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Grangemouth Refinery

Volume 569: debated on Wednesday 23 October 2013

(Urgent Question): To ask the Secretary of State for Energy and Climate Change if he will make a statement on the Government’s contingency planning in the light of the closure of the Grangemouth refinery.

I thank the right hon. Lady for her question. Let me inform the House of the latest situation in respect of the disruption at the Grangemouth refinery and petrochemicals complex in Scotland.

I recognise the concern of many Members, and, in particular, the active involvement of the hon. Member for Linlithgow and East Falkirk (Michael Connarty). The Government have been in regular contact with both sides throughout the dispute, and we continue to talk to both sides. We are working very closely with the Scottish Government, and I spoke to John Swinney, the Cabinet Secretary for Finance, Employment and Sustainable Growth, again this morning.

This morning INEOS made a statement confirming the decision of its shareholders to place the Grangemouth petrochemicals plant in liquidation, which puts 800 jobs at risk. The Government are saddened by the move, particularly because of the uncertainty that it will bring for the work force and all those who indirectly owe their livelihoods to the Grangemouth plant. The Government do not underestimate the plant’s importance to both the local community and the Scottish economy.

While respecting INEOS’s right to make this decision, it is regrettable that both parties have not managed to negotiate a fair and equitable settlement that delivers a viable business model for the plant. Even at this late stage, the Government urge them to continue dialogue, and we will offer all possible help and support with that. We want the petrochemicals plant to stay open if at all possible but, should redundancies be made, support will be available from Partnership Action for Continuing Employment, which includes the Scottish Government, Skills Development Scotland, Business Gateway and Jobcentre Plus.

INEOS’s statement this morning made it clear that the situation regarding the refinery is different from that of the petrochemicals plant. The owners of the refinery, INEOS and PetroChina, have announced their intention to keep their refinery open and their wish to restart full operations as soon as possible. The Government stand ready to help with discussions between the management and the union to ensure that that can happen, and I am speaking to both parties again today.

Throughout the disruption, fuel supplies continue to be delivered as usual. Moreover, my Department has been working closely with industry and the Scottish Government to put robust contingency plans in place to ensure that supplies of road fuels, aviation fuels and heating oils will continue to be available to Scottish consumers and to fuel the Scottish economy.

The Secretary of State for Scotland and I will be giving a briefing at 4.15 pm today in Dover house for MPs with Scottish constituencies and any other interested hon. and right hon. Members who wish to discuss the situation in more detail after these exchanges.

I appreciate the right hon. Gentleman’s remarks and the support, through Jobcentre Plus or anyone else, for those who have lost their jobs so that we do whatever we can to help the workers and their families at this difficult time.

The closure of the petrochemical plant at Grangemouth means that the 800 people employed there, and more who are employed as subcontractors, will lose their jobs. The INEOS chairman, Jim Ratcliffe, said at the weekend that if the petrochemical plant closed, it was likely that the refinery would go too. John Swinney, the Scottish Finance Minister, claimed yesterday that he was in discussions with potential buyers for Grangemouth. Is the Secretary of State aware of those discussions and what involvement have he or his Ministers had?

The Unite union committed not to strike, with no preconditions, while negotiations over pay and conditions were undertaken. PetroChina, the 50% shareholder in INEOS’s refinery business, made a statement calling for all parties to get back around the table and reach a consensus but today, sadly, rather than coming back to the negotiating table, INEOS has announced that it will close the—profitable—petrochemical plant. Sadly, there were reports on the BBC this morning that management delivered the news with smiles on their faces. Does the Secretary of State agree that INEOS should have got around the table to negotiate, rather than delivering ultimatums?

In its July report “UK oil refining”, the Energy and Climate Change Committee found a mismatch between refinery supply of petroleum and demand, but we are still waiting for the Government to respond. Can the Secretary of State be confident that the Grangemouth refinery will stay open? Will he tell us more about the contingency plans that are in place to secure fuel supplies for Scotland, Northern Ireland and the north of England? Given the current shutdown and uncertainty over the closure of Grangemouth, will he reassure us that he will commit to undertake the review of UK refining capacity that the hon. Member for Wealden (Charles Hendry) promised in June 2012 in response to the closure of the Coryton refinery?

