Thursday 14 September 2017
[Ian Paisley in the Chair]
Energy in Wales
I beg to move,
That this House has considered energy in Wales.
It is always a pleasure to serve under your chairmanship, Mr Paisley.
I look forward to hearing the Minister’s response, though I am a tad disappointed that it is the Under-Secretary of State for Wales, the hon. Member for Aberconwy (Guto Bebb) who will respond on behalf of the Government. If the Department for Business, Energy and Industrial Strategy truly wanted to spread wealth across the whole of the United Kingdom, and if energy and the industrial strategy were the central plank of this Government’s approach, I would at least have expected an Energy Minister to come along today. However, the Under-Secretary is a very good friend of mine—he helped me with many projects even before he became a Member of Parliament—and I know that he understands the subject of energy in Wales.
The purpose of this debate is to take stock of energy in Wales, to press the reset button—that is a polite way of telling the Government to get their finger out on certain projects—and, although it might not sound like I am doing so, to recreate a consensus. I stress the word “recreate” and will come to that in a moment. My contribution will look fairly at the good, the bad and the frustrating in energy policy, including some very welcome consensus in the late 1990s and the noughties, right through until about 2012.
Wales has enormous potential in energy. It has the potential to drive the energy policy of the whole United Kingdom and, indeed, its industrial strategy. We have natural resources, human resources and skills in the energy sector; welcoming local communities to host many of the proposed projects; and a forward-looking Welsh Government.
Does my hon. Friend agree that we need the UK Government to commit to big projects? Whether we are talking about the electrification of the railway to Swansea or the tidal lagoon, such commitment to Wales has been missing from this Government.
Following on from the comments of my hon. Friend the Member for Torfaen (Nick Thomas-Symonds), if the Government were to invest in electrification and the lagoon projects, much-needed jobs would be delivered throughout south Wales, as well as in north Wales and Ynys Môn. Such commitment from the Government would help with some of the longer-term unemployment issues that some parts of Wales have had for a number of years. Ii would also improve the skills agenda in Wales.
My hon. Friend is absolutely right. When we talk about energy projects, we are talking about building infrastructure, helping the environment, climate change, jobs and skills. They are important and linked to the other projects he mentioned. Wales not only complements the United Kingdom, but can lead the United Kingdom and rekindle a pioneering spirit in many projects.
Since I entered this House, I have been interested in energy. I used to work in the energy sector. One of my first jobs was in the oil industry: for many years I was a galley boy on an oil tanker going around the middle east. During the 1970s I saw some of the big issues of the oil crisis at first hand, when people talked about developing renewable, solar and other technologies because of the crisis. Sometimes it takes a crisis to focus attention and to concentrate minds. Afterwards, however, we went back to oil and coal, carrying on as normal in many ways.
I am proud that we now have the Climate Change Act 2008. I was proud to vote for it and I think I am the only Member present in this Chamber who did so. It was a pioneering Act that showed that the United Kingdom was a lead nation in looking after the environment. To complement the Act, to ensure that we reduce carbon and improve the environment, we need low-carbon projects. There have been some good results.
As the Minister knows, I am pro-renewables, pro-nuclear and pro-energy efficiency, and I see no contradiction in taking all three views, if we are to achieve the targets we all want. Even ardent climate change deniers now acknowledge that the climate is changing and accept—humbly, some of them—that mankind is contributing to that. We need to dispel the idea that the climate is not changing and that we need do nothing. We have to do something for this and future generations.
I repeat that I was very proud that under the previous Labour Government, but with the support of all parties in the House, we passed the Climate Change Act. We need a rich mix of energy technologies, to ensure that we reach our targets. When I sat on the Select Committee on Welsh Affairs, we produced a number of reports on energy in Wales and they were very good platforms to build on. I have also been on the Select Committee on Energy and Climate Change and am now on the Business, Energy and Industrial Strategy Committee, and we are considering the issue. I have scrutinised Governments of both colours—of three colours if we include the coalition, which was a mix of Conservatives and Liberals—but, to be fair, in the early days there was a consensus on how to progress.
We need to push the case for new renewables, new nuclear and new opportunities for jobs and skills in the future. I welcome the initiatives of previous Governments. The renewables obligation was introduced to help kick-start solar and wind, the development of which is now producing lower-cost clean energy. That was because of subsidy, which is not a dirty word but an essential tool to get firsts of a kind going. We need the help and support of subsidy. We rightly subsidise our buses and trains; we should be subsidising the development of renewable and future generation technologies.
I repeat that I welcome the consensus between the two major parties that promoted and developed a low-carbon economy. In 2001 and 2003, during a review, I lobbied the Labour Government to introduce new nuclear and to push the wind agenda to offshore as well as onshore. The Conservatives adopted that policy and supported the Climate Change Act. There was a great period of continuity from when the Conservatives were in opposition and Labour in government, to when the coalition came to office and the stewardship of the then Energy Minister, Charles Hendry, to whose name we will no doubt return. That continuity gave essential certainty to investors, which is important because such projects are long term and cannot be done in a single parliamentary cycle. In many cases, we need to consider working over two or three Parliaments.
That was the good part. The bad part was the populism of the coalition, with some of the Conservatives dancing to the tune of The Daily Telegraph and many others, pulling projects because they were not popular. The wind industry was coming to the end of its subsidies anyway, but the Conservative-led coalition turning against it hampered investment in the sector. Offshore wind is now back on the agenda; many of the projects started in 2006 and 2007 are now coming to fruition and producing the wind energy the country needs. Wind is important. I know it has its critics, because it is intermittent, but that means it can be switched off when demand is at a certain level. We can have continuous demand and supply, but also demand when needed.
We moved from a good period to a frustrating period because of external factors—the global financial crisis—when external investment became difficult to obtain. I understand that, but we need a stimulus. We needed it then, and I argued that the stimulus could have come in the form of investment in the energy requirement. That would have created the jobs and skills necessary to boost a flat economy that is on its knees.
I will come to price mechanisms in a moment, but my hon. Friend is absolutely right that we need certainty. Investors need to know what the price will be and what return they will get in the long term. I think that everyone accepts that economies of scale enable lower-cost energy production, and that should be reflected in subsidies. The governance framework needs to be a little tighter. The contract for difference, which I will come to, is a good principle. Many people do not appreciate that with a strike price, if prices fluctuate, big developers do not get the money; it comes back and stays with the Government, so we get certainty about how much the Government spend. That is good.
Major energy policies are reserved. I appreciate that the Wales Act 2017 devolved control over projects up to 350 MW, which reflects the larger scale of projects, but we require a partnership between local communities, local businesses, devolved Administrations and the UK Government, within—remember that we are still in the European Union—the European framework.
I acknowledge that whoever won the 2010 general election would have had to reform the electricity market. I sat on the Committee that discussed the relevant legislation before it went through. I did not agree with everything in it, but I did agree with the principle of reforming the electricity market to ensure certainty for investors and value for money for the consumer. Energy Ministers have changed frequently—that has been a problem with both Labour and Conservative Governments —so we have perhaps not given energy the attention it deserves. I support the contract for difference principle and the need for a capacity market mechanism, but during the period of populism I referred to, the oil price and energy prices went up, and that became a big political issue. We were significantly reliant on oil and gas prices, because we were not developing the renewable, new nuclear and low-carbon technologies we should have been.
Wales is still heavily reliant on oil and gas as part of our mix, so we need to move forward. It is ironic that Wales and Scotland are huge producers of energy, yet household and business bills are higher in those areas than in the rest of the United Kingdom. It is totally unfair that a consumer in Wales pays extra for their energy. They might be close to a power station that generates energy for the grid but, because of the transmission and distribution mechanisms, they end up paying more for it. I would not say that the energy market is completely broken, but it is fractured and those issues need to be addressed. Wales is still reliant on gas and coal, and it needs to wean itself off them. I am disappointed that combined storage schemes for coal and for oil have not progressed in the past five to six years. We could have retrofitted many of our power stations so that we had clean coal and oil production as we transitioned to renewables, but we did not do so.
Let me turn to some of the technologies. I will start with marine technology, which is important. We have a history in Wales of small hydro schemes. The Dinorwig pumping station in many ways revolutionised storage. We need to consider storage, and here is a scheme that was developed in Wales many years ago that pumps electricity up at night, when energy prices are low, and stores it.
I echo the hon. Gentleman’s comments about the potential in Wales for hydro schemes. Dinorwig is a fantastic example of a larger hydro scheme. Does he agree that smaller hydro schemes—the potential of which we perhaps have not fully realised—are just as important for our energy mix in Wales? He also talks about the UK and Welsh Governments working in partnership. We desperately need to look at the revaluation of business rates, which is affecting many hydro energy schemes, particularly community energy schemes. Does he agree that we have an opportunity to fully realise the potential of hydro in Wales by addressing that revaluation?
I welcome the hon. Member for Ceredigion (Ben Lake) to the House—this is the first opportunity I have had to do so. He is a new Member and he will get used to making shorter interventions as he gets going.
The hon. Gentleman is absolutely right: we need to look at barriers and at whether the rates system deters such schemes. We are going back to basics with some of these smaller hydro projects. Many farms and small communities had their own hydro projects many years ago. We get an awful lot of wind and rain in west Wales and the west of the United Kingdom, and we need to harness that. Many of the windmills that produced food in the past were driven by both hydro and wind; we are only returning to that.
Wales and the UK’s west coast have enormous marine energy potential. Their tidal ranges are some of the best in the world. The Welsh Government and the UK Government have done numerous studies in Scotland, west Wales and the west of England, yet although prototypes have been set up, many have not been developed. Indeed, I visited Strangford lough in Northern Ireland to see some of the pioneering schemes there, but those have not reached the necessary commercial scale because of a lack of investment. There is a blockage, and it is in all our interests to undo that blockage and ensure that such schemes are successful.
Minesto, a Swedish company in my constituency, is moving forward a project, which the Minister knows about, 8 km off the coast of Holyhead that links with the port of Holyhead. Not-for-profit organisation Menter Môn, which the Minister also knows about, is involved in the grid connection there and will benefit from that. That project is up and going.
This Parliament and the Welsh and Scottish Governments have talked for some time about tidal lagoons; we now need to move forward with them. We could have a cluster in Wales because of the tidal range from Colwyn Bay to Swansea Bay—the potential is absolutely there. I am sure that colleagues will want to elaborate on the Swansea Bay tidal lagoon, but I mention it because it has been identified as a first-of-a-kind project that could go forward. The Government have taken it seriously and a lot of development work has been done on it.
