Tuesday 3 September 2019
Business, Energy and Industrial Strategy
I want to update the House on the latest developments regarding British Steel Limited.
On 22 May British Steel entered insolvency, and control of the company passed to the court appointed official receiver. The Government provided an indemnity to the official receiver which enabled British Steel to continue to trade, customers to receive orders, key suppliers to maintain their services, and staff to continue to be employed.
Since then, the official receiver has been running an independent sales process with a view to finding a secure future for British Steel. The Government have worked tirelessly with the official receiver and all interested parties to leave no stone unturned to find a suitable buyer for the company and to keep steel coming off the production line.
Following several weeks of discussions with a number of interested parties, on the 16 August the official receiver confirmed it had accepted a bid from Ataer Holding AS for the whole business. This is an important and positive step towards protecting thousands of direct jobs and many more in the supply chain, and to securing steelmaking operations at British Steel’s sites in Scunthorpe, Skinningrove and on Teesside.
Work is now continuing to seek to finalise the details of a sale and the Government will continue to work closely with the official receiver and the preferred bidder during this process.
This has been a worrying time for British Steel’s dedicated workers, their families, those in the supply chain and their wider communities. Throughout this process their welfare has been paramount. This positive step, and the ability to secure a new owner, is due in large part to their commitment to securing the future of the company. This commitment and drive was abundantly clear in my visit to the site in Scunthorpe with the Industry Minister, during my first week as Business Secretary.
The Government’s determination, coupled with the support of Members from across the House of Commons, ensured every possible step was taken to secure a buyer and throughout the process our focus remained firmly on securing a buyer who could take the whole business forward.
While much remains to be achieved, Ataer has a long-term, strategic vision for growing British Steel with their parent company OYAK publicly stating that if this sale goes through their priority will be to increase production capacity and investment. Ataer is already in the steel industry, as the largest shareholder in Erdermir, Turkey’s largest flat steel producer. ln the first three months of this year alone, Erdermir posted profits of $186 million and 2.4 million tonnes of liquid steel production.
While the completion of the sale is by no means certain, the Government will continue to fully engage with all relevant parties as the sales process continues.
I would like to pay special tribute to the excellent work and dedication of the British Steel Support Group as well as that of my predecessor, the right hon. Member for Tunbridge Wells (Greg Clark). The support group includes Members from across the House of Commons, local political leaders, local enterprise partnerships, trade union representatives, British Steel management, in addition to Make UK and the FSB. Working constructively with the Government, this body has been instrumental in helping to move to the next stage of this process.
While there are challenges in the global steel market, the opportunities for growth are substantial—including an additional £3.8 billion per year of potential domestic sales for UK steel producers from 2030. Britain and the rest of the world will continue to need high-quality steel, and British steel is among the best in the world. The Government have already taken wide-ranging action to support the industry, including compensation for energy costs and introducing specific public procurement guidelines for steel.
Each one of British Steel’s sites has a proud record of steelmaking excellence which we are determined to see continue. I want to reassure colleagues that the Government remain firmly committed to securing a bright future for British Steel. In the days and weeks ahead we will continue to work closely with all parties to leave no stone unturned to finalise the sale and will take every possible step to ensure a long-term future for these valuable operations.
Clean Steel Fund and Low Carbon Hydrogen Production Fund
Moving to net zero greenhouse gas emissions for the UK economy requires transformation across all sectors of the economy and unprecedented levels of investment in green and low carbon technologies. The UK is a world leader in clean growth and in setting our ambitious, legally binding, target of achieving net zero emissions across the economy by 2050 we have demonstrated our commitment to maintain this position.
A vibrant steel sector is of vital importance to the UK economy. The sector employs 32,000 people and supports up to a further 40,000 jobs through its supply chains. With long standing expertise in steel making, the UK is well positioned to demonstrate international leadership in clean steel and realise domestic growth and export opportunities in associated products and technical knowledge.
