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Industrial Action (Grangemouth)

Volume 474: debated on Thursday 24 April 2008

The Secretary of State for Business, Enterprise and Regulatory Reform
(Mr. John Hutton)

With permission, Mr. Speaker, I should like to make a statement on the implications of the industrial action at the Grangemouth refinery, which, I regret to report, is scheduled to begin on Sunday and last for 48 hours. Throughout the past few days we have kept in close contact with Scottish Ministers, both parties to the dispute and the industry as a whole. I am particularly grateful to ACAS for its efforts to resolve matters between the parties.

Our first priority now is to ensure the maintenance of sufficient fuel supplies during the period of industrial action. Over the past few days, significant additional supplies of imported fuel have been made available in Scotland. I have been advised by the industry that there is sufficient fuel to resupply forecourts and other users ahead of the planned industrial action. The industry has also advised us that, at present, fuel stocks at Grangemouth, together with planned imports of finished product through Grangemouth to replace lost production, should be sufficient to maintain supplies through the period of industrial action and the consequent restarting of the plant.

We are already working under our established memorandum of understanding with industry to develop a jointly managed approach that allows fuel suppliers to work together to maximise available fuel. We also have available, if necessary, the national emergency plan for fuel, which can be used to ensure that fuel is available for priority groups such as the emergency services. Our best assessment is that there is at present no need for the Government to take action under their emergency powers. We are working closely with the Scottish Executive and the regional forums in Scotland to prepare for further action, should that become necessary. We will not hesitate to use the emergency powers if that becomes necessary.

The oil companies have reported significant increases in fuel uptake this week in response to concerns about shortages of fuel. Although this response is perfectly understandable, I want to emphasise that industry has made it clear that there is sufficient fuel available via imports and that any localised shortages will be resupplied quickly.

It is also essential to prevent the industrial action at Grangemouth from disrupting the flow of North sea oil and gas associated with the Forties pipeline system and the Kinneil processing plant at Grangemouth. There can be no justification whatever for any action that adversely affects production of oil and gas from the North sea. Continuing production depends on power, steam and cooling water being delivered by or through the Grangemouth site. Discussions are continuing this morning on ensuring the continuance of these vital utilities, and of course it is essential that they be maintained.

Finally, there is a need to protect critical equipment to allow a rapid return to normal operation following the period of industrial action. That will require the provision of safety cover for the INEOS refinery and petrochemical plants. It will also require maintaining the steam supply throughout the plant to ensure the integrity of steam lines, pipes and production units.

The dispute is one for INEOS and Unite to resolve as a matter of urgency. The Government’s view is that they both have a responsibility to minimise the impacts of their dispute on the public and the wider economy. I urge both sides to get back to the negotiating table as quickly as possible to resolve the dispute without any further harm being done to the public and the economy. We will continue to monitor the situation, working closely with the Scottish Executive, emergency services, local authorities and other key agencies.

My hon. Friend the Member for Rutland and Melton (Alan Duncan) apologises to the House for his inability to be here for the statement.

I thank the Secretary of State for advance sight of the statement on a matter which is of particular concern to people in Scotland. May I begin by agreeing with him that the parties should get back round the negotiating table as a matter of urgency? I would ask both sides to lift their horizons beyond their own immediate interests, and to show a maturity and responsibility which reflects the serious consequences that this dispute could have for the public and the economy.

I am pleased to learn that there has been close working with the Scottish Government, and I would grateful if the Secretary of State provided a little more detail on that. I do not know whether he has seen any of the headline-grabbing pronouncements from Scotland’s First Minister in the past few days, but it would seem that, for once, even his mythical powers have been unable to resolve this situation.

I welcome the proportioned tones of the Secretary of State’s words, as he will be aware that there has been much speculation about the impact that this shutdown could have on individuals, services and the economy. Does he agree that we need to maintain a sense of proportion in relation to these events and to ensure that all analysis is objective? That will be the only way to deliver reassurance to the public that there is no need for the panic buying of petrol or the stockpiling of supplies.

Will the Secretary of State join me in endorsing the view of the AA that if people act sensibly then there will be no shortages? Where fuel is being provided by contingency measures, will he confirm that it will be equitably distributed throughout Scotland and not just to major centres of population? Can he also confirm that, as this situation does not represent a more general shortage, he would not expect there to be any impact on petrol prices at the garage forecourt anywhere in the United Kingdom? Will he monitor what happens to petrol prices to make sure that no one tries to take advantage of the situation and to push their prices up unfairly?

