Meeting of the Parliament [Draft]

Meeting date: Tuesday, February 18, 2025

Official Report 1017KB pdf

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Grangemouth

The next item of business is a statement from the First Minister on securing a future for Grangemouth. The First Minister will take questions at the end of his statement, so there should be no interventions or interruptions.

15:13  

Members will be aware that, last September, Petroineos announced its intention to close the Grangemouth refinery between April and June of this year.

In the intervening period, there has been engagement between the United Kingdom Government and the Scottish Government with Petroineos to try to avert that closure. I put on record my appreciation to Gillian Martin and to the respective UK ministers, Ed Miliband and Michael Shanks, for their leadership in this regard. Despite efforts to date, on 5 February, Petroineos confirmed that it would cease refining operations and began notifying the workforce of redundancies.

Any redundancy, whether it is voluntary or compulsory, is a matter of deep regret. That is particularly so given that this Government believes that refining at Grangemouth should continue and that the closure is premature and is detrimental to Scotland’s transition to net zero. Petroineos has confirmed that 65 workers will be retained by the company at the import terminal, but that clearly does not make up for the hundreds who are losing their jobs.

This Government’s immediate focus is—rightly—on providing those who are losing their jobs with targeted skills support. Our partnership action for continuing employment—PACE—support, which offers assistance to individuals who are at risk of losing their jobs, has been activated. Furthermore, an initial careers fair that will enable those who are affected to be connected with other companies that have employment opportunities available will be held on 6 March. As of today, up to 19 companies have indicated their participation in the careers fair.

We have worked with Forth Valley College to set up an online platform to assess workers’ training needs, and the information that has been gathered is currently being analysed to determine what upskilling and training we can put in place. Drop-in sessions will also offer training on some of the steps that are involved in preparing for re-employment. The level of workers’ engagement with the process has been high, but we know that there is likely to be a small number of people who will prove harder to reach. Government officials and college staff will, therefore, liaise with Unite the union to find ways of identifying those individuals and helping to meet their training needs.

That is because, to this Government, every person, every family and every business that is impacted by the closing of the Grangemouth refinery matters. Everyone working at Grangemouth’s refinery is a valued employee with skills that are key to Scotland’s net zero future, and we want them to stay in Scotland and continue to make their lives here. We will do all that we can to ensure that they have a future in the Scottish economy as we make the transition to net zero.

That is why we are also working to secure Grangemouth’s role in that future and create an investable industrial strategy for the site. Our draft budget for 2025-26 allocates £7.8 million for support at Grangemouth, including £2.8 million in the forthcoming financial year of a total funding commitment of £5 million over three years, to support Ineos’s fuel switching project. We have worked closely with the business and Scottish Enterprise to develop that project, recognising the criticality of transitioning to cleaner fuels such as hydrogen.

Supporting the business as it transitions is critical to ensuring that Ineos Olefins & Polymers continues to play a crucial role in Scotland’s economy. It gives certainty to the workforce and to the business that the Government is committed to working with them to secure a long-term and sustainable future. However, I am determined to go further to help to secure a just transition for Grangemouth. I can, therefore, announce today that, this week, the Government will lodge a stage 3 amendment to the Budget (Scotland) (No 4) Bill to allocate an additional £25 million to establish a Grangemouth just transition fund. That funding, derived from the proceeds of the ScotWind process, will be available immediately in the new financial year to support businesses and stakeholders to bring forward investable propositions over the next 12 months and, if necessary, beyond. The aim is to expedite any of the potential solutions that will be set out in the project Willow report, as well as other proposals that will give Grangemouth a secure and sustainable future.

Through the Grangemouth future industry board, we will work with the local authority, businesses and the unions to explore and accelerate projects and proposals that support that ambition. Through project Willow, we will have the foundations of a strong evidence base for future investment in technologies such as plastics recycling, hydrogen production and the development of sustainable aviation fuel. We will also consider proposals from Unite and its members, and we will continue to pursue other options, including any as-yet-unknown potential investments.

When I said that my Government would leave no stone unturned to find the right solutions to secure the future of Grangemouth, I meant it. That includes extensive and meaningful collaboration with the United Kingdom Government. Just yesterday, I met with the Secretary of State for Energy Security and Net Zero, Ed Miliband, and we both agreed that the collaboration between our two Governments has been constructive. We also agreed that that will continue.