Today, the UK steel sector is a significant source of emissions cwwontributing 15% to industrial greenhouse gas emissions. The integrated steel works at the British Steel site in Scunthorpe and the Tata Steel UK site Port Talbot are the two largest industrial sources of emissions in the UK.
We believe the time is right to provide dedicated support to our steel industry, to help put it on a pathway to decarbonisation in line with our net zero commitments. As a signal of that support, on 29 August, Government announced a £250 million Clean Steel Fund.
There are a range of different decarbonisation options for steel production: switching to lower carbon fuels, including hydrogen; industrial carbon capture; and energy and material efficiency. In order to better understand the needs of the steel sector and which pathways best meet our objectives we issued a call for evidence alongside the fund’s announcement to inform its future design. We will work with the steel sector and other stakeholders to develop timelines for the fund and to identify how to maximise the economic and environmental benefits of these decarbonisation options.
Recognising that availability of low carbon hydrogen at scale is a constraint to large industrial users considering fuel switching, Government have also announced a new £100 million Low Carbon Hydrogen Production Fund. The fund will support the deployment of low carbon hydrogen production capacity and encourage private sector investment. This could enable a pathway to lower carbon steel production and support broader efforts to reduce emissions across the energy system, including transport, other industry, power and potentially heat in buildings. The Government intend to consult on the shape of the fund during 2020 with a view to launching the fund for bids in 2021.
Together these funds will be a vital part of transforming UK industry and allow us to seize the opportunities of clean growth, which are at the heart of our modern industrial strategy.
Reserve Forces and Cadets Association External Security Team Report 2019
I have today placed in the Library of the House a copy of a report into the condition of the reserves and delivery of the Future Reserves 2020 programme compiled by the reserve forces and cadets associations external scrutiny team. I am most grateful to the team for their work. The report raises interesting points which, after a thorough examination, I will respond to later in the year.
Today I will be making an oral statement in the House, updating on the schools and colleges funding package announced by the Prime Minister last weekend.
The package includes a cash increase compared to 2019-20 of £2.6 billion to core schools funding next year, with increases of £4.8 billion and £7.1 billion in 2021-22 and 2022-23 respectively.
This is in addition to the £1.5 billion per year that we will continue to provide to fund additional pension costs for teachers over the next three years.
We will also be investing an extra £400 million in 16-19 education next year—the single biggest annual increase for the sector since 2010.
My statement will set out core schools funding at a national level. Illustrative school level allocations and provisional local authority level allocations through the schools and high needs National Funding Formulae will be announced next month. I will then write to Members with further details on the impact for schools and local areas.
Environment, Food and Rural Affairs
Summer Flooding and Reservoir Review
This summer saw significant rainfall that unfortunately impacted several communities. In June, properties and farmland were flooded after the River Steeping broke its banks leading to a quick response from the Environment Agency supported by the RAF. At the end of July there was significant rainfall which led to flooding in several communities. The flash flooding in North Yorkshire saw homes, businesses and farms affected as well as causing damage to roads and bridges resulting in travel disruption. On 1 August further heavy rainfall led to the spillway of Toddbrook Reservoir experiencing damage. This did not lead to a breach of the dam itself, but to ensure the safety of Whaley Bridge, a decision was taken by the local resilience forum to evacuate 1,500 people until the authorities could be assured there was no ongoing risk. The local community responded with grace and patience despite the disruption this caused to their daily lives, which we are grateful for. Recovery continues in both North Yorkshire and Wainfleet, where the local authorities are working with those affected.
In Whaley Bridge, everyone was able to return home within a week. The Canal and River Trust, supported by the EA, fire service, voluntary organisations, contractors and the RAF worked to reduce the water levels in the reservoir and shore up the damaged spillway with over 500 one-tonne bags of aggregate to effect a temporary, but stable, repair. COBRA engaged a panel of experts, led by GO-Science, to review and advise on the engineers’ safety report and immediate management of the reservoir, before the local resilience forum made the decision to end the evacuation.