This Government set up the electricity market review and capacity mechanisms that I talked about, and they also set up the Hendry review, which reported at the beginning of this year. Reports take time, and I understand the Government’s frustration when they get external issues. Brexit is dominant, and we had a two-month election period that everyone wanted—apart from the Conservatives themselves, when they saw the results. That election cost the taxpayer £140 million, excluding the figure for Northern Ireland, which we have not yet seen. That money could have been invested in some of these projects, which could have been moving forward as I speak.
Tidal lagoons could generate 250 MW to 350 MW of electricity. The tidal range allows some 14 hours of generation per day—it is huge. That would enhance the area, since it could be used for tourism as well as for producing much-needed low-carbon energy. Of course, we need great connections, which are controversial. I will come to connections for transmission and distribution; we need to handle them properly and have them underground so they are not unsightly.
I urge the Minister to give us a response to the Hendry review. It is no good the Government saying, “We’re looking at it”—they have been looking at it for many months. The civil servants were not involved in the election campaign; they were diligently doing their work in the BEIS office. They should come up with recommendations for Ministers, and Ministers should have the grace to make their mind up and come back to the House to say where they are going. Investors need certainty; they do not need the Government to abandon decisions after setting up a review. In my humble opinion, the only thing holding the project back, having looked at the potential mechanisms and the price—the first of its kind will be expensive—is the political will of the Government. It will be the job of the Minister to convince the House that that is not the case. The only way he will be able to do that is by announcing the date of an announcement. The Government should stop prevaricating and do that immediately. The Orkney isles, the west coast of England and south Wales have the potential for marine technology.
Let me turn to new nuclear, because it is important that we keep these projects on track. Again, this is older technology that has been modernised for the 21st century. In my constituency, the Wylfa power station site generated safe nuclear power for a record number of years, which created jobs for many decades. In fact, it is the only industry I know where classmates who left school at the same time as me worked in the same high-quality, high-paid jobs in one industry, thereby contributing to the local economy. The supply chain is huge and the technical skills are high.
We need to move forward. The project that started in 2007 to 2009 is on track. We now have new developers in Hitachi with proven technology and capacity, and I know that, working with the Welsh Government, the local community, local government and the UK Government, we can move forward on the project and produce high-quality jobs. There is some £12 billion of investment, which I remind Members—I have raised this enough times—is the equivalent of the London Olympics being invested in north-west Wales. There is huge potential to develop the economies of Anglesey, Conwy, Gwynedd and the whole of north Wales. Indeed, it is the biggest project in Wales in terms of jobs—construction jobs and ongoing jobs as well.
The Minister is aware of this, but I also want to talk about small module reactors and the potential for them. I met with the Advanced Manufacturing Research Centre in Sheffield and have also visited. It has got all these companies together so that we can forge the modules for nuclear reactors with British steel in the United Kingdom and deliver the kits to different locations. Trawsfynydd is ideally located for that. It has a welcoming community that would play host, and it has the infrastructure in place. What we need, once again, is for BEIS to stop sitting on reports and papers and to start making announcements. That is what the business world and local communities want to hear: the trade unions and business working together to develop these high-skilled jobs.
I could also talk about many other projects. Orthios wants to develop an eco-park in my constituency. It was not successful in the auctions—the auctions are cumbersome, and it did not meet the criteria. We need to simplify those criteria. The threshold of 299 MW has, I think, been reduced to 150 MW, so it did not qualify.
We also have great offshore wind projects. My hon. Friend the Member for Vale of Clwyd (Chris Ruane) may interject, or he may wait—he is now a patient Front Bencher and statesman—and respond in his speech. Many people opposed the offshore project, including the previous Secretary of State, the right hon. Member for Clwyd West (Mr Jones), who I remember lobbying the Welsh Affairs Committee when we went to north Wales, saying, “Save our shore,” because the project was not wanted. It has now developed and was a flagship of the Conservative-led coalition Government in which he served. He suddenly changed his mind on that and then flew the flag for wind farm development. My point is that sometimes these projects are controversial and appear costly when looked at, but they are a worthwhile investment because they produce low-carbon energy off stream and jobs in localities. Celtic Array Rhiannon, just off my constituency, would have been the biggest offshore wind farm. That was aborted in many ways because of the mechanism as well as technology developments, but the potential is still there.
I am conscious that I have taken a lot of time, but I want to talk about distribution and transmission. Hon. Members will be aware that British Gas hiked its gas prices and that many other companies, including Scottish Power, have highlighted that the high cost of distribution and transmission has pushed bills up. I am sure, Mr Paisley, that you are diligent and look at your bill either online or in paper form, like I do. When we look at it, we see that 25% is for distribution and transmission costs. That is a huge amount of the bill.
If we are serious about reducing and capping energy prices, we need to look at distribution costs. The national grid is a monopoly—there is no competition in it—and it almost holds developers at ransom. I know it is regulated, but it does not work. Had there been a different result in the general election, the Labour party would have nationalised it or introduced a not-for-profit model, like we have for water in Wales. We are used to not-for-profit organisations, which reinvest all their money into infrastructure. Welsh Water—Dŵr Cymru—is an excellent example of that. Instead of paying directors in the United States of America and shareholders, it puts the money back into the communities in which it works.
The proposal for pylons across Anglesey and north-west Wales is controversial: 1950s-style pylons are to be attached to 21st-century nuclear power. National Grid needs to listen to the communities it is working with and look at undergrounding and subsea rather than pylons.
Finally, we need to deal with energy prices. As I have said, Wales has high bills compared with the rest of the United Kingdom. Transmission is cited as one of the reasons for that. There are also higher levels of fuel poverty in Wales and pockets of fuel poverty. I know there are issues elsewhere in the United Kingdom, but we do need to address that. When we invest properly in new technology, we are creating a better country and high-skilled jobs. If I had more time, I would go into energy poverty issues, but we do need to deal with them.
The coalition Government changed the criteria for measuring fuel poverty. They were archaic in many ways—the Queen was in fuel poverty because a high percentage of Buckingham Palace’s outgoings were on energy—but the serious point is that many people in Wales, in areas that produce a lot of energy, are paying a higher price and are in fuel poverty. The Welsh Assembly and devolved Administrations have done good work in that area, and I hope that the Government are listening. There needs to be more work on that as we go forwards.
I called for the debate because I believe there is huge potential for Wales to be a huge contributor to the United Kingdom’s industrial strategy when it comes to energy and manufacturing. We have successful projects going forward, which is good for Wales, for the United Kingdom, for Welsh businesses and for the consumer. They will reduce carbon emissions into the environment and help to deal with climate change. The skills issue, raised by my hon. Friend the Member for Ogmore (Chris Elmore), is essential. These projects create clusters of high-skilled science parks and faculties for research and development, which link into higher and further education institutes. This is a win-win situation.
I support the Government’s principle of an industrial strategy. They talked about nuclear and energy as being part of that. Electric cars are a good thing, but we need to get on with it. We need to press the reset button and get these projects going. We need to invest in them and work together to produce the low-carbon economy that the Minister, the Department for Business, Energy and Industrial Strategy and everyone in the Chamber wants to see. Wales can be the pioneer, creating the jobs, the technology and the energy that the country needs.
I hope that the Minister is in listening mode and that he has some answers for us. If he does not, I hope he will pass these points on to the BEIS Minister, who may have the grace to come to the next debate with “energy” in the title. Wales is part of the United Kingdom and part of the industrial strategy, and Ministers need to be aware of that. Wales is a forward-looking country when it comes to many things, including energy. We want the best for the people we come here to represent and we want a better, clean environment, clean air, and climate change to be dealt with. We want to play a leading part in that.
Thank you very much, Mr Paisley. It is a great pleasure to follow the excellent speech made by my hon. Friend the Member for Ynys Môn (Albert Owen). As the Minister will know, within the next few weeks the Government will launch their clean growth plan. I very much hope that he will use all his energies to ensure that the Swansea bay tidal lagoon, the tidal lagoon planned for north Wales and rail electrification to Swansea will be in that plan. Without trying to be rude to him, he is a Minister in the Wales Office: my great fear is that it is a small Department with very little bite and, arguably, very little bark. We hope that he speaks up for Wales on green energy.
I have to say that my other great fear is that the Swansea bay tidal lagoon and rail electrification to Swansea are set to burn on the altar of Brexit fundamentalism. I say that because the Government now face a bill from the EU of perhaps more than £50 billion, which translates to thousands of pounds for every family in Swansea and in Wales. The Government are now dashing out forward looking, long-term green plans—whether rail electrification to Swansea or the Swansea bay tidal lagoon—and prioritising London and the south-east once more, where they are not needed. They are looking at the short term, not the long term, and thinking about how they can pay that bill so that they can keep on pushing forward with a project that people now realise does not resemble anything like what they voted for.
I stood in the general election on a platform of saying that I will defend the 25,000 jobs in Swansea bay that depend on access to the single market, promote rail electrification and keep it on track, keep the lagoon moving forward and oppose fracking. On that basis, my vote went up by 50% in both share and number. I will stick to my pledges and will use this occasion to again promote the Swansea bay tidal lagoon. The tidal lagoon has been talked about for years. George Osborne, the then Chancellor, announced in his November 2014 autumn statement that he thought the lagoon was a fantastic idea and that he wanted to get work on it moving. David Cameron echoed that, and then the Hendry review gave it and its costings a clean bill of health.
However, we now have uncertainty and prevarication, which is making investors, who came around the table to support this important, pioneering project in good faith, wonder will happen next. We face uncertainties owing to Brexit, but people in Swansea and in Wales need the certainty that we will make these investments. On costings, the Treasury is obviously looking around and saying, “Oh, well how does the unit price for the Swansea bay tidal lagoon compare with the spot price for oil?”, but one has to remember—as I am sure you do, Mr Paisley—that 80% of fossil fuels that have already been identified cannot be exploited if we are to avoid irreversible climate change, sustain our commitment to the Paris agreement and fulfil our obligations under the Climate Change Act 2008. In the medium term, the price of oil will go up if we are not allowed to exploit it, while the value of green energy will be much greater. We need to pioneer forward.
Economists’ evaluations of the Swansea bay tidal lagoon showed that, if there is a marginal increase in the actual units of electricity produced—we are talking about a relatively small amount of global energy from this particular lagoon; enough to power 120,000 households —the actual cost is very small for market entry into what could be a global marketplace in a green future. The short termism of the bean counters at the Treasury, who ask about the cost over the next few years, is therefore completely counterproductive. We are looking to have a portfolio of lagoons around Britain and then beyond, to start off an export market during tough times. We know that the lagoon is in fact cheaper than new nuclear and, as I have said, it will be cheaper than oil in the future.
We want a green future for Wales and for Britain, and we want our fair share of infrastructure investment. We should be getting our fair share of HS2, for instance, which would be £2 billion that could be invested in infrastructure, whether that is rail electrification or helping to support the green energy of the future.
