TUC Submission to Regional Economic Strategy

Regional Economic Strategy

The Regional Economic Strategy (RES) is due for review. Led by the Regional Development Agency, the review will consider what measures should be taken to encourage sustainable development to deliver prosperity for all. The South West TUC is invited to submit its views.

Summary

• Prepare for growth: plan housing and job demands
• Link RES to Spatial Strategy
• Full Employment Strategy: calls for a new approach that brings together partners and policies to tackle economic inactivity
• Equalities: economic success increasing demands a stronger commitment to equal opportunities
• Skills: stress for workforce development and the role of unions
• Employment Relations: productivity and performance improvements require better treatment of workers
• Manufacturing: we can make it better in the South West
• Sustainable Development: the union case for and contribution to environmental protection

South West Growth

The South West is a successful region with a growing economy. It has the lowest unemployment rate of any region and has above average performance on almost all of the main economic indicators. This hides, however, large disparities within the region.

Forecasts all point to a continuing level of population growth. This raises issues around ensuring adequate provision is made in regard to housing, public services and infrastructure. The RES will need to be closed aligned to the plans in the Regional Spatial Strategy. In particular, the economic drivers will need to match expected housing growth.

Housing

South West housing has become the least affordable when comparing average pay with average house prices. This is causing major problem for key workers in the public sector along with low paid workers in general. Part of the solution has to be to increase the supply of 'affordable housing' but the problem is also related to the low levels of pay.

Communities

It is important that the development of neighbourhoods and ideas for regeneration are grounded in full and active participation of the local community.

Spatial Strategy

The Regional Economic Strategy will need to be closely linked to the review of the Regional Spatial Strategy. This is pointed towards concentrated growth in and around the region's main urban centres. Allocation of housing is not enough without a strategy to develop quality employment opportunities. There are particular areas on the South West where special consideration is required:

Camborne, Pool, Redruth in Cornwall

Plymouth

Torbay

North and West Devon

South Bristol

Quality Employment

Economic development has to be based on promoting better quality employment rather than just jobs. This means making hard choices in determining sector support. It requires a clear policy to support the promotion of better employment practices and earnings within tourism, agriculture and social care in particular. These sectors are key parts of the regional economy but their growth should be constrained unless pay levels and productivity improve.

Labour Activity Strategy - Full Employment

Activity rates in the region are healthy at just below 80%. This means that some 20% of the working age population are not in work: some for good reason and personal choice but many would like to find suitable employment. For each person in unemployment there are at least two on incapacity benefit. To meet recruitment needs and skill shortages, it is now essential that the region develops a comprehensive strategy, in partnership with the agencies involved and community groups to meet this challenge.

Equalities

Black workers are still twice as likely to be unemployed as their white counterparts. The employment rates for people with disabilities are less than 50%. Economic activity rates fall dramatically in older age groups; only 39.3% of the over 50 age group are in work. Any strategy to encourage greater participation will need to be developed with equal opportunities at its heart.

Childcare

There remains a lack of affordable and accessible childcare within the South West. This is a economic necessity if employment activity is to improve. The RDA needs to lead a strategy to ensure adequate provision is in place across the region.

Transport

The rural nature of much of the South West means that access to transport is critical for those seeking employment and training. Evidence suggest that women rely on public transport more than men. People with disabilities are even more dependent upon public transport. The South West bus availability is especially poor.

Disabilities

The TUC welcomes the positive assistance to people on Incapacity Benefit to find suitable work and to improve the level of benefits to those who cannot work. The Government's Pathways to Work pilots have been remarkably successful in helping people find work and there is little evidence of abuse or fraud.

A comprehensive strategy will also need to include links and partners around mental health, drug rehabilitation, ex-offenders, etc.

Age Discrimination

Employment activity rates fall sharply with age. The TUC wishes to see a more flexibile approach to retirement and greater support for work-life balance to help those seeking reduced hours or caring responsibilities.