The Secretary of State will be aware that the industry believes that a two-day strike is damaging but containable, but there is profound concern about the implications of a longer dispute, which would undoubtedly increase the risk of serious shortages. How is he monitoring that situation? At what point, for example, would he expect Cobra to meet to establish what further action might be needed? In the meantime, can he give the House more details of how his Department is working with the industry to secure fuel from other sources to make up for the shortfall while Grangemouth is out of action? To what extent does he understand that fuel has been stockpiled to minimise the effect of the strike on the public?

The Secretary of State will also be fully aware that huge costs are associated with ships that are waiting to load up with oil but cannot do so because of the industrial action. What is his understanding of the legal implications of this, and who will be liable for the extra costs incurred?

Finally, what is his understanding of the impact that the strike will have on plans to invest in the future of Grangemouth? What impact does he think a strike will have on INEOS’s ability to fund the £750 million investment programme necessary to modernise the plant? In that respect, does he agree that a strike will put jobs at risk and damage the interests of those working at Grangemouth and of a vital British industry?

I am grateful to the hon. Gentleman for the manner of his response and for his comments. I agree that there is no need for panic buying in Scotland or anywhere else, and I hope that hon. Members from all corners of the House will reflect that message in their comments today. I can assure him that the objective of our discussions with the industry in Scotland is to maintain fuel supplies for all consumers in Scotland, wherever they are. That is important not just in the central belt, but in rural areas and the highlands as well. It is also important for industrial consumers, including the airlines operating in Scotland, which need jet fuel and kerosene. There is absolutely no justification for profiteering, given the adequacy of the levels of supply in Scotland, and I condemn absolutely anyone who seeks to take unfair and inappropriate advantage of the current situation. We are looking carefully at that matter.

The hon. Gentleman has asked me a number of questions about what would happen if the dispute were to escalate. I am sure that he will understand that I do not want to speculate about hypotheticals today, but I can assure him and every Member of the House that it is the UK Government’s absolute and firm responsibility to ensure that there is continuity of supply, that the emergency services are protected first and foremost, and that we do everything in our power, if there were to be such an event, to minimise the wider impact on the community in Scotland and elsewhere in the United Kingdom.

It is rarely the case that industrial action advances a cause with the wider public, and I do not believe, in these circumstances, that it is fair or reasonable to expect the wider community in Scotland to be disadvantaged in any way by this dispute between INEOS and the Unite union. It is incumbent on all the parties to the dispute to find a way of getting back to the table as quickly as possible and to resolve the dispute, so that the Scottish public and Scottish industry can get on with their future.

I thank the Secretary of State for coming to the House to make this statement. I know that my hon. Friend the Member for Orkney and Shetland (Mr. Carmichael) has been trying to table an urgent question on this matter for some time, as it particularly affects people in Scotland.

I want to echo the Secretary of State’s observation that it is essential that INEOS and Unite get back round the negotiating table as soon as possible. I welcome his assurance that adequacy of fuel supply is assured for Scotland, particularly in rural areas. It simply cannot be the case that a piece of brinkmanship and a petty dispute about pensions should hold the economy of Scotland to ransom. Does he recognise, however, that his statement follows a week of panic buying? Many Scottish colleagues are already reporting localised—albeit, as he says, short-term—shortages of fuel. Does he think that an earlier, public intervention by the Government could have prevented that? Having said that, I welcome his statement today. It was extremely helpful.

The Secretary of State also mentioned profiteering, a matter that a number of Scottish colleagues have raised. He might be aware that there is a system in Western Australia called FuelWatch, which publishes tomorrow’s fuel prices today. Does he think that such a public display of information could be helpful in the UK in counteracting that unacceptable practice? He said that contingency plans were in place in case of need. Will he tell the House how close he believes this two-week stoppage could bring Scottish oil supplies to that point of need? I appreciate his point about not wishing to discuss the details regarding Cobra, but he will also be aware that the public find it reassuring to understand the extent to which the Government have planned for that need.

Finally, how confident is the Secretary of State that what he calls “well-functioning markets” are likely to deliver the investment in UK refinery capacity and function that the Wood Mackenzie report says we need? As the Conservative spokesperson has already mentioned, INEOS’s own briefing states that its investment programme is contingent on a resolution of this dispute in its favour. Does the Secretary of State believe that that demonstrates the vulnerability of the UK’s security of supply to unforeseen events?

I shall deal with some of the points that the hon. Lady has raised. We made our position clear on Tuesday in relation to this dispute and to the need for people to buy fuel normally during the run-up to any potential industrial action at Grangemouth. We felt that it was perfectly reasonable not to make a statement to the House of Commons at that time, given that discussions were continuing between ACAS, INEOS and the trade unions, and that there was a prospect that the dispute would be called off. Now that the dispute is clearly scheduled to take place, I believe that this is the right time for the Government to make a statement.