I am proud to say that I sit on the Welsh Affairs Committee, and we will produce reports on rail electrification and the lagoon. It is useful to have these exchanges, but the Minister needs to know that other Ministers, from energy to rail, will sit in front of us and will have to answer these questions, rather than flipping them away in the main Chamber in two seconds. We will issue responses to those. Infrastructure investment is important for lifting productivity in Wales, where, as the Minister knows, gross value added is only 70% of the UK average. We are delivering on skills and education to lift productivity, but we need to deliver on infrastructure, which we are not. That is why this is so vital.
On a green future, like my hon. Friend the Member for Ogmore (Chris Elmore), who has just left, I think there is also a case for investing in and supporting Ford’s attempt to generate batteries to support a new generation of electric cars as part of a plan to push forward with electric infrastructure across Wales. Investors need to know what is happening; there has been a lot of uncertainty, and not only with Brexit. While it is a long way away, I understand there was no consultation with industry on the announcement of the ban on sales of new petrol and diesel cars after 2040, which I welcome. We need to work with industry in setting our objectives in the clean growth plan to show our ambition. They should be ready for action, and we should put our money where our mouth is.
The question for people in Wales has always been “How green is my valley?”, and we very much hope that it will be a very green valley. We are here to ask the Minister to do everything he can to support both the Swansea bay tidal lagoon and other green energy, as my hon. Friend the Member for Ynys Môn said, and an integrated green future that provides productivity, prosperity and hope for all of us for the future.
It is a pleasure to serve under your chairmanship, Mr Paisley. I congratulate my hon. Friend the Member for Ynys Môn (Albert Owen) on securing the debate. In March last year, I stood in the main Chamber and spoke in the St David’s day debate about how accustomed to waiting for things we are in Wales. We waited so long for rail electrification, which is now merely another broken promise from the Government, and we waited for the Welsh national team to reach the European championships. That one was worth waiting for.
No comment. We were also waiting for Charles Hendry’s review on the Swansea bay tidal lagoon, which was published 10 months later. It was conclusive, and it provided the assurance that the Government sought on whether tidal lagoons could play a cost-effective role in the UK energy mix. It recommended moving forward with a pathfinder lagoon in Swansea bay
“as soon as is reasonably practicable”.
That was eight months ago, and once again we are still waiting.
Since the review’s publication, the Government have made no concerted effort to proceed. The Conservative party’s manifesto for the 2017 general election merely touched on renewable energy in Wales, with a promise to
“explore ways to harness Welsh natural resources for the generation of power”,
but failed to make any commitment to the Swansea bay tidal lagoon. By comparison, all other major political parties committed in their manifestos that it should happen as a priority. Since the election, we have heard nothing more from the Government about any plans to develop the project.
We all know that the tidal lagoon is the way forward; it harnesses natural power from the rise and fall of the tides, so offers an entirely predictable year-round supply. It is a guaranteed power source for generations to come, and the long-term cost benefits speak for themselves. The Welsh Labour Government, local councils and city regions all support a tidal lagoon in Swansea. Welsh businesses, community leaders and the people of Wales and Swansea support it. Swansea is ready for this now.
There are many benefits that will have immediate impacts on the economy and the community. The lagoon will bring an estimated 2,000 new jobs to the region, and there will be a demand for approximately 100,000 tonnes of locally sourced steel. The tidal lagoon already has 1,300 British businesses registered on its supply chain database. This is a golden opportunity to use British resources to develop British industry in Wales. Why are we stalling?
In his review, Sir Charles Hendry said:
“We can either stand back and watch other countries take the lead…or we can decide that we should do what the UK has done so well in the past—spotting an opportunity, developing the technology and creating an industry.”
As Britain moves into a post-Brexit world, we need to ask whether we want to be leaders or followers. Today, I ask the Minister that very question. Are we ready to be world leaders and develop this new energy source in south Wales, or are we going to be left behind waiting, this time for someone else to steal our lead? We cannot afford to let this slip through our fingers. We need an answer. We need the lagoon, and we need it now.
Thank you, Mr Paisley. You have indeed improved your pronunciation of my name. I would like to thank my hon. Friend the Member for Ynys Môn (Albert Owen) for securing this debate.
With the Government pursuing an ill-advised and short-sighted attack on renewables, the UK is set to miss its target. To put that into context, the EU is set to meet its target of producing 20% of its energy needs from renewable sources by 2020. The UK is missing even its own unambitious targets. That has not happened in a policy vacuum: it is a direct result of the Tories scrapping subsidies for onshore wind farms, solar energy, biomass fuel conversion, and killing the flagship green homes scheme—I could go on, as they have made many more decisions as part of their sustained attack on renewable energy.
In my constituency, we have a company called Gower Power that develops renewable energy projects and specialises in putting them into community ownership. That project will provide enough energy for 300 homes and create more than half a million pounds of funds for developing other community eco-projects. The Gower Regeneration project has been supported by the Welsh Government. It would not have been supported by the Conservatives. It serves as a telling case study into the contrast between a Labour Government’s support for new, renewable forms of energy and the Conservatives’ slashing of support for them.
The Welsh Government are completely committed to renewable energy and, despite significant budget cuts passed down from Westminster, have supported projects such as the Gower solar farm through their Energy Wales plan. Energy Wales is a framework and delivery plan for how Wales will transition to becoming a low-carbon country. Only a few years after its inception, solar farms such as the one in my constituency are springing up as a result of the Welsh Government’s foresight on this issue. Gower offers the perfect environment for a wide range of renewables, including the impressive onshore wind farm in Mynydd y Gwair.
In this harsh climate for renewables, new solutions and radical ideas are needed. We are talking about the Swansea bay tidal lagoon today, which is supported by parties of all colours. It is particularly notable that Conservatives from Swansea took to the seas this summer to support the tidal lagoon. Welsh Tories are behind it, so what is going on? The conditions around the Swansea bay make it perfect for a project of this nature. Both the River Tawe and River Neath enter the sea there. The proposal would build 16 hydro turbines and a six-mile breakwater wall around the area, generating enough energy to power 155,000 homes for the next 120 years. Where the Government’s short-sightedness has created a huge hole in our capacity to power our country in future years, the Swansea bay tidal lagoon offers us a way forward.
The benefits are not just environmental. West Wales was found by the Inequality Briefing to be the poorest region in northern Europe. Large infrastructure projects are few and far between. The Swansea bay tidal lagoon offers a rare glimpse of UK Government-provided hope in an area too often forgotten about by those who currently run Westminster.
My hon. Friend, who is a great advocate for the lagoon, will know that the constitution of the Welsh Government contains a commitment to sustainable development. With talks about changing powers post-Brexit, does she agree that this is the time to move the power to take leadership of green projects with the resources from Westminster to Wales, so that we can get on with the job of delivering a green future with our lagoon?
I agree with my hon. Friend. We have to move forward, and we need the infrastructure commitment from Westminster to be able to do that.
The tidal lagoon has a projected £1.3 billion capital spend, the majority of which will be spent in Wales and across the UK. The construction period is expected to contribute £316 million in gross value added to the Welsh economy and £76 million a year thereafter. In an area still struggling to recover from the loss of mining and manufacturing industries, the Swansea bay tidal lagoon offers a bright future for Wales post-Brexit.
Despite the money invested so far and the Government-commissioned Hendry report calling for the project to be signed off as soon as possible, where are we? The Government have now been sitting on the Hendry review for longer than it took Charles Hendry to conduct it. That is not acceptable. Investors’ money will not last forever, and we need to move on.
Labour’s Welsh Government and First Minister Carwyn Jones are delivering for Wales. We have Labour’s Swansea Council leader Rob Stewart delivering through the city deal. Everybody is behind it, but when the Conservatives in Westminster have a chance to deliver for renewable energy, for investment and for my constituency of Gower, they dither and delay.
Ultimately, it is not just my constituency that would feel the benefits of this project. Swansea bay tidal lagoon is a pathfinder project; we all know that. It offers a completely scalable blueprint for the programme, opening up the opportunity for a fleet of tidal lagoons across the country of varying sizes. Economies of scale apply, so the proposed follow-up larger lagoons could provide an even cheaper energy price. The Swansea bay tidal lagoon is therefore the litmus test for a renewable energy revolution across the UK.
It is a pleasure to serve under your esteemed chairmanship, Mr Paisley. May I also congratulate my hon. Friend the Member for Ynys Môn (Albert Owen) on securing this important debate? He coined the phrase “energy island” to describe his constituency. His dynamism and personal energy are recognised far and wide, in the Chamber and across Wales. In fact, I think if National Grid were to plug a couple of power cables into him, it could probably power the whole of north Wales—that might be painful, though.
My hon. Friend made a comprehensive speech, lasting half an hour—and thank God he did, because I think the debate will run short. He touched on many big projects, such as Wylfa Newydd and the tidal lagoon project for Wales, but also smaller projects, including small solar projects, Dinorwig pumping station and clean coal as a transition. It was a wide and comprehensive speech, and once again I congratulate him.
Wales as a nation is blessed with natural geographical and geological assets, which have contributed to the energy of these islands for centuries. Our coalmines supplied the energy for the industrial revolution; as we all know, the first industrial revolution in the world was in the United Kingdom. That energy was supplied from south Wales coalmines. They supplied the steel mills, the factories and the steamers that traded around the world. I pay tribute to the brave miners who dug black diamonds from the earth. As the saying goes, the earth does not give up its treasures lightly. Many miners lost their lives. In fact, there were 200 mining disasters and 6,000 men died. The first disaster was in 1766 and the last in 2011.
I pay tribute to the miners. The loyalty of and sacrifice by those brave men was rewarded by the previous Conservative Governments’ pit closure programmes in the 1980s and 1990s. The Minister may laugh, but the constituencies and communities affected are still suffering to this day.
There is this myth about the closure of mines by Conservative Governments. Will the hon. Gentleman confirm that more pits closed in Wales under the leadership of the Labour party, under Labour Governments, than under any Conservative Government?
The big difference between what occurred under Labour and under the Conservatives is that the communities were left high and dry under the Conservatives. It was a political decision to close those mines. It was spite because of the industrial action by the miners. That was the big difference, and those communities are still suffering today. I want to move on to more modern times, but I thought I would just give the historical perspective.
I hear this argument from the Conservatives about closures under the Wilson and Callaghan Governments. Those mines were exhausted; there was no coal left—that was one reason why they closed them —or they were dangerous and flooding. That was why they closed them down; it was not for political reasons, but for economic reasons.
I will move on now, Mr Paisley.
