24 Feb 2016 : Column 87WH
Westminster Hall
Wednesday 24 February 2016
[Mr David Crausby in the Chair]
Biomass Energy
9.30 am
Nigel Adams (Selby and Ainsty) (Con): I beg to move,
That this House has considered biomass as a source of renewable energy.
It is a pleasure to serve under your chairmanship, Mr Crausby. I am delighted to have secured this important and timely debate. I am also thrilled that, at this early hour, lots of colleagues from across parties and borders have come to participate.
It has been less than a year since the Conservative party secured a clear mandate from the British people to govern. One of the core commitments that we made in the run-up to the general election, which we repeat regularly, is that it is important to keep energy bills as low as possible for consumers and to promote competition in the energy market. Indeed, those same themes featured in the speech given by my right hon. Friend the Secretary of State for Energy and Climate Change to the Institute of Civil Engineers in November. It was referred to as the “reset” speech because it set out the Government’s direction of travel on energy policy over the coming years.
The two themes of affordability and competition are at the core of today’s debate. Like many of us, I am fully committed to ensuring that my constituents have an energy grid that is secure, reliable and affordable. The question, of course, is how we go about achieving that. Last week NERA, an independent economic research consultancy, and Imperial College London published a significant and insightful piece of research that considered the very issues we are discussing. The research was commissioned by Drax, which, as many Members will realise by now—if they do not, they have not been listening very hard for the past six years—operates a power station in my constituency. I grew up looking at the cooling towers. Drax power station generates between 8% and 14% of the UK’s electricity and, perhaps surprisingly, it is the UK’s single largest source of renewable energy thanks to its gradual conversion away from coal to sustainable biomass generation.
The report revealed that around £2 billion-worth of savings could be passed on to the consumer if the Government allowed biomass to compete in future renewable auctions. That £2 billion would equate to an average saving on each and every household bill throughout the land of between £73 and £84. That saving, which I believe any reasonable person—energy expert or otherwise —would argue is significant, stems from the fact that on a whole-system cost basis, biomass is without doubt the cheapest form of renewable energy available to us today. The concept of whole-system cost is important. It has attracted a lot of interest and discussion in recent months and, on that basis, merits further consideration today.
Much of current Government policy is skewed towards assessing the affordability of different technologies based on what is known as the levelised cost, a narrow metric
24 Feb 2016 : Column 88WH
that only captures the cost of an energy project from construction through its lifetime. However, as the NERA report highlights, a number of globalised costs sit outside the umbrella of levelised costs and are not currently captured by Government policy. I think I can fairly describe them as hidden costs. They are associated with more and more intermittent renewable technologies, such as wind and solar, coming on to the grid, and are ultimately passed on to our energy bills. For example, when the wind stops blowing and the sun stops shining, which it tends to do on these islands, the energy generated by wind and solar drops significantly. That forces the hand of National Grid, the system operator, to pay a back-up generator—usually gas—to switch on and generate power to fill the void. Clearly that action comes with an associated cost.
Because intermittent renewables are unreliable, they require much larger amounts of back-up than traditional coal or nuclear power stations, which have far greater control over how much electricity they generate and when. Again, that comes with an associated cost. The failure to capture those costs when evaluating the price tags of different renewables is doubly disadvantageous. On the one hand, intermittent technologies benefit by looking cheaper on paper than they really are; on the other hand, technologies that are more flexible and reliable and have higher availability are handicapped by not being able to demonstrate the financial benefits and value they bring to the system. That is unquestionably the very definition of a perverse outcome.
If the associated costs, which are great, were added up properly and allocated proportionately to the technologies that generate them, the NERA/Imperial report shows that one renewable technology emerges as considerably more affordable than any other: biomass generation. I should say that I shall focus my comments largely on power generation. I understand that colleagues may wish to discuss the heat side of biomass, which is just as important, but if they will forgive me, I will confine my remarks to the generation side.
The report shows that if a renewable auction was held later this year and the Government allowed biomass to compete with other renewables on a level playing field, it could deliver a strike price that was between £8 and £13 per megawatt-hour cheaper than onshore wind, and £43 per megawatt-hour cheaper than offshore wind. Why is biomass so much cheaper than other technologies when the hidden system costs are taken into consideration? One of the principal reasons is that biomass energy is a flexible source of generation, which can ramp up or down the levels of electricity it produces at short notice in response to the demands of the energy grid. Having that flexibility in place, on the scale that a full power station provides, is hugely important. In fact, the more flexibility we have in the system in the coming decades, the lower will be the costs we incur as more and more intermittent renewables come on to the grid.
The Committee on Climate Change, an independent and well-respected voice on energy issues, stated in its recent report on the future of the UK power sector:
“Flexibility can help to meet the challenges of integrating low-carbon technologies. Flexibility can provide low-carbon sources of system reserve and response to minimise the need for partloaded unabated gas plant, with associated emissions savings. Flexible systems also allow renewables and nuclear output to better match demand by shifting demand…supply…or both”.
24 Feb 2016 : Column 89WH
In the UK, only one other technology can provide the same level and scale of flexibility as biomass, and that is gas generation. However, as its usage has demonstrated over recent years, biomass has a far lower carbon footprint than gas on a life-cycle basis. Furthermore, as many colleagues will be aware, because of low commodity prices the market conditions are currently sufficiently challenging that the economics of building new gas-fired power stations from scratch does not stack up. There has been a dearth of new plants coming forward.
That brings me to the second reason why biomass is so much cheaper on a whole-system costs basis. Unlike many of the options touted as the solutions to our energy future—such as new nuclear, new gas, new wind and new solar—biomass generation re-uses the infrastructure we already have in place by converting and upgrading power stations to use compressed wood pellets instead of coal. Some colleagues present are old enough to remember the Central Electricity Generating Board building coal power stations, which are scattered all around the country—or rather, at least some of them are left. I vividly remember Drax B being built; in fact, members of my family were involved in its construction. Using such assets, which the taxpayer has already paid for, negates the need to build expensive new transmission lines or spend money to make existing transmission infrastructure more resilient.
All that is particularly pertinent given the fact that we are going through a volatile period when coal power stations are closing across the country. Eggborough in my constituency announced its intention to consult on closure, and Ferrybridge, just across the border, is going. In recent months, Fiddlers Ferry and Rugeley announced their intention to close or, at best, to operate on a very limited basis. I am delighted that my hon. Friend the Member for Cannock Chase (Amanda Milling) is here, as she represents Rugeley and is very concerned about the future of that plant and its workforce.
Such closures are terrible news for the communities in those areas and for the UK’s energy security. Since the beginning of this year, 2.5 GW of coal closures have been announced on top of the 4.9 GW announced last year, so a significant amount of power is coming off the grid. Those closures are creating genuine concerns about security of supply, and in recent months have forced National Grid to rely on expensive emergency measures to manage the grid and keep our lights on—the most recent event was in November. I am sure colleagues will be in equal measure surprised and concerned to hear that Drax is the last power station in the UK, and the only station between Yorkshire and Iceland, that can provide a black-start service, which is effectively a kick-start to the grid in the event of a blackout.
If the Government are committed to taking coal off the grid by 2025, as they have indicated, the quickest and most affordable way to do so is to enable more coal power stations to convert to biomass. That is not only the quickest and cheapest way to decarbonise our power sector, but a means of keeping existing stations on the grid, thereby ensuring that the communities that have enjoyed the social and economic benefits from those power stations for many years can continue to do so. There is a clear and compelling case, based on the analysis by NERA and Imperial College, for the Government to
24 Feb 2016 : Column 90WH
look hard at whole-system costs when considering which technologies to back or to allow to bid. I understand that the Department commissioned Frontier Economics to do work on that topic, which is very welcome, and that the Minister committed to publishing the results of that report in the first half of this year. That is unquestionably a step in the right direction and I thank her for it, but will she assure hon. Members that her Department will utilise the body of research on whole-system costs to inform Government policy?
The Secretary of State said clearly in her reset speech in November that,
“we also want intermittent generators to be responsible for the pressures they add to the system when the wind does not blow or the sun does not shine. Only when different technologies face their full costs can we achieve a more competitive market”—
hear, hear. Does the Minister agree that this issue can be sensibly addressed through the policy options outlined in the NERA-Imperial report? It states that we should introduce either an administrative solution that handicaps renewable technologies in future contracts for difference auctions based on their systems cost, or a market-based solution that allows renewables to bid into the capacity market and CfD auctions, thereby exposing them to market prices that better reflect their true system costs.
Will the Minister allow biomass to compete in upcoming CfD auctions, either on a level playing field—which seems perfectly reasonable—or on the terms I just described? Alternatively, for the sake of simplicity and expediency, will she work with the existing CfD pot structure that she inherited from the coalition? The CfD auctions are designed around three pots: one for established technologies such as onshore wind, one for less-established, higher-risk technologies such as offshore wind, and one for biomass. Why do the Government not simply transfer a portion of the funding allocated to pot 2 to the dedicated biomass pot in this autumn’s CfD auction? The Department could do that very simply without any significant regulatory or legislative changes. It would complement, rather than undermine, the Government’s strategy for supporting offshore wind by producing the system benefits that I described, which would benefit all generators in the system. That solution would also mean that fewer power stations have to join what one industry analyst recently referred to as
“the Strategic Balancing Reserve dole queue”—
an absurd situation in which renewables are rewarded for forcing coal off the grid, while National Grid has to pay through the nose for an SBR contract to ensure that coal power stations remain available as a contingency option.
As I said earlier, up to £2.2 billion-worth of savings could be passed on to the consumer by allowing just 500 MW of further biomass conversion—effectively one unit. The greater flexibility that biomass provides to the system will make it cheaper to integrate other intermittent renewables such as wind and solar into the grid, if that is the Government’s strategy.
David Mowat (Warrington South) (Con):
My hon. Friend is making a very important speech about biomass and the fact that it is the only dispatchable renewable. Will the Minister address the fact that the Government removed all subsidies from biomass stations unless they are 100% biomass? Fiddlers Ferry on my patch was keen to combine coal and biomass in the same unit, but there
24 Feb 2016 : Column 91WH
is no subsidy for that. Is there not a risk that the Government are making the perfect the enemy of the good?
Nigel Adams: My hon. Friend makes a very sensible point. Many of the stations that generate from biomass—certainly Drax, two of whose units now generate solely from biomass—have used coal firing as a way of learning about the technology. That is a perfectly sensible thing for a power station to want to do. I, for one, would like to see support in that area, so that is a particularly good point.
Converting stations to biomass is the quickest, most affordable way to get coal off the system and achieve what the Department says it wants to achieve. In less than three years, Drax has become the largest decarbonisation project in Europe; previously, it was called the dirtiest power station in Europe. It generates 12% of our renewable energy. I am delighted that the company has managed to protect the 850 or so jobs that are currently based in the power station, although colleagues may have read a Telegraph article this week that appears to imply that half of the station is under threat. I hope the Minister and her Department noticed that, because such threats are not normally hollow.
The company re-skilled its employees in the use of that exciting new renewable fuel in the place of coal, and invested hundreds of millions of pounds in a supply chain that includes new import facilities, four of our ports and 200 new rail wagons, which I had the pleasure of launching at the National Railway Museum. Those rail wagons, which hon. Members will have seen adorning and adding to the beauty of the north and east Yorkshire countryside, were purchased from Britain’s last independent rail wagon manufacturer, WH Davis. It really does add value to the UK economy. The Chancellor often refers to the northern powerhouse. The UK biomass industry is unquestionably the power behind the northern powerhouse, and will continue to power it for many years to come.
These issues are at the core of a number of concepts that I hold dear as a Conservative: competition, security and fairness. The clock is ticking, so the Government must take meaningful and decisive action. They have committed to holding three CfD auctions between now and 2020, the first of which is due at the end of the year. For the reasons I outlined, if the Government allow biomass to compete in those auctions on a level playing field with other technologies, they could save taxpayers billions of pounds and make the UK energy grid more secure in the process. To continue with the status quo would be inconsistent with my party’s oft-repeated commitment to securing the country’s renewable future at the least cost to consumers. I urge the Minister and the Government to think carefully about this issue.
Mr David Crausby (in the Chair): Four Members have indicated that they wish to speak. I intend to call the Front-Bench spokespeople at around 10.30 am, so if Members can keep their contributions to around 10 minutes, I would much appreciate it.
