Conclusions and recommendations
Industrial strategy
1. The
Government has expressed support for the enlargement of the UK's
domestic extractive sector. However, it is unclear how the Government
intends to promote the growth of this sector. We recommend that
the Department publishes a domestic extractives plan setting out
the extent and range of its support—both structural and
financial—and how it intends to realise that ambition. We
welcome the Minister's offer to meet with industry and deal with
roadblocks. We further recommend that the Government sets out
in its response the best mechanism for taking this forward. (Paragraph
15)
2. The Government
has focussed its Industrial Strategies on areas where it can have
a greatest impact on the UK economy. However, we are concerned
that these strategies do not currently offer explicit support
to the extractives industry beyond oil and gas. We recommend that
the existing Industrial Strategies be amended to take into account
energy policy in the UK, upon which a large section of the extractives
sector is reliant. That policy should explicitly take account
of the UK's domestic extractive sector and the Government should
consider other strategic minerals such as potash and rare earths.
(Paragraph 16)
Ministerial support
3. When
we took evidence from the Minister, it became apparent that the
domestic extractive industry sector crossed the portfolios of
several Ministers. Greater clarity of authority would be beneficial.
We recommend that, in addition to coordinating and taking responsibility
for the delivery of the domestic extractives plan, the Minister
in BIS be given clear responsibility for leading policy in this
area. This must include coordination with the devolved administrations
where appropriate. (Paragraph 19)
Concerns and risks
4. We
heard from several experts that extractive companies—both
domestic extractors and global companies listed in London—directly
contribute to the UK exchequer in a number of ways. In terms of
UK tax receipts, the Government did not believe that the sector
was substantially avoiding its tax obligations. However, a number
of NGOs warned that UK listed companies may be involved in tax
avoidance tactics such as profit shifting and transfer pricing
overseas. The introduction of EU Directives and registers of beneficial
ownership may help to stop such practices but we look to the Government
to take further action where companies continue to avoid paying
taxes overseas in this way. (Paragraph 33)
Employment
5. More
than 34,000 people in the UK are directly employed by the extractive
industries. An additional 21,600 people are employed if the connected
mining support services are included. The UK clearly has built
a strong reputation in supplying services to listed UK listed
companies—including finance, accountancy and law. Preserving
this reputation is key factor in retaining the UK as a centre
for the extractive industries. We recommend that the Government
implements a review of the impact of the global extractives sector
on UK employment and on British workers finding employment overseas.
(Paragraph 39)
Risks to hosting extractive companies
6. The
extractive industries sector is always likely to be controversial.
Negative impacts on local and indigenous communities abroad could
undermine the reputation of the sector more widely, including
the UK, where many companies are hosted. We therefore welcome
the work being done to increase transparency and improve corporate
governance in the industry—in particular by organisations
such as the Bench Marks Foundation. Notwithstanding controversies,
we believe that the benefits to the United Kingdom of hosting
extractive companies outweigh the risks, providing that the UK
aspires to lead the world in both the transparency and corporate
social responsibility agendas. (Paragraph 49)
Listing Regulations
7. The
current regulations governing transparency and reporting in the
industry will be enhanced by forthcoming EU Directives. We believe
that the Government should consider expanding the FCA's remit
to include not only oversight of financial transparency, but also
the social, environmental and corporate governance reporting for
companies applying to list on the London Stock Exchange. If it
is not felt appropriate for the FCA, the Government should determine
which body should have the remit to do so. (Paragraph 58)
Premium listing and the role of the sponsor
8. Both
the FCA and the Government have acknowledged the risk of a conflict
on interest in the role of a company's sponsor for a Premium listing.