We now live in greener, cleaner times, but the Conservative Government’s attitude to energy, and especially renewable energy, in Wales has not changed. I was privileged to open Wales’s first offshore wind farm—in fact, according to Wikipedia, it was the UK’s first major renewable power project—which was located off the coast of my constituency, off Rhyl and Prestatyn. North Hoyle was a pilot, test-bed project for this new industry in the UK. It had the full support of the Welsh Government, the UK Labour Government, the local MP—me—and Ann Jones, the Assembly Member. Can I ask the Minister whether he supported that project—the wind farms off north Wales—when it was proposed?
In relation to Gwynt y Môr, I was on the beach in Llandudno, insisting that the Gwynt y Môr project should ensure that there would be a local supply chain, and I am very proud of the fact that the further education college, Coleg Llandrillo Menai, is supporting the training of people to work on that site. The hon. Gentleman tries to score a cheap point, but fails again.
The leadership in Denbighshire was totally different, but again, we move on.
The North Hoyle project was an outstanding success, and I pay tribute to npower renewables, which has donated £80,000 a year since 2003 to local charities in the communities of Rhyl and Prestatyn. It was a blueprint for other renewable companies to embed themselves in those communities. Again, the support for these projects came from Labour politicians.
No. The Minister has had two bites of the cherry. He will have bags of time at the end as well; he can expand as he sees fit.
When the previous Prime Minister, David Cameron, was a candidate for leader of his party, he tried to curry favour in Wales. He visited the Tory party conference in Llandudno, pointed to the turbines outside in the sea and described them as giant bird blenders.
It was an example of the way the Conservative party has crudely used renewable energies to change its image. As well as the wind turbine on the Prime Minister’s house, there was “Hug a Husky”, but we all know that it was superficial. As soon as the Conservatives got into power, the worm turned—the winds of change turned. The Minister will know that many in his party were climate change deniers. My hon. Friend the Member for Ynys Môn pointed out that some of them have come around, but there is still a deep, ingrained resistance to green, renewable energies in his party.
I would like to compare and contrast the position of the Conservatives with the support that Labour gave, both in the Welsh Assembly and in Westminster. Labour supported this nascent renewable energy, wind energy, and it was a great success. We are seeing the benefits of that support today—last week, in fact—with prices per kilowatt-hour tumbling as the economies of scale take hold, research improves and manufacturing costs are reduced. It was a sound investment then, and we are looking for sound investments now and in the future in renewable energies.
Labour attempted the same level of support for the solar industry in the UK. In 2009-10, we set feed-in tariffs, in conjunction with listening to Japanese and British manufacturers, at a level that would result in investment in and actual manufacture of solar panels in the UK—not in China, but in the UK, and specifically in Wrexham in north Wales. There was a plan by the Japanese manufacturer to build the biggest solar panel factory in the whole of western Europe, but when the Conservative-coalition Government got in, they reduced the feed-in tariff rates and the Japanese factory pulled out.
My hon. Friend the Member for Ynys Môn said several times that what these new industries, and established industries, need is continuity—certainty for the future. Industries that will require billions of pounds of investment need consensus and continuity, to ensure that their investments will be sound and solid and the plug will not be pulled on them with a change of Government or on a whim.
We see the same measures being employed right up to today with tidal lagoons. The Labour politicians in south Wales, the Labour Welsh Assembly Government, are engaging with those companies because they realise that of the six tidal lagoons proposed for the UK, four will be in Wales. One is proposed off the coast of my own constituency, off Rhyl and Prestatyn, and one is proposed off Conwy as well. I have had a briefing from the two companies that want to take the project forward. It will be fantastic: it will create jobs and tourism; it is futuristic; and it will have a road all the way round it. That is the type of project that needs to be supported by the Government.
I pay tribute to my hon. Friends the Members for Swansea West (Geraint Davies), for Swansea East (Carolyn Harris) and for Gower (Tonia Antoniazzi) and, even though he is from 200 miles away, my hon. Friend the Member for Ynys Môn, who talked about tidal lagoons in his speech because he recognises their importance.
There is the tidal pilot project planned for Swansea bay. That will be the first purpose-built tidal lagoon in the world and it needs extra care, nurturing and attention, because it could change the way energy is delivered or harnessed on the whole of the planet. That is worth investing in. The investment that we put into wind in 2003-04 looked as though it was a bad investment at the time, because it was at a high rate, but we are reaping the benefits now, 13 or 14 years later. That is the kind of long view that we are looking for from the Government for lagoon energy in the UK, because good things will flow from it.
I am talking about research, building skills and manufacturing expertise, and all those could be exported around the world. The Government have shown little enthusiasm for this sector, and it is beginning to dry up. There is lots of enthusiasm all over Wales and especially around the Swansea area. Can I ask the Minister a question?
He says I cannot, but I am going to ask it anyway. Will he declare his love for the lagoon? There is a local campaign called “Love the Lagoon”—it involves Conservative councillors, Conservative politicians and Conservative Members who are keen to expand that because they can see the benefit for their community. Does he love the lagoon—if that is not a personal question?
Let us look at some of the arguments that the Government have put or may put forward for weakening their support for tidal lagoons. Will they be saying that prices for wind power have dropped so much that it will make lagoons unviable? The success of wind energy is down to early political and financial support, and we want the financial support that we offered then to be replicated now by the Conservative Government to make sure that these proposals go ahead.
The Swansea lagoon, like North Hoyle, was a test bed—a pilot project to test the effectiveness of lagoons and to learn from that experience. The cost of funding the Swansea lagoon—the pathfinder—is equivalent to the cost of a pint of milk a day for every household in the UK. That is a sound investment, as far as I am concerned. If it works, we can expand it to Cardiff bay, Liverpool bay, Colwyn Bay and England, to make sure that we stay at the forefront of this great, new, green technology.
The Welsh Government have given their full support to tidal lagoons. Senior Cabinet Ministers from many Departments have met Charles Hendry and fully engaged with him. The Welsh Government have invested in the skills demand and supply report for the proposed Swansea bay lagoon development, and have provided a £1.25 million commercial loan to the tidal lagoon company.
Absolutely, there was cross-party support. I think that there are even Conservatives who support it down there. In the meantime, we have prevarication and procrastination by the UK Government on the matter of lagoons. Welsh Government Ministers wrote to their UK counterparts in April and June of this year, and I believe that the June letters have still not been responded to. Will the Minister look into that?
Tidal lagoons also have an added benefit in that they will protect the coastlines where they are located from flooding. Both Denbighshire and Conwy have suffered terrible floods. The Minister will remember the floods in the early ’90s in Sir Anthony Meyer’s old seat, Clwyd North West, in Conwy county. Five thousand homes flooded. We had floods as recently as two years ago in my constituency. There has been coastal flooding from waves and the sea. That would be prevented if we were able to establish these tidal lagoons off the coast of Wales.
That is the point that I am trying to make. They are about tourism, flood defence, manufacturing, skills and research. That is why Welsh Ministers from different Departments have engaged on the issue, and that is what we want to see from the UK Government. We want to see Ministers from the Department for Business, Energy and Industrial Strategy, the Department for Environment, Food and Rural Affairs and other UK Departments engaging positively with Charles Hendry, the Welsh Government and the Welsh Assembly to make sure that these projects go ahead.
One of the arguments made—perhaps not by the Minister, but by others—is that with wind power and solar power, the wind is not always blowing and the sun is not always shining. With tidal lagoons we can predict down to the minute when the energy will be created over the next 125 years. It is all down to the moon and the movement of tides. That could create a predictable baseline of support for our national energy mix, on top of solar, wind power and nuclear, so that we have a good baseload of support.
All these renewable energy sources also become more viable with the advent of batteries. The lagoon will produce energy throughout the night, and if that can be stored in batteries it can benefit the rise of the battery-powered car industry in the UK. I ask the Minister to take these issues way and to consider them carefully. Hopefully, cost will not be an issue. I believe that £700 million will be saved by the cancellation of the electrification of the Cardiff to Swansea route. Can some of that money—just a fraction of it—be used to prime the Swansea economy and to support it?
I move on now to Wylfa Newydd. At £12 billion, it will be single largest investment project in Wales over the next 10 years. It has the potential to transform the economy of not only Ynys Môn and Gwynedd, but the whole of north Wales. Again, the Welsh Government have been working flat out to secure this development. It is their No. 1 priority as far as the economy is concerned. Successful delivery will involve many Welsh Government Departments if we are to maximise the economic benefit and reduce any negative effects on the environment and culture in Wales, so there is total engagement.
Big issues need to be addressed, such as the new power station’s access to the national grid and the building of a third crossing over the Menai strait. All those ducks need to be put in a row before this project starts. Again, we are looking for engagement and consensus between the Minister, MPs and Departments in Whitehall and the Welsh Government. There are many stakeholders, including local authorities; the company itself, Horizon Nuclear Power; the North Wales Economic Ambition Board; and the national Government. There is a good mix of groups and organisations, and we need to gel them together to get this renewable energy up and running in Wales.
I do not mean to take my hon. Friend off track, but I will just take him back to what he mentioned a moment ago about the cost of rail electrification to Swansea being put somewhere else. I just make the point that there are many of us across Swansea who want to hold the Conservatives to David Cameron’s promise to bring about electrification, and to keep that money in that project and deliver electrification for Swansea bay.
I will do that, Mr Paisley—absolutely. Our No. 1 fight in Wales at the moment is to ensure that electrification from Cardiff to Swansea takes place. We have not given up. We will still be pestering. We tabled questions last week and this week, and are organising meetings. We have not given up on that.
In conclusion, we have two great opportunities to return Wales to her former glory as a provider of the nation’s energy, this time with cleaner, greener technologies that will last hundreds of years, create tens of thousands of jobs and, most importantly, save the planet. I urge the Minister and his Government to rise up to the challenge, do their bit for Wales, the UK and the planet, and get these projects moving.
It is a pleasure to serve under your chairmanship this afternoon, Mr Paisley.
I congratulate the hon. Member for Ynys Môn (Albert Owen) on a wide-ranging, detailed speech, which is nothing less than I would expect from him. He has always shown a great interest in the energy sector in Ynys Môn, and his enthusiasm and hard work in Anglesey is well understood by myself, from both before I was elected to this place and since. I suspect that he was very pleased that in June the people of Ynys Môn acknowledged that hard work when they provided him with the largest majority that he has enjoyed since he was first elected to this place in 2001. I congratulate him on that comprehensive success.
I considered the hon. Gentleman’s speech to be very wide-ranging and thoughtful. It was made in his typical manner—he always tries to be consensual and cross-party in his approach. I believe that is one reason for his recent success. It is fair to say that some of the speeches then fell into party political point scoring. That is a great shame because, as many Members have said, there is cross-party support for energy developments and opportunities in Wales. There is cross-party support for the nuclear sector in Anglesey—perhaps not from all parties in all parts of Wales, but certainly from all parties in Anglesey. There is cross-party support for the concept of a small modular reactor in Trawsfynydd, and for the concept of a tidal lagoon.