Response to Redundancies

A strategy to increase activity rates also has to address why people leave the labour market after redundancy. Many would still like to work. The target driven approach still seeks to reduce numbers on Job Seeker Allowance rather than to meet the needs of those effected or enhance skill levels. The South West TUC would like to see reforms to the rules on redundancy support including:

• Immediate consultation with trade unions by Jobcentre Plus or other agencies when redundancies are announced.
• Recognition of the role that can be played by Union Learning Reps
• The condition that bars the use of Rapid Response until formal notices of redundancy have been issues to be lifted to allow early support to those threatened with redundancy.

Low Pay

The South West is held back by a low wage/low skill balance. The Minimum Wage has clearly helped but and the TUC welcomes its rise above inflation. Dependence upon low paid sectors of the economy is particularly high in counties such as Devon and Cornwall. Whilst tourism and care will always be key employment providers the region must work to improving pay levels rather than increase the numbers employed.

Productivity

The low paid sectors are also the poorest performers in terms of productivity. Recent evidence to the RES review played down industrial composition but other research places importance upon trading businesses as a driver for pay and productivity. Companies operating in a higher pay environment are forced to improve skills and performance in order to compete. Other key ingredients to improve the region's productivity are skills, employee involvement in decision making, access to god practice and improvements to communications.

Skills

The South West TUC has welcomed the establishment of the Regional Skills Partnership: the South West Enterprise and Skills Alliance. There remains, however, confusion over the leadership of the skills agenda in the region between the RDA, the LSC and Sector Skills Councils. There needs to be greater focus upon workforce development.

Unions are proving their worth in supporting workers by promoting learning and providing new pathways to training courses. The success of our Learning Works for All Fund (supported by the RDA and other key regional partners) is very encouraging and shows how unions are developing this agenda. There are currently 34 projects running under the Fund, ranging from proactive responses to redundancies, to mobile Union Learning Representatives in the retail sector, to workplace learning centres in a range of Somerset manufacturers. Projects cover a wide variety of sectors, unions and geographical areas. We intend to take this work forward by continuing to embed the learning agenda within unions and workplaces.

Sector Development

The RDA chose a number of key sectors in order to prioritise its intervention. The LSC has undertaken a similar process and produced a different list. On top of this the Sector Skills Councils are growing into an important part of the skills landscape. The Government has also promised to establish Sector Forums in low-paying, low-skills sectors to consider raising productivity, health and safety, pay, skills and pensions.

Sector Forums will have to have strong trade union participation and significant legal force in order to secure the sort of step change needed in this regard. Trade unions want to see companies compete on skills and performance rather than on low pay. In a tight labour market, many employers support this position as well and the time is right for bold actions in this regard.

Migrant Workers

Migrant workers are an essential part of the South West Labour Market. Without them our public services would collapse, the tourism and hospitality industry would be in crisis along with agriculture, food, construction and drink and social care. For many migrants the experience is not a good one. The agencies involved make unfair and often illegal deductions from minimum pay levels. Promises made in the host countries are broken.

For the good of migrant workers and the regional economy, the RDA needs to take the lead on developing positive systems to help good employers recruit and train migrant workers and to ensure that migrant workers have access to independent advice and support.

Employment Relations

How people are treated at work is the critical factor in business success. The South West has a reputation for partnership working and low levels of industrial disputes. This however hides poor employment practices and non-observance of minimum standards resulting in poor performance and productivity. In the year ending March 2004 ACAS South West received 6,888 individual tribunal applications of which 2,838 were complaints of unfair dismissal and 1,479 were complaints of underpayment of wages. The South West Citizens Advice has registered significant numbers of workers who are not in receipt of statutory holiday entitlements.

The South West TUC would welcome a more proactive approach by the RDA, in partnership with ACAS, business support bodies and employer groups to promote positive employment relations.

Transport Infrastructure

The peripheral nature of the South West is a key factor in its poor productivity and low pay. The South West TUC would want to press for enhanced railway investment under greater public control as well as a substantial uplift in busses.

We support limited growth of the regional airports including improving surface access to Bristol and security for Newquay Airport.

MAKING IT IN THE SOUTH WEST

Challenges facing UK manufacturing

The manufacturing sector faces a number of major challenges. Most obvious is the growth of emerging economies. China is now the world's sixth largest economy. By 2015, it is likely to have surpassed every European economy in size, becoming the world's third largest economy, after the US and Japan. Other emerging economies, notably India, Russia, Brazil and Mexico, will further change the balance of global economic activity. Much lower wages in the former Eastern and Central Europe provide a further challenge to Western European nations such as the UK.

