Meeting of the Parliament

Meeting date: Tuesday, October 29, 2013

Official Report 750KB pdf

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Grangemouth Plant

The next item of business is a statement by John Swinney giving an update on Grangemouth. The Cabinet Secretary for Finance, Employment and Sustainable Growth will take questions at the end of his statement and there should therefore be no interventions or interruptions. I call John Swinney, who has 10 minutes.

14:04

The Grangemouth refinery and petrochemical plant comprise the largest industrial site in Scotland. The combined site employs 1,350 people and directly contributes around £500 million of gross value added—around 0.5 per cent of the total—to the Scottish economy. When the wider contribution of the plant is considered, such as the additional activities that are supported through the supply chain and the induced effects on the economy, it is estimated that the complex supports around £1 billion of GVA, 1 per cent of the Scottish total, and around 6,500 jobs.

The complex is also a critical component of the distribution and refinery capacity associated with production from the North Sea. It is central to the operation of the Forties pipeline system, which transports crude oil and gas liquids from offshore and onshore entry points with a nominal capacity in excess of 1 million barrels per day and carries around 40 per cent of the United Kingdom’s oil production. The site is of strategic significance to the Scottish economy and, for that reason, securing its future has been a major priority for the Government for some time.

The First Minister, Fergus Ewing and I were engaged extensively on the issue throughout the recess period, and we have worked with a range of stakeholders. Our sole aim has been to broker an agreement that would ensure a secure economic future for the plant while simultaneously exploring all possible contingencies should that outcome have failed to materialise. Ministers have consistently engaged with the company that owns the site, Ineos, on many occasions in recent years in considering a variety of issues that have ranged across, among other subjects, ensuring continuity of fuel supply during previous industrial action, and in discussing future investment proposals.

On 13 September, ministers were advised that Unite the union intended to ballot for industrial action up to and including strike action in connection with two issues: the alleged victimisation by Ineos of a Unite official, Steven Deans; and the use of agency staff by Ineos. On 27 September, Unite members voted to support industrial action on both counts, and the union decided to implement an overtime ban and a work to rule to support its concerns.

The First Minister and I engaged directly on that issue, and we encouraged both sides to enter into meaningful dialogue to try to resolve those issues, recognising the significant impact that would arise if there was to be even the shortest period of industrial action. The Government took that approach directly by contacting Ineos and Unite personnel.

We proactively sought a solution, and we maintained active and regular discussion at ministerial and official level with the United Kingdom Government. I spoke to the Secretary of State for Energy and Climate Change on several occasions to co-ordinate our initiatives and responses. Our efforts were underpinned by the Scottish Government emergency Cabinet sub-committee, which met to help to focus the resources of the whole Government in managing the issue.

As we took forward that approach, Ineos set out the details of a survival plan that it believed had to be implemented to secure the future of the site. That plan involved changes to the terms and conditions of employees, the replacement of the pension scheme, reforms to collective bargaining arrangements, and other provisions.

On Friday 11 October, after talks in the plant did not make progress, Unite announced that it intended to take strike action for a 48-hour period, which would commence at 07:00 on 20 October. During that weekend, Scottish and UK Government ministers engaged with Ineos and Unite to encourage both sides to enter into substantive dialogue to resolve the issues, ideally through the Advisory, Conciliation and Arbitration Service. The First Minister, along with the secretary of state, Ed Davey, intervened directly to press the urgency of that move.

On Monday 14 October and Tuesday 15 October, those talks took place under the auspices of ACAS. Considerable progress was made and, at one stage, an agreement was judged to be possible, but the talks collapsed in the early hours of Wednesday 16 October. The consequence of that failure was that Ineos continued to take the plant out of operation, on the ground that, although Unite had unilaterally cancelled the industrial action, further action could commence at any time.

The following day, the First Minister and I met both Unite and Ineos to try to construct an agreement. We proposed that a two-part deal be taken forward in which Unite would withdraw its threat of strike action until the end of the year and Ineos would restart the plant that had been stood down. We also judged that that represented a realistic way of making progress, by enabling the plant to start production and substantive discussions to be held on the issues at stake.

