap in our research landscape.

On whether ARIA will follow all the rules that UKRI follows, I am pretty sure that the answer to that is no, because as I understand it, it is not going to follow freedom of information or procurement rules. We have seen over the past few months with the scandal over Greensill—this is what the comments from the Chair of the Liaison Committee were about—that the existing rules and regulations are not sufficient. Finally, for the hon. Member for Newcastle-under-Lyme to say that we can expect these people to behave better because they are going to be better than that—really? Many scandals have been founded on expectations like that and again, we do not want the touch or hint of scandal near our fantastic science base.

[Jerome Mayhew (Broadland) (Con)]

Can I have some clarity from the hon. Lady? The point made by my hon. Friend the Member for Newcastle-under-Lyme—the other Newcastle—was that there is already a written requirement for members of these kinds of bodies to make full disclosure. If they are going to ignore that, why does the hon. Lady think that they would not ignore a regulation from the Secretary of State saying exactly the same thing?

[Chi Onwurah]

I thank the hon. Member for his contribution, which I think was made in a constructive sense.

I think the Chair of the Liaison Committee is making a point about that guidance. Clearly, it was not sufficient for David Cameron and it is clearly not proving to be sufficient in other cases. I hope that, as this amendment sets out, it is not simply about declaring. This is a critical part and I am grateful to the hon. Gentleman for allowing me to emphasise it. The amendment does not say they should declare conflicts of interest; it states that the Secretary of States makes regulations—detailed, I would say—establishing the procedures to deal with conflicts of interest. That is the key thing. This stems from the need to have a close working relationship with the private sector, which will give rise to conflicts of interest that may be quite complex, especially with new and evolving technologies, which may go on to complex and potentially international supply chains. Those conflicts of interest may be complex, involving equity stakes and so on. We need procedures to deal with them that are more detailed than the current general ones and which are specifically targeted at ARIA’s unique role.

Dr Regina Dugan, the chief executive officer of Wellcome Leap, effectively supported that proposal:

“The particular way that we work is through contracts; we do not actually do grants. I also think that this position of not taking equity is important, because the non-profit element of it is part of the differentiation, and we have an entire commercial sector that is good at assessing value and figuring out return on investment.”—[Official Report, Advanced Research and Invention Agency Public Bill Committee, 14 April 2021; c. 48, Q43.]

What is different with ARIA is that it is, potentially, going to be taking equity, which can raise more complex conflicts of interest.

Professor Pierre Azoulay of the Massachusetts Institute of Technology said that

“the programme managers at DARPA and also at ARPA-E—the Advanced Research Projects Agency-Energy—have a fixed expiration date, which means they will need to go back to academia or to the venture capital firm or large firm that they left, and generally they want to do so with their head held high and their reputation intact. I think that that has created over time a norm of correct behaviour, if you will, and the absence of cronyism.”—[Official Report, Advanced Research and Invention Agency Public Bill Committee, 14 April 2021; c. 38, Q30.]

We want to see that norm of correct behaviour established through supporting processes and procedures. I asked Dr Highnam,

“What should we be looking for in the directors and programme managers as the key positive part of the culture that ARIA should seek to build?”

He answered:

“Honour in public service is top of the list.”––[Official Report, Advanced Research and Invention Agency Public Bill Committee, 14 April 2021; c. 39, Q32.]

I should say that I have not heard any Government witness or Minister emphasise the importance of honour as a key characteristic of board members. I think it is really important that procedures to deal with conflicts of interest are established. That view is shared by the Chair of the Liaison Committee, who has said

“After the dust settles over the Greensill affair, I suspect that we will find that the lack of judgment over David Cameron’s approaches to ministers is less important than the general failure to address what has become a casual approach to conflicts of interests amongst many in government and in politics…All can see now the general inability of the various codes and systems”—

to the points made—

“of oversight, such as the toothless advisory committee on business appointments, to provide sufficient transparency and accountability, which is why even its chair, Lord Pickles, wants reform.”

When the Chair of Liaison Committee, who is much respected on the Government Benches, says that, and when we are mired in scandals as a consequence of a lack of appropriate conduct and clear processes and procedures, I urge the Minister to accept the need at the very least for greater detail when it comes to avoidance of conflicts of interest. I urge her to accept the amendment to establish processes and procedures to avoid conflicts of interest in this new body, which is critical to our future economic and scientific prosperity.

Advanced Research and Invention Agency Bill (Second sitting)

Jerome Mayhew Excerpts

Wednesday 14th April 2021 Public Bill Committees

[The Chair]

I am afraid this will probably have to be the last question to this set of witnesses. I call Jerome Mayhew.

[Jerome Mayhew (Broadland) (Con)]

Q We are clearly taking a huge amount of inspiration from DARPA in the creation of ARIA. It is an organisation that has many strengths, but every organisation has weaknesses as well. I would like to give you the opportunity, given your huge knowledge and experience of DARPA, to give us advice on what to avoid. To put it more diplomatically, how can we improve on some of the DARPA processes?

Dr Dugan: One can look at any set of processes and ask, “Are they optimised for the outcomes?” I think ARPA-like organisations are very much optimised for the outcome, which is to catalyse breakthroughs. It is not optimised, as my colleagues have said, for multi-decade-type funding that supports basic research that is foundational and builds a body of knowledge and extends incrementally our understanding of the world. Neither is it optimised for commercial success. I think those things are okay, and there are other organisations and other funding mechanisms that are optimised for those types of activities.

Part of what we see is that the programmes very much take on the character of the programme directors. That is good from the perspective of speed, agility and getting the work done. Sometimes people do not agree with all the things the programme director says. That is the nature of the type of work we do, which is high-risk and breakthrough-oriented. We used to say that the good and the bad of DARPA is that it has no institutional knowledge, which means that we can take a shot at something that has been tried before, and most of the people who tried it before are no longer at DARPA. That is good, as it gives us multiple shots on goal in a changing science and engineering landscape.

[Jerome Mayhew]

Q Finally, to Professor Azoulay, DARPA clearly recognises the benefit of greater integration between the public sector and the private sector, but inevitably that exposes civil servants to political accusations of cronyism. How do you protect DARPA and DARPA servants from those kinds of attacks?

Professor Azoulay: I think there are two elements. One is rules—conflict of interest rules are very important in this regard—and the second, which I mentioned at the beginning, is norms. It is a lot about whom you choose to put in those roles. They typically have credibility and a reputation that is established in the world that they come from—it could be academia or the private sector. Serving as a programme manager at DARPA or ARPA-E is a wonderful opportunity to have an impact—

[The Chair]

Order. I am afraid that brings us to the end of this session, I am sorry. It is a perfect end to the session, but it is the end of the time allocated to the Committee to ask these questions. I thank our witnesses on behalf of the Committee for that evidence. Thank you very much.

Professor Azoulay: Thank you. It was a pleasure.

Examination of Witnesses

Professor Dame Anne Glover and Tabitha Goldstaub gave evidence.

Advanced Research and Invention Agency Bill

Jerome Mayhew Excerpts

2nd reading
Tuesday 23rd March 2021 Commons Chamber

[Jerome Mayhew (Broadland) (Con) [V]]

It is a clichéd truism that research and development is the growth of tomorrow. It is an expression of confidence in the future prosperity of our country. Recent modelling by Cambridge Econometrics suggests that increasing R&D investment to 2.4% of GDP by 2027 would boost annual growth by between 1.2% and 1.4%, and increase our productivity by 1%, with further increases thereafter. It is obviously the right course of action for the Government to continue to grow investment in R&D from the historic lows of the last Labour Government.

The lion’s share of Government investment is rightly channelled through UKRI, with its objective of growing a large and vibrant research and innovation culture throughout the UK. UKRI is deeply engaged with both the academic community and the business community, and it will continue to do the heavy lifting in this sector. ARIA will provide something additional to the mix.

Looking around the world for examples of effective applications of R&D investment, I am glad that the Government have learned from the experience of others. DARPA has been instrumental in assisting the crossover of research into commercial opportunities, despite having an overt focus on defence technologies. Given its global impact and consequent reputation, it is surprising to learn that it is a small organisation. I looked it up and found that it has around 220 employees, yet it supports some 250 research projects and has a track record to be proud of, as referred to by many speakers, including my hon. Friend the Member for Burnley (Antony Higginbotham). DARPA has been operating since 1958, so it is fair to say that the Government have allowed the start-up wrinkles to be ironed out before emulating its success.

Much as the £800 million allocated in this Parliament will be welcomed by the research community, the greatest contribution of ARIA will be the expression of intent that it articulates. We are living in a new world in which the cosy certainties of previous years are no longer there. That democratic western societies have technological and economic superiority is no longer a given. Membership of the protectionist European trading bloc has been left behind. Our leaving the European Union has provoked a new spirit of national endeavour. Depending on one’s politics, this is either in response to opportunity or out of necessity—it does not really matter. What is important is that we recognise the change in attitudes and do all we can to promote it.