I thank the right hon. Lady for her questions. Her first was about the recent statement by the Finance Secretary in the Scottish Government that they were looking for potential buyers. I have spoken to Mr Swinney about that, and we in the Westminster Government certainly stand ready to assist. It is a devolved responsibility, but my right hon. Friends the Secretary of State for Scotland and the Secretary of State for Business, Innovation and Skills will be making all efforts, through Departments and UK Trade & Investment, to assist should we need a buyer for the petrochemicals plant.

The right hon. Lady asked whether INEOS should have got around the table. Throughout the dispute, I have personally been asking both sides to get around the table. At one stage, INEOS was not prepared to go to ACAS. I personally spoke to INEOS and persuaded it to go to ACAS, which it then did, and I regret that those ACAS talks were not successful at avoiding the situation that we have arrived at today.

The right hon. Lady asked about the contingency plans that we put in place. We have been working for a significant time to ensure that there were contingency plans, should the disruption become any worse. As she knows, the refinery is currently closed down, but fuel is coming through the refinery—refined fuel is being loaded from ships into the plant and then on to racks to go into tankers. That is a part of our contingency plans, but they are much more detailed and granular than that. They go into minute detail about how we would ensure that fuel—heating oil, road fuel and aviation fuel—is supplied throughout Scotland, which is why I can say confidently that the people of Scotland may be reassured that we will keep fuel going through that economy.

Finally, the right hon. Lady asked about the review of refineries, and we expect to have that—probably—by the end of the year. It is very detailed and has been under way for some time. She will understand that there has been a big switch in the way in which motorists use fuel—away from petrol to diesel—but most refineries in the UK produce petrol rather than diesel. We import a huge amount of diesel, and that is one of a number of issues being considered in that review.

I welcome my right hon. Friend’s statement. The dispute has been characterised by intransigence on both sides and it is regrettable that it has resulted in this decision. I support the fact that the Governments who have jurisdiction in Scotland—the Scottish Government and the UK Government—are working together to ensure that we get a solution. What assurances can my right hon. Friend give about any guarantees that we can secure for the future of the Scottish and the UK economies, which are threatened by the present situation, and not least for the future of North sea oil production?

I am grateful to my right hon. Friend for his question. The Scottish Government and the Westminster Government have been working extremely closely and I am grateful for such work. The partnership has been successful and constructive, and we will need to continue to work together in the days and weeks ahead for the people of Scotland—and, indeed, for the people of the UK, because as he suggested, this has UK-wide implications. Beyond that, I remind the House that Her Majesty’s Treasury has been working with INEOS to look at potential infrastructure guarantees, should INEOS make a decision to invest in the petrochemicals plant. My right hon. Friend the Chancellor of the Exchequer has developed innovative infrastructure guarantees and we stand ready to assist with that. I know that the Scottish Government have plans to assist as well.

I thank the Secretary of State for recognising that I have kept the Government and Opposition Front Benchers, and also the Scottish National party, informed of developments. There is common purpose in this.

On 14 October, I sat with Calum MacLean as he told me about the bright future that was available to Grangemouth Petrochemicals—the chemicals side—if it could go across the bridge to a point where it would be breaking even and then making money in large amounts, with ethane coming from America after 2022. It is unfortunate that there seems to have been an ultimatum approach, rather than a negotiation approach. There is still time for all parties—the Opposition, the Government and the Scottish Government—to ask the company to rewind the tape, get back to negotiations and think of the bright future that can be shared with the community after negotiations.

I heard the general secretary of Unite in Scotland saying this morning that the entire survival plan and all the terms and conditions of employment are on the table for negotiation, so there is still time to save the plant, which supplies 30% of the ethylene to the UK down the pipeline. It not just refines 300 barrels of oil a day for Scotland, the north of England and Ireland, but feeds the chemical industry of the whole of the UK.

I once again pay tribute to the hon. Gentleman, who has been representing his constituents with his usual skill. I agree with much of what he says but, as the Government must look at all potential scenarios, we have to look at the potential scenario of liquidation, as announced by INEOS today. We very much regret that, but we have to plan for all potential outcomes. The hon. Gentleman is right that a better outcome would be to get both sides around the table so that we can get agreement on a way forward and secure the investment that we wish to see. We want to see the petrochemicals plant staying open and developing.