It is important to deal with the issue of the tidal lagoon at the outset. People want a tidal lagoon to be developed at Swansea. They can see the potential of the technology, and that the lagoon offers an opportunity for economic regeneration in Swansea and other parts of Wales. All Members in this place should support that. As the hon. Gentleman and other Members have mentioned, it is important to ensure that we have a cost-effective energy supply, prevent fuel poverty and avoid a situation in which businesses struggle to compete internationally due to energy prices. I therefore make no apology that this Government have commissioned the Hendry review and are taking it seriously.
My point, as the hon. Member for Vale of Clwyd (Chris Ruane) conceded in his speech, is that the funding of a tidal lagoon is a complex calculation that must be done by Government. He is absolutely right that we do not have to go back to the floods that struck Towyn in my constituency, for example, to understand the importance of flood defences in north Wales; there was flooding in Deganwy fairly recently. The construction of a tidal lagoon has the potential to deal with those issues, but I argue that flood defences are a devolved issue, not an energy generation issue.
A complex set of calculations need to be undertaken. The hon. Member for Vale of Clwyd also said that the cost, equal to a pint of milk a day, was eminently affordable. A pint of milk a day is £3.50 a week, or £14 a month. Before being flippant about £14 a month, he should remember that not all pensioners in Wales enjoy the salary of an MP. I would expect a Labour Member, of all Members of this House, to understand that £14 is a significant sum on a pensioner’s bill.
I believe that it was the hon. Member for Swansea West (Geraint Davies) who commented that good things are worth waiting for; that was certainly the case with the Welsh football team’s appearance at the European championships last year. I would rather have a good decision made in time than a rushed decision. This debate has highlighted the previous Labour Government’s decisions to invest in all sorts of concepts in Wales, but it is fair to say that by the time the coalition came into government, we were paying the price for how the Labour Government dealt with public money. It is much better to have a decision made on sound grounds, which is what we will provide, than an early decision.
The Minister is engaging in the knockabout that he said earlier he did not like. What I was arguing in my contribution was that we must make difficult decisions and investments in first-of-a-kind technology, to get that technology going. We did it in solar and wind, and we are reaping the benefits; I believe that we can do it in tidal as well, and the review says so. We have a competent Minister in Charles Hendry, who delivered it. He knows his onions. What we are getting from this Government is prevarication and pushback.
I am sorry, but I need to establish this. I have been trying to tie this issue into the electricity market reform and the mechanisms set up by this Government. The Hendry review fits into that. We have cost-effective mechanisms and capacity mechanisms. For joined-up thinking, we now need a decision from Government.
No, I will not take another intervention on this issue. I would like to move on to the main elements of the debate—the issues raised by the hon. Member for Ynys Môn. As he rightly said, there has been an element of political knockabout towards the end of this debate, but it is important to highlight that we in Wales have an opportunity to contribute significantly to the energy mix in the United Kingdom, and to lead on energy generation. To those hon. Members participating in the debate who commented that we have not provided that leadership or that opportunity, I highlight recently consented projects in Wales: the Brechfa Forest wind farm, the Clocaenog Forest wind farm, the South Hook combined heat and power station, the Hirwaun power station, the internal power generation enhancement at Tata Steel and the North Wales wind farm circuit connection, which has benefited both my constituency and that of the hon. Member for Vale of Clwyd. We have had the Brechfa Forest connection; the Glyn Rhonwy pumped storage system, also approved recently; and the Wrexham energy centre at the Wrexham industrial estate.
If we were to believe the comments of the Labour party—
On a point of order, Mr Paisley. Is it in order for the Minister to refer directly to a comment that I made about the Government’s prevarication over three or four years about the cost of energy, which has created massive uncertainty in the business community, but not to allow me to intervene on that point?
I highlight again, therefore, in response to the comments that this Government have not supported energy generation in Wales, that the facts speak for themselves. The opportunities for further development have been discussed by the hon. Member for Ynys Môn and other hon. Members. I turn particularly to Anglesey’s potential for nuclear.
I think that everybody who is committed to the economic regeneration of north-west Wales is aware of the potential in nuclear. The hon. Gentleman has been rightly applauded by colleagues from all parties for the work that he has done to ensure that the development of nuclear does not happen in a vacuum but is fully integrated into the further and higher education sectors. We in north Wales can only be proud of how the HE and FE sectors are investing, in advance of any decision on the nuclear station on Ynys Môn, in order to ensure that the economic opportunities that come along with it are available for local people as well. We should be proud of that integration. Similarly, he highlighted that renewable energy is a success story in Wales. One of those successes, as I mentioned in an intervention, is the way that the FE sector in north Wales has tried to ensure that work opportunities servicing wind farms off the coast are open to local people.
North Wales is taking an integrated approach. The Government—both the Wales Office and the Department for Business, Energy and Industrial Strategy—recognise that as a positive sign of an area that is looking constructively at how we can contribute to the UK energy mix. Nuclear offers great opportunities as well as great challenges. This Government are the first to have commissioned and agreed to a new nuclear power station, but that was also a long-drawn-out process, because the sums involved and the implications of the investment are significant. The same will be true of the new Wylfa Newydd. It is imperative, in my view, that we reach a successful conclusion. In Horizon, we have significant partners willing to work with Government, but the decisions have to be right.
As a Minister in the Wales Office, I am pleased. I take with a pinch of salt the view of the hon. Member for Ynys Môn that I should not be in my place today, but I would have attended this debate regardless. Since taking my position at the Wales Office, I have been pleased to visit the current Wylfa station before decommissioning started, I will be pleased to visit the new proposed site and I have been pleased to visit Trawsfynydd, because the Wales Office knows full well how the energy mix in Wales can contribute to our economic redevelopment. That is why so many Conservatives in south Wales support the lagoon.
The small modular reactor opportunity is also an exciting prospect. The hon. Member for Ynys Môn mentioned the cabling systems that will be required to transfer electricity from Wylfa Newydd; my understanding is that the potential site of a small modular reactor in Trawsfynydd already has enhanced connectivity to the national grid. I take seriously the opportunity to build a small modular reactor in Trawsfynydd, and I am pleased to say to the House that I will visit there on Tuesday with a Minister for the northern powerhouse. We understand that although the consequences of a decision on Wylfa Newydd or a small modular reactor in Trawsfynydd would benefit the economy in north Wales, they are far more significant than that. As hon. Members have said, they have the potential not just to transform the economy of north Wales—as other projects could in south Wales—but to have an impact on the wider supply chain within the United Kingdom.
Contrary to Opposition Members’ comments, the Government have invested in city region deals for Cardiff and Swansea, so I must ask why we are accused of ignoring the Swansea city region. One reason for the Welsh and UK Governments’ keenness to see a cross-border north Wales growth deal is the energy supply chains. The energy opportunities in north Wales are not confined to north Wales; they are dependent on cross-border connectivity.
I apologise; I meant Swansea West. The hon. Gentleman should be aware that the Swansea city deal includes a number of projects, but the tidal lagoon is not one of them, although it has certainly contributed to the development of the city region. I would have expected him, as the local MP, to understand what was within the deal in question.
I should also address the possibility of moving forward with the small modular reactor—as I said, we will visit Trawsfynydd very shortly—and the renewables issues that hon. Members have raised. Our track record on renewables is positive. I fully accept that wind farm costs have fallen quite significantly as a result of investments made, but I think the comments of the hon. Member for Vale of Clwyd about the success of our renewables project since we have been in government were unreasonable. There has been more than £52 billion of investment in renewables since 2010—not an insignificant sum.
As for expected energy generation, we are now on track to deliver 35% of the UK’s electricity demand through renewable sources. Far from being a failure, that is a success story that we should be proud of. I am surprised by the accusation that the Government have not been proactive in our investment within the renewables sector. The evidence points the other way. It is all very well talking about projections, but in 2015 we achieved 25% of energy generation through renewable sources.
These are successful outcomes of an integrated Government policy that should be supported. Their success is reflected in the fall in the cost of renewable sources of energy. Opposition Members talk about failure to support developments in Wales, but it is worth pointing out that 49,662 sites in Wales are generating renewable energy—another success story that we should be proud of.
That point brings me on to an issue raised by the hon. Member for Ceredigion (Ben Lake). I have not responded to him in this Chamber before, so I welcome him to his place. He is absolutely right that one of the success stories of north-west Wales has been community hydro projects. My constituency has a few such projects, and I know full well that there are similar projects in the constituency of the hon. Member for Arfon (Hywel Williams), who is not here today. Community energy projects are really exciting, because they generate electricity locally and give a financial benefit to the locality. The Government support such developments, which are crucial to our energy policy, but we need to highlight to the Welsh Government how they are taxed differently in Wales from in Scotland and England.
The Welsh Government have been very constructive on energy generation in many ways, but the taxes on community projects—on equipment used in small hydro plants, for example—are not beneficial to the development of further community projects. That can be contrasted with the situation in England, which is a result of the UK Government’s decisions, and in Scotland. The Barnett consequentials of the decisions made in England could be applied in Wales; certainly the funding has gone to Wales.
We have a good story to tell on renewables. It is a success story that has really touched the grassroots, but we need to make sure that it continues, and that requires action both from the Welsh Government and from Westminster.
I apologise that I am running out of time, but I would like to allow the hon. Member for Ynys Môn time to conclude. He mentioned marine energy opportunities beyond tidal lagoons. I fully understand why tidal lagoons have dominated the debate—the hon. Members for Gower (Tonia Antoniazzi), for Swansea East (Carolyn Harris) and for Swansea West have a real interest in the issue, as do Members throughout Wales, because we understand the potential—but there is a real opportunity for innovatively designed marine energy proposals in Wales. I know that for a fact, because I have visited potential developments off Holyhead and off the Pembrokeshire coast. This is an opportunity for new technology to be developed to put Wales at the forefront of renewable energy opportunities.
The Government are looking carefully at these issues. We want to be supportive, which is why I have visited sites in Pembrokeshire and Ynys Môn and met Anglesey developers. We want to see renewable technologies operating in Wales, but within the context of an energy policy that is fair to the consumer and the business user and supports the development of the energy sector in Wales and the job creation that goes with it.
I thank the hon. Member for Ynys Môn again for bringing the matter to our attention. I apologise if I did not respond to every issue he raised, but 15 minutes is 15 minutes, and I am more than happy to write to him with further guidance on any specific issues. To hon. Members who are concerned about the wait for the tidal lagoon decision, I say that the Wales Office continues to argue strongly for that decision to be made, but—as has consistently been stated—it must be right for Swansea, for people who support the tidal lagoon there, and for our energy policy and its costs. That is the decision that the Government will deliver in due course.