I have also had several discussions with the Prime Minister, and I will continue to ensure that my Government, at all levels, engages meaningfully and substantively. That is because I am convinced that Grangemouth can, and does, have a potentially bright future contributing to Scotland’s net zero economy, and I want the Government that I lead to do everything possible to secure that future.

The Scottish Government will continue to urge the UK Government to put adequate measures on the table to address the immediacy and urgency of the situation at Grangemouth.

That is necessary because I fully understand the consequences for the Scottish economy of the closure of the Grangemouth refinery at this critical juncture.

The UK Government clearly recognises the need to act to safeguard economic and energy interests.

Just last weekend, the UK Government said that up to £2.5 billion will be put towards supporting the steel industry via the National Wealth Fund, and the production and development of sustainable aviation fuel in Teesside has already received in the region of £50 million in support from the advanced fuels fund.

The support for sustainable aviation fuel development in Teesside comes on top of UK Government support for carbon capture and storage in Teesside, but no green light has been offered for the project involving Grangemouth.

Today, I have come to Parliament to assure the workers, businesses and communities whose fortunes have, for so long, pivoted around Grangemouth that my Government will do all that we can to make that continue long into the future.

Within our limited powers and budget, we are acting, but more needs to be done to secure the future of Grangemouth through the following steps.

First, we will continue to work with the UK Government to drive forward the next phase of project willow in order to enable and support the consideration of any and all alternative investable propositions for Grangemouth.

Secondly, we will continue to press the UK Government, as I did again yesterday, for immediate progress on Acorn and the Scottish cluster of carbon capture projects.

In October, the UK Government announced £21.7 billion for carbon capture and hydrogen projects in Merseyside and Teesside but ignored Scotland. Grangemouth cannot wait for the UK Government to drag that out any further.

Thirdly, we will press the UK Government for urgent progress on allocating funding for the second round of hydrogen production projects.

Scotland—and, indeed, Grangemouth—is well placed to lead on the production of green hydrogen, and a number of Scottish businesses submitted funding proposals to the UK Government’s hydrogen allocation round, which closed last April—nearly a year ago. Those businesses are still awaiting a UK Government decision on shortlisting, and we need immediate progress on that.

Finally, I urge the UK Government to at least match our funding commitment to deliver a just transition fund for Grangemouth. The initial funding that the UK Government provided for the growth deal is welcome. However, spread over a 10-year period, that funding does not recognise the urgency of the situation that now faces Grangemouth, and it needs to be accelerated.

My Government has made the strategic decision to support that key activity through a drawdown of a total of £25 million of ScotWind revenue, to add to the £7.8 million in our budget for 2025-26. Altogether, the Scottish Government, with a finite budget, has committed or already invested £87 million in Grangemouth.

We need the UK Government to do at least the same and deliver a fair amount to avoid significant economic disruption in central Scotland, and to protect and promote Scotland’s—and Grangemouth’s—future interests. In short, we need the Labour Government to do what it said that it would before the election.

The Scottish Government has always recognised the strategic significance of Grangemouth to the Scottish economy. We recognise the significance of the fact that we now face a programme of redundancies at Grangemouth and the impact that that will have on the lives of those who are employed at the site.

We recognise that this moment means we have to intensify our response and our actions. My commitments today demonstrate the necessity to do that, and I urge the UK Government to do the same.

We are committed to working with the UK Government to bring forward real investment to save Grangemouth and the jobs, businesses and livelihoods that depend on it. We will do all that we can to achieve that aim.

The First Minister will now take questions on issues that were raised in his statement. I intend to allow around 20 minutes for questions, after which we will move on to the next item of business. I ask members who wish to pose a question to press their request-to-speak buttons.

I thank the First Minister for advance sight of his statement.

My party welcomes the additional funding that has been announced today. Grangemouth and its hundreds of dedicated workers make a crucial contribution to the Scottish economy, so it is essential that Scottish and UK ministers commit to working jointly and with urgency to explore every possible option.

In his statement, John Swinney rightly recognised the importance of our journey to net zero. However, Grangemouth is not just important for net zero in the future—it is vital for oil and gas in the present. I find it remarkable that, in a statement of around 1,600 words, the words “oil” and “gas” were not mentioned even once. The truth is that the party that used to champion Scotland’s oil now seems to regard it as a dirty word. Grangemouth workers know that the anti-oil-and-gas sentiment from the Scottish National Party in Edinburgh and Labour in London has been fatal.