Whilst they indicated that they were alive to that risk, both
must guard against the fact that the perception of potential misconduct
could be as damaging as the practice itself. The Government should
review the role of the sponsor and consider strengthening the
terms attached to the role along with the range of a sponsor's
remit. (Paragraph 66)
A social index
9. There
is a demonstrable benefit in the Government introducing enhanced
transparency and accountability in the mining sector. We recommend
that the Government conducts a detailed comparison of the Socially
Responsible Investment (SRI) index (found on the Johannesburg
Stock Exchange) and the FTSE4GOOD index which features on the
LSE. That assessment should demonstrate both the levels of information
which are collected and published and the level of information
companies are required to disclose. The Listing Authority should
consider whether the FTSE4GOOD indices can be adapted to address
transparency in the extractive industries, or whether a separate
Social Responsible Index for extractive companies is required
in the UK. (Paragraph 71)
10. Where the requirements
in the UK (including those of the FTSE4GOOD initiative) fall below
those in Johannesburg, they should be strengthened so that investors
in the UK have the same opportunities and information about the
environmental and social corporate governance practices of companies
listed in the UK as they do on companies listed in Johannesburg
or other exchanges. We further recommend that the Government looks
to close the potential loophole in which a company can avoid engaging
with the SRI index by holding a Premium Listing on the LSE. (Paragraph
72)
The Extractive Industries Transparency Initiative
11. We
support the decision of the UK to sign up to the EITI but we regret
that it took so many years to do so. The Government should now
make up for lost time by proactively selling the benefits of EITI
compliance and become a beacon for best practice. (Paragraph 79)
12. We welcome the
fact that the UK has now signed the EITI. However, the lengthy
delay in doing so has lessened the benefit of the initiative.
The Government must now take the role of a vocal advocate of the
adoption of the Extractive Industries Transparency Initiative
to encourage other industrialised countries to sign up. (Paragraph
86)
13. Given the amount
of time it took to sign up to the EITI, we were disappointed that
the Government's engagement with stakeholders does not appear
to have been comprehensive, with stakeholders such as the Mineral
Products Association asserting that it was left out of consultation
on the EITI. We recommend that the Department undertakes a programme
of detailed engagement with businesses in the Extractive Industries
so that all stakeholders in the industry both understand and actively
support the EITI. (Paragraph 87)
EU Directives
14. We
support the Government's intention to implement the EU Directives
on both accounting and transparency. These should be implemented
in a timetabled and proportionate manner to minimise the cost
to industry. We expect the Government to send us a progress report
on the timetable for adoption and any changes it intends to make
to the original Directives before any legislation is laid before
Parliament. In each case it must provide an updated Impact Assessment
on the timing of implementation. (Paragraph 98)
15. The introduction
of the EU Directives and EITI will impact on the work of other
government Departments, particularly the Department for International
Development (DFID). It would further debate if DFID, or the International
Development Committee, shared with us any evidence they had received
about the combined impact of these measures on supporting development
and international tax transparency. (Paragraph 99)
Supplying equipment
16. It
is clear that suppliers to the extractive industries value the
United Kingdom as a base from which to do business with the rest
of the world. We commend the work of the UKTI in both attracting
foreign companies to base in the United Kingdom, and also for
promoting British companies abroad. It is clear that to retain
a leading position, the UK will have to remain a centre for extractive
industries' skills. (Paragraph 110)
Supplying labour
17. The
technology involved in modern mining is both substantial and exciting
and requires specialist staff to thrive. It is clear that the
both industry and Government should do more to highlight these
aspects of extracting to boost the sector as an attractive career.
(Paragraph 114)
Demand for STEM graduates
18. We
recommend that the Government works with educational institutions
to promote and excite the next generation of extractive workers.
In particular, the Government should collaborate with the education
sector to encourage more students to study STEM-related subjects
in university. This will help not only the extractive industries
but also the other many industries that need STEM graduates. To
do this effectively the Government should perform a STEM skills
audit in order to assess:
1) The number of vacancies in the UK which require
a STEM qualification;
2) The number of students currently studying STEM
subjects;
3) The number of school leavers intending to study
STEM subjects in the next two to three academic years; and
4) What industries/sectors STEM graduates enter after
completing their studies. (Paragraph 118)
The perception of the extractive industries
19. Given
the difficulties in obtaining sufficient numbers of STEM graduates,
we recommend that the Government uses its engagement with industry
to actively encourage and promote mining as a rewarding and exciting
career. Concept mines, concept machines, seabed mining and even
mining asteroids for NASA are part of the potential future for
mining and students' perception of mining needs to be updated.
(Paragraph 124)
The role of the Government and industry
20. We
recommend that the Government encourages large mining companies
to support the UK as a base for mining through funding and resources,
including active engagement from school level onwards. This should
include the provision of scholarship opportunities and supporting
lecturing staff so that they are putting support into institutions
where they list, as well as in countries where they operate. (Paragraph
127)
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