I want to consider the difficulties faced by an important industry in the UK: producers and distributors of packaging products. The matters I want to raise fall broadly into three categories: issues affecting industry generally; the cost inputs by which the packaging industry is affected, particularly energy and international competition; and the impact of packaging on the environment. I realise that of those three items only the first is specifically the responsibility of the Minister and his Department, whereas the second is broadly that of the Department of Energy and Climate Change, and the third of the Department for Environment, Food and Rural Affairs; but I am pleased that the Minister of State, Department for Business, Innovation and Skills, Mr Prisk, is to answer, because I want to dwell on the broader issues affecting an important business sector.
We all recognise packaging when we see it. It performs an important role in our lives. The container that food is sold in protects the product and reduces spoilage, keeping it fresher for longer. Packaging exists only because other products exist. First and foremost it is a delivery system for other products. As to its impact on the economy, the UK packaging manufacturing industry has a turnover exceeding £11 billion, with 85,000 employees, representing approximately 3% of all UK manufacturing output. It is recognised by the Minister’s Department as an important part of the green economy; it has a role as a major recycler and as a reuser of recycled material. The sector has contributed to raising the UK’s packaging waste recycling record over 10 years from just 28% in 1998 to 65% in 2008.
I believe that I have some authority to speak on packaging because of my career background before entering Parliament. In 1979, as a 22-year-old fresh from university, I joined a company called Autobar Vending Supplies as a graduate trainee. The business’s product range originally consisted of beverages for the drink vending sector, but also, importantly, included disposable plastic cups. The range of cups led the business into supplying a broader range of catering, disposable and food packaging items. As an aside, I draw attention to the fact that the model of that business is, regrettably, seen less frequently today; it was owned by an entrepreneur, who had a strategy of building up sales of a range of products to a level where it made sense to acquire a manufacturer or to start up manufacturing from scratch, so as to control quality and delivery, and retain the manufacturing profit. It is a shame that today the perceived complexities of running and managing manufacturing businesses mean that the strategy would probably involve sourcing the products in volume from an overseas manufacturer.
In my early years with the business I was involved in sales of goods manufactured in the UK by businesses such as Mono Containers, Autobar Vendabeka and Fibracan. At that time, in 1979, the catering disposable sector was growing fast. In 1974 McDonald’s opened its first restaurant in the UK, in Woolwich, serving in-store customers and those who wanted takeaways with products in the same disposable type of packaging. That started to change people’s attitudes towards the use of packaging more broadly.
It is rather heart-warming to hear the hon. Gentleman talk about home-grown British packaging businesses. He may know that north-east Wales has been badly let down by Tetra Pak, a company that had net sales of €9.98 billion in 2010, but which closed down an entire operation with a loyal work force. Will he, with me, implore the Minister to speak to the company again, especially as the Rausing family is an extremely large donor to the Conservative party?
I am very pleased that the hon. Gentleman has secured the debate. Nampak Plastics in my constituency would welcome his comments about the need to support UK industry, and the need for home-grown businesses to thrive. However, it would point out that those things also have to do with the raw materials being home-grown. It is concerned that the waste products that can be turned into recycled packaging material cannot be processed in the UK because of an insufficiency of suitable waste recycling plants. Does the hon. Gentleman share my wish for the whole product chain to become, as far as possible, a home-grown industry, with British industries supported throughout?
The hon. Lady makes a good point: we need the industry to go from start to finish, recycling a product and bringing it back. There have been difficulties about planning consents, and the Minister may be able to comment on changes in the planning system that will enable some of the new processes and facilities to come online.
I welcome the debate; it is excellent that my hon. Friend has secured it. There is another issue that we need to explore in relation to the supply chain, and that is the enforcement of regulations. In my constituency, silage from farms is covered with black cellophane. That is, effectively, being exported to China, where it may potentially be dealt with inappropriately, when it is needed here for plastic recycling, to be turned into bin bags. We would be greatly aided in tackling that by the enforcement of existing DEFRA regulations. I know that Lord Henley is busy working on that, but we would welcome consistency and long-term planning on that front.
My hon. Friend makes a good point: recycled material should be seen as a resource. It should be used and valued, whereas historically we have put it into landfill. He is right to say that, increasingly, large proportions of recyclable materials are being sent overseas to be manufactured into products.
I was talking about the growth in the use of packaging, particularly in the food service sector, because of the advantages of disposable packaging over reusable products, and the role of packaging more generally. In my business, our challenge was to enable a customer to get hot food products home still hot, and in one piece.
In 1982, I formed my own business supplying catering disposables and food packaging to businesses throughout the midlands. In the 30 years that I have been involved in the industry, it has seen substantial developments in food-service packaging. The greater use of disposables arrived at the same time as changing lifestyles, with people eating more regularly on the move or grazing, and there has been a substantial growth in the hospitality industry, and the development of mass-catering at far more venues. That has led to a variety of innovations. Sandwiches represent an interesting development; at the outset they were packed in paper bags, or possibly wrapped in cling film, but then there were containers made of moulded plastic and, more recently, of moulded coated board with a heat-seal to preserve the life of the product.
I congratulate the hon. Gentleman on securing this important debate. I declare an interest: I have a company in the agri-food sector. The hon. Gentleman will be aware that there have been scares in the food sector in the United Kingdom, whether justified or not. Concerns have been raised about the use of recycled cardboard in the food sector because it may contain mineral oil. Although there is no firm evidence that it could be a health risk, does he agree that the packaging industry, whether it deals with cereals or whatever, needs to address the matter to prevent such health risks developing?
The hon. Gentleman makes a good point about the use of recycled materials. We need to be careful about products that come into contact with food. I shall speak later about a recycling project with which I am familiar, but the recycled products are not for food use.
I referred to recent developments in food packaging. The speciality coffee sector is another case; the producers of better-quality coffee are able to distinguish their products by presenting them in board, rather than the less expensive plastic or expanded polystyrene foam. Throughout my time in business, I saw catering disposables and packaging being used as a marketing medium—a device on which to print a name, logo or marketing message to convey the nature of the business. My experience of the catering disposable sector has given me such a knowledge of its products that I often joke with friends that I could speak for more than an hour on the various methods of packing a hamburger, but I shall not inflict that on the House. However, like sandwiches, hamburger packaging represents a good example of development. We moved from the paper bag to wrapping in foil, and then went from expanded polystyrene to the folded and glued board carton with which we are familiar today.
