Our welfare system needs reform, not arbitrary cuts
As the smoke settles from yet another astonishing tyre-screeching U-turn by Kier Starmer on his welfare proposals, the stark reality is that instead of significant savings, we will all now face an extra tax bill of £3bn in the autumn.
This U-turn isn't surprising to me because their proposal was a classic panicky short-term Treasury driven cut but in no way genuine reform. I even doubt that the savings would in the longer term have materialised. This is because I believe they were going at it the wrong way.
The Covid lockdowns blasted a hole in our welfare system. Since 2020, the number of households where no one has ever worked has doubled. Economic inactivity due to long-term sickness has risen by 800,000. And taxpayers today are shelling out an extra £30 billion every year on sickness and disability benefits, on top of an already bulging bill.
Lockdown reversed much of the progress we had made under the transformations of Universal Credit, in part relaxing eligibility rules and assessments for benefits, a leniency that astonishingly continues to this day.
But also expanding the 'claim culture', albeit inadvertently, through schemes like furlough. It is easy to forget that by 2019 we had the lowest rate of workless households on record. Clearly, we have to get a grip. But solving this problem will take thought, courage and time.
The Government's proposals are rushed in order to be 'scored' by the OBR in time for the Spring Statement. In a panic, the Treasury opted to simply top-slice spending by raising the threshold for disability benefits across the board.
This leads to some deeply concerning outcomes. According to the Department for Work and Pensions (DWP), three in four Personal Independence Payment (PIP) claimants with arthritis, two in three with cardiovascular disease, and even a third with cancer could lose support.
Yet there is another way, one which focuses on the root causes of the crisis. But that must start with a grown-up conversation about mental health.
Monthly PIP claims have more than doubled, driven in large part by a threefold increase in people citing mental health conditions. Meanwhile the majority of people on Universal Credit receiving health-related top-ups now also report poor mental health.
Tragically, it is disproportionately young people fuelling this rise, those most likely to suffer the mental and emotional consequences of being out of work. And yet it is the system itself that is driving worklessness and dependency. Of course, PIP eligibility does not require someone to be out of work. Yet five in six recipients are. Taken in the round, once you tot up all the various benefits, the system has tilted towards incentivising ill health rather than supporting recovery.
There is another way. New research from the Centre for Social Justice (CSJ) shows that better targeting of mental health benefits – focusing help to those with more serious conditions – could save the Government up to £9 billion. A more humane and sustainable approach to reform would recognise that, for many people with anxiety or depression, ensuring proper treatment is much more compassionate than parking them on benefits and slamming the door to an independent life.
First, the government could use the savings to fund a £1 billion investment in NHS Talking Therapies, expanding 1.5 million additional treatment courses. CSJ polling also finds that nearly half the public believe people with less severe conditions should be supported through programmes and services, compared to one in five saying cash.
Second, the Government should accelerate the rollout of Universal Support, originally launched by the last Conservative government and now rebranded as Connect to Work. This scheme works with the local charities and community organisations best placed to help people who are furthest from the workforce.
These inspirational people are already on the ground, collaborating with employers to tackle the most difficult barriers to work, whether family breakdown, debt, addiction, and poor health.
Finally, for the first time, sickness benefit is being brought into Universal Credit as I had designed originally. The DWP now has powerful tools Universal Credit provides. The NHS has made it clear that for depression and anxiety, the largest new claimant group, work is a health treatment. Yet far too many people were left on sickness benefit with no meaningful contact. Many who were off work for health reasons received no time with a work coach at all. Now under Universal credit that can change. The system should be doing more – using AI to free up work coach time – to increase the contact time with claimants and not leaving them parked on the sidelines.
Our welfare system needs reform, not arbitrary cuts. I understand the pressure Liz Kendall is under. But short-term fixes risk doing lasting damage. We need a system that treats people with compassion while actively supporting them to recover and return to work. That's how to reduce dependency, control costs, and rebuild lives.