The fall in the exchange rate has had a relatively modest impact on manufacturing output growth. This suggests that demand in Europe may be even more important than the exchange rate against the euro for UK manufacturing exports. It also suggests more deep-seated concerns about UK manufacturing competitiveness, such as skills, investment and innovation, remain major challenges.

For these reasons, UK manufacturing is finding life difficult. A million manufacturing jobs have been lost since 1997.

South West Manufacturing

The South West has witnessed a number of significant closures and cut backs from manufacturing in recent years. The region, however, has fared far better than in other regions. Some 327,000 work in manufacturing in the region. In the last year manufacturing employment in the South West grew by around 1,000 jobs, up .3%. The forecasts prepared by the RDA point to a slight decline of .3% between 2003 and 2010 reducing its share of the regional economy from 15.8% to 15.3%. The impact on jobs would be higher with .9% reduction - about 2,700 full time equivalent jobs.

Key Priorities

The Warwick agreement, between trade unions and Labour, includes some important commitments to manufacturing. These include the following:

A procurement strategy that safeguards UK jobs and skills as permitted by the EU rules to ensure that British industry can compete fairly with the rest of Europe.

• A full review of business support in the UK with a view to having the best business support possible. This will assist British manufacturing to compete and grow their business in tough European and global markets.

• Labour will be proactive to ensure manufacturing does not lose critical support and disappear.

Britain must compete in the global marketplace on the basis of high performance workplaces where employees are involved in innovation and the decision-making process and where we seek to improve productivity through a culture of long-term investment, skills and high quality production.

Review and enhance where necessary investment funds for support of manufacturing - investment allowances for technology and equipment, regional capital funds, research and development tax credits, support for science and innovation, export promotion and support for skills - to ensure that manufacturers are given every opportunity to set up and to continue manufacturing in Britain and to ensure we are not disadvantaged compared to other European countries.

National Manufacturing Forum

The role of the national Manufacturing Forum is to ensure the effective implementation and evolution of the Manufacturing Strategy. It is jointly chaired by the Industry Minister and by Kevin Smith CBE, Chief Executive of GKN.

The Forum:

Monitors the progress of the Manufacturing Strategy and comments on and helps steer policy that impacts on manufacturing;

Engages actively in areas where increased participation of business, unions and other stakeholders can make a significant impact;

Helps to promote key messages on manufacturing and develop the profile of the manufacturing sector;

Will produce a concise annual report on delivery of the Manufacturing Strategy, and an assessment of the overall health of the manufacturing sector based on key performance indicators.

The membership of the Forum is made up of senior figures from industry, business organisations, trade unions, academia and RDAs. Amicus, TGWU and GMB, along with the TUC, are represented on the Manufacturing Forum.

At its first meeting, the Forum established three task groups. These cover:

Procurement

Skills

The image of manufacturing

South West Manufacturing Forum

The South West Engineering Employers Forum has called for a Manufacturing Action Network that would bring together a range of local groups who represent manufacturers. The South West TUC would welcome a debate between partners about such a body and the role of trade unions. Unions also wish to work with the South West Manufacturing Advisory Service.

Climate change and the RES review

A green RES offers a diverse and forward looking range of employment opportunities, particularly, in energy, transport, manufacturing and agriculture. It should help advance the shared priorities for UK action set out in the strategy:

• Sustainable Consumption and Production.
• Climate Change and Energy.
• Natural Resource Protection and Environmental Enhancement
• Sustainable Communities - in terms that reflect regional distinctiveness.

Greening the RES

The TUSDAC report, Greening the Workplace aims to encourage trade unions to tackle the growing challenge of climate change, by using our influence for good at work, in our own organisations, through contacts with Government nationally and regionally, and internationally.

Climate change - an energy revolution

As a signatory to the Kyoto treaty, the UK Government is committed to reducing our greenhouse gas emissions by at least 12.5 per cent below 1990 levels (the so-called base year) by 2012. The Government's climate change and sustainable development strategies involve ambitious measures to cut CO2 emissions, reduce reliance on fossil fuels, promote energy efficiency and cut waste. The Government is committed to moving beyond the minimum target set by Kyoto, with national goals, set in 1997, to reduce carbon emissions by:

• 20% below 1990 levels by 2010
• 60% below 1990 levels by 2050

The TUC strongly welcomes the Government's commitment to move beyond the Kyoto target.

