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China Clay Industry

Volume 448: debated on Tuesday 11 July 2006

I welcome the opportunity to have this urgent debate on the devastating news that has hit mid-Cornwall, and particularly the china clay community, not just about some 800 direct job losses in Imerys, but about the loss of as many knock-on jobs and, significantly, the fact that china clay will no longer compete in a major sector of the market against overseas competition. This is not outsourcing, which has been behind many job losses in the past, but a real loss at the centre of one of Britain’s most impoverished communities.

My hon. Friend is right. Some commentators believe that this problem is identified directly with the clay industry in a relatively small geographical area. In fact, it will have huge repercussions throughout my constituency, which is adjacent to my hon. Friend’s, and will go wider into other sectors of the Cornish economy, much of which is fragile and at a critical point.

I agree. It is worth noting that this announcement has also led to the lowest morale that I can remember, not just in the clay industry, but in St. Austell and the wider community, including Fowey, Par docks and the other affected areas in my hon. Friend’s constituency. I hope that the Minister will be able to bring a glimmer of hope to that devastated community.

I do not intend to make any political complaint. It has been obvious for some years that there is a threat to the Cornish industry. Cheaply accessible reserves of clay are opening up in Brazil. Those are cheap not because of low labour rates, but because the clay deposits have already been washed out of the hard rock. I visited Brazil and saw that a digger and a lorry is all that is needed to produce clay there. Cornwall has been relatively protected because it is near the main paper markets and Brazil is a long way away. I shall return to that issue.

I thank the Minister’s colleagues at the Treasury, with whom I worked for some years to find a solution to the climate change levy, which has impacted on the clay industry. When I first raised that matter with Ministers in 2003, the levy had already taken £4 million out of the industry and raised energy costs alongside others that were already rising. The climate change levy was a clear threat to an industry in which 20 per cent. of costs are energy related and 80 to 90 per cent. of production is exported. I was pleased that Ministers acknowledged that the industry was potentially in the category that should have help with the climate change levy. There was a rather tortuous route to get help, but help has been put in place and, as a result, climate change levy costs for the industry have potentially been reduced by £1 million or so a year. The industry has also done a lot of work for itself, for example, by introducing combined heat and power plant before any grants from Government to do so and being innovative in reducing energy costs.

This is not a complaint about Government in any sense; it is a plea for help, particularly for Ministers to understand the scale of the impact in a tightly defined community. Sadly, the work done with Treasury Ministers and others to get the reduction in costs has not been enough, given the pressures on the industry from energy costs that have risen through the roof.

Figures given to me by Imerys during a meeting on Thursday, when I also met trade unions and local councils, show that over a three-year period its energy costs have risen from £15 million to £40 million per annum. That is a huge hit by any standard and is compounded by the dollar exchange rate. The low value of the dollar has increased the competitiveness of clay from Brazil, where both production and sales are in dollars, meaning that it is cheap relative to Cornish-produced clay. All those factors have hit the industry hard and the only protection for Cornwall has been the cost of bringing clay from Brazil, which is around £35 a tonne.

It is a significant, although not huge, factor that paper-coating clays sell for $120 to $140 a tonne. Imerys is now pulling out of that market, because that product is highly energy intensive to produce and not so protected from shipping costs, because of its high value. Imerys is saying that it will concentrate on filler clays, which are low value—the opposite of what is happening generally in manufacturing and other goods markets in the UK—and by selling at roughly £70 a tonne, the £35 a tonne shipping costs and low energy costs significantly protect Cornwall’s clays relative to Brazil. However, the company is still on edge. Later on, I shall mention help that the Minister might be able to offer.

It is interesting to hear the trade unions, which I met privately, and workers in the company say that there is low morale and great unhappiness with this decision by a French-based company. Nevertheless, there is a degree of understanding of the pressures faced by the industry and the strategy that it is pursuing. I thought that my meeting with the company on Thursday was likely to be preparatory to a pull-out from Cornwall on a fairly short-term scale. Imerys is making some major investment to try to ensure that the filler clays will continue, which makes sense strategically, but we need to be aware that this industry will not be in Cornwall in the lifetimes of those alive and working in the industry now. There is a limit to how far the clay can be worked economically. Only three years ago, the company’s statements were talking about a 40-year life; it is now talking about 20 years-worth of reserves, even if things go well. They may last longer than that—there are potential new reserves to work—but the future for the industry is rapidly contracting in an area where there is little other employment. That situation should be viewed in the context of measures that the company says will cut its operating costs by nearly a third. These are drastic reductions.