One thing that encouraged me, as a new Member, to apply for this debate was the fact that I have joined the all-party group on the packaging manufacturing industry, and I am pleased to see a number of its members here today. I was encouraged to join the group not only because of my experience in the packaging sector, but because a substantial manufacturer is based in my
constituency of Rugby. Ball Packaging manufactures one-piece aluminium drink cans, and I was pleased to visit its highly automated high-tech plant only last summer.
I congratulate my hon. Friend on securing this debate. Following his observations on the company in his constituency, does he recognise that the packaging industry is not just important as an industry, but provides a lot of model companies for Britain? For example, Innovia in Wigton is investing a great deal in the local secondary school, the Nelson Thomlinson school; it provides good apprenticeships, spends more than £8 million a year on research and development, and has achieved 92% exports from the far west of Cumbria. Could we please include in this masterful discussion an account of the good company practices of the packaging industry?
My hon. Friend makes a good point. I shall speak later about concerns that have been raised about the effect of packaging on the environment. However, that pressure has caused industries in the sector to become good neighbours, and to work with their communities and undertake exactly the kind of work to which my hon. Friend refers.
At a meeting—probably my second—of the all-party group, I was concerned to hear what the manufacturing companies had to say. One comment stuck with me for some time. One or two people said that the pressures on the packaging industry were such that people present believed that the industry might not exist in its current form 15 years from now. Given the number of people employed in it and its importance to our economy, that truck me as a significant statement, and one that deserves further attention.
The industry will continue to exist, because we will still need packaging, but we should celebrate the fact that the industry is capable of huge technical advances. Nampak in my constituency, which makes bottles for Dairy Crest, has made some great strides in reducing the weight of its bottles, stopping leakage and so forth; the product is almost perfect now, and much less wasteful. Critically, that manufacturer is using high technology and will continue to develop—for example, by moving to products that are less dependent on oil. Those are things to celebrate.
I shall speak later about some of the industry’s innovations in response to the pressures, and my hon. Friend gives a great example.
Given those concerns, I turn to matters to do with the environment and energy costs. I understand that many of them are not the direct responsibility of the Minister’s Department, but I am sure that he will appreciate the concerns of this important manufacturing sector. Given the challenges faced by industry more generally, manufacturing has been and continues to be an important part of the UK economy, adding £140 billion per annum to the economy and providing 2.5 million jobs, but it has been badly affected over the past 10 or 15 years and particularly by the recent recession. He will be aware that industry generally considers it vital to provide the right conditions to ensure that manufacturing can succeed in a globally competitive environment. It is important that the Government deal with the barriers that businesses face, such as finance, regulation, tax and skills.
Despite the recent slow-down in global growth, the world economy is predicted to double in size over the next two decades, with massive growth in emerging markets such as China and India. It is important that the UK’s manufacturing sector is able to take advantage of such opportunities. The good news is that manufacturing output rose by 1.3% in April and that, in 2010, manufacturing output grew by 3.6%—the fastest since 1994. The Government place a high priority on helping manufacturing firms to invest, and they have cut the main rate of corporation tax to 26% and the small profits rate to 20%.
In addition to encouraging investment, industry needs new recruits. We need to encourage school leavers to consider a career manufacturing. In many ways, that will require a change in culture, as we must give an incentive to school leavers to consider manufacturing. The UK skills shortage is recognised by Proskills UK’s chief executive, Terry Watts. He said that the skills shortage in the manufacturing sector is currently costing the UK £118 million in lost productivity. He also said that the Government should
“do more to espouse the whole of manufacturing, and not just the high profile industries.”
We should also consider the process industries that are not as high-profile as manufacturing, recognising that industries such as packaging are fundamental to the development of the whole economy.
The Government take the skills shortage seriously. Addressing the shortage means increasing the number of apprenticeships and technical training opportunities. In a positive move, the Government have said that they will fund an additional 80,000 work experience places for young people and expand the programme of universities and technical colleges.
I agree with what my hon. Friend says about the need to increase young people’s awareness of the opportunities that exist in manufacturing. Does he agree that we need to shake up the image that the career service has of manufacturing? I am talking about the idea that engineering is an oily rag type profession. The service should lay before our young people all the potential that manufacturing offers as a career.
My hon. Friend makes a good point about the image of engineering. As west midlands MPs, we both know the importance of engineering. As a father of children who have recently gone through school, I recognise that the case for going into industry and getting involved in manufacturing has not been put sufficiently strongly by the career service. We want to change that attitude in the hope that some of those bright young people who are coming from the technical colleges will find their way into the packaging industry, whether through design and innovation or through their input into the manufacturing process.
Let me turn now to the challenge of competing in world markets and energy costs. The production of packaging— the process by which paper, board, glass and metals are manufactured—is energy intensive, and the energy agenda affects the packaging industry and packaging manufacturers disproportionately. The packaging industry produces large volumes of low-value items. The cost of a box, can or bottle is measured in pence per item and the cost of a bag measured in points of a penny per item. A significant increase in energy costs will have an impact on those items.
The Government aim to reduce carbon dioxide emissions to 50% of the 1990 level by 2027. The packaging industry fears that that objective, together with other plans, will put UK manufacturers at a greater disadvantage than those located elsewhere in the world. It feels that the UK expects too large a carbon reduction in too short a space of time.
The think-tank, Civitas, recently prepared a report on the effect of energy prices on the chemical industry; the effect on packaging would be pretty much the same. Civitas states:
“Britain is making the deepest emission reductions of any industrialised nation. The 2020 34% target is 14% higher than that of any other EU nation. The latest carbon budget now commits the UK to emission targets beyond 2020, the first country in the world to do so. To meet these over-ambitious targets, high unilateral costs are being imposed, such as the new carbon price floor. Taking all green levies into account, the average energy-intensive company’s energy bill is set to rise to £17.5 million by 2020 from the current £3 million.”
My hon. Friend is being very patient with me this morning. Is he aware of the National Industrial Symbiosis Programme, which works across industry, thinks outside the box and uses other firms’ waste and by-products? Since April 2006, its 12,500 members have reduced by 7 million tonnes the waste that would have gone to landfill, and they have reduced carbon emissions by 6 million tonnes. Would he like to see that extended to all industries throughout the country?