Much to our regret, after initial indications that that approach would be approved, it failed to hold at a meeting between the shop stewards and the company on 18 October. As a consequence, the wind-down of the plant continued, and the company continued to consult the workforce directly on the contents of the survival plan. Unite asked its members to reject the survival plan. On Monday 21 October, it became clear that about half of the workforce had accepted the plan and half of the workforce had rejected it. Ineos announced the closure of the petrochemical plant on 23 October, after a day of consideration.

Throughout the intervening period, ministers and officials were in frequent dialogue with both Unite and Ineos to try to avert industrial action but also to advance the necessary contingency arrangements to ensure continuity of fuel supply in Scotland. We acted because we estimated that, if the petrochemical plant at Grangemouth were to close permanently, there would have been a direct loss of around 800 jobs and £290 million of gross value added from the economy.

Closure would also have led to a legacy of environmental impacts that would have required remediation. We engaged the Scottish Environment Protection Agency in our work to ensure that, had such a situation arisen, we would have an early understanding of the costs that former owners would have to bear and, of equal importance, to support informed decisions about alternative activities on this important site.

In the immediate aftermath of the Ineos announcement on 23 October, the Scottish Government continued active discussions with both parties, and the First Minister spoke with the Unite secretary in Scotland, Pat Rafferty, and then with the chairman of Ineos Capital, Jim Ratcliffe, to advise him that the Unite position was likely to change.

On Thursday, I, along with the Secretary of State for Scotland, continued those discussions with both parties at the Grangemouth plant. It became clear that morning that Unite intended to accept the terms of the Ineos survival plan and to agree to commit to no industrial action during the period in which the investment plans were proceeding. That approach made it possible for the closure announcement to be reversed. The First Minister also met Len McCluskey, the general secretary of Unite, Pat Rafferty and BP—at the highest level—to assist in resolving matters.

Last Friday, Ineos announced that its earlier decision to close the petrochemical plant would be reversed and the investment proposal that it had made would be implemented. That would provide a secure future for the plant and provide a positive outlook for the next 25 years. The decision, while involving significant changes to the terms and conditions of members of staff, was welcomed with relief given the stark and immediate impact that would have been felt from a closure announcement.

Indeed, by the time I met the owners of local businesses drawn together by Falkirk Council last Thursday along with the Secretary of State for Scotland, many recounted negative short-term impacts as a consequence of the closure of the plant for just a few days. Those included guest houses no longer filled with contractors, tool hire firms with little or no work and maintenance companies with no active plant to maintain. In just a few short days, the significant impact of a plant closure was felt very directly in the locality.

Over the past two weeks, the Scottish Government’s priority has been to bring Ineos and Unite together to resolve the dispute and resume normal working. Our assessment of the situation did not give us total confidence that the issues at stake could be readily resolved. We therefore pursued other options, including seeking new ownership for the plant in the event of a closure announcement. We did so because we were not prepared to accept the closure of the petrochemical plant and believed that it was our role to actively work to ensure that a better outcome was achieved. We therefore contacted a number of interested parties, in partnership with Scottish Enterprise, and took discussions to an advanced level.

The Scottish Government has undertaken discussions with Ineos about supporting its investment plans for some time. I have confirmed to Ineos that, providing the already agreed employment conditions continue to be satisfied, regional selective assistance to a level of £9 million will be applied to support the investment plans. That is part of a package that includes loan guarantees provided by the UK Government.

That investment, along with investment from Ineos Capital, and a contribution from BP in connection with the adjustment to some commercial terms around the interaction with the Forties pipeline system and the security of utilities supply, will secure the plant’s future.

The Scottish Government considers the Grangemouth complex to be a strategic asset for our country and has believed, without reservation, that the plant had and has a strong and prosperous future. Investment in the plant was, of course, required, but that should not be used to assert any underlying weakness in the plant’s financial prospects.

The past two weeks have been a period of acute anxiety for the workforce at Grangemouth. Indeed, for more than 24 hours, hundreds of employees and their families would have faced deep uncertainty about their economic future. Throughout this period, the Scottish Government has acted to protect the interests and livelihoods of those individuals.