The energy challenge is massive. At the TUC GreenWorks conference (March 2005) energy minister Mike O'Brien spoke of a 'revolution in energy generation' that would be needed to meet these goals. Decoupling growth from environmental damage was essential - and achievable. Since 1990, the UK economy has expanded by over 35%, but CO2 emissions have fallen by at least 12%.

Cutting carbon - the challenge ahead

In 1990, the base year for these targets, the UK emitted 209 million tonnes of greenhouse gases, including carbon dioxide (CO2), into the atmosphere. This includes emissions from all sources - power plants, industry, road transport, domestic consumption. In the 15 years since 1990, the UK has emitted in excess 2 billion metric tonnes of carbon (MtC) into the atmosphere.

Successful carbon reductions in the early years were due in large part to the switch from coal to gas in electricity generation. But, as the following table shows, carbon emissions seem to have increased in four of the last five years, spurred on by increases in transport, industry and domestic emissions. These rises, if unchecked, threaten not only the Kyoto-plus target, but even reaching the minimum Treaty reduction of 12.5% by 2012.

Trends in UK greenhouse gas emissions, 1990-2004

Emissions	1990	1997	2003	2004
Carbon dioxide (CO2), million metric tonnes of carbon	165	154	156	158
Total basket of greenhouse gases, million metric tonnes of carbon equivalent	209	193	182	183
Reduction on 1990	-	-8%	-13.4%	-12.6%

A recent report from the House of Commons Environmental Audit Committee said the climate change strategy is 'off course . . . radical measures are needed to meet even our Kyoto targets.' The recent upturn in carbon emissions (ENDS report, Spring 2005) appears to stem from:

• Industry - steep increases in 2004, partly due to the recovery of the steel industry: emissions were 39 million tonnes of carbon, 1% above 1990 levels.
• Transport - now 10% above 1990 levels, due to increases in car and road freight traffic.
• Households - up 12.5% since 1990, reflecting consumer behaviour and long-term increases in the number of households.

Shifting to low carbon energy

The trade union members of TUSDAC believes that the Government should lead an objective, forward-looking analysis of the balance between positive employment impacts of moving to a low carbon economy, for example through growth of R&D and employment associated with renewables, against negative consequences with possible job losses in other energy sectors. Taking forward this transitional energy policy means practical engagement between unions, Government, employers and the wider community.

Electricity generation

Generating electricity is both a major source of UK employment and one of the main sources of greenhouse gas emissions, including just over one quarter of all carbon dioxide. Since 1990, as can be seen from the table below, reliance on natural gas has increased dramatically to become the pre-eminent source of electricity generation. Although coal is still a substantial contributor, a large proportion of coal is now imported. The Government anticipates a much larger role for gas by 2020, and a much diminished role for coal. The TUC believes that this is the wrong direction for future energy policy.

UK Electricity Generation by mix, 1990-2010

Fuel	1990	2001	2010 predicted
Coal	64%	37%*	25% *
Nuclear	21%	24%	22%
Natural Gas	1%	32%	37%
Renewables	2%	3%	10%**
Oil	11%	2%	2%
Other	1%	4%	4%

Source http://www.dti.gov.uk/energy/inform/energy_indicators/internet_ Note* includes imported coal

** 10% is the Government's target for renewables.

The above table includes the forecast national balance of energy sources in 2010, based on DTI figures. On present performance, the achievement of 10% from renewable sources by 2010 is challenging. The only carbon-free options are nuclear and renewables. Developments in these areas and in clean coal technology are considered later in this paper.

The Government's climate change programme targets are:

• 10 per cent of electricity from renewables by 2010
• 20 per cent by 2020
• Scottish targets are higher: 18 per cent by 2010, and 40 per cent by 2020.

Each region is in a position to make a significant contribution towards these renewables' targets.

Regions and renewable energy

Overall, the UK is struggling to meet its 10% renewables target. In 2003, about 3%1 of electricity generated in the UK was sourced from renewables, a 26% increase on 2002.