The creation of ARIA reflects this new dynamism: let us learn from the lessons of covid, breakdown bureaucratic barriers and be prepared to take risks and accept failures as part of the price of ambition. Global Britain must be not just a marketing slogan but a reflection of countless investment decisions in boardrooms right throughout the country. ARIA is part of a wider message to business and society as a whole that post-Brexit Britain is dynamic, taking control of its future rather than just hoping for something that is not too bad. It is saying no to the status quo and its cosy relative decline; it is saying yes to the new, to the unproven, to the possible, to the opportunities of low-carbon growth and to scientific endeavour. It is as much a response to the lessons taught to us by the Chinese Government as it is a lesson learned from the United States of America. I suspect it will just be the start.

DARPA has in the US military a guaranteed customer, helping with the development of commercial products from its technological advances. Close attention will need to be given to this process of commercial exploitation. Is there a role for Government to create markets and prime industries? The deindustrialisation of globalisation has delivered us cheaper products in the short term, but there is a difference between offshoring production, and with it the hubs of capacity and expertise, and growing a resilient domestic manufacturing base. To ignore that is to pretend that the geopolitics of the world have not changed in the past 10 years. We need to respond to that, and the response involves the shortening of supply chains. I therefore welcome the focus on UK exploitation as well as UK exploration.

As for the criticism of the Opposition parties, they have a choice: they can snipe from the sidelines, waiting to pounce on the mistakes of those brave enough to try new things, or they can support our dynamism, recognising that risk and opportunity are the two sides of the same coin. The Government have made the right choice in this Bill and they should be supported.

UK Renewables: Critical Minerals

Jerome Mayhew Excerpts

Monday 15th March 2021 Commons Chamber

[Alexander Stafford (Rother Valley) (Con)]

I refer the House to my entry in the Register of Members’ Financial Interests. As vice-chair of the all-party parliamentary group for critical minerals, I am delighted to have secured this debate on the use of critical minerals in the UK’s renewables future. As was the case with my two hydrogen Adjournment debates, I am pleased to announce that this is the first debate in the UK Parliament dedicated to critical minerals.

Critical minerals have long been overlooked by successive Governments and by this House—the mantra of “out of sight, out of mind” is apt. Awareness of where our critical minerals come from and what they are used for is low, however. The Government are waking up to the fact that the race for critical minerals security is the new great game. Urgent action must be taken now to safeguard the future prosperity of the United Kingdom and the west in the spheres of the economy, defence and energy. With the upcoming COP26 in Glasgow and the G7 summit in Cornwall, there could not be a better time to do so.

It is vital that this House is made aware of the significant threat to our economy and our post-covid and post-Brexit recovery if we run out of the critical minerals needed to supply our low-carbon industries of the future. The UK’s 10-point economic plan makes an assumption that the international supply of these minerals is sufficient to service every country’s needs in our global race to avoid climate change. I would like to inform the House that that is clearly not the case.

What are critical minerals and what are they used for? In simple terms, these are the minerals that are vital for low-carbon industrial capabilities, but which face supply chain vulnerability. The Critical Minerals Association has split the definition of critical minerals into three subsections: critical minerals, which are important for industrial strategy and consist of minerals such as lithium, cobalt and rare earths; technology metals, which are bulk metals such as copper that are not susceptible to supply chain vulnerability, but are important nevertheless for the UK’s industrial objectives; and strategic minerals, which have potential defence importance. Those three groups of critical minerals are ubiquitous in their use, and that is part of the problem.

In fact, critical minerals are becoming more and more important by the day. Our renewables and telecommunications technology of the future requires an ever-increasing amount of critical minerals. Without them, our society just cannot function. With global demand at this scale, shortages present a real threat to our economy and to our society. In the past five years, we have seen the mass commercialisation of satellite and drone technology, led by British companies such as Blue Bear Systems, all of which rely on critical minerals. Likewise, advanced robotics for British manufacturing, which is crucial to my seat of Rother Valley in South Yorkshire and places across our country, require more than 40 different critical minerals.

It is incredibly important that British industry thrives in the post-Brexit and post-covid era. For that to happen, factories and plants in the Rother Valley region must stay at the cutting edge of their sector, with the best equipment and secure, efficient supply chains, thus staying competitive and retaining their reputation for the highest-quality products.

The most visible everyday examples of the importance of critical minerals are mobile phones and electric cars. Our ultra-modern smartphones, boasting touchscreens, cameras and 5G, use a huge number of critical minerals, including potassium, tin, copper, tungsten and advanced aluminium. Electric vehicles are often hailed as the future of renewable transport, but they are key users of critical minerals. Each car on average uses 100 kg of copper, rare earth for the magnets and lithium, nickel, cobalt, manganese and graphite for the batteries. Many people are surprised to learn that a solar panel relies on 16 different minerals and metals.

An equally important part of the UK’s renewables future is the wind turbine, with the Prime Minister boldly envisioning that we shall become the

“Saudi Arabia of wind power”.

I share his enthusiasm for the role that wind can play in powering the UK and in reducing our carbon emissions, but to meet the Prime Minister’s objective of having every home in the UK powered by wind turbines by 2030, experts indicate that we will need to increase our output of energy from 10 GW to 40 GW by 2030. That will require building a new wind turbine every single day until 2030. To achieve that, we need more than 26,000 tonnes of rare earths and more than 4 tonnes of copper. The UK Government must acknowledge that the construction of renewable energy technology is inextricably linked to the supply of critical minerals. We must take action accordingly to protect our energy sector and the generation of power.

Importantly, seven points in the Government’s 10-point plan for the green recovery are dependent on a secure green supply of critical minerals. Herein lies the challenge for the United Kingdom. We are facing a two-pronged threat. The first threat is that as demand rockets for the use of critical minerals in the technology of the future, there is a global shortage, which would affect our economy and livelihoods, our energy supply, our environmental agenda, our security and defence, and basically the way we live our lives.

The second threat is that our current suppliers of critical minerals are not dependable or sustainable. I shall name two countries in our critical minerals supply chain in order to demonstrate that fact. The first is involved in the mining of critical minerals, and the second in the midstream processing. The Democratic Republic of the Congo is not a dependable source of minerals for the UK to rely on. It is politically unstable, and Chinese influence is concerningly strong in mining areas. It is not a sustainable source of minerals either, with the DRC home to low environmental standards and frequent human rights violations against local people and children. In fact, there is currently a class action lawsuit against the big technology companies, including Apple, Google, Dell, Microsoft, and Tesla, which stand accused of operating supply chains that use cobalt mined by children.

The second country in our critical minerals supply chain is the People’s Republic of China, and it is in the midstream, where the communist PRC dominates, that we face our greatest threat. Clearly, we are totally dependent on China’s good will, from processing and refining to beneficiation. For instance, China mines only 1% of the world’s cobalt, but refines 65% of it. It mines 12% of the world’s manganese but refines 97% of it, as well 89% of the world’s graphite. China’s absolute control of the critical mineral midstream is so strong that graphite from the UK is sent to China for beneficiation, and then bought back from China at the component section of the supply chain. That is absurd. Of the 172 gigafactories being built in the world at this moment, 130 are in China.

It is estimated that by 2030 the world’s demand for lithium will mean that global production is 1.4 million tonnes a year in deficit. Graphite will be 8 million tonnes in deficit, cobalt 800,000 tonnes in deficit, and nickel 400,000 tonnes in deficit. If China controls the midstream of those minerals, and is building over three times more gigafactories than the rest of the world put together, it is only logical that China will serve its industrial requirements before the rest of the world, and before the United Kingdom.

[Jerome Mayhew (Broadland) (Con)]

We talk about industrial strategy, but would my hon. Friend enlighten the House about his views on whether this is also a national security threat?

[Alexander Stafford]

I thank my hon. Friend for that point, and of course it is a national security issue. This is one of the biggest national security issues facing us over the next 10 years or so, and we need to have control of it.

Let me give more examples of why this is such an important matter. More than 75% of the world’s lithium-ion component manufacturers are located in China, resulting in more than 72% of lithium-ion batteries, and 45% of all global electric vehicles, already being produced in China. In December 2020—only a few months ago—the Chinese legislature passed a law on export control, allowing the Government to ban exports of strategic materials and advanced technology to specific foreign companies. A Chinese Government spokesman said:

“China may take countermeasures against any country or region that abuses export-control measures and poses a threat to China’s national security and interests”.