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Telegraph
28 minutes ago
- Telegraph
Why Britain pays such a crippling price for electricity
At a vast stainless steel plant on the edge of Sheffield, Christian Brüggmann's job is to keep things running. The factory, owned by Italian manufacturer Marcegaglia, is the only one of its kind left in Britain, producing primary stainless steel used in everything from pipes to cutlery. Yet rather than focusing on production, an increasing amount of Brüggmann's time in recent years has been spent worrying about something else: sky-high electricity prices. 'It's been a roller-coaster ride ever since Covid,' says Brüggmann, the German operations chief at the facility. 'In one day now, you can have swings of £200 per megawatt hour in the price – it just creates so much uncertainty and makes it very hard to plan.' The Marcegaglia plant is more exposed than most. It uses a massive electric arc furnace to melt down scrap metal and combine it with other alloys in a large cauldron, with this mixture then poured and cast into slabs. Even turning the furnace on is a commitment, as it triggers a production process that must continue for three days, regardless of swings in the power price. Yet Brüggmann's experience is far from unique. All across Britain today, businesses and households are complaining about the seemingly unstoppable rise of electricity prices. In the Government's new industrial strategy, ministers singled out the problem as one of the biggest challenges facing domestic factories. And at the same time, regulator Ofgem has warned that higher prices are forcing more households into poverty. Ed Miliband, the Energy Secretary, blames the rise on our dependence on gas for generating electricity. His critics claim it is the Government's gung-ho pursuit of net zero that is responsible. Shocking rise At her home in Horncastle, Lincolnshire, Sheila Correll often goes from room to room to check she has turned off as many appliances as possible to avoid wasting electricity. With a weekly income of around £200 from the state pension and pension credit, she often resorts to hand-washing clothes to avoid switching on her washing machine, as she fights to keep her bills to 'as little as possible'. Yet the 83-year-old widow, who was a legal secretary before retiring, says the task only seems to be getting harder. 'Whatever I do, the electricity bill still seems so high, but I am using the minimum I can use already and there's nothing much left to live on,' she says. 'You never used to have to worry this much about electricity. Looking back, we never even really thought about it. It wasn't the way it is now.' Take a look at the numbers, and it isn't hard to see why millions of people like her are struggling. Following Russia's attack on Ukraine, energy prices surged to eye-watering levels as all of Europe scrambled for gas supplies for heating and electricity. But even with the worst of that crisis now behind us, prices remain much higher than they were beforehand. Last week, Ofgem published shocking new figures showing that household debts have breached the £4bn level for the first time, up from £1.3bn in 2020. The explanation for this is simple. Between 2019 and 2024, wages and the state pension increased by 32pc and 31pc respectively, while power prices surged 58pc for medium-sized households, according to official figures. For a typical household that consumes around 3,100 kilowatt hours (KWh) of electricity per year, this has led to an annual power bill of about £930, up from £589 in 2019, with taxes included. (A washing machine typically consumes about 1KWh of power per cycle.) Yet even the cost of abstinence has grown. In the past five years, the average standing charge for a household that consumes no electricity has also jumped from about £7 to just under £15 per month, according to regulator Ofgem. 'The standing charges are horrendous,' says Mrs Correll, in Lincolnshire. 'And with all the taxes as well, it's even worse. Without them I'd be a damn sight better off.' And it isn't just households that have had to swallow bigger costs. Businesses are arguably even worse off, with British factories paying the highest electricity prices of any developed country, according to the International Energy Agency. Their costs more than doubled between 2019 and 2023, the most recent year for which data is available. British industrial users paid 25.85 pence per kilowatt hour when taxes were included, up from 11.55 pence just four years earlier. Crucially, this was 45pc higher than in France and Germany and four times what American companies paid. In Marcegaglia's case, paying for power directly accounts for roughly 25-30pc of the Sheffield plant's outgoings, says David Scaife, the company's chief financial officer in the UK. 'We're obviously happy that electricity has dropped to lower levels than two years ago,' Scaife says. 'But prices are still much higher than they were before the pandemic. 