There are many deeply unsatisfactory matters relating to the conduct of industrial relations in this instance between the company and the union at Grangemouth. We hope that both the company and the union will now work together for the future of the plant. However, the Scottish Government’s overriding priority has been to secure the future of the plant, and that is what we have worked to do.

I draw members’ attention to my entry in the register of members’ interests, which shows that I am a member of Unite the union.

I thank the cabinet secretary for early sight of his statement. To secure what we all hope is a bright future for the Grangemouth plant and refinery, from a point at which closure and the loss of thousands of jobs looked inevitable, was a great result. The Scottish ministers, not least the cabinet secretary, and their UK Government colleagues deserve much credit for working together, refusing to accept the closure and shepherding the negotiations to a positive outcome.

Above all, we must recognise the painful sacrifices that the workforce made, in reductions in terms and conditions, to save not just their jobs but many thousands of jobs in the supply chain and to secure the value of the plant to the Scottish economy and the local economy in the Falkirk area.

There is now an obligation on the company to deliver the survival plan. The Scottish and UK Governments are—not for the first time—providing significant investment in the plant, in the form of grants and loan guarantees. What assurances has the company given the Scottish and UK Governments? As the investment unfolds, what can be done to avoid the lack of transparency about this vital strategic operation’s finances that dogged negotiations about its future?

I thank Iain Gray for his generous remarks, and I acknowledge, as I did in my statement, that staff at the Grangemouth petrochemical plant and refinery have accepted a diminution of their terms and conditions of employment, which has protected employment not only in the site but across the very extensive supply chain that is tied up with the Grangemouth plant’s activities.

As I made clear in my statement, the decision to accept the survival plan was the material factor in changing the course of events.

I think that Mr Gray is familiar with the fact that regional selective assistance from the Scottish Government is provided only when there is particular eligibility in relation to employment guarantees and only when those guarantees are fulfilled. Elements of grant support that we have given to the Ineos plant in the past remain in force and, if the commitments that were made around those elements of regional selective assistance were not fulfilled, the Government would be able to reclaim the grant money involved. The same rules apply in relation to the current circumstances.

On Mr Gray’s points in relation to UK Government loan guarantees, I cannot furnish him with a definitive answer. However, I know from our active discussions with the United Kingdom Government that an extensive process of due diligence is under way with HM Treasury as part of the exercise. The issues that we have considered in relation to regional selective assistance will be similar to those that the United Kingdom Government will consider in relation to the loan guarantees.

On the point about the company’s finances, Ineos has an obligation, in terms of the legal framework, satisfactorily to set out and record all relevant financial information about the company’s operations. I think that that would be enhanced by ever greater clarity around the financing of the plant. I made it clear in a number of media interviews during the recess that I thought that the description of the plant as “distressed” was entirely inappropriate. The plant certainly required investment, but it had and has a strong future. The Scottish Government will work to ensure that it attracts the necessary investment to guarantee such a future.

I welcome the cabinet secretary’s statement and I thank him for providing an advance copy of it. As he fairly said, the closure of the Grangemouth plant would have been catastrophic for those whose jobs depended on it and deeply damaging to the wider Scottish economy. I commend not only the cabinet secretary and his Scottish Government colleagues but the Secretary of State for Scotland and his colleagues in the UK Government for their prompt action in helping to keep the plant open. The Scottish people are clearly well served by their two Governments working closely together.

We cannot forget that it was the irresponsible actions of Unite the union that put this plant at risk. No one in the Scottish Labour Party has dared to criticise its union paymasters, but can the cabinet secretary tell us how the Scottish Government will foster a more responsible approach to industrial relations in future?

Secondly, the Grangemouth petrochemical plant’s future will depend on the importation of huge quantities of shale gas across the Atlantic from the United States. Does the cabinet secretary agree that the plant’s future would be more secure with a domestic source of shale gas? How will the Scottish Government encourage the development of a shale gas industry in Scotland?

I thank Mr Fraser for his generous remarks. However, I say to him that, over the past few weeks, I, the First Minister and Mr Ewing have strenuously tried to resist the temptation that he has just entered into of apportioning blame in this issue. We have tried to bring people together to resolve these issues, not play games with people’s lives or livelihoods.

