Thursday 19 October 2017
[Sir David Amess in the Chair]
Carbon Capture and Storage
I beg to move,
That this House has considered carbon capture and storage.
I thank the Backbench Business Committee, chaired by the hon. Member for Gateshead (Ian Mearns), for granting this debate, and the sponsors who helped to secure it, particularly my hon. Friend the Member for Waveney (Peter Aldous) and the hon. Member for Redcar (Anna Turley), whose support is deeply appreciated. I also thank the team at the Energy and Climate Intelligence Unit for their help and Sarah Tennison at the Teesside Collective for her excellent advice. I congratulate the Minister on the production of the clean growth strategy and I support its core message that there does not have to be a trade-off between green energy and economic growth.
As the Minister noted in her announcement to the House last week, since 1990 the United Kingdom has simultaneously grown its economy by almost 70% and reduced its emissions by more than 40%. I also welcome the commitment that the UK will continue to be a world leader in creating clean technologies, jobs and businesses.
Chiefly, I am delighted with the new resolution to demonstrate international leadership in carbon capture, usage and storage. The benefits of carbon capture and storage are multiple. CCS will be essential in ensuring that the UK meets its legally-binding target to reduce carbon emissions by a minimum of 80% on 1990 levels by 2050 in a cost-effective manner. That was the conclusion of the Energy and Climate Change Committee, which warned that without CCS the UK
“will not remain on the least cost path to our statutory decarbonisation”.
That has been echoed by other leading authorities. The Intergovernmental Panel on Climate Change estimates that without CCS, the cost of meeting global climate change targets could increase by 138%. Similarly, the Committee on Climate Change believes that
“carbon capture and storage…has the potential to almost halve the cost of meeting the UK’s 2050 target.”
It warns that the additional costs of inaction on CCS for UK consumers could be £1 billion to £2 billion a year in the 2020s, rising to £4 billion to £5 billion a year in the 2040s.
The economic benefits of CCS stretch far beyond the cost-effective attainment of our carbon budgets. According to the House of Commons Library, CCS could create 60,000 jobs in the UK, not to mention the greater number of jobs that could be saved by avoiding the decline or closure of carbon-intensive industries, for which it will quickly become progressively less viable to remain in operation in the UK as levies on carbon emissions increase. Those industries emit carbon dioxide as an intrinsic part of their production methods, so regardless of how much we decarbonise our power supply, they will continue to be huge emitters. As the North East of England Process Industry Cluster, which represents the chemical industry in the north-east, warns,
“on current trends and policies, industrial emissions reduction will only be met through the closure of industry.”
That would be a totally avoidable catastrophe and we need to do everything in our power to prevent it, and that means developing CCS.
The International Energy Agency estimates that there will be a global CCUS market worth over £100 billion. With even a modest share of that market, UK gross value added could increase to between £5 billion and £9 billion per year by 2030. The wider economic benefits and opportunities presented by CCS are huge, whether in the form of increased domestic manufacturing activity, a more positive balance of trade, or the possibility that UK carbon storage sites could generate income by storing emissions from other countries.
When it comes to the location for CCS, hon. Members will be unsurprised to learn that I think there is a natural choice: Teesside. That judgment is not born of the bias of someone who was born and grew up there, and is very proud to represent it, but based on a number of unique advantages that our area has to recommend it as a prime site for CCS development.
First, Teesside is home to nearly 60% of the UK’s energy intensive industry. Regional emissions per person are almost three times the UK average. Fully rolled out, CCS on Teesside would therefore have a substantial impact on overall UK emission reductions.
Secondly, Teesside has one of the highest concentrations of industry in the UK. That includes the specific and unique mix of companies that comprise the Teesside Collective. That group has come together with the excellent Tees Valley combined authority to drive the case for CCS investment in the area. The group includes Sembcorp Utilities, the area’s leading energy supplier; SABIC, one of the world’s largest makers of chemicals, fertilisers and plastics, whose Teesside operations alone emit 1.25 million tonnes of CO2 every year; Lotte Chemical UK, which manufactures the plastic needed for soft drinks bottles; BOC, which produces more than half the UK’s hydrogen; and CF Fertilisers, the UK’s largest ammonia fertiliser plant.
That integrated cluster is so important because the emissions from those facilities can be captured, mixed with emissions from a power station in the same area, and transported and stored together. Analysis by the Green Alliance found that this approach would reduce the cost per tonne of carbon captured by about two thirds, compared with the cost of doing it for a power station alone. The mixture of companies would also allow a test project to assess the cost of CCS when facing different levels of difficulty in the removal and extraction of carbon.
Thirdly, the cost of CCS would be further reduced by Teesside’s close proximity to North sea storage sites. A fortnight ago, I had a fascinating briefing from Professor Jon Gluyas and Simon Mathias of Durham University at Boulby potash mine in my constituency. The UK storage appraisal project, which concluded in 2013, identified some 600 storage locations on the UK continental shelf—enough to store our direct emissions for the next 130 years.
My hon. Friend mentioned nitrogen fertiliser and the need to use carbon capture and storage to help create more fertiliser. At the moment we use a lot of natural gas to make this fertiliser. Therefore, it will be a win-win situation, because we will be reducing the amount of natural gas we use and using the carbon that is already being produced.
I agree with my hon. Friend that carbon utilisation is something we should look at. It is not necessarily the same as carbon capture and storage, but it is definitely a valuable mechanism to ensure we are not wasting carbon dioxide that we have to produce. Therefore I would certainly back that, as does the strategy.
Fourthly, Teesside is the prime location because developing industrial CCS would create an additional 1,200 jobs during its construction phase and help create and retain a further 5,900 jobs when in operation. That is vital in our area, where, as Opposition Members will attest, despite the huge progress that has been made, too many people are struggling to find secure and well-paid jobs. The Teesside workforce have the strong engineering skills required for CCS, largely as a result of long-standing expertise in the oil and gas, energy supply, and chemical and process sectors.
Finally, and perhaps most importantly, Teesside is ready to go. The Teesside Collective is ready to commence front-end engineering design—FEED—studies immediately and could be capturing and storing CO2 in just six years. No further research or innovation is required. The Teesside Collective has already presented a cost-effective finance model to Government, which sets out an attractive business case for both Government and industry to invest in a demonstration phase.
Last week, the Minister told me that Teesside makes a very powerful case for the funding set out in the clean growth strategy, of which £100 million has been committed to support CCUS innovation and deployment in the UK. That is greatly welcomed. She said that pints would be available for myself and the hon. Member for Stockton North (Alex Cunningham), and I think she could be included in the round as well. However, can the Minister provide clarity as to what proportion of that investment will be spent on carbon capture and storage specifically, as opposed to carbon capture and utilisation, which was referred to by my hon. Friend the Member for Tiverton and Honiton (Neil Parish)? Although I can understand the rationale for investing in carbon utilisation, such as its relative ease of development and more direct economic gains, it does not allow us to store the same amount of carbon dioxide as carbon capture and storage, which I believe is the real prize.
In relation to CCS, specifically CCS on Teesside, I ask the Government to take three critical steps. First, just as the Government established the contracts for difference mechanism, which is the incentivised investment that led to the huge cost reductions we are witnessing in green energy, so too the Government need to come up with an incentive mechanism for industrial CCS. What would that look like in practice? There are two elements. We need a transportation and storage solution, and the Government need to state their intention to agree a financing mechanism. Stakeholders tell me that those are the two most important things they are asking for, without which there can be little practical progress on delivering CCS in the UK. The Teesside Collective very much hopes that such a model can be developed and agreed in 2018 and it has already done really impressive groundwork.
Secondly, please deliver FEED funding for a trial industrial CCS network on Teesside. The Teesside Collective has requested the relatively modest sum of £15 million to get a demonstration project under way and it hopes that that can be allocated in 2019. Government support for the deployment of such a strategic demonstration project will enable CCS to reduce costs significantly if and when it is built at commercial scale in the 2020s.
Thirdly, we need to establish the facts to show the rest of Government and the public why this matters so much. In its April 2017 report on CCS, the Public Accounts Committee stated:
“By the end of 2017, the Department should quantify and publish the impact across the whole economy of delays to getting CCS up and running, and of it not being established at all.”
Will the Minister inform us whether such analysis has been commissioned and, if so, when the Department will publish the results?
Those are my three asks, which I sincerely and deeply hope are deliverable. I have come into politics to try to help deliver many things: a stronger economy; a world that we can pass on to our children in better shape than we found it; and a change in people’s perceptions of Teesside and what it has to offer our country and our world. I am an unashamed evangelist for the latter, as are so many of the people who work there. Carbon capture and storage would allow us to deliver all those objectives. I urge the Minister, as I urge all colleagues: let us seize this opportunity, and seize it today.
It is a pleasure to serve under your chairmanship as always, Sir David. I thank the hon. Member for Middlesbrough South and East Cleveland (Mr Clarke) for securing this debate and for his powerful contribution.
Carbon capture and storage is a technology with huge importance for our industry, energy and our climate challenges. It has huge potential to bring investment and jobs to Teesside, which is why I am so pleased to be joined today by so many colleagues from the Tees valley area. I welcome the shared cross-party ambition to see the UK leading the way by introducing CCS into our national infrastructure.
Following the clean growth strategy, which the Government published recently, I hope that this debate will help to reinforce the case for making progress. Earlier this year, I pressed the hon. Member for Ruislip, Northwood and Pinner (Mr Hurd)—the then industry Minister—on the need for some clear Government leadership to help to get the technology off the ground, and I am delighted to see the process reignited in the clean growth strategy and the promise of a CCS demonstration project. I sincerely hope to see that responsibility granted to the Teesside Collective in my constituency—a project ready and waiting to start decarbonising UK industry.
Meeting our commitments to reduce emissions under the Climate Change Act 2008 and the Paris agreement while protecting and expanding British industry is a serious challenge. The fifth carbon budget commits to a 57% reduction from 1990 levels by 2030. The easiest and most cost-effective solution to this challenge is, without doubt, CCS.
Research by the Committee on Climate Change has shown that CCS could virtually halve the costs for the UK of meeting emissions targets. The UK is especially well placed to be a leader in the industry, not least because of storage space in our depleted oilfields just off our coasts, but the clock is ticking. The UK has fallen down the Global CCS Institute’s readiness index in the past two years, due to a
“lack of clear CCS policy”.
The Committee on Climate Change has also been clear that we must develop this technology in the coming years so that we are ready for a full-scale operation in the 2030s.
There is also an urgent need to stay competitive with our continental partners, which is particularly important post-Brexit. In fact, getting ahead on CCS could be the competitive edge that we need to attract inward investment. If we delay, we will see that investment lost to other countries who get ahead. For example, this year Norway announced the award of contracts for full-scale carbon capture at cement, ammonia and waste-to-energy plants. In 2016, Toshiba completed construction of a carbon capture facility at a waste incineration plant in Saga city, and the world’s first large-scale carbon capture facility in the steel industry was launched in Abu Dhabi. The Dutch Government have committed to CCS and handling 20 million tonnes by 2030 from industrial sites. Rotterdam is one of the biggest industrial zone competitors, so it is vital for Teesside to get ahead.
The difficulties we have experienced in the steel industry, where energy cost pressures are higher than those faced by our European competitors, are a warning of what is to come if we do not get serious about industry decarbonisation. As my neighbour, the hon. Member for Middlesbrough South and East Cleveland, has mentioned, our region has huge CCS potential. The Teesside Collective project could become one of Europe’s first clean industrial zones.
Yesterday, I attended the launch of the South Tees mayoral development corporation’s strategic masterplan for the future of the former SSI steel site. At 2,000 acres, we have a once-in-a-generation opportunity to attract global investment and to become a hub for new industries and technologies. We could genuinely create a world-renowned site for clean industry with CCS at its heart.
Teesside is home to nearly 60% of the UK’s major energy users in the process and chemical sectors. The internationally renowned North East of England Process Industry Cluster—NEPIC—represents chemical-based industries in the region, but particularly those concentrated in Teesside. The sector generates £26 billion of annual sales, £12 billion of exports and is the north-east’s largest industrial sector. BOC, one of the Teesside Collective partners, operates the UK’s largest hydrogen plant, which produces over half the UK’s hydrogen. If we are to convert our gas grids to hydrogen—as Leeds is currently exploring—CCS on Teesside would need to be a key part of that decarbonisation strategy. Another Teesside Collective partner, Lotte Chemical, produces plastic for the soft drinks industry. CCS could capture over 90% of its carbon output, essentially decarbonising the soft drinks materials supply chain.
The density of our industry makes us a heavy emitter of carbon dioxide—it is three times the national average and accounts for more than a fifth of all UK industrial emissions. That makes us especially vulnerable to uncompetitive energy prices and carbon price pressures relative to other countries, but it also makes us a prime candidate for CCS, because the technology could drastically cut a very significant proportion of UK emissions. If we combine that with our close proximity to the North sea industry and potential storage sites in depleted oil fields, it means that Teesside would be one of the most efficient and cost-effective locations for a test case. The technology would help us to maintain and even enhance the comparative advantage we already have in chemicals and process industries. Or, to put it another way, without support to decarbonise our industry, we risk seeing the problems at the SSI steelworks happen in our other sectors.
NEPIC estimates that the use of CCS could create and safeguard almost 250,000 jobs by 2060, and 7,000 new jobs could be created in Teesside for the building and operating of facilities alone. The House of Commons Library estimates that CCS could sustain up to 60,000 jobs and deliver a £160 billion economic boost by 2050 if it is delivered along the east coast. Teesside is ready and waiting to face the carbon reduction challenge and could be capturing and storing CO2 within six years.
The Teesside Collective has costed engineering for three industrial plants and presented to Government the business case for an initial CCS hub in Tees valley. Its proposals are for a cost-effective introduction strategy, with companies capturing and storing 11 million tonnes of carbon dioxide over 15 years. That would then expand to include power stations and more industrial companies as the network demonstrates its worth. It estimates that a pilot could repay up to £31 million a year to the Government in carbon savings.
The Government have understandably been concerned about cost and value for money for the taxpayer, which unfortunately led to the disappointing decision in 2015 to cancel the £1 billion CCS competition. I am glad that the Government have changed their view and recognised that CCS is a technology where, for relatively small up-front investment, greater savings in reducing carbon can be made down the line.
The Oxburgh review noted that investing in CCS now would deliver the lowest cost to the consumer and that heavy costs would follow if it kept being delayed. I truly welcome the Government’s commitment of £100 million in the strategy, and I hope that some of that will support the £15 million FEED—front-end engineering design—study requested by the Teesside Collective. The Oxburgh review suggests that CCS on a power station could be constructed at a cost of £85 per megawatt-hour under state ownership, which is lower than Hinkley Point’s £92.5 per megawatt-hour. Those costs would be even lower for industrial clusters. Analysis by Green Alliance, for instance, suggests that costs in that context could be cut by two thirds, making it comparable to wind and solar power. The Teesside Collective already has two industrial plants producing pure CO2 and therefore requiring no additional capture facilities at all.