My hon. Friend makes a good point about the industry’s activity. None the less, I want to focus on the concerns that a cost input of the industry is significantly out of line with that of similar manufacturing companies based elsewhere. I shall add to the Civitas quote. The think-tank said:
“The response to the price hike”— in energy costs—
“will be industrial emigration. Companies, especially multinationals, will leave the UK to settle in countries with lower energy prices and fewer punitive costs. Those who cannot afford to relocate will likely fold. In the long-term, foreign investment will also dry up, leaving the UK an industrial backwater.”
That is a real concern for companies involved in manufacturing, especially in this sector.
I thank my hon. Friend for giving way so many times. Although it is undeniable that we need to deal with climate change, is he not worried that we might not only lose industry abroad, but off-shore our CO2 emissions, which effectively means that we do not deal with the problem at all?
I want to address that point a bit later. My hon. Friend is right. All we end up doing is moving more product around rather than manufacturing it in the place where it would be most sensible to do so. In that movement, we generate additional carbon dioxide.
On business investment plans, one of the key things that business needs to do is to estimate future costs of raw materials and energy, of which energy is often the most significant. There is already an account of the Business Secretary having had his ears burned by industry leaders about energy costs. If other countries do not follow our lead, the concern is that packaging manufacturers might move away from their UK bases. A number of people involved in the industry have said that a large proportion of UK plants producing packaging are now owned by companies that are based overseas and that if energy prices or regulation in the UK become excessive, there is no reason why those overseas-based multinationals would continue to keep those businesses in the UK.
Let me touch now on the standards under which imported products are manufactured. Manufacturers based in the UK, particularly those involved in producing packaging for food, incur costs by ensuring that they are compliant with all relevant food safety and hygiene legislation, but that is not the case for competitors based outside the EU, which puts UK-based manufacturers at an economic disadvantage. If such packaging is supplied without the recognised accreditation concerning EU food safety and hygiene, the concern is that there could be health risks to consumers.
Another strand of my argument relates to packaging products being seen as an obstacle to a greener environment and a greener economy. The Prime Minster has pledged to make this the greenest Government ever. One of the ways in which the Government aim to achieve that is by reducing the amount of packaging used and encouraging even more recycling. The industry accepts that its product is highly visible; we see it around us all the time. None the less, its environmental impact is much less than many would presume. Less than 3% of land-filled waste is packaging waste, despite the fact that 18% of household waste comes from packaging. It is accepted that packaging is visible because of litter. By definition litter is waste that happens to be in the wrong place. It is created by individuals through thoughtless or antisocial behaviour. The industry has a responsibility regarding litter, but it argues that litter should be addressed by education, investment in street cleaning and law enforcement.
The problem is that packaging attracts media attention. I would present Jeremy Paxman as a witness. Only the other day, he spoke on Radio 5 Live as chair of the Clean Up Britain campaign and railed against manufacturers of packaging. The industry argues that the attention that it receives is disproportionate and that packaging should be seen not as a problem but rather as a resource-efficiency solution. Given all the media attention, the packaging industry feels that it has become an easy target for those who wish to present their green credentials.
The emphasis on packaging and the environment has been recognised in the waste policy review, which was recently published by the Government. That review outlines the Government’s determination to move towards a zero-waste economy by relying more on voluntary approaches to cutting waste, increasing recycling and resource productivity and improving the overall quality of recyclates.
Broadly, the industry is pleased that the review acknowledged the valuable role that packaging plays and that, in most cases, the carbon footprint of packaging is absolutely dwarfed by that of the products that it protects. However, there is a view within the industry that the review continues to pander to public misperceptions about packaging, as it draws attention to surveys that show that consumers believe packaging remains a big environmental question. The industry is disappointed that the review does not attempt to challenge some of those misconceptions.
The industry believes that, to challenge such misconceptions about waste, customers need to understand that good food packaging reduces food waste, which in turn saves people money through lower grocery bills and reduces the amount of unused food that is sent to landfill or composting. The review refers at some length to the need for packaging to be improved further, but it focuses on toy packaging. Unfortunately, toy packaging makes up only 0.36% of packaging in the UK and it is mostly used for imported goods, over which we have no control in the UK. In addition, the review pays a lot of attention to waste prevention, with the announcement of new initiatives and funding, and it also has a stated aim of reducing food waste. Some organisations have praised the review for making commitments to work with businesses to help them to reduce wastage, rather than carrying on the old practice of handing out penalties to companies that fail to comply with legislation.
Broadly, the industry believes that it can work with the Government on the waste policy review. Dick Searle, chief executive of the Packaging Federation, has said:
“It looks like there’s nothing unexpected in here and it’s all reasonably logical. I’m sure the industry will appreciate the light touch approach. I’m very pleased to see the reference to packaging being ‘dwarfed’ by product in terms of carbon footprint. Overall, it looks like government has been listening.”
Perhaps we might consider that response from an industry to Government plans as a refreshing one.
I am listening with care to the hon. Gentleman and agree with much of his analysis. Does he agree that the Government have an opportunity to galvanise a cross-sectoral approach to the issue—for example, by looking at a product from beginning to end and considering packaging within that context? In the milk industry, the packaging used is responsible for only 7% of the industry’s carbon footprint and joint work by the industry and the Department for Environment, Food and Rural Affairs has enabled the entire product chain to be analysed. Does he endorse that approach to looking at environmental concerns?
Absolutely. Cross-cutting and working together through voluntary agreement is entirely the way forward. That is the main thrust of the waste policy review, and I am delighted that the Minister has said with regard to the review:
“This Responsibility Deal with the waste management industry is most welcome. It is a good example of the way alternatives to regulation can work to achieve better waste management and recycling services for SMEs”— small and medium-sized enterprises—
“and encourage better sorting of recyclable material to help the recycling industry.”
Voluntary arrangements are certainly the way forward and they are arrangements that industry that will respond to. Perhaps the carrot will always work better than the stick.
It is not possible to talk about the regulation of business without making some reference to Europe. European legislation and regulation is already in place under the European packaging directive, which requires the packaging industry to meet strict requirements to prevent the use of excessive packaging. Since that directive came into place, the total amount of packaging waste recovered and recycled in the UK increased from 3.3 million tonnes in 1998 to more than 7.1 million tonnes by 2009.