The impact of Grangemouth closing is far in excess of the 800 jobs because of the issues regarding ethylene and refining capacity throughout the country. Will the Secretary of State assure us that, in the same way that European countries go to the nth degree to prevent their refineries from closing even though there is overcapacity in Europe, he will do the same in this country?

My hon. Friend is right to say that the ramifications, severe though they are for the 800 people, their families and the communities in which they live, go wider than that, which is one of the many reasons why I and my colleagues have been working so hard to secure a resolution that sees the investment and sees the plant staying open. As I said in answer to the right hon. Member for Don Valley (Caroline Flint), we are very much focused on looking for the right approach to maintain the refinery capacity that the UK needs. We have already seen—I think it was two years ago—a refinery at Teesside closing, and recently there was the situation at Coryton. Refineries in the UK and throughout Europe are under severe pressure; their margins are very narrow and there are serious economic issues. I have referred to one of the reasons for that—the switch from petrol to diesel—but there are others as well. We need to ensure that our response is strategic and based on evidence, and that it will have the results that we need. We do need a successful refining industry in the UK and that is the purpose of our work.

I think that everyone in the House recognises the importance of the Grangemouth plant—not just for Grangemouth, but because, if we lose it, there will be huge hole in the Scottish economy and the loss of the refining capacity would have a serious implication for the UK. Does the Secretary of State agree that two things are necessary? First, the Government and the Scottish Government should do everything that they can to try to persuade the employers to start negotiating again. It would be a tragedy if we were to lose the plant as a result of it falling victim to rhetoric that looks more like the 1970s than the industrial relations we would expect today. Secondly, if that is not successful and INEOS is determined to walk away, what steps will the Government and the Scottish Government take together to try to find an alternative? Frankly, losing such a facility would be a major loss and, once lost, we would never get it back again.

The right hon. Gentleman is absolutely right. It is critical that we do everything possible to keep the petrochemicals plant and the refinery working. I am clear that, working with the Scottish Government, we will do everything that we can to get negotiations going again. I understand from INEOS this morning that it will be talking to Unite today, not just to tell it about the shareholders’ decision, but to discuss the issue in more detail. Let us see what comes from those talks. Should they not be successful, and should INEOS decide to walk away, of course we will be very much involved in trying to find a future. The Scottish Government have a key role for the petrochemicals plant in particular, and we will work with them on that. A lot will depend on the process that the INEOS management at the petrochemicals plant decides to follow. It says that it will talk to liquidators, but it has other options, so we will be in close contact with it as it develops those options. There may be alternatives with INEOS’s involvement. Whatever happens, we will be active in seeking an acceptable solution for the people involved and the Scottish economy.

The loss of any jobs is, of course, a real tragedy for those concerned and their families. May I welcome what the Secretary of State says about a review of refining capacity, especially with regard to diesel? My understanding is that much of the diesel used in the UK is refined in Russia, which obviously adds to costs for motorists, who have been under a lot of pressure recently.

My hon. Friend is absolutely right. When we decided to undertake the review of refinery capacity, we did so in the light of a huge amount of evidence that we needed to ensure that our economy was not vulnerable, yet with the developments in the refining industry, there was a danger that it would become increasingly so. He is right that we are importing a lot of refined fuel at the moment, and we need to ensure, as an energy security issue, that we know where our supplies of transport fuel are coming from.

Does the Secretary of State not agree that this situation shows the importance of good, mature industrial relations? My right hon. Friend the Member for Edinburgh South West (Mr Darling) suggested that it was reminiscent of the 1970s, but I suggest that lockout, threats and ultimatums are more reminiscent of the 1870s. Any new buyer must have a better industrial relations policy, and the Government must encourage that and not undermine it.

I understand the hon. Lady’s concern, and indeed anger, and am sure that in that regard she speaks for many local people. As the Government working with the Scottish Government, we have been, and must remain, balanced in our approach, because our job is to try to get both sides to negotiate. That is the most effective role we can play, so we will continue to do that in as balanced a way as we can.