Government policy for renewable energy includes investment in research and development, and the Renewables Obligation on electricity suppliers in England and Wales, who must supply a growing proportion of electricity from renewable sources. Their target is 10% by 2010 and 15% by 2020.

Experience from other European states such as Demark and Germany suggest that there is a large potential for power generation and jobs growth in these new energies, especially wind generation:

• In Denmark, 29,000 people work in the renewables sector. After 15 years of investment, wind power contributes 16.7% of energy generation and its wind technology is a major export industry.
• In Germany, 30,000 people work in the wind generation sector, with renewables contributing 9% of energy needs (national target: 12.5% in 2010).

These are good examples of how a progressive and forward-looking industrial strategy can create manufacturing industries for the future. In addition, the global market for environmental control systems has been recognised as of strategic importance by the DTI.

A DTI study has identified 2,000 companies involved in the renewables sector - wind and wave/tidal power, as well as small-scale micro-generators, solar energy and biomass. The 8,000 jobs involved (2,000 in Scotland) range from research, design, manufacture and installation to maintenance. Apparently, about 10 jobs (including construction and operation) are produced for each megawatt of renewable power produced.

Jobs in renewables, 2003

	England, Wales, N. Ireland	Scotland	Total
Current jobs	4,200	1,300	5,500
Employment to support export activity	630	200	830
Emerging technology	200	40	240
Spin-off employment	1,200	400	1,600
Total	6230	1940	8,170

Source: Renewable Supply Chain Gap Analysis, Mott MacDonald and the Bourton Group, November 2003.

The South West is geographically well suited for the construction and operation of wind farms. Of all the renewables sources, wind technology is likely to produce the most jobs in the immediate future. The British Wind Association estimates that there are already 4,000 jobs in the sector. Amicus wants to ensure that the manufacture of wind turbines is firmly established as a UK industry and is used as a global manufacturing base.

Tidal and wave power

Similarly, the region has some of the best tidal energy in the world, and it is highly predictable. Wave energy is driven by wind, and is also a significant potential source of energy. Around 100 people are employed in the research and development of wave and tidal power.

The first full-scale pre-production prototype wave energy converter is being tested at the European Marine Energy Centre in Orkney, called Pelamis. Built by Ocean Power Delivery, Pelamis is a novel offshore wave energy converter building on existing technology developed for the offshore industry. Pelamis has a similar output to a modern wind turbine. The employment potential of this technology is significant.

The DTI study recognises that the number of jobs secured depends on how much manufacturing takes place in the UK. With the right level of investment, the study forecasts up to 30,000 new jobs in the UK's renewables sector in the next decade. With UK manufacturing losing close to 100,000 jobs a year, the key issue is to ensure that the research, technology and manufacture remains based in the UK.

Nuclear power

Nuclear power currently contributes about one-fifth of our energy needs and it provides a major carbon-free source of energy. The TUC's balanced approach to energy policy is that all energy options should be actively pursued. As far as nuclear power is concerned, this will require:

• an agreed strategy for dealing with radioactive waste;
• maintenance of the physical infrastructure;
• a robust programme of research, development and demonstration; and
• greater economic certainty, both in terms of better public engagement and shorter lead times.

Underpinning all these requirements is the need for positive action to maintain and renew the nuclear skills base. There are pressing needs to rebuild the extensive knowledge and expertise that has been lost from the nuclear industry in recent years as well as to replace existing skilled staff due to retire in the next few years, even if only to deal with decommissioning and management of existing radioactive waste.

Timing will also be critical to ensuring security of supply given the uncertainty over whether renewable energy can expand rapidly enough to replace, in say the next 10 to 15 years, the massive one-fifth of carbon-free energy supply that nuclear currently offers.

Clean coal

A proven operating clean coal plant in the UK would provide a platform for UK design and manufacturing to export the technology to places such as China and India who will be constructing coal-fired plants for the foreseeable future.

Loads in coal-fired power stations can be varied relatively easily, so coal fired generation is particularly useful in meeting peak demand or covering for supply difficulties or variability in other energy sources. This will become even more important as the share of renewables in electricity generation increases, though gas-fired stations are also relatively inflexible.

