§ Jonathan Shaw (Chatham and Aylesford) (Lab)
I am pleased to bring to the attention of the House an industry of which Britain should be proud. It makes a massive contribution to the manufacturing base, with a turnover of £3.5 billion. It directly employs some 30,000 people and indirectly employs another 250,000. My constituency has the largest concentration of paper and board manufacturing in the UK, employing about 1,000 people with 1.4 million tonnes of production. The paper industry is a good employer; it offers well-paid jobs with good industrial relations.
In Britain, we consume 12.6 million tonnes of paper and board every year. The UK market is the sixth largest in the world and the second largest in Europe. The shape of the economy can be benchmarked against the consumption of paper and board. If the economy is doing well, the newspapers get fatter; if the newspapers get thinner, there is uncertainty or a downturn in the economy. Advertising, rather than the quality of journalism, determines the weight of the satchels carried by newspaper boys and girls to our front doors every day.
The 80 mills in the UK account for 40 per cent. of domestic production. The majority of paper and board is now imported. Since I held a debate four years ago, the industry has faced many challenges. The then Minister went on to become Secretary of State, which shows that Ministers who take a close interest in the paper industry enjoy good fortune, so I am sure that the Minister is taking note. Four years ago, the strength of the pound was a primary concern for the industry, as it was for most exporting businesses. The situation improved last year. Performance in export markets is up and that is welcome. However, it has not returned to the level of 2000. Throughout the 1990s, production and consumption grew year after year, but that halted on 11 September 2001. One mill in my constituency, Aylesford Newsprint, felt the effect immediately. Despite a successful economy, there was a loss of confidence, advertising reduced and newspapers became thinner.
The purpose of the debate is to build on the paper industry's work on engaging with the Government. It must assist the Government to meet recycling levels and carbon emission levels by investing in high-quality combined heat and power plants. Those objectives are mutually beneficial not only in terms of the bottom line. The paper industry has the desire to fulfil its potential for the common good in a sustainable way.
Over the past four years, the industry has organised a new trade body—the Confederation of Paper Industries—which represents recovered paper as well as paper and tissue manufacturers and converters. The industry is developing a sustainable development programme to identify how it can improve its environmental performance. Its strategy covers the whole paper cycle, from raw material production to disposal. It also incorporates elements such as training, health and safety, staff turnover and sickness rates.
Over the past few years in particular, the industry has developed a constructive dialogue with Ministers and officials. The all-party group on paper-related 492WH industries, which I chair, encourages industry representatives to speak to Members of Parliament so that we can understand the needs of the industry and what the industry can do for the British economy and environment.
The paper industry is the largest recycler of paper in the UK and is the largest exporter of recovered paper. Last year, 2.2 million tonnes of paper were exported, with the majority going to Asia. Progress has been made on the materials used. In 1991, wood pulp accounted for 43 per cent. of production, but that has now reduced to 24 per cent. There has been investment by the industry and support from the Government. Most recently, £17 million from the waste and resources action programme contributed to an increase of 30 per cent. in recycling at the UPM Kymmene mill at Shotton in north Wales.
The Government set targets for local authorities, which have made a significant impact in the collection of household waste for recycling—rightly so, because doorstep collection is popular; people want to be able to make their contribution to protecting our environment. In 2001–02, 87 of the 375 local authorities did not offer a kerbside collection. That number has now fallen to just three. A health warning to attach to that might be that not all kerbside collections are as good the next. Aylesford Newsprint, working with my hon. Friend the Member for Lewisham, Deptford (Joan Ruddock), has produced an atlas— a league table—of those who are performing well and those who have much more to do.
As a consequence of that situation, the market for raw materials has stabilised, which is a crucial factor for the industry. It must have a guaranteed supply of material. Running an operation such as Aylesford Newsprint requires 500,000 tonnes a year. In the early days, when that mill was commissioned, the fluctuation of the cost of the raw material meant that considerable costs had to be built in and it penalised the company for many years. However, now there is continuity. That has not happened by accident, but by the industry working as partners with local authorities to help to develop longterm contracts at agreed prices. That is good for the industry, local authorities, the environment and Britain. That type of commercial environment can create the confidence that is needed for investment, which might increase the UK's ability to provide a greater proportion of the domestic market than it currently does. For once. our collection rate is at 54 per cent., although it is still one of the lowest in Europe.