'When we're looking at our ability to compete in the world market, that is pretty damaging. We export more than 90pc of our production, mostly to the EU and the US, both of which have pockets where power is far cheaper than it is here. 'So our competitiveness is very dependent on getting lower electricity costs.' The high price of power was recognised as 'one of the most pronounced challenges to the competitiveness of our energy-intensive sectors and the attractiveness of the UK to foreign investment', according to a government report last week released as part of the industrial strategy. In a worst-case scenario, it also puts Britain 'at risk of de-industrialisation', a report by manufacturers' body Make UK warned – a scenario that some have warned is already playing out. Between 2021 and 2024 alone, the output of heavy industrial firms such as paper mills, steel makers, glass blowers and potteries fell by a third because of high energy prices, a recent analysis by the Office for National Statistics found. And high power prices are threatening not just Britain's traditional industries but also those of the future. Under plans to reach net zero by 2050, the consumption of electricity will only become more crucial as production processes are electrified to cut carbon emissions. Yet even those at the top in Westminster struggle to fully explain just how Britain became saddled with such crippling electricity costs. When Labour's Sarah Jones, the industry minister, was quizzed about the cause on BBC Radio 4's PM programme last week, she said the full reasons 'would take all day to explain'. France, she said, was cheaper, because it had 'huge amounts of nuclear power' while Germany 'has been better historically in terms of industrial energy prices because they've put extra costs on to consumer bills'. That answer hinted at the failures of past governments to build new nuclear power stations. But it also failed to mention that nearly of a quarter of Germany's power is generated by the cheapest fuel of all: coal. However, another reason Jones was unable to unpick the cause is the sheer complexity of our energy bills. They include not just the cost of power but also a multitude of taxes, green levies and other charges that have been introduced over time. 'Growing complexity is a very serious issue,' says Michael Grubb, professor of energy and climate change at University College London. 'It's hard for politicians to understand. And that makes it easier for companies to game the system or to lobby for stuff that sounds plausible.' So how did things get like this? Hooked on gas The way our bills are constructed is key to understanding what is happening to electricity prices. Look closer, and you'll see that the amount of power you consume only accounts for about one third of your monthly bill. Another 23pc pays for grid costs such as transmission and distribution, while 20pc pays for green energy subsidies. Another 23pc is set aside for miscellaneous items such as supplier profits, operating costs, metering and bad debt provisions. 'Fundamentally, you've got the price of electricity, then you've got the costs of distributing it, and then you've got all sorts of levies and charges,' says Michael Liebreich, an independent energy consultant and investor. At the moment, the biggest single factor affecting electricity prices is gas. Following the discovery of huge gas reserves in the North Sea, the 1990s 'dash for gas' saw a string of gas-fired power plants built across Britain, and they have since become the backbone of our power grid. Before that, burning coal power plants were our biggest source of electricity. But in recent decades, successive governments have sought to phase them out with heavier taxes due to their higher carbon emissions. The rise of renewables is now pushing gas down the pecking order of the power system as well. But because of a market system called 'marginal pricing', gas still continues to influence prices heavily. Grid operators must constantly keep the supply and demand of electricity in balance at all times by continuously fine-tuning both. To decide which power plants to use on a daily basis, grid officials will work their way up a list of generators. They start with the cheapest and carry on until demand is met, eventually sourcing energy from the most expensive supplier. At the end of this process, the price paid for power is set not by the cheapest but by the most expensive. This means that even if wind, solar, batteries and other clean power sources provide the bulk of power, but gas-fired plants are used to deliver the final fraction, every generator still receives whatever the gas plant was paid. 