Let me correct one thing that the hon. Lady said. It is not a two-week stoppage; it is a two-day stoppage—[Interruption.] I am not trying to trip her up; she does not need to worry about trying to come back in. Because it is a two-day stoppage, and because of the action that the industry took in the run-up to the dispute, and the action that can be taken during the dispute, we are confident—and the industry has reassured us—that there is adequacy of supply in Scotland. That is why we are not activating any of the emergency powers. There is no need to do so, given the adequacy of the levels of fuel supply.

The hon. Lady has rightly asked about the planning that goes into all eventualities. It is comprehensive and extensive, and I would be happy to extend an invitation to her and to the hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) to have a briefing with my officials, to reassure them about the level of planning and the adequacy of those arrangements.

May I first, through you, Mr. Deputy Speaker, reprimand the hon. Member for Brent, East (Sarah Teather) for referring to this as a “petty” dispute over pensions? It is all very well for us sitting here with our final salary pensions—much higher than anyone’s in the industry—to call this a petty dispute when people’s standards of living are being attacked.

Is the Secretary of State aware that the breakdown of talks yesterday took place because although the trade union was willing to talk about the safety and integrity of the plant so that it could be started up very quickly, all the company seemed to be doing was talking through fancy public relations companies and bringing in very expensive barristers to threaten the trade union with action in the courts? In fact, the company did not try to negotiate at all. Oddly enough, it said that it wanted to return to the position of three months ago, yet this dispute, as we know, started eight months ago when the company brought new workers on site with different terms and conditions of employment from those already there—with no final salary pension scheme and contributions taken out of their salary, which was not the deal when BP sold the plant to INEOS.

May I suggest that the solution is to put it to Mr. Jim Ratcliffe, the owner of INEOS, that if the company is willing to return to the position of eight months ago, when everyone coming on to the site had the same terms and conditions of employment—a final salary pension that is non-contributory, as it was under BP—the negotiations could be resumed with good will? Mr. Ratcliffe was willing to come and see me when he was lobbying to buy BP, and I am willing to meet him privately at any time to talk about how to solve the problem.

I do not dispute for a second the importance of pension rights for the work force at Grangemouth, but my responsibility in all these matters is not to get drawn into taking sides in the dispute. There is a dispute between the parties and I have already said that I very much hope for a sensible settlement so that business can get back to normal at Grangemouth, which I strongly believe is also the desire of the trade unions there, as they will be the most immediate group to lose out. My responsibility to the House and the people of Scotland is very clear: it is to maintain essential fuel supplies, ensure that the economy of Scotland does not suffer as a result of the industrial action, and make sure that there is no ripple effect out into the North sea in respect of production from the Forties pipeline system.

My hon. Friend was right to refer to agreements that have already been secured in respect of safety at Grangemouth and to the ongoing provision of essential utilities on the site. I commend the unions for their willingness to ensure that there is no damage to the basic infrastructure at Grangemouth, but it is absolutely essential—it is impossible to exaggerate the importance of this—that there is also an agreement to ensure the safety and security of the Forties pipeline itself. It simply cannot be in anyone’s interest for any fundamental damage to be done to the long-term value of the infrastructure that links Grangemouth to the North sea. If that were to happen, it would be a tremendous own goal, which would serve no one’s interests.

I also welcome the Secretary of State’s statement and very much hope that he is right in his assessment of the situation. May I press him on the question of co-operation and communication with the Scottish Executive? Will he give an assurance that some thinking is being done about how priority can be given to the maintenance of supplies to vital public services—fire, police and ambulance services, but also ferry and air services that provide lifeline routes to communities that are heavily reliant on them—should that become necessary at some future date?

I am grateful to the hon. Gentleman for giving me the opportunity to give that assurance; it was remiss of me not to have dealt with the matter in my response to the hon. Member for Dumfriesshire, Clydesdale and Tweeddale. We have had discussions with the Scottish Executive; I spoke to the First Minister on Monday and again this morning, and my hon. Friend the Minister for Energy has had discussions with the Scottish Finance Minister as well. We will keep in close communication with the Scottish Executive; it is important that we do so.