The important thing is that business and Government work together to devise a sustainable funding model that does not place unsustainable costs or risks on the partner business or consumers. One crucial element missing from the clean growth strategy is the lynchpin for starting any major CCS project in the UK: work on transportation and storage. The report of the parliamentary advisory group on CCS stated:
“The lowest cost CO2 storage solution for the UK at the scale required will be offshore geological storage in UK territorial waters.”
The group also cautioned:
“The state will need to take an enhanced role in managing storage risk if costs are to be minimised.”
Teesside is well placed for that, given its location and links with the oil industry, but work needs to start on developing the infrastructure soon, so that a cost-effective model can be found.
As the Government acknowledge in the clean growth strategy, the success of the offshore wind cost reduction taskforce provides a good model for the cost challenge taskforce on CCS. However, as NEPIC has argued, that success was based on Government investment through a clear marketplace and a funding model that provided the certainty that investors need. Both the Oxburgh review and the Green Alliance report recommend contracts for difference or similar for financing the storage infrastructure to achieve that.
The strongest message that I want to send to the Government is: let us get moving on this as soon as possible. The Public Accounts Committee cautions that the UK has already missed opportunities, and we cannot afford to lose any more. It is crucial for our energy and climate strategy, but it is also a chance for Britain to take a world lead in a cutting-edge industry, future-proof our industries, protect jobs and create new ones. Teesside stands ready and willing to get to work and make it happen.
It is a pleasure to serve under your chairmanship, Sir David. I congratulate my hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke) on securing this debate. His timing is spot on, given the publication last week of the clean growth strategy.
We last held a debate in this Chamber on carbon capture and storage on 24 January. From my perspective, the outcome of that debate was disappointing, but nine months on, I believe that we are in a much better place. A framework is beginning to emerge within which carbon capture and storage in the UK can become a major industry, and we are learning lessons from the aborted second CCS competition.
I believe that the Government are studying closely the proposals in the noble Lord Oxburgh’s report of September 2016. I was on his advisory committee, which heard the evidence, drafted and approved the report, and I believe that it is a good blueprint for the future. We see carbon capture and storage as fitting in well with the 10 pillars of the Government’s industrial strategy; it ticks all the boxes. Finally, the publication last week of the clean growth strategy provides the much-needed road map that business is looking for in order to invest time and money in carbon capture and storage.
Invariably in debates such as this, Back-Bench MPs have an ask of the Government, which we look to the Minister to take on board and respond to. However, from my own perspective, with the publication of the clean growth strategy last week, the Government have, to a large degree, shot my fox. I shall briefly set out the case for CCS and why it is so important that it is at the heart of the UK’s industrial strategy.
The UK has legally binding commitments, set out in the Climate Change Act 2008, to reduce carbon emissions by a minimum of 80% from 1990 levels by 2050. As the Intergovernmental Panel on Climate Change and the Committee on Climate Change have both pointed out, if we do not deploy CCS, it will be very difficult to meet that target cost-effectively.
The UK has a unique selling point that means we should be at the vanguard of the CCS movement. It is the thing that most colleagues in this room have in common, in that our constituencies adjoin it: the North sea. I believe that your seat also adjoins it, Sir David. In the North sea and the UK continental shelf, the UK has its own large, safe and secure offshore CO2 storage vessel, in the rocks deep beneath UK territorial waters. It provides us with the least-cost form of storage on an industrial scale. Over the past 50 years, as a result of the development of the North sea oil and gas industry, the UK has acquired enormous expertise and experience that can be harnessed to deliver CCS.
Will my hon. Friend join me in acknowledging and welcoming that the University of Aberdeen has world-leading experts at the forefront of research into carbon capture and utilisation? It is reflected in the fact that Aberdeen was the only UK university whose entry into the Carbon XPRIZE was accepted. It is developing technology to help create a solution to the damage that CO2 can cause, such as using what is left as materials for furniture and so on. Does he welcome and acknowledge that?
Yes, I do. I am happy to acknowledge it. We have enormous, significant expertise across the UK. I am sure that all of us in this Chamber can highlight institutions in or near our constituencies that can and should put us at the vanguard of the low-carbon economy and its global development over the next few years.
As I was saying, the UK has acquired enormous expertise and experience in the oil and gas sector, which can be used to deliver CCS, create jobs and—most importantly for the Government—generate revenue for the Exchequer. However, as the hon. Member for Redcar (Anna Turley) highlighted, time is of the essence. We need to get on with it. As a result of the lower oil prices that have prevailed for the past three years, the North sea is going through a period of transition and restructuring. We must move quickly to use assets that otherwise might be prematurely decommissioned.
As we have heard, CCS has an important role to play in delivering growth across the whole UK and in bringing jobs to coastal communities, which in recent years have faced particular challenges with the decline of traditional industries. There are areas where clusters of energy-intensive industries are based—such as Scotland and the north-east on Teesside, as the hon. Member for Redcar highlighted—which could benefit significantly from CCS. That might not be the exact situation in my own constituency, but we have businesses in East Anglia that are part of the North sea supply chain, whether in oil and gas or in the emerging offshore wind sector, and that would benefit from the development of CCS.
The industrial strategy highlights the importance to the UK of cultivating world-leading sectors and being global pioneers in industries in which we have an advantage. CCS is one of those industries. We have the resources and the skills. It is an industry in which we can not only secure inward investment but, in due course, create significant export opportunities, building on the expertise that my hon. Friend the Member for Aberdeen South (Ross Thomson) mentioned a minute ago.
On the resources and skills required for CCS, Norway is a country with which we have a great deal in common.
On that point, we have had disappointing news from Norway this week. I spoke to the Teesside Collective to discuss what was going on there. It is important to put it on record that although the Norwegians have retreated somewhat in the scope of their ambition for when things will happen, they have not pulled out of CCS altogether. Effectively, they have found themselves in a minority Government situation—we can perhaps empathise—and that has made certain investment decisions rather harder to achieve, so they are looking to make them on more of a case-by-case basis. That is why the news has come out of Norway in the way that it has.
I am grateful to my hon. Friend for that intervention. I talked this morning to representatives of Statoil, who emphasised that they are proceeding with CCS and that the situation is, dare I say, a fact of life with minority Governments.
We have a great deal in common with Norway. The Norwegians are also taking forward CCS, and they are slightly ahead of us. However, I emphasise that it is not a question of CCS taking place either in the United Kingdom or in Norway; it should be in both. We need to collaborate between our two countries to ensure that that takes place on the best possible terms and at the lowest possible price.
On that point, cost is the elephant in the room. CCS has foundered on this particular rock in the past, and I am sure that there are some who say that it will do so again. However, I do not believe that that will be the case. The Oxburgh report showed that in the right circumstances, CCS can be delivered at £85 per megawatt-hour. It is also important to highlight what has happened in the offshore wind sector. Costs have decreased in the past three years from around £140 per megawatt-hour to just under £60. That has been achieved by the Government providing the framework for the delivery, and by the industry getting on with the job and building, rather than just talking.
With the clean growth strategy, the Government have provided a framework for CCS to develop. I look forward to more details from the Minister about the road map for turning this exciting vision into a practical reality. Doing so will not only make the world more resilient to climate change, but transform places and—most importantly —people’s lives.
I am grateful to the Backbench Business Committee for granting this debate, and to the hon. Members who persuaded it to do so. It is a particular pleasure to follow my co-chair of the all-party parliamentary group on carbon capture and storage, the hon. Member for Waveney (Peter Aldous).
My interest in the Government’s new approach to CCS in the clean growth strategy goes wider than Teesside, but I am pleased that new colleagues from our region are present, including the hon. Member for Middlesbrough South and East Cleveland (Mr Clarke) and my hon. Friend the Member for Hartlepool (Mike Hill). They join the work that many of us have been doing for years to persuade the Government to get serious about CCS. I am surrounded by no fewer than five Teesside MP colleagues; 100% of us are here, and we are 100% behind the debate.
I hope my new Tees colleagues recognise that the Government’s reaffirmed commitment to CCS, two years after withdrawing £1 billion in funding, is only a small step along what will be a very long road if our country is truly to reap the benefits of carbon capture. We need more than tens of millions in investment; we need billions. We need big leaps, not tiny steps. Nevertheless, this new recognition of CCS is testimony not only to the impressive body of evidence that continues to emphasise the key role of CCS in delivering least-cost decarbonisation, but to the energy—no pun intended—and enthusiasm of the industry, which has kept up a steady drumbeat on CCS since November 2015. I pay tribute to the Carbon Capture and Storage Association for its work and for its support of the APPG.
In the clean growth strategy, the Government have recognised what the industry has been saying for years: CCS is vital to broad sections of the UK economy. Power aside, key industries such as steel, cement and refining are increasingly looking for ways to remain competitive in a low-carbon world. CCS offers the only solution for deep decarbonisation in these industries that helps to enable their sustainable future, which is crucial for regions such as the Humber, the north-west and Teesside.
CF Fertilisers is based in my hon. Friend’s constituency, Stockton North, but also employs people in my constituency and in Middlesbrough. My hon. Friend the Member for Middlesbrough (Andy McDonald) has a long-standing commitment to carbon capture and storage, but cannot be present because of a Front-Bench commitment.
CF Fertilisers uses as much gas every year as the city of Manchester. Does my hon. Friend the Member for Stockton North (Alex Cunningham) join me in calling on the Minister to acknowledge that carbon capture and storage is very much part of the future of CF Fertilisers?
Order. Having recently been at a meeting of the Panel of Chairs, I remind new Members that if they wish to intervene they must be present at the start of the debate. However, I know that Dr Williams spoke in the main Chamber earlier, and I realise that he cannot be in two places at once. Nevertheless, as a Clerk is sitting beside me, I thought I should point that out.
My hon. Friend the Member for Stockton South (Dr Williams) was indeed in the main Chamber earlier. So was I; I was in the smoking debate, trying to persuade our country to give up the weed.
I agree entirely with my hon. Friend. The company he refers to consumes the same amount of gas at its other plant in Runcorn. It is crucial that CCS be spread across the country.
May I address that question now, in case I forget later? The hon. Member for Stockton South (Dr Williams) is right to focus on the effect on companies such as CF Fertilisers. He will be pleased to know that I had a meeting with that company yesterday. We have had conversations on several issues, but the impact of this technology on its carbon dioxide emissions and its cost base is clear.
I thank the Minister for that helpful intervention. I have seen companies across the area, including those that make up the Teesside Collective, working hard to decarbonise their processes, but engineering can only do so much. The Government appear to understand that. The clean growth strategy estimates that CCS could provide almost half the required emissions reductions in energy-intensive industries, helping them all on their way.
A recent study by Summit Power gives a simple explanation as to why the first CCS projects must begin operation in the 2020s: achieving the CCS capacity needed to meet the UK’s 2050 target requires a 30-year build-out rate. Any attempts to significantly shorten that period would place unrealistic expectations on the supply chain and the construction companies. The end result would either be a failure to meet the 80% target by 2050 or the deployment of alternative low-carbon solutions that are likely to be considerably more expensive. We need the first CCS projects to begin operation in the 2020s. Although the £100 million of funding to support that work is welcome, the Government will need to do much more if we are to realise our ambitions.
The Government’s recommitment to CCS sets out an ambition to deploy it at scale during the 2030s, which throws up some interesting questions. What exactly is meant by “at scale”? Does it mean deploying the first CCS projects in the 2030s, or does it mean that the projects will be up and running in the next five to 10 years and at the required scale 10 years later? To achieve large-scale deployment of CCS in the 2030s, it will be essential to have at least one phase, if not two phases, of operational projects in the 2020s to enable learning and cost reduction.
That was just one of the messages from yesterday’s APPG meeting, where we heard about CCS progress in three fantastic projects that could be the first building blocks in the construction of a world-leading CCS industry: the Caledonia Clean Energy project, the Teesside Collective and the Liverpool-Manchester hydrogen cluster. They are all in a strong position to get work under way to deliver projects that could be expanded or replicated with relative ease.
The Department is familiar with those projects and is providing some support, but the message to Government at that meeting was clear: each of the projects is costed, demonstrates relatively low cost and, most importantly, could make something happen quickly. The projects have invested heavily in development, worked with leaders in the field and done the numbers. Their plea was for the Government to come up with a timetable for decisions.
The Teesside Collective spells out what it needs in its briefing note, which the hon. Member for Middlesbrough South and East Cleveland alluded to. It asks for the allocation of £15 million in capture plant FEED funding to enable it to develop phase 1 of the project. It wants support for investment in a suitable CO2 store. It states that transport and storage costs will come down through new delivery models and that it is keen to work in partnership with Government to look at a cost-effective solution. It also wants the establishment of a funding mechanism to build and operate an industrial CCS network.
Will the Minister address those pleas and let us know what decisions we can expect from her? The industry desperately needs decisions. I invite her to attend a meeting of the all-party group early in the new year so that she can outline the Government’s thinking, listen to Members’ feedback and answer their questions.
I hope I will be forgiven for being a bit more parochial now. As other hon. Members have mentioned, NEPIC has identified Teesside as a location with a particularly strong competitive advantage in the deployment and commercialisation of CCS. My Teesside constituency is home to the Teesside Collective, a consortium of industries developing the first CCS project in the UK. Teesside has the workforce and the strong engineering skills required for CCS, largely as a result of long-standing expertise in the oil and gas, energy supply, chemical and process industries.
We know from the clean growth strategy that CCS has to do more than demonstrate carbon reduction and low cost. It also has to offer a competitive opportunity for the whole of the UK. There is every reason to believe that that aim can be realised. The UK has some of the best CO2 storage capacity in the world, a world-class oil and gas industry with the ideal skill set for CCS, and industries already located together in key regions. The economic benefits of CCS could be immense, with the Summit Power report concluding that developing it in the UK could deliver an estimated £129 billion of benefits. The clean growth strategy includes a commitment to developing a deployment pathway for CCS in 2018, but there is no detail about how that pathway will be developed or about the actions that may be included, so I hope the Minister can help us in that regard.
To make sure that, come the 2020s, the first CCS projects are operational, the Government need to implement a number of key actions in this Parliament to kick-start CCS clusters in a number of key regions. Countries such as Norway and the Netherlands have come forward with strong commitments on CCS, and it is time for us to step up and take our place among the leading group of countries that are developing this transformational technology.
I am ambitious and optimistic about the potential that exists and I am encouraged that we seem to be moving in the right direction. However, in closing I reiterate three messages: we need huge leaps to be taken, not tiny steps; the Government need to publish a timetable for the decisions needed to make real progress; and there are good, costed projects ready to go that can make our country a world leader in carbon capture and in creating and protecting countless jobs. I hope that the Minister will help us do that.
It is always a pleasure to serve under your chairmanship, Sir David.
