Steel rescue package could be a ‘missed opportunity’, Labour MP Stephen Kinnock warns
A government aid package aimed at securing the long-term future of steelmaking in South Wales could be a “missed opportunity”, a senior Labour MP has told Sky News.
Stephen Kinnock, whose Aberavon constituency includes Port Talbot, home of the steelworks owned by Tata, also said the deal could be counterproductive.
While it does include the building of electric arc furnaces (EAFs) – which are greener than traditional blast furnaces – it does not focus enough on transitioning to a decarbonised economy, Mr Kinnock said.
“Nobody’s really talking about hydrogen (to produce steel), carbon capture and storage,” he said.
Dr Jonathan Aylen, a steel industry expert at the University of Manchester, has similar concerns, describing the potential agreement as a “bit of a stop-gap solution”.
Getting rid of blast furnaces, which use coke derived from coal, would be an important step, however.
While they are a “great way to make steel” they are also a “great producer of carbon”, Dr Aylen told Sky News.
“For every tonne of steel you make you get two tonnes of carbon dioxide going into the atmosphere.”
But he, too, mentioned the use of hydrogen and carbon capture and said ministers need to take a “long, careful, hard look at what needs to be done to decarbonise steel and stop becoming, so to speak, being taken for a sucker by every company that wants a handout”.
For the unions, there are concerns about job cuts, because EAFs use less labour-intensive processes to produce steel than blast furnaces.
The government is “choosing to follow a jobs cuts agenda”, the Unite union has claimed.
Community, the steelworkers’ union, said unions had “not agreed any decarbonisation strategy for Port Talbot”.
A molten steel ladle
There are questions, too, about whether it is worth spending taxpayers’ money to support the steel industry.
Russ Mould, investment director at AJ Bell, said it accounts for a “fraction of a percent” of the UK economy.
UK steel has been through “multiple insolvencies” and this latest rescue plan could be seen as the government “throwing good money after bad”, Mr Mould added.
But Mr Kinnock said that failing properly to support the British steel industry could mean becoming reliant on metal from China which is produced in an “incredibly dirty, heavily polluting” manner.
The potential agreement, uncovered by Sky News, could see ministers handing over a £500m aid package, with Whitehall officials and Tata Steel getting close to agreeing a deal that would commit more than £1bn to the future of the firm’s South Wales plant.
Mr Kinnock said he had “real concern” that the “focus seems to be very much on electric arc furnaces”.
He added: “Nobody’s really talking about hydrogen, direct reduced iron, carbon capture and storage, which are all vitally important routes to decarbonising the steel-making processes.
“If we don’t have all those different routes we won’t be able to make all the grades and quantities of steel that we need to retain our customer base.
“And if we don’t do that there will be more job losses than are necessary, and it will be a missed opportunity by the government and by Tata Steel.”
Tata Steel, Port Talbot
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Mr Kinnock is calling for a “full spectrum approach” as the UK pursues rapid decarbonisation, and said it is “vital” the unions and the workforce are fully consulted about the agreement.
Asked if the steel industry has a future, Mr Kinnock said: “Imagine the cost of doing nothing. There are 4,000 very well paid, high-skilled jobs in the Port Talbot steelworks.
“If we’re going to transition to a decarbonised economy are we going to do that by importing steel from China?
“We’re also living in a dangerous and turbulent world. Do we really think it’s a good idea to be relying on other governments – sometimes hostile to the UK – to supply our steel?”
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What’s the cost of Tata Steel going green?
Sharon Graham, the general secretary of Unite, said: “This government could make us the green steel capital of Europe – instead they are choosing to follow a jobs cuts agenda. Unite will leave no stone unturned in the fight for jobs.”
Community, the steelworkers’ union, said: “We remain in discussions with the company and the unions have not agreed any decarbonisation strategy for Port Talbot.
“We continue to support a solution that will maintain blast furnace production and safeguard the future for all the UK plants.
“We are ready to use all means at our disposal to protect jobs and our vital strategic industry.”
Business
Post Office Capture scandal: Sir Alan Bates calls for those responsible for wrongful convictions to be ‘brought to account’
Sir Alan Bates has called for those responsible for the wrongful convictions of sub postmasters in the Capture IT scandal to be “brought to account”.
It comes after Sky News unearthed a report showing Post Office lawyers knew of faults in the software nearly three decades ago.
The documents, found in a garage by a retired computer expert, describe the Capture system as “an accident waiting to happen”.
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Post Office: The lost ‘Capture’ files
Sir Alan said the Sky News investigation showed “yet another failure of government oversight; another failure of the Post Office board to ensure [the] Post Office recruited senior people competent of bringing in IT systems” and management that was “out of touch with what was going on within its organisation”.