This year alone, China has openly discussed the potential of cutting off the supply of rare earths or rare-earth components to the United States. Those are necessary for the US defence sector and, to put that into context, more than 400 kg of rare earths are needed for a single F-35 fighter.

Let me return to the example I often cite, which is the coronavirus pandemic. Last year, the UK imported most of its personal protective equipment from China, with only 1% of it made in the UK. When we needed it most, however, at the height of the pandemic, China decided to not fulfil its obligations, by sending us defective PPE, or by not even sending it to us at all. We now manufacture 70% of PPE domestically. It is a similar situation with critical minerals. When we take that together with China’s actions over Hong Kong, Taiwan, and its treatment of the Uyghurs, it is clear that we cannot, and should not, depend on the PRC for the future of our economy, energy, and defence sectors.

For the economy, the consequences of such supply chain instability for the United Kingdom are stark. Let me take the automotive sector as an example of the consequences. Some 70% of the value of an electric car is realised in its battery and motor. If those components cannot be manufactured in the UK because we do not have the minerals coming into the country, the consequences for the automotive sector alone are bleak: it could cost up to 500,000 jobs by 2030. There is no doubt in my mind that the Government must take immediate and assertive action to avert this potential disaster, which may strike just as we set out our post-covid-19 recovery.

The Government must adopt a two-fold approach, the first arm of which is to focus on relocating as much of the critical minerals supply chain as we can to the UK, thereby boosting the UK economy and creating jobs and opportunities. The second arm is to take a leading role in creating a Five Eyes critical minerals alliance to co-ordinate an overarching strategy to secure a stable network of interdependence.

On building a critical minerals industry in the UK, we already have some world-leading companies and research institutions in the sector, doing vital work. Of course, Britain has long been a pioneer in industrial innovation. If we look through history, we see that we have been at the forefront of industrial revolutions and part of revolutions in power supply, from early agrarian methods to steam to oil. What differentiates today’s power revolution is that we are not only looking for more powerful or cheaper sources of energy but developing renewable energy sources that meet our social objective of being less damaging to the environment. It is inescapable that critical minerals are the building blocks of this new economy, and the renewable energy sector will need them. The reality is that our future economy and green energy desires rely on a steady, secure and vertically integrated supply of critical minerals for the UK.

The UK has a particularly long history of mining stretching over 2,000 years and more. Everyone in Britain is only too aware of the legend that Jesus himself visited our green and pleasant land more than two millennia ago precisely because of our mining heritage—his relative Joseph of Arimathea was a tin trader—as memorialised in the song “Jerusalem”. Our bulk mining capacity has been depleted because of decreased ore grades, but we are now seeing a growth in domestic critical mineral potential. Although this will never meet our entire critical mineral needs, the shortening of supply chains and production of feedstock domestically is the first step towards reducing vulnerability and tapping into the £7 billion-per-year industry.

We know of UK critical minerals deposits in the south-west of England, Northern Ireland and Scotland. Cornish lithium is key to UK critical mineral potential, securing battery-grade lithium from geothermal brine. Elsewhere in the region, Tungsten West is reopening a globally significant tungsten deposit in Devon and Cornwall, and Cornish Metals has the potential to supply industrial levels of tin for the British economy. Not only are such projects significant to our industrial objectives, but they provide an alternative year-round economy to Cornwall and the south-west, where the community has rich mining heritage. In Northern Ireland, Dalradian Gold has the potential to deliver significant copper for the UK economy. Such companies require support to unlock the potential in our regions and secure critical minerals sourced from home.

Domestic mining is just one small part of the greater picture. It is important to note that no one expects us to repatriate all upstream mining to Britain—quite simply, we do not have the geology to support that. It is key that we relocate to the UK other steps in the supply chain, particularly in the midstream. Crucially, by shortening our supply chain we can reduce our embedded carbon footprint, which is vital to the delivery of our green economy and to meeting our net zero target. The domestication of the critical mineral stream and investment in the circular economy is crucial. We are lucky to have in the sector leading British companies such as the Materials Processing Institute, Less Common Metals, TechMet and Technical Critical Minerals.

Let me turn to the second arm of the two-fold approach that I urge the Government to adopt. It is evident that the act of mining is determined by the geology in a nation. If we are to meet the UK’s industrial needs, we will need to secure sufficient critical minerals from other countries. It so happens that our Five Eyes partners are blessed with critical minerals in abundance, as are our Commonwealth friends.

I am a firm believer that the UK is a force of good in the world. In stable partner nations such as Malawi, Tanzania, and Zambia the multiplier effect of a responsibly-run mine is somewhere between 10 and 25. In respect of Five Eyes, collaboration is vital for the mutual benefit of us all. We largely share the same economic and security objectives and we face the same global threats. Closer collaboration with our partner nations, especially Australia and Canada, will be vital to our upstream overseas critical mineral supply chain. As vice-chair of the all-party parliamentary group for critical minerals, it was an honour to host the Australian high commissioner this morning to hear about Australia’s recently launched critical mineral strategy and how Australia seeks greater co-operation with the UK in this vital sector.

The high commissioner reiterated that neither country will get to net zero by 2050 through the development and deployment of low-emission technologies without a secure supply chain of critical minerals. His Excellency confirmed that the UK is at the front of the queue for critical minerals co-operation due to our shared environmental and ethical standards and commitment to a market that is diverse, robust, secure, and underpinned by good governance and environmental, social and corporate governance practice, driven by innovation, free market forces and co-operation.

Together, we can diversify the supply chain and complement each other to protect our economies and societies. However, we must secure a UK-Australia free trade agreement. I am pleased that we are already working to establish a working group on critical minerals with Australia. I urge my colleagues to study closely Australia’s critical minerals strategy as it is very much what we should doing in the UK, and the creation of a critical minerals facilitation office should be explored too.

The UK has an opportunity to take the lead on developing an overarching Five Eyes strategy that will safeguard our prosperity and security for decades to come. It is quite possible that we can work with our mining counterparts to host the midstream and downstream parts of the supply chain, creating a supply chain balance across the Five Eyes alliance. Quotas, too, are particularly important in ensuring that our respective needs are met and that we do not face any shortages. One territory that Five Eyes must pay particular attention to is Greenland. As a member of the all-party parliamentary group for Greenland, I welcome the timely publication of the Greenland critical minerals report, which outlines the crucial role the UK has to play in leading the Five Eyes critical minerals alliance, and I urge the Government to enter into an enhanced partnership with Greenland for critical minerals and to prioritise a bilateral UK-Greenland trade agreement.

I now turn to the benefits of adopting my new strategy on critical minerals for the whole United Kingdom. We are at a crossroads, looking to a future dominated by the green renewables transition and the levelling up agenda. We have left the European Union and we are looking to turbocharge the economy post covid, as well as hosting the G7 and COP26 this year. The building of a critical minerals supply chain will spread huge opportunity to every corner of our country.

I have already spoken about the critical mineral potential of left-behind areas. I know from my own work on locating a hydrogen hub in my constituency of Rother Valley that the domino effect of such supply chains in a region is transformative. For example, Sheffield’s hydrogen giga-factory could be used as part of the electric vehicles and critical minerals supply chain, creating efficiencies and synergies between our burgeoning hydrogen economy and our critical minerals economy. That will not only safeguard existing jobs but create thousands more jobs, providing well-paid employment in the region for generations to come and injecting much needed investment into our high streets in industrial towns such as Dinnington, Maltby, Thurcroft and Swallownest.

As more companies and educational institutions are attracted by that industrial cluster of critical minerals, steelmaking and hydrogen plants, prosperity is sure to follow. Repatriating the critical minerals supply chain is a vital part of our levelling up agenda, upskilling the local population and supporting our green programme. The more steps in the chain located in the UK, the more we control environmental standards, labour standards and ESG matters.

A circular economy underpinned by the expansion of industries such as recycling, repair and remanufacturing could also create over half a million jobs across the UK. Most of these would be in remanufacturing and most would not be in London or the south-east. It would be particularly important to give a second life to machinery that will enable a low-carbon future.

We are, of course, in a race for these manifold benefits. Our industrial objectives are the same as those of Europe and their companies are looking for the same critical minerals we are. The threat is that we will not secure the supply chain as the EU and other nations advance their strategies before we can. Companies looking to take advantage of the new industrial revolution are thinking regionally to maximise profits against the relatively high capital expenditure needed to start these businesses. As such, we find ourselves in a race against friends to secure a supply chain of critical minerals and secure the domestication of component manufacturers to deliver the industrial objectives.

