I thank the Minister for introducing the regulations. Before I start, let me say that I will not speak for longer than I would do if we were dealing with just one set of regulations; I will treat all the regulations together and not go through them individually. I will conclude by asking just a couple of questions. I apologise in advance if any of my questions are wrong. These are quite complicated regulations so I offer any advance apologies as necessary.
These four draft instruments propose to implement jointly the key aspects of the British industry supercharger, a package of measures that the Government announced back in February 2023. It aims to make strategic energy- intensive industries, or EIIs, in the UK—for example, steel production, cement production and glass manufacturing, as well as other areas including critical national infrastructures such as steel and chemicals—more competitive. This is to be achieved by closing the gap in electricity prices between the UK and our competitor countries, especially in the European Union. I note that these measures apply only in the UK and not in Northern Ireland.
Despite the technical names of these regulations, there is a back story to all of this, with the war in Ukraine, Covid and our continued reliance on importing energy. We know the impact that this has had on the increase in energy bills in the domestic sphere. These measures are the equivalent of saying, “It’s a question of the Government supporting these energy-intensive industries to make sure that they can continue, survive and flourish in a market where energy prices are rising”. However, I want to be clear: they water down some of the reforms to our carbon markets that have previously been agreed.
I understand that the impact of these measures will be that the cost of emitting 1 tonne of carbon under the UK’s emissions trading scheme will fall from almost £100, as it was a year ago, to about £47. I also understand that the costs will be borne by bill payers, be they domestic consumers, small and medium-sized industries, charities, the health sector or the education sector in this country. I understand that, for these industries, the percentage of their operating costs that is represented by the cost of energy has risen; in some cases, it has risen from 3% of their operating costs to 10% or in some cases 15%. So I recognise that these instruments are important and necessary. I will not go through them individually; I had a sentence on that but, in the interests of time, I will cut that out.
4.45 pm
The Government estimate that around 300 businesses will benefit from the support package. The total value of the reduced prices is estimated to be between £320 million
and £410 million in 2025, and around £5.1 billion over 10 years. As I said, the cost will be borne by both domestic and non-domestic consumers. In 2025, this is expected to add £4 to £5 to the annual electricity bill of the average household and lead to an increase of less than 1% in electricity costs for businesses. Although I recognise that those costs are small as percentages, they come on top of the cost of living crisis and the energy crisis, and any increase in bills will have an impact on various sectors of the UK economy.
My understanding is that the oil refining and electricity generation sectors are not included in these regulations. Can the Minister confirm this? This is about the cost of carbon leakage. Can he confirm that not every sector with carbon leakage is covered by these regulations and that other sectors are still to be covered? I recognise that the Government are in a difficult position on some of these matters because, in some areas, calculating carbon leakage is very difficult. Where there are no treaties or agreements, the Government may not be able to make those comparative calculations.
I understand that, over time, there may be new international agreements, but in the interregnum what more will be done to help these two industries meet the increased cost of energy? What action will the Government take to make sure that they are not put at a competitive disadvantage? Have they thought about the impact on those industries if they are excluded from these packages while other intensive industries are included? Will that put them at a further disadvantage? I recognise that these are difficult and challenging things, but I am sure that the Government would not want to see certain sectors left out. Can the Minister say what plans the Government have on that and how we get to parity for all high energy-use sectors in the UK?
On the timeframe, how long do the Government expect these measures to continue? I understand that, over time, the Government need to bring down our energy emissions in line with their goals for net zero. Can the Minister set out a forward timetable for how the Government see that move happening over time? At the moment, we are subsidising our heavy, energy-dependent industries to continue to burn fossil fuels, but that sits awkwardly with the timeframe of our need to hit net zero. Can the Minister say a word about that?
As I said, I recognise that these impacts on households are small, but in the light of the impact assessments that the Government have already done, do they feel that there is any need to go further with exclusions for, say, our health service or education? Our NHS and schools are struggling. Even though the costs are small, in these big public service sectors there is no spare skin on the bone to deal with further costs. Are the Government happy with that?
Finally, do the Government have any further plans for reforms to the network access charges? Do they plan to publish the technical guidance, or has it been published already? If not, can I get a timetable for that? Has a full monitoring and evaluation scheme been agreed, and how will its findings be published?