The Scottish Government has focused on resolving what are clearly difficult industrial relations issues at the Grangemouth plant. I certainly hope that our actions in bringing the relevant parties together, securing agreement where we can—and coming very close to agreement, as I thought we had done a week past Thursday night—and at least kick-starting a process of substantive discussion will be representative of our style in and approach to resolving these issues.

I say to Mr Fraser that I can think of a number of other industrial situations around the country in which Unite the union is involved, in which good process, dialogue and co-operation between the trade union and management have resolved significant economic difficulties facing plants. Indeed, I can think of a number of very real examples in which the co-operation and commitment between management and unions, including Unite, have helped to resolve difficulties, and we welcome such an approach.

Mr Fraser is correct to suggest that Ineos’s strategy is predicated on the importation of shale gas from the United States. Clearly, the company has confidence in that business proposition—it would not be investing £300 million in the Grangemouth plant if it did not believe that it presented a satisfactory and beneficial opportunity.

As for the domestic debate on shale gas, the Scottish Government has made it absolutely clear that all propositions for shale gas exploration or development will be considered within the legislative and planning framework that ministers have set out over time. That is our clearly expressed position on such questions.

As the local member, I first of all place on record my thanks and appreciation to the cabinet secretary, the First Minister and the energy minister for their major input in resolving the Grangemouth situation last week and averting what could have been an absolute disaster for the local economy.

It is clear that there was extensive engagement between the Scottish Government, Ineos and Unite. Will the cabinet secretary detail the number and extent of the contacts between the Scottish Government and all other parties?

I cannot give the member a specific number for the contacts that we made but, in my statement, I set out as fully as I could the contact that we had with the parties involved.

Over the past two weeks, there has been very intensive dialogue between ministers, Ineos and Unite, and we have also had extensive discussions with BP and discussions with the local authority, Forth Valley Chamber of Commerce, Forth Valley College and a variety of other interested parties in an attempt to resolve the issues.

As I said in my statement, we also held discussions with a range of other interested parties who were prepared to consider a change of ownership at the Grangemouth plant, in order to work towards our objective of ensuring continuity of employment for the individuals who are employed at the Grangemouth facility.

The situation at Grangemouth saw one wealthy, very powerful individual control one of the most important strategic industrial assets in the country. Does the cabinet secretary agree that the episode has put the debate about the common ownership of such assets firmly back on the political agenda and that we cannot allow actions such as those of Jim Ratcliffe to threaten our energy supply and distribution in the future?

There is an active debate about common ownership of the country’s major strategic assets, and the Grangemouth refinery and petrochemical plant is one of those facilities. There is also an active debate about common ownership in the public interest of the Royal Mail, which the Government believes should remain in common ownership. I look forward to the support of Mr Findlay and his party for the position that the Scottish Government adopts in that respect.

Those issues will be considered and debated. We must ensure that, at all times, we are explicit about where Scotland’s strategic interest lies and what the Scottish Government can do to protect that strategic interest. I assure Mr Findlay that, whenever circumstances arise in which the Scottish Government can act to protect Scotland’s strategic interest, we will do that.

The cabinet secretary will be aware that there was also trouble at the Grangemouth plant in 2008. Five years on, we are here again. What steps can the Scottish Government take to ensure that commitments are followed through this time, that the Forties pipeline will take oil and gas from the North Sea for decades to come, and that the rest of the Grangemouth plant will have a strong future for decades, not just for another few years? Does he believe that having worker representation on the board might help that?

I reassure Maureen Watt that we are in a significantly different position from the situation in 2008. In 2008, there was a period of industrial disruption, and issues were not resolved or concluded at that time. The issues at stake regarding terms and conditions, particularly the sustainability of the Ineos pension scheme, have been resolved as a consequence of the recent industrial dispute. Nevertheless, I recognise—as I did in my response to Iain Gray—the fact that that will have been a difficult issue for members of staff at the plant to wrestle with.