In its response to the DTI's carbon abatement consultation, the NUM argued that, to date, the 'Kyoto sacrifice in the UK has been made almost entirely by the mining communities, and they have little to show for it'. We support the NUM's case for clean coal technologies to reduce emissions of all kinds.

Carbon capture and storage

In March 2005, the Chancellor announced a study of the incentives needed to encourage the development of carbon capture and storage technology. Instead of being vented into the atmosphere from power stations, carbon emissions could be liquefied and pumped back out to the North Sea's emptying oil and gas reservoirs via a disused gas pipeline.

Sustainable transport

Carbon emissions from transport in the UK are rising rapidly. Transport is currently responsible for 26% of the UK's carbon emissions. The growth of road and air transport has resulted in a significant increase in greenhouse gas emissions over the past decade.

The Department for Transport (DfT) recognises that transport needs to play a key role in helping to deliver reductions in emissions of CO2. Yet some means of transport are more sustainable than others. Recent Government figures show that for the journey between London and Edinburgh:

• by rail, the average passenger is responsible for about 12 kilograms of CO2 emissions from an electric powered train;
• by car, the journey burns up 70 kgs of CO2 per passenger;
• by air, the figure is nearly 100 kgs of CO2.

Paradoxically, road transport emits six times more carbon dioxide per passenger mile than rail, but motoring costs have fallen in recent years. Meanwhile, rail is far more carbon efficient, but rail fares have increased steeply.

A sustainable rail network

TUC policy is firmly behind a publicly owned, publicly accountable rail network. Opinion polls consistently show that a great majority of the travelling public want rail back into public ownership. Railways are also relatively efficient users of energy compared to other modes of transport.

In response to the Government's climate change review, TUSDAC argued that:

• The Government should make the environmental case for rail more forcefully, and resists any proposals for rail replacement that fails to take full account of the environmental and social impact.
• Measures in the 2005 Railways Act may lead to cuts in regional and branch routes, or substitute bus services, to the detriment of the government's environmental targets. Peripheral parts of the South West are particularly vulnerable.
• The Government should urgently review the potential for rail expansion.

Despite concerns over railway safety, fare increases and reliability, rail travel is rising significantly year on year. In 2004, the number of rail journeys exceeded one billion, the highest number of passengers travelling since 1959. Some rail services have grown remarkably - the past 10 years have seen a 100% increase on the Bristol-Plymouth corridor.

Work undertaken for the Strategic Rail Authority by AEA Technology Environment shows that:

• Passengers travelling by rail produce much less carbon emission per passenger-kilometer than travelling by car. On electric powered commuter lines, the figures are significantly better for rail travel.
• Rail freight causes about one-tenth of the emissions per tonne-kilometer of HGVs.
• Railways produce less than 1% of a group of key pollutants. Road transport generates 49% of nitrous oxide emissions.

In electric powered trains, rail travel is clean at the point of use, with polluting emissions controllable at power stations. Diesel powered trains generate CO2 and other emissions - but there are only some 4,400 diesel trains in the UK, compared with 24 million cars and 425,000 highway goods vehicles.

We believe the Government should recommit to its transport strategy, with tough targets for growing rail and bus passenger traffic, and rail freight. We also urge the Government to support the UK's train manufacturing industry.

Light rail and tram

There is a strong environmental and employment case for expanding light rail and tram services and it is disappointing to see little progress on such schemes in the South West. Experience from light rail and tram schemes shows that commuters will transfer from road to the high quality pubic transport they provide.

Light rail's benefits include:

• lower carbon emissions
• modal shift from car to public transport
• reduced traffic congestion in city centres and along the rail corridors
• better local air quality
• job creation
• regeneration - for instance, Croydon Tramlink was associated with a 9.3 per cent fall in unemployment (35 per cent on the Fieldway estate)

full accessibility for people with disabilities

Road transport

In its review of the Government's energy strategy, a recent IPPR study said: 'The issue of transport emissions encapsulates the Government's problem of balancing economic and environmental concerns.' Not wanting to discourage the movement of people and goods, Government policies focus instead on increasing engine efficiency and the use of new fuels, especially biofuels.

