Rt. Hon. Jacqui Smith MP

CBI Minerals Annual Conference

The Minerals sector plays an important part in supporting the UK economy. It underpins UK economic activity. It provides much of the primary materials and energy on which both industry and wider society depends. Gas, oil and coal to drive industry; raw materials for construction; materials for processing into metals, glass, ceramics and plastics; providing soil conditioning for agriculture. Without your products - sand for glass, lime for steel or clay for ceramics, these industries would simply not be able to operate effectively in this country. As I am sure you are aware, the UK produces over £26Bn in minerals per annum.

We as Government too are reliant on minerals production to help achieve our aims for the economy, for industry and for society.

A clear example of Government's reliance is within construction. We have an ambitious programme to improve the nation's infrastructure through housing, schools, hospitals, road and rail. There are major Sustainable Communities growth areas to be served and regeneration to be undertaken in the Midlands and North.

In the last few years, we have undertaken unprecedented investment in the country's infrastructure. Some 38,000 projects since 1997 building and refurbishing: schools, hospitals, road and rail. Developing our communities, for example, a progress report by the Deputy Prime Minister on delivering growth in Thames Gateway and other growth areas was issued on 30 July 2003. This contained the Government's pledge of support to enable the development of 120,000 new homes in the Thames Gateway, 40,000 above current planning targets, by 2016. It also pledged the Government's support for the development of 133,000 new homes in the Milton Keynes/South Midlands growth area - 44,000 above planning targets. To meet our ambitions we are reliant on Mineral based products such as Cement, Aggregates, Glass and Steel to carry through the programme.

Minerals also play a significant role in achieving our energy conservation targets. Through our Energy White Paper we have signaled ambitious targets for reducing the energy used within society, particularly within the built environment. We are looking to further improve the energy efficiency of buildings. Minerals based products have a significant role to play. I am thinking of the broad raft of products from lightweight concrete blocks to use of mineral fibre and plastic insulants that help achieve improvements to building insulation. Again these targets can't be achieved without sustainable and managed access to the underpinning minerals.

However mineral extraction is tapping into a finite resource - one that has to be managed to the benefit of this and future generations. It is incumbent upon us all to use these resources in the most sustainable ways possible.

It is also timely to have this opportunity to consider the challenges that the minerals sector faces on a number of interrelated fronts: International Market exposure, Environmental, Regulatory. However I believe your biggest challenge is that of meeting change.

Historically, the concept of 'national need' underpinned policy for industrial mineral extraction. This protected your industries from external competition but limited its horizons to progress and innovation. However it is a fact of economic life that some high value minerals and mineral products are almost wholly imported either because we have no remaining deposits or like other commodities, are mostly traded in a global marketplace, a marketplace in which the UK has to compete.

UK Minerals production faces particular challenges from overseas competition. This comes particularly from the current low cost for sea transportation for bulk goods, for example gypsum from Spain and Germany, coal from Australia and USA, cement from Europe and dressed stone from both Europe and China.

Of course this brings with it a temptation to protectionism - but we have made clear our intention to participate openly in the World market. At the risk of making other participating countries so, we cannot afford to be protectionist. This brings with it enormous challenges for those industries operating within commodity markets. They need to innovate to improve efficiency and move up the value chain so that we can produce steady supplies of high quality, consistent products for which customers are willing to pay premium prices.

Creating the efficiencies to compete against low cost economies and to evolve businesses into new and alternative material sources that will help conserve the UK's natural mineral reserves.

An example of good practice in application of innovative technology was the FIESTA project. This DTI Foresight Link project provided funding to a consortium of industry, including Glebe Mines and Universities. This evaluated a range of new technologies transferred from space and marine industries for mineral exploration in environmentally sensitive areas.

The sector also suffers from an historic reputation for a lack of care for the environment. The industry is doing much to improve site management and to undertake high quality restoration of sites. I particularly applaud initiatives such as the QPA's Quarry showcase. These events cast a spotlight on the industry as, responsible and caring for the environment.

A striking individual example of how good environmental practices are working hand in hand with economic development comes from a leading silica sand and clay company, WBB Minerals Limited. The company received an award from the Campaign to Protect Rural England (CPRE), for restoration enhancement and conservation for their King's Lynn site. The restored habitat now provides 33% of Norfolk's low land heath Biodiversity target. It has been recognised by English Nature as being rarer than tropical rain forest. WBB Minerals are working towards providing a further 17%.

You cannot stand still. Society is increasingly sensitive to the environmental impact of activities. Through planning regulation, the control of waste and emissions to soil water and air, there is and will continue to be pressure on the minerals sector to justify its activity and further improve its sites.

Both a challenge and an opportunity for the industry is the increased use of material and energy from alternative sources. An example being the recycling of waste to both replace primary product and as alternative sources of energy. I am pleased to see that minerals operators have already embraced the challenge to recycle construction and demolition waste. But it remains to be seen whether more use can be made of mineral wastes if it proves economic to do so.

Given its significance and impact, it is not surprising that your industry is affected by a broad range of legislative and regulatory issues, Environmental, Fiscal, Social and Planning. This is a point where Government can have a critical effect on your industry. There is not time here to discuss in all the aspects of the legislative challenges but I would like to pick out three.

