Packaging Industry

Mark Prisk Excerpts

Tuesday 5th July 2011 Westminster Hall

[The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk)]

I congratulate my hon. Friend the Member for Rugby (Mark Pawsey) on securing the debate and, indeed, on the comprehensive range of his remarks, which demonstrate his knowledge of the industry. I do not think you were fortunate enough to have the opportunity to hear his contribution, Ms Osborne, but I know that Sir Alan and the rest of us were fascinated by the range of issues raised. I will do my best to deal with all of the 10 action points raised in my hon. Friend’s remarks and with some of the excellent points made by my hon. Friend the Member for Amber Valley (Nigel Mills) and the previous speaker, the hon. Member for Wrexham (Ian Lucas). Everyone has highlighted a different aspect of the subject.

I want to make a small plea. This subject relates to substantial areas that are far beyond my remit and come under the Department of Energy and Climate Change and the Department for Environment, Food and Rural Affairs. We work closely together, and I will do my best to answer hon. Members without creating new policies for my ministerial colleagues.

As has been pointed out, packaging is part of our everyday lives and, in a sense, is commonplace. At the same time, the different elements and materials—the metals, plastics, glass and paper—feed across the whole of manufacturing as they are very broad and are part of a wide range of supply chains. That is why it is right to say that there is a genuinely competitive role for UK industry in the sector. There have been some encouraging signs of innovation both as a discrete sector and as a process that is part of manufacturing as a whole. My hon. Friends the Members for Amber Valley and for Stroud (Neil Carmichael) have set out a couple of good examples of the kind of innovation that hon. Members across the House want to be encouraged.

As has been accurately pointed out, the packaging industry employs 85,000 people and has a value of £10 billion. In terms of the share of the manufacturing industry, it represents about 3% of the work force. It is worth noting—I am keen to put this on the record to demonstrate that we are mindful of this as a Government—that the productivity of the sector is double that of industry’s average performance. We are not talking about an industry that is sitting back and waiting for things to happen; it is very responsive. I will come to that point in a moment.

I shall thematically pull together the 10 actions mentioned by my hon. Friend the Member for Rugby and the other points made. He mentioned the industry’s role within manufacturing and what the Government can do to help, energy costs—which were raised by several hon. Members—and the broader issue of waste regulation and how that impinges both on the customers of the packaging industry, who are very often industry and business themselves, and the sector.

On the industry’s place within manufacturing, my hon. Friend is absolutely right to say that we need to make sure that we rebalance that economy. We want to ensure that an over-reliance on a too-narrow group of sectors is replaced with a broader base, so that manufacturing has a key role to play. As the Minister with responsibility for manufacturing, I include in that not only what we might think of as high-tech, but industry as a whole.

On perceptions, which were rightly raised by the hon. Member for Wrexham, in the past 12 months, there have been good signs in terms of output, investment, exports and, in some parts of manufacturing, jobs, which is encouraging. He mentioned the automotive industry. There have been some encouraging signs in the investment that Jaguar Land Rover, BMW and Nissan all want to make. There are reasons to be encouraged, and we have had a good opening year, but we need to do a lot more. That is why the Government are determined not only to take corporation tax down from 28% to 26%, but to take it on down to 23%. At the end of that process, we will be putting £1 billion back into the coffers of industry, including packaging. That money can be reinvested. As we have heard, one of the key ways in which industrial sectors keep ahead is not simply by trying to reduce costs all the time, although that is important, but by innovating to keep ahead of competitors. That reinvestment capability—the £1 billion extra a year—is a very important part of that equation.

In addition, the Chancellor set out our plans in the Budget to improve short-term capital asset release and to extend it to eight years instead of just four. From talking to a number of people in industry, I know that that is a real boon, because when people invest in an industrial project, more so than perhaps in services, the payback time is often more than four years—it is often five, six, seven or eight years, and in some cases it is beyond that. My hon. Friend the Member for Rugby knows that, because he has worked in the industry. That is another important incentive to enable the packaging industry to progress.