Recycling has taken a big leap forward, and the industry and local authorities are to be congratulated on that. The next step is to examine how we collect that raw material and how we measure it. Tonnage-driven rates have caused unforeseen problems. Local authorities are driven by considerations of weight rather than of quality. Therefore, a reduction in quality inevitably happens. The quality of the raw material is vital for the paper industry to produce the quality product that consumers want. To illustrate the point, the number of councils that offer a dedicated paper and card collection dropped from 117 in 2001–02 to 55 in 2002–03.
Many materials are all lumped together, which causes significant problems. If recovered paper comes into contact with grease, food or glass, it is contaminated and cannot be used. If we are to take the next step in recycling, we must separate materials at the doorstep. It 493WH makes no sense to separate them after collection, particularly when one of the key materials is redundant. The message from the industry is that we have made a good start— the industry played its part in that— but we need to move away from purely considering tonnage to considering quality. There is brass in muck, but there is more brass for everyone if the muck is of a better quality.
I hope that the Minister will note that and give it some attention, particularly when he is in discussion with colleagues from the Department for Environment, Food and Rural Affairs and the Office of the Deputy Prime Minister. I know that he has met industry representatives and is aware of the significant investment of people, time and systems that has gone into implementing European legislation on pollution prevention control, which has cost the industry £4 million.
I am proud of the Government's environmental achievements. We have not done enough, by any means, and industry has to play its part. The industry appreciates that the Department of Trade and Industry has set up the regulatory impact assessment as a way of ensuring that UK industry is not unfairly affected on the European scene before environmental legislation is implemented. We are six years ahead of the game on pollution prevention control. Some of the industry complains about that, but I hope that it will mean that we will be in a more competitive position than our European competitors when they implement the PPC in the years to come.
Investment in good quality combined heat and power plants is a major plank of the Government's strategy to deliver on climate change. My hon. Friend will be aware that there are just 19 CHP plants in operation in UK paper mills. Sadly, at least five projects have been shelved. The reason for that, which he will understand, is that gas prices have doubled. They doubled in 2001, and the bill for the paper industry lone increased by £50 million. It remains high, which means that investment in CHP has riot reached the expected level.
A plant costs around £10 million. Officials from the Department of Trade and Industry, the Treasury and the Department for Environment, Food and Rural Affairs visited a CHP plant at a paper mill in Kent a few months ago and the problems were explained to them. The industry has proposed that if power companies were obliged to include CHP as a percentage of their output, in the same way that they are obliged to do for renewable energy, investment might be kick-started. Has the DTI given serious consideration to that proposal?
The industry is concerned that the Government think that the solution for reinvestment in CHP will be achieved by an increase in electricity prices. Can my hon. Friend confirm that that is not a serious solution and is not desirable? He will realise from the number of mills that I have mentioned that CHP mills are in the minority and the rest rely on electricity. With the cost at £10 million for a new plant, a huge hike in electricity prices would have a devastating effect on the paper industry, which already faces considerable challenges.
494WH Will my hon. Friend confirm that that is not the Government's solution? Will he also confirm that he is keen to seek new ideas and solutions to unlock the desirable CHP investment that we all want, so that we reach our climate change and Kyoto targets? Furthermore, what consideration has he given to the increased gas prices arising from the EU emissions trading scheme? There is uncertainty in the industry about how CHP will be treated in the new regime. I should be grateful if he shed some light on that matter.
I understand that the European co-generation directive provides that member states should consider heat demand as well as electrical power demand in assessing their overall energy needs. That is welcomed by industries, including the paper industry, because it makes the importance of heat more central. However, there is concern that the UK has not fully embraced that approach and remains wedded to the sole consideration of electrical demand. Again, I should be grateful if my hon. Friend commented on that.