9.50 am
Ronnie Cowan (Inverclyde) (SNP):
It is a pleasure to serve under your chairmanship, Mr Crausby. I thank the hon. Member for Selby and Ainsty (Nigel Adams) for bringing forward this debate and for his continued
24 Feb 2016 : Column 92WH
work on biomass and renewable energy. I hope we can put cross-party pressure on the Government to do the right thing by the electorate of the United Kingdom.
It will be apparent to everyone present today that unabated climate change presents a major challenge to legislators in the UK and across the world. We must address the environmental health of our planet and the decarbonisation of our energy supply as priorities. Tackling the problem will require an unprecedented level of international co-operation. In some instances, our best course of action is to provide a positive example for other nations to follow, and I am proud of what Scotland has been able to achieve so far.
The Scottish Government are on track to meet their 42% emissions reduction target by 2020, and around half of Scotland’s current energy consumption is supplied by renewable wind power. We have also outperformed the UK on total emission reductions from a 1990 baseline in every year since 2010, and Sweden is the only European Union state to have outperformed Scotland. Professor Jim Skea, a member of the UK Government’s Committee on Climate Change said:
“If you divide where Scotland is now, versus where it was in 1990, it is actually among the world leaders. That is unambiguous.”
The Scottish Government aim to have 100% of our electricity consumption generated from renewable sources by 2020. If we are to meet that ambitious target, biomass must play a key role in that transition. I welcome the Scottish Government’s strong commitment to this energy source.
Thanks in part to that support, over 2,000 jobs in Scotland are now based in the biomass sector, and Scottish Renewables believes that the industry has
“massive potential for growth in the future.”
West Coast Woodfuels, a company located in my constituency of Inverclyde, is one such organisation, and it shows the potential for growth in the biomass sector. Founded by farmer Alastair McIntyre, it produces woodchip that is dried in specialised kilns and stored on site. The raw timber for the operation comes primarily from local and sustainable sources. The rise in demand means that the company is now selling its product to a range of public and private sector customers. The example of West Coast Woodfuels shows that biomass is most efficient as a source of energy when the producer and customer are located close to each other. The environmental benefits of biomass are reduced if stocks of wood are hauled great distances across the country to be turned into woodchip, only to be transported on as a source of fuel. A strong local market for biomass fuel, close to producers, minimises carbon emissions and is a healthier option for our environment.
The economic benefits to our local economies should also be self-evident. Biomass plants create jobs in the construction, operation and maintenance of facilities. Employment opportunities are also created in the supply chain, not only through transportation but in growing and harvesting raw materials. The benefits extend beyond the biomass industry and into the wider renewables sector. A report issued by NERA and Imperial College London concluded that biomass
“is a reliable and flexible power source that provides firm capacity. Including biomass as part of the generation mix is likely to lower the costs associated with adding more wind and solar power to the system. This means that it can enable the integration of other intermittent renewable technologies (by providing back up generation),
24 Feb 2016 : Column 93WH
and help to facilitate the phasing out of old coal-fired power stations, whose closure is putting pressure on security of supply.”
If we are to continue enjoying the benefits of the biomass sector, adequate support must be forthcoming from the UK Government.
I share the concerns of those in the renewables sector that the decline in UK Government support not only prevents the industry from meeting its full potential, but damages investor confidence. Had the UK Government maintained their previous levels of support, the viability of many projects would not be in question. The cuts undermine Scotland’s renewables ambition, they are bad for our environment, and they are hurting businesses and consumers in my constituency.
David Simpson (Upper Bann) (DUP): Does the hon. Gentleman agree that there was widespread disappointment at the Government’s bringing forward of the closure date for the renewable heat incentive? It has caused problems for the poultry sector and major difficulties for many farmers, who will not be able to avail themselves of the scheme.
Ronnie Cowan: The hon. Gentleman has either read my mind or read my speech over my shoulder, because I was about to move on to the renewable heat incentive. I was particularly disappointed by the Chancellor’s announcement that spending on the RHI would be some £690 million less than previously forecast by the Office for Budget Responsibility. The UK Government’s own reports have shown that the RHI has been an important tool in pushing forward the decarbonisation agenda. Data issued by the Department of Energy and Climate Change found that two thirds of users would not have installed renewable heat technology without the RHI. It is therefore difficult to understand why the UK Government feel it necessary to make these changes, which are being imposed against expert industry advice and to the detriment of jobs, investment and the environment.
I regret that we can only scratch the surface of this broad subject in the time available today. I would like to discuss a range of further issues given the opportunity, including how best to incentivise biomass use, address air quality concerns and ensure biomass producers are fairly treated through the tendering and procurement process. Most importantly, I want to see the UK Government abandon their policy of managed decline in support for renewables.
David Mowat: The hon. Gentleman has a list of things that the UK Government need to do to enable Scotland to meet its ambitious renewables targets, but, as of this morning, we have a fiscal framework. Is he aware that the Scottish Government intend to put money into such schemes? Presumably they can now do that.
Ronnie Cowan: I have not read the entirety of the fiscal framework at this point in time, but there are some issues that are reserved and will have to be handled through Westminster.
David Mowat: Maybe I am misinformed, but my understanding is that this is a reserved matter, but the Scottish Government will be free to invest in their own choices. If this was one of those choices, they could do so.
24 Feb 2016 : Column 94WH
Ronnie Cowan: The Scottish Government will now have more powers to raise taxes and spend tax revenue as they feel fit for the benefit of the people of Scotland.
Callum McCaig (Aberdeen South) (SNP): My understanding of the devolution framework is that when something is within the competence of the UK Government, the Scottish Government are unable to invest in it. There are specific exemptions in the Scotland Bill for topping up benefits, but there is nothing about energy. We are talking in a purely hypothetical way about something that is impossible.
Mr David Crausby (in the Chair): Order. It is not really in order to intervene on an intervention, unless Mr Cowan allows you to do so. Are you allowing Mr Mowat to intervene, Mr Cowan?
Ronnie Cowan: I was simply slow in getting back to my feet; I have absolutely no issue with the hon. Gentleman intervening. It is a topic of conversation, but when Scotland is independent, we will then take care of our own energy resources and will use them in a way that is most efficient for the people of Scotland. Until that time, there are certain issues that will remain reserved to Westminster and we will have limited power over what we can do about it.
Most importantly, I want the UK Government to abandon their policy of managed decline in support for renewables. Scotland is ambitious and we take the responsibility to tackle climate change seriously. It is time for the UK Government to do likewise.
10 am
Amanda Milling (Cannock Chase) (Con): It is an incredible pleasure to serve under your chairmanship, Mr Crausby. I congratulate my hon. Friend the Member for Selby and Ainsty (Nigel Adams) on securing the debate and on providing such a compelling argument for the benefits of biomass.
I will talk a little about coal-fired power stations and then about biomass conversion. Rugeley, in my constituency —and where I live—has been generating power since the 1960s; Rugeley A opened in 1961, taking coal from the local Lea Hall colliery, and Rugeley B was commissioned in 1970. Iconic power station cooling towers have therefore dominated our skyline for decades. In fact, I grew up looking at cooling towers, as my hon. Friend did, but along the Trent, and today I look out at them in Rugeley.
Rugeley A was decommissioned and demolished in the 1990s, leaving Rugeley B as the last remaining power station in the town; it continues to be coal-fired. Earlier this month, however, its owners, Engie, announced the probable closure of Rugeley B in the summer. That is incredibly disappointing news and a major blow to Rugeley and our community and, in particular, to the 150 employees, the contractors and the wider supply chain. Our immediate focus must be on support for all those affected at such a difficult time.
That news came only a week after the announcement of the scaling back of the coal-fired power station at Fiddlers Ferry in the constituency of my hon. Friend the Member for Warrington South (David Mowat).
24 Feb 2016 : Column 95WH
Furthermore, over the past few months, as my hon. Friend the Member for Selby and Ainsty mentioned, about five of the small number of coal-fired power stations in the country have announced that they will close or partially close. The Government have already declared their intention to phase out coal-fired generation by 2025, but the closure or part-closure of those power stations demonstrates the real challenges that we face in the short term, let alone the medium term. The potential closure of Rugeley is a function of deteriorating market conditions in recent years, with a combination of a fall in power prices and an increase in carbon costs.
The Rugeley closure will see 150 employees and at least the same number, if not more, of contractors losing their jobs. There will also be a negative impact on the broader supply chain, not only for the Rugeley area in Staffordshire and the midlands, but going wider to include ports and the freight industry. The closure not only puts jobs at risk, but puts further pressure on energy security—simply keeping the lights on—because Rugeley B alone provides electricity for about 0.5 million homes. Consider that in the context of the other possible power station closures in the country.
I appreciate the desire to move towards renewable energy such as wind and solar, but it does not necessarily offer the same reliability or flexibility as other forms of energy. As my hon. Friend the Member for Selby and Ainsty said earlier, we are reliant on the wind blowing or the sun shining for those forms of renewable energy, but biomass, as a low-carbon renewable energy source, provides both reliability and flexibility. To date, however, the benefits of biomass unfortunately do not appear to have been fully recognised although, as my hon. Friend outlined, biomass has huge benefits. Biomass, though, is not necessarily playing on a level playing field versus wind and solar, because the whole-system costs are not being considered.
The owners of Rugeley B investigated the conversion from coal to biomass fuel in 2012, but made the decision in 2013 not to pursue the option. Given the closure of coal-fired power stations throughout the country, I believe that there is a real need for the Government to revisit their biomass policy, and quickly. Such power stations provide the infrastructure for potential conversion to biomass, and their workforces have the specialist skills required to operate a power station.
Business rates are incurred up until the point at which a power station is demolished, so there is no incentive to retain the infrastructure—in fact, quite the opposite, because the incentive to demolish quickly is the key issue. Once the power stations are closed and demolished, that’s it, because the infrastructure that could otherwise be used to support alternatives such as biomass is gone. I therefore have a question for the Minister. At a time when market conditions seem to be accelerating the closure of coal-fired power stations, what are the Government doing to fully investigate biomass as a realistic alternative to other renewables, and to create policies to encourage and incentivise the conversion of those last remaining coal-fired power stations before they are gone forever?
10.6 am
Albert Owen (Ynys Môn) (Lab): It is always a pleasure to serve under your chairmanship, Mr Crausby. I congratulate the hon. Member for Selby and Ainsley (Nigel Adams)—
24 Feb 2016 : Column 96WH
Albert Owen: Will the hon. Gentleman say that again?
Albert Owen: He has it three times on the record—that’s important.
Along with the hon. Gentleman, I share a constituency interest in biomass and a general interest in energy. It is important to have the debate at this time, because we need to get a proper energy mix back on the agenda. We need that balanced agenda and I disagreed with the hon. Gentleman’s opening remarks when he talked about intermittent wind, because we need wind as part of the mix.
We have had this debate before, but we need to have periods when we have to switch some of our generation off. Although I hope for a long, hot summer with no wind, which many of us want for the tourism industry and everything else, one of the best ways to do things is to have wind as an intermittent back-up system, because it is cheaper to switch wind generation off than it is to switch off gas, biomass or nuclear-powered power stations. We need to start talking, and to build a consensus on a balance of energy sources for the country. We had such a consensus in the 1990s and right through until recently.
I worry about that, and the Minister knows my views, because I genuinely want to achieve the Government’s goal of an affordable, secure and low-carbon energy economy. To achieve it we need the broadest suite of energy sources. Biomass has huge potential to be part of that mix, and that is what I will talk about. There has been uncertainty with solar and uncertainty created on onshore wind, which damages not only energy production but the supply chain in the country. We need a forthright debate on the long term, yes, but we still need long-term policies for the renewables sector.
I am by choice pro-nuclear, pro-renewables and pro energy efficiency. I see no contradiction in that, because we need the three of them. One of the reasons why Scotland is reaching its low-carbon renewables target was not mentioned by our colleague from Scotland who spoke before me—I did not catch his constituency either, so he might want to intervene to name it—and that is that nuclear back-up and the extension of nuclear are helping to get emissions down.
Nuclear is an important part of the mix. In my constituency we have had 44 years of safe nuclear generation, although it has now come to an end, with high-quality jobs and a helpful contribution to the country’s energy security. With Hitachi and the Horizon project, we are proceeding with a new nuclear build in my constituency. I hope that that, too, will provide decades of quality jobs and of help to the country’s energy security.