I congratulate the hon. Member for Middlesbrough South and East Cleveland (Mr Clarke) on leading today’s debate and speaking so eloquently about the benefits of carbon capture—and, of course, on throwing a strong pitch for his own constituency into the mix as well. In fact, all Members in this debate have spoken about the benefits of carbon capture, so I will not cover the ground that others have already covered, apart from perhaps touching on a couple of the points made. I will concentrate more on the policy.
As we know, carbon capture and storage has huge potential for decarbonising fossil fuels and it could be highly effective in reducing greenhouse gas emissions, as we have heard from many Members today. However, it was telling that, in the last contribution, the hon. Member for Stockton North (Alex Cunningham) referred to “tiny steps”, because that is indeed what these are: tiny steps on the way.
In Scotland, the SNP Scottish Government are already consulting on a new climate change Bill, with proposals—along with interim targets for 2020, 2030 and 2040—for a 90% reduction by 2050. That is as far as the reduction can go under current scientific advice. The independent expert advice from the Committee on Climate Change has said that that is the limit of feasibility and at the moment there is not enough evidence to set a net zero target.
However, I would caution the hon. Member for Middlesbrough South and East Cleveland. If he is successful and gets a promise about an installation, there is an elephant in the room. It is not the white elephant of Hinkley Point, which I will refer to later; it is the elephant that is Peterhead, where there was a shameful decision by the UK Government to pull the plug on a long-planned development. Peterhead is not far from the Aberdeen South constituency and it is where we saw a hugely damaging decision being taken, without warning, that will create a legacy that will deter investment incentives and dent consumer confidence.
That decision was a manifesto betrayal. That should be key—it was in the Conservative manifesto that the project would go ahead, and the cost to the taxpayer was £100 million. Peterhead was set and ready to accept a £1 billion contract and expected 600 jobs. I would therefore caution the hon. Gentleman about getting too excited about any promises, because by axing that project at the 11th hour, George Osborne committed what can only be described as a betrayal of the people in Peterhead.
Even now, the commitment to CCS, welcome as this small U-turn is, is still fairly mealy-mouthed, because in the detail it says: “subject to cost reduction”. That is the bare minimum of commitment, and the Carbon Capture and Storage Association has pointed out that it is counter to the way that technology actually develops. We have to invest in order to get the experience to get the drive costs down, so it is very difficult to see how an energy policy cherry-picked in this way, with these announcements and selected U-turns, will really provide a cohesive way forward for the industry. And all the while, in the background, we have the expensive and regressive nuclear policy at Hinkley C.
The SNP Scottish Government support the Paris agreement’s zero-emissions aim and we are providing significant funding in Scotland to establish the feasibility of the Acorn CCS demo project at St Fergus. Incidentally, that project is also supported by EU science funding of €1.9 million, and with SNP Government support the low carbon and renewable industry has created 58,500 jobs. That was the figure in 2015, which was up by a third from 2014.
I know that the marching orders for the SNP, if not always for the hon. Gentleman himself, is that its Members have to be as gloomy as possible about everything at all times, but it is, frankly, really very sad that he has made no reference today to the high-wind offshore floating wind plant, which is one of the most innovative and creative things that is being done. It is being done by the UK Government, because this area is not a devolved matter, as he knows. That has been done because of the combination of the policy, Government leadership and work with industry to drive down the costs of offshore wind, exactly as we propose to do with this technology. Let us focus on what can be delivered and acknowledge that no country in the world is taking a major step into unreformed CCUS at the moment, and we want to do this together, so perhaps we could have just a bit more cheerfulness from north of the border.
I am grateful to the Minister for her short speech, or lecture, about how we should look at Government policy. I believe it is quite common now for us to be told that we should just hope for the best—that we should all be doing a “rah-rah” and saying, “This is all going to be great in the future”. No amount of deflection from the Minister will get away from the point that the UK Government, at the 11th hour, cancelled the Peterhead project, with no warning to the people involved, and that is shameful. On the point of the floating wind farm, which was launched yesterday, she will be aware that Nicola Sturgeon was there, not only to welcome the project but to launch it officially.
By making these policies—by making these small U-turns and small concessions—the Government are doing some welcome things. However, we want to see further, more significant U-turns. We want to see a significant investment, because, as has been stated, it is time for a long-term, robust UK policy for a low-carbon future. That is needed urgently. I urge the Minister to come up with some actual details about what the Government are going to do in the future to deliver it.
It is a pleasure to speak under your chairmanship, Sir David. I am grateful to the hon. Member for Middlesbrough South and East Cleveland (Mr Clarke) for securing this debate. As an MP who supports climate change initiatives and the reduction of carbon emissions, I am pleased that the Government are now recommitting to CCS as part of their clean growth strategy, in order to meet legally binding targets.
I am proud that in Hartlepool we are already one of the main suppliers of low-carbon energy to the national grid, and EDF is developing green technologies around the production and supply of electricity for a future beyond the life of the nuclear power stations.
While I am pleased that such work is being undertaken, I recognise that where we have more traditional coal and gas-fired power stations, we need to act swiftly to reduce emissions. CCS is a proven technology that can do that. The Tees valley has been identified as one of two energy-intensive industry clusters that would benefit from the development of CCS technologies. Further, our expertise and experience of working with the offshore oil and gas sector put us in prime position as a region to develop technologies for the use of depleted oilfields for the purposes of carbon storage.
I commend the Tees Valley combined authority, which is made up of four Labour council leaders, the Labour Mayor of Middlesbrough and the elected Tees Valley Mayor, Ben Houchen, for their efforts to secure CCS pathfinder status for the Tees valley. Success would not only bring much-needed jobs but much-needed investment into the area. If we are serious about meeting environmental targets, we must invest in initiatives such as CCS. As an industrial base located on the coast, Hartlepool and the wider Tees valley area are best placed to meet those needs.
It is a pleasure to serve under your chairmanship, Sir David. Like other Members, I congratulate the hon. Member for Middlesbrough South and East Cleveland (Mr Clarke) on bringing forward this debate. He promoted Teesside and highlighted the possible economic benefits of CCS, including to the energy-intensive industries located there.
I had started to wonder what the Teesside Collective was. Before I came into the Chamber, I understood that it was the consortium looking to develop the project, but it is quite clear that the name could be applied to the Members gathered in Westminster Hall, because there is no doubt that they spoke with a unified voice. It is good to hear cross-party support fighting for jobs in constituencies, and it is to be applauded.
As the hon. Member for Waveney (Peter Aldous) said, this is the second debate on CCS in this Chamber in a 10-month period. That shows how valuable CCS is deemed to be for climate control and emissions reduction. The debate has been somewhat more upbeat and optimistic than the debate in January, but I warn the Minister that, just like my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), I reserve the right to apply a bit of gloominess to the issue.
Before the hon. Gentleman introduces further gloom to the debate, perhaps he would like to welcome, as I did yesterday, the fact that the Caledonia project in my home country is working very closely with the Tees Collective project in my adopted home. It is co-operation between projects that will capture the imagination of the Government and others and drive things forward.
Yes, I welcome that collaboration and announcement. The hon. Gentleman made a joke about being parochial for his area and his constituency, but surprisingly I am not going to be that parochial. I would like to see all these projects develop, with local areas across the United Kingdom benefiting.
The hon. Gentleman talked about taking tiny steps forward. We need to take much bigger leaps forward—this is where I turn to the gloomy aspect that my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey touched on—but we have taken backward steps. The Minister might not like hearing this, but it is important, and it has got us to where we are just now. Pulling the plug on the Peterhead project cost the Peterhead area 600 jobs, but it has the much wider implication that it dented investor confidence. The Government need to take action to recover that confidence and find ways to get private investment going forward.
In 2014, before the Scottish referendum, we were told by the Better Together campaign that only the broad shoulders of the United Kingdom could cope with a reduction in the oil price. Since then, we have sadly seen a reduction in the oil price, but we have not seen enough support from those broad shoulders. That is why the pulling of the project at Peterhead was a further blow to the oil and gas industry in that area of Scotland. That project could have been the perfect fillip.
Does the hon. Gentleman accept that the White Paper on independence was wrong when it talked about the proceeds from oil and that the Deputy First Minister John Swinney was wrong when he said that there would be a second oil boom? As we are talking about U-turns, will the hon. Gentleman join me in calling on the First Minister to perform a U-turn on scrapping the energy jobs taskforce, because that is needed to support jobs in Aberdeen?
I thank the hon. Gentleman for that intervention and for talking down the oil and gas industry in his area. Yes, the Scottish Government’s predictions in the White Paper had the future price of oil wrong—just like the UK Government and the Office for National Statistics had it wrong. The Scottish Government were somewhere between the two. We were not the only ones who got it wrong; economists got it wrong too. We admit that we got it wrong, but it is why the SNP has long argued for an oil fund, because that would have helped to smooth the trough that came. I am happy to acknowledge that point and put it on the record.
Returning to where I was going to go, the decision to pull the plug on Peterhead had wider implications for investor confidence. It has been acknowledged and was repeated in the clean growth strategy that risk was an issue with these projects, but in the previous competition the real risk was the White Rose project, where the contractors involved could not apportion risk between themselves properly and could not provide a compliant bid. In the Peterhead project, Shell was able to manage the risk. The Government need to review that and find out why Shell said it could manage the risk and provide a compliant bid. That has important implications going forward.
The National Audit Office report compiled after that decision confirmed that a total of £168 million was spent on the two CCS competitions with no tangible research and development outcomes to show for it. The Government may suggest that the contractors or personnel involved in the projects developed some expertise, but there is no guarantee that they will be involved in future projects. There is a risk that they will take their expertise elsewhere. That is why we need to go forward quickly. Following the decision on Peterhead, there has been the withdrawal of funding for onshore wind and solar power, which has caused problems in those sectors, leading to a 95% drop in expenditure on renewables. There is a clear pattern, and I highlight that to remind the Government that investor confidence is low and it must be stimulated. They need to find a way forward.
The Government can find ways forward to manage risk. In the Thames tideway project, they underwrote risk to the value of £5 billion. Hinkley Point C had bonds of £2 billion underwritten, not to mention the fact that the National Audit Office estimates that the project will cost £30 billion. We must remember that, unlike the other contracts for difference awards, Hinkley has a 35-year lifespan and not the standard 15. It is clear that where there is Government will, there is a way. They need to find that will and way for carbon capture and storage. The hon. Member for Waveney talked about the Oxburgh report, which highlights that CCS can deliver an estimated strike price rate of £85 per megawatt-hour. That compares favourably with £92 per megawatt-hour for Hinkley.
Other Members have highlighted the estimate of the Committee on Climate Change that CCS could halve the cost of meeting the 2050 carbon reduction target. In that respect, I welcome the clean growth strategy, which the Government brought forward last week. As I said at the time, however, the strategy gives mixed messages. It states that CCS will be deployed subject to cost reductions, but we need clarity. What are the Government’s cost expectations and what is the expected trajectory once the initial project is up and running? We need to remember how that compares with the “sign at all costs” attitude taken towards Hinkley. The Government also need to state clearly how they expect CCS to be paid for. Members from Teesside have highlighted the need to find a suitable and robust payment mechanism that gives value for money.
I welcome the Government’s statement in the clean growth strategy that they
“will work with the ongoing initiatives in Teesside, Merseyside, South Wales and”—
importantly from our perspective—“Grangemouth”. However, they need to clarify what “work with” means. What is the real level of support that they will provide? It needs to be more than working with or providing token support. As my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey highlighted, the St Fergus project in the north-east of Scotland is being supported by the Scottish Government and EU funding. When it comes to EU funding, what future funding are the UK Government going to allocate beyond the 2020 horizon? How do they see collaborative working going forward?
Due to the abrupt pulling of the previous competition, at great cost to the public purse, not only was the National Audit Office report undertaken, but the Public Accounts Committee also undertook an investigation. It made a number of recommendations; hopefully the Minister will advise us on how the Government will take them forward. First, the Committee recommended that the Government
“set out in its Industrial Strategy the role that CCS can play”.
I am not sure that there is enough detail in the industrial strategy on that yet. The next recommendation was that
“By the end of 2017, the Department should quantify and publish the impact across the whole economy of delays”
to CCS and of its not having been implemented yet. The Committee recommended that an
“Emissions Reduction Plan should set out a clear, joined-up strategy for deploying CCS”.
It also said that the Government need to look at different risk options for energy policies, that the Treasury should buy into the emissions reduction plan at the outset and that there is a need for less Treasury interference—the Department for Business, Energy and Industrial Strategy must actually make the decisions, rather than the Treasury intervening.
I hope that the Minister will respond to that, and advise whether the carbon capture, utilisation and storage cost challenge taskforce that is to be put forward will consider those aspects. I welcome the setting up of that taskforce. Will she also confirm how experts will be selected and incorporated into the taskforce, and what the terms of reference from the Government will be?
It is laudable that the clean growth strategy reiterates that we want to see the implementation of CCS. As the hon. Member for Stockton North (Alex Cunningham) asked, what does large-scale CCS in the 2030s mean, what is the pathway to that, and what projects do we need to see on board before then? The mention of supporting hydrogen production is also laudable; that is certainly a good way forward. I would also highlight the fact that Scotia Gas Networks is looking to run demonstration trials up in Scotland, to see how that will work in a domestic setting.
It is laudable to say that the UK aims to be a global leader, but to be a global leader we need to lead from the front. We need financial commitment, drive and determination, and we need to see a clear way forward soon. I look forward to hearing the Minister’s response.
Surrounded as I am by what we now know is a Teesside collective, who look out on to the North sea, I cannot offer quite such a spectacular view from my constituency. I have a view on to the English channel, which is of course rather less bracing for a dip this time of year, but does not share the North sea’s potential for CCS in the future.
It was good to hear this afternoon from Members across the House about that potential, in terms of what is in Teesside—both in its own right and in conjunction with what is in the North sea. As a country, we must play a role in, among other things, making sure that after the exploitation of the North sea for oil and gas, the industry continues. That can be done by ensuring that the plant, the connections and the various other things currently in the North sea are turned around over the coming period, so that we are the leading country in Europe and the world for storing carbon as well as capturing it—perhaps offering that facility to not only our own country, but all the countries bordering the North sea and more widely.
In that context, it is interesting that that is precisely where Norway is now going. Statoil has been fairly busy recently; I met with its representatives just the other day. It was good to hear from them that although there have been setbacks in the process of getting the Norwegian project under way, it is very much still on track. The aim is to develop the Troll field, essentially as the first part of a European-wide process of storage of carbon in the North sea. They are currently looking at processes of barging captured carbon to an onshore site in Norway and then pipelining it out.
The development in Norway is an illustration of why the UK needs to get on its bike and get moving. Yesterday, at the all-party parliamentary group meeting, it was revealed that the cost for projects in this country might be as low as £40 or £60 a tonne, but going to a third party might cost us £100 a tonne. That is an economic argument in favour of our own comprehensive storage.