I will not take two minutes, because Members who are here for the next debate missed my opening remarks; they would be at a loss if I came to a lengthy conclusion.
Welsh Members of Parliament are passionate about energy in Wales. We have a good record; we pioneered many technologies in the past, and we want to do so in the future. I take on board what the Minister said about the continuation of renewables policy, but the heavy lifting was done by the previous Government. This is the time and the opportunity for the Government to show their credentials. They started the Hendry review; it is time for them to respond positively to that review and to move forward.
I give the Government nine out of 10 on new nuclear. We need to move forward on small module reactors. We need to be pioneers. I want Wales to be central to the industrial strategy, which it can and will be if the Wales Office, BEIS and others work with the Welsh Government, with business and with the community, so that Wales is at the forefront of energy in the United Kingdom.
Question put and agreed to.
That this House has considered energy in Wales.
Armed Forces Pay
[Steve McCabe in the Chair]
I beg to move,
That this House has considered armed forces pay.
It is a pleasure to serve under your chairmanship, Mr McCabe, and to have secured my first debate in Westminster Hall today, following my maiden speech in the main Chamber yesterday.
Portsmouth has a proud military history. It is one of the most famous ports in the world and our association with the Royal Navy continues to go from strength to strength. Our naval base is home to almost two thirds of the Navy’s surface ships and we have recently welcomed the new aircraft carrier, HMS Queen Elizabeth. We look forward to welcoming the second new carrier, HMS Prince of Wales, in the near future.
The Navy is an intrinsic part of my home city, its DNA and my own family’s history, and the naval dockyard is hugely significant to the local economy. A tenth of Portsmouth’s workforce is employed there, either in the armed forces or as part of the civilian workforce who support the Navy’s work there. I pay tribute to all their work, but for today’s debate I will focus on the work of our armed forces and specifically on their pay.
I called for this debate because our armed forces have been subject to years of pay restraint in the face of rising costs and increasing pressure on their incomes. This week, we have all seen the displeasure of public sector workers about the 1% pay cap as well as the hard work of their various unions in speaking out for them, which, hopefully, is now starting to effect real change. However, our armed forces do not have that voice; we have a responsibility in this place to be their voice. We have to speak out about their pay, pensions and working conditions if they are to see any improvements.
I will focus on three areas today: pay restraint; rising costs; and, finally, recruitment and retention. First, there is pay restraint. Like other public sector workers, members of our armed forces have been subject to pay restraint for several years. New figures from the House of Commons Library show that the starting salary of an Army private is now down 5.3% in real terms since 2010—a cut of more than £1,000 a year.
I suspect that the Minister will tell us that it is the Armed Forces Pay Review Body that makes recommendations for armed forces pay, and that the Government have accepted those recommendations. However, it is clear from the review body’s 2017 report that they are making recommendations with the constraint of the cap in mind. The report states that both the Chief Secretary to the Treasury and the Defence Secretary reinforced that approach in Government policy. The report even goes so far as highlighting the review body’s concern with the cap, saying that
“We commented last year that we were concerned about the sustainability of the current ongoing pay restraint policy, and that continues to be our view”.
I ask the Minister today whether similar constraints will be put on the review body when it makes recommendations in the future. If the Government decide to lift the public sector pay cap for our armed forces, will the review body be given a chance to produce an interim report so that new pay levels for our armed forces can come in as quickly as possible?
The second area that I will cover is rising costs. It is not just the case that pay is being restrained; it also comes at a time of rising costs for families across the UK, with some specific rising costs for forces’ families, which my constituents have raised with me personally. There is a new combined accommodation assessment model that uses new grading criteria, and it will see charges increase for about three quarters of service families accommodation occupants.
Armed forces personnel have also seen their national insurance contributions rise. Again, I refer to the pay review body’s 2017 report, which made the situation very clear:
“A common theme from our visits was that the one per cent basic pay award…was not perceived as an increase as it coincided with increases in National Insurance, changes in tax credits and…increases”—
that is, other increases—
“that left a number of Service personnel seeing a reduction in take home pay.”
My third and final point is about recruitment and retention. Pay restraint is not only hurting our armed forces personnel in the pocket but it is clear that it is having an impact on the ability to recruit and retain personnel. When it comes to recruitment and retention, our armed forces are in crisis. All of our services are running at a liability of 5.1%. Figures released just today show that, for the first time and even by the Government’s new and questionable definition of “trained”, the Army has fallen below 82,000 in number. Its full-time “trained” strength is 81,920 and the numbers are trending downward.
That is nothing short of a broken manifesto commitment by the Conservatives. They promised us that they would keep Army numbers above 82,000. The Government now urgently need to take action, and although I recognise that dealing with pay will not solve all the existing problems, it is a good place to start. This year’s armed forces continuous attitude survey showed how unimpressed our services personnel are with their pay. Only 33% of respondents were satisfied with their basic rate of pay. By comparison, in 2010 satisfaction with pay was at 52%. Can the Minister identify what might have changed since 2010 to cause that 19% drop?
Among all those members of our armed forces who have put their notice in to leave, pay was the fifth most significant factor in making that decision. However, when we look just at “Other Ranks”, pay was the fourth most cited reason. Opportunities outside the armed forces also played a strong role in people’s decision to leave. The Army Pay Review Body’s latest report highlights that the review body has experienced this attitude at first hand, stating on page 53 that
“our visit programme made clear that Service personnel are becoming increasingly frustrated with public sector pay policy. They feel their pay is being unfairly constrained in a period when costs are rising, private sector earnings are starting to recover, and the high tempo demands on the Armed Forces have not diminished.”
The evidence is there: voluntary outflow is hugely high and recruitment is stagnant. If the Government do not get to grips with this problem soon, operational capability will start to diminish. Our armed forces are enormously professional and are respected around the world. They can do a lot with a little, but we have to be realistic: if we do not meet recruitment targets, they are not going to be able to do everything that we want them to.
So far, I have been disappointed with the Government’s responses to questions from my colleagues about recruitment targets. When asked for specific details about future targets, Ministers have responded with vague, single-sentence answers, such as:
“The Government is committed to maintaining the overall size of the Armed Forces”,
which the Minister for the Armed Forces recently wrote in response to the shadow Defence Secretary, my hon. Friend the Member for Llanelli (Nia Griffith). This makes me concerned that the Government are not taking this issue seriously.
In conclusion, I have recently returned—hot-foot—from the Defence Academy of the United Kingdom, where I saw at first hand some of the challenges that our armed forces face, and I want to put on the record my encouragement to any Member of Parliament to consider attending this useful scheme. However, some of those on the frontline have said to me that they now feel undervalued and unappreciated, and that morale is low. When I asked them what I personally could do as a new Member of Parliament, their feedback was, “Make sure the Government make us feel valued again”.
Given all his experience, the Minister will understand the severity of the current problems regarding the plans to lift the 1% pay cap for the armed forces. I hope that he will get to grips with that issue.
It is an honour to follow my hon. Friend the Member for Portsmouth South (Stephen Morgan), who made such an eloquent maiden speech in the main Chamber yesterday. To throw himself in at the deep end with a maiden speech and then a 90-minute Westminster Hall debate less than 24 hours later shows the grit and determination that Portsmouth seems to instil in its MPs. I commend him on securing this debate.
I share my hon. Friend’s interest in the armed forces. As the son of a submariner, I know that armed forces pay is not only about supporting and rewarding those people who serve our country but about putting food on the table for families right across the country. Nowhere is that closer to my heart than in Devonport, which is the country’s largest naval base—indeed, it is the largest base in western Europe—and home to many of the frontline fighting forces that our country so relies on. It is also home to half our nation’s frigates and to our amphibious assault craft, including HMS Ocean, which at the moment is doing such a good job in supporting the relief effort for our overseas territories and our friends in the Caribbean.
Plymouth, Sutton and Devonport is also the spiritual home of the Royal Marines, at Stonehouse Barracks. Sadly, that base is due to close under Conservative Government cuts. We are also home to the Army and the Artillery at the Royal Citadel: again, a base that is closing. The Army numbers and the Royal Marines and Navy personnel in Plymouth are an integral part of our city. The cap has had an effect not only on the ability of those forces’ families to afford to pay their bills, but on the contribution that they can make to our local economy.
Figures from the Library show that the number of armed forces personnel in the Navy and Royal Marines in Plymouth have fallen from 7,240 in 2010 to 5,000 now. Each job lost and each job transferred away from Devonport means less money spent in our communities and in our shops. There is a further cut in terms of officers in the Army and even in the RAF, which is not something that Plymouth is widely known for, although we have a few of them.
It is important to look in detail at what the pay means for each of the different ranks in the armed forces. There is a real manpower and personnel crisis in our armed forces, not only in terms of recruitment, but in retention as well. In particular, I want to talk about what it means for the engineering grades in the Royal Navy. Within the engineering sector there is a real concern about how many engineers we are producing and where we are recruiting them. If it were not for the assistance of our friends in the US Coast Guard and in fellow NATO countries, we would not currently be able to put the ships to sea that we are able to because we have so few homegrown engineers. One of the big reasons why engineers are leaving the senior service is pay: not only the pay cap, but the draw of larger rewards in the private sector.
In the far south-west, if someone holds an engineering qualification, particularly a nuclear engineering qualification, they are in heavy demand. The ability of the nuclear industry to continue to grow with the new nuclear builds and the potential decommissioning work adds to the draw of the private sector for a lot of our Royal Navy engineering grades. That needs to be looked at because the pay cap is an arbitrary tool that has been applied for ideological reasons; it does not look at what the consequences are. Can the Minister tell us what is the additional cost of recruitment and the additional cost of the uplift that we need to bring in freelance and other types of engineers to support our Royal Navy and whether a relaxation of the pay cap for those grades would be a more efficient use of public money?
Figures from the Library show that, throughout the entire military, if there had been a 3% increase over the course of the pay cap since 2010, a private would now be earning over £3,000 more. A corporal and equivalent ranks would be earning nearly £5,000 more. Lieutenants—many people mispronounce that; I think they watch too much “Star Trek” and Americanise our grades—could be earning £4,000 more, and majors and equivalent ranks whose actual pay was £59,783 could have been earning £66,886. All of those are a draw against staying in our military.
The British armed forces are the finest fighting forces in the world. The arbitrary, ideologically driven pay cap affects not only our ability to retain the first-class talent that we have within our armed forces, especially at engineering grades in our naval dockyards and bases that both I and my hon. Friend the Member for Portsmouth South represent—it also affects how we recruit people to those grades. Will the Minister address what we are doing about engineering grades in the Royal Navy?