The competitive challenges facing the refining market have been well established for a number of years and led to the closure of Petroplus in Coryton last year. In view of the competitive challenge, is it not regrettable that the local branch of Unite was more interested in manipulating the Labour party in Falkirk than in representing the interests of its members?

The hon. Lady asks me to comment on an issue, the details of which I am not privy to. There is a disciplinary investigation under way, which INEOS has been leading. I understand that it might publish, or at least share with Unite and the convenor involved, the results of its investigation later this week, but I do not think that it is for me to comment on that.

I thank the Secretary of State for many of the answers he has given so far, but ask him to reiterate the following three important points: it is vital that the refinery is reactivated, that both Governments continue to take steps to mitigate even the threat of job losses, and that there is continued joint working between both Governments to keep the plant open and to search for a new buyer.

I can say yes to all three points. It is vital that the refinery gets going again, as I said in my initial remarks. We must do everything we can to prevent job losses. I am afraid that it is not in our power to prevent the threat of job losses, which the hon. Gentleman asked me to do, but we will certainly do everything we can to prevent that threat being realised. Both Governments are absolutely duty-bound to co-operate for the people involved and for the Scottish economy.

I think that everybody here accepts the seriousness of what is at stake in this dispute, but we are in danger of downplaying the impact that closure would have not only on Grangemouth, Linlithgow and central Scotland, but on Scotland’s economy and, as other Members have said, that of the United Kingdom. The closure of the Grangemouth complex, or indeed any part of it, would be an act of industrial vandalism the scale of which we have not seen in decades. Given the seriousness of that, I welcome what my right hon. Friend and the Secretary of State for Scotland have been doing, including working with the Scottish Government. Can he assure me that he is willing, before we give up on negotiations, to work with the Scottish Finance Secretary and anybody else and to meet the key players around a table so that we do every last possible thing before thinking of this being sold to somebody else?

I will first pay tribute to my right hon. Friend, who worked extremely hard on this case when he was Secretary of State for Scotland. Much of the contingency planning we have in place is down to his hard work, for which I am grateful. He knows better than anyone what the impact on the Scottish economy would be if part or all of the Grangemouth plant were to close. I can reassure him that we—I am sure that I speak for the Scottish Government on this—will do everything we can together, leaving no stone unturned, to try to reach a resolution.

As well as the concerns about supplies to Northern Ireland, it is estimated that upgrading the refinery will cost £300 million. What discussions have the Government had with the owners on helping them through the infrastructure guarantee loan?

I am grateful to the hon. Gentleman for his question. My right hon. Friend the Chief Secretary to the Treasury is in charge of the discussions with INEOS on infrastructure guarantees. Of course, it is impossible to guarantee an investment proposition until it is put forward, so we await the business case. Given today’s news, it does not look like it will be immediately forthcoming, but I can tell the hon. Gentleman, the House and INEOS that, should a business case be put forward for investment in the petrochemicals plant, we will look at it extremely closely.

This is obviously very sad news for those at Grangemouth, but many others working in the chemical and petrochemicals industry, including many thousands on the south bank of the Humber, will also view it with concern. Can the Secretary of State give us an assurance of the Government’s long-term commitment to the sector and inform us whether any lessons can be learnt from this case and applied to other areas, such as the Humber?

My hon. Friend is right to focus on the chemical industry not only in his area, the Humber, but across the UK. The chemical industry is the UK’s leading manufacturing exporter, and it has significant growth potential. My right hon. Friend the Secretary of State for Business, Innovation and Skills has been working with others to try to maximise the growth potential. The chemistry growth partnership strategy has been developed, and the aim is for the Government to do everything we can to support our important chemical industries. We have been looking at the impact of a closure of the petrochemicals plant at Grangemouth on the rest of the UK’s chemical industry, and that is also being led by the Secretary of State. So far we believe that the supplies that would be needed for the rest of the UK’s chemical industry can be found, and obviously that is quite an important industrial issue, but we keep that under close review.