On the question of the emergency services, my point is that there are adequate fuel supplies in Scotland, so we do not need to activate the national emergency plan, which rests fundamentally on the assumption that there is no adequate supply, thus highlighting the need to prioritise supply to the emergency services. Should the situation in Scotland change, we will not hesitate, as I have already made clear today, to use the powers that we have to prioritise the supply of essential fuel to vital emergency services. I also want to make it clear to the hon. Member for Orkney and Shetland (Mr. Carmichael) and other hon. Members who represent the remoter constituencies in Scotland that Caledonian-MacBrayne has clarified that no services will be interrupted and that we are sure that airline operators have sufficient jet fuel to maintain a regular service.

I fully support the Secretary of State’s comment about the need for a speedy negotiated settlement so that industrial action is averted. Does he agree, however, that this is yet another example of new workers being brought in to undercut the wages and conditions of the existing work force, and that we need to look at the employment law regime to ensure that we provide protections and do not have two-tier work forces in the private sector? Does he agree that we also need to look into the pensions issue, and that pensions should be treated as deferred pay and a pensions regime should exist so that people have security in their retirement? Clearly, the reduction of pensions entitlements is a major cause of concern for the work force at this time.

I agree with my hon. Friend about the importance of pensions to working people. Of course we recognise that, and we have a clear framework of law in the UK in respect of the protection and security of accrued rights in final salary schemes such as the one at Grangemouth—and they cannot be interfered with. There is also a clear statutory procedure if any changes are proposed to future rights under those pension schemes. I believe that our employment law framework is robust and appropriate and that it guarantees essential rights to workers while also allowing companies to manage change when they need to do that. Rather than get embroiled in a blow-by-blow account of what has happened or a post-mortem, I would rather focus on the importance of ensuring and maintaining fuel supplies in Scotland—they are secure and they can be maintained—and on bringing this industrial action, which will ultimately benefit no one and may hurt a lot of people, to an end as soon as possible.

Does the Secretary of State agree that the seriousness of the situation is underlined by the fact that if the walk-out goes ahead on Sunday, it will be the first of its type in any UK oil refinery for no less than 73 years? Indeed, the chief executive of INEOS, Tom Crotty, has described how the strike will

“cause chaos and disruption for the people of Scotland”—

irrespective of the best efforts of Governments either here or in Holyrood.

We have heard reports over the last few days of people queuing at petrol stations and forecourts in Inverness. Maintaining fuel supplies to the highlands does not mean maintaining them only in the populous centres such as Inverness, Dingwall and Fort William, but in Wester Ross, Skye and Lochalsh and the small isle areas, which are very much at the end of the line physically and require reassurance. Will the Government take up the suggestion of my colleague at Holyrood, Nicol Stephen, that in view of the anecdotal reports we have heard of prices being jacked up despite the reassurance and the fact that there are no immediate shortages, the Competition Commission may in due course wish to look at the activities of the oil companies over this period?

Let me deal with the last of the right hon. Gentleman’s points first. It is the role of the UK competition authorities to keep a close eye on the way in which markets operate. If there is any evidence of anti-competitive behaviour, we would expect the Office of Fair Trading and the Competition Commission to get stuck into it. We must not allow consumers to be ripped off in those circumstances.

As to the right hon. Gentleman’s main point, I agree about the importance of preserving fuel supplies across Scotland and to all parts of Scotland. That is absolutely what the industry, the Scottish Executive and ourselves are working to ensure. I take issue with the comments about causing chaos and confusion. There is no reason for chaos and there is absolutely no reason for confusion. The unions gave important undertakings yesterday and today about preserving the continuity of utilities operations on the Grangemouth site. Yes, we are in unchartered waters; this has not happened before. The complex technology at Grangemouth requires constant maintenance and utility provision, but I think that it is agreed that it is in no one’s interest to damage the essential infrastructure there. I certainly hope that common sense prevails in that regard.

I welcome my right hon. Friend’s statement and I endorse the view that the matter needs to be resolved as quickly as possible and that it can be resolved only by negotiation. I am concerned about how the threat to the processes and the plant is being discussed in the debate. My experience and involvement in industrial disputes, including in the oil and gas industry, suggests that the unions go out of their way to ensure that the integrity of health and safety services, as well as the production equipment, is upheld. Nobody has an interest in destroying the future of the place where they work. Everyone is well aware that when they return to work they must have a proper working relationship.

I am worried by what my right hon. Friend has said about the threat to the North sea oil and gas industry. I hope that the issue is not being raised by management without proper discussion with the unions to ensure that both sides are satisfied that the integrity of the system is being preserved by agreement.

My hon. Friend is right. As I have tried to make clear, it is in no one’s interest for any fundamental damage to be caused to the vital infrastructure at Grangemouth. However, there is real concern about the provision of utilities, particularly on the BP Kinneil site at Grangemouth. That is essential if production from the Forties pipeline is not to be disrupted. I do not think we are exaggerating the consequences of that. I am hopeful of a good outcome from the continuing discussions on maintaining high steam pressure for Kinneil, which is absolutely essential. As I have said, I am confident that good sense will prevail.