Government initiatives include:

• Fuel duties - including a 20p per litre reduction for biofuel. Following the abandonment of the Fuel Duty Escalator in 2000, there has been no real-terms increase in fuel duty.
• Varying rates of Vehicle Excise Duty - introduced in 2001, the level of duty varies according to the level of a car's emissions. However, the current narrow spread of charges doesn't seem to be much of an incentive for customers to switch to lower emission brands.
• Powering Future Vehicles - a voluntary scheme encouraging car manufacturers to reduce carbon emissions from cars. The target is 10% of new cars sold should emit 100g of CO2 per kilometre or less. Average UK carbon emissions are significantly higher than other EU nations.

The IPPR estimates that these initiatives together are meant to deliver carbon savings of up to 8 million tonnes annually by 2010. However, carbon emissions from transport have increased in at least the last two years.

But the VED differential is not high enough to encourage consumers to switch to low carbon cars. Equally, the biofuel duty differential is not wide enough yet to stimulate greater take up of renewable sources of fuel.

Incentives to change

There should be real and immediate incentives for moving from a high pollution transport system by a process of sensible investment to one that is less polluting.

Key to this will be to encourage a shift away from the car dependency and the development of an integrated transport infrastructure. Road taxes and congestion charging both have a potentially useful role in promoting fuel efficiency. In practice, more far reaching changes may be needed over a period of years so as not to suddenly inconvenience anyone or further overload existing public transport systems. But action could and should be taken immediately to influence new developments.

Biofuels

Most regions are in a position to benefit from the agricultural and manufacturing employment opportunities associated with a successful biofuels industry.

Biofuels - fuels distilled from a variety of crops such as sugar beet and wheat - offer the prospect of a major cut in transport's carbon emissions. The Government's Transport White Paper suggested that biofuels could account for some 5 percent of road transport fuels by 2020. If 5% of biofuel were added to standard fuels, it would save an estimated 2.3 million tonnes of CO2 a year, the equivalent of taking one million cars off the road.

But this target is not sufficiently ambitious. In May 2003 the EU's Biofuels Directive came into force, requiring Member States to set indicative targets for biofuels sales - 2% by energy content in 2005, and just under 6% by 2010. Hopefully, the EU's draft rural development fund (European Agricultural Fund for Rural Development) will harmonise with the biofuels regulations and support projects involving renewable energy, biomass and crops for biofuels. In the UK, a £1.6 billion rural investment fund will be co-managed by RDAs and 'Natural England,' the new Agency replacing English Nature.

Biofuels are derived from biomass energy - the energy from organic matter. The three main types are:

• Biodiesel - currently on sale in the UK, and generally used as a blend in conventional diesel. It can be produced from recycled waste vegetable oil and oil crops such as rapeseed and palm.
• Bioethanol - can be blended into petrol. It offers air quality as well as carbon benefits. Bioethanol can be produced from sugar beet. Developing technologies may allow bioethanol to be produced from a variety of source materials including wood, grass, straw and green waste.
• Biogas - used instead of compressed natural gas to power gas vehicles, offering excellent air quality benefits as well as carbon savings.

Meeting the EU's biofuel target would require fuel suppliers to blend around 5% of biofuel to petrol and diesel. Up to this level, the mix has no adverse effect on engine performance. Recent fuel price rises and the Government's reduced rate of fuel tax on bio fuel makes this look option look more attractive.

We believe the Government should support a renewable fuel obligation, rising in stages to 6% of biofuels by 2010. The growth of a successful UK biomass industry depends on three things:

• establishing an energy crop growing industry;
• developing generating plants; and
• encouraging operators to switch to biofuel.

Companies such as British Sugar are investing in this sector. The T&G argues that this investment will broaden the jobs mix in rural areas, both agricultural and industrial. Biomass has the potential for significant employment growth - up to five farming jobs for each 1,000 tonnes of biofuel produced. A 100,000 tonne processing plant could lead to 60-80 jobs directly and as many as 550 jobs in agriculture. Further employment would develop in the petrochemical industry for conversion and mixing processes. These are potentially significant sources of sustainable employment.

The RDA should work with industry, unions and others to assess the employment potential, training needs and investment and infrastructure required to support the growth of the biofuels sector.