I visited the north-east last week, where businesses told me that that sentiment is harming investment and costing jobs in Grangemouth and beyond. Does the First Minister accept some responsibility for creating the hostile environment that has resulted in hundreds of Grangemouth workers losing their jobs, and will he now change his Government’s short-sighted and damaging approach to Scottish oil and gas?

There are incredibly serious and significant issues involved in the handling of the situation at Grangemouth. However, there are also incredibly serious and significant issues facing the safety and future of the planet because of the necessity to transition to net zero. I take the responsibilities seriously. They are responsibilities to future generations that we have to get right, and we also have to get the transition correct for those who are currently involved in oil and gas activity in Scotland.

That is why the Government is taking the steps that we are taking with the investments that will be made in the budget. I have announced additional investments that we are making specifically for Grangemouth, and other resources have been made available over the course of the budget process, which will hopefully be concluded by next Tuesday. That will see investment in the transition to net zero and active work and support by the Scottish Government to assist and deliver the transition to net zero. That is the correct policy direction to take.

I sense that Russell Findlay is now departing from the territory of the importance of the transition to net zero, where his party has championed the need to achieve our climate targets. He now seems to be deserting those commitments, but the Government will stay true to the course of taking responsible decisions for the future of the planet.

I thank the First Minister for the tone and the content of his statement. I know that he will share my deep frustration at the intransigence of the company in the face of UK and Scottish Government attempts to avert the closure. I note his thanks to Labour ministers Ed Miliband and Michael Shanks, and I put on record my thanks to John Swinney and Gillian Martin for their co-operation on the issue.

Governments have known of the company’s intentions for five years but have failed to put plans in place. However, over the past seven months, the UK and Scottish Governments have worked collaboratively to deliver the Falkirk and Grangemouth growth deal, joint working on project Willow and joint attempts to secure incomes for workers for the next 18 months. I have been clear that more needs to be done, and today is progress on that.

In the spirit of co-operation, will the First Minister commit that, whatever other political disagreements we may have, both Governments will continue to support the workforce and work in partnership with the unions, the company and potential investors to deliver a future for Grangemouth and a real transition that ensures that we do not repeat the mistakes of the Thatcher years?

I am happy to associate myself with that sentiment, because I lived through the damage of the Thatcher era and we are still living with the consequences of that damage in many aspects of our society. That degree of economic recklessness is something in which I have no interest whatsoever.

Over a number of years, the Scottish Government has been involved with the company in taking forward a number of different projects to try to transition towards a better future. For example, I think of the biofuels production options review that was undertaken in July 2022, the study of decarbonisation interventions for Petroineos in July 2021, which was supported by the Government, and the appraisal of the viability of a blue hydrogen production plant at Grangemouth in July 2022. The Scottish Government has been engaged in working with the company to find an alternative course.

I welcome the change in engagement that took place with the change of UK Government last July. We have taken part in that engagement constructively—I had a very positive conversation with Ed Miliband yesterday—but we have reached a different moment now. Today, I have come to Parliament recognising that, with the regrettable issuing of redundancy notices, which I wish had not happened, we are now in a different place. My Government is responding to that and I invite the United Kingdom Government to do likewise.

I advise members that there is an awful lot of interest in asking questions. I hope to get everybody in, but that will require brief questions and responses.

I welcome the moves to, for example, provide PACE support, hold a careers fair and carry out a skills audit, and I absolutely welcome the £25 million funding. If the intention is to expedite potential project Willow proposals, the recent leak of the report points to truly eye-watering sums of money that will be required. Presumably, that funding will come entirely from the UK Government, given that the majority of the proposals would require capital investment. Will the First Minister outline whether he has had the chance to discuss that with the Prime Minister? Given his statement today, will he outline how he thinks that that investment will mitigate the loss of the existing skills base, particularly with regard to the all-important chemical cluster in that area?

We will need briefer questions.

There are a number of issues to respond to. On skills retention, I have discussed with the trade unions the importance of focused support being available for employees. If Michelle Thomson, as a constituency member, encounters any employees who are finding it difficult to access any of the systems, I would ask her to contact ministers and we will address those issues.

Secondly, there are a range of investment possibilities in Grangemouth. We are creating some of the funding infrastructure to enable those to be realised. There are other funding sources, such as the Scottish National Investment Bank and the UK Government.

Thirdly, a range of ideas have emerged through the project Willow process, which are welcome, but there is a wish—this is what I am signalling today—to attract other investment to support us in realising economic opportunities in Grangemouth. The Deputy First Minister leads on that for the Scottish Government, and the Government will be open to dialogue on those questions.