I am disappointed that carbon capture and storage is off the agenda, because clean coal and gas could also play their part in the transition to a fully low-carbon economy. However, CCS is not on the agenda. What is on the agenda is the opportunity to have co-firing biomass plants for the future and I very much support that.
24 Feb 2016 : Column 97WH
My constituency has been dubbed the energy island, a concept that I support, because we had early prototypes of onshore wind—they were much smaller than is proposed now. We have also had safe nuclear generation for 40 years, and we have projects in the pipeline for tidal power as well as the biomass project that I will talk about in my remaining time. It is a £1 billion project for not just a biomass station but an eco-park. Under the proposal we will have 299 MW produced from biomass and linked to that will be aquaculture, with a large fish farm and the opportunity to produce fertiliser at the farm for use in food production. It is a very forward-thinking project, so when we talk about building power stations in our areas, we should build eco-parks and link them into district heating systems in the future, so that there is no waste. Such areas really would be low carbon, with heat retained in them, which limits the effects of climate change.
The food part is important. There will also be research and development at the eco-park and it is important that we do the R and D in this country and do not just import that from other countries. We need to work at the cutting edge of new technologies and biomass and eco-parks are one way forward.
The 299 MW plant—a very large plant—will be five 60 MW units in a module form that will be gasified on site. I understand that biomass sourcing is controversial. Orthios is working with DECC, which has already given consent for the project, which is under way—I was there at the launch of the site. In his opening remarks the hon. Member for Selby and Ainsty talked about using existing infrastructure. The project is on the site of a former large Anglesey aluminium smelter, so it is an industrial site that is linked to a jetty that can bring in the biomass from abroad, but I am told that it will use locally sourced biomass from the UK as well. The biomass to be brought in will be managed waste from forests and other areas, which is less controversial than just cutting down trees and burning them. Biomass must be managed. I understand that the opponents of biomass feel that it causes deforestation, but there are ways of using waste materials that can be converted into biomass.
I realise that there is a time constraint, and that another hon. Member wants to speak, but there is the jobs aspect, which was touched on. New green energy jobs can be created if we go forward with biomass technology, many of which can be for retrained people as well as for apprentices. As I said, they can be in research and development. In the construction phase of the Orthios project in my constituency there will be 1,200 construction jobs and then 550 permanent jobs.
I was at the launch a couple of weeks ago with apprentices who have already been taken on, and with young people from the schools. We must say to the young people that climate change is real—they get it even if many other generations do not—and there is a future for them in producing green, low-carbon energy. The United Kingdom can be world leaders, and Wales and my island of Anglesey in particular can pioneer many of the technologies.
I commend what the Scottish Government have done in wind because that project was not popular, but I would add that the renewables obligation allows the
24 Feb 2016 : Column 98WH
Scottish Government to top up renewables funding. They have done that as a way to entice companies in the first place.
Callum McCaig: That was allowed under the previous regime, but the power over the renewables obligation was brought back to Westminster and the scheme has been closed prematurely despite an explicit promise. While that was a sensible way of dealing with things that allowed for different development, unfortunately that opportunity is now closed.
Albert Owen: I was involved in some of the Government talks when the renewables obligation was set up and it did have that flexibility, so it is a shame if that has been taken away, because the devolved Administrations could pioneer their own sources and technologies. They and the UK could work together to make the UK a world leader in technology. I accept the hon. Gentleman’s point, but the flexibility was there. I am glad for the correction.
We need to have low-carbon energy going forward and biomass is a huge part of that. I say to the Minister that the auctions are a complicated process. I sat on an Energy Bill Committee in the previous Parliament in which many of us—including the Ministers, who are no longer Ministers in that Department—found them confusing and complicated. We need to simplify them, because if we do not we could lose out on innovative schemes and that worries me. As the hon. Member for Selby and Ainsty said, we need a level playing field for biomass, or indeed a special category for it so that we can develop the technology to play a part in the mix going forward. We need a truly consensual approach to our energy policies, with them not determined by five-year electoral cycles. They need to be in the long-term interest and work towards climate change.
I was at the COP 21, where there was a mixed reaction to Britain. Yes, the Secretary of State was trumpeting the fact that we are closing down our coal stations, but there was also real concern about the cuts to our renewables. What I want to see is real investment in low-carbon energy going forward. I repeat that that should be in new nuclear, in renewables and in energy efficiency measures so that, on climate change, the United Kingdom can hold its head up proudly and say, “We are world leaders.” I want to see biomass as part of that and I hope that when the Minister responds she will give special consideration to biomass, because the project I have outlined in my constituency and what we have heard from other hon. Members is good for Britain and good for climate change.
10.16 am
Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP): It is a pleasure to serve under your chairmanship, Mr Crausby. In contrast to the hon. Member for Selby and Ainsty (Nigel Adams), I will focus more on combined heat and power, which he mentioned earlier. I thank him for bringing the debate on this critical issue to the House. I am glad to see it getting the attention that it so richly deserves.
The Scottish National party is highly supportive of the increasing role that biomass heat and combined heat and power schemes are playing in reducing CO2 emissions. Biomass has played a vital part in putting Scotland on track to meet its 42% emissions reduction
24 Feb 2016 : Column 99WH
target by 2020 ahead of schedule, which was touched on eloquently by my hon. Friend the Member for Inverclyde (Ronnie Cowan). Of course, biomass is the oldest source of renewable energy.
Biomass is the only other naturally occurring, energy-containing carbon resource known that is large enough to be used as a substitute for fossil fuels. Unlike fossil fuels, biomass is renewable in the sense that only a short period of time is required to replace what is used as an energy resource. Biomass is also held to be carbon neutral in that the amount of carbon absorbed in growing it is equivalent to the amount produced when burned for energy. The intermittency of solar and wind and the role that biomass can play in our overall energy solution have been well commented on, so I will not take them further than that.
The Scottish Government have shown a strong political commitment to biomass as a renewable energy resource. The UK’s largest biomass combined heat and power plant in Markinch, in the kingdom of Fife, received significant funding from the Scottish Government. The plant not only is an asset to Scotland but will help deliver the target of 11% of non-electrical heat demand by renewable sources by 2020, yet the UK Government’s decisions continue to undermine the UK’s and Scotland’s renewables commitments—more on that later.
The Association for Decentralised Energy has provided information on CHP, CfDs and the RHI, which are issues that have been touched on by speakers today. Combined heat and power can use renewable and non-renewable fuels. No matter the fuel, CHP represents the optimal use of that fuel, reducing fuel use by 10% to 30%. Biomass CHP plants are most commonly used in industrial processes where their energy efficiency helps the user to improve competitiveness and reduce carbon emissions. However, biomass CHP is suffering a significant investment hiatus, because of a lack of policy certainty with respect to both the contract for difference and the renewable heat incentive. Only 20 MWe of the potential 440 MWe in biomass CHP projects have reached financial close. Most others are on hold or cancelled, or have been converted to power-only sites.
Under the contract for difference, new-build biomass projects must be CHP, as the hon. Member for Selby and Ainsty mentioned. However, the industry currently views biomass CHP as largely uninvestable—if that is a word—under the contract for difference, because the CfD scheme’s design is not fit for purpose. The CfD biomass CHP tariff will need to be changed before we can expect the biomass CHP opportunity to be captured. To make the CfD investable for biomass CHP, the Government must allow biomass CHP to receive CfD for its electricity over the full 15 years of the contract, even if its heat customer closes. The Department for Energy and Climate Change has been considering that necessary change for close to two years, and there is now a risk that the regulations that are needed will not be in place before the next CfD allocation round, which is expected late in 2016. We might contrast that with the Hinkley C nuclear strike price of double the current rate, guaranteed for 35 years.
Albert Owen: I am not trying to trip up the hon. Gentleman against his party, but does he welcome the extension of nuclear plants? We have safe generation there which will produce low-carbon energy for up to an extra five years.
24 Feb 2016 : Column 100WH
Philip Boswell: As the hon. Gentleman well knows, we have two ageing nuclear power stations in Scotland, and while they have played their part, we do not see nuclear as what we require to advance in the long-term future in Scotland. In fact, we do not need it. It is a choice that England has made and that it unfortunately seems to be forcing on us.
Philip Boswell: And Wales—I concede that point.
The debate pack provided by the House of Commons Library states:
“Following its commitment to increase funding for the RHI to £1.15 billion in 2021, the Government published a series of RHI review documents in February 2016, in advance of an expected review of the scheme in 2017. The Government concluded that ‘the RHI had been wholly positive in its influence on the renewable heat technology market’”.
Many, including myself, would disagree with that statement.
While the industry welcomes the decision to extend funding for the renewable heat incentive up to 2020, reforms are needed to increase certainty within the scheme if it is to be successful in delivering large-scale renewable heat projects. Investors do not know the RHI’s value when they plan and then make an investment decision, as happens under other large-scale renewable electricity mechanisms, such as the renewables obligation, which has been much covered in other debates. The Association for Decentralised Energy therefore recommends that DECC should implement a tariff guarantee under the RHI to bring forward lower-cost, large-scale renewable heat such as biomass CHP. With tariff guarantees, the Government would allow a developer to lock in their RHI tariff when the project reached financial close. I agree entirely with the ADE about that.
The House will doubtless note that the only constant with UK Government energy legislation is change—moving the legislative goalposts and destroying investor confidence via uncertainty. I suppose they are at least consistent about moving the goalposts, with more than 18 changes in oil and gas legislation in 15 years, the removal of the renewables obligation removal one year early for onshore wind, withdrawal of the £l billion fund for carbon capture, solar energy subsidy cuts and the scrapping of large-scale solar energy projects, and plans to privatise the green investment bank just as it is flourishing. Those renewables cuts are made because of the UK Government’s focus on the “rash dash for gas”, or fracking, and their prioritisation of nuclear energy, which shows the true direction of their energy policy.
The hon. Member for Selby and Ainsty spoke of a black start capability constraint, and that is made all the more pertinent by the closure of Longannet next month. I put the blame for that squarely with the Government, because of their prejudiced transmission charge regime.
The hon. Member for Selby and Ainsty and my hon. Friend the Member for Inverclyde touched on the reuse of existing energy infrastructure and the SNP believes that the UK Government should be more flexible about legislation, to make a smoother transition to renewable energy from fossil fuel use possible. I maintain that biomass has a key role to play, and I urge increased use of it, especially given DECC’s own figures for electricity generated by renewables and as a percentage of gross
24 Feb 2016 : Column 101WH
consumption, which show a meagre increase of biofuel as a percentage of overall renewable energy, from around 4.1% in 2009 to 4.7% in 2013. However, in line with the Government’s advice, I would introduce a word of caution, because that industry often competes with other types of land use such as food and raw materials production, and of course with the vagaries of crop prices we should also be careful about the availability and price of sufficient sustainably resourced biomass.
Albert Owen: The hon. Gentleman makes an important point, which is why waste areas are relevant. Many parts of the world have shrub overgrowth. That can be used and the land can return to agricultural use, helping less developed countries.
Philip Boswell: That is certainly an option that any sensible leader would consider when thinking about future policy. I agree that it is vital to retain a sensible balance.
The hon. Gentleman mentioned how critical research and development is to the development of the industry. I understand that the Government are doing something about that. Indeed, the UK Government set out policies to support the use of biomass in energy generation in their UK biomass strategy published in 2012, which noted:
“It is widely recognised that bioenergy has an important role to play if the UK is to meet its low carbon objectives by 2050. Excluding biomass from the energy mix would significantly increase the cost of decarbonising our energy system—an increase estimated by recent analysis at £44 billion. As set out in the 2011 UK Renewable Energy Road map, bioenergy is also an important part of the Government’s plans to meet the Renewable Energy Directive objectives in 2020.”
Nevertheless, biomass, like all other proven renewable energy sources, is being neglected for the UK Government’s preferred options of nuclear and unconventional gas, which of course means we will not meet our climate change targets as set out in the Climate Change Act 2008.
David Mowat: The hon. Gentleman and his colleague, the hon. Member for Inverclyde, both made the point that Scotland has outperformed many parts of Europe—everyone except Sweden, I think we heard—with its decarbonisation initiatives, yet we also hear that that is a reserved matter, so such policy is for the UK Government. I am interested to understand how in that case the credit for doing so well is due to the Scottish Government, not the UK Government. I would point out, as the hon. Member for Ynys Môn (Albert Owen) did, that, of all the devolved Administrations and England, Scotland has the highest percentage of electricity generated from nuclear. It is a long road to replace that.