The Minister will not be surprised that I have some policy asks of the Government. The first is to support the development of potential critical minerals by supporting upstream mining capability throughout the UK. The second is the development of a critical mineral midstream. The global supply chain bottleneck is at the midstream section. When the rest of the world focused on bulk mining, China looked to the future of the industry and cornered the market for the minerals we need now. It is a monopolised sector and therefore free market forces do not work. As a Government, we must find innovative ways to fund the right projects to ensure we overcome this global bottleneck. Our regional competitor for critical minerals, the EU, has already started a finance programme looking to raise £16 billion off the back of an institutional £6 billion investment. Unless we find a way to compete, companies will be attracted to where the investment exists.

The third ask is that we work with our international partners to produce a Five Eyes critical minerals strategy. I strongly believe that working with our cousins in Australia and Canada is the key to building that.

The fourth request is that the Government support university programmes, such as the Camborne School of Mines, to make sure that they look at critical minerals. The final ask is that the Government release a critical minerals strategy at the earliest opportunity, to give investors and industry certainty and to allow Members of this House to scrutinise the economic, environmental and societal benefits.

I believe firmly in our 10-point plan for a green recovery and our net zero target, and I am a staunch supporter of the levelling up agenda. The UK has all the necessary skills and talent to be a world leader in the sector, working with our Five Eyes and Commonwealth friends. We just need the Government’s support, direction, and investment to unleash this potential, creating opportunity across Britain, boosting our green economy, and protecting our energy and defence interests. The critical minerals great game has begun. With the Government behind us, I know that the UK will be the winner.

Border Carbon Adjustment Tariffs and Decarbonisation

Jerome Mayhew Excerpts

Wednesday 16th December 2020 Commons Chamber

[Jerome Mayhew (Broadland) (Con)]

Border carbon adjustment: it may not trip off the tongue, but this is not a dull subject. This policy is the stuff that dreams are made of.

I ask hon. Members to imagine that, as they settle down in their beds, they start to wonder how we could create the economic environment for levelling up in our manufacturing heartlands, giving them a low-carbon head start on the rest of the world. As they turn over and start to count the fluffy sheep jumping over a fence, they catch sight of a free market that naturally seeks out the most effective way to reach carbon net zero and deliver on the Prime Minister’s 10-point plan. Finally, just as they drift off to sleep, they glimpse, as in a glass darkly, a Government leading the world at COP26, achieving an international approach that brings co-operation and rapprochement with our European and American friends and allies. Could this be real, or must it evermore remain but a dream?

Well, this is no dream, and we can turn it into reality with a border carbon adjustment. We know we need to reduce carbon to net zero by 2050, and centuries of experience have taught us that the free market is without equal in being able to solve challenging economic problems such as this. Yet, right now, our free market stands helplessly by, its creativity and innovation useless.

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Gentleman on bringing this matter forward. He is right about the Prime Minister’s statement on environmental issues. Does he agree that we now have the potential to make a real and lasting change for the better by implementing environmental changes, but that we must also be aware that the pressure on businesses must allow them to continue to operate and not put them out of business? There is a balance to be got, I believe, and we have an obligation not only to the industry, but to the environment to get it right.

[Jerome Mayhew]

The hon. Gentleman is entirely right. That is one of the great benefits of a border adjustment: it allows us to raise domestic costs without being unfairly undercut by international imports coming in. We can square the circle. We can support the environment by setting a carbon price that is sufficient to change people’s behaviour, to make lower-carbon products more attractive in the economy than higher-carbon products, while at the same time facilitating our domestic industry to remain competitive.

It is because we cannot price carbon emissions that our market is currently floundering. The reason is that they are an externality. When I produce a piece of paper, I take account of the cost of the ingredients for the paper, the energy I will use, my overheads, my marketing spend, my transport and distribution costs, and my profit. However, in the free market exchange with my purchaser, the cost to society of the emission of carbon through that manufacturing process is not currently accounted for, because it is dissipated into the environment and we cannot put a price on it. That is why we have market failure on the price of carbon.

So what do the Government do to try to deal with that market failure?  They are left in a very difficult position. They try to change behaviour by announcing a reduction in targets, making piecemeal regulations as and when they become available, and picking innovation winners—we have a list, most recently hydrogen and modular new nuclear, to name but two. I very much hope the Government have got those expensive choices right. Based on the available evidence I believe that they have, but that is the point: only a properly functioning market finds the best way to allocate capital, with its invisible use of the combined knowledge of the sum of all the participants in that market. No Government can match that combined wisdom.

Our current approach to carbon pricing simply does not work. If we raise the cost of energy with our higher cost of carbon, our industry simply becomes uncompetitive, as the hon. Member for Strangford (Jim Shannon) pointed out a moment ago. Manufacturing simply moves abroad, or it goes bust and its place is taken by the raft of imports from higher-carbon countries—in addition to the very high cost of carbon in the import process and transport—like China. The result is damaging to jobs. It is, of course, damaging to our business. It is very damaging to our balance of trade. It is very damaging to our tax base and it is damaging to the climate. All in all, it is a damaging disaster.

Border carbon adjustment can transform that process: charge imports from a high- carbon economy the same carbon cost as we impose on our domestic industry via a BCA and the problem is solved. There would be no incentive for our manufacturers to base production abroad, since the costs would be equalised. Foreign companies would no longer have an unfair trade advantage. In fact, it would provide them with a direct incentive to reduce carbon usage in their domestic environment to avoid corrective tariffs. From a policy perspective—I am using China as an example—the Chinese Government would have a choice: either their exports pay a carbon price at our border and the money goes to our Exchequer; or they create a carbon price in their domestic market and they get to keep the money themselves. There is, therefore, a really positive incentive internationally for carbon reduction and the benefits to be spread. After all, climate change knows no borders. Better still, using the same calculation for border carbon adjustment but this time in reverse, our own factories would get the benefit of a carbon cost rebate at the border when they export, making their exports both cheaper and more profitable, increasing our competitiveness already on the international market.

There are many ways that you can skin this particular cat, Madam Deputy Speaker. We can either design a system whereby all products coming in or out of the United Kingdom have their carbon contribution assessed, or, if that is considered to be too complex, we can take baby steps. We can start off by applying a BCA towards the five or six most carbon-intensive industries and then take it from there. We would start with steel, fertiliser, petrochemicals, aluminium and energy. I will take two examples from that list by way of explanation.

First of all, with steel, an independent research project has been undertaken to assess the impact of a border adjustment tariff on the steel industry. Its conclusions were that were we to implement a BCA in the United Kingdom, it would increase the competitiveness of UK steel against many of its international competitors, at the same time as raising for the Treasury a tax windfall of between £270 million and £850 million if that carbon price was set at between £50 and £75 per tonne.

[James Cartlidge (South Suffolk) (Con)]

My hon. Friend is making an incredibly sophisticated argument. On international competition, can he tell us what other countries are doing? For example, is the EU considering something along these lines?

[Jerome Mayhew]

My hon. Friend has anticipated a point in my speech

that I was coming to in a few minutes. He is absolutely right that, just in July this year, the EU started a formal consultation on the implementation of the border carbon adjustment process for the entire European Union—and not just there, but he will have to wait a moment or two before I come on to the other exciting news.

Let us look at steel. We can get a huge amount of tax benefit, plus increased competition, that will give a fair, competitive advantage to our domestic steel.

[Anthony Browne (South Cambridgeshire) (Con)]

I commend my hon. Friend and his campaign for border carbon adjustment payments, which makes absolute sense. There is no reason why people who are not green should get a competitive advantage over those countries that are leading in the battle to become carbon neutral. My question is a somewhat technical one: we have a very complex economy, how do we work out which products need border carbon adjustment payments and which ones do not, or do we just focus on one key industry, or do we try to do it across the board?

[Jerome Mayhew]

I thank my hon. Friend for his intervention. The answer is that there are many different ways that we could approach it. The simplest would be to choose the five or six key carbon-heavy industries and start with them. As we get more knowledge of how to implement this kind of scheme, we could spread out to the wider economy. I suggest that the best way to do that would be to look at the carbon-emitting credentials of the energy market in the third country and assess in broad terms what its carbon contribution is. For example, in China, the coal contribution to the energy mix is between 70% and 80% and we would use that as the basis for the carbon contribution of its imports. When we get a bit more sophisticated, we could look at giving rebates to individual businesses that can demonstrate that they have a low-carbon approach despite the high-carbon attitude of their country as a whole. That would benefit behaviour and would not be protectionist, but would merely be a fair assessment of the carbon cost of transactions.