The industry is a good employer. The industrial relations that are enjoyed between the employer and the main union, the Graphical, Paper and Media Union, are constructive and in many ways exemplify modern partnerships in the workplace. Yet despite that positive working relationship, the industry had an accident rate that was twice the level experienced by the rest of manufacturing industry, and a fatal and major accident rate that was equal to, or in excess of, the construction industry. In 1998, the industry experienced two fatalities and had an accident rate of 23.4 per 1,000 employees. Everyone agreed that things had to change.
In 1998, the paper and board industry advisory committee set out its target to reduce accidents by 50 per cent. Four years ago in this Chamber, I strongly criticised the industry for its lack of progress. However, its safety record has improved considerably. The total injury rate is 16.6 per 1,000 employees. That is a major achievement, but everyone, including the unions and employers, agrees that more needs to be done. That does not just involve the unions and the employers; there has been a tripartite approach. The Health and Safety Executive has been effective in that partnership. However, there is concern among the unions and employers that the reduction in the number of HSE employees means that it will not be able to play such a constructive role in future. Perhaps my hon. Friend could comment on those concerns.
Britain should be proud of this industry, which makes a considerable contribution to UK plc and also the UK environment. It wants to continue the current constructive dialogue to find solutions that enable the industry to go forward in a highly competitive market. In addition, it should supply far more to the domestic market so that we no longer have to import so much.
§ The Parliamentary Under-Secretary of State for Trade and Industry (Nigel Griffiths)
I congratulate my hon. Friend the Member for Chatham and Aylesford (Jonathan Shaw) on securing the debate. He has given me the opportunity to praise this industry and to acknowledge his close interest in this sector over a number of years. Indeed, I am grateful for the advice that he has given me as a Minister in his capacity as chair 495WH of the all-party group on paper-related industries. In fact, his is one of the best-informed contributions that I have had the pleasure of listening to as a Minister.
My hon. Friend has given the Chamber details of the contribution made to the economy and to employment by the UK paper industry. The sector, which includes pulp and paper products, employs 93,000 people in more than 2,400 companies and contributes a staggering £11 billion a year to our economy. It covers a wide range of key products from newsprint to packaging, fine papers to health care. Large companies like St. Regis, as well as smaller independents like Tullis Russell in Fife, compete with multinationals that also make a significant contribution to our economy.
Aylesford Newsprint, to which my hon. Friend referred, is a world-class facility. I am proud that the Department of Trade and Industry helped it with financial investment to ensure that it has built this fantastic capacity. It now produces 1 per cent. of the world's production of newsprint. Its newest machine, the PM14, has set five world records for newsprint production. About a third of the mill's production is exported to Europe, making a valuable contribution to our balance of trade. The company owns and operates 2,145 banks for recycling, which is a terrific contribution to the recycling aims that we all share. It has achieved Investors in People ISO 14001 and ISO 9002, which reinforces my hon. Friend's message about the respect it pays people and the fact that it sees its work force as its most valuable resource.
This year I have already had two meetings with the key sector representatives: the Confederation of Paper Industries came in with Chris Blackford of LINPAC, and Martin Gale of UPM-Kymmene, Don Coates of St. Regis and Peter Mansfield of Cheshire Recycling have all been to see me and given me high-quality briefings. We discussed the key issues affecting the industry, including recovery and recycling.
I join my hon. Friend in praising the 370 councils that now offer recycling facilities. They have worked with the Government to meet our targets, but I am alarmed at the trend towards mixing paper for recycling with metals, glass or other materials that contaminate the paper. I am pressing for this trend to be reversed. Co-mingling makes it much more difficult to recover quality paper products. Although the industry and I appreciate that the need for other vehicles to be involved in collection weighs heavily on resources and depletes our environment, I am sure that there are solutions that are cost-effective, good for the environment and good for the industry in question. I am also aware of the corrugated case and, like my hon. Friend and the industry, we want to see as much of that recovered as possible.