'It could be that there's only one of these plants that's needed somewhere, and yet the whole country will pay the peak gas price, which is just insane,' says Liebreich. The driving idea behind this is efficiency, as power plant owners are incentivised to offer lower prices so they stay on the list of generators for longer. But it means consumers are being forced to pay for the rollout of supposedly cheaper renewables, while still paying the price of gas. For instance, a study in the journal Energy Reports found that in 2021, gas was used to generate around 43pc of Britain's electricity but set the national power price 97pc of the time. This dependence has also left the country vulnerable to global crises such as the Ukraine war, which sent prices soaring and prompted the Government to intervene with a massive support scheme. The renewables rollout is also leaving us more exposed to gas in other ways, too. We have not yet upgraded the power network to carry all the electricity being generated by wind farms in Scotland, so when the grid becomes too congested, we are instead switching turbines off. At the same time, grid operators will then fire up a gas plant elsewhere to make sure demand is met. This leads to huge so-called 'curtailment' compensation payments to wind farms, all of which are paid via household bills. Green contradiction Subsidies are another key driver of power prices. Successive governments have loaded energy bills with a multitude of levies, from those designed to support the rollout of clean power to those meant to help poorer households with their bills. All are expensive, says the Renewable Energy Foundation, which puts the total annual cost of energy subsidies at around £25bn. The origins go back to 1990 when Margaret Thatcher's government created the non-fossil fuel obligation, a levy on coal and gas generators. Its aim was to support privatisation of the nation's nuclear stations, which produced power so expensive that they couldn't attract buyers. The money funded guaranteed prices for their power, but the key innovation was that levy costs were passed directly to consumers – a mechanism integral to the levies driving bills up today. Of all of these, the biggest levy is the renewables obligation. This levy awarded certificates to wind, solar and other renewable generators for each megawatt hour (MWh) of power generated, on top of what they received for power. At the same time, electricity suppliers were obliged to buy the certificates to compensate for their carbon emissions. The result was a renewables gold rush, with wind farms springing up across the UK. The scheme has since been closed to new entrants but owing to the length of contracts awarded, it continues to account for £6.8bn of levies on bills. The cumulative costs since 2002 come to a whopping £67bn. In 2008, Ed Miliband, in his previous stint as energy secretary, also helped to create the feed-in tariff (FiTs) to boost small-scale renewables such as solar and low-carbon electricity generation. This pays property owners who put solar panels on their roof for every unit of power generated, even if they use the power themselves. FiTs have added a cumulative £15bn to bills. Other similar schemes include the energy company obligation and the warm homes discount. Altogether, say analysts at Cornwall Insight, such policy costs add a total of £198 to the average consumer bill per year. And those costs exclude the fastest-growing subsidy of all, contracts for difference (CfDs), under which low-carbon generators are guaranteed a fixed price for their power. This means developers can build wind farms, solar farms or nuclear power stations safely in the knowledge that, even if power markets plunge, they will be guaranteed a profit. Last year, CfD subsidies added about £2.5bn to Britain's bills – but you won't see that information set out on your power charges because they are hidden within the figures for wholesale prices. John Constable, director of the Renewable Energy Foundation, a charity which tracks the cost of such subsidies, says they now amount to costs of £25.8bn a year, or about 40pc of the total cost of supply. The sheer scale of these subsidies means it is misleading for politicians to keep blaming gas prices alone for high energy costs, argues Adam Berman, policy director at Energy UK, the trade body for energy suppliers. 'It's true that wholesale power prices are driven partly by gas,' he says. 'But wholesale power prices only account for 40 to 50pc of our bills. 'The rest is driven by additional charges, subsidies for renewable energy, and policy costs.' The combined effect of these issues has created a contradiction: renewables are supposed to bring abundant and cheap supplies of electricity, but the more we add, the more prices are going up. 'You've got to make a distinction between costs and investments,' argues Liebreich. 'We're a generation that's pouring money into our infrastructure. There will be a benefit to all this. But that's been very poorly explained to people.' How soon those benefits materialise is a crucial question, he admits. 'Saying it will be better in the 2040s is clearly not an answer.' Greg Jackson, the boss of Octopus Energy, has issued a similar warning. 'The reality is, if prices continue to go up, one day the elastic snaps,' he said recently. 