Mr David Crausby (in the Chair): Order. That is a long intervention.
Philip Boswell: I concede that the hon. Gentleman is perfectly right—energy is more widely reserved. We in Scotland are keen to play our part in the UK as part of an overall national solution for energy. Our choices may be different, and our choices and powers are constrained. In fact, during the debate on the Energy Bill, the Government rejected our calls for CfD devolution, which is the most popular mechanism we would have for making inroads.
24 Feb 2016 : Column 102WH
As I mentioned, we will not meet our targets under the Climate Change Act 2008, so I urge the Minister to revise legislation to enable biomass to play its part in achieving our renewable energy targets on time.
10.29 am
Callum McCaig (Aberdeen South) (SNP): It is a pleasure to sum up for the SNP in this debate, which has been interesting. It has perhaps been a different debate from the one I anticipated, as the majority of contributions have been on the transfer of existing coal power plants to biomass, but I completely understand why that is. I add my congratulations to the hon. Member for Selby and Ainsty (Nigel Adams) on securing the debate. It is good to get a hearing on this issue.
I met with Drax quite early on in my role as the SNP’s energy and climate change spokesperson and very much commend what it has done on shifting away from coal to biomass. There are issues around such large-scale production, which have been touched on, but if it is done right and done well—as I think it broadly is by Drax—it has a large role to play.
The hon. Gentleman mentioned research that suggested that converting just 500 MW of coal to biomass could save £2 billion for consumers, when looking at the whole-system cost. That is quite a remarkable piece of research to suggest such a level of savings.
One theme in the debate has been the need for both a level playing field and a long-term plan for biomass technology. I know the Government are very fond of their long-term economic plan. It is perhaps time they got a long-term energy plan—I note that that has the same acronym, so it could be used interchangeably. The two plans are tied together rather neatly: to have a long-term economic plan, we need a long-term energy plan. As we have heard, we very much require that plan to include biomass if we are to meet our decarbonisation targets.
The hon. Gentleman talked about the hidden costs of intermittent technologies; that is fair. His comment was that that is the “definition of a perverse outcome”. My definition of a perverse outcome would be applying the climate change levy to green energy production. I was surprised that that did not feature in his speech, given that when the levy was introduced in the Budget, Drax’s share price fell by 25% overnight.
Nigel Adams: I am grateful to the hon. Gentleman for raising that. If he looks back in Hansard, he will discover that I raised that issue at the time—quite vociferously, in fact. It was the first time that I voted against my own party, to my regret, so it was a deeply held view.
Callum McCaig: I thank the hon. Gentleman for that. I would gladly check Hansard, but I have no requirement to do that as I will take him at his word. That is a point well made—touché, as they say.
UK energy production faces significant challenges due to the move away from coal. Significant power stations and traditional behemoths of energy production are coming off the market. The hon. Member for Cannock Chase (Amanda Milling) said that ensuring we get the policy structure right before those power plants close is fundamental. She made a valid point about the incentive for the plants to be demolished. Once the power stations are gone, there is no going back.
24 Feb 2016 : Column 103WH
The reuse and recycling of the existing transmission line infrastructure is a powerful point. We will get one opportunity to do this, and that opportunity is closing by the day as the power plants close. I would impress upon the Minister that if she and her Government think biomass has a role to play, as it is clear a number of hon. Members do, time is pressing to get the framework right to enable that to happen. I repeat: once the power stations and the transmission lines that take the power from them are down, the cost of establishing biomass on that kind of scale will be astronomical in comparison with what it was.
My hon. Friend the Member for Inverclyde (Ronnie Cowan) talked about the positive benefit of biomass at a smaller, more localised level than the large-scale power plants on which other Members focused. He mentioned the 2,000 jobs in biomass in Scotland and the potential for more. The link between proximity of supply and production of energy through biomass is also important. While there will be a role to play for biomass in large-scale production, the use of it in a decentralised manner is very much a part of the future.
My hon. Friend the Member for Coatbridge, Chryston and Bellshill (Philip Boswell) talked about combined heat and power being a real and credible part of the future of biomass technology. In my own constituency, Aberdeen Heat and Power Company Ltd delivers heat, hot water and electricity through biomass to a number of my constituents and others across the city of Aberdeen. Its programme has resulted in a 56% reduction in emissions and, perhaps more startlingly, a reduction in bills of 50%.
Combined heat and power is used well elsewhere in the world, in particular on the continent. It has always struck me as perplexing that we have never utilised it on the same scale, because it is a pretty simple technology. It stops the wastage of electricity because it is converted into heat. If we can get that level of savings—by and large in deprived communities in Aberdeen—that is a win-win situation. I am pleased to see the Scottish Government looking at how combined heat and power can be ramped up as we look to meet our climate change commitments. We have discussed the different ways that the devolved Administrations and the UK Government can work. A lot can be learned from that example, and we would welcome that.
Albert Owen: In my contribution, I mentioned combining food and power. Does the hon. Gentleman have a comment to make on that, as a Front-Bench spokesman for his party? Does he see that as something that could be taken forward in different parts of the UK?
Callum McCaig: I thank the hon. Gentleman—I was coming on to his contribution. He made a number of interesting comments, several of which I agreed with. We will come to the nuclear issue, where there is a degree of disagreement. Combining food and power is an interesting way, particularly when looking at the more decentralised model. Agriculture is clearly a huge industry right across these islands, and there are significant waste products that can be used in different ways. I know there is huge potential for using the by-products of our agricultural production to produce energy through both biomass and biofuels. That requires an awful lot more investigation through research and development.
24 Feb 2016 : Column 104WH
The conflict of land use in biomass was touched on. If, as the hon. Member for Ynys Môn (Albert Owen) suggested, we focus on primarily using waste resources or sub-optimal land—shrub and suchlike—that would allay a number of the fears of those who doubt the viability and compatibility of biomass as a way of achieving carbon reduction. The hon. Gentleman also mentioned the requirement for a level playing field, and the fact that we require renewables, nuclear and energy efficiency to do that.
There was some debate about the apparent discrepancy between the SNP’s position on nuclear and our welcoming the extension of nuclear power plants in Scotland. On the face of it, that seems sensible, but one has to remember that there is an astronomical bill for decommissioning nuclear. Putting that out as long as possible, sweating those resources and ensuring we get the greatest return on them before we decommission them is sensible. The significant difference between biomass and nuclear, in terms of the benefit, is that the by-product from biomass will not be radioactive for 100,000 years and require billions of pounds to decommission.
The time is now. As with so many of the issues around energy and climate change, if we are to decarbonise, we need a sensible framework. A number of Members have pointed out where there are gaps in terms of biomass. They need to be closed, but the gaps in our energy policy more widely also need to be closed.
10.40 am
Dr Alan Whitehead (Southampton, Test) (Lab): As hon. Members around the Chamber this morning have made clear, biomass has a substantial role to play in the move towards a low-carbon energy economy. Indeed, not only does it have a substantial role to play, but we should encourage the proper fulfilment of that role over the next period—I will come to that in a moment. We should also be clear about where biomass stands in the move towards a low-carbon economy and the extent to which it can play a role. In that respect, we need to be clear that, given the extent to which reasonable levels of feedstock can be provided to biomass over the next period—and, indeed, over the longer period, up to 2050—it can probably achieve penetration in the UK energy market of perhaps 12% or so.
I take that estimate from the Government’s UK bioenergy strategy, which the hon. Member for Coatbridge, Chryston and Bellshill (Philip Boswell) mentioned. We need to be clear that it is not the case that there is no strategy; there is a strategy—at the moment. Whether the present Government consider it to be their strategy now is another question, bearing in mind our discussions on the recent Energy Bill, for example, about to the extent to which things that happened under the last Government really were or were not part of the Government’s strategy. Before we end proceedings this morning, I would be interested to know from the Minister whether she feels that her Government wish to continue to pursue that strategy, or whether she is in the process of writing a new bioenergy strategy for the future.
The existing strategy clearly places limits on the extent to which biomass can play a role in the move to a low-carbon economy. As my hon. Friend the Member
24 Feb 2016 : Column 105WH
for Ynys Môn (Albert Owen) emphasised, that underlines the fact that biomass has to play a role as part of a suite of technologies in order to provide the widest possible mix of energy over the next period.
We also ought to be clear that, as a low-carbon energy technology, biomass has to be just that: sustainable. As my hon. Friend and the hon. Member for Coatbridge, Chryston and Bellshill both mentioned, sustainability is not just about where we get our biomass feedstock from, but about how we use land for biomass production, and the extent to which biomass production may push out other forms of production, or, as my hon. Friend the Member for Ynys Môn mentioned, the extent to which it takes place on marginal land. In the UK, Drax, for example, is encouraging the planting of short rotation coppicing production, Miscanthus grass and various other things, which can provide a sustainable source of biomass for those undertakings. It is important that biomass is fully sustainable, and of course that comes into play in ensuring that imports of biomass are fully certified across the board, as far as their origin and how they are produced are concerned.
Having said that, biomass certainly can play a clear and substantial role and can perhaps produce 10% to 12% of the UK’s energy requirements in future. That also emphasises the point that biomass should not be set against other forms of renewable energy. In that context, I was a little concerned about the suggestion from the hon. Member for Selby and Ainsty (Nigel Adams) that biomass should, as it were, be advantaged against other forms of renewable energy, because of its relationship to system integration costs, as far as the network is concerned.
Nigel Adams: I apologise if that is how my remarks came across. What I actually want for biomass generation is a level playing field—for the industry to be able to bid on an equal basis, taking into consideration the full system costs of all technologies. That is all I want: an opportunity for the industry to be able to bid on a level playing field, in a fair way.
Dr Whitehead: I thank the hon. Gentleman for that clarification, but perhaps I can also make a little clarification for him. He mentioned the NERA and Imperial College London report about system integration costs. That is an important report, but he should also know that a similar report from NERA and Imperial College London was produced about three months before the report that he mentioned. It so happened that the client for the other report was the Committee on Climate Change, as opposed to Drax. The questions that were asked in the two reports, which had identical authors at almost identical times, were slightly different and therefore produced fairly different results for overall system integration costs. Essentially, one looked at how biomass would relate to the system as it stands; the other looked at how it might relate to system changes.
One thing I am sure the hon. Gentleman would endorse is the extent to which system changes have to take place to ensure that those changes in the mix are integrated into the system as a whole—so, the periods over which energy is sourced, and what happens with
24 Feb 2016 : Column 106WH
transmission charges and how they may be levied in future for a particular location.
David Mowat: I hear what the hon. Gentleman is saying. Does he not accept, though, that it is a fact that intermittent forms of energy require back-up and that there is an associated cost that is not reflected in the CfD structure at the moment, which I think is the point that was being made?
Dr Whitehead: The hon. Gentleman is absolutely correct. There are system integration cost differentials between different forms of renewable energy. My point is that, depending on which report people read, those are not the same as they might appear to be between renewables. Indeed, what is undertaken in how the system works as a whole can substantially mitigate the different costs, so that, as we evolve the system, we can be in a much better position to ensure that the suite of different renewables—which, as my hon. Friend the Member for Ynys Môn mentioned, is so important for future low-carbon deployment—can properly be deployed happily alongside one another, as a suite of measures to ensure that we move towards a decarbonised economy.
I recognise that we have limited time this morning, so I want to turn briefly to the point the hon. Member for Selby and Ainsty made about the level playing field that is necessary for biomass. It is undoubtedly the case, given the measures that are in place at the moment for the enhancement of renewable energy, that there is not a level playing field. There is an overall problem with that suite of measures because of the levy control framework and the extent to which hardly anybody is likely to get a contract for difference for their project over the next period. Indeed, the hon. Gentleman will be aware that some biomass plants got contracts under the early investment decisions, prior to the new form of CfDs coming into being. However, when it comes to the efficiency of biomass, allying that with CHP schemes to ensure that biomass can get 15-year contracts under the CfD arrangements, even if the heat source is not there for 15 years, is an important change that would need to be made to CfD arrangements for the future.