Ineos has made it absolutely clear that, on the basis of the workforce’s acceptance of the survival plan and the commitments that have been made by the Scottish Government, the UK Government and BP, there is a strong and vibrant future for the plant for at least the next 25 years. That will involve opportunities for the Forties pipeline into the bargain. We will be actively involved in discussions with the company to ensure that that transpires and that that future lies ahead for the Ineos plant.

Maureen Watt asked about worker representation on the board. Companies’ attitudes and perspectives are enhanced by a breadth of participation in their boards, especially employee representation. That is an important issue to consider as we try to build the best possible climate for industrial relations in Scotland’s economy.

I thank the cabinet secretary for the advance copy of his statement. He has documented the effective and welcome partnership working that has taken place with the Secretary of State for Energy and Climate Change, Ed Davey, and Alistair Carmichael. People will have found it reassuring that the two Governments were working together in a time of crisis. It is also reassuring to know that talks were under way with potential new buyers.

This morning, Joan McAlpine detailed the discussions that the First Minister had with Andrew Ovens from Greenergy in Uphall. She also talked about the way in which those talks were reported to Ineos. Can the finance secretary give the Scottish Government’s official account of those talks?

I think that that is a matter for another statement, although the cabinet secretary might want to address some of those points.

Certainly. I am very happy to say to Willie Rennie first that he should not be surprised that the Scottish and UK Governments are able to work together. We work together on a host of issues. The debate would be enhanced if people such as Mr Rennie did not go around peddling the idea that we cannot work together most of the time. We frequently work co-operatively to resolve issues, so people should not be at all surprised that we have been able to do so on the Grangemouth situation.

In relation to alternative ownership, I say to Mr Rennie that the Government was involved in discussions with a number of parties. I will not go through all the details of all the discussions that we had with those parties. We had those discussions because we were not confident that the strategy that was being pursued to bring Ineos and Unite together would work. We had an alternative approach, which involved a number of discussions with a number of interested parties. The changed circumstances last Friday meant that that option did not require to be utilised, but I can assure Mr Rennie that the Government made every effort to ensure that the option was open, as part of our strategy to protect employment at Grangemouth.

I commend the work of the cabinet secretary and, indeed, of the First Minister and the Minister for Energy, Enterprise and Tourism in helping to facilitate such a result.

Does the cabinet secretary believe that the Grangemouth experience can have some bearing on future industrial relations in Scotland?

I think that it can, in the sense that many lessons must be learned from the situation that we have just been through at Grangemouth. There is a contrast with the examples that I cited in response to Mr Fraser. I have been involved in a number of scenarios that have attracted none of the media coverage and none of the scrutiny that Grangemouth has attracted over the past fortnight because the management and the workforce have sat round the table, looked at the same information, wrestled with the same problems and worried about the same questions in an effort to resolve them among themselves. I have to say that I much prefer such situations, because they ensure that all the talent of a company can be deployed to resolve the challenges that it faces.

If there is one lesson that can be learned from the Grangemouth situation, it is that closer working between management and trade unions is the essential bedrock of successful industrial and economic relations in our country.

Six members still wish to ask questions of the cabinet secretary. I am prepared to let the time run on to allow all six to be taken, but I would appreciate members’ co-operation in keeping their questions short.

The cabinet secretary will know from his meeting with Falkirk Council that it has, as a precaution, set up a task force to help to deal with any local job losses. What support can the Scottish Government give to the task force?

At the meeting that I held with Falkirk Council and businesses on Thursday, I made it clear that the Scottish Government’s support to the local business community would manifest itself principally through the work of the business gateway, which is available to provide assistance to companies that are in difficulty. Forth Valley Chamber of Commerce made it clear that it would make available resources and advice to companies that feel the effects of the run-down of the Grangemouth facility, which has had—as I recounted in my statement—material consequences for a number of companies.

As I made clear to the leader of the council, the Scottish Government will be happy to provide any input to the task force that the council requires. That is consistent with our desire to ensure that we create the best possible conditions for employment growth in the Falkirk area.

Will the cabinet secretary consider what further support could be made available to diversify employment at Grangemouth in order to ensure that it benefits from low-carbon technology?