My hon. Friend highlighted the role of combined heat and power and emissions trading, and I was pleased also to discuss that in some detail with industry representatives. I recognise that the increase in gas prices and lowering of electricity prices in recent years has affected investment decisions in CHP. After I met industry representatives, officials from the DTI went to Aylesford Newsprint, in my hon. Friend's constituency, with colleagues from the Department for Environment, 496WH Food and Rural Affairs and the Treasury to learn more about the issues and, I hope, help come up with some of the solutions.
My hon. Friend rightly asked about the industry proposal for power companies to have an obligation to use CHP-generated power. A CHP obligation would be the surest way to ensure that the CHP 2010 target of 10 GW is met, but I am advised that it would be expensive relative to the carbon saved. We showed our commitment to CHP by publishing the UK CHP strategy four weeks ago on 26 April. It sets out a framework to support the growth of CHP capacity in the UK and to enable the CHP industry to meet the challenges ahead. I am keen to work with the industry to seek solutions and unlock CHP investment, and I am determined that the Government should help the paper industry to maximise its contribution to the UK economy.
My hon. Friend also mentioned industry concerns about the impact of the European Union emissions trading scheme, in particular on gas prices. As a form of low-carbon generation, CHP plants should benefit above other less efficient forms of energy generation. The impact of the scheme on CHP capacity is difficult to quantify, but modelling work has suggested that it would be in the range of 100 to 400 MW by 2010. Considerable uncertainty exists about the likely price of carbon, and the final impact on CHP will depend on decisions yet to be taken on the implementation of the EU's emissions trading scheme. We are grateful for the representations that my hon. Friend and the industry, both individually and collectively, have made to us, and they will help us reach a better-informed conclusion.
My hon. Friend also mentioned the EU co-generation directive. CHP is a highly fuel-efficient energy technology that puts to use the waste heat produced as a by-product in the electricity generation process. We have had that in the United Kingdom for a number of years, and the situation has not changed with the co-generation directive. The point that I want to emphasise is that it will not place the importance of heat more centrally than it is now.
We have heard about health and safety issues, which I know that the industry takes seriously. I am grateful for the positive steps that have been taken to set the challenging target to the industry of a 50 per cent. reduction in accidents. I understand that the industry has reduced the number of accidents by 29 per cent. in the past three years, and I pay tribute to everyone in it, including the unions and work forces, for their efforts in securing that improvement. I know that they will now redouble their efforts to reduce the accident rate further. All accidents are avoidable, and best practice is the way towards a zero accident rate. The industry and Department recognise that more work is needed, and I shall ensure that the Department works with the industry to monitor that and give every assistance possible.
I am delighted that the CPI is developing its sustainability strategy for the industry. It is consulting stakeholders for their views, including my Department and environmental groups. I am also glad and proud that the DTI part-funded an image study. It was published last year and found that the industry could work with us to highlight the positive achievements that it has made in sustainability and, in particular, managed 497WH forests. I represent a constituency in Scotland and I know that that is of particular interest to a wide group of hon. Members, including my hon. Friend.
The CPI recognises that there is room for improvement. It is addressing the issues so that companies in the sector have the tools to improve sustainability across the board. As with all challenging companies at the forefront of technology, it has set itself an ambitious goal to make the United Kingdom paper industry the first truly sustainable sector. It is about to publish its strategy and I am confident that if any one sector can be in the lead and make such an achievement, it is that excellent sector. We are liaising with it to ensure that we can showcase what it achieves.
498WH If there are points that I need to cover in more detail, I shall write to my hon. Friend. We have a close and warm dialogue on the sector and we both feel strongly about it. I have some good news for him and the Chamber. In spite of being a Minister who runs a high-tech office, has state of the art computers and electronic document management at the latest cutting edge level, my office is far from being a paperless office—something to which my staff will attest. The future of paper with a Minister like myself is very bright. I congratulate my hon. Friend again on securing the debate and on his well-informed contribution to it.
§ Question put and agreed to.
§ Adjourned accordingly at eighteen minutes to Five o'clock.