As for the renewable heat incentive, the fact that there are no guarantees for tariffs between commencement and completion of a project if a biomass plant is trying to go for RHI seems to be an omission for the future that should be rectified as far as their admission to those arrangements—
Mr David Crausby (in the Chair): Order. Dr Whitehead, if we are not careful, we will not hear the Minister, and I really want to hear her.
Dr Whitehead: I appreciate that, Mr Crausby. I will bring my remarks to a close immediately.
My view is that it will be necessary to ensure a level playing field in the future arrangements for low-carbon energy; indeed, whether biomass should be accessible to the capacity market as part of those arrangements might be a consideration the Minister is thinking about. I will be interested to hear from her what arrangements
24 Feb 2016 : Column 107WH
may be made for CfDs and RHI for that level playing field to ensure that biomass plays the role that all of us here this morning want it to play in the future of renewables.
10.52 am
The Minister of State, Department of Energy and Climate Change (Andrea Leadsom): I congratulate my hon. Friend the Member for Selby and Ainsty (Nigel Adams) on securing this debate and in particular for being such a champion of Drax. He and I have had many conversations about it. I am delighted to see my hon. Friend the Member for Cannock Chase (Amanda Milling) here supporting Rugeley, which is absolutely right. I have enormous sympathy for the people affected by yesterday’s incident at Didcot, which was a long-standing and good source of energy for the UK. It was a great tragedy.
Every hon. Member here will know that our priorities are to move to decarbonisation at the lowest cost while ensuring that lights stay on. This debate has shown that there are many ways of achieving that. I am grateful to the hon. Member for Ynys Môn (Albert Owen) for pointing out that a balanced energy policy is needed—the shadow Minister also made that point. It cannot be all or nothing.
The installed biomass capacity of all biomass technologies at the end of 2014 was 5.4 GW, which is no small capacity. Of that, biomass combustion was about 3 GW, landfill gas was 1 GW and energy from waste was coming up to 1 GW. That is impressive and the technology certainly plays its part, from potentially low-carbon dispatchable energy to uses in heat and transport biofuel applications and from extracting energy from waste products to injection of low carbon gas into our gas grid.
It has been pointed out that we cannot go ahead without careful consideration of the effects, both positive and negative, that biomass can have on the wider environment. Unlike other renewable technologies, biomass cannot rely on an inexhaustible fuel like the wind, tides or sunshine. The fuels on which biomass is dependent need to be sourced responsibly and sustainably, and in a manner that realises the carbon and greenhouse gas savings that biomass is capable of delivering. Our renewable energy policy seeks to balance those considerations.
My hon. Friend the Member for Selby and Ainsty asked about CfD auctions. He will know that, in November 2015, the Secretary of State announced that if, and only if, the Government’s conditions on cost reductions are met, we will make funding available for three contracts for difference allocation rounds in this Parliament. The first, for less established technologies, is expected to take place by the end of 2016, and the technologies included will be offshore wind, wave, tidal stream, advanced conversion technologies, anaerobic digestion, dedicated biomass with combined heat and power, and geothermal. That is where we are right now. We will set out our further thoughts on that as soon as possible.
My hon. Friend asked whether I agree with the proposals in the NERA report regarding whole-system costs. I am often asked, and I understand why, whether Department of Energy and Climate Change is familiar with the full-life costs of biomass compared with other technologies. I assure him that we are very aware of the costs of balancing the grid from intermittent technologies
24 Feb 2016 : Column 108WH
that are not incurred from electricity generated from biomass. It is dispatchable, can be base load, is controllable and is very valuable. I confirm that my Department is looking carefully at whole-system costs, but the reports that he and the hon. Member for Southampton, Test (Dr Whitehead) mentioned consist of a subset of technologies and we must look carefully at whole-system costs.
My hon. Friend the Member for Warrington South (David Mowat) asked whether subsidies can be available for co-firing. I assure him that subsidies are still available through the renewables obligation. Fiddlers Ferry in his constituency has previously co-fired under the renewables obligation and can take advantage of that scheme until 2027.
My hon. Friend the Member for Cannock Chase asked how the correct mix should look going forward. I assure her that we recognise there are implications when looking at proposals to end coal generation. It is important to have clear consultation on that, which we will announce shortly. In particular, we will look at how that might impact on coal-fired power stations that are currently co-firing.
The hon. Member for Inverclyde (Ronnie Cowan) raised his proud point that Scotland is doing so well on renewables, but I remind him that, as my hon. Friend the Member for Selby and Ainsty pointed out, over 20% of the support under the renewables obligation as a whole goes to Scotland with far less of Great Britain’s population. Scotland received 24% of RO payments in 2014-15 and will receive significantly more than its per capita share, so it would be fair if the hon. Gentleman credited the UK Government and Great Britain’s bill payers with the Scottish Government’s achievements in renewable energy.
Philip Boswell: Will the Minister give way?
Andrea Leadsom: I am sorry, I will not give way.
The hon. Member for Inverclyde asked why the Government are cutting RHI support. The RHI budget to cover renewable heat schemes has been confirmed to March 2021, rising each year to a total of £1.15 billion. The hon. Member for Coatbridge, Chryston and Bellshill (Philip Boswell) referred to biomass CHP. We are considering our proposals for that for the forthcoming RHI consultation. We will refine our current policy so that it delivers improved value for money to taxpayers and targets biomass in line with the Government’s long-term approach to heat decarbonisation, focusing on large biomass and biomass for process and district heating, and to encourage deployment that is sustainable without subsidy in future.
The hon. Member for Southampton, Test asked about the bioenergy strategy published by the previous Government in 2012. It set out a direction for biomass and recommended supporting sustainably produced biomass to deliver real greenhouse gas savings cost-effectively and taking account the wider impact across the economy. A great deal has happened in the industry since it was written, but those recommendations remain compatible with our current intentions.
Finally, as many hon. Members have pointed out, bioenergy contributes to the UK economy, creates jobs in the fuel supply chain in harvesting, processing and transport, and creates opportunities for foresters, farmers and UK ports and railways. It remains and will continue
24 Feb 2016 : Column 109WH
to remain important, bringing many benefits to the UK in decarbonisation, security of supply and economic benefit. I remain of the view that, when sourced responsibly, biomass can provide a cost-effective, low-carbon and controllable source of renewable energy.
That this House has considered biomass as a source of renewable energy.
24 Feb 2016 : Column 110WH
Kneller Hall
10.59 am
Dr Tania Mathias (Twickenham) (Con): I beg to move,
That this House has considered the proposed sale of Kneller Hall, Whitton by the Ministry of Defence.
It is a pleasure to serve under your chairmanship, Mr Crausby. This is about the sale of Kneller Hall, but it is about more than that; it is about Whitton, and Whitton’s history. The proposed sale of Kneller Hall was announced by the Ministry of Defence in a statement just a few weeks ago. Listed in that statement were about a dozen Ministry of Defence sites. Kneller Hall is the exceptional one in that list, because this is not about a building, but about a community.
It is no ordinary building and no ordinary site. Kneller Hall in effect is Whitton, and Whitton is Kneller Hall, which brings me to my first request of my hon. Friend the Minister. I am grateful that he is here to listen to some of the concerns of residents and, I hope, to agree to my requests and to reconsider the sale of Kneller Hall. My first request is that the Minister will get Ministry of Defence personnel to come to Whitton, preferably to Kneller Hall and preferably with the commandant, Colonel Barry Jenkins, who I notice is in the Public Gallery, because the Ministry of Defence needs to tell the community of Whitton face to face the reasons for the sale of Kneller Hall, and the Ministry of Defence needs to hear Whitton’s reasons why it is not a good idea.
It is tragic and extraordinary that in peacetime the Ministry of Defence has managed to create such hostility in a peace-loving community—the community of Whitton. The Ministry of Defence may have estate agents, but it needs historians and psychologists. If the Ministry of Defence had good historians, it would know that Kneller Hall has been in Whitton for nearly 150 years. It would know that Kneller Hall was created because a cousin of Queen Victoria, George, Duke of Cambridge, realised that top-quality musicians, well rehearsed, are essential to inspiring the military. That is our heritage and legacy, which began nearly 150 years ago, in Whitton.
I understand that new military recruits are taken round the museum at Kneller Hall, and in that museum are musical instruments going back to the Crimean war. There is even a musical instrument that was played by a boy soldier at the battle of Waterloo. In the museum, on all the walls, are pictures of all the people who have passed through Kneller Hall—all the top-class musicians—so new recruits know that they are part of an important legacy and an important heritage. Just as every recruit goes through the museum at Kneller Hall to know how much they belong there—they belong for life—every resident of Whitton feels that belonging and that link to Kneller Hall. This is not about a building, but about a community.
The Ministry of Defence notice talks about releasing sites for housing. In London, yes, we need housing, but housing needs to be part of a community. Kneller Hall is the identity of Whitton; it is the heart and soul of Whitton. We cannot rip out the heart and soul of a community and all its identity and replace it with housing that has no identity. That is not what I believe we want as a Government when we say that we want more housing in London. This is a unique site, in a unique
24 Feb 2016 : Column 111WH
place. Whitton is not a suburb. Whitton is not a dormitory town. Whitton is a unique community, and that uniqueness comes from Kneller Hall.
The Minister may well know, and perhaps some historians in the Ministry of Defence know, that over the years there have been proposals to sell Kneller Hall. My predecessor but one, Toby Jessel, fought the sale of Kneller Hall in the 1980s and in the 1990s. I hope the Minister will join the late Margaret Thatcher and Michael Heseltine and Jeremy Hanley, who realised the importance of Kneller Hall and saved it then.
I would like to quote what Toby Jessel said when he was MP for Twickenham. In the 1990s, in a debate in the House of Commons, he said that there were eight reasons why we should keep Kneller Hall. Those eight reasons are still relevant today. He said that Kneller Hall is a world-famous institution. As the Minister will know from the press, people such as Howard Goodall have been saying how important and internationally famous Kneller Hall is today.
Toby Jessel said that a large sum had been spent on Kneller Hall. My freedom of information requests, answered just last week, have shown that more than £1 million has been spent over the last few years—since I became an MP and just before—on Kneller Hall, so that reason is still relevant today.
Toby said it is the largest of the three schools of music. Importantly, he noted—Toby is a musician himself—that it is half an hour from London, so specialist teachers can travel easily to Kneller Hall. We need that for Kneller Hall’s excellence. If the military move away from this school of music, it will not have access to those specialist teachers in the same way. Toby Jessel said in the 1990s that it has a good bandstand, and it is still there today.
Kneller Hall draws large audiences. Again, it is the heart and soul of Whitton. The Proms at Kneller Hall are far better than the Proms at the Albert hall, because it is a community event; it is about the identity of the community. Toby said that Kneller Hall has the capacity to take in the training of the Royal Marines and Royal Air Force bands. That is still possible. And Toby said that it could not be sold for much. Interestingly, I think that this is where the Ministry of Defence estate agents have got it wrong. The Kneller Hall site is metropolitan open land. The Ministry of Defence estate agents did not realise that there are tree preservation orders on most of the trees on the site. We cannot break the heart of a community and replace it with soulless housing. I am sure that that is not the intention of the Minister.
Like Toby Jessel, I have presented a petition to the House of Commons. Even though we have known about the proposed sale for only a few weeks, more than 1,000 people over a weekend signed the petition in Whitton. That demonstrates the feeling in Whitton. Of course, unlike in the 1990s, we now also have online petitions, and a local resident, Nikki Bradshaw, has started one. It has nearly 5,000 signatures already. That is how much Kneller Hall means to people in Whitton and to people who respect the international status of the place.
On the Facebook page—I hope the Ministry of Defence has it—thousands of people are writing comments. I pick a handful of comments on the online petition to show the character of these important points. We need a public meeting because these people need to be heard.
24 Feb 2016 : Column 112WH
Some have written that Kneller Hall is “part of our community” and a Whitton “institution”. Others say, “Stop selling our heritage.” Typical comments include things like “My grandfather was there as a boy soldier”, “My uncle used to teach there” or, “My daughter trained there.” Some say that there is no other school of music like it in the world and that it is short-sighted to allow the loss of such a revered establishment.
Importantly, somebody—not me—wrote on the Facebook page, “Kneller Hall is part of the big society that Mr Cameron values.” Others commented that, “Selling off the family jewels springs to mind”, and said that we should not destroy what is good about the UK. Nikki, who set up the online petition wrote, “Where was the public and local opinion in all of this?”