My hon. Friend has exactly anticipated, in rather more eloquent terms, what I was about to say almost immediately. The pace of the Norway project illustrates that we should get our act together as early as possible in making sure that we have the lead on the whole process in the North sea, for all the reasons that my hon. Friend mentions—cost, expediency and proximity. This unparalleled opportunity will probably not come again. If, for example, we close down all the capped wells and sites in the North sea as the oil begins to diminish, we will have lost that opportunity to be world leaders in the North sea. Action needs to be undertaken now, or in the very near future.
I endorse everything that has been said by pretty much everybody in the Chamber today about the importance of carbon capture and storage for the future. I cannot do better than describe it in the exact words of the Committee on Climate Change:
“Carbon capture and storage (CCS) is very important in meeting the 2050 target at least cost, given its potential to reduce emissions across heavy industry, the power sector and perhaps with bioenergy, as well as opening up new decarbonisation pathways (e.g. based on hydrogen).”
The committee goes on, in that report, to talk about the cost of not doing anything as far as carbon capture and storage is concerned over the coming period, which hon. Members have discussed.
The Committee on Climate Change sees carbon capture and storage as absolutely essential. That is what it said in its report, “The Fifth Carbon Budget”, which we in the UK have now adopted. It is incumbent on us to make sure that we respond to what the committee has underlined in that report—the importance of carbon capture and storage.
On that matter, I have been pleased to see that the clean growth strategy not only mentions but more than mentions what will happen with carbon capture and storage. Just a little while ago, the Minister told us in the House that the clean growth plan would be on its way shortly, with further bells and whistles. I would like to think that that mention—all three pages of it—may be a bell or whistle that she personally inserted into the clean growth plan to get a new view abroad of what we can get from carbon capture and storage, how important it is for the future and what the next pathways are.
I cannot be wholly uncritical, because certain things need to be underlined at this stage. Opening an avenue on carbon capture and storage will inevitably be seen by many people concerned about the area as springing from something that hon. Members have also mentioned this afternoon—the shameful passage in our recent history of the cancellation of the two carbon capture and storage pilot projects at the very last moment, in 2015. The cancellation of those projects was not just a tragedy and a disaster for the communities involved in them; it spread a pall of doubt and concern across the whole of the industry about whether carbon capture and storage has a future, whether it is worth investing in and whether confidence can be restored to make it go forward, as we all want. We have to tread a path back to the starting line, and I hope that, given the intentions about carbon capture and storage set out in the clean growth strategy, the Government understand what that setback has done to us and find a way to get back to the starting line. There are a lot of measures in those three pages, which suggests that that can be achieved.
I am not sure whether the £100 million—or, to be precise, up to £100 million—that has been set aside for the next phase of the development of carbon capture and storage will be remotely sufficient to get us where we want to go. I hope that, in 2018, when the Government come forward with more plans and details about how the £100 million will be spent and what will happen to it—the clean growth plan assures us that they will do that—the next stage of the road map will set out what we will put in over the next period to make carbon capture and storage work properly and ensure we reach the carbon reduction goals set out in the fifth carbon budget.
In that context, we ought to pay more attention to the excellent report on carbon capture, usage and storage by the Oxburgh commission, of which the hon. Member for Waveney (Peter Aldous) was a member. Although the clean growth strategy says that that advisory group’s advice influenced the Government’s thoughts on carbon capture and storage, the report sets out the investment that is likely to be needed for carbon capture and storage over the next period, and it is substantially more than the £100 million set out in the clean growth plan. It would be helpful for the Government to provide a formal response to that report, which they have not done hitherto, to put on the record which parts of it they think are important, which parts they will try to implement at an earlier stage and which parts they will leave for later. I will leave that thought with the Minister. That would be a very positive thing to do, in the light of what was put forward in the clean growth strategy. We must be clear about the path ahead of us, and we need to learn from the report’s very good insights.
I hope the Minister notes the cross-party agreement in this Chamber about the urgency of the need to develop carbon capture and storage, about the development route we need to take, about the key role that Teesside and the North sea will play in that process, and about the need to work together to realise the carbon capture and storage goals that are so necessary on our path to carbon reduction.
As always, it is a great pleasure to serve under your chairmanship, Sir David.
I thank my hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke) for securing this excellent debate, to which there have been many thoughtful, detailed and factual contributions. My hon. Friend is a strong proponent both of the technology and of the area he represents. It was wonderful to hear the unanimity of views, in particular from the hon. Member for Redcar (Anna Turley), who speaks so passionately on behalf of her constituency; the hon. Member for Stockton North (Alex Cunningham), who made a very factual contribution about the importance of this technology; the hon. Member for Hartlepool (Mike Hill), whose predecessor also promoted the technology; and my hon. Friend the Member for Waveney (Peter Aldous), who, although not from the region, represents a coastal constituency and has a long-standing interest in this issue. As always, he spoke very well on this subject.
I tweaked the tails of the hon. Members for Kilmarnock and Loudoun (Alan Brown) and for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) slightly. I understand their points, but I sometimes wonder whether we do not have more solar deployment in Scotland because listening to the Scottish National party might lead us to think that the sun never shines north of the border, whereas we all know that it does very frequently. They made a fair point about the criticism that has been levelled at previous decisions, and that criticism has made me determined to find a copper-bottomed means of taking this technology forward. We all accept, and the report is clear, that it should be in our decarbonisation mix, but we need to develop it in a way that meets our triple test: it must ensure maximum decarbonisation, offer a clear route to an acceptable cost level, and help us boost the UK’s technology leadership so we grow the number of jobs in that part of the economy and our export potential.
I will try to answer all hon. Members’ questions. As always, some will not get answered, but I am sure my excellent Parliamentary Private Secretary, my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak), will be assiduous in capturing any that are not answered and making sure that I answer them further down the line.
I have not reviewed those particular costings. As the hon. Gentleman knows, I am never without my calculator. If there is one thing I want, it is value for money and a clear route to cost-effective deployment. Hopefully, we all want to go down that path.
It was excellent to hear cross-border, cross-party support for this technology. That is the way to boost investor confidence and ensure the clean growth strategy survives the vagaries of the political cycles. These long-term decisions benefit both us and our children and grandchildren.
All parties welcomed the clean growth strategy, and I thank their representatives for that. We are coming at this from a position of strength. We have the best decarbonisation and growth performance of the G7 economies. We are all determined to capture the enormous opportunity from the global pivot to low-carbon economies, and we want to ensure the UK’s productivity benefits from it. The strategy is broad and binding. It sets out clear targets and harnesses the power of innovation, on which we lead the world, to drive down costs and increase the pace of the roll-out of innovation. It also clearly sets out how we intend to meet some of the challenges.
Carbon capture, usage and storage is a vital part of the strategy. It is needed as a long-term strategic option so we can deliver the 2050 target at the least cost. It is crucial that we cut emissions from sectors that are hard to decarbonise. CF Fertilisers has done an excellent job in taking as much carbon as possible out of its industrial processes, but we understand that producing that vital product is carbon-intensive.
Carbon capture, usage and storage also gives us optionality. The hon. Member for Kilmarnock and Loudoun talked about the opportunity to decarbonise hydrogen production, and it is important that we maintain that option as we move towards our low-carbon future. As my hon. Friend the Member for Middlesbrough South and East Cleveland argued so well, capturing and effectively deploying this technology enhances the competitiveness and productivity of industrial regions such as Teesside, Merseyside, Grangemouth and south Wales. I do not want anyone listening to this debate to be in any doubt that, although some areas may be leading in terms of their ability to promote themselves as places to use this technology, that does not rule out other areas. We want it to be deployed effectively in all parts of the UK where there are industrial clusters.
The technology represents an export opportunity for firms such as Shell and Costain and new UK technology providers such as Carbon Clean Solution, which was funded by the Department for Business, Energy and Industrial Strategy to develop globally leading new forms of carbon sequestration for industrial processes.
Many companies are involved in the supply chain as well. I have been following with great interest the Eight Rivers plant, because it is UK-developed, completely breakthrough technology. It is funded with UK Government money deployed in Texas because of the package of incentives put around it, but the supply chain to the plant involves venerable companies such as Goodwin in Stoke-on-Trent, which is an amazing leader in high-specification metallurgy, and Heatric in Poole, Dorset. If we can capture such opportunities onshore, we bolster our onshore supply chain and, as the IEA has estimated, the global CCUS market could be substantial.
The problem, however, is this: we all accept that CCUS is important—we had some conversation on the nervousness in Norway about doing this—but while 21 CCS plants are operating at scale in the world, 16 are dependent on the revenues from enhanced oil recovery, which suggests that for only five plants on the planet has someone been able to persuade a Government or local player to subsidise the technology substantially, despite the potential of such technology. That tells me that the cost of the existing technology is too high and that there are potentially ways to deploy it more effectively.
That is why I want to change things—this is the point made by the hon. Member for Southampton, Test (Dr Whitehead)—and it is very much a personal commitment and something I strongly believe is exceptionally important. That is why we have put in place a much broader strategy on CCS. We want the prize of global leadership in the area: we want to be the people who break the deadlock, deploy CCS in the UK and capture the export opportunities.
We therefore have three areas in which I have set out actions under the clean growth strategy. First, we will constitute the CCUS cost challenge taskforce rapidly, because the model worked extremely well for offshore wind where we all accepted that the existing costs were too high. I take the point about risk sharing—the hon. Member for Kilmarnock and Loudoun is knowledgeable about this. There is a real question as to how much risk partners were able to accept in that structure. We are keen to probe our understanding of how to get down the cost of the deployment of the technology, so the new taskforce will be constituted in the next month. It will report to me and, as with the green finance taskforce, it will be set specific challenges to come up with ways to reduce the cost.
Secondly, we will publish a deployment pathway for CCUS over the course of the next year, which will include the points made about power capture, industrial capture, and transport and storage. We want specific delivery and investment models for each of them. We will continue to progress the work we are doing with the Teesside Collective, but will also work with other initiatives in Teesside, Merseyside, south Wales and Grangemouth, because there are other opportunities to do so and to learn from.
I very much welcome the commitment to a timeline over the next 12 months. That is extremely welcome, and I wanted to say it specifically, but what else will the Minister do to help build the investor confidence to ensure that we can get the investors to put the money forward to make the projects happen?
The hon. Gentleman has pre-empted what I was going to come on to, although I am conscious of the time and that I have to leave some for my hon. Friend the Member for Middlesbrough South and East Cleveland. For example, I too am meeting Statoil today— I am doing the rounds and going straight from this debate.
I am very conscious of the opportunities to work with organisations such as the Oil and Gas Climate Initiative, which for the first time is deploying new funding specifically into this area. We are very keen on substantial private sector investment. We are talking for the first time to the gas turbine blade manufacturers, who have never been involved in the conversation but who clearly depend for their long-term business survival on continuing to generate power with gas.
Internationally, I want to be sure that everyone is aware that we are perceived as a technology leader. We participate in Mission Innovation and its carbon capture innovation challenge. We are already exploring collaborative working relationships with countries such as Norway, which has an excellent Energy Minister. Collectively, between our two countries, we took the hydrocarbons out from under the North sea; surely there is cost-effectiveness in co-operating to put back the CO2 we have extracted. Given budget constraints, Norway in particular bears some interest, but there is also interest in working together in the United States, Canada and Australia.
We will therefore keep investing in our international CCUS programme and will organise and host an international global carbon capture, usage and storage conference next year to affirm that this is an area in which we want to take international leadership. We want to be the movers and shakers in this field.
As we have made hon. Members aware, we will invest in innovation to support such technology through our £100 million industry and CCUS innovation programme. We will make up to £20 million available for a CCU demonstration programme; we will support the next generation of technology; and in particular, as we talked about, we will support CCUS in some of the further out technologies, especially those to do with the removal of greenhouse gases. To ensure that that all works, I will personally chair a new CCUS council with industry to review progress and priorities.
I want hon. Members to be in no doubt that we are making a fundamental doubling down, as it were, on our commitment, but the guideline is that we must come up with a more cost-effective way of doing CCUS. We have to ensure that we produce the maximum reduction in emissions and we want to position the UK as the global technological leader in this space. That is at the heart of the clean growth strategy.
I will be delighted to attend the APPG and I am happy to have the conversation. As hon. Members should know, my door is always open. I feel that collectively—I choose the word advisedly—we are much better together on this sort of technology. The more we set aside any political differences, the more we ensure that we are perceived as a great place for investors—that would be great.
Sorry, I have one point to finish on quickly. I was asked about the response to the Public Accounts Committee. We accepted a majority of its recommendations, but we did choose to reject that one because, for one thing, it was based on outdated cost analysis. We want to convince everyone—I hope we have done—of the Government’s commitment to move forward on CCUS. I do not feel that we need to demonstrate its importance because that is already accepted.
I want absolutely and sincerely to say how impressed I am with the work of the Teesside Collective, which has made an exceptionally powerful case to be the first place to move forward with this technology. Discussions are very active, but it would be a bold Minister at my level who set out funding commitments ahead of the publication of the industrial strategy or the Budget. However, the case has been made, and made so well that—forgive my lapse into urban slang—I wonder whether “Teesside Massive” might be more appropriate than Teesside Collective. It is a powerful force, and it is wonderful to see so many colleagues from all parts of the House making the case.
It has been a pleasure to serve under your chairmanship today, Sir David. This has easily been the most pleasant debate that I have experienced in my short time in this House. I hope that it marks a new era of consensus in our politics.
We have heard about the fierce urgency of “now” when it comes to seizing the moment for CCS. In a powerful speech, the hon. Member for Redcar (Anna Turley) set out her long-standing commitment to delivering this technology, rightly alluding to its potential significance after Brexit. My hon. Friend the Member for Waveney (Peter Aldous) made a typically thoughtful speech, welcoming the progress that has been made this year and referring in particular to the opportunities for coastal communities—including his own in East Anglia—that form part of the supply chain. The hon. Member for Stockton North (Alex Cunningham) has made a huge contribution to the pursuit of CCS for Teesside—for our new “massive”, which may take me a while to get used to—in his role as the chair of the APPG, where I am delighted that the Minister will join us in due course.
The hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry)—I hope I did not just mispronounce his constituency, or at least that I have not endangered the Union in so doing—made a passionate case for the Peterhead site for CCS, and that was echoed by my hon. Friend the Member for Aberdeen South (Ross Thomson). I entirely agree that there must be no more false starts. This is surely the line in the sand and I think we have heard enough today to suggest that it will be.
The hon. Member for Hartlepool (Mike Hill)—my mother is also from Hartlepool; she is also a monkey hanger—rightly referenced the key role his town has to play in our green revolution. The hon. Member for Kilmarnock and Loudoun (Alan Brown), in a very generous tribute to the work of the Teesside Collective, rightly emphasised the benefit of delivering all the viable projects, including those in Scotland. The hon. Member for Southampton, Test (Dr Whitehead) is a hugely informed Opposition spokesman who has done so much on this issue down the years. He rightly praised the Oxburgh review and there is a lot to learn from that.