A plan is in place to ensure the water levels are monitored and remain at safe levels until full repairs are completed. As the body responsible for Toddbrook Reservoir, the Canal and River Trust (CRT) is now fully assessing the damage and identifying the most appropriate long-term repairs to provide confidence in the long term safety of this dam. As the regulator, the EA will assess the proposals. My officials in DEFRA will also work with the CRT as they consider the long term future of the reservoir taking into account both the views of the local community and their legal obligations.
I wish to thank the Whaley Bridge residents displaced from their homes for their forbearance and patience in difficult circumstances. I also want to recognise and thank the emergency services, local authorities, the Environment Agency, our servicemen and women, contractors and the very many volunteers who responded in all of these situations to both mitigate the immediate impacts or risks and support those who were affected.
On 10 August the Government announced a £5.25 million package of support for these communities which included support to the local authorities for the extra costs, funding for bridge repairs and support to farmers for any uninsurable costs.
We have an excellent reservoir safety record in this country, but it is important that we learn from this incident to ensure such infrastructure, and the legislation that governs it, is and remains fit for purpose. To that end, I am commissioning an independent review which will investigate what might have led to the damage, whether there was anything that could have prevent or predicted it and identify any lessons learned. This review will supplement the future report from the Canal and Rivers Trust into their assessment of the factors that led to the damaged spillway.
Any lessons learned will be shared with other reservoir owners to inform their inspection and maintenance regimes, to be used to make recommendations to Ministers to update the implementation of current regulations, including inspection guidance, and/or to suggest any changes required to current reservoir safety legislation. I am expecting an interim report by the end of the year.
In advance of this piece of work the Environment Agency, as the regulator for reservoir safety, have contacted the operators of over 2,000 reservoirs since the Toddbrook incident requesting that all operators check that there are no safety concerns. The EA has identified eight reservoirs that have concrete spillways with some similarity to Toddbrook Reservoir and has followed up directly with the owners of these eight reservoirs to secure additional inspections. At this stage there is no indication of any concerns with any of these eight reservoirs. The EA is also carrying out inspections of their own reservoirs directly, and the Department is writing to reservoir owners and the local resilience forums to ensure they have up to date flood and evacuation plans in place.
Climate change and population growth mean that the risks from flooding and coastal erosion are increasing. That is why Government are looking to update the flood and coastal erosion policy framework to ensure that we can continue to manage these risks effectively into the future. By the end of 2019, the Government will set out their policies to better prepare the country for flooding and coastal erosion in a Government policy statement on flooding and coastal erosion. The Government will also set out plans for a step change in broader infrastructure investment through the publication of a national infrastructure strategy later in the autumn. Informed by this Government policy, the Environment Agency will update its national strategy for flood and coastal erosion risk management.
The Prime Minister and I have been clear about the potential for transport investment to drive growth, redistribute opportunity and support towns and cities across the UK. But we have been equally clear that the costs and benefits of those investments must stack up.
The Government announced on 21 August 2019 an independent, cross-party review led by Douglas Oakervee into whether and how HS2 should proceed. The review will consider its affordability, deliverability, benefits, scope and phasing, including its relationship with Northern Powerhouse Rail. I have published the terms of reference in full on gov.uk.
The chair will be supported by a deputy chair, Lord Berkeley, and a panel of experts from business, academia and transport to ensure an independent, thorough and objective assessment of the programme. Panellists will provide input to, and be consulted on, the report’s conclusions.
The review will report to me this autumn. I will discuss its findings with the Prime Minister and Chancellor of the Exchequer. Its recommendations will inform our decisions on our next steps.
HS2 is the single largest project of this Government. One important aspect of the panel’s work is to consider whether both the costs, and the benefits, of the scheme have been correctly identified. HS2’s business case has been founded on increasing capacity on our constrained rail network, improving connectivity, and stimulating economic growth and regeneration. The current budget was established in 2013 and later adjusted to 2015 prices. Since that time, significant concerns have been raised.