Moving on to energy, we naturally assume that we create all the energy that we use in this country domestically, but that is not the case. On average, we import, via undersea interconnectors, about 7% of the electricity that we use in this country. Members may recall that, last May, we trumpeted in the press that we had a two-week period in which we were coal free. We had coal-free electricity for two weeks. That was very exciting, but what the newspapers failed to mention was that, during that two-week period, we imported from Holland 40 GW of coal-fired electricity. The reason that we did that was not that we lacked generating capacity in the United Kingdom, but that it was cheaper to import coal-fired electricity from mainland Europe than it was to use our own. The reason why it was cheaper was that it was entirely tax-free, whereas we imposed a carbon tax on the generation of our own domestic electricity. Unbelievably, we actually incentivise the importation of high-carbon coal-generated electricity at the expense of our domestic manufacturing processes. How can that be right? A border carbon adjustment would sort that out in a jiffy.

What single better way is there to forward this Government’s levelling-up agenda than by putting in place the economic conditions for the market to want to re-industrialise in the UK, and all that with no need for Government subsidies. In fact, not only does it not require Government subsidies but it will actually produce an annual windfall for the Treasury year after year. Working out how big that windfall might be has a number of imponderables in it, but the Grantham Research Institute of Climate Change and the Environment has produced a report on this and, again, using the assessment of a carbon price between £50 and £75 a tonne, starting in 2020 and working up towards 2030, it assessed that the gross amount that the Treasury could recover under this process would max out at £36.7 billion a year. I stress that that is the gross amount. Members may well take the view that, rather like VAT, this is a tax that is consumer based and would impact poorer households disproportionately as a percentage of their gross income. The Government might very well want to use some of that £36.7 billion to cushion the blow and to make it more acceptable for lower-income families, perhaps by investing in insulation for their houses or other measures.

[Duncan Baker (North Norfolk) (Con)]

My hon. Friend is making a fascinating speech—despite starting off talking about sheep, he has managed to keep everyone’s enthusiastic attention throughout. A lot of emissions-intensive British industries will already find it difficult to compete in the global marketplace. As we begin to encourage the use of carbon capture and clean hydrogen by heavy industry, they will face higher production costs. Would a border carbon adjustment enable heavy industry to decarbonise while preventing job losses, and is that something the Treasury would also find attractive?

[Jerome Mayhew]

My hon. Friend has hit the nail on the head, because one of the key benefits of a border carbon adjustment is that it would allow us to decarbonise, and allow our heavy industry to accept the pain of higher energy costs, therefore letting the market work in our domestic market to incentivise the development of lower-carbon technology, while at the same time protecting it from being undercut by countries that are taking a little longer to go on the low-carbon journey.

We are not going to be spending money; we are going to be making money. That money could be used as the Treasury knows best. It does not mean that the money is taken out of the economy, because it could be put straight back in—in productivity-enhancing tax cuts, I hope, but that is up to the Treasury.

Best of all—I have saved the best till last—by freeing up the ability to price domestic carbon emissions at a realistic, behaviour-changing level, we can unleash the magic of the free market to seek out the most efficient solutions to low-carbon production. We do not need the Government to pick winners and subsidise industry once a market is working properly. Give a price to carbon, and that is exactly what we will create: a many-headed monster of innovation, entrepreneurialism, dynamism and efficient, productive capital growing our low-carbon future.

This future, if we are brave enough to embrace it before other nations, rather than just following, and if we are bold enough to allow the reshaping of the economy by demand rather than by direction, will equip our industry as leaders in low-carbon manufacturing. They will be leaders because they will be swimming in their natural element, whereas their international competitors will still be struggling to react to the short-term Government green initiatives and schemes that we all currently suffer from. It is a lead that could generate exports and growth in this country.

What is stopping us from delivering on the Prime Minister’s vision of a low-carbon, dynamic economy? Some worry about a protectionism challenge at the World Trade Organisation, but with a BCA applied in an open and transparent manner, nothing could be further from the truth. This policy is about removing unfair competition, not creating it. In any event, WTO rules expressly allow for tariffs whose purpose is to protect

“human, animal or plant life and health”

or

“to conserve exhaustible natural resources”.

Those are two exceptions tailor-made for this kind of tariff.

More practically, if the UK were to join the United States of America, our friends in the European Union and other countries to establish the principle of BCAs at COP26, that would be a game changer, because that would ensure their practical acceptance. Others worry that putting forward such an ambitious proposal at COP26 runs the risk of failing to achieve the consensus that would allow the PR men to claim a stunning success. It might, but the risk of failure is the price of ambition, so should we give up on our ambition? Of course not.

[Sir Bernard Jenkin (Harwich and North Essex) (Con)]

I have no doubt that my hon. Friend is right about the application of WTO rules, but what happens if a free trade agreement is already in place? Would that free trade agreement have to be renegotiated? Suppose we have a free trade agreement with the EU and we want to put a carbon tariff on German steel, which is very carbon intensive. Are we going to be tied in knots by what we might have already agreed? How does he think that would be resolved?

[Jerome Mayhew]

The example that my hon. Friend gives—that of Germany—would fall neatly into the European Union, which is consulting on this very issue, so in that case, it would be a coalition of the willing to allow us to go forward, I hope, with a form of equality between the European emissions trading scheme, or its successor, and the approach that we would take ourselves. However, I accept that that would be up to country-by-country negotiations.

Is there international support for this approach? Do we have a realistic prospect of bringing the world community together and with us at COP26? I say that there is, because President-elect Biden has already spoken about “carbon adjustment fees” against

“countries that are failing to meet their climate and environmental obligations.”

That is a clear indicator that the incoming Administration in America is taking this seriously. I know that there is many a slip between a statement of intent and action, but it is something that we can potentially get behind at COP26. The European Union, as has been mentioned, just this July launched a formal consultation on the implementation of a border carbon adjustment, and it is worth noting that for the President of the Commission—I think it was part of her manifesto when she was first appointed— this is one of the key objectives for her presidency.

[Anthony Browne]

I commend my hon. Friend on his absolutely fascinating speech. It is clearly good to try to get global co-operation on this as a coalition of the willing, as he put it, among as many countries and trading partners as possible. If we fail to do that, does he think that the UK should go on its own, or would that be too difficult and put us too much out on a limb in the global trading system?

[Jerome Mayhew]

I say that we go it alone. I think it is one of the great freedoms that we have from Brexit. We have taken the trouble to get our independence. What use is it if we are not prepared to use it—if we are too scared to use our independence to make a bold statement and say, “This is the right thing to do. We are going to do it. Follow us if you like.”?

[Barry Gardiner (Brent North) (Lab)]

I am delighted to hear the depth with which the hon. Member is exploring this subject. What he has been saying is fascinating. Does he agree, though, that if it is about the right thing to do, the first thing we must do is to stop the subsidies and tax concessions that currently go to carbon industries domestically, and that it only makes sense as part of a whole package if we do that?

[Jerome Mayhew]

The hon. Member recognises that we are on a journey in our decarbonisation of industry. I would be delighted if I managed to persuade the Minister to accept this one element of the policy without rewriting the entire economic agenda for the next period, but it is clearly true that, over time, we will be moving away from petrochemicals, and the economic case—the business case—for subsidising what will soon become stranded assets becomes less and less clear.

Our hosting of COP26 would be the perfect forum to crystallise these disparate movements that we have already identified around the world into a coherent whole. What better objective for the conference could there be? Politics is full of mis-steps and compromise. Very rarely do the stars align in favour of a truly inspiring act of political and economic leadership—one that can transform the future of our country and the world for the better. The stars are aligning for border carbon adjustments, if only the Government will believe in the Prime Minister’s vision of a post-Brexit Britain and be bold.

--- Later in debate ---

[Kwasi Kwarteng]

No, I have to make some progress.

Ahead of COP26, obviously, as the hon. Member for Brent North (Barry Gardiner) mentioned, we have to look at carbon accounting in the round, and we have to look at how we reduce incentives for carbon-emitting activity here in the UK and in the context of the imported carbon that we bring in from other countries. All these issues have to be addressed in the round.

What I wanted to say, and have said very clearly, is that we are actual leaders in this subject. We are actually driving ahead mandatory TCFD financial disclosures. There are no other countries in the G20 that have done that. We passed the net zero amendment to the Climate Change Act 2008 last year. Again, even though other countries have made public statements supporting that policy, they have yet to enshrine it in their in their legal codes. We are showing leadership. We intend fully to continue showing leadership and providing that sort of steer at COP26 in Glasgow.

[Jerome Mayhew]

The Minister has repeatedly said that the best way to proceed is by multilateral agreement, and I absolutely agree. It is wonderful that we have COP26 coming up next year, and it is the perfect opportunity to show multilateral leadership. Will the Minister therefore commit to the House that we will make border carbon adjustments a core objective of COP26?