In closing, I thank the Minister for her personal commitment to making a success of CCS. Her speech was thoughtful and really helpful. It was great to hear about the taskforce and the deployment pathway. We have a great ally in her and I look forward to working with her, and with all colleagues who were here for this debate, as we move forward in the years ahead. I think we are on the cusp of something very special.
Question put and agreed to.
That this House has considered carbon capture and storage.
[Mr Peter Bone in the Chair]
[Relevant documents: First Report of the Defence Committee of Session 2015-16, Flexible response? An SDSR checklist of potential threats and vulnerabilities, HC 493, and the Government response, HC 794; Second Report of the Defence Committee of Session 2015-16, Shifting the goalposts? Defence expenditure and the 2% pledge, HC 494, and the Government response, HC 465; Third Report of the Defence Committee of Session 2016-17, Restoring the Fleet: Naval Procurement and the National Shipbuilding Strategy, HC 221, and the Government response, HC 973; Oral evidence taken before the Defence Committee on 28 February on the UK National Shipbuilding Strategy, HC 970; Written evidence to the Defence Committee, on the UK National Shipbuilding Strategy, reported to the House on 7 March, HC 970; Oral evidence taken before the Defence Committee on 8 and 15 November and 6 December 2016 and 31 January, on Defence Acquisition and Procurement, HC 698; Written evidence to the Defence Committee, on Defence Acquisition and Procurement, reported to the House on 25 October, 1 November and 6 December 2016 and 17 January, 7 March and 24 April, HC 698; Eighth Report of the Defence Committee of Session 2016-17, SDSR 2015 and the Army, HC 108, and the Government Response, HC 311; and Oral evidence taken before the Defence Committee on 12 September and 17 October, on F-35 Procurement, HC 326.]
I beg to move,
That this House has considered the Government’s review of defence capability.
It is a pleasure the serve under your chairmanship, Mr Bone, and an honour to engage with the Under-Secretary of State for Defence, my right hon. and gallant Friend the Member for Bournemouth East (Mr Ellwood), in this vital debate. People throughout the country will remember his empathy, bravery and application when he helped the emergency services during recent terror events not far at all from here. They will not be surprised to learn that he served in our armed forces with distinction before he came to this place. They will recognise the virtues that he displayed that day as the instincts of our armed forces personnel serving throughout the world. We are all lucky to have him representing us as a Minister.
At the battle of Thermopylae some 2,500 years ago, a vastly outnumbered 300 Spartans led resistance against the massed ranks of Persian invaders from the east on a narrow seaside salt marsh only 100 metres wide, while their Greek allies retreated behind them, better to defend their homeland. That Spartan royal guard, who were specially selected for their prowess and the fact that they had sons, and their King, Leonidas, all perished together at those hot gates. They bought their allies crucial time to fall back and regroup, to preserve what they held dear. A famous ancient memorial inscription to them at the site reads:
“Go tell the Spartans…that here, obedient to their laws”
The Greek word for laws that was used is ambiguous. It can mean orders. That ambiguity was appropriate, since at that particular festival time, the Spartans usually observed a strict religious law that was against their normal tradition of military readiness. However, they had been ordered by the Spartan political council to lead this vanguard of the Greek city states’ defence, and they put aside what must have been deeply mixed feelings to do the duty that had been assigned to them, for their countrymen and for wider civilisation. The culture of the enlightenment and the forces enlisted throughout history to help defend it have drawn inspiration from these men, who did their duty for the greater good against all odds.
We all remember Nelson’s final message, that
“England expects that every man will do his duty”,
and his own personal sacrifice for our nation and our allies. Our modern civilisation and modern forces face different challenges and threats, but what does not change is our crack forces’ heroic willingness to go all out, head on and straight at them, to defend each other and what we hold dear. When our modern-day political councils ask what our country should ask of those who are willing to put themselves in harm’s way for us, and how we should help them, we need to remind ourselves of the value of that bond in blood that binds our history and our fighting generations. It is easy for generations whose family memory is distant from the sacrifices our nation made to make the future safe to lose feeling for their importance. However, the modern western civilisation in which we live and into which most nations—even those from outside our tradition—seek to integrate, even while maintaining their own traditions, is founded on a rules-based system that we, as much as any nation, helped to make. We must be prepared to defend it.
Our politics, our freedom and our democracy are worth fighting for, now as always. It is only through preparation, innovation, training and modernisation in our time of relative peace—when the gates are not so hot, as it were—that we will ensure that, should things change, this and successive generations can fight and win.
It is right that in this fast-changing and in many ways increasingly dangerous world we constantly consider how to enhance our capability, capacity and ability to defend the things that we hold dear. The Government recognise that. They have a growing budget for defence and they are committed to the regeneration of our capabilities. They are committed to spending at least 2% of GDP and to grow the defence budget by at least 0.5% above inflation every year. We need to get the most out of that spending and to ensure that our armed forces and other security and support services have the resources, forward thinking and support from our nation that they need to succeed, if at any stage they are called upon. It is right that we, as politicians, in close consultation with our security advisers, military and otherwise, clearly assess our capability requirements in different areas. It is also right that we constantly drive for value for money in the long term, which includes ensuring that we have a highly productive, agile and innovative defence and security industrial base that is a strategic asset and deterrent in its own right. The political councils of our time must take a long-term view and provide consistent leadership on policy in this area for military and security chiefs to implement.
At this time especially, as we leave the political construct of the European Union, we must lead in showing that our European friends and allies have no more dependable, able and committed a partner in defence and security than the United Kingdom. I believe that the people of the UK instinctively understand that and have the overwhelming will and desire to ensure that it remains the case. The vast majority of people across politics get that when it is expressed in this way. Those who rail at the inefficiency of Brussels and its largesse, inscrutable accounting and questionable politics would nevertheless, without hesitation, defend the values at the heart of homes across Europe. Those of almost all shades of political opinion on how we should improve our compatriots’ lot would agree in a heartbeat that the defence of our shared basic values of liberal democracy and the rule of law should be defended in as modern and effective a way as we can muster. Most people understand that those values provide and preserve the certainty that is fertile ground for prosperity and happiness to flourish, and that protecting and nurturing them is a multigenerational and never-ending endeavour for us all to pursue.
I will leave it to others to catalogue the ways in which our ongoing and upgraded sovereign contribution could help to preserve the rules-based structures that nations of the world enjoy, but let us make no mistake: every child, every family and every individual throughout the land should understand that our willingness to stand up for the civilisation that we hold dear is part of what makes us the people we are, and temporary strictures should not be allowed to detract from that. We are proud of our forces and of the people who serve in them, and we want them to be proud, too. We want them to serve, safe in the knowledge that they and their loved ones will be looked after. If we need to spend more to ensure that they know that, then that is what we must do.
We should not underestimate the economic value to our communities of defence spending. That value comes not just in pounds, shillings and pence, or in the form of the 10,000-plus jobs that support families across my constituency, for example. No—the ethos of service, and respect for it, has its own much wider value in society. If we want public servants who are committed and dedicated to often unseen work, they need to know that, even when they are not thanked, we are thankful. If we want people to look out for each other, it helps to think about what we would do to help each other in extremis.
Everyone in our nation has been touched by stories of ordinary people doing extraordinary things in recent moments of need, in Manchester, London, Paris, Brussels and Nice. Our defence personnel, our security services, our police forces and all the other public servants and civilians who leap into action daily inspire us. They, too, are ordinary people doing extraordinary things. Let us think about how we inspire those who make that their life’s work. Let us ensure that we have the most excellent personnel to operate our state-of-the-art new equipment. Let us ensure that they have good pensions and homes. Let us ensure that they are incentivised to give their all.
Colleagues will, I hope, speak about how we used to spend more on defence. I will highlight two aspects of that as food for thought. In the early part of the cold war, we spent 6% of GDP on defence. I do not necessarily advocate spending quite as much as that, and obviously circumstances are different. However, it may be worth noting, at least for theory’s sake, that if the UK were to make up the other EU nations’ deficit of spending against their NATO target of 2% of GDP, we might do that by spending 5.5% to 6% of our GDP.
Some extraordinary new strategic assets are coming into our forces, not least the two Queen Elizabeth class aircraft carriers and their complements of aircraft, which it would absolutely be in our allies’ interests for us to be able to deploy, concurrently, in the European sphere and elsewhere. We should maximise the sovereign usefulness of those assets by making sure we can operate them in battle groups on our own if need be. Our naval programme should be geared towards that, and our defence spending and training of skilled personnel should be upgraded substantially to deliver it.
My community in south Somerset is particularly proud of the contribution that it makes and can make in future through the Fleet Air Arm at Yeovilton and the helicopter manufacturing and wider defence industry supply chain. I strongly believe that the armed forces component of our national security must have a 360-degree ability to deal with all requirements. For me, amphibious capability is an essential part of that. I strongly support the modernisation of our Army and want it to have sufficient trained personnel to be scalable and capable of sustained use, with properly equipped medium-weight strike brigades that can make an essential contribution to allies and that are a strategic deterrent in themselves.
I am conscious that the tempo of operations and lack of proper equipment, at least in the early part of operations in recent middle eastern engagements, put significant pressure on the Army and its families, and that must not happen again.
Helicopters were one thing our forces lacked, and I am proud of the way that my Yeovil community has helped to give our forces proper battle-space protection and mobility with its Wildcat and Merlin programmes. In particular, I note Wildcat’s agility and flexibility in close support operations, versatility over land and sea, and flexible and powerful inter-operation with other key systems in both the naval and army spheres. Although there may be other systems that one might want to add for specific purposes, I believe it would be immensely short-sighted not to upgrade and extend our indigenous helicopter platform capabilities, and indeed support, as the Ministry of Defence is, the development of the next generations of battle-space mobility and protection products.
I appreciate the hon. Gentleman giving way on that point. Does he agree that it would be great to see a defence industrial strategy that really set out a vision for the way in which we procure stuff from the MOD, particularly to support the British steel industry, which is close to my heart, so that we do not see a repeat of the procurement process for the Type 26 frigate, which saw just 35% of the steel in each ship coming from British steel?
I thank the hon. Lady for her intervention. She makes an excellent point. I will come on to industrial strategy in a moment.
I will be working as hard as I can with industry partners to raise the tempo of productivity and innovation to match the commitment from the Ministry of Defence. Defence should be a fundamental part of our industrial strategy for both military and economic reasons, and I stand ready to work with Ministers and their Departments to ensure that we get this right and that proper account is taken of these matters during the defence and security review.
So what are the arguments against spending more? There are those who say we do not have the money. I wish a strong signal to go to the Treasury and Cabinet Office from this debate that it is a false economy not to give defence what it needs to regenerate a full 360-degree capability at this time. We could certainly use a few billion pounds a year currently given in international development, with overwhelming popular support and much greater domestic economic impact.
I have made other multibillion pound suggestions for savings to the Chancellor for his upcoming Budget, which I look forward to discussing with him again. To those who say we have other priorities, I say that this Government more than any other have focused spending on defence and on regeneration of our capabilities, and that this success needs to be reinforced. Economic value added to our communities and inspiration to our people and our allies should be top priorities for us at this time.
To those who say we do not have the will, I have never underestimated the ingenuity, good humour and grit of the British people. We should not hide our light under a bushel. I believe most of our fellows citizens would be proud to see it shine as a beacon for all to rally around.
I will conclude now because I want to allow time for others to speak. We all have a duty to do what we can to keep ambitions for our civilisation open to the next generations. There are some things worth fighting for, and we need excellence in the fight for them in all aspects of what we do every day. We have a duty to honour those who have gone before us. Giving our defence what it needs now is part of defending what they held dear.
I congratulate the hon. Member for Yeovil (Mr Fysh) on securing this debate via the Backbench Business Committee, and I was pleased to be able to support it. It is incumbent on all Members to thank our armed forces for their contribution. They do a heroic job all year round keeping us safe and defending our citizens and allies. As the son of a submariner I know from experience how important the armed forces are, not only for my family who relied on the money brought in to help us when I was growing up but for Plymouth, which is the area to which I will restrict my remarks on the upcoming defence review.
Members will know that since the election in June I have mainly spoken in this Chamber about the paucity of the shipbuilding strategy, the offshoring of our Royal Fleet Auxiliary builds, which should have been done in UK shipyards, and the lack of detail on our Type 31 armaments. My concern is that we will have a lightly armed fishing patrol vessel rather than a fully capable frigate. I am concerned about the loss of HMS Ocean, particularly its helicopter-carrier capability in littoral waters close to the coast. Then there is the issue of wages and veterans and the need to invest more in our frigates and escort carrier fleet. There was a lot of support for that and I am grateful to Members of all parties who encouraged me to continue speaking on these matters.
My concern about the upcoming review is about the potential for hollowing out capabilities, particularly around the Royal Navy and Royal Marines. Devonport in my constituency is home not only to half our frigate fleet, but to the deep maintenance facility for frigates, submarines and our amphibious assault ships. We already know that HMS Ocean is due to be scrapped, creating a capability gap in helicopter-carrier capacity in littoral waters, but the rumours and speculation that HMS Bulwark and HMS Albion, two world-class capable amphibious assault ships, also face the axe is deeply concerning to those people who have an interest in not only Devonport and Plymouth, but in our national security, which is where I want to focus for a moment.
Having assured access capabilities and the ability to project force and deter our enemies via amphibious assault ships is absolutely a key component of our Royal Navy’s full spectrum capability. As we have the precedent of HMS Ocean, one of our three amphibious assault ships, being cut, I am concerned that we could further erode or scrap altogether our amphibious capabilities. Tying up either Albion or Bulwark alongside in Devonport has reduced our capability in that respect, which is deeply concerning.
Once the amphibious capabilities have been removed, there is a logical step forward threat to the Royal Marines. I note from recent speculation in the media that up to 1,000 Royal Marines also potentially face the axe. We need to be really clear that the amphibious capabilities provided by the Royal Navy and the specialist forces in the Royal Marines are absolutely essential.
I am grateful to the hon. Gentleman for giving way. He talks in great detail about what is going on in Plymouth, but I should make it clear, in case other hon. Members pick up on speculation about what may or may not be happening in the review, which I hope to elaborate on, that no decisions have been made at all. I know hon. Members will want to get things off their chest and share their concerns, but no decisions have been made about any of the ships the hon. Gentleman has mentioned so far. Any decisions to be made are quite some distance off.
I think it is entirely possible for Ministers to set a strategy and direction in which the country will preserve its amphibious assault capabilities. The forthcoming defence capability review should be able to match that, to be honest.
My concern about what is happening to amphibious assault ships is matched by the concern of many people in Plymouth after the experiences of the past couple of years: not only the closure of Stonehouse barracks, but the cut to 42 Commando Royal Marines, and the loss of the Royal Citadel and HMS Ocean. No decisions have yet been made about the future basing arrangements for the Royal Marines, and I invite the Minister to talk about when a decision will be made. The possibility that without an amphibious assault capability in Devonport the Royal Marines could be moved out of the city is a matter of deep concern to me and to those who have served, especially those who were based near the spiritual home of the Royal Marines at Stonehouse barracks.