I welcome the announcement that ScotWind money will be used to support the workers of Grangemouth. Those workers have done so much over the decades to keep our country powered up and moving, and it is right that we support them as much as we can.

In his statement, the First Minister said that the funding will be available immediately in the new financial year to support businesses and stakeholders to bring forward investable propositions. Will he give more detail on what governance arrangements will be put in place to evaluate the propositions and to make the awards? Will he assure Parliament that any process that is put in place will act swiftly, to avoid any gaps in employment?

As I said, the Deputy First Minister leads the Government’s activities on investment. She has undertaken a transformative amount of work to ensure that the Government and our agencies are all engaged with industrial sectors on key opportunities. I value enormously speed of decision making in Government, and I want to make sure that we can take decisions quickly—once due diligence has been undertaken, because it is vital that due diligence is undertaken in all circumstances.

I assure Mr Lumsden that the Government acts with pace in its decision making on those questions.

In his statement, the First Minister made reference to the Falkirk and Grangemouth growth deal, which he will know is critical to the repositioning of the wider economy in the area in the years ahead. However, the 10-year timeframe does not reflect the urgency of the situation that we now face and the need for immediate action to support jobs and industries in the area.

I have previously asked whether we could progress some of the early projects at a quicker pace in order to support their development. To date, limited progress has been made. Will the First Minister instruct officials in the Scottish Government to engage with UK Government officials and Falkirk Council to identify the projects that could be moved forward at a quicker pace so that we can make progress as quickly as possible?

I am very open to Mr Matheson’s proposal. My statement recognises the fact that we are in a different place as a consequence of the redundancy notices being issued. We must move with greater urgency.

I assure Mr Matheson that our officials are working on that mandate from my office. We have put additional resources in place, which will be available from the start of the financial year, to address Mr Matheson’s point about the need for more urgent intervention. If more acceleration of investment is required, we will look at providing that within our financial arrangements, although Mr Matheson will be familiar with the fact that that would involve rescheduling commitments in our existing budget plans. The Government remains open to doing that in order to avoid the economic impact that we fear will come as a consequence of the closure announcement.

Does the First Minister agree that, following his statement, we urgently need the Scottish Government to publish its long-awaited energy strategy and just transition plan, so that we can see what progress urgently needs to be made? Will he commit to working constructively with the UK Government to attract investment in sustainable aviation fuel and green hydrogen to deliver the jobs that workers need now at Grangemouth?

The Government has set out a large amount of its thinking on the transition at Grangemouth in what has already been published.

I am absolutely committed to working with the UK Government on hydrogen and on sustainable aviation fuel. I just wish that that work was happening at Grangemouth, and that there was a clear pathway—in essence, that is the import of my statement today. I am completely and utterly signed up to those options, but we need the UK Government to provide the practical intervention and fiscal support that it is giving to other parts of the United Kingdom to enable us to make progress on those options. We are willing partners, and we are putting additional resources on the table, but I need to see greater urgency from the UK Government.

We all know the important role that the Acorn carbon capture and storage project could play in the future of Grangemouth. However, as the First Minister has indicated, to date the UK Government has prioritised investment in carbon capture and storage elsewhere in the UK. People across Scotland—rightly—will not understand why the Labour Government can back carbon capture in Teesside but not in Scotland. Does the First Minister agree that it is long overdue that the UK Government gives its full backing to fast-tracking Scottish carbon capture in order to support a future for workers at Grangemouth?

As I indicated in my answer to Michelle Thomson at the last First Minister’s question time before the recess, I am intensely frustrated by the amount of time that it is taking to deliver the Acorn project. I was promised an agreement to that project by the previous Conservative Government, and it did not materialise. There is now an absolute necessity for that project to be delivered by the Labour Government. I have made that point to the Prime Minister and to Ed Miliband, the Secretary of State for Energy Security and Net Zero, in correspondence and in meetings. I use this opportunity today in Parliament to reinforce the central importance of that decision being taken.

I thank the First Minister for providing advance sight of his statement and I welcome the £25 million that has been announced.

However, the closure still poses the risk of a huge potential loss of skilled workers from the area, and there is still concern about the impact on small businesses in Grangemouth that are reliant on the refinery workers for their business. Can the First Minister outline what extra support could be made available to support some of those small businesses as they adapt? Will the Government consider proposals for the use of the £25 million for projects at sites around Grangemouth that are outside the Ineos compound?