On recycling, my experience as local councillor before coming to Parliament led me to conclude, first, that most people are pretty sympathetic to recycling and see activity by their local authority to improve recycling rates as a good thing and, secondly, that individuals are prepared to put time and effort into sorting out waste streams, so it is important for the industry to make it as easy as possible for people to identify the materials used in the manufacture of each product. For example, most Members present here today will know that plastic is not just plastic; there are many varieties, some of which are recyclable and some of which are not.
How local authorities go about waste collection and recycling leads to a concern that the industry has about localism, which of course is a key objective of the Government. Localism is appropriate in many sectors, but occasionally it has a downside. The packaging industry takes very seriously what happens to its products at the end of their life and, consequently, regularly engages with the authorities that are responsible for the collection and disposal of waste. Of course, for consumer goods, those authorities are local authorities.
The Food and Drink Federation has referred to the difficulty for the packaging industry of responding to the localist agenda given that there are 398 local authorities, each with a different approach and different priorities with respect to waste planning and disposal, including whether it is right to recycle or incinerate. The industry believes that the lack of uniformity across local councils makes life difficult for it in terms of establishing contact and liaising with local councils. It also believes that it might be helpful if the Government suggested some form of unifying strategy and that, in addition, such a strategy might be of benefit with regard to dealing with litter. I recognise the conflict between that objective of the packaging industry and the broader objective of the Government to enable local people to have the right to decide, through their elected representatives, the best way forward in their area.
Given the problems that I have referred to—problems that fall into three categories—how is the packaging industry responding to the challenges that I have outlined? First, regarding its image, the industry recognises the need to convey the benefits of the products that it produces and to put forward examples of positive development and innovation. It is very clear that modern packaging solutions have enabled a huge change in the way that we shop and go about purchasing our goods, but the industry recognises that it needs to do more work to convey its message more effectively and to get across the benefits of packaging. For example, eliminating packaging from fresh produce would lead to massive food waste. The Cucumber Growers Association has conducted tests that show that unwrapped cucumbers are unsalable after three days, whereas just 1.5 grams of plastic packaging can keep the same product fresh for as long as 14 days. The industry recognises that it needs to get that type of message across.
The second response of the industry to the challenges that it is facing is innovation. The industry has been designing products with waste prevention in mind for years. Improvements in packaging design and production techniques have resulted in huge reductions in material use, which have been referred to by hon. Friends. For example, a pint glass bottle is 65% lighter today than it was in 1940; a 330 ml steel drinks tin has been reduced in weight by 63% since 1950; a 1 litre plastic detergent bottle is 58% lighter than it was in 1970; and cardboard outer packs are typically 14% lighter than they were in 1970. Given all that improvement in efficiency and despite growth in the quantity of consumer products over the years, the quantity of packaging material has increased at a slower rate. Between 2006 and 2008, when the economy was growing, there was zero growth in grocery packaging.
Innovation has not been just about reducing the quantities used but about making greater use of recycled material. In March, The Mail on Sunday reported that Coca-Cola, one of Britain’s biggest users of plastic packaging, had agreed a 10-year £200 million deal with Britain’s biggest plastics recycling firm, ECO Plastics, to turn old bottles into new ones. It is hoped that the Lincoln plant will produce enough recycled plastic to achieve the company’s target of 25% of its packaging being made of such material. That will help the Government to achieve their objectives of reducing the volume of plastics sent to landfill sites and of stopping tonnes of material having to be sent to China, as happens at present. Such development and innovation not only benefits the environment, but goes some way towards making the industry competitive. The challenge for the industry, however, is that innovation is often recognised and copied, making any competitive advantage short-lived.
I have spoken about the industry’s support for recycling. The Save a Cup scheme to collect used plastic and paper vending cups was established some years ago, and its range has now been extended to include cans and pods. In connection with the point made by David Simpson about food safety, the scheme has an online shop where people can buy trays, bins and stationery items such as pencils and rulers that have been made from the recycled material.
Although development costs are high, the packaging industry—in particular, the food service packaging industry—has looked to embrace new materials such as polylactide—PLA—and recycled polyethylene terephthalate—rPET—along with coating developments, and encourages UK companies to participate in efforts to increase local manufacturing.
We have spoken about how litter is created by individuals rather than by companies, but most companies take part enthusiastically in litter-reduction schemes. Many industry participants attended the recent parliamentary launch of the “Love Where You Live” campaign, at which Keep Britain Tidy’s ambassador, Kirstie Allsopp, acknowledged the responsibility of end users of packaging:
“Being part of Love Where You Live is a chance for the big brands to become the heroes instead of the villains in the fight against litter. Those who mindlessly chuck their fast food or cigarette packet on the floor cost our country millions and destroy the places we call home.”
Individuals create the problem but industry can help, and is doing so. In its simplest form such help can include, as part of its design, reminders to dispose of packaging responsibly, and the new “Love Where You Live” logo will start to appear on large amounts of packaging. The industry already includes information on materials used in manufacture and on how and where to recycle.
I shall draw my remarks to a close with a shopping list for the Minister of things that the industry would like the Government to consider. The first is action to stop further erosion of the UK’s manufacturing base and to ensure that packaging manufacture is not exported outside of Europe to economies that can live with a more carbon-intensive environment. The industry is keen to see greater recognition of its contribution to the UK economy, as a major UK manufacturer with £11 billion of sales and 85,000 employees, and it is keen to see support for action on ensuring a level playing field with overseas competitors, particular regarding the cost, supply and taxation of energy. It also wants there to be an understanding that carbon impact is created only by responding to consumer demand for products and that pursuing a low-carbon economy by squeezing manufacturing without addressing that consumer demand might lead to substantial UK manufacturing job losses.
The industry would like to see an acknowledgement that unilateral action by the UK Government on carbon floor pricing might end up putting the UK packaging industry and its customers at a disadvantage compared with international competitors. It also wants recognition of the progress that it has made in supporting recycling and in decoupling packaging growth from growth in gross domestic product, and it wants greater recognition of packaging’s pivotal role in protecting products and providing safe and secure supply chains for a variety of products. The industry would like acceptance that the measurement of environmental impacts must be based on sound research and scientific fact rather than on the emotive language that we occasionally hear. Finally, there is the benefit that would accrue from a little national guidance on local waste and resource management strategies.