I would like the Minister to reconsider the sale of Kneller Hall, and to arrange for a public meeting, which I will host, preferably at Kneller Hall. Now—Queen Elizabeth’s 90th year—is not the time to sell Kneller Hall. Neither is it the time to sell Kneller Hall when one of the musicians, Dave Barnes, is in a national television musical competition. I do not want him playing the “Last Post” at the finals of that competition and I do not want Whitton to have its own “Brassed Off” drama. This is not the time.
I am privileged to be speaking to the Minister because he is a courageous man. He has served in the Army—I have seen his medals. However, it is not courageous to leave the retreat from Kneller Hall. He will not get a medal for that, but I will personally pin a medal to his chest if he saves Kneller Hall.
11.11 am
The Parliamentary Under-Secretary of State for Defence (Mark Lancaster): It is a pleasure to serve under your chairmanship, Mr Crausby. I start by reminding the House of my interest as a member of the Army Reserves.
I would like to start by thanking my hon. Friend the Member for Twickenham (Dr Mathias) for obtaining this debate on the future of Kneller Hall, a Ministry of Defence site in her constituency. Her drive to stand up for the interests of her community is commendable—an example that should be followed by all. I want to acknowledge from the outset that the Department is ever-mindful of the emotive nature of estate rationalisation, and that the concerns and feelings of the local community have been, and will continue to be, considered as part of this decision-making process.
I announced to the House on 18 January 2016 that, as part of the Government’s prosperity agenda, the MOD is committed to releasing land to contribute towards 55,000 new housing units this Parliament. Kneller Hall is one of the first 12 sites to be announced for release. Alone, those sites are expected to generate some £500 million in land receipts—a significant and valuable reinvestment for Defence—and approximately 15,400 housing units across the 12 sites. However, our work goes far beyond that important goal. Our footprint strategy is about chairing a path to a more effective, affordable estate that better enables military capability. In that context, it is fair to say that the vast majority of the Defence footprint is currently under review, as the Department gains momentum in the complex planning work necessary to provide the brave men and women of our armed forces a more effective, fit-for-purpose estate.
24 Feb 2016 : Column 113WH
The residents of Twickenham and its surrounding boroughs are not alone in their strength of feeling and, indeed, in their drive to want to retain a local Defence presence. However, the simple fact is that these plans are not directed at individual communities, regiments or bases. This is about ensuring that Government funding is in the right place to ensure the continued defence and security of the United Kingdom.
Dr Mathias: The Minister said that Twickenham is not alone, but does he agree that the petition presented to the Commons and the online petition are unique among the 12 sites mentioned in the January notice?
Mark Lancaster: It is certainly the only petition of which I am aware among the 12 sites. I do, however, imagine that by the end of the process, there will be other petitions on many other sites across the UK because it is absolutely understandable that individual local communities feel strongly about their relationships with Defence. This is an ever-evolving issue so I sense that there will be more petitions to come, which is something I regret, but that is the nature of the job I have to do as I seek to rationalise the Defence estate in the best possible way to deliver Defence outputs.
Kneller Hall is the home of the Corps of Army Music and the Royal Military School of Music, two organisations that are of great significance to the United Kingdom. Despite that sentiment, the facilities in which they are currently homed are ageing, inefficient and not fit for purpose. How can it be that an organisation that contributes so much at home and overseas is expected to train and operate out of an old and failing site? The school and the headquarters have a very small footprint. There are 43 military and 30 civilian staff permanently employed at the site. Regardless, it is unfair that those 73 people have to endure ageing single living accommodation and sub-optimal facilities that do not meet appropriate training standards. The fact is that the site just is not designed for its current use. It is a stately home, not a school, and it is definitely not a military training facility. To bring the site up to standard for its current use would cost at least £30 million.
So what can we do with the site? Do we invest over £30 million of taxpayers’ money in an ageing site that houses fewer than 75 staff? Should Defence invest in a site where maintenance costs will continue to rise over the years? Is that really in the best interests of Defence and military capability, and the best use of taxpayers’ money? I have looked at this case and concluded that that would not be the right decision for Defence. Disposal would offer better value for money and, crucially, better military capability. Every additional pound we spend here is a pound that cannot be spent on the front line.
Dr Mathias: The Minister says that £30 million is needed because of the decay. Will he tell me—this is important to the community—whether that information has been in the public domain? Have the community and previous Members of Parliament been informed of that? Over how long a period has £30 million been required?
Mark Lancaster: I cannot give an exact answer now but I am happy to come back to my hon. Friend. I believe that the £30 million dates back to 2009, so I would imagine that, in today’s prices, it is even greater.
24 Feb 2016 : Column 114WH
The MOD is reviewing a number of options regarding the future of the capability currently provided at Kneller Hall. For instance, the parent headquarters, the Royal School of Military Engineering, has barracks at both Chatham and Minley with vastly improved technical and domestic accommodation. It also has the necessary vacant space required to house the personnel currently employed at Kneller Hall, irrespective of whether they are military or civilian. The commandant of the Royal Military School of Music has confirmed that either site, with suitable reprovision, would provide far better and greatly improved training facilities for his people.
The Department has considered the prospect of relocating other Army units to the Kneller Hall site. The problem is that there just is not the space and the facilities are not in a good enough condition. Kneller Hall just is not suitable. Both Chatham and Minley are still within reasonable travelling distance of London and the south-west, the main locations of the customers of the British Army’s 41 bands. There are generous practice and teaching rooms in place at both sites, since they are modern technical colleges and already host military bands. As well as that, the accommodation is of a more than suitable standard to home the junior soldiers that make up the future of Army music—those who are at the very beginning of their career.
I recognise that our announcements to close sites are unsettling for units, for their families and for our civilian staff. We will do all we can to provide them with the necessary certainty of their future locations as soon as practicable. As an independent site, Kneller Hall requires its own guard force of 18 servicemen and women. It needs its own independent integrated logistical section and its own administrative personnel. If the sites were collocated, these highly skilled service personnel could be employed in more operationally vital posts. Furthermore, the freeing of the site could make way for the provision of up to 192 new homes, which are required to meet the UK’s ever-growing housing demand.
I recognise my hon. Friend’s concerns on the nature of the community, which is precisely why this is very much a two-stage process. The first stage is establishing that there is not a military use for the site, but the second stage—the future—is for the local community to decide. The MOD will engage with the local community and the local planning authority to decide the best future for the site.
Dr Mathias: Again, I appreciate the Minister’s giving way. He talks about 192 homes, but has the Ministry of Defence already been in communication with Richmond borough’s planning department? If so, the community is unaware of it.
Mark Lancaster: Yes, I can confirm that the Defence Infrastructure Organisation has been in touch with Richmond’s planning department, so that process has started. Again, I make it clear that the disposal of this site is based on military capability need, which alone will generate the disposal of this site. The second process—the potential building of new homes—is a secondary issue; it is all about delivering military capability.
Where do we go from here? Much work is still required to ensure timely and efficient closure of the unit and the relocation of the occupants. There are also a number of third party users of the site that we would wish to give the opportunity to find alternative locations. Important engagement will continue to take place with the local
24 Feb 2016 : Column 115WH
council and planning authorities. We have negotiated a number of compromises on the site’s future use and occupation, including ensuring that the area of metropolitan open land that sits within the unit’s boundaries remains untouched, and that the trees on the site continue to be protected and preserved. I confirm that I am happy for specialists from my Department to attend a public meeting on the process for disposing of the site, should my hon. Friend wish to arrange one.
The MOD, as do all Government Departments, follows a set process for disposing of any site. Once declared surplus to defence requirements, a site is placed on a register of surplus public sector land, a database managed by the Cabinet Office, which provides an opportunity for other public bodies to express interest in acquiring sites before they are placed on the open market. As already mentioned, however, the MOD will continue to proceed with the plan for housing, liaising with the local council and planning authorities to ensure the best possible future use for the site. That will present an opportunity for the local community to engage with the MOD on the future use of the site, which will not be disposed of before 2018.
I acknowledge and recognise the emotive nature of closing sites, especially ones such as Kneller Hall that have been at the centre of a community for many years. I am delighted to say that I understand the Army will continue to play proms to the public in the park in the summer. I appreciate wholeheartedly the concerns of my hon. Friend and her constituency, and I assure her that great consideration is given to all military establishments, along with their historical and national significance, but as I have already mentioned, this is not about individual communities, bases, regiments or units; it is about ensuring that the MOD has an updated, efficient and rationalised estate that is fit for purpose and fit for it to operate now and into the future. This is about ensuring that the right resources are in the right place to keep Britain safe.
11.23 am
24 Feb 2016 : Column 116WH
Department for Business, Innovation and Skills Office: Sheffield
[Mr George Howarth in the Chair]
2.30 pm
Kevin Barron (Rother Valley) (Lab): I beg to move,
That this House has considered the closure of the Department for Business, Innovation and Skills office in Sheffield.
I suppose I ought to say at the outset that I would like the Government to reconsider the closure of the BIS office in Sheffield. The announcement came on Thursday 28 January of plans to start the process to close the BIS office at St Paul’s Place in Sheffield by 2018. It was announced by the permanent secretary for BIS on that day, and it was a complete unknown as far as the workforce were concerned. The closure could result in job losses among the 247 staff in the office. On Tuesday 2 February, the Secretary of State for Business, Innovation and Skills said that the decision had been taken to save money for the taxpayer. As was said later, that really smacks of hypocrisy when the Government hope to build a northern powerhouse.
As my hon. Friend the Member for Sheffield, Heeley (Louise Haigh) said following the urgent question that was taken in the House on Friday 29 January, the day after:
“It speaks to this Government’s London-centric focus and contempt for the north of England that they think a consolidated ‘combined central HQ and policy centre’ has to be, by rights, in London rather than in Sheffield where the operating costs are cheaper and the perspective on UK investment is much broader.”—[Official Report, 29 January 2016; Vol. 605, c. 558.]
I am sorry to say I was not there on the day and, having read Hansard, I deeply regret that, because in all my 30-odd years in this place, I do not think I have seen the word “Interruption” used so much in Hansard, particularly against the Government Front Bench—the Minister seemed to be “on one”, for want of a better expression. It is a great pity that I missed that day; I know that I can now see it on iPlayer, and I may do so at some stage.
Mike Kane (Wythenshawe and Sale East) (Lab): I congratulate my right hon. Friend on securing this debate. I recently attended a round-table of the Confederation of British Industry North West on the powerhouse. The people there did not know, or could not name, the Minister who is responsible for the powerhouse. Does my right hon. Friend agree that that says it all?
Kevin Barron: I watched with interest, after the urgent question, the question my hon. Friend asked about individuals in the northern powerhouse and what they felt about this situation, but I will leave that aside at this stage.
We have to look at this against the backdrop of what was reported in the Financial Times. It said that 20% of civil service jobs had been lost in the regions since 2010, as opposed to only 9% in London. That is an extraordinary figure and seems to go against the main thread that we have had—or should have had—in Government circles, not for the last five or six years, but for about the last five decades. I remember very well the advanced manufacturing park near Sheffield, which was a glowing example of what Governments can do if they have an intention to do it. When I represented part of it, I was
24 Feb 2016 : Column 117WH
lobbied on several occasions when some massive offices were going to be built on the advanced manufacturing park—which is actually in Rotherham, but on the edge of Sheffield—on the basis that thousands of civil service jobs were supposed to be going there. Of course, that never happened, unfortunately.
We can also put this into perspective by considering infrastructure expenditure in the north, which stands at £539 per head, as opposed to £3,386 per head in London. When we are presented with such statistics, it is no wonder that people say that this concept of the northern powerhouse is little more than words.
This move is all about, I believe, accommodating large reductions in headcount and nothing to do with the Department’s core function of boosting business. I have been contacted by several constituents regarding the closure. One of them says:
“I’ve worked in the civil service for”—
I am going to say that this person is now in their third decade in the civil service—
“ten years in London and the rest in Sheffield. For the majority of that time, I have worked in teams that have been split site between Sheffield and London. To my knowledge, there has never been any issues regarding the quality of work or negative impact on policy decisions/policy work due to operating split site teams.
Aside from the obvious impact on me personally with respect to having to find another job, I am concerned about the effect this decision will have on the City of Sheffield and surrounding areas. I am still trying to understand why the Department for Business would take such a step.”