It is also important to bear in mind—several hon. Members made this point—that it is not only the hard capital issues that matter, because soft capital issues and skills matter, too. That is why we have made a determined change in the investment in and development of apprenticeships. During this Parliament, 250,000 additional apprenticeship places will be created. That is particularly important in an industry such as packaging, because it has to adapt and to be able to cope with conventional packaging issues and the growing issues around climate change and the environment. It is a crucial part of the equation for the packaging industry to be able to reskill its work force.

On that note, the hon. Member for Solihull (Lorely Burt), who sadly is not in the Chamber at the moment, raised a point in response to my hon. Friend the Member for Rugby on the perception of industry. Indeed, the hon. Member for Wrexham also highlighted that important matter. There is an outdated perception of industry that is often blown away when someone gets the chance to go and see an industrial facility. We note the generous invitation issued by the hon. Gentleman to Mr Paxman to visit a packaging company, and he is right: we need people to visit centres and see what an industrial facility is all about in the modern era. That is why, last week, we started a pilot project called “See Inside Manufacturing.” I went to the north-west to encourage and talk to careers advisers and teachers. In the autumn, we want to roll out the programme, so that it works not only with the automotive industry—as it does at the moment—but with the whole of industry.

I extend to the packaging industry an invitation to consider joining that programme in the coming few months, so that we can consider how we can show young people and the public as a whole the broader opportunities in that field. It is also important to change people’s perception of what is involved in the range of different careers. People often assume that the range of skills and careers in industry is narrow, but it is actually very broad and people are highly skilled in many different ways. I certainly want to see the packaging industry play a part in the “See Inside Manufacturing” programme. I will leave it to the hon. Member for Wrexham to decide whether to accompany Mr Paxman on a visit. It would certainly be good if were to get a broad range of people to see what the industry does.

Let me turn specifically to the challenges faced by the packaging industry. My hon. Friend the Member for Rugby raised the question of getting the balance right and of Government and public dialogue about the role of packaging. He is right that packaging and the packaging industry are not the principal problems in waste management. The statistic that packaging makes up less than 3% of landfill has rightly been mentioned. However, packaging clearly has a role to play if we are to ensure that we have a more effective waste strategy. Our approach is to work with producers and encourage a change in consumer behaviour. That issue was rightly mentioned in a number of contributions. When we consider how consumer patterns have changed in the past few years, we realise that we are a world away from where we were before.

We live in a 24-hour, seven-days-a-week culture in which people expect all kinds of produce that for our parents were never available at certain times of the day, let alone at certain times of the year. We expect them, however, to be available 24 hours a day, seven days a week. Inevitably, the industry has responded to that challenge and has changed the nature of how packaging is produced. I suspect that is why, as my hon. Friend the Member for Amber Valley has pointed out, people suddenly find themselves with things wrapped in things wrapped in things wrapped in things, and wonder why. It is right to say that if we were not to wrap effectively, we would find that food waste would be significantly greater. It is important that while we work with the industry—I will discuss the Waste and Resources Action Programme in a moment—we ensure that consumers are encouraged to change their habits positively.

Let me look briefly at what the industry is already doing because, as my hon. Friend the Member for Rugby has rightly said, that is often something that we do not recognise. It is important that we recognise that lightweighting of packaging in the supply chain has been going on for many decades. In the past eight years, household expenditure rose by 20%, but packaging increased by only 3%. While there has been, perhaps for an individual household, the sense that they have more packaging to recycle at home, the gap between expenditure and actual packaging strongly suggests that the industry is being responsive and responsible in this area.

Several hon. Members have raised good examples of that. Asda saved itself approximately £10 million in 18 months simply by changing basic packaging processes. The Home Retail Group looked at the dreadful waste one has when one gets a new sofa or new piece of equipment—not that we have been able to manage one of those in the Prisk household in recent years—and introduced reusable sofa bags. That particular retail outlet has cut packaging by 1,800 tonnes every year just by that simple change, which is an important example. My hon. Friend the Member for Penrith and The Border (Rory Stewart) raised the point that this industry has models of good practice, particularly regarding local impact in more remote areas, and he is right about that.