The clay company has said that there are 1,850 directly employed jobs left. Some reduction is already going on from a previous round of cuts, but another 800 jobs are to go. The company also confirms, as does the council, that because it will no longer be operating in this sector, the present reductions are not like previous ones, when much work was being outsourced. In this case, the outsource suppliers will be losing jobs on a large scale as well. A minimum of 800 job losses are expected on top of the ones already announced, so we are probably talking about a minimum of 1,600 jobs being directly affected by this decision.

I congratulate my hon. Friend on securing this debate and thank him for giving way. He mentioned the impact on the wider economy of mid-Cornwall and potentially the whole county. Does he agree that that will make it harder for the convergence funding that is coming to Cornwall to have an effect, given that the playing field has been lowered even further for people in mid-Cornwall, who will now have to work particularly hard to achieve any level of regeneration?

Convergence funding is important. We in Cornwall are fortunate to have objective 1 funding, which is the highest level of European support. That has been matched by the Government. We are the only place in the UK poor enough to get convergence funding, but there is a still a question about the match funding. It is difficult for the Government to put that in place quickly, but we urgently require some reassurance on that convergence funding matching from Government, which is important and even more difficult to find, especially when yet another private sector employer—the biggest one in Cornwall—is contracting.

The net effect of the china clay job losses impacts on nearly 7 per cent. of jobs in the travel-to-work area. The concentration in the clay villages is massive. Taking into account the direct and indirect effect of the job cuts, more than one in three of the 3,700 working households in the clay villages can expect one of their members to lose full-time employment. One in five clay village household jobs will go directly with the Imerys job losses. Within the clay communities, the impact is absolutely enormous. We are talking about between 20 per cent. and one third of all the employment in villages that are among the most deprived communities anywhere in the country and where employment opportunities are extremely scarce and, indeed, employment land has been extremely scarce up to now because of the clay workings themselves.

To put this in context, the Imerys jobs are relatively well paid. The incomes average £23,000 a year in a borough where local incomes average only £18,500 a year, so they are some of the high-grade jobs. Despite the fact that they are sometimes relatively low skilled and they are certainly very specifically skilled, they are full-time, mainly male jobs in an area that has very little else and where other jobs in the community are worse paid.

A study conducted a few years ago—so the figures are a little out of date—in St. Dennis, which happens to be the village I live in, showed that the average household income there was only £6,000 a year. That is one of the larger clay villages, so these are very poor communities indeed. Thirty-two per cent. of people in Restormel borough as a whole—the communities that we are talking about are the poorest communities, so the figure for them is likely to be even higher—have no skills, compared with an average in the south-west of 26 per cent., so there is a major issue about skills as well. The skills that people do have are mostly specifically orientated on clay communities.

The deprivation in these communities is among the greatest in the United Kingdom. We are talking about a community that is regarded as one of the poorest communities in Cornwall, which is poorer than anywhere else in England. We need to bear it in mind that the only really equivalent community is that in the Camborne-Redruth area, which lost its heavy engineering and is now the target of very high levels of Government support. If I can get one message across to the Minister, it will be that the fear in St. Austell and the clay villages is that we will end up in the same circumstances. Those of us from Cornwall remember the way in which the shops went from Camborne and the shops closed in Redruth—everything went. Only now, after huge investment, is the area showing signs of picking up.

In this case, we know that the clay industry will go over the next 10 or 20 years—whatever it will be—at best. We know that there are huge-scale job impacts now in villages that are best thought of as coal-mining villages—if the Minister is not familiar with clay villages, she should think of coal villages. We need the kind of support that coal villages received and we hope to receive it before the full impact is felt. The Minister may well say that at least this is not a closure; it is only a cutback. However, we know that closure will come in time, and right now the cutback is huge for what are very small communities.

The Minister may be aware of the closure at St. Mawgan on almost exactly the same time scale. RAF St. Mawgan is shutting. There, we are losing 920 military jobs and some 200 civilian jobs. It is the other half of the borough, but I know that many of those people are located in the clay villages, because it is that kind of employment. I meet all the time military staff working at RAF St. Mawgan and civilian staff. It is a relatively affordable area, a relatively low-cost area, so there will be an impact there, too. Some 670 indirect jobs associated with RAF St. Mawgan are also expected to go as part of the works happening.

We know that the Minister and other Departments will offer a package relating to training, skills and job seeking. That is one of the things that will come through the action force that will be set up. A taskforce involving the South West of England regional development agency, the Government office for the south-west, the county, the borough, the jobcentre and others is meeting now in St. Austell to consider the issue. I know that a lot of work will be going on, but if there are no jobs, there is a limit to what can be done. People cannot be retrained for jobs that do not exist.