The industry recognises that there is a need for greater dialogue between itself and the Government, and I hope that this debate will form part of that. The industry argues that it is vibrant, successful and economically important and that it makes products that safeguard the environment, conserve resources and enable modern living. It has worked hard to address many challenges and has developed into one of the most innovative industries of its type in the world. It believes that the fears about viability that we heard expressed in the all-party group for the packaging manufacturing industry might not be as serious as presented at the outset, but that it is important for the Government to recognise the challenges.
To sum up the importance of the sector, I can do no better than to quote Steve Kelsey, the founder of PI Global, a company that developed a lightweight bottle for Stella Artois and saved carbon dioxide production in manufacture and distribution:
“Packaging is the forgotten infrastructure that is as important as clean water, electricity and highways.”
It is a pleasure to serve under your chairmanship, Mr Meale, for the second time this morning. I pay great tribute to my hon. Friend Mark Pawsey for that 47-minute summary of the packaging industry, which demonstrates his knowledge of and enthusiasm for it. He has made almost all the points that I would have cared to make, but I shall reinforce a few of them.
First, we should stress how important the industry is to the UK economy. The data suggest that the UK packaging manufacturing industry has annual sales of £10 billion, employs about 85,000 people and represents about 3% of UK manufacturing. This key industry constitutes a sizeable part of the economy in many of our constituencies, and it is one that we want to protect and encourage.
I have talked to the packaging manufacturing businesses in my constituency. The largest of them is, I think, BPI Consumer Promopack, which made supermarket carrier bags for many years until the business became uneconomic in the UK—the bags are now made in China. The company subsequently changed, and it now makes the heavy-duty garden waste bags that we all buy from the supermarket and spend our weekends filling. One of its product lines is a bag made by recycling the complex agricultural wrap that my hon. Friend Neil Carmichael referred to earlier. The business chose to invest in recycling those complex agricultural films. The films, which can become dirty from lying around in farmers’ fields for several months, are washed in Dumfries, converted into pellets and made back into garden waste bags. Some people are trying to undercut the cost of the process by exporting those incredibly dirty films as clean waste to China, Burma or other places in the far east. It is illegal to export waste that dirty, but they are managing to export it as clean waste, because the regulations are not enforced adequately.
There is a lesson there. If we want businesses to invest in recycling, which we need in the sector, we must be sure that they have a stable regulatory base and that those regulations are enforced, otherwise their investment decisions will not be viable. As my hon. Friend the Member for Rugby has said, many of our businesses are multinationals, which consider their investments closely at board level. If investing in one territory is substantially less economical than investing in another, the investment will go where the best returns are.
That leads me to concerns about our energy policy. The industry requires substantial amounts of energy to create packaging. It does not count as an energy-intensive industry eligible for the special treatment proposed by the Government, but there is no gain to us in accidentally exporting packaging manufacturing to other countries that probably use less demanding environmental standards and then shipping it back to ourselves. I suspect that that will result in a far higher carbon footprint than manufacturing in the UK, where the industry is fully committed to becoming more environmentally friendly and using less material.
The industry tells me that its customers are adamant in wanting less packaging, because less packaging means less weight, less cost and less expense shipping products around the country. There is huge pressure in the market to make packaging as efficient and effective as possible. We do not need to get out the big stick and force the industry into it, because it has been doing so for years and wants to keep doing so. It is absolutely in its interests for the future of the business that the industry gets it right. It is important that the Government recognise that we do not want to move too fast and make ourselves uncompetitive.
My hon. Friend has discussed how we all go to the supermarket to buy a pack of potatoes and wonder, “Why do I need the plastic tray and plastic film? Why can’t I just buy loose potatoes?” What we do not understand is that from the time food is grown and shipped to when it is sold through the supermarkets and ends up in our fridges, very little is wasted—I think that it is less than 3%. Compare that with the amount of food that we waste once it is in our fridges, when we forget to eat it until it has gone off and end up throwing it away. Around the world, we are having problems feeding the population. Packaging that makes food last longer and ensures that we buy it in a safe, edible condition and do not waste it is vital to an adequate food supply. The last thing that we want to do is damage the industry. It does not have the resources or incentive to invest in the continual improvement of packaging.
I urge the Minister to recognise how important the industry is, both as a UK industry and to various other Government objectives, and ensure that we do not accidentally damage it as we chase laudable goals elsewhere. The industry clearly needs to keep investing in new machinery, new equipment and research and development. It is important that we get the R and D rules right to encourage that research to be done here and that we get the tax rules right to encourage business to invest in new machinery. We had a long debate on that during consideration of the Finance Bill yesterday. I struggled to convince the Government that reducing capital allowances to 18% in a hugely complex way is perhaps not the best way to encourage investment. I will have another go at the Minister of State, Department for Business, Innovation and Skills, my hon. Friend Mr Prisk to see whether I can get an encouraging reply from that angle, but perhaps I should not hold my breath that he will contradict the Treasury.
Creating a business environment that encourages innovation and investment is the best way to reach our environmentally friendly goals. A big stick and a blunt instrument will, I suspect, lead the trend the wrong way, and we will end up importing from far-flung places things that have travelled huge distances and been made in a less environmentally friendly way than they will be if we can protect the industry in the UK and encourage it to invest.
It is a pleasure to serve under your chairmanship, Sir Alan, and to hear Mark Pawsey tell us about his background and expertise in the subject. I was interested to hear about it. It shows the value of having Members who have experienced other worlds before coming to this place.
I should say at the beginning that I am a long-standing member of the all-party group on the packaging manufacturing industry, and I have several packaging companies in my constituency, including Ball Packaging, to which the hon. Member for Rugby referred, and Amcor. I confess that when I was elected—I came from another background than manufacturing—I knew little about the packaging industry, but it fast became clear to me that it was an important industry in the area, in terms of inward investment, jobs and profile in the local community. At the time, in addition to those two companies, another company, Tetra Pak, was located just outside my constituency in Clwyd South and employed many people, although regrettably that company has ceased manufacturing in the UK. Its reasons for doing so are relevant to this debate.