The hon. Member for Wrexham is right to say that there needs to be a good, open dialogue in the relationship between an industry sector and the Government. I have sought to develop and continue that in the Department. This is where I suspect the opportunity for the packaging industry, perhaps through such forums as the Green Economy Council, could help us crack the problem to which he has alluded. We have developed a road map, which allows us to look at the issue in the round. As we heard in the debate, the problem in packaging is that it is not quite as simple as just a sector. The nature of what it does inevitably means that it strays into areas relating to waste, water and energy. If we could encourage different parts of our industry to get into that dialogue, that would be good and it is certainly something that I want to encourage.

On energy costs, we recognise that our impact, when we look to set the right energy and climate change polices, needs to reflect both generators of electricity and their users. That is a natural tension in any form of energy or climate change policy. It is also important to stress that we, as a Government and not just as a Department, want to ensure that industry, and especially industry with a high or intensive use of energy, remains competitive. There is an issue about how different forms of energy have risen in price. Information from last year shows that, in the past five years, average industrial electricity prices have gone up by approximately 35% in real terms. In that same period, average gas prices have increased by 10%. It is therefore clear that there is a specific issue around electricity pricing, which might pose a risk to the competitive future of those sectors.

The hon. Member for Wrexham rightly pointed to a joint report by the TUC and the Energy Intensive Users Group. That is a powerful document that highlights the estimated cumulative impact of the future energy price in the coming years. That is why not only the Secretary of State in my Department, but our colleagues in the Department of Energy and Climate Change and in the Department for Environment, Food and Rural Affairs, are working together with the encouragement and involvement of Downing street to ensure that we specifically look at and address those concerns around industry.

Later this year, we will announce a package of measures, particularly for energy intensive businesses, where there may be a danger that their international competitiveness is affected. I appreciate that, per se, the packaging industry would not necessarily be classified as energy intensive. Self-evidently, however, some of the key materials it uses—metals and chemicals—are included. That is one way that we can help. I have always made it clear to industry as a whole that I want to know where the pinch points are—the carbon floor price is a good example—so that we do not end up with the danger that has been highlighted. We do not want unintentionally to export jobs and industrial capability, which in the end does not help the climate at all. Several hon. Members have raised that important point.

[Mark Pawsey]

Does the Minister have any particular advice for the packaging industry to ensure that it is considered as energy intensive and subject to the benefits that he has just outlined?

[Mr Prisk]

Yes; I want to encourage industry to ensure that specific aspects of the carbon floor price or other elements of our commitment to reduce carbon are incorporated, so that both my Department and other Departments are crystal clear as to where those issues are and that those issues are fed into the current dialogue. I know that there is a dialogue in hand at the moment, but it is important that the industry keep that pressure going.

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

I hope that the Minister will take from the debate the point that for most of the industry energy costs are significantly greater than the average profit margin, which is a massive issue that needs to be tackled.

[Mr Prisk]

I am mindful of that, and the hon. Gentleman has made a good point about overheads. Clearly, energy is a crucial issue. That is why, while we want to ensure that we set the right regulatory environment so that generators in renewables come forward, we do not unintentionally to create an unreasonable detrimental impact on the users of energy. That is a difficult balancing act to perform, but that is why we have made it clear that, while we want to pursue the regulatory framework, we want to look at those industries that find themselves under particular pressure with regard to their use of energy. Clearly, electricity rather than gas is the centre of that process.

Other regulatory issues have been raised with regard to waste policy. The waste strategy is focused on waste reduction, driving recycling and the reduction of packaging. We take the view that that can best be achieved in partnership with the sector. That comes back to the important issue, which a number of hon. Members have raised, about the balance between carrot and stick. We genuinely believe that voluntary agreements are one of the best ways forward. In a sense, that is the way in which WRAP operates. It started in 2000 and was designed to advise and help businesses change and innovate—for example, the Courtauld commitment focuses on how waste management can be improved. There have been some important changes. WRAP has been able to secure backing for infrastructure projects with savings of approximately 120 million tonnes of waste from landfill. It also backs programmes such as Rethink Waste, which looks specifically at working with manufacturers to reduce waste and improve resource efficiency. A number of hon. Members have mentioned food and drink. I point to the Federation House commitment, which is important.

In conclusion, this has been a positive debate. We recognise and value the industry, and the change that it is making is important. It is crucial to support and encourage consumer behaviour that enables innovation. We want to work with the industry in a positive dialogue in the weeks and months to come.