I thank the Secretary of State for the way he is handling the crisis and for his comments to the hon. Member for Dundee East (Stewart Hosie). I am sure that the Secretary of State will be as saddened as many of the workers were to hear that the negotiations that he managed to secure around the table at ACAS were slightly thwarted because the billionaire hedge fund manger who runs INEOS, Mr Jim Ratcliffe, was on his yacht in the Mediterranean, so the negotiating team had to phone him. I think that shows a lack of seriousness. One of the big concerns people have is that tax avoidance disguises the profitability of the site. Will the Secretary of State consider conducting an independent financial assessment of the site to see what options future buyers might have?

We will not have access to all the information, because the site is the property of a private company, as I am sure the hon. Gentleman would recognise, but we have made it very clear to INEOS, and indeed to the joint owners of the refinery, that we stand ready to assist. I do not think that I can take up his proposal, but he should not take that as an indication of any lack of resolve on the part of Government to do everything possible.

I understand that INEOS believes the plant to be loss-making. What assessment has the Secretary of State or his counterpart in the Department for Business, Innovation and Skills made of the source of those losses? Given that the plant is so important in producing a third of Britain’s ethylene product, what assessment has been made of the knock-on effect on all the other companies that depend on that product throughout the United Kingdom economy?

On my hon. Friend’s latter point, we have already made that assessment, as I have said, and at the moment we are convinced that the chemical supplies required can be supplied from other sources. With regard to why the petrochemicals plant is making a loss, I can only tell him what INEOS has said publicly: that the cost of pensions and salaries make the plant unprofitable. However, as I have said throughout my answers, the Government will remain balanced and even-handed on this issue, so we are not going to say that one party is right and the other is wrong, because we want both sides around the table.

I know Grangemouth well. As a former deputy general secretary of the old Transport and General Workers’ Union, I well remember when the tanker drivers broke the fuel blockades to restore fuel to a Scotland then in crisis.

Make no mistake: today’s announcement poses a serious question mark over the whole of Grangemouth. I recognise that the Secretary of State has done everything he can thus far, but he must not give up. Will he meet INEOS representatives and express to them the strong feeling across the House that, even at this late stage, they should come back to the negotiating table so that we secure the future of the whole of Grangemouth?

I am grateful to the hon. Gentleman for his question and I recognise his knowledge and expertise in this area. I refer him to my statement at the Dispatch Box that we have engaged with INEOS throughout. I am due to have a phone call with Mr Ratcliffe later today.

I thank the Secretary of State for his answers so far—in particular, his recognition of the importance of the chemical industry. I ask the Government to give maximum support and have close discussions with the petrochemical industry in my constituency—in particular Sabic, with its ethylene cracker. Furthermore, when does he expect to get state aid clearance for his measures on energy-intensive industry, which the Grangemouth complex clearly represents?

I am grateful to my hon. Friend for his question. Many of his requests fall under the responsibility of the Secretary of State for Business, Innovation and Skills, although we work closely together on all these issues, not least those to do with energy-intensive industries.

My hon. Friend is right to say that we have an application in front of the Commission with respect to state aid clearance on the costs to energy-intensive industries of the carbon price floor. We already have state aid clearance for our proposals to assist energy-intensive industries with the indirect costs of the European Union emissions trading system. As he will know, we are consulting to help energy-intensive industries with the costs of contracts for difference. Like other member states, we have a comprehensive programme to support energy-intensive industries. We continue to press that case.

I concur with others in saying that the closure of the Grangemouth plant is a disaster not only for its staff and the local community but for the Scottish economy. It also has ramifications for the wider UK economy. Does the Minister agree that now is the time for an urgent review of how we regulate the owners of critical infrastructure of this country, to make sure that it is fit for purpose and that we do not again end up having to urge a reluctant company to come back to the negotiating table?

The Government have looked at all aspects of critical national infrastructure—not just in the petrochemical sector, but across the piece—to make sure that, in the face of a whole series of potential disruptions to critical national infrastructure, whether industrial action or natural causes, critical national infrastructure is available for our country, economy and people.

We have had the most comprehensive review of policy to ensure that CNI is available. I apologise, but I am not sure what the Minister for the Cabinet Office, my right hon. Friend the Member for Horsham (Mr Maude), who is leading that, has published on it. However, he is leading that work and it is extremely thorough.