[Kwasi Kwarteng]

It is not in my power to make that commitment to the House. As my hon. Friend knows, I am not the COP26 president, and I suggest that he directs that question to my right hon. Friend the Business, Energy and Industrial Strategy Secretary, who is the president of COP26. However, I can assure my hon. Friend that the issue is absolutely at the centre of the wider debate about climate change and of what I might call international energy diplomacy, and I am sure it will discussed very seriously at COP26 next year.

Climate Change Assembly UK: The Path to Net Zero

Jerome Mayhew Excerpts

Thursday 26th November 2020 Commons Chamber

[Jerome Mayhew (Broadland) (Con)]

As a member of one of the six commissioning Select Committees, I have followed the work of the Climate Assembly with considerable interest, but I have to confess that my initial impression was not favourable. The concept of a relatively small number of members of the general public—just 108 people, I think—being imbibed with any greater knowledge, understanding or wisdom than the ranks of experts that already advise Parliament and the Government on the one hand, and my own membership of a larger and infinitely more democratic citizens’ assembly—this place—on the other, made me doubt the value of the work being undertaken. Frankly, I was also concerned that the assembly would simply become a mouthpiece for some of the more extreme environmental pressure groups. But when the participants were surveyed about the quality of the information that they had received, 78% agreed that it had been fair and balanced between the different viewpoints. Although this was admittedly the lowest score for any of the evaluation questions asked, it still represents a substantial consensus of opinion.

Having now seen the assembly’s output, I recognise that my first impression was wholly a wrong one. Although the assembly’s work can in no way supplant the role of this House in formulating and then enacting public policy, its report has added greatly valuable insights to the debate on the mix of policies required to achieve our common goal. The standard answer to the question which technologies should be used to get to net zero is “all of them”, and that is still likely to be the case, but the Government should take note of the assembly’s views, and take note very seriously, given that public acceptance of the huge changes required will be critical to their success. If we do not bring the public with us, the best laid plans will be doomed to failure.

It is for that reason that I was so glad to read the Prime Minister’s 10-point plan for the green industrial revolution. I do not believe that it is serendipity that this key policy announcement mirrors so closely the Climate Assembly’s conclusions: increasing our target for offshore wind capacity from 10 GW to 40 GW by 2030; promoting the hydrogen generation market; accelerating the transition to electric vehicles, as has already been referred to during this debate; pushing additional investment into public transport, walking and cycling; and researching zero-emission aviation and shipping. The list goes on. It shows that the Government have been listening, and listening hard, and that they are seeking to reflect many of the Climate Assembly’s key objectives. It is a testament to the value of this process, and all those who were involved should recognise the impact that their work has already had. But there are some interesting differences.

Technologies that hold out the prospect of fixing carbon emissions without the need for behavioural change by us as consumers did not receive as much support by the Climate Assembly as I would have expected. Carbon capture and storage—either direct air or from bioenergy—were, relatively speaking, less popular than other proposed changes. In the responses in chapter 9 of the report, there was a strong desire not simply to fix carbon emissions but actually to address their root causes.

There is a desire to use our response to climate change as an opportunity to address what kind of relationship we should have with our natural surroundings—less an industrial supremacy and more, perhaps, of a collaborative symbiosis. Although it is my view that we will certainly need all our technological ingenuity in carbon capture and storage, and probably in nuclear, to achieve net zero carbon by 2050, as policymakers we should seek to understand and reflect this deeper and wider need. It is this more mature relationship between us and our environment that sets the current generation apart from its predecessors, and gives me such hope for the future.

Offshore Wind Transmission Connections

Jerome Mayhew Excerpts

Thursday 5th November 2020 Commons Chamber

[Duncan Baker]

My hon. Friend makes perhaps one of the most important points I am about to come on to. He is absolutely right that as our growth has become almost exponential, we have had to tackle the problem of infrastructure and find that better way. We will come on to that in a moment, but first of all I just want to highlight some of the problems that that presents for my communities and the communities of my hon. Friends the Members for Broadland and for South Suffolk.

I have said before that it is about the rate of growth. Because of the rate of growth at the moment, communities are blighted by the invasiveness of connecting these mammoth pieces of infrastructure to the transmission grid. I have said many times—for the record, I still believe it—that I am lucky enough to represent the most beautiful constituency in the country, which is my home of North Norfolk. An increasing number of offshore wind projects are being granted in similar locations within my constituency, breaking land and sharing cables routes that go through my countryside. My communities, such as Weybourne and Happisburgh, which I am sure some of my hon. Friends know well and have holidayed there, are seeing year after year of destruction to their communities as cable routes tear through villages, communities and farmland.

[Jerome Mayhew (Broadland) (Con)]

I congratulate my hon. Friend on securing this important debate. Does he agree that, although cable corridors call to mind something rather minor, they in fact run a 100-metre corridor through whatever is in front of them, whether it is the environment or local communities?

[Duncan Baker]

My hon. Friend is right, and he highlights another important point. It has been a privilege to serve in this place since December 2019. Since then, we have held many meetings with—

--- Later in debate ---

[Duncan Baker]

My hon. Friend is absolutely right. I know that she has an equally beautiful constituency; perhaps we should do an exchange programme one day and view each other’s constituency. She makes an important point: wind energy is just one part of the jigsaw of how we decarbonise and create enough green energy. There will be other forms of energy that are part of the mixture that will help us to decarbonise by 2050. We are lucky in Norfolk and Suffolk to have an enormous amount of wind energy off our coast, but there are many areas around the country with leading initiatives that are helping in the fight to tackle climate change.

The point I want to highlight, and the reason why this debate is so important, is what these cable corridors are leading to. They are causing major environmental damage, as wildlife habitats and agricultural land are dug up multiple times. Nutrient-rich land is sometimes irreversibly damaged from the disturbance caused, and many farmers report poor crop growth along cable routes—much worse than before those cables were put into the ground—caused by the disturbance of the digging. Communities also suffer great socioeconomic damage from the disruption and upheaval caused. For businesses that are along cable routes, there is disturbance, including from heavy goods vehicles and traffic for many months—sometimes up to a year—while these trenches are being dug. It causes enormous problems for these small, often rural communities in my part of the world.

[Jerome Mayhew]

My hon. Friend has already made mention of the beautiful village of Cawston in my constituency and the neighbouring village of Oulton. Does he agree that when we look at the socioeconomic impact of these cable routes, it is wrong to look at them in isolation? In the case of Cawston, for example, there are no fewer than two routes crossing each other in the same community, yet we have individual planning applications. Does he agree that a more integrated approach dealing with all the infrastructure requirements for offshore wind should be taken?

[Duncan Baker]

My hon. Friend is absolutely right. He makes a hugely important point: we have places that are seeing multiple crossings of cable routes. Of course, what we should be doing is looking ahead with some vision about what is coming in.

--- Later in debate ---

[Duncan Baker]

Again, my hon. Friend hits such an important point. We touched on this at the very beginning when we talked about the ability to create energy security for ourselves. Where else do we produce a solution in which we could actually end up exporting energy? We will be a sovereign nation—we are a sovereign nation again—and the ability to have that security but export excess energy to other countries in Europe is almost a no-brainer. I know that he has very close links to the Chancellor, and I am sure that he, too, is watching this speech and that his eyes will light up at the potential export opportunity and income to the Treasury.

The integrated technology is reasonably available, but a key way to unleash the new system is through the use of HVDC circuit breakers. As we heard very recently, some of the technology is already available. Some is being developed. We are very much at the cusp of this.

[Jerome Mayhew]

In your discussions—

[Madam Deputy Speaker (Dame Eleanor Laing)]

His.

[Jerome Mayhew]

I am so sorry, Madam Deputy Speaker. In my hon. Friend’s discussions with members of the offshore industry, has he formed a view that they are keen to adopt the new system? If so, have they indicated that the sooner they get clarity and the sooner the rules change to facilitate the new system, the better it will be for industry, the environment and our constituents?

--- Later in debate ---

[The Minister for Business, Energy and Clean Growth (Kwasi Kwarteng)]

I am delighted to respond to my hon. Friend the Member for North Norfolk (Duncan Baker), whose forays into parliamentary history, going back 415 years, I particularly appreciated. I was very pleased to be reminded of the fact that it is 5 November, but I will make no further reference to it my speech. I will briefly, but as succinctly and comprehensively as I can, address the points that he very ably made.

I also thank my hon. Friend for his efforts, along with the quintet—I can count only four—of MPs who have so ably, over many months, lobbied me, persuaded me and cajoled me to look at this issue in a much more detailed way than we had done in the past. I commend them also for a classic example of MPs coming together, forcing an agenda and getting some quite substantial results over a relatively short time.