The unearthed Capture report was commissioned by the defence team for sub postmistress Patricia Owen and served on the Post Office in 1998 at her trial.
It described the software as “quite capable of producing absurd gibberish” and concluded “reasonable doubt” existed as to “whether any criminal offence” had taken place.
Ms Owen was found guilty of stealing from her branch and given a suspended prison sentence.
She died in 2003 and her family had always believed the computer expert, who was due to give evidence on the report, “never turned up”.
Patricia Owen (right) was convicted in 1998 of stealing from her post office branch. She died in 2003
Adrian Montagu reached out after seeing a Sky News report earlier this year and said he was actually stood down by the defending barrister with “no reason given”.
The barrister said he had no recollection of the case.
Victims and their lawyers hope the newly found “damning” expert report, which may never have been seen by a jury, could help overturn Capture convictions.
Read more: Post Office scandal redress must not only be fair – it must be fast
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What is the Capture scandal?
‘These people have to be brought to account’
Sir Alan, the leading campaigner for victims of the Horizon Post Office scandal, said while “no programme is bug free, why [was the] Post Office allowed to transfer the financial risk from these bugs on to a third party ie the sub postmaster, and why did its lawyers continue with prosecutions seemingly knowing of these system bugs?”
He continued: “Whether it was incompetence or corporate malice, these people have to be brought to account for their actions, be it for Capture or Horizon.”
More than 100 victims have come forward
More than 100 victims, including those who were not convicted but who were affected by the faulty software, have so far come forward.
Capture was used in 2,500 branches between 1992 and 1999, just before Horizon was introduced – which saw hundreds wrongfully convicted.
The Criminal Cases Review Commission (CCRC), the body responsible for investigating potential miscarriages of justice, is currently looking at a number of Capture convictions.
A CCRC spokesperson told Sky News: “We have received applications regarding 29 convictions which pre-date Horizon.
25 of these applications are being actively investigated by case review managers, and two more recent applications are in the preparatory stage and will be assigned to case review managers before the end of June.
“We have issued notices under s.17 of the Criminal Appeal Act 1995 to Post Office Ltd requiring them to produce all material relating to the applications received.
“To date, POL have provided some material in relation to 17 of the cases and confirmed that they hold no material in relation to another 5. The CCRC is awaiting a response from POL in relation to 6 cases.”
A spokesperson for the Department for Business and Trade said: “Postmasters negatively affected by Capture endured immeasurable suffering. We continue to listen to those who have been sharing their stories on the Capture system, and have taken their thoughts on board when designing the Capture Redress Scheme.”
Ministers are considering a commitment to cut soaring industrial energy prices for British companies to the same level enjoyed by competitors in France and Germany as part of its industrial strategy.
Sky News understands proposals to make energy prices more competitive are at the heart of final discussions between the Department for Business and Trade and the Treasury ahead of the publication of its industrial strategy on Monday.
Industrial electricity prices in the UK are the highest in the G7 and 46% above the median for the 32 member states of the International Energy Agency, which account for 75% of global demand.
Industrial electricity prices by country
In 2023, British businesses paid £258 per megawatt-hour for electricity compared to £178 in France and £177 in Germany, according to IEA data. Matching those prices will require a reduction of around 27% at a cost of several billion pounds.
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Earlier this month, automotive giant Nissan said UK energy prices make its Sunderland plant its most expensive in the world.
Business secretary Jonathan Reynolds is understood to be sympathetic to business concerns, and chancellor Rachel Reeves told the CBI’s annual dinner the issue of energy prices “is a question we know we need to answer”.
Extending relief
While around 350 companies in energy-intensive industries, including steel, ceramics and cement, enjoy some relief from prices through the energy supercharger scheme, which refunds 60% of network charges and is expected to rise to 90%, there is currently no support for manufacturers.
Sky News understands ministers are considering introducing a similar scheme to support the 200,000 manufacturing businesses in the UK.
Cutting network costs entirely could save more than 20% from electricity prices.
Explainer: Why are UK industrial electricity prices so high?
The mechanism for delivering support is expected to require consultation before being introduced to ensure only businesses for whom energy is a central cost would benefit. This could be based on the proportion of outgoings spent on energy bills.
It is not clear how the scheme would be funded, but the existing industrial supercharger is paid for by a levy on energy suppliers that is ultimately passed on to customers.
A central demand
Bringing down prices, particularly for electricity, has been the central demand of business and industry groups, with Make UK warning high prices are rendering businesses uncompetitive and risk “deindustrialising” the UK.
The primary driver of high electricity costs in the UK is wholesale gas, which both underpins the grid and sets the price in the market, even in periods when renewables provide the majority of supply.
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Why are costs so high?
Wholesale prices account for around 39% of bills, with operating costs and network charges – the cost of using and maintaining the grid – making up another 25%, and VAT 20%.