Is what has happened not a puzzling action to take about what many feel is in reality a money-making petrochemical plant? Does the Secretary of State agree with the First Minister, Alex Salmond, that the Grangemouth site has a positive future?

I certainly believe that it can have a positive future. We need the investment to go in; the Scottish Government will offer the maximum they are able to, £9 million, as part of regional assistance support if investment does go in. I agree with the thrust of the hon. Gentleman’s question. It is incumbent on us to ensure that the plant has a positive future.

I also welcome the Secretary of State’s statement. Any investment in our country is welcome, whether it be foreign or otherwise. However, that should not come at the cost of the livelihoods of the workers—many of whom, along with the local community, pay taxes, unlike Mr Ratcliffe. If there is to be state intervention, and I hope there will be, will the Secretary of State make sure that it does not end up on anyone else’s profit sheet? Will he make sure that we speak to the Chinese partner involved, to see what it has to say?

We have been in discussion with PetroChina, and my right hon. Friend the Member for Sevenoaks (Michael Fallon), the Minister, is due to meet its representatives next week. We are talking to everyone involved. Given our infrastructure guarantees, we are now more engaged in state support than Governments have been in the past. That makes sure that we get good value for both the taxpayer and the economy. I do not think that what the hon. Gentleman is rightly concerned about will come to pass. As part of the way we do the infrastructure guarantees, we will make sure that we get the outcomes we need for our country.

Is the Secretary of State aware—I am sure he is—that people who work for big powerful multinationals need effective, intelligent trade union representation? Sadly, that is the last thing that people in Grangemouth have had for the past few months.

Today we have heard a lot of personalising—who owns INEOS and so forth—but at the root of all this is Unite’s placing a petty party political issue at the very top of its priorities and ignoring the looming train running along the track. Will the Secretary of State be aware of that in the coming weeks, when he will do what he can to help people at Grangemouth? Is he also aware that INEOS continues to be the main income driver for thousands of families across the Falkirk area?

Like my hon. Friend the Member for Thurrock (Jackie Doyle-Price), the hon. Gentleman invites me to talk about a disciplinary dispute. The investigation is due to be published and shared with those involved on Friday and it would be wrong for me to speculate about the rights and wrongs of any individual or individuals involved.

I welcome the Secretary of State’s approach. Will he say more about how he will assure the UK’s fuel security and secure a sustainable future for UK refineries, including those on the South Humber bank?

I am grateful for that question. One of the first issues I had to deal with when I became Secretary of State was the potential for a tanker drivers’ dispute. I got very involved in thinking about energy security with respect to transport fuels. The Department has set up a unit that was not there before. When we talk about energy security, we normally mean the security of the electricity supply, but actually the issue is much wider than that. I have personally given a lot more focus to that than previously, particularly in respect of what the hon. Gentleman mentions—not just for Scotland, but for the whole UK. The review of refinery capacity is part of that, but only part; we have to look at a number of issues to make sure that the people who drive the cars, lorries and vans on the roads get the fuel they need, given the critical role that that transport sector plays for our economy.

To what extent does the Secretary of State believe that the current structure of the industry—a small number of large sites, often with foreign owners—effectively stacks the deck in favour of those owners and against the needs of the wider community?

The hon. Gentleman is asking me to speculate about the outcome of our review. Given that I have not received the report, that would be unwise. However, large complexes are needed to refine fuels in what is a capital-intensive business. Small players would be unlikely to have such capital. Whether the hon. Gentleman or I like it or not, there are going to be big players. The question is whether we have the right fiscal, financial and regulatory framework to make sure that we have the refinery capacity that our economy needs. That is what the review will answer.

Bill Presented

Counsellors and Psychotherapists (Regulation) Bill

Presentation and First Reading (Standing Order No. 57)

Geraint Davies, supported by Dr Julian Lewis, Jonathan Edwards, Mrs Siân C. James, Jessica Morden, Chris Evans and Mr Mark Williams, presented a Bill to provide that the Health Professionals Council be the regulatory body for counsellors and psychotherapists; and for connected purposes.

Bill read the First time; to be read a Second time on Friday, 22 November, and to be printed (Bill 120).