When I took over this brief, and I had the privilege of accepting the Prime Minister’s offer to be the Energy Minister in this country, I was struck by the fact that thinking about this subject had not really evolved since 2015. That year was significant, because it was when Ofgem, to all intents and purposes, ruled out an offshore transmission system network of the kind that my hon. Friend has promoted. However, in the short time since—in the last year and a bit—we as a Government and a lot of industry players have really shifted on this issue, and the contribution of hon. Members in this regard has been remarkable.

My hon. Friend the Member for North Norfolk also did a good job in suggesting that net zero was at the centre of our strategy to fight climate change. We are, as he said, rightly proud of our commitment to that. In many ways, the problem that he refers to is a function of our success. It was not long ago that we thought 10 GW of offshore wind capacity by 2030 would be a significant achievement, and that it was a reasonable target. Today we want to have 40 GW by 2030. That is a quadrupling of the ambition, and because we have upscaled our ambition so considerably, his argument about the disruptive effects that point-to-point landing of electricity would have on his and other communities has been recognised. I would suggest that the argument for some form of offshore network system has been won.

What is critically under discussion at the moment is the timing. In a way, that is the devil that lurks in the detail, and it is precisely the reason that, in July this year, thanks to the lobbying of my hon. Friend and others, I launched the offshore transmission network review, to bring together key stakeholders involved in the timing, the siting and the design of an offshore wind transmission system. The 40 GW ambition equates to installing one turbine each weekday throughout the whole of the 2020s. That gives an impression of how comprehensive and ambitious this deployment will be. We cannot afford to slow that rate, so, given the nature of the ambition, it is absolutely right that we should look at developing an offshore transmission network system.

My hon. Friend did a good job in referring to the National Grid ESO analysis, which was published only in the past few weeks. It showed that the economic benefits of a fully integrated approach could save as much as £6 billion by 2050, and that is not even considering all the local environmental benefits that such an offshore network system would provide. The crucial thing to remember is that most of this technology is already here with us right now. Shifting away from individual connections towards a larger, more integrated solution would be environmentally sensible as well as presenting an enormous economic opportunity not only for the constituency of my hon. Friend the Member for Waveney (Peter Aldous) but for the whole country. As my hon. Friend the Member for South Suffolk (James Cartlidge) said, this is about UK plc at the end of the day.

[Jerome Mayhew]

My right hon. Friend referred to the review undertaken by National Grid ESO. When considering the cost-benefit analysis of the integrated design compared with the counterfactual—the current system—the report concluded that adopting the new integrated system immediately or as soon as possible would be the way to get the majority of the £6.4 billion of savings, both in capital expenditure and operating expenditure from then right up to 2050 and beyond. That is an 18% saving for consumers. Does he agree that it would be irrational if the Government did not do all in their power to put this new system in place and get the benefits as soon as possible?

[Kwasi Kwarteng]

I fully appreciate my hon. Friend’s point. We want to expedite this process, but we are talking about very expensive infrastructure and about redesigning or tweaking the regulatory framework in order to accommodate that investment. These things take time, but it is absolutely right for him and other MPs to hold the Government’s feet to the fire. That is entirely legitimate, and he has done a great job on that.

Coronavirus Business Interruption Loan Scheme

Jerome Mayhew Excerpts

Thursday 5th November 2020 Commons Chamber

[Jerome Mayhew (Broadland) (Con)]

I draw the attention of the House to my entry in the Register of Members’ Financial Interests—in particular, my significant shareholding in a business that has received a CBIL.

We have heard about the Government’s actions. We have heard about the enormous numbers that are involved, which were referred to directly by the hon. Member for Midlothian (Owen Thompson), and about how they are just fantasy numbers because they are outside the essence of our individual experience. It is just for the same for me. Big numbers mean little to most people, because we do not really understand them in our normal lives.

However, I have a very real experience of the transformative effect of the CBIL system. Prior to entering this place, I was the managing director of, and a significant shareholder in, a seasonal tourism-based leisure business of just the kind that we have heard so much about over the past six to nine months. It operates in 34 locations right across the United Kingdom, employing people in Scotland and in Wales as well as in England. In March this year, we had weathered our planned seasonal losses over the winter. The business had been invested in and had recruited a large number of staff, looking forward to Easter trading. It was an irony not lost on me and everyone else who was employed in the business that the lockdown was announced in the very week of our minimum cash flow in the entire year, by which I mean that we had the least amount of money to respond to an economic shock. As a result, the lockdown was an immediate existential crisis for that business, which employs up to 1,000 people in this country and 250 to 350 people in the United States of America.

Without doubt, the CBIL that we were able to obtain within a matter of weeks saved the business from the risk of collapse. It bought time. It cushioned the cash-flow blow—this crisis is primarily about cash flow—and allowed space for the business to adapt, survive, and then, I am very pleased to say, absolutely to thrive now, although I recognise that that is not the experience of an awful lot of other businesses in the sector. The Chancellor’s intervention directly saved hundreds of jobs and careers. Let us not forget now how fast the Government acted—and thank goodness they did, because without that, the economic damage to this country would have been so much greater.

In a previous debate, I highlighted what I considered to be one of the key weaknesses of the CBIL scheme. As we plan to grow out of the crisis phase and into the economic growth phase, we need our recovery to be led by businesses that have cash to invest, creating new products, investing in growth, increasing efficiencies, exploring new markets and, importantly, creating employment. To do this, they need access to cash, as my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) has identified, at a time when the unwinding of the CBIL loans, with their straight line capital repayment scheme after the first 12 months, means that cash will actively be withdrawn—at that stage, in a one sixth per annum phase, but most likely, in reality, between two and five years. That would be taking money out of the productive economy just at the time when we want these businesses to be investing in growth. I was therefore delighted—and impressed, frankly—when the Chancellor announced recently the increased flexibility in interest and capital repayment requirements and increased the maximum period of capital repayment from six to 10 years. At a stroke, this almost halves the capital repayment requirements for businesses, it frees up a really significant sum of money to be reinvested in growth, and it focuses exactly on the businesses that are able to do it.

However, there is one further point that I hope the Treasury will look into. Lending banks currently have their covid loans sitting on their balance sheets, albeit supported by the Government’s partial guarantee. This reduces their capacity, and their appetite, to lend further to support the business-led recovery. I ask the Minister whether the Government could develop a scheme to allow these covid loan books to be sold to institutional investors via a special purpose vehicle, because this would provide long-term, very low-risk, fixed-income investments that are sought by pension funds, for example, particularly if the resulting coupon was tax-free. I know that is an ask of the Treasury, but it would ensure the success of the scheme.

[Kevin Hollinrake]

My hon. Friend makes an interesting point, but one of the mistakes we have made in past years is allowing the sale of loan books to very aggressive companies that pursue those loans and repayments in the most inappropriate way for SMEs. Does he propose some kind of restrictions on who those can be sold to?

[Jerome Mayhew]

It would be an unwise legislator who had not learned from the financial crisis of 2008-09. It would require regulation and careful oversight by the Bank of England, I suggest, but we should not throw the policy baby out with the execution bathwater. This suggestion is something the Treasury should look into, and I encourage it to do so, because in return the lending banks would have their balance sheets reflated and their risk removed from the sector, encouraging them to support business investment and recovery further. When Government finances are stretched as never before, the suggestion has the merit of allowing the market to provide much needed capital for growth and not the Treasury.

There is no doubt that the Government have invested massively and effectively in supporting our business community and the jobs, importantly, that they support, through the swathe of schemes that have been discussed today, most recently with the Chancellor’s announcement this afternoon of the extension of the furlough scheme. It gives me great confidence that the Government remain committed to the business sector and supporting them to lead the future economic recovery.

Corporate Insolvency and Governance Bill

Jerome Mayhew Excerpts

2nd reading & 2nd reading: House of Commons
Wednesday 3rd June 2020 Commons Chamber

[Mark Pawsey]

That is a good point, and I hope that the Minister will consider that, because in many cases a contract has been entered into on the basis of a certain volume of business. Many businesses have contracted, so a purchasing company may not be buying the same volume. Does that provide the ability to keep the price at the original position? Price and volume go hand in hand, and there may be additional economies of scale. There are concerns, and I know that the Minister will respond.

My hon. Friend the Member for Huntingdon (Mr Djanogly) raised the issue of debts accruing because of extended payment terms. Buyers are often more interested in payment terms than the price of the product. A buyer does a great job if he manages to screw 60 or 90-day payment terms out of a supplier, rather than a particularly good deal on the product. If we can move our culture away from extended credit many of the provisions in the Bill would be rather less necessary than they are. The Minister will deal with those issues, and it is entirely right that in the Bill he guarantees that supplies that are made during the moratorium are exempt—the supplier is guaranteed to be paid once the monitor has agreed that they will continue to trade. That goes some way towards providing substantial confidence to the supplier. I am also happy with the exemption from the provisions for small companies. As the Secretary of State has said at the Dispatch Box, the usual criteria on size apply.