'And then you call an end to investment in renewables.' In search of a solution So what can be done to bring power prices down? For environmental groups, the primary blame for high energy prices will always lie with fossil fuels. They argue that the best way to cut bills is to drive down our reliance on gas by continuing to build more renewables, but crucially, alongside battery storage and grid upgrades. One of the most influential climate groups is Ember, a London-based think tank that was called on by Labour and Mr Miliband to draft the party's plans for clean power. In particular, Ember helped to inspire the pledge for clean power by 2030 and provided the workings behind Mr Miliband's ill-conceived pledge to cut £300 from household energy bills. Josie Murdoch, an analyst at Ember, says: 'Before the energy crisis, the UK had similar electricity prices to other European countries. 'The price of electricity in the UK has remained high because the UK is over-reliant on gas for energy and grid stability, with gas almost always setting the price of electricity. 'Clean power generation and grid stabilising technologies such as batteries will free the UK from this pricing dynamic.' Prof Grubb, at UCL, says Britain could consider boosting power supplies by building more nuclear power stations, with all but one of the existing fleet set to close by the end of this decade. But nuclear plants are not cheap. They take years to build, cost tens of billions of pounds and will also generate electricity for significantly higher prices than gas plants. Not to mention that Hinkley Point C in Somerset has busted its budget several times over, and is currently forecast to cost up to £47bn. Another option being put forward is market reform. Octopus boss Jackson and Liebreich both advocate so-called zonal pricing, which would split the country's electricity market into regions. Each would have its own wholesale price. This would mean that when there is too much wind power in Scotland, prices would plummet, while in other areas, higher prices would incentivise the construction of new wind farms closer to cities. Meanwhile, the Climate Change Committee has called for ministers to take levies off electricity bills to make it cheaper for people to own electric cars and heat pumps. Yet this idea is riven with political risk, not least because ministers would have to make up the revenue either by shifting the levies to gas bills or general taxation. The Government insists that levies have successfully driven investment in renewables, reducing the UK's exposure to volatile global fossil fuel prices and protecting consumers against future price shocks. 'Through our clean power mission, we will get off the roller-coaster of fossil fuel markets – protecting business and household finances with clean, homegrown energy that we control,' a government spokesman says. Ministers have also increased financial support for energy-intensive businesses by providing relief on network charges and other fees. But Claire Coutinho, the shadow energy secretary, says that while in office she had to constantly battle with officials who wanted to add even more levies to bills. 'Cheap energy has to be our priority – otherwise we will keep offshoring British industry to China, which is just mad,' she says. In Sheffield, Marcegaglia's Brüggmann says the plant is preparing to invest in a new state-of-the-art electric furnace that will reduce electricity costs and boost production capacity. It will also benefit from the new government scheme to cut power bills. Yet even with that support, steelmakers will still face higher electricity prices than competitors in France and Germany, according to industry calculations. 'We want to produce more next year,' he says. 'We're the only producer of stainless steel still here. But what's the Government's commitment to this industry?'
Telegraph
29 minutes ago
- Telegraph
Supermarkets told to cut 100 calories from shoppers' baskets
Supermarkets will be ordered to cut up to 100 calories from the average shopping basket under a new 'nanny state' drive to tackle obesity. Ministers are set to impose a 'healthy food standard' that will force stores to curtail sales of sugary and salty snacks in favour of more fruit and vegetables. Shops failing to meet the mandatory targets could face fines, which retail sources warned could see prices rise. The measures will form the backbone of a 10-year plan to improve the nation's health, which will be unveiled by Wes Streeting, the Health Secretary, this week. Downing Street hopes the changes can help avert the need for future tax rises by slashing the £11 billion a year that obesity costs the NHS. But senior retail figures said they had been blindsided by the 'draconian' plans, which they said would add to a growing glut of red tape on business. One called the proposals a 'nanny state' policy, while another industry source warned that the measures were being 'propelled by food propagandists' who did not believe in people taking responsibility for their own diets. Andrew Griffith, the shadow business secretary, said: 'Labour want the nanny state sitting in every supermarket trolley. 