HMS Albion and HMS Bulwark are incredibly capable, world-class ships. They are due to be out of service in 2033 and 2034 so there is still a lot of life left in them. It is important to consider the context of the defence review. I am concerned that, without the normal detail that comes with a strategic defence and security review, the mini-review will look simply at cuts, rather than at the upcoming threats that the country faces. I am concerned particularly about the rise of Russia and its influence in the Arctic. For quite some time our amphibious assault ships and the Royal Navy have been good at deterring Russian aggression, or Russian possession of Arctic waters. That issue needs to be looked at.
I am also concerned about the figure of 2% of GDP for defence spending. It is a line that I hear from Ministers a lot. The Minister will know that the gaming of the 2% figure by the inclusion of war pensions produces a situation in which we are not spending 2% on defence. I should welcome it if the Minister would adopt Labour’s position of removing those gamed elements and spending an actual 2% on defence. I am sure that that sentiment would be echoed by hon. Members throughout the House. Would the Minister rule out cuts to our amphibious force, explain briefly how the capability review will mean a greater number of frigates and, importantly, more capable frigates—with a decent offensive and defensive armament package on the Type 31s, in particular—and address what the review means in the context of post-Brexit Britain? A strong and robust full-spectrum UK capability is vital to enable us to project our power, so that we can have a distinctive beacon status as a nation after Brexit, and so that we can fulfil our obligation to our NATO allies, particularly with Russia flexing its muscles, both in cyberspace and in military space, in relation to its near neighbours.
I invite the hon. Gentleman to clear something up; he talked a lot about cuts in the military. He knows my position on that. I have advocated on that matter for a long time. However, the debate must be in the realms of honesty. Since April 2016 the money going into defence has been increasing and it is at 2%. It is going up by half a billion pounds a year. I do not understand how that fits in with his narrative of cuts happening all the time. Surely our defences should be dealt with according to threat and capability, rather than with a constant narrative of doing down our armed forces.
I am grateful for that intervention, which gives me an opportunity to direct the attention of the House to the comments from the hon. Gentleman about the gaming of the 2% that I believe appeared in the media recently. It is important to base the debate on capabilities, and I have clearly done that in my remarks. As we approach the latest round of defence cuts—
If it would be of use to him, the hon. Gentleman might apply to the Ministry of Defence for a useful fact sheet that it has provided to me. It clearly states that as of 2016 our defence budget was £34.3 billion, but that by 2020 and 2021 it will be £39.7 billion. How is that a cut?
I invite the hon. Gentleman to visit Plymouth, where I can show him Stonehouse barracks and the Royal Citadel, which are shortly to be closed, and HMS Ocean, which is shortly to be scrapped. The key point that I was making in my remarks, which I shall happily repeat so that it will not be missed, was about the capabilities of the Royal Navy and Royal Marines. It is in the matter of capabilities that we need to preserve our world-class excellence. I am grateful and thankful to the people who serve in our armed forces; I know many such people, and members of my family have served in that area as well, so I am cautious about how I talk about the issue.
I have asked, both in Plymouth and nationally, for cross-party working to make a robust case to the Government opposing cuts to our amphibious assault ships in the future. [Interruption.] I know there has been some laughing about this but, after the interventions that I have taken during my speech, I do not expect, in a few months’ time, the Ministry of Defence, the Government or the Royal Navy to announce any loss of our amphibious assault ships. I implore the Minister to cement and celebrate the world-class contribution that HMS Albion, HMS Bulwark and the Royal Marines make to the United Kingdom’s amphibious assault capabilities, and protect them in the capability review that is coming up. I should be grateful if the Minister would address the concerns that I have raised about the Type 31 frigate, in particular.
It is a pleasure to serve under your chairmanship, Mr Bone. I congratulate my hon. Friend the Member for Yeovil (Mr Fysh) on securing this important and timely debate and I echo the comments that he made about my right hon. Friend the Minister, whose recent actions in trying to save the life of an injured police officer are an example and inspiration to us all.
I welcome a review of Britain’s defence capability. There is, after all, much to review. We should review whether we are really meeting our 2% of GDP NATO spending commitment. We should review the woeful situation that means that we cannot commit to enduring brigade-size multi-theatre operational deployments. We should review what the future of defence capability and procurement will look like if we do not continue to support and encourage the expertise and world-leading skills that we have in our country and our industry. We absolutely must address the shortfall in the current defence equipment budget. I understand that that is about £10 billion over 10 years or so. I agree with other hon. Members that we must significantly increase defence spending, for several reasons: first, the defence of the realm and the protection of our people is the first duty of any Government; secondly, we must do it for vital strategic reasons; and, finally, the armed forces are the jewel in the crown of the country, and the best of Britain. Defence spending increases our industrial capability and the ability to defend ourselves, but it is also a fantastic vehicle for social mobility and advancement for people of all backgrounds.
A few weeks ago, I visited the Kurdistan region of Iraq. I was immensely proud to meet elements of 2nd Battalion the Mercian Regiment, who are there training peshmerga forces. That is one of the many contributions that we are making in the fight against Daesh, and it is a clear demonstration of our armed forces’ global reach. Needless to say, ours is not a peaceful world: we can see threats from an emboldened Russia, a belligerent North Korea, and the remnants of the Daesh death cult. There is also always the possibility of unforeseen threats. History demonstrates that we rarely see where the next conflict will come from. It is therefore unwise, at the very moment when we are launching ourselves back into the world as an independent, free and sovereign nation, to penny-pinch on our national defence expenditure.
The 2% NATO obligation, which I am pleased to see the Americans are urging all our NATO allies to take extremely seriously, was a welcome commitment from the previous Prime Minister. However, it may inadvertently have given our forces false hope. It is now clear that we achieve 2% only by a recent change in how we measure, and what we include in, our defence expenditure. The inclusion of forces pensions and efficiency savings diminishes the value of the 2% in terms of real defence capability. I hope sincerely that the review will address those matters and lead to a realistic increase in defence expenditure. However, regardless of how much is spent on defence in future—and we must spend more—the result must be forces that are truly capable, with the ability to project both hard and soft power globally.
Currently our armed forces cannot deploy at brigade level to two major operational theatres simultaneously and enduringly. That means that we could not today undertake Iraq and Afghanistan-type operations simultaneously. That is a massive reduction in our global power, our status and our military capability and credibility. We must be able to deploy in more than one operational theatre simultaneously and enduringly at brigade level if we are to be—or remain—a nation of some worth. We need the ability to project the full spectrum of our capabilities on land, sea and air without having to be part of an international coalition, as we did successfully in Sierra Leone and the Falklands.
I thank my hon. Friend for his excellent intervention. I was careful to use the word “enduringly”. We could possibly throw 10,000 troops around the world to do a short operation simultaneously, but the important point is about doing so over a reasonable period of time and enduringly.
As long as we have a funding settlement that forces commanders to choose between equipment and recruitment, the armed forces will remain severely restricted and hampered in their capabilities. I suggest that the restraint on our current defence capability must be reviewed as a matter of great urgency. Such discussions normally lead to the question of equipment and its provision. Better, more realistic funding will help buy more equipment in the mid-term, but we must think in strategic terms. If the review does not lead to increased investment but further limits the spending power and capability of our forces, we may soon discover that it will be more difficult for our country to remain a world-renowned centre of defence and aerospace excellence and expertise, never mind having the ability to defend our people here and abroad.
I have the interest and great pride of representing a constituency that has a very large number of successful and highly skilled defence and aerospace companies, the largest among them being Rolls-Royce, Airbus and GKN. As an example, Rolls-Royce represents 2% of all UK exports by value. We must build on and increase that. Filton and Bradley Stoke is also home to Defence Equipment and Support at MOD Abbey Wood, which employs about 10,000 people and does a fantastic job in procurement and equipping our armed forces across the world.
The most obvious example of the threat to our sovereign defence industrial capacity is the recent announcements from BAE. From conversations I had with representatives of Rolls-Royce in my constituency just a couple of days ago, I know it is concerned in the wake of those announcements. The RAF Typhoon jets have a predicted service life of until about 2040. That may sound like plenty of time, but the delivery of the next-generation fighter could take two decades from start to finish. Also, without such defence contracts, as well as clarity on what the Government’s plans are and sufficient funding, companies such as Rolls-Royce are in danger of losing skilled personnel capable of delivering such contracts. In recent conversations the company was unequivocal in its fear that once the capability and skills are lost, in many cases they are lost for good.
I am pleased that recent responses from the Ministry of Defence have confirmed that it understands how important the review is to British industry and our sovereign capacity to equip our armed forces properly. I would therefore like to ask the Minister when progress will be made on committing to the next-generation fighter. That is vital to safeguard the expertise we need and the capacity and capability we require for future generations.
The review comes at a crucial time. If done properly, and acted on, it will reinforce and strengthen our sovereign defence capability at a time when we are reasserting ourselves on the world stage. Crucially, in the end, wars are not won, and nations are not defended, by equipment alone; we need people. The Army has a severe manpower shortage, the Royal Navy is fearful of being unable to man our aircraft carriers and the Royal Marines are very concerned about potential cuts to our amphibious capabilities.
I call on the Minister to show real courage and leadership. A failure to increase resources would see Britain losing both its technical expertise and international credibility. In short, it would serve to entrench a dire situation and diminish our place in the world—and, crucially, our ability to defend our people.
It is a pleasure to serve under your chairmanship, Mr Bone. I thank the hon. Member for Yeovil (Mr Fysh) for bringing forward this important issue for discussion.
I welcome the review of defence capability and hope that it will address some of the serious shortcomings of the current strategic defence and security review, which was published only a few years ago. As we know, the 2015 SDSR does not take into account issues regarding Brexit in any shape or form and it therefore requires urgent revision in the current climate.
We have often said that the SDSR is hugely ambitious. However, in recent years the Government have failed to manage the defence budget effectively and get best value for the taxpayer. There are gaping holes in the existing budgets. There is an £8.5 billion black hole in the defence estate strategy budget and a £4 billion hole in the defence equipment plan. As many in the Chamber know, the National Audit Office warned at the beginning of the year:
“The risks to the affordability of the Ministry of Defence Equipment Plan are greater than at any point since reporting began”.
The National Audit Office also noted the lack of room for unplanned cost growth in the equipment budget and the vulnerability to changes in foreign exchange rates, which are significant, with £18.6 billion for equipment that has to be paid in US dollars. The Prime Minister’s own former security chief, Mark Lyall Grant, has warned of a stark impact on UK national security and the military’s spending plans in the event of a Brexit downturn in the coming years.
As many Members will know, in Scotland, the Tories have slashed 20% off our defence estate, and Army personnel numbers are at an historic low. What is more, in Scotland we still have no conventional ocean-going vessels in our waters, and we have had no maritime patrol aircraft since the scrapping of the entire Nimrod fleet.
I am grateful to the hon. Gentleman for taking an intervention. Will he acknowledge the significant investment in my constituency at RAF Lossiemouth, with the P-8 Poseidon aircraft, which is replacing the maritime aircraft scrapped in 2015? That is a huge investment by the UK Government in a Scottish airbase that will make Lossiemouth one of only three fast jet airbases in the whole of the United Kingdom.
Of course, we welcome that, just as we welcome the contribution of other countries in the northern Atlantic. I believe Norway has also taken on a number of P-8s. It is important that we have that level of cover. Other Members have mentioned capability, and the critical issue is how we spend our budget, so as not to keep ramping up a misspent budget.
We are now in the absurd situation in Scotland that we do not have a single maritime patrol aircraft, and neither do we have any ocean-going surface vessels to defend our own waters. Let us not forget the ludicrous scenario in February 2014, when The Scotsman reported that the MOD had had to use Twitter to gather information about a Russian warship moored in Scottish waters over the Christmas period of 2013. That was not only a national embarrassment; it reflects the utter inadequacy of the UK’s defence capabilities.
As a member of the all-party parliamentary group for the polar regions, I have a particular interest in the Arctic and high north. The Defence Committee published a report in 2015 called “Flexible response? An SDSR checklist of potential threats and vulnerabilities”, which identified Russian aggression in Europe and the high north as one of the potential threats facing the UK. In evidence given to the Committee in 2015, Tim Reilly, founder of the Arctic Advisory Group, highlighted the importance of a UK presence in the Arctic and high north, yet the UK has gone AWOL in the region. That is not good enough for Scotland and for the UK. It should be a bread-and-butter activity and military priority to defend our own shores and coastlines.
The cuts in defence—some Members have said that there are no cuts—have been made to fund the Tory obsession with Trident. In 2010, the national security strategy downgraded the threat of nuclear weapons conflict, yet the SDSR failed to downgrade the role of nuclear weapons and military capability in that area. It is high time the Government prioritised conventional defence capabilities instead of weapons of mass destruction, which I think we all pray will never be used. We issue the reminder again that Trident skews every single part of the defence budget, across three services, and that the project should be abandoned.
Almost all the promises made to Scotland on defence during the independence referendum have been broken. It is clear to us that the Government cannot be entrusted with the defence of the UK or Scotland. Only this week, we heard that the Type 31 ships, promised in 2014 to workers on the Clyde, may now be built on Merseyside. For those workers, their trust in the Government lies at zero. I urge the Government to commit to publish the findings of the review by the end of the year. Beyond that, we need as a matter of urgency a new live-within-our-means SDSR that takes account of the repercussions of Brexit for today and beyond.
I am grateful to my hon. Friend the Member for Yeovil (Mr Fysh) for securing this important debate. I must start by saying that my constituency will be at the heart of any discussion of defence capability. Aldershot, the home of the British Army and with a significant garrison, welcomes some of the specialised infantry battalions that will be formed in response to the SDSR 2015. In Farnborough, the birthplace of British aviation, we have a significant number of world-leading defence industry companies, which export their world-class manufactured goods around the globe.
In the brief time that I have, I will express two things. First, I hope that this review will be about more than just kit and equipment. When we consider responding to the threats this country faces around the world, our attitude should be one of energetic and ambitious global engagement. I saw a good example of that last weekend—I refer hon. Members to my entry in the Register of Members’ Financial Interests—when I travelled to Bahrain with several other hon. Members to see work being done on the new Royal Naval base, HMS Juffair. It is a remarkable facility, which will accommodate the four mine countermeasure vessels that are already out there, and will allow our aircraft carrier to be serviced via tender. It is a phenomenal capability multiplier and a tangible commitment to the security of an important ally. That is the kind of model we should apply elsewhere—not just in the Gulf, but around the world.
It is an attitudinal thing. We must ask the question: “If we do not have the resources to facilitate that commitment in the Gulf states and beyond, should we perhaps invest in them?” It will be money well spent.