I imagine that Members here today share a common desire for the Royal Navy to succeed. An integral part of the Royal Navy’s success is looking not only at the capability of hulls and what we put on them—the new frigates, the new carriers, the new offshore patrol vehicles, the Type 45s and other ships—but at the personnel on board. I am really concerned that if the arbitrary pay cap continues in our armed forces, we will hollow out the expertise, especially around the specialist grades that we need to put our ships to sea. In a more uncertain world, we need to retain and recruit the very best for our engineering grades and for our frontline fighting forces.
The Government could take a big step forward and consider whether an arbitrary pay cap for our armed forces is the right way forward. Relaxing that pay cap or removing it altogether to ensure that people are paid the same in real terms this year as they should have been last year would be a way of recognising not only the fantastic work they do, but would recognise that in their pay cheque as well. I have had—I am sure my hon. Friend the Member for Portsmouth South has as well—people come to me since the election to say they are growing sick and tired of politicians saying warm words when people in our armed forces have stepped up to serve the country, but not rewarding them when it comes to the budget settlement about how much those people take home.
As we are all here because we respect and value the work of our armed forces, I ask the Minister to think seriously about how the pay cap is having a serious effect on retention and recruitment of specialist personnel in our armed forces and how that could be addressed in the coming years. We know a lot of skilled engineers are facing retirement, so we will be hollowing out our engineering grades. Will the Minister address those points when he responds?
It is a pleasure to see you preside over proceedings this afternoon, Chair. I congratulate the hon. Member for Portsmouth South (Stephen Morgan) on securing this debate and doing so just 24 hours after he gave his maiden speech, also on the issue of public sector pay restraint. It is obvious, given his first two outings in Parliament, that he will be a thorn in the side as far as public sector pay is concerned. He is absolutely right, so I wish him well.
Earlier this week I saw a tweet from the hon. Member for Plymouth, Sutton and Devonport (Luke Pollard). It said that he and his hon. Friend the Member for Portsmouth South often get mixed up because people think they represent the same cities. If they carry on in this vein, following each other, that will likely continue for the life of the Parliament. If you will allow me, Mr Chairman, I also wish to put on record my thanks—I hope other Members will join me, particularly the Minister—to a former Member of this House who sadly did not hold on to her seat at the general election: Kirsten Oswald, the former SNP armed forces spokesperson, who did a tremendous amount of work on the issue we are debating this afternoon.
I am surprised to see that there is not a single Conservative Back Bencher here to defend the Government’s position. Given their defence of the European Union (Withdrawal) Bill on Monday, the power grab on Tuesday and the pay cap on Wednesday, I thought they would at least make it along to defend their own Government, but clearly armed forces pay restraint was just a step too far. It seems there are indeed brass necks on the Tory Benches. Is it any wonder? The Conservatives have continuously painted themselves as the sole party in this Parliament that defends and stands up for the armed forces, while continuously painting my party and lambasting the Labour party as being what they see as weak on defence. But we have heard the figures this afternoon: targets for the size of the Army have been missed; morale is low; recruitment is in crisis; and pay has been cut and cut, by over £1,000 a year, with pay restraint for the past seven years.
There are other issues surrounding the pay and conditions of members of the armed forces. One of those was highlighted by a colleague of mine in the Scottish Parliament, Gordon MacDonald, the MSP for Edinburgh Pentlands. It concerned Ministry of Defence housing where the rents go up all across the country. In Scotland the new charging system introduced by the MOD has seen 81% of service families having to pay more rent than under the old regime. Complaints about MOD housing in Scotland, outsourced to Carillion, have gone up by a massive 43%.
I do not wish to speak for long because I am keen to hear from the Minister, who is very diligent. Although we crossed swords a couple of times in the previous Parliament, and no doubt will do so again in this Parliament, I and many in my party have a great deal of respect for him. I look forward to hearing what he has to say, but I will end with this. As was adumbrated in the House yesterday by members of my party, the Scottish Government have now committed to lifting the pay cap for all public sector workers in devolved Government agencies. It is about time this Government followed suit. The utterly bizarre stunt that was pulled yesterday, when they did not even have the gumption to march through the Lobby and vote for what we all know they believe, says it all. It made this place look like a banana Parliament. I have spent my political life arguing that it is a banana Parliament, but yesterday was perhaps the best—or should I say the worst—example of that.
I commend the Scottish Government for what they do to support service personnel, service families and veterans in Scotland as far as they can. The “Renewing our Commitments” document that they published last year came with £5 million of funding to try to support service families, who are having to deal with the burdens of the pay cuts imposed on them by Whitehall.
Defending the country is of course the first duty of Government. It is increasingly difficult to know how that is to be done with hollowed-out armed forces, a recruitment crisis and forces whose morale is at an all-time low. It is not just a matter of our commitments to them—and those commitments are supreme. We must ask what effect there will be on national security, and whether the current situation allows us properly to live up to the commitments that we make to our allies, to be a strong and ready fighting force to protect the people of this country.
I look forward to hearing what the Minister has to say, and I congratulate the hon. Member for Portsmouth South on securing the debate. I look forward to seeing him take on the Government, on this issue and many others, as the Parliament progresses.
It is a pleasure to serve under your chairmanship, Mr McCabe. I congratulate my hon. Friend the Member for Portsmouth South (Stephen Morgan) on making his second maiden speech. His eloquent words show strongly that he is a stout supporter of the interests of his constituents—particularly the armed forces and the Navy. It is particularly appropriate that we are holding this Westminster Hall debate today, because tomorrow is Battle of Britain Day and today is Support Our Soldiers Day. I have seen people taking to the streets of London to raise awareness of and funds for ABF The Soldiers Charity.
There can be no doubt that today, sadly, our armed forces as a whole face a crisis of recruitment and retention. In figures from the Ministry of Defence published only this morning, we are told that there are a total of 142,100 full-time trained personnel in all the services combined. That figure represents a stark reduction: on 1 April there were 143,090. The reduction is throughout the services—the Royal Navy and Royal Marines, the Royal Air Force and the Army. Let us not forget that the Conservative manifesto of 2015 said that the Army should not fall below 82,000. Yet the figures today show it is down to 81,920, and the situation is getting worse, not better.
A few months ago there was a good report, commissioned by No. 10 Downing Street, from the right hon. Member for Rayleigh and Wickford (Mr Francois), a former Armed Forces Minister. He reported that there was a crisis. That is my word, not his, but nevertheless he noted a severe reduction in the number of personnel in the armed forces. His figures were slightly different from what the MOD said this morning, but nevertheless the trend is quite clear. He said:
“The Regular strength of the UK Armed Forces is currently 138,350, 4.8% below the required number…In the year to April 2017, 12,950 people joined the UK Regular Armed Forces but in the same period 14,970 left.”
I share the regret that has been expressed that no Conservative Back Benchers are here for this important debate.
We must ask the reason for this unfortunate trend, and, as the right hon. Member for Rayleigh and Wickford said, there are several clear reasons. He comments that
“while more personnel continue to leave each year than to join, the recruiting organisations across the Services are increasingly ‘running to stand still’ to try to fill the widening gaps in the ranks. Whilst the most serious problems remain in the Army, this is also likely to prove an increasing challenge for the Royal Navy and the RAF as their liability will increase by several hundred over the next few years”.
He hints that the problem can be put down, in part, to concerns about the future prospects that the armed forces offer, and declining standards of accommodation, with quite minimal improvements, in many areas. There is also real concern about the levels of remuneration available—or not.
The findings and recommendations in this year’s report by the Armed Forces Pay Review Body are governed by Government diktat, but it is nevertheless obliged to paint the picture that it sees, objectively. It states:
“On levels of pay generally, our visit programme made clear that Service personnel are becoming increasingly frustrated with public sector pay policy. They feel their pay is being unfairly constrained in a period when costs are rising, private sector earnings are starting to recover, and the high tempo demands on the Armed Forces have not diminished.”
I think that that is objectively correct, and it underlines the unfairness of the Government’s policy and attitude. It is essential to provide an objective facility so that honest recommendations can be made. Unless the Government have real reasons to reject those recommendations, they should be obliged to accept them. New figures from the House of Commons Library show that, for example, the starting salary of an Army private is down 5.3% in real terms since 2010. That is a cut of more than £1,000 a year.
We all want young men and women to join the armed forces in greater numbers, but—hand on heart—how on earth can anyone be persuaded to go into something with limited career prospects, where the living conditions for them and their family would be far from good, and where they would be likely to see a continuing fall in their standard of living? It is clearly unacceptable, and we strongly urge the Government to take a comprehensive approach to lifting the 1% public sector pay cap and to allow the Armed Forces Pay Review Body to make recommendations on pay rises for the armed forces. The Government should allow it to do so without restriction.
That seems to be a perfectly reasonable request, and it is one that many in the House support, including, I suspect, many Conservative Members—that is why they are not here to support the Government this afternoon. It will be warmly welcomed by the armed forces and those proud men and women who defend our country, sometimes in the most difficult circumstances. A point was made earlier about how the armed forces do not have a trade union to speak for them and are constrained in their access to the media to get their message across.
The issue of an armed forces trade union for non-commissioned personnel featured in the Scottish National party’s manifesto. I am unsure about the hon. Gentleman’s party’s manifesto, but it sounds as though he supports the principle. Will he note that, just this month, a captain has been named as the general secretary of the trade union for non-commissioned armed forces in Denmark? Is it not about time that we followed countries such as Denmark, Germany and the Netherlands and established that here in this country?
I hear what the hon. Gentleman is saying, and there is a strong argument for it, but it would be unfortunate if we allowed that issue, important as it may be, to distract us from the central issue before us this afternoon, which is our request—it is a cross-party request, I hope—for the Government to comprehensively lift their 1% pay restraint on the public sector, including the armed forces.
In conclusion, as things stand at the moment, there are few external voices to support the armed forces. The armed forces themselves are constrained in what they can say, so it is all the more up to us to put forward their case with strength, determination and, I hope, unity. Through that, the Government can clearly hear the voice of the House of the Commons. They should adopt common sense and fairness and change their policy forthwith.
It is a pleasure to serve under your chairmanship, Mr McCabe, and to respond to this debate. I declare an interest, which is in the Register of Members’ Financial Interests: I am ex-Army and a lieutenant colonel in the reserves. I pay tribute to the other coastal towns that have been represented in the debate by the hon. Members for Portsmouth South (Stephen Morgan) and for Plymouth, Sutton and Devonport (Luke Pollard). I represent Bournemouth. I think the only Members present who do not represent coastal towns are the spokesmen for the SNP and the Labour party, the hon. Members for Glasgow South (Stewart Malcolm McDonald) and for Caerphilly (Wayne David). Nevertheless, the debate has been helpful in understanding and sharing concerns about public sector pay specific to the armed forces.