This announcement comes alongside the recent announcements by Her Majesty’s Revenue and Customs about job cuts, and the fact that funding has been withdrawn entirely from the UK Commission for Employment and Skills, which is based in the constituency of my right hon. Friend the Member for Wentworth and Dearne (John Healey) and which is part of the BIS 2020 initiative. Words fail me. What should have been happening for decades in this country now seems to be in reverse. These announcements clearly send out completely the wrong type of message to large businesses that might be looking to invest in Yorkshire or other northern cities and towns.
John Healey (Wentworth and Dearne) (Lab): Is not the answer to the question that my right hon. Friend’s constituent put—“Why?”—that this is about crude number-cutting of budgets, jobs and offices? At a time when knowledge of economies outside London and support for the creation of jobs and businesses outside London is needed more than ever, surely this is a short-term decision that will also prove to be counterproductive.
Kevin Barron: I completely agree with my right hon. Friend’s analysis. The decision is completely at odds with this concept—it is not much more than a concept—and promise of money of the northern powerhouse. Under the circumstances, these are the worst signals in the world that central Government could send to the north.
Not only will the closure be devastating for South Yorkshire; it will lead to a huge loss of expertise for the Department—for example, the person I have just quoted, who has been in their job for decades. The idea that they can uplift and come down to work in London, even if they could afford to buy a property in London, is a very difficult thing to imagine.
24 Feb 2016 : Column 118WH
Nick Hillman, who was formerly a special adviser to David Willetts during his time as universities and science Minister, has described this closure as
“a genuine tragedy for good public policymaking.”
He says that the Sheffield civil servants
“hold BIS’ institutional memory on HE and often know more than the policymakers who are nominally closer to the centre of power.”
The staff in Sheffield work closely with external organisations, such as employers and education providers, visiting them to explain policies about funding, deregulation, further and higher education, and Government strategy on rail, as well as listening to their issues so as to better inform policy. Having purely London-based staff will mean additional costs, particularly as a result of pay differentials and a less prompt service for organisations based in the midlands and the north. Gone will be the knowledge and understanding of localities, sectors and industries that can make a difference to effective policy making and allocation of funding.
I have spent more than 30 years in this Parliament now, and for most of that time I have heard many people who believe—people from all parts of the House; Ministers of all political colours, as if they do not recognise it—that north of Watford is a strange land. Bringing more people down from the north to work in London will just bolster that attitude and, I have to say to the Minister, that is fundamentally wrong.
Sheffield staff are also responsible for applying ministerial strategy and policies on the ground. For example, BIS sites such as the Sheffield site ought to be in the vanguard of helping the Government to rebalance the economy and supporting such rebalancing in the sectors that are most prevalent in their respective regions. It seems particularly strange that BIS, with its supposed ambition to create more geographically balanced growth, should take this decision, when other Departments, such as the Department for Education, plan to remain in Sheffield. Can the Minister explain that to us—not just to the Members from Sheffield who are here today, but to other Members from the region as well?
Another constituent drew my attention to the fact that BIS Sheffield has recently advertised for a level 3 apprenticeship in the very office that the Department is planning to close in 18 months. In fact, the closing date for the apprenticeship applications is today—I have the advert with me, and the closing date is 24 February. The post is fixed-term for 18 months from April 2016. There is no mention at all of the office closing in 18 months, so any hope of a permanent job at the end will be non-existent. Indeed, to be honest, who would really want to work in that atmosphere of despondency and anger? I find it hard to understand the mentality or the morality of carrying out such an exercise in the current climate—and, of course, it costs public money as well. Under the circumstances, it seems wrong.
The comments made by the right hon. Member for Broxtowe (Anna Soubry) in response to the urgent question on 29 January stick a little in my throat. She said:
“As I say, in difficult times when we have to make sure that we continue with our long-term economic plan, difficult decisions have to be made, but we take the view that this is the best way to spend public money more efficiently and more effectively.”—[Official Report, 29 January 2016; Vol. 605, c. 562.]
24 Feb 2016 : Column 119WH
If that is the case, it is simple. My understanding is that a report was written about the “BIS 2020” initiative. It was about the closure—not just of Sheffield, but potentially of some other regional offices as well—but it has never seen the light of day. I say this to the Minister—and to the Government: I do not blame the Minister. That report was created by public money and we have the right to see the business case for the change. And I will tell you who has the right to see it more than anyone else: the 247 people who have this cloud hanging over them. I urge the Government to publish the facts, so that we can properly review the decision.
2.41 pm
Paul Blomfield (Sheffield Central) (Lab): It is a pleasure to contribute to this debate with you in the Chair, Mr Howarth. I congratulate and thank my right hon. Friend the Member for Rother Valley (Kevin Barron) for securing this debate on the closure of the office. The office is in my constituency, but the closure has a far wider impact, and that is reflected by the Members here from across the region. It is not just a blow for Sheffield, but for a region that has been trying to engage positively with the Government on the northern powerhouse. I hope that the Minister will engage positively with us on the concerns that are being expressed.
I have some sympathy with the Minister; the decision seems to have been driven by senior managers—I am delighted to see the permanent secretary here—but is falling apart under scrutiny. Ministers have been put in a difficult position. They have been briefed, and when my hon. Friend the Member for Sheffield, Heeley (Louise Haigh) asked her urgent question, Members were told that the decision has been taken to save money. Meanwhile, staff in the office in Sheffield have been told that there has been no cost-benefit analysis. Under questioning at the Business, Innovation and Skills Committee on 10 February, the permanent secretary as much as admitted that there was no business case for the decision. It is not too late, however. The Minister is a thoughtful man, and I hope that he will approach the issue in the same way as he has his Green Paper on higher education—we have discussed it on many occasions—listening to concerns, sharing them with his colleagues and agreeing to an open discussion of the options.
The House of Commons Library’s briefing for the debate described the Sheffield office as one of a number of regional offices and somehow mixed it up with the network of 80 offices. I have raised that issue with the Library, but for the record, we must be clear that the Sheffield office has a head office function that happens to be taking place in Sheffield, and for good reason. I have spoken to a number of the staff in the office, and they are shocked not simply that their jobs are being taken away, but that those jobs are going without a single good argument being advanced in defence of the decision. They are senior policy staff, and they help make Government decisions. They are used to looking at evidence, evaluating it carefully and advising Ministers, and they are shocked that the rules about effective and responsible decision making have not been applied to them.
The staff have many questions, and I will start with four that I would like the Minister to answer. First, why does the 90-day consultation period not include consultation on the rationale to close the Sheffield office? Secondly,
24 Feb 2016 : Column 120WH
why does it not give those affected the chance to examine the business case and discuss alternatives? Thirdly, why does it not invite alternative proposals for other models that would work well for Government and provide best value for taxpayers? I have some more questions later, but the final one for this cluster is: why does the documentation state that the 90-day consultation closes on 2 May 2016 when it also states that a final decision on the closure of the Sheffield site is planned by the end of March? That is five weeks before the consultation closes.
People in the office and more widely in the region are genuinely bewildered. This Government talk about the northern powerhouse, are supposedly committed to a diverse civil service and regularly talk about value for money, but in the case of the Department for Business, Innovation and Skills, apparently they want all their policy jobs to be based in the most expensive city in the country because—this may not be the case, and the Minister can clarify things, but it is what staff have been told by senior managers— Ministers cannot be supported by people based elsewhere. Frankly, it just does not add up.
On the business case, I recognise that the Minister is in a difficult position, because the permanent secretary was unable to share any facts on which the decision was based. The first line of the restructuring proposal form, which was sent to all staff on 17 February, makes the case for the decision. It states:
“BIS is required to make significant savings by 2020.”
I have a simple question for the Minister—I hope he can succeed where the permanent secretary failed at the Select Committee: how much money will the proposal to move all policy jobs to London save? If he wishes, he can intervene on me now.
The Minister for Universities and Science (Joseph Johnson): I will come back later.
Paul Blomfield: I look forward to the answer. The civil servants whose jobs are on the line as a result of the decision are familiar with the concept of making savings for the public purse. They are engaged in that very pursuit in delivering the Government’s agenda on apprenticeships and further and higher education. They work within strict financial constraints, but were they to make a proposal without any evidence of the budgetary implications, the Minister would agree that they were not doing their jobs properly. Why are the Government, elected on the back of a promise to supposedly balance the books, so reluctant to publish the business case for the decision? I fear from my exchange with the permanent secretary during his appearance before the Select Committee that it is because there is no such document and no such business case. Will the Minister clarify the basis on which the decision was made, if not to save money?
In the documents that have been published, the proposed “combined regional footprint” that will remain—this is mentioned in the restructuring proposal form—
“the FE funding centre (location yet to be decided)”,
“possibly a regulation centre in Birmingham”
are all part of the new vision. How much will all those things cost? We do not know. We do not know because the Department does not know, but how on earth can they be less expensive?
24 Feb 2016 : Column 121WH
The Government’s own estate strategy, which was published in 2014, points out that the cost of space in Whitehall is expensive. It cites the Ministry of Defence main building at a cost of £35,000 a year a person, compared with the Home Office buildings in Croydon at £3,000 a person. That is less than a tenth of the cost, and Sheffield is less expensive still, and that is before we take account of central London weighting and the extra staffing costs involved. The decision, which has huge consequences for my constituents, the city and the region, has been made on the basis of so little fact and evidence.
There is a wider issue, which my right hon. Friend the Member for Rother Valley alluded to, about the way that this country is run. There is real value in locating policy making in the regions and nations of Britain. That is why successive Governments have moved Departments out of London. I remember when the Conservatives under Margaret Thatcher moved the Manpower Services Commission to Sheffield in 1981, and such moves continued under Labour. That policy stalled under the coalition and is now thrown into reverse. Before the Minister wheels out the line that more BIS jobs are based outside London, let me remind him that the focus of this debate is on the highly skilled policy jobs that are at the centre of the decision.
Too many decisions in this country are made through the prism of the personal experience of people who live, work and bring their families up in London. The rest of the country is different. We need more people who live their lives, like most of the population, outside London bringing their experience into policy making. The Department for Education carried out its own review of its estate. The review stated:
“We benefit from maintaining sites around the country—we get alternative perspectives on our policy issues, we can draw from a wider recruitment pool, and employing people in sites outside London helps to keep costs down.”
If that is important for the DFE, why does it not apply to BIS? The Minister risks his own goals if he loses some of his most experienced staff just as he embarks on an ambitious programme in higher education. My right hon. Friend the Member for Rother Valley cited the special adviser of the Minister’s predecessor, David Willetts. His special adviser, respected by all parties in Parliament, described the move as
“a genuine tragedy for good public policymaking.”
Is the Minister not concerned about the loss of talent? I hope he will come back on that point. What assessment has he made of the loss of jobs on the successful delivery of the policy agenda for higher education, further education and apprenticeships?
There is another issue about creating a diverse civil service. Earlier this month, Cabinet Office Ministers launched the Bridge report to achieve the Government’s stated aim of creating,
“a public sector that reflects the diverse nature of the UK”.
They launched it with a fanfare, and the head of the civil service, Sir Jeremy Heywood, said:
“The Bridge Group report offers potential nuggets of gold, not just for the civil service but for the UK...The problem is that talent is everywhere but opportunity is not.”
24 Feb 2016 : Column 122WH
One of the plans arising from that report to address inequality in the public sector states that we need
“new terms in place which make it easier for civil servants to live outside London.”
How on earth can the Government square that circle? Where is the joined-up thinking?
The Bridge report also found that the number of people in the civil service from poorer backgrounds is shockingly low, with only 4.4% of successful applicants coming from working-class backgrounds. Does the Minister think this move will increase that figure? What equality impact assessment has been made of the decision? It cannot be right that we restrict opportunities to those who can afford to live and work in London, and who have the option to do so without commitments elsewhere. The Government could massively reduce the talent pool from which they recruit with this move, so why are they narrowing their options?
Staff in Sheffield have been told by BIS board members that the reason for the move is because Ministers want them close by. I do not believe that. I think Ministers are more open-minded and more innovative than that. It runs counter to the Government’s own estate strategy, published in October 2014, which stated:
“Civil servants should be able to work flexibly across locations at times that are convenient to them and their managers”.
“Some parts of the civil service and the private sector still have an inflexible, command-and-control model where people are managed more by their presence than by achievement.”
The decision seems to confirm that that is how BIS wants to continue to run itself.