In those terms, I also want to highlight the fact that Imerys is not the only clay company. In particular, Goonvean wrote to me only last year, expressing its concern about the impact of rising energy costs. I hope that we will not see the same effects on that company. It is a specialist company,—a niche supplier,—so it is a little more protected than Imerys. Nevertheless, there is an almost palpable concern that this issue runs right across the china clay industry at the moment.

What do we want? First, I am not optimistic that we can save any of these jobs. There is a clear reason for the changes, and the company is presenting a strategy to meet that challenge. Nevertheless, there is an ongoing threat to the remaining operations. I hope that it will be possible to look again at the energy costs facing the company. The company will be doing that. It is taking out the thermal driers, which is the most expensive end, but if the Government could do anything to help the company to work through the energy cost issue, that would be helpful. I know that there is a limit. Nevertheless, work with the company would be welcome.

Secondly and fundamentally, I have talked in the past about the support given to MG Rover when it shut during the general election. However, the impact of MG Rover closing, in a much, much larger community, was not, frankly, as big as the impact will be in clay communities. As I said, the best way to think of them is as coalfield communities. I hope that I can persuade the Minister to examine whether some of the support packages given to the coalfield communities can be offered to clay communities. That includes all the waste restoration issues. The company will have an obligation to restore some of the areas, but there are no obligations on the company to restore some of the older worked areas that are no longer being worked. It now looks extremely unlikely that those areas will be worked again.

We need the Government agencies—the Government office for the south-west, the regional development agency, the county council and Restormel borough council—to work together through a 20-year strategy. Some of that work will already have been initiated. Clearly, it must be brought forward now, and the 20-year strategy has to include the process of working out what the future is for employment in the area, what the Government can do to help that, and what can be done to bring it forward. Clearly, waiting is no longer an option.

I hope that the Minister will look again at the A30-St. Austell link road: the A391. That has just been deprioritised by regional government’s recommendations to the Department for Transport. It said that it is not a regional priority, so it is unlikely to happen in 10 or 20 years. That link road is proposed specifically to help to facilitate economic regeneration in St. Austell. I know that it is not directly the Minister’s responsibility, but I hope that she can say today that she will talk to her colleagues at the Department for Transport about it. Clearly, the decisions taken at regional level by the regional assembly on the issue do not really apply in the current circumstances. I hope that Ministers will consider the proposal in terms of the specific needs of the community.

I hope that we can also have an assurance that in terms of Government funding—I talked about match funding for objective 1—there is potential for investment in a range of ways in the community. I am thinking particularly of the closures at Par docks. The complete cessation of use of those facilities by the clay company opens up a big opportunity for marine-related industries or other kinds of development. It is important that the Government work through that with the local councils to ensure that it is based on employment opportunities, not simply a quick profit for developers. I hope that the Minister will ask officials to work with the company and the local councils to ensure that any land disposals and asset disposals take place in the context of job regeneration, rather than a quick payback to the company. The company has given some reassurance on that, but it is easy to say it; it is often harder to do it in practice. We need employment opportunities to come out of these events. I hope that the Minister will work with colleagues to seek to ensure that we can have some reassurance about the match funding needed for the next round of European funding.

There is no underestimating the impact of these events in the communities affected. We really ask just two things of the Minister, and these are the biggest points of all. First, we must not wait for absolute catastrophe in order to start prioritising the St. Austell and clay village area in the same way as the Camborne, Redruth and Poole area is the subject of some prioritisation at the moment. That will require a change in policy to be made by the regional development agency and by Government, but it is important that we do that now, rather than waiting for catastrophe to strike.

Secondly, we ask that the Minister give some reassurance to the community that she is aware that the impact of what is happening is far bigger than it may seem on paper to a Government who are used to dealing with thousands of jobs. In the community in question, one in five households is set to suffer a direct loss of full-time employment, and the number is probably one in three when the knock-on effects are taken into consideration, even without RAF St. Mawgan. That is a very big impact.

I congratulate the hon. Member for Truro and St. Austell (Matthew Taylor) on securing the debate so quickly after the news that we received towards the end of last week. I am very conscious of the importance of the china clay industry to Cornwall, and to his constituency in particular. I understand entirely the disproportionate impact that such events can have, especially in a rural constituency. I know the area quite well and have been there a number of times, with various ministerial hats on, to try to tackle some of the problems with employment opportunities—particularly, in the first instance, when the tin mines were closed. I know that such closures create devastation for individuals, families and communities, and we all need to work together to ensure that we build a sustainable future by way of jobs for people who live there.

