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The Economy Of The North-East Will Be Shaped By The Government's Green Policies

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NORTH EAST UNEMPLOYMENT
The North East's Economy Is Improving, But Many Uncertainties Remain | PA

This week's unemployment figures were an unexpected bit of good news for the country - a surprising fall in the jobless total which left Labour a bit wrong-footed and David Cameron jubilant at PMQs.

And for one region in the UK this was the second month the unemployment count fell; the north-east of England.

Often typecast as an unemployment sink-hole where declining industries have led to epic dole queues, things have been looking up for the north-east in the past few months. It remains a region of high unemployment but for the first time in many months, jobs are being created - and they're private sector ones.

But some worry that the government's own green policies on renewable energy and carbon taxes are causing uncertainty for the region - and could make a manufacturing base that's struggling to recover uncompetitive on global markets. And a debate at the heart of government on whether it should be the "greenest ever", as David Cameron once promised, will have a huge impact.

But first the good news - steelmaking returned to Teesside this week with the relighting of the blast furnace at Redcar. It's created hundreds of jobs, although many of these are the same people who were put out of work when the furnace shut down in 2010.

Towards Durham, Hitachi will be making a new generation of intercity trains - creating hundreds of more jobs. Nissan are building a new hatchback at Sunderland - that could lead to thousands of new jobs.

Alastair Thomson, the Dean of Teesside University Business School, says the upturn is happening because the northeast has a traditional economy: "We're the only region seeing a balance of payments on traditional goods, and we're manufacturing and exporting. That's something the country as a whole needs to be doing," he told HuffPost.

Will it last? "There's undoubtedly a risk of unemployment going up again, as a part of the world with a relatively high public sector, and would the people who used to work for the council be the sort of people who would work in a blast furnace? Probably not. There will probably times over the next year or two when it slips, but the trend is good."

But some worry that the really big opportunities for growth - in the renewable energy sector - are being missed because of dithering in Whitehall. Sarah Green, the regional director for the CBI based in Newcastle, told HuffPost UK "They've messed about with it for absolutely ages. If we could get a sustainable energy policy, that would the the one thing that businesses in this region would really like, and that lack of certainty is holding things back massively."

The delay is over the Renewables Obligation Certificates (ROCs), a labyrinthine set of protocols which in essence compel energy providers (the utility companies in layman's terms) to produce a certain amount of their energy from renewable resources.

The more ROCs an energy company has, the less it has to pay to the government. Energy firms with lots of ROCs can then, in theory, charge their customers less for their electricity and gas. That's the plan. Lots of that renewable energy could come from offshore wind. Some of those windfarms could be constructed off the coast of the northeast of England, and even if they were installed elsewhere, they could be built there.

But how much each ROC should be worth to an energy provider appears to be stuck in an interminable review by the government, with accusations that different bits of Whitehall are arguing about it. Some see it as part of a wider rowing back by the government - led by George Osborne, it's claimed - on the green agenda. A consultation on the value of ROCs ended in January of this year, and since then ministers have been very quiet about it. Some believe there is a deadlock between the Department for Energy and Climate Change and the Department for Business, Innovation and Skills over the pricing.

The impact of this, according to Sarah Green from the CBI, is that big firms are unwilling to invest in offshore windfarms in the north-east, because it's not clear how committed the government really is to green technologies like windfarms, and might stage a dramatic shift towards nuclear.

"People will not invest without knowing what the prices will be," she told us. "I think it is an area where significant and sustainable jobs could be unlocked very quickly. It will help with manufacturing wind turbines, other manufacturing jobs in the supply chain, maintenance and servicing jobs."

But renewable energy is just one plank of the green agenda, and for Alistair Thompson at Teeside Business School, how the government formulates another aspect of it in the near future could easily have a massive impact on the north-east.

"I don't know if it's Whitehall or the EU, but there is uncertainty about how the carbon tax credits are going to work, and what the government's current view is on nuclear," he says. "All those things are strong factors in the economy of the north east and there's more uncertainty than we would like."

Thompson also worries that even if the government does stick to its purported pledge to be "the greenest government ever", carbon reduction strategies could end up hurting some of the manufacturing industries of the north-east even as it helps others.

"Because we are manufacturing-led, we're a high energy use region, and we emit a lot of CO2. If you open up a blast furnace, there's a lot more CO2 kicking around. You can make the manufacturing industry uncompetitive if you have a too high level of carbon pricing."

Under the government's carbon tax system, businesses are charged £12 per tonne of carbon they produce. It used to be that businesses got various rebates if they could show they were trying to reduce their emissions, but recently the scheme has changed - you pay £12 and get nothing back.

Thompson believes this change by ministers hasn't been though through: "It's probably unintended but it's a fantastic way of encouraging accountants to switch their lights off when they go home. You can't do that with a blast furnace. That's where the law of unintended consequences kicks in a bit. Our manufacturers are largely exporters, so if we could end up being uncompetitive."

The north-east seems to find itself in a strange situation where hundreds of jobs will depend on how the government decides to focus its energy priorities. If it sticks to its pledge to be the greenest government ever, it'll harm traditional manufacturing.

If it decides to row back on renewables, jobs which could be created on Tynesside and Teeside won't be. I asked James Wharton, one of only two Tory MPs in the north-east, to respond to some of these concerns.

"It's important not to obsess just about renewables," he said. "Because, yeah, it'd be great if we could get our renewables industry firing on all cylinders. All signs are that we are slowly getting there, but there is a fair debate about whether renewables are the right way forward for our energy mix, that's part of the problem, that uncertainty which is that a legitimate debate about whether we can actually meet our needs by going down this route.

It seems that Wharton is much more interested in talking up traditional industries than renewable ones.

"If you look at the Barclays small business confidence index, the North-east SMEs are right at the top. We'd all like to see - if there is going to be a thriving renewable sector - that it would all be based in our region. But let's not get hung up on one area of industry and pin our future on it entirely. It's a contributor, but it's not all there is."