I recognise that regulation, much of which stems from the EU, can also be a cause for concern. We need to work with you on the design and implementation of regulation, but we are also working to ensure better regulation both at home and abroad, and to a regulatory framework that reflects the need to maintain business competitiveness.

In the EU we are working hard to strengthen better regulation disciplines at Member State level and across the EU Institutions. This will be a key focus for the 2004/05 Presidency Countries and our Finance Ministers recently launched a joint Regulatory Reform initiative to demonstrate the priority that we, along with our Irish, Dutch and Luxembourger colleagues, attach to this agenda.

We are also working proactively with the Commission and other Member States to get a strong focus on competitiveness built into EU policy making. UK is leading on a project to develop more robust competitiveness impact assessment to sharpen the focus on business issues in EU regulatory processes.

You will be expecting me to make comment on the Aggregates Levy. I know that many aggregates producers are unhappy with this levy. My Officials are currently working with HMCE and other Government Departments to ensure that the levy is properly monitored and reviewed. I hasten to add that the environmental pressures in favour of the aggregates levy sustainability fund remain and I see the innovative work that flows from that funding as beneficial.

Gaining and maintaining access to reserves of minerals is a subject close to the hearts of all minerals extractors. However I would like to highlight one particular sector and the issues and approaches that surround it.

Opencast mines produce around 45% of UK coal output, which in turn supplies half the fuel burned in our coal fired power stations. When you consider that these stations supply 30% of the electricity we use, and are likely to continue to do so for the foreseeable future, the importance of ongoing access to opencast coal reserves is plain to see.
Yet opencasts operators - particularly those working in England and Wales - are facing a severe shortage of consented reserves.

I understand, of course, that despite their potential contribution to local economies - and, where opencasting is part of a land reclamation scheme, to improving the local environment - opencast applications can be unpopular with local communities. I also understand that planning authorities have to consider the balance between the potential impact of opencast working, the possible benefits to the local economy and the interests of local communities whenever they consider new applications.

In this instace my colleague, Stephen Timms, the Minister for Energy, is in contact with ministerial colleagues in ODPM and in Scotland and Wales over how planning authorities currently achieve that balance, and to ensure that balance is adequately considered when decisions are reached on applications for opencast coal working.

Assisting the planning process and promoting the positive aspects of the industry, I think a particular success has been for those Minerals extractors that have positively engaged with their local communities. Giving the community forums in which to express their concerns and providing the opportunity for minerals extractors to make their environmental, economic and social cases. The new Planning and Compulsory Purchase Act has introduced provisions for community involvement in the preparation of development plans.

The industry should, perhaps, see this as a reason to engage with the community before any planning application or active site becomes a focus for opposition.

Of course, government cannot and should not try to run British business. Our role is to make sure the frameworks and structures are right for the very best businesses to thrive. So that highly successful, high value added, highly productive, high wage and responsible businesses are promoted across our economy - so there are more and better jobs for all. So that everyone and our economy has the opportunity to meet its potential.

That is why we have put in place the conditions for macro-economy stability. After years of boom and bust, this is what business, and our economy, needed first and foremost.

As a result of the decisions we took, we're now enjoying the longest period of low inflation since the 1960s. Interest rates are remaining at historically low levels.

This has provided business with the crucial foundations for growth - even at a time when many of our major competitors have faced falling output.

For many of you, demand for your products will depend on thriving construction and manufacturing in the UK.

Construction continues to grow strongly. There is optimism, despite the challenges, for manufacturing. But it was to build on this, that we established the Government's Manufacturing Strategy two years ago. Marking a step-change in our approach to industrial policy, the Strategy set out a framework for the necessary actions for Government, industry, unions, and others for what we are all working to achieve - a strong and successful manufacturing sector, supporting good jobs.

The Manufacturing Strategy contains a wide range of measures to help firms to apply science and innovation, best practice and skills to make the most of these opportunities by competing on the basis of high value products rather than cost alone.

That means improving our competitiveness and raising productivity - within of course the spirit of the four planks of sustainability, one of which is the effective protection of the environment.

So we are not abandoning needed primary production nor simply exporting our environmental 'problems'. Neither would be acceptable. It would be contrary to sustainability objectives.

I welcome the strides that many of you have taken in addressing the sustainability agenda, ranging from corporate reporting of environmental performance, through engagement with Government's sustainability strategies, to schemes for mutual funding for restoration. But these practices can be more widespread across industry. There is also a need for industry to better communicate what it achieves to the wider public to improve its image.

Minerals projections indicate an on-going need for your products as has been demonstrated in the revised Minerals Revised Planning Guidelines. Demand is supplemented by, but cannot be met by alternatives. Overall I expect the Minerals industry to evolve to meet the challenges I have outlined. In some cases moving effort from primary mineral production to processing waste streams such as the already very beneficial use of artificial gypsum from sulphur scrubbers.

Where suitable the use of tailings and mining waste, used increasingly as substitutes for virgin material. This will not negate the need for virgin mineral extraction but should prolong the life of existing sources. But in some cases it will be a case of developing new alternatives to dwindling mineral resources. We have seen that already with fullers' earth where few resources remain and supply is necessarily from imports and synthetic alternatives.

In conclusion then, it is clear that a strong and diverse economy needs the contribution that the Minerals sector can make. That needs to be a sector confident to face the challenges of sustainability and innovation. I hope the Minerals sector rises to the challenges it faces and prospers. We will certainly work with you to help you to do so.