Early in my political career, I visited Tetra Pak and got to know the managing director of the plant well. I also visited Ball Packaging, and I was pleasantly surprised when I visited both companies. When I approached the packaging industry for the first time, my default position, like that of most of the general public, was a bit sceptical. We all have visions of toothpaste being packaged in cardboard boxes and wonder why that is, as we know that our society needs to create less waste. I therefore wondered what the purpose of packaging was. Would not an ideal world be one without packaging? Of course, I was entirely wrong in that approach, as I learned quickly. It fast became apparent to me how efficient the packaging industry is. It is efficient because it depends on two crucial drivers: energy prices and regulation. Over the 10 years that I have been in Parliament, the all-party group has always returned to those two things. They are crucial to the future of the industry in the UK.
When I first visited the packaging plants in my constituency, it became clear early on that they were very efficient in their energy use. At the time, they were much more efficient than individual consumers, because they saw energy costs as a crucial part of their bottom line. Whenever they produced items, they were keen to reduce costs as far as possible, and they worked extremely hard to do so, because energy costs are such an important part of their total costs. Energy costs have always been a major driver for the business.
The second important area is regulation. The drivers of the massive changes that have taken place in recycling and elsewhere have been defined largely by elements of regulation, often from Europe. Those drivers have had an enormous effect on progress in recycling during the time that I have been in Parliament. The hon. Member for Rugby referred to the improvement in recycling rates in the industry from 28% in 1998 to 67% nowadays. The reason why that is so important is that it reduces costs and is being done in response to regulation originating at a European level. We still need to pursue that regulatory goal.
[Sandra Osborne in the Chair]
We all agree with, and all three main parties supported, the Climate Change Act 2008, which will be the fundamental driver of industrial policy, and packaging policy specifically, in the UK for years to come. The Act has compulsory targets that we must achieve, because we all believe that it is important to deal with climate change. It is important that we convey the importance of that to the general public. I still do not think that most individuals—it was interesting to read about this in the papers that I received from the all-party group on the packaging manufacturing industry—recognise that climate change should be a driver in the decisions that they make when they purchase items. The fundamental driver, particularly in these difficult times, is cost. If we are serious about dealing with the profound challenges that climate change poses, we have to get across to everyone how important it is as a driver.
We need to get the regulation right, including at a European level, which means that whenever draft regulations are proposed, or regulations are introduced, Members of Parliament should engage as early as possible with business and industry in their communities. It is important that business draws to the attention of elected representatives, whether in the UK Parliament or the European Parliament, the impact that regulation can have on their businesses. It is also important that we ensure that regulation extends as far as possible across the world.
The issue of carbon leakage has been referred to on a number of occasions. Unless we reduce the carbon emissions of the planet as a whole, there is no point in reducing carbon emissions in one country alone. It is important that we reduce carbon emissions on a European level, but it is also important that we do it on a worldwide basis. We need to co-operate across the piece on reducing carbon emissions and put in place the right regulations to do so.
Business is very capable of responding to frameworks, provided that they are set early and are clear, and that they enable business to make the right choices as far as investment is concerned. Even the most challenging goals in regulations can often be achieved by industry, provided there is clarity. That clarity depends, crucially, on the relationship between Government, business and industry, the early interchange of ideas, and a close working relationship. In the past, we have not had as close a relationship as we need with the packaging industry. By contrast, we received very good news recently of substantial inward investment in the automotive sector, and of £72.2 billion-worth of orders from the aerospace sector. We have to ask ourselves why we have massive inward investment in some sectors, and the opposite in others. Last year, Tetra Pak decided, after 30 years in the Wrexham area, to cease manufacturing in the UK and to move the company’s manufacturing responsibilities to mainland Europe. It has decided to move in the opposite direction when other areas of industry are inwardly investing in the UK.
One of the reasons for the success of the UK aerospace and automotive industries is that there has been a close working relationship between Government and industry. There has been early engagement with the important issues we face, such as low carbon, so that we have excellent innovations, such as the National Composites Centre, and the automotive sector has a constructive and positive approach to the low-carbon economy in the automotive sector.
There will be long-term challenges in relation to low carbon, and the packaging industry and the demands placed on it are one of the areas that will be affected. There has to be a closer relationship, and consumers, industry and Government need to have a better understanding of the issues facing the packaging industry. There is a real threat to a large number of jobs; some 85,000 people are employed in manufacturing in the
UK. We all want more, not less, people to be employed in the packaging industry, so we need to make the UK the place of choice for investment in packaging companies. I am afraid that, at the moment, it is clear from the representations we all receive from the industry that that is simply not the case. We need to take a long, hard look at what is different about packaging companies and our successful companies in the UK. We need more successful companies and more successful sectors.
I talked about regulation earlier, and would like to pick up on an area mentioned by the hon. Member for Rugby: consistency of regulation as far as local authorities are concerned. Localism is a little like motherhood and apple pie; everyone is in favour of it, and would like to have a hospital on their street corner and everything sorted out between them and their next-door neighbour. In the real world, however, that is not practical. Localism, with each local authority determining different policies on waste, causes great difficulty, or difficulties that need not be there, for many businesses.
The packaging sector is efficient. I challenge everyone, including Jeremy Paxman, to visit a packaging company. I suspect that he has not visited many during his career, but if he did, he would see that packaging companies are, without exception in my experience, very efficient. If they were not efficient, they would not be in business. Their focus on cost-reduction and energy use is second to none. They work extremely hard at it. We need to ensure that they are enabled by Government to do the right thing. They need to be able to work closely with local authorities, to develop more efficient supply chains through the industry, and to ensure that waste is not made too complicated for business. That is a real problem and is part of the inevitable tension between centralised practices, which in some respects make things much easier for business, and the pool of localism, whereby there are very different approaches in local authorities. I am still unsure about why recycling practices have to be different in every local authority, and I am sure that that makes things difficult for businesses in general.
The Energy Intensive Users Group and the TUC have produced an impressive report on energy. It has some good recommendations, and I urge the Government to look at them. The sector is under pressure. It needs to be listened to more than it has been, and not just by this Government; this has been an issue throughout my time in Parliament, and when I was a Minister in the Department for Business, Innovation and Skills. This has been a difficult time for the industry, but we still have very good and strong companies in the sector in the UK. We need to ensure that those companies have a future in the UK, and that they work to provide the jobs that we all want to see in the UK economy.