My hon. Friend makes an important point about an attitude, with which I entirely agree. Under this Government, we are seeing for the first time an increase in the defence budget by 0.5% each year. We have a growing defence budget, a new naval base east of Suez again, Type 31s giving us the opportunity to increase platform numbers on the fleet, and new aircraft carriers. Under this Government we see an increasing defence budget and increasing defence capability.
I will gladly afford the Minister the opportunity to listen. I agree with my hon. Friend the Member for Witney (Robert Courts). When travelling in the Gulf, as the Minister and others will know, it is reassuring that they recognise the tangible commitment to our collective security. There is a return on the investment that is more than the value of the vessel itself. I hope that that attitude, and our requirement to invest in that attitude, will be recognised in the review, because it could apply elsewhere, such as Libya or Iraq. If that recognition is to be meaningful, however, it must be joined up with our foreign policy. For example, there is no point in our having military engagement with Iraq while simultaneously closing our consulate in Basra. We should be energetic and ambitious, but that must be part of the whole package, alongside our foreign policy.
My second point is that I hope the review will recognise the strategic importance of our defence industries in enhancing our global position. I have talked about the naval base, but I want also to mention the export of Typhoon to our allies in the Kingdom of Saudi Arabia. That has not been without controversy, but having travelled to Riyadh to visit the targeting centre, where targets in Yemen are assessed and allocated, I was most impressed to see NATO doctrine in use and a large number of British-trained members of the Saudi royal air force and army. Because we are involved, and not another supplier such as China or Russia, they have the benefit of our doctrine of responsible use. We do not only sell them aircraft, but we export a doctrine of responsible use. I know that the Saudis are grateful for that, and it is a tremendous strategic benefit to us.
I was with my hon. Friend when he visited. I point out to the House that the Saudi pilots we spoke to would often abort their mission immediately if they felt there was any danger of so-called—I hate this phrase—collateral damage; in other words, civilians being killed. That was good to hear.
I agree entirely with my hon. Friend. We should have the confidence to double down on those relationships. BAE Systems successfully supplied the Typhoon to our allies in Saudi Arabia, and it has been very effective operationally. We heard recently that BAE Systems has signed a memorandum of understanding with the state of Qatar for 24 Typhoon aircraft. I hope that more exports can be achieved throughout the region. It is the right thing to do not only commercially, but strategically and morally.
We have now heard from all those hon. Members who notified me of their wish to speak. It may help new and less experienced hon. Members—I know that some are less experienced—to know that the same rules apply in Westminster Hall as in the Chamber: you should notify the Chair if you wish to speak.
I congratulate the hon. Member for Yeovil (Mr Fysh) on securing the debate. I will concentrate on the particular aspect of defence and industrial capacity relating to his constituency: helicopters. It has long been understood that that is an important sector—those with long memories will remember that Michael Heseltine walked out of the Cabinet over the issue. It was also important to me. I recall that early in the coalition Government we had a deputation from the six leading aerospace companies, which pointed out that the British capacity in aerospace manufacture was gradually declining because of a lack of commitment to research and development. Helicopters were very much part of that story. On the back of that, we launched the aerospace growth partnership, a £2 billion joint research programme that did a lot to revive the sector.
The current Defence Secretary was a stalwart supporter of that programme, and of the defence partnership that was a key component within it. We also provided substantial funding through the regional growth fund to enable what was then AgustaWestland to diversify into civilian aircraft while maintaining its military capacity. Although it is seen as a niche industry, it is an important one—I think current figures suggest that about 10% of British aerospace exports come from the helicopter subsector within the industry. There is a massive supply chain; about 17,000 jobs depend on it. For the part of the country that the hon. Member for Yeovil represents, south Somerset, it is fundamental to its future as a regional economy. The industry’s health is a matter of great importance.
However, there are clouds on the horizon, as the hon. Gentleman knows well. There was a decision two years ago on Apache replacement, and he will recall that, contrary to the advice from the Business Department, his predecessor for Yeovil and others, the Government went ahead with procurement from the United States rather than from Yeovil. Since then, the pound-dollar exchange rate has deteriorated by 18%, which makes it a rather less clever decision than it may have seemed at the time. There are now doubts over the Wildcat platform. The company has a potentially excellent long-term future built around unmanned helicopters, but it needs time, resources and steady orders to maintain its capability.
I agree with much of what the right hon. Gentleman says about past Governments’ actions. In the light of that, does he agree that it would be odd to decide to scrap the Wildcat, of which we have about 60 and which is an exportable helicopter with a high degree of flexibility, in order to keep the Pumas, which are not made in the UK, are not exportable and are old, about to retire and less flexible and capable?
The right hon. Gentleman is right. The Wildcat programme is of great advantage, and it is of considerable concern to the industry that its future is now in question as a result of the opening in a very open-ended way of the procurement programme by the Government.
I want to leave the Minister with one question. Can he say quite explicitly that the helicopter sector is an important part of the industrial strategy? If he can give that statement and commitment, that is rather important. This is the only part of the whole aerospace sector where there is a completely integrated system, from R and D upstream, down to manufacture in the UK. If that is lost, an industry that is crucial to defence and to the economy is lost.
As time is so pressing, and so many people wish to speak who do not get as many opportunities as I do to speak on this subject, I shall just raise a few brief points.
First, I wish to place on record the gratitude of the Defence Committee as a whole to my hon. Friends the Members for Beckenham (Bob Stewart), for Filton and Bradley Stoke (Jack Lopresti) and for North Wiltshire (James Gray) and the hon. Member for Dunfermline and West Fife (Douglas Chapman), who served on the Committee in the last Parliament, for everything they did to buttress the strength and depth of our inquiries and conclusions. We are very grateful to them all.
I would like to raise the following questions. What is this review about? Who should be able to scrutinise the process? What should we be spending on defence? What is our concept for defence? Is our decision-making process adequate to produce a strategy? Is our soft power adequately resourced? The answers necessarily will be inadequate.
The answer to the first question—what is this review about?—is: I do not know. It is about either increasing the money, sorely needed for defence, or further cutting capability in order to balance the books. I know which of them I should like it to be, and I know which I fear it will be.
Who should be able to scrutinise the process? This process is being carried out by the National Security Adviser, Mark Sedwill. The Defence Committee has applied to have Mr Sedwill appear before us, but the initial response has not been encouraging. It is being suggested that the Joint Committee on the National Security Strategy would be the appropriate body for the National Security Adviser to appear before, notwithstanding the fact that National Security Advisers have appeared before us previously. I hope wiser counsels will prevail there.
What should we be spending on defence? I thank my hon. Friend the Member for Yeovil (Mr Fysh) for not only initiating the debate, but making the point very well about what percentage of GDP we used to spend on defence. We used to spend the same on defence as we spent on education and health in the 1980s. Now we spend two and a half times on education and nearly four times on health what we spend on defence. Although we are spending more on defence, defence has indisputably fallen down our national scale of priorities.
What is our concept for defence? That was ably set out by the Labour-led strategic defence review of 1997-98, which came to the conclusion—at a time when we were not facing a threat on the continent of Europe—that we needed an amphibious taskforce and a carrier strike taskforce in order to form a sea base that could go anywhere in the world. I hope to reassure the hon. Member for Plymouth, Sutton and Devonport (Luke Pollard) by quoting to him from what the Minister for Defence Procurement wrote in a letter deposited in the House of Commons Library in January, after I raised the question of the future of HMS Albion and HMS Bulwark on the Floor of the House. She said:
“There are no current plans to decommission the ships early, and I can reassure you that their out of service dates are 2033 and 2034 respectively.”
It would be diabolical to take ships with that amount of life left in them and retire them early.
I absolutely agree with what my right hon. Friend said, not least because he is my boss on the Defence Committee. To take Albion and Bulwark out of service would be an absolute false economy, and I very much hope that the Minister will convey that back to the Department.
The idea that anyone could be my right hon. Friend’s boss on the Defence Committee is polite, but fanciful.
Is our decision-making process adequate to produce a strategy? In a word, no. We have got to a situation where the chiefs of staff are too divorced from strategy-making. They are then left to have to make cuts in capacity themselves, while they are not able to get together to thrash out a joint strategy in the way that the Chiefs of Staff Committee traditionally did.
Finally, is our soft power adequately resourced? It could be, but the signs are not promising. For example, we produced a report entitled, “Open Source Stupidity”—I think that is probably the first time the word “stupidity” has appeared in an official Select Committee report title—referring to the fact that, for £25 million a year, we need not close the BBC Monitoring centre at Caversham. It is not too late to reverse that extremely stupid decision; and I am glad that the Foreign Secretary, the Chairmen of the Foreign Affairs Committee and the International Development Committee and I will have the opportunity to visit that excellent establishment soon, in the hope that we can, even now, prevent that folly from proceeding.
It is an honour to serve under your chairmanship, Mr Bone. I thank the hon. Member for Yeovil (Mr Fysh) for securing the debate.
I will constrain my remarks to a specific element of defence policy, which is the recently published national shipbuilding strategy, in the context of previous policy with regard to the shipbuilding strategy in the United Kingdom and, in particular, the terms of business agreement signed between the Ministry of Defence and what was then known as BVT in 2009 and subsequently known as BAE Systems Surface Ships Ltd. I would appreciate it if the Minister made specific reference to how that terms of business agreement has been formulated into the current national shipbuilding strategy.
I was alarmed to read that document and learn of key omissions that have not been carried over from the TOBA to the national shipbuilding strategy—most notably, the definition of any key industrial capability with regard to the shipbuilding industry. The key industrial capability for shipbuilding is defined as being to
“design, build and integrate…a complex warship of up to 5,000 tonnes deep displacement at an interval of 1 shipbuild every 12 months and a design interval of every 6 years”
“contribute to the sustainment of sovereign capability”
through the provision and maintenance of facilities and key post workers in the shipbuilding sector.
I was alarmed to learn that the Type 31 frigates should be competitively tendered, which essentially breaks clause 39 of the TOBA between the Ministry of Defence and BAE Systems because it jeopardises that long-term drumbeat of work. It also makes no reference to the achievement of upper quartile performance in the national shipbuilding industry. That upper quartile performance was defined as a benchmarking exercise that would determine the optimal design, build, combat systems integration and through-life support infrastructure in the UK that would be in the upper quartile of all firms engaged in the industry worldwide. I would like to know why those terms and definitions have not been sustained in the current national shipbuilding strategy.
I had the privilege of working in the shipbuilding industry, following in the footsteps of my grandfather and father, and was heavily involved in the development of the benchmarking exercise during my time at BAE Systems. That included development of the design of a shipyard on the Clyde that would deliver exactly what I have referred to: the key industrial capability at an upper quartile performance level. I was rather alarmed to learn that that will no longer be invested in. That means that we will no longer be able to achieve a build interval of one shipbuild every 12 months or a design interval of every six years. That capability has now in effect been surrendered by the Ministry of Defence, as is clear in the current shipbuilding strategy. I would like to know why that has happened and why the business case demonstrating that delivery of that capability was perfectly financially viable has not been upheld. What long-term financing options have been considered beyond current in-year spend to deliver that long-term build capability? I would be grateful if the Minister elaborated on those issues.
I shall be brief, Mr Bone.
This is like wandering into a group of the last of the big spenders. I do not share the view of most of my colleagues that we should be spending more on defence. Moreover, I am always very suspicious of Members of Parliament who come and represent their constituency interests in these sorts of lobbying exercises. Therefore, I was loth to contribute to a debate that is about, from my point of view, the question of helicopters, which the leader of the Liberal Democrats raised, but I have looked into it a bit and I find, to my surprise, that I can reconcile what I want to say both with my views about defence expenditure and with the national interest rather than my constituency interest, which happen, on this rare occasion, to coincide.
I understand that, as part of the review, the Government are, rightly, considering reducing the number of kinds of helicopter that are run by the armed forces as a whole by at least one. I welcome that, because I am perfectly sure that we run too many kinds of helicopter, which is a very expensive way to do things. I understand that the choice may come down to one between the Puma and the Wildcat. As my hon. Friend the Member for Yeovil (Mr Fysh) mentioned, the Wildcat is built in his constituency. Many of my constituents work in the Leonardo factories that produce it. It is a relatively modern—in fact, very modern—helicopter. It is highly flexible, small, agile, armed with the latest equipment and highly exportable. It is also highly usable on the new light frigates, which unlike most of the ships of our Navy, which I persist in believing will never be used in the whole of their lives, are likely to be used, because they are small and agile themselves and may be useful somewhere in the world. They would be a great deal more use if they had helicopters on them, and those helicopters are ideally suited to that. The Army also uses them. They are very new, as I said; they have many years of life ahead of them. We own roughly 60 of them.
The Puma, by contrast, is a much bigger thing, which the Royal Air Force loves. I bear the scars, as I think the right hon. Member for Twickenham (Sir Vince Cable) and my right hon. Friend the Member for Rayleigh and Wickford (Mr Francois) do, of a previous defence review, in which we found a sort of gang of all the top brass. They appeared, with spaghetti all over them, at the National Security Council, and persuaded us to invest in cats and traps and things on those very large aircraft carriers, and to get rid of the vertical take-off planes that we then had, the Harriers, because the Royal Air Force loves big fast jets. I fear that the Royal Air Force may also love those large helicopters, but they are not built in Britain. They are aged. They will be disappearing quite soon anyway. They do not carry the latest equipment. We cannot put them nearly so easily on ships.
I think it would be a travesty if we ended up getting rid of the 60 modern, light, effective, flexible, British-built, exportable helicopters, for the sake of keeping 22—if I have the number right—ancient, foreign-produced, non-exportable, heavy RAF helicopters. I very much hope that the Ministry of Defence will not make that mistake.
It is a pleasure to serve under your chairmanship, Mr Bone. I, too, welcome the debate secured by my hon. Friend the Member for Yeovil (Mr Fysh).
I want to put on the record some positive points about defence and defence spending in Scotland. GMB Scotland reported in July 2016 that almost 14,000 people were estimated to be employed at MOD installations in Scotland and that MOD employees support 20,687 jobs and £473 million-worth of wage payments in Scotland alone. That contrasts with some of the more negative points that we heard from the hon. Member for Dunfermline and West Fife (Douglas Chapman). He went on to talk about the Clyde. The Clyde is getting 20 years of work building the eight Type 26 anti-submarine frigates. That is what this Government are investing in Scotland. The hon. Gentleman also mentioned the Type 31 contracts. Scottish yards will be able to apply to build those frigates like any other yards across the United Kingdom, so it is important to put that on the record.
I again welcome the investment in my constituency; I also did so in my intervention. RAF Lossiemouth will be a key focal point for the UK’s defences with the arrival of the P-8 Poseidon aircraft. That will bring 400 new jobs and will involve £3 billion of investment over the next 10 years. That is crucially important to my constituency and very welcome.
The UK has one of the biggest defence budgets anywhere in the world. Scotland benefits from that, and I am sure that under this review it will continue to benefit.