Business groups, including the manufacturers group Make UK, have called for a reduction in those additional charges, as well as the so-called policy costs that make up the final 16% of bills.
UK industrial electricity prices
These are made up of levies and charges introduced by successive governments to encourage and underwrite the construction of renewable sources of power.
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Make UK estimate that shifting policy costs into general taxation would cost around £3.8bn, but pay for itself over time in increased growth.
Government sources confirmed that energy prices are a central issue that the industrial strategy will address, but said no final policy decisions have been agreed.
The industrial strategy, which is delayed from its scheduled publication earlier this month, will set out the government’s plans to support eight sectors identified as having high-growth potential, including advanced manufacturing, life sciences, defence and creative industries.
Britain has the highest industrial electricity prices in the G7, a cost businesses say makes it impossible to compete internationally and risks “deindustrialising” the UK.
Electricity prices are driven by wholesale fuel prices, particularly natural gas, but include taxes and “policy costs” that business groups, including Make UK and the CBI, want the government to cut.
Sky News understands the issue is a “live discussion” within government as ministers finalise the government’s industrial strategy, due to be published next week.
Money blog: Interest rate held – but Bank of England gave ‘small surprise’
So what are the options, and why are prices so high in the first place?
How much does UK business pay for electricity?
Industrial electricity prices in 2023 were 46% higher than the average of the 32 members of the International Energy Agency, a group that includes EU and G7 nations that, between them, account for 75% of global demand.
UK businesses paid an average of £258 per megawatt-hour, according to IEA data – higher than Italy (£218), France (£178) and Germany (£177), and more than four times the £65 paid on average in the USA.
While wholesale prices have been driven up in the last five years by external factors including post-pandemic demand and the Ukraine war, this is not a blip – UK prices have been consistently above the IEA average for decades.
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Britain’s big energy price problem
Why are prices so high?
The main determinant is exposure to wholesale gas markets. Gas underpins the UK grid, reliably filling the gaps renewables and nuclear sources cannot fill. Crucially, gas also sets the price in the electricity market even when it is not the primary source of energy.
The UK market uses a “marginal pricing system”, in which the price is set by the last, and thus most expensive, unit of power required to meet demand at any one time.
That means that while renewable sources, initially offered at a cheaper price, may provide the majority of power in a given period, the price for all sources is set by gas-fired power stations providing the balance of supply.
Industrial electricity bills are lower in markets that are less exposed to gas. In France, gas sets the price less than 10% of the time because its fleet of nuclear power stations underpin supply.
Industrial electricity prices by country
What makes up electricity bills?
The biggest single element of electricity prices is wholesale gas costs, which make up 39% of the bill, according to industrial supplier SEFE.
The next largest element is “network costs”, charges imposed for using, maintaining and expanding the grid, which account for 23%. Operating costs are 2%, with VAT adding a further 20%.
The remaining 16% of electricity bills is made up of “policy costs”, levies and payments introduced over the last two decades to subsidise the construction of renewable power capacity, primarily wind power.
Cost breakdown of UK industrial electricity prices
Increasing renewable supply and storage to reduce exposure has been the long-term solution favoured by successive governments. Sir Keir Starmer‘s administration has a target of shifting to a “clean power” grid by 2030 and achieving net-zero carbon emissions by 2050, a target Kemi Badenoch describes as “impossible”.
Read more from Sky News:
Government considering slashing industrial energy prices
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Some energy-intensive industries (EII), such as chemicals, steel, and cement, already receive support, with a 60% relief on network charges and a reduction of around 10% from the British Industry Supercharger fund, which the government is considering increasing.
What does business want?
Business groups are calling for these policy costs to be lifted and shifted into general taxation, calculating that a 15% reduction in prices would give them a chance of competing more equitably.
Make UK say cutting policy costs would cut 15% from bills, and is also proposing a “contract for difference” for manufacturers’ electricity, a model borrowed from the renewables market.
Under the plan, the government would guarantee a “strike price” for electricity 10% lower than the wholesale price. When prices are higher, the taxpayer would refund business, and when they are lower, industry would pay back the difference.
Keep up with all the latest news from the UK and around the world by following Sky News
Make UK estimate the cost to the exchequer of £3.8bn. They believe it will be cost-neutral courtesy of increased growth. The alternative, they say, is an uncompetitive manufacturing sector doomed to decline.
“We need to see the government remove those costs in the industrial strategy,” says Make UK chief executive Stephen Phipson.
“We believe it will be cost-neutral because of the benefit to the economy of retaining manufacturing in this country. If we don’t see it happen, we will risk deindustrialising the United Kingdom.”
A government spokesperson said: “Through our sprint to clean power, we will get off the rollercoaster of fossil fuel markets – protecting business and household finances with clean, homegrown energy that we control.”
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