First, we need to educate consumers. The cucumber packaging example that the hon. Member for Rugby gave is a good one—packaging can be a good thing. Secondly, we need a closer working relationship between the industry and Government, and perhaps the Government need to listen a little more to the industry. Thirdly, we need to work hard to get the right regulations in place, and we need to engage with all the institutions that create the regulations to ensure that they are clear and fair. That means having very early engagement.
This is a very important industry for the UK that can have a future, if we make the right choices. I urge the Government to engage as much as possible with not just the industry, but the all-party group on the packaging manufacturing industry. I am celebrating my 10th anniversary of membership of that group this year. Thank you, Ms Osborne—I note that you have magically appeared in the Chair—for allowing me to speak.
I congratulate my hon. Friend Mark Pawsey on securing the debate and, indeed, on the comprehensive range of his remarks, which demonstrate his knowledge of the industry. I do not think you were fortunate enough to have the opportunity to hear his contribution, Ms Osborne, but I know that Sir Alan and the rest of us were fascinated by the range of issues raised. I will do my best to deal with all of the 10 action points raised in my hon. Friend’s remarks and with some of the excellent points made by my hon. Friend Nigel Mills and the previous speaker, Ian Lucas. Everyone has highlighted a different aspect of the subject.
I want to make a small plea. This subject relates to substantial areas that are far beyond my remit and come under the Department of Energy and Climate Change and the Department for Environment, Food and Rural Affairs. We work closely together, and I will do my best to answer hon. Members without creating new policies for my ministerial colleagues.
As has been pointed out, packaging is part of our everyday lives and, in a sense, is common place. At the same time, the different elements and materials—the metals, plastics, glass and paper—feed across the whole of manufacturing as they are very broad and are part of a wide range of supply chains. That is why it is right to say that there is a genuinely competitive role for UK industry in the sector. There have been some encouraging signs of innovation both as a discrete sector and as a process that is part of manufacturing as a whole. My hon. Friends the Members for Amber Valley and for Stroud (Neil Carmichael) have set out a couple of good examples of the kind of innovation that hon. Members across the House want to be encouraged.
As has been accurately pointed out, the packaging industry employs 85,000 people and has a value of £10 billion. In terms of the share of the manufacturing industry, it represents about 3% of the work force. It is worth noting—I am keen to put this on the record to demonstrate that we are mindful of this as a Government—that the productivity of the sector is double that of industry’s average performance. We are not talking about an industry that is sitting back and waiting for things to happen; it is very responsive. I will come on to that point in a moment.
I shall thematically pull together the 10 actions mentioned by my hon. Friend the Member for Rugby and the other points made. He mentioned the industry’s role within manufacturing and what the Government can do to help, energy costs—which were raised by several hon. Members—and the broader issue of waste regulation and how that impinges both on the customers of the packaging industry, who are very often industry and business themselves, and the sector.
On the industry’s place within manufacturing, my hon. Friend is absolutely right to say that we need to make sure that we rebalance that economy. We want to ensure that an over-reliance on a too-narrow group of sectors is replaced with a broader base, so that manufacturing has a key role to play. As the Minister with responsibility for manufacturing, I include in that not only what we might think of as hi-tech, but industry as a whole.
On perceptions, which were rightly raised by the hon. Member for Wrexham, in the past 12 months, there have been good signs in terms of output, investment, exports and, in some parts of manufacturing, jobs, which is encouraging. He mentioned the automotive industry. There have been some encouraging signs in terms of the investment that Jaguar Land Rover, BMW and Nissan all want to make. There are reasons to be encouraged, and we have had a good opening year, but we need to do a lot more. That is why the Government are determined not only to take corporation tax down from 28% to 26%, but to take it on down to 23%. At the end of that process, we will be putting £1 billion back into the coffers of industry, including packaging. That money can be reinvested. As we have heard, one of the key ways in which industrial sectors keep ahead is not simply by trying to reduce costs all the time, although that is important, but by innovating to keep ahead of competitors. That reinvestment capability—the £1 billion extra a year—is a very important part of that equation.
In addition, the Chancellor set out our plans in the Budget to improve short-term capital asset release and to extend it to eight years instead of just four. From talking to a number of people in industry, I know that that is a real boon, because when people invest in an industrial project, more so than perhaps in services, the payback time is often more than four years—it is often five, six, seven or eight years and in some cases it is beyond that. My hon. Friend the Member for Rugby knows that, because he has worked in the industry. That is another important incentive to enable the packaging industry to progress.
It is also important to bear in mind—several hon. Members made this point—that it is not only the hard capital issues that matter, because soft capital issues and skills matter, too. That is why we have made a determined change in the investment in and development of apprenticeships. During this Parliament, 250,000 additional apprenticeship places will be created. That is particularly important in an industry such as packaging, because it has to adapt and to be able to cope with conventional packaging issues and the growing issues around climate change and the environment. It is a crucial part of the equation for the packaging industry to be able to reskill its work force.
On that note, Lorely Burt, who sadly is not in the Chamber at the moment, raised a point in response to my hon. Friend the Member for Rugby on the perception of industry. Indeed, the hon. Member for Wrexham also highlighted that important matter. There is an outdated perception of industry that is often blown away when someone gets the chance to go and see an industrial facility. We note the generous invitation issued by the hon. Gentleman to Mr Paxman to visit a packaging company. He is right: we need people to visit centres and see what an industrial facility is all about in the modern era. That is why, last week, we started a pilot project called “See Inside Manufacturing.” I went to the north-west to encourage and talk to careers advisers and teachers. In the autumn, we want to roll out the programme, so that it works not only with the automotive industry—as it does at the moment—but with the whole of industry.
I extend to the packaging industry an invitation to consider joining that programme in the coming few months, so that we can consider how we can show young people and the public as a whole the broader opportunities in that field. It is also important to change people’s perception of what is involved in the range of different careers. People often assume that the range of skills and careers in industry is narrow, but it is actually very broad and people are highly skilled in many different ways. I certainly want to see the packaging industry play a part in the “See Inside Manufacturing” programme. I will leave it to the hon. Member for Wrexham to decide whether to accompany Mr Paxman on a visit. It would certainly be good if were to get a broad range of people to see what the industry does.