'You'd have thought they'd be too busy with their policy U-turns or trying to fix the economy that Reeves broke with her tax rises – but no – it sounds like the miserable socialists have their sights on every small treat in our weekly shop.' The exact target will be agreed in talks with major retailers, but ministers are expected to push for it to be set at around 100 calories per basket – the equivalent of two cubes of butter. It will be underpinned by a new regime of mandatory reporting, meaning large shops have to submit data on how much of each product they sell. Under the proposals, it will be left up to supermarkets to decide how they meet the requirements. Retailers could change the recipes of own-brand products, target discount offers or award shoppers more loyalty points for choosing healthier options. Mr Streeting warned that, without taking action, the growing cost of obesity-related care risked making the NHS 'unsustainable' in the near future. 'Obesity has doubled since the 1990s and costs our NHS £11 billion a year – triple the budget for ambulance services,' said the Health Secretary. 'Unless we curb the rising tide of cost and demand, the NHS risks becoming unsustainable. 'Through our new healthy food standard, we will make the healthy choice the easy choice, because prevention is better than cure. By shifting from sickness to prevention, we will make sure the NHS can be there for us when we need it.' Announcing the new policy, the Government cited research estimating that cutting the average person's intake by just 50 calories a day would lift 340,000 children and two million adults out of obesity. However, experts questioned the claim. Tom Sanders, professor emeritus of nutrition and dietetics at King's College London, said it was 'not a view that most experts in nutrition would share'. He added: ' Tackling obesity can only be effective if it changes the obesogenic environment, which is characterised by sedentary behaviour and over-exposure to high-calorie food.' Sir Keir Starmer will unveil the plans on Thursday after tense negotiations with supermarket bosses over the details went down to the wire. The Telegraph has been told that late on Friday officials were scrambling to drum up support for the policy after a fierce backlash. During the talks, retail giants warned that they would oppose any measures that would hit their profit margins, which are very tight. Shops already face significant regulation over unhealthy food, including being required to move products with high salt and sugar away from the front of stores. Supermarket chiefs are understood to privately be concerned that further regulation would force them to raise prices in stores and pause new openings. One senior industry figure said there was no evidence that such 'draconian regulation' had helped tackle obesity, adding: 'Proponents now want to go further.' The insider claimed the agenda was 'propelled by food propagandists' who wanted a crackdown on ultra-processed products such as sliced bread, crisps, biscuits, and ham. Another source questioned why ministers were focusing solely on supermarkets rather than also including takeaway chains and high street bakeries. But officials said that by introducing a 'level playing field' where all businesses faced the same terms, they would avoid creating a 'first mover advantage'. However, Tesco and Sainsbury's, two of the country's biggest chains, said they welcomed the proposals. Health campaigners also backed the move, saying that improving people's diets would help cut rates of killer conditions such as heart disease and cancer. Allies said the Health Secretary was acutely aware of the cost of living crisis and had rejected ideas that would have pushed up costs for shoppers, having blocked more radical proposals such as banning buy one, get one free promotions or introducing new 'sin taxes' on sugary and salty goods. The 10-year strategy will also include plans to expand the use of pharmacies to treat conditions such as obesity, asthma, high blood pressure and diabetes. They will be handed greater powers to prescribe drugs and encouraged to offer people advice on lifestyle changes and nutrition. The changes form part of a wider drive to cut the burden of people attending GP surgeries and A&E units for relatively minor complaints. Research by the National Pharmacy Association found that six million hours of A&E time could be saved every year by redirecting patients. It said 325,000 people had attended a hospital in 2023-24 with a sore throat or cold, whilst 18,000 went for treatment for insect bites. Mr Streeting said: 'The nation's high streets will join the front line of NHS care, as pharmacists get far more power to prescribe and manage a range of health conditions.'