The Government stands ready to engage with different investment propositions to secure growth and activity in the economy. I recognise the disruptive issues that Gillian Mackay highlights, all of which will have damaging implications. We will work closely and collaboratively with Falkirk Council, with which we have good relationships, to identify what further steps we can take to address those issues.

My announcement today on investment funds is about trying to secure long-term, sustainable employment opportunities through a just transition. That will be the focus of the investment package that we are taking forward, but we stand ready to engage in discussion with the local authority on how we might help in other respects.

Can the First Minister advise when he expects project willow to publish its phase 1 report and what the next steps are in taking forward the options for transitioning the Grangemouth refinery site to a new low-carbon fuels hub? Given that the UK Government has instead made the perplexing decision to provide a loan to Petroineos to invest in a refinery in Belgium, how confident is the First Minister that the UK Government will step up and support those next steps?

We expect the project willow findings to be published in the coming weeks. Obviously, we are working on developing the propositions with a view to ensuring that they can be taken forward. The purpose of my statement today is to reinforce the absolute urgency that is required in addressing these issues. We will work with all interested parties to ensure that that agenda is pursued with all the energy that it can be pursued with.

It is right that the First Minister is leading for the Government on the issue, and I hope that the UK Government listens to the pleas from across the chamber to provide some funding. This is a dark period for the workers, but there is also a great prospect for the site, because it is good industrial land that is well connected by land and sea, with good access to workers. What is the First Minister’s assessment of the approach of the company, Petroineos, to working in partnership to fully exploit the potential of the area?

I welcome the points that Mr Rennie makes. He correctly assesses the significance of the site and the potential for it to play a significant part in the work that we need to take forward in the transition to net zero. We are open to dialogue with the company about how the site can be used to sustain employment in the future and how to ensure that it is an essential part of the transition to net zero. However, we need to be able to engage in constructive dialogue with the company, and I assure Mr Rennie that there will be no shortage of willingness to do that on the part of the Scottish Government.

The First Minister will understand the concern, which will be widely shared in Grangemouth, that, in his statement, he did not say anything about how exactly the highly skilled and well-paid jobs will be saved. There needs to be a practical plan. As he mentioned, there is great urgency, and immediate action is necessary. I fear that the workers will be gone—from Grangemouth and from Scotland—before anything changes. I note the First Minister’s comments about UK Steel.

Has the First Minister spoken directly to Petroineos about what can be done to repair and restart the hydrocracker, which is the critical line for profitable diesel and aviation fuel? Such an intervention might just extend the life of the refinery to allow for a transition of some sort.

Those are all issues of discussion with Petroineos, but I assure Mr Kerr—this is central to my statement today—that the Government is putting in place support to ensure that individuals and families are supported. We will do everything that we can to secure a future for those individuals by providing support and by making ourselves available to engage with the company on future opportunities to safeguard the future of the site. That is the commitment that I give to Parliament today, and it will underpin the Scottish Government’s approach.

It is vital that the voices of the workforce, many of whom live in my constituency, are listened to closely when options for the site’s future are considered. We cannot simply sit back and watch another economic crisis unfold in central Scotland due to apparent inaction from Westminster, particularly in relation to carbon capture. Can the First Minister say any more about the Scottish Government’s latest engagement, specifically with regard to trade unions?

I met workforce representatives last Thursday, and we discussed the current situation in the light of our understanding of the events. We have maintained dialogue throughout the period since Petroineos made the initial announcements. I met members of the workforce at Forth Valley College in Falkirk to discuss the challenges that they face, and I assured them of the steps that we have put in place. I will continue to have dialogue with the workforce about the issues.

I remind members of my voluntary register of trade union interests.

Be under no illusion—this is a close-and-import strategy, so a £25 million investment is welcome. However, from the more than £0.5 billion that is available from the ScotWind licensing round, a jobs fair and assistance with CVs is simply not enough. What more is the First Minister prepared to do to keep Grangemouth workers working?

I am surprised by Richard Leonard’s points, because I did not announce £25 million for CV writing. All the support for individuals has been previously announced by the Scottish Government, and it is part of the budget that Mr Leonard currently proposes not to support. I remind him of that point.

Mr Leonard has an opportunity to redeem himself, because, in recognition of the situation’s urgency, a stage 3 amendment will be lodged to the Budget (Scotland) (No 4) Bill so that an additional £25 million of investment can be provided to advance the issues, and I urge him to support the Government in its investment.

That concludes the statement on securing a future for Grangemouth. There will be a brief pause before we move on to the next item of business, to allow front-bench members to change over.