I want the House to have the full picture. There is no future in obscuring the true costs of a large infrastructure project—as well as the potential benefits.
The recently appointed chairman of HS2 Ltd, Allan Cook, provided his advice to me on the cost and deliverability of the current scheme shortly after my appointment as Transport Secretary—and I want the House to have the full details at the earliest opportunity. I am determined to set out everything that is currently known, so I have today placed a copy of the advice in the Libraries of both Houses. This has only been redacted where commercially necessary, and the Oakervee review panel will of course see the report in full.
Colleagues will see that the chairman of HS2 does not believe that the current scheme design can be delivered within the budget of £55.7 billion, set in 2015 prices. Instead he estimates that the current scheme requires a total budget—including contingency—in the range of £72 to £78 billion, again in 2015 prices.
Regarding schedule, the chairman does not believe the current schedule of 2026 for initial services on phase 1 is realistic. In line with lessons from other major transport infrastructure projects, his advice proposes a range of dates for the start of service. He recommends 2028 to 2031 for phase 1—with a staged opening, starting with initial services between London Old Oak Common and Birmingham Curzon Street, followed by services to and from London Euston later. He expects phase 2b, the full high-speed line to Manchester and Leeds, to open between 2035 and 2040.
He has also suggested that phase 2a, west midlands to Crewe, could be delivered to the same timetable as phase 1, subject to parliamentary approval. Finally, he is of the view that the benefits of the current scheme are substantially undervalued. HS2 Ltd continues to refine its estimates of cost, benefits and schedule. All these will be considered within the scope of the Oakervee review.
I said when I announced the independent review into HS2 that I now want Doug Oakervee and his panel to assess independently these findings from the chairman of HS2 Ltd and other available evidence. That review will provide independent recommendations on whether and how we proceed with the project.
Furthermore, the costs and benefits of HS2 have been quoted in 2015 prices since the last spending review. While this allows a stable set of numbers to compare against, it also risks being misconstrued and understating the relative cost of the project, and indeed its benefits.
I therefore think it is worth also updating the House in current prices. Adjusting by construction cost inflation, the range set out in Allan Cook’s report is equivalent to £81 to £88 billion in 2019 prices, against a budget equivalent to £62.4 billion.
To be clear, these additions do not represent an increase in the project’s underlying costs, and are largely a point of presentation. Nonetheless, I will discuss with the Chancellor the case for updating the costs and benefits of HS2 to current prices to ensure transparency. Again, this is another reason for an independent review.
During the short period in which the independent review completes its work I have authorised HS2 Ltd to continue the current works that are taking place on the project. This will ensure we are ready to proceed without further delay for the main construction stage of phase 1 in the event that the Government choose to continue. Similarly, I intend to continue to progress the next stages of the hybrid Bill for phase 2a, west midlands to Crewe, in the House of Lords while the review is ongoing.
This update is intended to provide colleagues with the information they require about the current status of the HS2 programme. An independent review is now under way to give us the facts about the costs of the HS2 project. I want to be clear with colleagues that there is no future for a project like this without being transparent and open, so we will be candid when challenges emerge. Therefore, as soon as I have a clear sense of the costs and benefits from Doug Oakervee’s review I will update the House.
In the same spirit, my permanent secretary has today written to the National Audit Office, offering my Department’s support—in their inquiry already under way—in auditing not only the project’s cost and schedule pressures, but the steps taken in response to these.
We all in this House know we must invest in modern infrastructure to ensure the future prosperity of our country and its people. We look back to past achievements with a sense of pride—from the canals and railways that ensured the UK led the world into the industrial revolution, to the space ports and launch sites we are now considering that will make the UK a global leader in space. These endeavours both inspire and improve the quality of our everyday lives. It is therefore right that we subject every project to the most rigorous scrutiny; and if we are to truly maximise every opportunity, this must always be done with an open mind and a clean sheet of paper.
The attachment can be viewed online at http://www. parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2019-09-03/HCWS1809/.