A number of Members have made perhaps a little bit of a political point, asking where the Conservative Members are in this important debate. I could say to the SNP spokesman that there are no SNP Back Benchers here either; he is his party’s sole representative. Many Members who would have been here today are participating in the armed forces parliamentary scheme. That is why they are absent.
I pay tribute to the hon. Member for Portsmouth South for calling this debate. Like the hon. Member for Plymouth, Sutton and Devonport, he represents a historical city that has a connection with all services, but specifically the senior service. We need to place the debate in context and against the backdrop of the nation’s finances, which ultimately are the question mark hanging over the size of the coffers that the Treasury has to provide financial support not only to the Ministry of Defence, but to all armed forces. I will not go into the politics of the situation, but when we came into government in 2010 there was a significant deficit. That deficit has been reduced by three quarters and the economy is now growing. The low taxes we are seeing are creating growth in our economy. We have record lows in unemployment, which is a good thing.
However, let us be honest: the election result and the debates during the campaign showed a nation concerned about our public sector and the length of time that the pay freeze has affected them. That concern was shared not only by those individuals affected, but by those who support our teachers, nurses, doctors, fire service, police, ambulance service and armed forces. Our armed forces do not have the voice of the unions, as has been mentioned a number of times. Members will be aware that the Government have been continuing the difficult task of balancing the books, but we must recognise that that ultimately means a period of pay restraint that has affected all public sector workers, including the armed forces.
We are aware, as we bring fiscal discipline back to the public finances, that that restraint has had an impact on the salaries of our people, but looking forward, the Government’s recent announcement of greater flexibility where required in public sector pay means that the independent pay review bodies can now make their own judgments on future pay awards, which will mitigate the impact. As the Chief Secretary to the Treasury said on Tuesday, our public sector workers, including those in the armed forces, are among the most extraordinarily talented and hard-working people in our society. I would go further: our public services are one of the things that define Britain across the world, by which I mean not just our blue light services, but our armed forces in particular. I echo other contributors by saying that professionalism is what defines us and gives us our reputation across the globe. It is important that we look after the people using equipment in operations. They make their mark and step forward to make a contribution with allies as a force for good in this very difficult and challenging age. They, like everyone else, deserve to have fulfilling jobs that are fairly rewarded. We have to take a balanced approach to public spending, dealing with our debts to keep our economy strong while also ensuring that we invest in our public services.
The Minister is hinting at something important, but I would like clarification. He talks about greater flexibility for the Armed Forces Pay Review Body. Is he suggesting that were that greater flexibility to produce a recommendation for a significant increase for the armed forces, the Government would accept that immediately, without question?
I will not do what the Leader of the Opposition suggested when we came back to office after the general election, which was a knee-jerk removal of the 1% pay freeze. That was suggested in proposed amendments to the Queen’s Speech. I will work extremely hard to ensure that that ambition is fulfilled. If the hon. Member for Caerphilly recognises and reads what is happening this week, there is greater clarity to provide independence, to ensure that Departments are free to reflect what is required in this day and age.
The Government will continue to ensure that the overall package for public sector workers is fair to them and that we can deliver world-class public services that are affordable within the public finances and fair to taxpayers. The last spending review budgeted for 1% average basic pay awards, as has been mentioned a number of times, but that is in addition to progression pay for specific workforces, such as the armed forces, and that must not be forgotten. There will still be a need for pay discipline over the coming years to ensure the affordability of the public services and the sustainability of public sector employment. The Government recognise that in some parts of the public sector, particularly in areas of skill shortages—such as with engineers, as has been mentioned—more flexibility may be required to deliver those world-class public services, including in return for improvements to public sector productivity.
The detail of the 2018-19 remit for the Armed Forces Pay Review Body and the Senior Salaries Review Body—I stress that they are both independent bodies that provide advice to the Prime Minister and Secretary of State on pay and remuneration for the armed forces—is still under consideration and will be agreed as part of the Budget process. Recommendations from the AFPRB and SSRB are expected in the new year.
The Government, as I have emphasised, fully recognise the invaluable work undertaken by our gallant members of the armed forces, often in dangerous and difficult circumstances. A good example is the response of our personnel to the recent events in the Caribbean and Hurricane Irma. That is a timely example of the professionalism of our armed forces in a crisis. More than 1,100 armed forces personnel have been deployed so far under Operation Ruman, to provide relief to the people of the devastated Caribbean islands. A further 600 are en route on board HMS Ocean, which was mentioned earlier. I am sure all hon. Members will join me in paying tribute to the valuable work of our armed forces personnel.
The armed forces pay and wider remuneration package is designed to reward their unique service to our country and to support the recruitment and retention of personnel. The Government are of the view that the armed forces receive an attractive package of terms and conditions of service, which have not been mentioned so far and include a competitive salary with incremental pay scales. I stress that there are pay bands for privates, lieutenants and other ranks, such as captain. Each year they move up the band and their salary does not stay still. In fact, across the armed forces, the average individual pay rise has been about 1.5%.
I am going to do everything I can to make sure that we do our best to have the remuneration package that our armed forces deserve, but we have to bear in mind the context and the backdrop, which I have spelled out. There has to be fiscal recognition of the place we are in, but I agree with the hon. Gentleman that we should all work as hard as possible to make the case and ensure that personnel get the salary they deserve and need.
There is also a non-contributory pension scheme, subsidised accommodation and food, and access to free medical and dental care. Service personnel also have access to an allowance package that provides financial assistance towards additional costs incurred as a result of their service. Throughout the pay restraint period, many personnel in the armed forces have received an annual increase in pay of well above 1%.
During the period of pay restraint, armed forces pay has not stood still. In 2016 we introduced a major revision to armed forces pay in the form of the Pay 16 pay model, which was designed to simplify an individual’s pay journey, enabling them more accurately to predict their future career earnings. That has also rebalanced pay to reward armed forces personnel more effectively in line with their skills, while addressing many of the concerns raised by the AFPRB regarding the previous Pay 2000 structure.
We also employ remunerative measures to address issues of recruitment and retention, which have been mentioned, to ensure that our armed forces are manned to the required levels and with the requisite skills. Where there are particular issues in recruiting or retaining personnel, for which career management action by the services has had limited impact, we have the option of introducing targeted payments. Those payments can range from time-limited financial incentives, to longer-term recruitment and retention payments that recognise the particular challenges we face in retaining certain defence specialisms, such as military pilots or submariners.
Armed forces pay is subject to annual review by the Armed Forces Pay Review Body and the Senior Salaries Review Body, which are independent bodies tasked with providing the Government with recommendations on armed forces pay and charges for all military personnel, including the reserves. Their terms of reference require them to give consideration to the need of the services to recruit, retain and motivate suitably able and qualified people, taking account of the particular circumstances of service life.
As part of its review, the AFPRB undertakes a detailed and comprehensive programme of work each year, which consists of a package of both written and oral evidence from the Secretary of State for Defence, senior officials and service families federations, representatives of which I had the pleasure of meeting only yesterday. The AFPRB also undertakes a series of visits to military units to hear directly from service personnel about their views on pay. In 2017, the AFPRB met more than 2,300 service personnel and 154 spouses and partners during 186 discussion groups. It visited establishments both in the UK and overseas, including operational theatres and ships.
In addition to the evidence it receives from Government, the AFPRB also commissions its own independent analysis and research, including on the pay comparability of the armed forces within the wider UK economy. A programme of visits has just concluded and the Government look forward to receiving the AFPRB recommendations next year.
Turning to the 2017 report, which the hon. Member for Caerphilly mentioned, in January this year the AFPRB and SSRB recommended a 1% pay increase for service personnel, taking into account the evidence received and independent pay comparability data. Those recommendations took into account the need to recruit, retain and motivate high-calibre people; the Government’s policies on the public services; inflation targets and the public funds available for Defence. The AFPRB reported that it believed that a 1% increase in base pay would
“broadly maintain pay comparability with the civilian sector.”
We need to bear that in mind, because that is the competing area.
The Government accepted in full the recommendations of the AFPRB and SSRB. I take this opportunity to thank the members of both pay review bodies for their work; it is greatly respected.
Turning to future pay, on which we want to focus, as I stated previously the detail of the 2018-19 pay remit for the pay review bodies is still under consideration and will be agreed as part of the budget process. As the Secretary of State said this week at the Defence and Security Equipment International conference,
“we will have greater flexibility to respond to the recommendations of the Armed Forces Pay Review Body.”
I hope that answers directly the question posed by the hon. Member for Caerphilly. It is for the AFPRB to make its recommendations for 2018-19, and as I mentioned earlier its remit allows it to consider any specific recruitment and retention issues that may apply to the armed forces. I am sure it will consider some of the issues raised in this debate. Over the coming months, the Chief Secretary will write to all the pay review bodies setting out the Government’s pay policy. The Defence Secretary will submit formal evidence to the AFPRB, setting out any specific recruitment and retention issues.
The armed forces are among the most extraordinarily talented and hard-working people in our society. The Government are committed to ensuring that the overall package that they and other public sector workers receive reflects the value we place on their work. The last spending review budgeted for 1% average basic pay awards, but the Government recognise that in some parts of the public sector, particularly in areas of skills shortage, more flexibility may be required, as reflected in this week’s announcement. There does, however, need to be pay discipline over the coming years, to ensure the affordability of the public services and the sustainability of public sector employment.
I make a personal statement that I will do all I can, as Minister for Defence People and Veterans, to make sure that the remuneration package that our gallant armed forces personnel get is what they deserve.
I pay tribute to everyone who has spoken in this debate. I thank my hon. Friend the Member for Plymouth, Sutton and Devonport (Luke Pollard) for his important comments on the contribution that armed forces personnel make to local economies, and on the shortages for engineering jobs. I understand that that is also the case with chefs, and it is certainly an issue in Portsmouth too.
I also thank my colleague from the SNP, the hon. Member for Glasgow South (Stewart Malcolm McDonald), for his contribution on what the devolved Government in Scotland are doing and for his important message about the lack of Back-Bench Conservative Members in this debate. That says a lot about their support for the armed forces and it is a concern.
I thank the Labour spokesperson, my hon. Friend the Member for Caerphilly (Wayne David), for his contribution on accommodation. He reminded us of the key findings of recent reports and the real challenges we face on recruitment to the armed forces.
As I said in my introduction to the debate, it is for us in this place to speak up for those who dedicate their lives to the armed forces, because they often feel unable to do so owing to a sense of loyalty to Queen and country. We have heard about the impact that the cap has had on morale, retention and recruitment. I will continue to work with colleagues throughout the House to build a cross-party consensus to hold the Government to account and to ensure that the armed forces get the pay they deserve.
Question put and agreed to.
That this House has considered armed forces pay.