The Guardian
30 minutes ago
- The Guardian
‘It breaks my heart': how a refinery closure is hitting jobs and politics
Every morning in Grangemouth, chemists at Celtic Renewables's small factory feed a vial of microbes with a precisely tailored cocktail of food – liquid residues from the scotch whisky industry. In vessels surrounded by a web of metal pipes and gleaming stainless steel valves, the microbes multiply into something other than drink: a starter solution for batches of acetone, butanol and ethanol – chemicals essential for countless everyday products. Celtic Renewables wants more: a plant 10 times its current size. That could form part of plans to sustain Scotland's chemicals industry after Grangemouth sustained a crushing blow: the closure of the 100-year-old refinery in April, with the loss of 400 jobs. The huge complex will be reduced to a fuel import terminal, staffed by only 75 people. As many as 4,600 jobs in the refinery's supply chain could also be affected. That closure has made Grangemouth one of the earliest tests of a 'just transition': the idea that the economy can move relatively painlessly from fossil fuels to net zero, helped along by judicious government interventions to spur new jobs in place of the old. The Labour government fears that failure could mean voters turn their backs on it – and on the pledge to reach net zero carbon emissions by 2050 – throughout what remains of Scotland's largely fossil fuel-dependent industry. Climate action by government remains popular in Britain, but parties on the right, and particularly Nigel Farage's Reform UK, believe opposition to net zero can win them power. As the government this week unveiled a new industrial strategy, this article – the second in a series on the battle for Britain's deindustrialised areas – looks at the future for one of Scotland's industrial icons. After the second world war, deindustrialisation wiped out much of the coal mining, shipbuilding and steelmaking that dominated employment in Scotland's central belt from Glasgow to Edinburgh. While those industries all but disappeared, Grangemouth held out, refining crude oil to feed Scotland's cars and planes taking off from Edinburgh and Glasgow. Grangemouth's refinery traces its history back to 1924, making it the second oldest in Europe, but since 2005 it has been part of Jim Ratcliffe's Ineos chemicals empire. Ratcliffe's investments bolted together assets that others did not want, and generated huge profits. Ineos agreed a deal in 2011 for Chinese state-owned PetroChina to partner in a joint venture, Petroineos. Petroineos executives argued in Scottish parliamentary hearings that Grangemouth was not able to compete with newer, more efficient plants in the Middle East and Africa. UK chemicals output has slumped 42% since peaking in March 2020, according to the Office for National Statistics. Ratcliffe has faced significant criticism for cutting jobs in chemicals and at Manchester United Football Club – which he took control of last year. But he has claimed that it was UK energy policy, not his decisions, that made Grangemouth unviable. Chemicals companies report UK energy costs are five times higher than in the US and well over double those in the EU, according to the Chemical Industries Association, a lobby group. Ratcliffe is also a staunch opponent of carbon taxes on businesses. 'We are witnessing the extinction of one of our major industries as chemical manufacture has the life squeezed out of it,' Ratcliffe told the Financial Times in January. Deindustrialising Britain achieves 'nothing for the environment,' he said. 'It merely shifts production and emissions elsewhere.' Cutting energy costs was the flagship measure of the government's industrial strategy, with exemptions for chemicals businesses for the costs of renewable energy programmes and discounts for levies to fund the grid. The measures did not include short-term help on driving down wholesale prices, the key complaint of big energy users. What do you do with a tangle of pipes, furnaces and crackers like the Grangemouth refinery? A Scottish government-funded study, known as Project Willow, described nine options for chemical industries that could happen on the site, including plastics recycling, making chemicals from wood, or – perhaps most ardently desired – making so-called sustainable aviation fuel (SAF). Westminster has set aside £200m to support private sector investments at Grangemouth, plus £25m from the Scottish government, to support projects. Senior government sources said more money could be available if the right projects come up. Yet each of those options comes with a price tag, ranging from the relatively manageable (£15m for turning organic waste into methane, with up to 70 jobs) to the truly enormous (up to £2.1bn for a SAF plant, and 270 jobs). The transition does not feel pain-free in Grangemouth town centre, with the refinery chimneys visible from the end of the road. A pleasant park, rows of sandstone homes and later semi-detached houses evidence the prosperity of the early 1900s and the boom times of the 60s and 70s, but the town also has several areas counted among the 10% most deprived in Scotland. Manufacturing in 2023 accounted for 11.1% of jobs in the broader Falkirk council area. That compared with 6.9% across Scotland that year – down from 35% in 1951. Mohammad Saleem, the shopkeeper at Sweet Talk, is already feeling the effects of the refinery closure, and has cut back opening hours, with fewer workers passing through to grab chocolate or a paper on the way to work. 'Quiet,' is his description of business in recent months. 'It used to be good before corona. After corona, that's it. This time, lunchtime, you would see crowds. Now you don't see anybody.' 