I am certainly happy to do that. There is a clear recognition that the Grangemouth site is heavily dependent on petrochemical and refining activity. There are complementary activities that could be developed on such an extensive site. Indeed, as part of the survival plan that Ineos is taking forward, a number of changes will be made to plant configuration and operation, so there will be opportunities to pursue the type of agenda to which Mr Stewart referred. The Government will certainly engage constructively in order to try to bring that about.

I thank the cabinet secretary for advance sight of his statement. Having met Falkirk Council last Friday to discuss the situation at Grangemouth, I can confirm that there is a palpable sense of relief among all parties and in the town generally that an agreement has been reached. In view of that, can the cabinet secretary indicate what economic benefits there will be from the new terminal in terms of construction jobs? Will building on the new site have any impact on existing hazard zones around the plant?

Ineos will have to undertake a process of active management of the site to deal with implications of, or crossover from, the construction activity for existing parts of the site. Obviously, the Scottish Environment Protection Agency has been active on our behalf in ensuring that any issues around site management in relation to environmental implications are properly and fairly considered and assessed. That responsibility will be taken forward on an on-going basis by SEPA, which acts on our behalf in that respect.

On the economic impact of the wider construction activity, I do not have detail that I can give Margaret Mitchell today. However, I said in response to the business gathering, when I was asked what the Scottish Government could do to assist in strengthening the local economy, that the best thing that we could do was work to resolve the dispute at Grangemouth to ensure that £300 million of private investment came into the Grangemouth area. We need to leverage private investment into the economy to support development opportunities. I am glad that we have created the foundations on which that can be undertaken.

The cabinet secretary mentioned environmental issues in his statement, and he partly answered the question on that in his response to Margaret Mitchell. The potential environmental situation at the site was considerable. What role did SEPA play over the past two weeks in examining the full implications of potential impacts on the environment from closure?

SEPA has on-going responsibility for ensuring that sites are properly managed, and that commitments that are required under the licences that are made available by SEPA for operations are properly and entirely fulfilled by companies. SEPA has undertaken that activity and role, as it always does. Further, ministers considered with SEPA what additional steps would have been required should the petrochemical plant have closed and what on-going and further implications would have had to be managed as a consequence. SEPA has assisted us greatly in providing advice.

Mr Swinney and Iain Gray mentioned the sacrifice of the workforce to secure the continued operation of the plant, and to secure not just existing jobs but the hope of jobs for others in the future. The minister referred to £9 million in regional selective assistance and said that it would be paid provided that employment conditions that have already been agreed continue to be satisfied. Can he say a bit more about what that statement encompasses? Can he indicate whether the conditions attached to RSA in this case differ significantly from RSA that might have been provided in the past?

Let me just clarify part of what Mr Smith set out. If I did not express it clearly enough earlier, I will put it on the record again. The point that I made to Mr Gray is that previous examples of regional selective assistance have attached to them conditions that must continue to be fulfilled or the Government will claw back the RSA.

The decision-making process that we have gone through for the further round of regional selective assistance is dealing with conditions in connection with the particular grant award. Those conditions are consistent with the assessment that is made in comparable situations to ensure that the criteria on employment levels are assured. Those criteria must be assured for three years beyond the last payment that is made under any regional selective assistance award.

Following his positive comments on the role of workforce representation on boards, will the cabinet secretary tell us what actions the Government can take to further that agenda, such as on conditionality on RSA and other grant schemes, so that we never again see a billionaire happily pocketing taxpayers’ cash before laughing all the way to the comfort of his superyacht after playing such reckless games of brinkmanship with people’s livelihoods?

Throughout the events of the past fortnight, I have been incredibly careful about the language that I have used in navigating my way through a difficult situation that has involved a conflict of the interests of management and trade unions. I simply say to Mr Harvie that a bit more of that approach might help to resolve some of the issues that we face.

I remind Mr Harvie that company regulation issues are reserved and that the Scottish Government has no discretion over them. We can apply conditions to regional selective assistance, as I have set out in my answers. We will continue to explore ways in which we can positively encourage a climate of effective industrial relations in Scotland, in order to realise the ambition that I have set out of creating the best possible work framework for employees.