Let me turn specifically to the challenges faced by the packaging industry. My hon. Friend the Member for Rugby raised the question of getting the balance right and of Government and public dialogue about the role of packaging. He is right that packaging and the packaging industry are not the principal problems in waste management. The statistic that packaging makes up less than 3% of landfill has rightly been mentioned. However, packaging clearly has a role to play if we are to ensure that we have a more effective waste strategy. Our approach is to work with producers and encourage a change in consumer behaviour. That issue was rightly mentioned in a number of contributions. When we consider how consumer patterns have changed in the past few years, we realise that we are a world away from where we were before.
We live in a 24-hour, seven-days-a-week culture in which people expect all kinds of produce that for our parents were never available at certain times of the day, let alone at certain times of the year. We expect them, however, to be available 24 hours a day, seven days a week. Inevitably, the industry has responded to that challenge and has changed the nature of how packaging is produced. I suspect that is why, as my hon. Friend the Member for Amber Valley has pointed out, people suddenly find themselves with things wrapped in things wrapped in things wrapped in things, and wonder why. It is right to say that if we were not to wrap effectively, we would find that food waste would be significantly greater. It is important that while we work with the industry—I will discuss the Waste and Resources Action Programme in a moment—we ensure that consumers are encouraged to change their habits positively.
Let me look briefly at what the industry is already doing because, as my hon. Friend the Member for Rugby has rightly said, that is often something that we do not recognise. It is important that we recognise that lightweighting of packaging in the supply chain has been going on for many decades. In the past eight years, household expenditure rose by 20%, but packaging increased by only 3%. While there has been, perhaps for an individual household, the sense that they have more packaging to recycle at home, the gap between expenditure and actual packaging strongly suggests that the industry is being responsive and responsible in this area.
Several hon. Members have raised good examples of that. Asda saved itself approximately £10 million in 18 months simply by changing basic packaging processes. The Home Retail Group looked at the dreadful waste one has when one gets a new sofa or new piece of equipment—not that we have been able to manage one of those in the Prisk household in recent years—and introduced reusable sofa bags. That particular retail outlet has cut packaging by 1,800 tonnes every year just by that simple change, which is an important example. My hon. Friend Rory Stewart raised the point that this industry has models of good practice, particularly regarding local impact in more remote areas, and he is right about that.
The hon. Member for Wrexham is right to say that there needs to be a good, open dialogue in the relationship between an industry sector and the Government. I have sought to develop and continue that in the Department. This is where I suspect the opportunity for the packaging industry, perhaps through such forums as the Green Economy Council, could help us crack the problem to which he has alluded. We have developed a road map, which allows us to look at the issue in the round. As we heard in the debate, the problem in packaging is that it is not quite as simple as just a sector. The nature of what it does inevitably means that it strays into areas relating to waste, water and energy. If we can encourage different parts of our industry to get into that dialogue, it would be good and is certainly something that I want to encourage.
On energy costs, we recognise that our impact, when we look to set the right energy and climate change polices, needs to reflect both generators of electricity and their users. That is a natural tension in any form of energy or climate change policy. It is also important to stress that we, as a Government and not just as a Department, want to ensure that industry, and especially industry with a high or intensive use of energy, remains competitive. There is an issue about how different forms of energy have risen in price. Information from last year shows that, in the past five years, average industrial electricity prices have gone up by approximately 35% in real terms. In that same period, average gas prices have increased by 10%. It is therefore clear that there is a specific issue around electricity pricing, which might pose a risk to the competitive future of those sectors.
The hon. Member for Wrexham rightly pointed to a joint report by the TUC and the Energy Intensive Users Group. That is a powerful document that highlights the estimated cumulative impact of the future energy price in the coming years. That is why not only the Secretary of State in my Department, but our colleagues in the Department of Energy and Climate Change and in the Department for Environment, Food and Rural Affairs, are working together with the encouragement and involvement of Downing street to ensure that we specifically look at and address those concerns around industry.
Later this year, we will announce a package of measures, particularly for energy intensive businesses, where there may be a danger that their international competitiveness is affected. I appreciate that, per se, the packaging industry would not necessarily be classified as energy intensive. Self-evidently, however, some of the key materials it uses—metals and chemicals—are included. That is one way that we can help. I have always made it clear to industry as a whole that I want to know where the pinch points are—the carbon floor price is a good example—so that we do not end up with the danger that has been highlighted. We do not want to unintentionally export jobs and industrial capability, which in the end does not help the climate at all. Several hon. Members have raised that important point.
Yes; I want to encourage industry to ensure that specific aspects of the carbon floor price or other elements of our commitment to reduce carbon are incorporated, so that both my Department and other Departments are crystal clear as to where those issues are and that those issues are fed into the current dialogue. I know that there is a dialogue in hand at the moment, but it is important that the industry keeps that pressure going.
I am mindful of that, and the hon. Gentleman has made a good point about overheads. Clearly, energy is a crucial issue. That is why, while we want to ensure that we set the right regulatory environment so that generators in renewables come forward, we do not unintentionally see an unreasonable detrimental impact on the users of energy. That is a difficult balancing act to strike, but that is why we have made it clear that, while we want to pursue the regulatory framework, we want to look at those industries that find themselves under particular pressure with regards to their use of energy. Clearly, electricity rather than gas is the centre of that process.
Other regulatory issues have been raised with regard to waste policy. The waste strategy is focused on waste reduction, driving recycling and the reduction of packaging. We take the view that that can best be achieved in partnership with the sector. That comes back to the important issue, which a number of hon. Members have raised, about the balance between carrot and stick. We genuinely believe that voluntary agreements are one of the best ways forward. In a sense, that is the way in which WRAP operates. It started in 2000 and was designed to advise and help businesses change and innovate—for example, the Courtauld commitment focuses on how waste management can be improved. There have been some important changes. WRAP has been able to secure backing for infrastructure projects with savings of approximately 120 million tonnes of waste from landfill. It also backs programmes such as Rethink Waste, which looks specifically at working with manufacturers to reduce waste and improve resource efficiency. A number of hon. Members have mentioned food and drink. I point to the Federation House commitment, which is important.
In conclusion, this has been a positive debate. We recognise and value the industry, and the change that it is making is important. It is crucial to support and encourage consumer behaviour that enables innovation. We want to work with the industry in a positive dialogue in the weeks and months to come.