I welcome the statement, and hope that the Secretary of State’s contact with the Scottish Government will continue in the same constructive spirit. Although this is principally a Scottish problem, I understand that Grangemouth supplies parts of the north of England and Northern Ireland as well.

I welcome the Secretary of State’s assurance, which has also been given by the Scottish Government, that there are sufficient supplies. I hope he understands how important it is for politicians of all parties, and also the media, to do nothing that would cause the problems to escalate. It has been reported—and I know from experience in my area and adjoining constituencies—that there has been a run on petrol stations, some of which have run out of fuel, particularly unleaded fuel and diesel. That is causing difficulties in some rural areas.

The Secretary of State mentioned looking into the activities of oil companies. There is evidence, at least anecdotal, that some stations have jacked up their prices considerably during the dispute. While I appreciate that there may be an investigation at a later date, has the Secretary of State any powers to take immediate action if there is any evidence that that is happening?

It would not be appropriate for anyone to grandstand in relation to this dispute, and I hope that that temptation will be resisted. I think we should work together sensibly to try to resolve the problems. Certainly we envisage no difficulty: we have good working relations with the Scottish Executive, which we will preserve. It is in everyone’s best interests to ensure that fuel supply is as close to normal as it can be.

The hon. Gentleman is right to say that there have been some local shortages, but I understand that they were corrected as soon as possible. There could well be more in the next few days—I do not wish to pretend that such difficulties could not arise—but the essential point for his constituents and people throughout Scotland is that supply is sufficient, and there is no reason for people to start buying fuel other than in the normal way. There is enough diesel and petrol for Scotland, and there are enough industrial supplies. That is the most important message.

I share my right hon. Friend’s sentiments, and hope that the company and my colleagues in Unite reach a negotiated settlement quickly. He mentioned profiteering. Two days ago I was contacted by a business man in my constituency who wanted to purchase red diesel. He approached about half a dozen of his usual suppliers, and was told that the price of red diesel had increased by 5p per litre if he bought less than 1,000 litres, and by 10p per litre if he bought more than 1,000 litres. What is taking place is not just profiteering, but sheer naked exploitation on the back of a dispute. I hope that my right hon. Friend will send a clear message to those who are intent on exploiting the situation that that is not acceptable.

I strongly agree, and I have made clear that there is absolutely no excuse or justification for that type of sharp practice. If there is any evidence of collusion between suppliers on prices, it will suggest a potential violation of competition law. There is an appropriate mechanism for investigating and bringing about redress in such circumstances. I invite my hon. Friend to give me the details of his constituent’s experience.

I welcome the Secretary of State’s assurances about supplies, which I hope will be noted. As for what was said by the hon. Member for Dumfries and Galloway (Mr. Brown), is it not up to forecourt owners and managers to act responsibly and inform their customers that they can secure future supplies and manage them sensibly?

I am, however, concerned about the implications of the dispute for the security and continuity of production in the North sea. Many of us have thousands of constituents who work in the North sea, and who must fear that a dispute downstream could threaten their livelihoods and their long-term future in upstream activity. Can the Secretary of State assure us that he will investigate thoroughly the integrity of the system downstream and upstream, to ensure that no dispute of this kind can cause serious long-term damage to production capacity and delivery in the North sea and the future employment of people whose livelihoods depend on it?

Yes, I can give the right hon. Gentleman that assurance. I have spoken to Tony Woodley, the general secretary of Unite. Thousands of Unite members also work in the North sea, and it is in no one’s interests, including theirs, for the dispute to have a ripple effect on production upstream.

As with all events such as this, there are lessons to be learnt. I am sure that once the dispute is brought swiftly to a conclusion, as I hope it will be, we can all reflect on what should be done to ensure better protection of continuity of supply and vital infrastructure should a similar situation arise in future.

May I reinforce the needs of rural communities? I am glad that the Secretary of State is keen to protect the whole of Scotland, not just urban areas. May I also ask him to ensure that there is proper monitoring to prevent price exploitation?

What can be done about the impact on the North sea, short of exhorting people not to do anything that might jeopardise production? Has the Secretary of State any powers to intervene to protect production and vital infrastructure?

I have a number of emergency powers under the Energy Act 1976 and the Civil Contingencies Act 2004. The only questions concern when they can and should be used, and their extent and duration. I assure the hon. Gentleman that the Government are fully equipped with a range of powers to deal with emergencies.