I want to conclude with the temporary suspension of the rules on wrongful trading, which I entirely support. Right now, business directors around the country are pretty worried about the financial viability of their businesses and their liabilities if they continue to trade, particularly if the trade position continues to worsen. The current rules are that they could be liable personally if they do not bring their business to a conclusion, even though the challenges facing those businesses are not of their making. Relaxation of those wrongful trading provisions will enable many directors across the country to sleep rather more soundly at night.

[Jerome Mayhew (Broadland) (Con)]

Could I just come back on that interesting point about the risk of personal liability hanging over directors? I declare an interest, as I am a director of a trading business. It fits very well, does my hon. Friend not agree, with the development of the CBIL scheme? Originally, that scheme was not very popular, because many banks insisted on personal liability for businesses and for the directors of businesses to stand behind the loans that they were giving. The current scheme removes the risk of personal liability for directors via the scheme.

[Mark Pawsey]

My hon. Friend makes a good point, and we must provide every support to business owners and directors at this challenging time, to allow them to make decisions that will enable their businesses to continue to survive.

--- Later in debate ---

[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to speak after my hon. Friend the Member for Strangford (Jim Shannon); we have spoken in many debates on business issues before and he is a huge champion of business. It was also a pleasure to listen to the maiden speech of my new colleague, my hon. Friend the Member for Heywood and Middleton (Chris Clarkson). It is great to have another Conservative northern Member of Parliament to champion the cause of the northern powerhouse. He neglected to mention Yorkshire, and particularly north Yorkshire, in his list of areas in the north that will contribute to the recovery, but I will have a word later. It was a fantastic speech.

I draw the House’s attention—of course, in all these types of debates—to my entry in the Register of Members’ Financial Interests. I am still involved in business to this day. I am also the chair of the all-party group on fair business banking, which has talked about many of these issues over the last months and years. In my view, the CBILS and BBLS are a huge success, but there are problems, particularly with the CBILS, in terms of making sure that banks do allow money to go out the door based upon the business being a viable business on 1 March. There are still issues about banks assessing the ability of the business to pay the loan back over a period of time. In particular, there are sector-based issues—football clubs being one and house builders being another. Banks seem to be translating from a standard lending policy into a CBILS lending policy, which cannot be right. That was never the intention of the Government scheme.

On the Bill, I am a strong supporter of the measures being brought forward by my right hon. Friend the Secretary of State, particularly on the moratorium and the opportunity to restructure. That has been planned for some time to give businesses breathing space. Irrespective of the covid crisis, at any point in time, many businesses can be salvaged through this process. It has happened in the US for many years—it is known as chapter 11—and it is absolutely the right thing to do.

I will not talk in detail about the Bill, because many others have, but I will talk about some of the things that I think we need, as well as this legislation, that would make a significant difference. There are some outstanding issues that the Minister and the Department are aware of and they have consulted on some of them, particularly about moving from a self-regulation basis for insolvency practitioners to a single, truly independent regulator. There are some very important issues that we have seen over recent years in terms of conflicts of interest that will carry on despite the Bill. The moratorium and the opportunity to restructure will help to some extent, but the conflicts of interest will carry on. This is particularly because most insolvency practitioners who are appointed to carry out work on an insolvent business are appointed by the major creditor, which tends to be the bank. It is a panel appointment by the bank and clearly, people rarely bite the hand that feeds. So if most of the work that the insolvency practitioner—who is supposed to work independently of any individual creditor and in the best interests of all creditors—is getting is from the banks, they are more likely, in our experience, to work in the interests of the bank.

It is even worse than simply the facts of what happens in the insolvency. On many occasions, we are talking about large accountancy practices, such as KPMG, Deloitte, Ernst and Young, who are appointed by the banks prior to insolvency, for example, to carry out a supposedly independent business review—paid for by the business but instructed by the bank. They have been brought in to do an independent business review, which is supposed to give a fair representation of the business, and that accountancy practice then becomes the insolvency practitioner and can earn hundreds of thousands of pounds of fees in the insolvency, which is a clear conflict of interest.

This issue has been brought up for decades in this House. I found two debates in 1999 when this conflict of interest was mentioned. It is something we need to deal with. This has featured in many of the issues we have seen over the last decade or so, particularly around the last crisis, where we had tens of thousands of businesses that were put into administration by the banks—this is a matter of public record—particularly by RBS and Lloyds Banking Group. Tens of thousands of businesses were put into insolvency inappropriately. A fair percentage —around 20%—of those businesses were viable, but there is not one instance of an insolvency practitioner deciding to sue the bank and saying, “Your business has gone into receivership as a result of creditor misconduct.” In other words, the bank is forcing the business into administration. Never has there been a case in which an insolvency practitioner who is supposedly independent and working for all the creditors has said, “There is something wrong. We need to take the bank to task.” There has not been one instance. We have pushed for information, and we have received emails from accountancy practices saying, “We would never sue a bank—we would never litigate—because of the conflict of interest.” There is a huge conflict of interest, and huge sums lie at the heart of this.

We are talking about thousands of businesses in this situation. This is systemic for every bank and almost every insolvency practitioner, but I should like to discuss a particular case, because it reveals the nature of the issue. We are talking about tens of thousands of businesses, and we have to understand that there are tens of thousands of people—individuals—whose life’s work has been taken from them, along with hundreds of thousands of jobs. These are very serious issues.

The case I wish to raise is that of Arthur Holgate and Son. This is not a sub judice issue, and I have obtained consent from the business to discuss it. It is a tangible example of the problems that arise. It was a family-owned business that ran caravan parks and turned over about £2 million. It was a significant business that, like a lot of other businesses, sold a swap that put it in danger, which increased the cost of loan servicing a great deal. That became the matter of a redress scheme, because of the inappropriate sale of complex financial instruments to businesses that were not sophisticated.

When that came to light, with a route for redress, the business approached the scheme and was offered £300,000 in compensation, despite the fact that its losses totalled £1.4 million. Ultimately the business failed and went into administration. It was taken off the owners—it had been in the family for generations—but it was one of the few businesses that we have come across that had the financial wherewithal and tenacity to get this thing through to court. On the courtroom steps, compensation was settled at about £10 million by Barclays bank.

We need to look at the actions of the insolvency practitioner as well as the actions of Barclays bank. Despite the fact that the insolvency practitioner is supposed to work independently, it did not do so. It colluded in bringing about the failure of the business and as a result the distribution of assets from the business effectively went to them and to the banks. Deloitte was the insolvency practitioner. This is not an isolated case: Deloitte was fined this year for its administration of Comet—many Members will remember that—and it was given a £1 million fine for failing to manage a conflict of interest in that case. We need to deal with this, as we are not dealing with it in the legislation.

Deloitte was brought in to undertake an independent business review for the bank to see whether the business was viable and able to get through its financial difficulties. It charged the business £50,000 for that work, which was paid after the business was declared insolvent on a preferred creditor basis, which is against the law.

There are many concerns, but the most disgraceful part of this case was the correspondence between Barclays and Deloitte. Barclays effectively told Deloitte to ignore the directors, although they were running the business and knew it best. In fact, I can quote from one of the emails sent internally in Deloitte, which said: “Be careful of swallowing the Paul Holgate line”—Paul Holgate being one of the directors of the business—“that it’s somebody else’s fault”. He kept saying to them, “It’s not our fault that we are in this position. This is because the bank sold us a swap.” He was right, but Deloitte deliberately did not put that information in the business review and did not even mention the swap at that point in time or when the insolvency happened. Another email sent internally in Deloitte said, “We do not want to appear critical of the bank.” That is because of the conflict of interest, and it cannot be right.

We must put a Chinese wall between consultancy work that a bank requires an accountant to do and that very accountant then being able to do the insolvency work, because there is a clear conflict of interest. In this case, there were fees of £400,000 for Deloitte to carry out the insolvency work. Had it just done the £50,000 report and said, “This business is fine. It’s actually your fault because of the swap. If you settle that problem, the business will carry on trading fine,” Deloitte would have got £50,000, and that would have been it.

[Jerome Mayhew]

My hon. Friend talks very persuasively about this, and I have found myself nodding along to everything he has been saying for the last several minutes, but he keeps on referring to a conflict of interest, when surely what he is talking about is better named corruption.

[Madam Deputy Speaker (Dame Eleanor Laing)]

Order. Before the hon. Gentleman answers the intervention, although he has not spoken for an inordinately long time—indeed, other Members have spoken for much longer—he has spoken for well over 10 minutes, and I have to ask him to conclude pretty quickly, because it is in the interests of everyone that the Minister is able to answer the debate. Members have asked questions, and we must have time for that.