I shall be brief, Mr Bone. There is a realism that we need to bring to this debate. A capability review starts with what sort of country we want to be, what sort of role we want to play in the world, and the strategic situation that we face; and the only thing that is changing is the strategic situation that we face, which is getting worse. The Development, Concepts and Doctrine Centre puts state-on-state warfare as a major threat; it is slight now, but growing and will be becoming severe in the next 20 or 30 years. That is the context in which this debate should be seen. We keep hearing, peppered throughout the debate, the noises from colleagues who are complaining that capability is being cut on an arbitrary basis because there is not enough money in the budget. These are not strategic decisions; they are decisions taken to match a year-on-year target, so the impression being given is that the defence budget is really being planned only one year ahead, with the consequences of these cuts.
Let us look back over the last seven years. The coalition Government inherited a black hole in the defence budget of £35 billion. Coupled with George Osborne’s 8% defence cash cut to the headline figure, that meant that we reached 2015 already having suffered a real-terms cut of 17% in the defence budget, regardless of the ongoing pressure of defence cost inflation. Recently, we have suffered the collapse in the value of the pound against the dollar, as has been said; and looking five and 10 years ahead, we are facing another black hole in the defence budget, which will have severe consequences, because the big equipment programmes that tend to dominate defence expenditure are crowding out investment in technology and people. Always it is manpower that takes the cut to protect the big equipment programmes.
We need to concentrate not just on how we are to strategically improve the defence budget to protect the existing programmes. If we are to have such a limited defence budget, we need to learn how to spend more on people, technology and industrial capacity, to be able to build the equipment that we need for the campaign that we are in, rather than finding ourselves with the equipment that we ordered 10 years ago, which is inappropriate for the campaign that we now face. We need to invest more in the people, who are, in the end, the absolute force multiplier in any crisis that we face. It is a big challenge, but if we continue on the present trajectory, the situation will just get worse.
I am not a religious man, but it is proof that God is smiling on us when you are in the Chair, Mr Bone. I congratulate the hon. Member for Yeovil (Mr Fysh) on securing the debate and giving a very thoughtful speech at the start.
Like other hon. Members, I pay tribute to members of the armed forces, the first responders to the events that happened here and across Europe earlier this year, and of course to the Minister. He knows that although we have disagreements, I have great respect for him. I am a fan of his. I think he is a thoughtful Minister and I look forward to his summing up the debate.
The review is welcome. It is of course necessary. However, as has been mentioned, we hope that it leads to a new SDSR, because the previous SDSR, which other hon. Members have mentioned, does not take account of the currency fluctuations and does not take account of Brexit. We need a proper review of our strategic assets.
The Government need to be a bit more transparent on this. I was concerned to hear what the Chairman of the Defence Committee, the right hon. Member for New Forest East (Dr Lewis), adumbrated earlier on the lack of engagement from those involved in the review. It would be good if the Minister secured that for the Defence Committee when he leaves the debate today.
The big thing that we need to look at is our own back yard. As the hon. Member for Plymouth, Sutton and Devonport (Luke Pollard) and my hon. Friend the Member for Dunfermline and West Fife (Douglas Chapman) mentioned, we are AWOL in the High North. It is an area where we are not just letting ourselves down, but letting our allies down as well. It has to be a high strategic priority, and this review and the subsequent SDSR that we think should happen must address that. The total absence of major surface vessels anywhere in Scottish waters, and the continued reliance on our allies, should alarm every single Member of this House. They are our waters and we have a duty to protect them.
I also want to address the 2% spend on GDP. It is, frankly, the most creative accountancy that I have witnessed in some time, including efficiency savings and pension contributions, as has been mentioned. Let us be clear: the 2% that the Government claim is an example of the books being well and truly cooked.
There are too many glaring and serious problems for one mini review to handle: a black hole in the equipment plan; inadequacy of the defence estate; dilution of the national shipbuilding strategy, as mentioned by my fellow Glaswegian, the hon. Member for Glasgow North East (Mr Sweeney); threats to the Royal Marines; uncertainty over amphibious assets; and the impact of Brexit—the list is alarmingly long. If the review is to be honest, and if it is to be worth the paper it is written on, it will lead to a new SDSR and it should be published before the end of the year. I look forward to hearing what the Minister says in his summing-up speech.
It is a pleasure to serve under your chairmanship, Mr Bone.
This is an important debate, and I congratulate the hon. Member for Yeovil (Mr Fysh) on securing it. It comes at a very appropriate time, as has been mentioned, because the Ministry of Defence, the Cabinet Office, the Treasury and other Government Departments are currently conducting a review of national security capabilities. My first question to the Minister, echoing what others have asked, is about whether he can indicate when that report will be published and what exactly its terms of reference will be. As I understand it, the strategic defence and security review will be, to use the Secretary of State for Defence’s phrase, “refreshed”. Will the Minister confirm that that will dovetail into the review of national security capabilities?
We know that a review is necessary because the Ministry of Defence is facing enormous problems. The SDSR 2015 is built on the premise that there will be sufficient efficiency savings, but as we all know those savings have not been identified. I know that the MOD was hoping for savings in the defence estate, but very little has come from that direction and, of course, there is the deprecation of the pound following the decision on Brexit. In fact, the Royal United Services Institute recently warned that there will be “substantial financial implications” for defence as a result of the weakening pound. In August, RUSI warned that the MOD faces extra costs of up to £700 million a year in the wake of the Brexit vote and the pound’s fall against the dollar. The National Audit Office recently pointed out that there is
“little room for unplanned cost growth”
and has expressed concern about the current defence equipment plan’s vulnerability to foreign exchange rates.
The problem is that approximately £18.6 billion is going to the United States in dollars. Rather than placing an emphasis on developing our own industrial defence capacity—our sovereign capacity—the Government are buying a whole raft of new equipment from the US for the Navy and the RAF: the F-35s, nine P-8 Poseidon maritime patrol aircrafts and 50 Apache attack helicopters, all from the United States of America.
We buy equipment and weapons from the United States because they are better than the equipment and weapons we can produce here, and those of us here all want our armed forces to have the best. That is the reason we do it: we do not have a choice if we want to help our armed forces.
That highlights the short-term thinking of the present Government. What we really need is an industrial defence strategy that invests in the skills and capabilities of our own indigenous industries, so that when choices have to be made we can choose, quite rightly, to have our own capability enacted and not bought off-the-shelf from abroad.
The Government regularly come out with their platitudes that defence expenditure increases every year, but let me be clear that the MOD faces a financial crisis. We are told by the MOD’s permanent secretary that over the next 10 years the MOD will have, in his words, to seek out and secure £20 billion of efficiency savings. He says that notwithstanding increased budgets,
“our ambitious equipment program will not be affordable without”
those efficiency savings. I do not believe it is realistic or, indeed, honest to talk about that level of efficiency savings. I note the comments by Sir George Zambellas, the admiral and former head of the Royal Navy, who recently said to the press:
“There is a suggestion that there’s lots more efficiencies to be made. There are not. I’ve been helping deliver efficiencies for my 37 years in the navy. We have reached the bottom of the efficiency barrel and we all know that, because the Navy is so hollowed out. It hasn’t got enough missiles and spares. It’s very short of the integrated support that is needed as a single service.”
Those are damning comments by someone who does not have a political axe to grind, but takes an objective view of the very real crisis that the Navy, in particular, faces.
Indeed, it is clear that the MOD is already involved in planning for a fresh round of deep and crude cuts. As we have all seen, there have been reports in the press that the Royal Marines may be cut by 1,000 from their present 6,500. Earlier this year there was confirmation that Plymouth’s 42 Commando, one of the last specialist Royal Marines fighting units, was withdrawn from frontline service. The amphibious fleet may face decommissioning, with HMS Albion and HMS Bulwark both potentially becoming part of history—I refer Members to the excellent early-day motion 391 in the name of my hon. Friend the Member for Plymouth, Sutton and Devonport (Luke Pollard). I ask the Minister to listen not only to what I am saying, but to what all Members have said this afternoon about how important it is to maintain that amphibious capability, and I urge him to give a commitment today that those two ships will not be considered ripe for cutting.
This is all occurring, as I said, at a time of crisis. The Navy personnel stands at 2% under establishment. There is a particular problem in the Navy with skilled personnel and engineers. The RAF is 5% under strength, and we had the very bad news last week that nearly 2,000 skilled, well-paid jobs will be lost with BAE Systems. One of the reasons it has given for those redundancies and the cutback in capacity that has taken place, is the slowdown in production of the Hawk aircraft. I would reiterate what was asked for this week and ask the Government to bring forward an order for nine new Hawk aircraft for the Red Arrows. As well as the crises in the Navy and the RAF, we are seeing a crisis in the Army, which is 5% understrength. I remind hon. Members—
I am about to wind up. I remind Members that the Conservative manifesto for the 2015 election said that the Army would not fall below 82,000 people. It has: the latest figures show that the Army is down to 76,680, which speaks for itself. There is a very real crisis.
In conclusion, I ask the Minister for an honest statement about the real problems that our armed forces face today. Can we have a commitment that the short-term—
I am grateful for the opportunity to speak today, Mr Bone. It is a real pleasure to be able to draw some thoughts and conclusions together on this important, interesting and timely debate. Like others, I pay tribute to my hon. Friend the Member for Yeovil (Mr Fysh), who has shown passion and a detailed understanding not only of what is going on his constituency, but of the wider picture of the defence capability. I congratulate him on bringing this debate to the fore. Looking around the Chamber, I recognise that there is an officers’ mess worth of experience, commitment and understanding of what the armed forces has done and is doing, and of where we want to go. It is a pleasure to respond to this debate.
I give hon. Members the apologies of the Procurement Minister—the Under-Secretary of State for Defence, my hon. Friend the Member for West Worcestershire (Harriett Baldwin)—who would otherwise be here. However, I take a personal interest in these matters, so I grabbed the opportunity to share some insight about what is going on. This has been a wide-ranging discussion and as I have said, if I am not able to answer some questions, I simply will not be, but I will write to hon. Members, as I have before.
All hon. Members, including my hon. Friend the Member for Yeovil, began by paying tribute to our brave and professional armed forces. As a former Regular Army officer, and indeed, a reservist, I stand with all in paying tribute to those who, when there are so many opportunities in the world today, choose to wear a uniform, to step forward and be counted, to stand and defend our country and to do the things we see, whether that is in the Caribbean or in the floods, or by going into harm’s way. We think about what it means to be British, what Britain is and what our reputation is, and that is shown in the professionalism that our armed forces display.
As a nation, we have an aspiration and the ability to shape the world around us and to play a role on the international stage, and that comes about because of what our armed forces can do. We are recognised as the world’s leading soft power because our professional armed forces are respected and revered not just by our allies, but by our adversaries. We follow a transparent agenda and in a changing, challenging world, leadership is needed on the international stage. I think we can all agree that we want our armed forces to continue to play that role in shaping this very challenging world.
We need to face some big questions, many of which have been raised today. I join right hon. and hon. Members in recognising the important economic value of our industrial base—not just in defence and aerospace, but in a wider context—in the economics of this country. However, we face a fiscal reality and my hon. Friend the Member for Harwich and North Essex (Mr Jenkin) made the situation clear, taking us back in time to the legacy fiscal issues that we have inherited, which are still very real today. My hon. Friend the Member for Yeovil touched on the important wider duty of care that we have to our armed forces. I include the whole family—the partners, the wives, the husbands, the children, the cadets and the reserves. It is important that we look after them not only when they are in uniform, but further afield, when they finally move back into civilian life as our respected veterans.
Before I come on to the national security capability review, which is the core of our discussion, I will respond to a couple of points. The hon. Member for Plymouth, Sutton and Devonport (Luke Pollard) spoke about the importance of the Type 31e. It is a simple design that is intended to have bespoke changes put on to it. It is designed for export. That is why it seems simplistic compared with the Type 26, the frigates, the destroyers and so on.
I am grateful to the Chair of the Defence Committee, my right hon. Friend the Member for New Forest East (Dr Lewis), who made the future of HMS Albion and HMS Bulwark clear. We should not forget the amphibious capabilities in the Bay class, as was illustrated in our response to the recent hurricanes in the Caribbean.
My hon. Friend the Member for Filton and Bradley Stoke (Jack Lopresti) spoke about our commitment to 2%, which I can confirm. I am pleased that other nations are catching up with us to meet that important commitment. We want that to continue and, as many hon. Members have said, we are increasing our budget by 0.5% above inflation. That is very important to recognise.
My hon. Friend the Member for Aldershot (Leo Docherty) spoke about the importance of our footprint across the world. There is not only HMS Juffair, which I am pleased that hon. Members were able to see; we have a footprint right across the Gulf and in other places, including in a transitional or temporary mode. We are operating in and have exercises in 20 locations from Nigeria to the Balkans, to further afield in Poland with a resurgent Russia, to the Caribbean and not least, to the skies of Iraq and Afghanistan.
The right hon. Member for Twickenham (Sir Vince Cable) asked important questions about helicopters. If I may, I will ask the Procurement Minister to write to him in more detail.
My right hon. Friend the Member for West Dorset (Sir Oliver Letwin) spoke about the number of platforms, and I agree with him. We have more than a dozen different helicopter platforms, if we count them all up, which is too many given all the procurement lines, software upgrades and training packages. That needs to be simplified.
On the national security capability review, we need to step back and remind ourselves that the SDSR 2015 was the blueprint for our security—for meeting terrorism, the growth of terrorism and extremism, state-based aggression and cyber, and responding to those who undermine the rules of international order—but there have been changes. We have had five terrorist attacks in this country, a resurgent Russia, the activities of North Korea and cyber-attacks on our health service, on companies and on Parliament itself. That is why the capability review is required. As I said, there has been much speculation, but the details will come through in the new year. I am sure that Parliament will be involved in the usual manner, including through the Select Committee.
The review will be Cabinet-led and have 12 strands, of which the defence aspect is simply one part. It is important, however, to recognise that any armed forces must adapt to and evolve with the times. We need to understand what the right balance of scale, readiness and reach is, and what our enablers to provide that support are. Where do we place those assets, not only so they are ready to be used but as a deterrent?
I will leave a minute for my hon. Friend the Member for Yeovil to conclude, but I am sure that we can all join in saying that we are very proud of our—
The hon. Member for Caerphilly (Wayne David) has successfully eaten into more of my time, so I think he had best remain seated.
To get back to the point, we are all committed—I hope even the hon. Member for Caerphilly—to working hard for our armed forces and ensuring that they have the equipment they need and that we provide support for personnel. Yes, in politically difficult times, that is tough, but we will work hard to ensure that we meet the armed forces’ requirements.
I thank all hon. Members for turning up to this important debate. We have heard that since SDSR 2015 the challenges have increased and so has our need to project our capabilities and to make them available to our allies on a full-spectrum sovereign basis. We heard from many Members about the energy we need and about our potential deficiencies, not least in integration with industrial strategy, which in defence must be an essential consideration.
Motion lapsed, and sitting adjourned without Question put (Standing Order No. 10(14)).