'It's a disgrace,' said another shopkeeper in the centre. 'But what can you do?' Marilyn McIlvaney, the secretary of the Kersiebank Community Project, a volunteer-run charity shop that runs a food bank, said they had seen more people under pressure in the weeks since the closure of the refinery. Redundant workers got a relatively generous 18 months of pay, but they are still tightening belts. 'They're cutting back,' she said. 'It's having a knock-on to the other businesses. It's getting worse. Food banks are queueing out the doors – some of them [users] are working.' The question now for workers is whether Project Willow jobs come through before they have to look elsewhere. Those hopes are looking increasingly forlorn, according to Cliff Bowen, who has worked at Grangemouth for 33 years, and is now a convener for Unite, a union. He argues that the political implications will be huge. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion 'All we asked for is another couple of years until these technologies come online,' Bowen said. 'It breaks my heart. Labour are done for a generation in this area.' Bowen, a lifelong Labour supporter whose anger is palpable, believes that Reform UK will benefit from the loss of jobs at Grangemouth, and throughout Scotland's oil and gas economy, because it appears to offer a chance for those businesses to continue to operate. 'They're talking sense when it comes to energy supply,' said Bowen. 'People are going to vote for that, regardless of the colour on their rosette.' Reform's support is notably strong in areas around other refineries: near Stanlow refinery it won the Runcorn Westminster byelection, while Reform is leading Westminster polls in each of the constituencies that host the UK's other refineries at Fawley in Hampshire, Pembroke in west Wales, and the plants at Humber and Lindsey in Lincolnshire. Richard Tice, the Reform deputy leader, said: 'Reform will scrap net zero which will enable lower energy costs and investment in the chemicals and refining industries, thus creating jobs and leading to the reopening of Grangemouth.' That prescription is not seen as realistic by industry experts, even if big subsidies were offered. It would also lead to continued UK carbon emissions: the refinery was responsible for more than a quarter of all Scotland's carbon. Yet the pledge may resonate with people struggling to find work. Labour managed a surprise victory in a Scottish parliamentary byelection earlier this month in Hamilton – leaving the Scottish National party (SNP) in second and Reform a close third. Yet Brian Leishman, who won Grangemouth back for Labour only last year in the Westminster general election, said the closure was a 'failure from the political class' – including Labour, after it failed to live up to a pre-election pledge by the Scottish Labour leader, Anas Sarwar, to 'step in to save the jobs at the refinery'. The SNP is keen to win back an area it held for nearly a decade at Westminster, but also has limited room for manoeuvre because of its nearly two decades leading the Scottish government. Leishman argued that the government should take ownership stakes in return for Project Willow funding, to prevent the area being vulnerable to the whims of distant bosses in the future. He said that Labour needed to invest in Scotland if it wanted to hold on to its previous gains. 'If you give people good jobs, good life chances, that's now you get a second term,' he said. 'If you do the basics of government well and you improve people's living standards, you'll beat Reform.' Scottish Enterprise, the lead agency on Project Willow, is hopeful that some of the interest will translate into action soon. Jane Martin, the managing director for innovation and investment, said she was 'aware of the need for short-term wins to turn the narrative around'. The agency is working to triage projects, and work out which will be most likely to succeed. They are a mix of 'inside the fence' at the refinery, and others outside. 'Project Willow is a really important lever but we are not only focused on those technologies,' Martin said. 'We're not shutting anything down at this stage.' It does appear increasingly unlikely that a single employer will emerge to replace the refinery's jobs. One much vaunted possibility was an investment to produce SAF to meet the UK's mandate of 10% of all aviation fuel by 2030. However, Michael Liebreich, a clean energy expert, said SAF was still seen as too risky for investors. SAF production (either from biological sources or using green hydrogen) is still several times more expensive than refining oil into kerosene, and nobody has dared to make the huge investment needed without a cast-iron guarantee that the product will be bought. There does not appear to be much hope for a neat solution. The question now appears to be whether smaller projects can let the town retain a chemical industry. That could allow it to salvage something from the devastation of the refinery's closure – and prove whether a messy transition can also be just. 'We've got a redundant petrochemical facility that has land, utilities and access to great people, if we can be courageous,' said Mark Simmers, the chief executive of Celtic Renewables. 'And it does require bravery and courage, particularly for governments to say, 'We're going to create these low-carbon manufacturing jobs, and repurpose all that land and utilities and people to do something which is all about the future'. 'That then becomes an example for the world. So I really believe if people are brave and courageous and say 'let's do this', it will provide a blueprint for lots refineries in the UK and the world.'