My analysis of the future of the china clay industry is the same as the hon. Gentleman’s, but I am not as pessimistic as he is. We should grasp the opportunity of the £25 million that Imerys is putting in to maintain a presence in the area, and work with the company. We shall do that—probably through the regional development agency, which is our vehicle for ensuring delivery of many of our tools of support to companies. However, we will work hard to ensure that we do the most that we can.

It is an important point; I do not want to give the impression that I think the company is about to pull out overnight. I think that it has a strategy in place, and I hope that that will retain jobs, but there is a limited resource. The company is under continued pressure. However, I agree that it is important, for the sake of morale, for the community to understand that there is work, and to try to preserve the 1,200 jobs that remain.

As the hon. Gentleman knows, we have established the taskforce, and I and other Ministers will be examining its work. That provides immediate support to the individuals affected and their families, and provides retraining. I hope that it will be able to organise some job fairs and similar events, such as we have used elsewhere in comparable circumstances, to try to link individuals who have just lost their jobs with employers in the region who have vacancies to fill.

I am conscious that I have little time to answer the hon. Gentleman’s questions. The Cornwall economy is one of the poorest; for that reason it always gets access to many of the European funding mechanisms that are available, in recognition of the challenges that it faces in sustaining jobs and developing enterprise and growth. However, figures are much better than they used to be. The growth rate for 2002-03, with respect to total gross added value, shows that Cornwall added 6.8 per cent., outperforming the rest of the UK by 5.5 per cent. and outperforming all other objective 1 areas, where the average was 5.9 per cent.

Employment has grown in Cornwall since 1999, although, interestingly enough, it is a depopulating area, and many of the traditional jobs have gone. Clearly, new industries are settling there. Other key initiatives are important. One of those is the combined universities in Cornwall, which I was involved in helping to establish when I had responsibility for higher education. The hon. Gentleman spoke about new marine-related industries, for example. If the right relationship can be established, involving the university and its research capacity, and if ideas arising from that knowledge and research development can be translated into practical enterprise opportunities in the locality, that will be the best way to ensure sustainable long-term job opportunities in the area. I always saw that combined university development as central to the attempt to regenerate.

We all take great joy in visiting such places as the Eden project or Tate St. Ives. The Eden project now employs up to 600 staff during its busy period. I hope that the hon. Gentleman accepts that that is a positive development in the area. We reckon that it brings about £100 million of local economic benefit. I understand that there is also a major redevelopment project in St. Austell.

Yesterday I announced the new map for assisted area status. Cornwall has full status and will also benefit from full convergence funding. I hear what the hon. Gentleman said about match funding; it is down to the local players—the regional development agency and the local authorities, including the county council—to look for that match funding, but they, and the RDA in particular, have the necessary resources and I hope that those concerned will benefit from them. If the hon. Gentleman has a problem, he should come back to me about it. Substantial resources are thus available in the area in question, and assisted area status, for example, could be of help to the company if it has a sustainable project. Perhaps the company should work with the RDA to see whether, on matters such as energy costs, a proper case could be put, through assisted area status, for state aid to support its continuing endeavour in the area.

Many of the issues that the hon. Gentleman has raised are now dealt with locally. We have decentralised, and his party should be in favour of that. I was surprised—it was news to me—that the A391 had been deprioritised locally. I had seen it as a quite important way to open up those very poor communities to job opportunities. It is a decision that has been taken regionally, however, and I am in some difficulty. I do not mind talking to my colleagues in other Departments, but if it has become a lower regional priority, that is difficult for us at the centre to override.

It is a matter in which the region advises, but Ministers dispose, so the Minister’s colleagues at the Department for Transport take the decision. Also, the issue has arisen in the consultation exercise at regional level. I hope that the Minister will raise it. We shall have a much better idea by the time Parliament returns in the autumn, and perhaps the Minister will be willing then, if we feel the need, to meet local representatives if issues need to be dealt with.

I am certainly happy to meet representatives, and I undertake to do so. I also undertake to write to my colleagues in the Department for Transport, if that decision was taken before the Imerys redundancies. I completely understand, also, the impact of the supply chain in relation to jobs. However, land and asset disposal are really matters for the locality, through the RDA and the relevant local authorities. It is not a matter for Government, and I urge the hon. Gentleman to work closely with those bodies, as I am sure he already does.

The hon. Gentleman asked me to show an understanding of how devastating the impact of the closure is locally. I understand totally, and tried to express it last week in the responses that I gave to the situation. Our job, in working with the hon. Gentleman and all the relevant agencies locally and nationally, must be to give the area a future, and to close the gap in prosperity and job opportunities that still exists across England. It is our intention and policy aim to tackle that gap.

Question put and agreed to.

Adjourned accordingly at one minute to Two o’clock.