The killer blow to the rationale for this decision is at the bottom of page 11 of that document:
“With modern IT, officials no longer necessarily need to be physically present, for example to brief ministers.”
I am sure the Minister will concur with that point. Has this decision been taken behind closed doors because somebody had the bright idea that it might be easier for Ministers if they sit on the floor above their policy people rather than pick up the phone, use the video link or plan meetings in advance? No assessment has been made of the expertise and experience lost; of the impact on access to and diversity in the civil service; or of the way in which decisions are made in this country, never mind the cost to the public purse.
Finally, let me reflect on the thoughts of the Department’s most senior civil servant, the permanent secretary Martin Donnelly. It is good to see him here. Almost a year ago to the day, he published a blog post on his experience after the Department had undergone huge change back in 2011. The title of the piece is, “Leadership Statement: Talk less, listen more”. I have a copy that the Minister might want to share afterwards. Mr Donnelly writes that,
“people felt that the process has been done to them not by them.”
He was right. It was a problem then, and it is a problem the Department is on the brink of repeating now. But it is not too late. I urge Mr Donnelly and the Minister to listen to the hugely talented civil servants based in Sheffield. I urge them to listen to the head of the civil service, whose statement, made less than a month ago, I make no apology for repeating:
“Talent is everywhere but opportunity is not.”
24 Feb 2016 : Column 123WH
I hope that the Minister will confirm today that the Government will publish the papers that have informed this decision and I hope he will commit to reviewing it. Is that really too much to ask?
Mr George Howarth (in the Chair): Order. To accommodate everyone who has indicated that they want to speak, I am imposing a seven-minute time limit on speeches.
2.56 pm
Sarah Champion (Rotherham) (Lab): It is a pleasure to serve under your chairmanship, Mr Howarth. I apologise to you, to the Chamber and to the Minister because I will have to leave before the end of the debate owing to constituency business.
The decision to close the Business, Innovation and Skills office in Sheffield feels like the latest example of Tory scorn for the north. Yet again, we are faced with major job losses in the north as a direct result of the actions of a Government seemingly unable to look beyond the confines of London and the south. We have 247 staff now facing redundancy, having been informed that their jobs would be moving to London. The Government have described this as a transfer, yet they offer no guarantee that those affected will be allowed to transfer if they so wish, only that they “may be able to”. For those facing such uncertain futures, that is small comfort.
In her letter to me, Baroness Neville-Rolfe acknowledged that the Department is
“very likely to take the opportunity to make some of the significant headcount reductions”
that the budget requires. The Department has said that staff will receive comprehensive support, but we do not yet know what the support will involve. We do know that it will most likely not include any financial support for either travel or relocation costs. In effect, the Government’s commitment to staff amounts to a promise that they might be able to keep their job but, if they do, it will be at their own expense, and very likely a significant expense.
The Government’s statements are contradictory. They continue to talk of a transfer. I found Baroness Neville-Rolfe’s words to me to be very telling. She said she would “take the opportunity” to cut jobs. Do the Government really see a huge job loss in the north as an opportunity? Yet again, they label this as a transfer. To do so is deeply disingenuous. This is a job loss, plain and simple. The irony that the Department responsible for the delivery of the northern powerhouse should choose to divert jobs from one of the great northern cities to London is inescapable and sends entirely the wrong message.
Repeated reviews, most recently the Lyons review in 2004 and the Smith review in 2010, have recommended that the Government should decentralise the civil service, as my colleagues have been saying, both to provide better value for money and to enhance career progression outside of London. Yet the proportion of civil servants based in London has increased from 16% in 2010 to 18% in 2015, a move in entirely the wrong direction. The proposed reduction in BIS staff equates to almost 5% of the total civil servants in the city of Sheffield. This is on top of the previously announced closure of Sheffield’s HMRC building, with the loss of 500 jobs.
24 Feb 2016 : Column 124WH
The St Paul’s building is currently shared by BIS and the Department for Education, with a number of other Departments basing small numbers of staff in the premises. The closure of the BIS office represents a loss of approximately a third of the current workforce. That will inevitably affect the feasibility of the remaining departmental offices, risking yet more job losses. BIS’s other regional offices face an uncertain future, with the risk of more redundancies in the Department’s northern offices. The Government are choosing increasingly to withdraw from the north while simultaneously offering platitudes of support for the northern economy. That has serious consequences not only for the staff who are directly affected but for the wider community and economy.
Each time a decision such as this one is announced, the Government resort to the same old tune. They talk of efficiency savings and the need to provide better value for money, but let us be clear about what is proposed: the Government are moving jobs from the north to London, one of the most expensive cities in the world. To justify the decision on their own terms, it would be reasonable to expect that a detailed business case had been conducted and all possibilities fully explored before we reached this point.
Mike Kane: My hon. friend is making a very powerful point. Does she agree that this decision lacks vision, guts and gravitas? That is particularly true when it is compared with the decision to move parts of the BBC to Salford, which in terms of transferring jobs from London to the north has been one of the greatest success stories. We remember the problems and the noises off in the press at the time about how bad that decision apparently was, but nobody looks back on it now as a bad decision, just as they do not dismiss the resulting efficiency savings and service improvement. The same can be done with the decision on the BIS office.
Sarah Champion: This decision shows a complete lack of common-sense, along with everything else. The Government have still not released a detailed study. Indeed, as the permanent secretary suggested under questioning from my hon. Friend the Member for Sheffield Central (Paul Blomfield), such a report may not even exist. It beggars belief that the jobs of 247 dedicated staff should be threatened when no business case whatever has been made. I echo the call made by others today for the Government to publish the evidence that underpinned this decision without further delay.
The north has borne the brunt of the Government’s ideologically driven agenda, as it did the last time the Tories were in power. Time and again, we see the Government taking actions that hit the north disproportionately hard. Most recently, they announced a £300 million transitional fund to help local authorities that are struggling to implement Tory cuts. It speaks volumes that the five least deprived local authority areas will collectively receive £5.3 million, while the five most deprived will receive nothing. Each of the five areas most in need are in the north.
Sheffield City Council’s central Government funding has fallen by almost 50% since 2010. From the ever-deeper cuts to local authority budgets to the abject failure to support the steel industry, the Government have shown disdain for the north. A long line of examples show up the empty rhetoric of the northern powerhouse. The Government are delegating cuts to the north and calling it devolution.
24 Feb 2016 : Column 125WH
3.3 pm
Louise Haigh (Sheffield, Heeley) (Lab): It is a pleasure to serve under your chairmanship, Mr Howarth. I, too, congratulate my right hon. Friend the Member for Rother Valley (Kevin Barron) on securing the debate.
It is good to see the Minister in his place. This is the second time that a Minister has had to be dragged before Labour MPs to account for the decision on the Sheffield BIS office after the shoddy, shocking way in which the announcement was made. There was no consultation or wider strategy; just the permanent secretary turning up on a Thursday morning and a low-key press release on the Government website later that day. So far, we have heard a good deal of rhetoric from Ministers but not a lot of genuine debate.
I hope that today will change things, that the Minister will reflect on this decision, and that we can have a thoughtful conversation, because the workers at risk of being laid off, who I know will be watching closely today, see a plan that, I am sorry to say, seems to be based on assumptions and tired thinking not fit for a Department that is supposed to be preparing us for a century of innovation and change. They see a decision that, as we have heard, is not backed up by a business case that looks at the decision to close the Sheffield BIS office alone and what the office brings. After all, it differs significantly from local offices throughout the country—something Ministers do not seem to have grasped entirely when they signed off the BIS 2020 plan.
As my hon. Friend the Member for Sheffield Central (Paul Blomfield) asked for during the Business, Innovation and Skills Committee hearing, after his request for a comprehensive document was rebuffed, any scrap of paper will do—any shred of evidence or jottings on the back of a fag packet. It is clear that nothing has been forthcoming, because we have received nothing at all. As my hon. Friend asked: how much money will this decision save? It is hard to see it saving a single penny of taxpayers’ money, not least because the lease for the office will still be held by the Department for Education, as my hon. Friend the Member for Rotherham (Sarah Champion) said.
This is a serious problem. If the Government are to demonstrate any genuine commitment at all to the northern powerhouse, they will have to move away from the lazy assumptions that underlie the justifications for keeping policy making in London Departments, move away from the belief that London water-cooler conversations matter because they take place in close proximity to Ministers, and move away from the belief that the intangible benefits far outweigh historic knowledge of an area and a different perspective on investment in a northern hub.
The Government have shown wanton disrespect for the workforce at the Sheffield office, giving flimsy justifications. First, they were told that the decision was based on saving money, which, as we have heard, will be next to impossible. Then, it was about policy. At a later meeting, it was because the phones and computers did not work properly—this at the Department responsible for innovation, in the 21st century.
The decision reveals tired thinking from senior Whitehall officials who, when asked what they wanted the Department to look like in 2020, came back with the same old Whitehall answer: a centralised command and control HQ,
24 Feb 2016 : Column 126WH
based in London, where all employees are within eyesight and earshot and fresh perspective is discouraged. When devolution of power and resources is supposed to top the agenda, the Department cannot seriously take a Kremlinesque approach to policy and decision making.
How can we expect a centralised HQ issuing orders from London to have the same insight and perspective on regional investment as we currently enjoy in Sheffield? That perspective has been built over years of working and living in the community and comes with an historic understanding of what works and why our northern regions are so very different from London. It betrays the Government’s thinking. When push comes to shove, they have instinctively retreated into their comfort zone, insulating themselves in a London bubble. It says a lot about where the northern powerhouse comes on their agenda that they would prefer civil servants to be close to Ministers rather than providing a distinct perspective on investment in Sheffield.
The water-cooler conversations at BIS must be pretty good, because this decision is so at odds with the supposed direction of travel across Government. The estates report mentioned by my hon. Friend the Member for Sheffield Central not only found that the cost of space per individual is in Croydon a tenth of what it is in Whitehall, but that the cost of each individual is about 27% higher in London than in other areas of the country, and that the previous Labour Government saved around £2 billion by moving 20,000 civil servants out of London.
Six years after the Smith report said that ministerial behaviour was crucial in overcoming what it termed the “London magnet” and relocating Whitehall, we now have a BIS Secretary doing the exact opposite. The report, which was published just before Labour left power, had at its heart a direction of travel that would move civil servants out of Whitehall to bring the Government closer to the people and stimulate economic vibrancy.
Senior officials categorically admitted to Sheffield employees that they did not even think about the effect on the local economy when they were making their decision, an oversight that flies in the face of years of Government policy, in which the move to cities and regions outside London was supposed to be a standard-bearer for businesses to follow. If the Minister thinks that the author of that report, Ian Smith, was not talking about types of policy roles such as those in Sheffield when he spoke about “ending the London magnet”, he is wrong. In fact, Mr Smith argued that
“power and career opportunities will only truly move out of London when significant parts of the core policy departments are moved.”
Senior BIS officials must have great hopes for the benefits of these water-cooler conversations if they are to override the clear direction of travel of Government; if they outweigh the huge costs, not only per individual employee but of the loss of historic knowledge and perspective in Sheffield; and if they outweigh the terrible message that this sends about concentrating power in London to businesses hoping to locate to a region that BIS is supposed to be helping to grow.
I imagine that even the Minister agrees that the business justification for the Sheffield closure is flimsy, so I want now to turn to why it is so important that we do not lose these jobs in Sheffield. In the near six weeks
24 Feb 2016 : Column 127WH
since the decision was announced there has been no acceptance of the unique position of this northern policy centre. The Sheffield BIS office is unique. It is part of the headquarters—the only office outside London carrying out the high-level policy functions that civil servants in Whitehall also carry-out, such as analysis of evidence, project management and stakeholder engagement.
In trying to justify the decision, the BIS Secretary was adamant that his plan will continue the existing arrangement where more of his civil servants will be outside of London than inside. I am sorry to say that he either does not get it or is being disingenuous. The description of his Department in an internal advert tells the truth. It says:
“the vast majority of the 2,300 directly employed staff at the Department of Business, Innovation and Skills are based in London”.
That was written before the Sheffield closure was announced. The vast majority—96.7%, as I discovered in a recent parliamentary question—of the Department’s senior civil servants are based in London, as are almost all of the core BIS office staff. If you think I am leaping to—
Mr George Howarth (in the Chair): Order. I call Deirdre Brock.