IRON AND STEEL SCRAP (EXPORT) (Hansard, 2 December 1958)

§ Sir Peter Roberts (Sheffield, Heeley)
I hoped to catch your eye later on the Adjournment, Mr. Speaker, but I feel that the subject on which I want to talk follows closely the very interesting speech of my right hon. Friend the President of the Board of Trade. I want to talk about exports—exports of iron and steel scrap. At the moment, we have a surplus of scrap of the common sorts. In fact, many merchants' yards are full up. There is a demand for scrap overseas. The President of the Board of Trade has been exhorting us tonight to work up our exports. Here we have surplus scrap and a demand overseas, yet up to date the Board of Trade and the Minister of Power have, by very rigid licensing controls, prevented—

§ Sir P. Roberts
I was saying that at the moment the export of iron and steel scrap from this country has been prevented by very rigid licensing controls 1150 carried out by the Minister of Power and the Board of Trade. The time has come when there should be a reappraisal of the situation.
I have no doubt that the Government have been giving a good deal of thought to this matter. They have to weigh the interests of those who use scrap, those people who make steel, and steel foundries on the one hand and the economic interests of the country on the other. It is not an easy decision for the Government to make.
The facts, as I understand them, are as follows. Up to August this year, the export of scrap was not allowed, but during August and September the Minister allowed about 400,000 tons to go out under licence and slightly more during October and November. All applications had to be against firm orders from overseas. Despite this, I understand that about 1,500.000 tons worth of export orders for scrap were not allowed to be exported owing to licences not being made available.
We cannot afford, at this stage, that sort of protection, if that is the right word, for home users of steel and iron scrap. A balance obviously has to be held between the various factors, but I believe that balance has now gone too far. I do not advocate doing away with the licensing system entirely. For one reason, other countries have a very rigid licensing system on scrap and it would be unwise to throw away our system at this time. Of course, there is also the possibility that scrap may become more scarce in future months.
I am not pressing the claim for the export of high alloy steel scrap, nickel scrap and stainless steel scrap, of which there is a certain shortage. There is now an opportunity for the Government to seize on the present demand abroad for the sort of scrap which we have in this country.
I remind my right hon. Friend of advice which I gave to the Ministry of Power about two years ago on the export of coal. At that time, we could have exported coal, but I regret to say that we did not do so, and the position now is that, whether we want to export it or not, the market has gone and we find the export of coal difficult. I do not want to see that happen with scrap.
1151 We must consider the argument against adopting a more liberal approach to the export of scrap, which is that it may become scarce at home. That may increase scrap prices which in the long run may be handed on to industry. I do not believe that that is a valid argument. There is no likelihood of a serious shortage of steel scrap in the next twelve months—possibly slightly shorter for cast iron scrap—but a great amount of scrap in this country has not been collected from the places where it now lies. If one asks a large number of scrap merchants, one will find that they will not even buy scrap at present because their yards are full. In addition, of course, we can obtain iron and steel from other sources. At present, millions of tons of blast furnace coke lie unused in stockpiles up and down the country. There are, unfortunately, a number of blast furnaces which are not at present in commission. Therefore, I see no immediate danger from increasing the exports of common scrap.
The advantages to this country would be great. First, it might help to increase the demand on coke and iron and help those employed in these industries. Secondly, it would convert into cash stocks which at the moment lie idle. This ties in with the very point which my right hon. Friend the President of the Board of Trade was stressing only a quarter of an hour ago. Thirdly, it would bring to this country currency which would help our balance of payments and exchange position. Therefore, weighing carefully the various influences which are at play in this problem, there is a case for increasing the amount of scrap which we can at present sell abroad.
There is a further point, although, possibly, an academic one. I do not feel that the present system of scrap licensing is fair and equitable. Apparently, it is a question of first come, first served. A certain amount of scrap is open for licence and those who get their applications first on the desk of whoever is dealing with it get a licence without much query.
To my mind, that is not a very satisfactory system. The post might delay the arrival of a letter at the Ministry, with the result that a man loses a valuable contract because of a delay over which he has no control. What is perhaps 1152 worse, the letter might fall from the table of the person dealing with it and go to the bottom of the pile, thereby losing the man his place in the list.
This is a sort of rationing system which we could envisage in extreme circumstances, when it would be necessary, but I do not believe that at present it is necessary to have this form of hit-and-miss rationing control. Therefore, I urge my right hon. Friend the Paymaster-General, whom I am glad to see present and who, I know, has given a great deal of thought to this matter, to consider whether or not the time has come to take a positive step. If we take 1,500,000 tons as the amount which has been restricted by licence and turn that into money at the present price of scrap, it represents something like £18 million which we have denied ourselves in the last four months for export material.
That is on the assumption that all the orders have a firm buyer at the other end. Although every application must state that there is a firm buyer at the other end, there might have been some duplication. On the face of it, however, one could argue that there has been a loss of exports over the last four months of about £18 million.
That is the problem and I hope that my right hon. Friend will be able to solve it tonight. It is the problem of balancing various interests one with another—the interests of the economy, of getting exports and of converting idle material into cash and, on the other hand, the problem that a scarcity may be created at home which would force up the price of the scrap and, thereby, force up the cost of living.
That balance has to be held. My point tonight is that the balance has gone too far one way. As a result of this perhaps inequitably rigid licensing system, we have been hurting our economy by not using this scrap and converting it into money and foreign currency. If we do that, my feeling is that throughout the country there is a great reserve of scrap which has not yet been touched, and that this could be pulled out and would replace the scrap which is sold, so that there will be a general benefit. Although it is always difficult to gauge, my feeling about the industry is that, as far as the steel industry is concerned, the export of more scrap than is exported now would not be a detriment. As far as the cast iron industry is concerned, I believe that 1153 there is still a pool of scrap cast iron in this country which can serve a useful purpose.
Therefore, for a period, I believe that there should be some re-thinking on this matter, and I am grateful for being able to raise it tonight, because I think it is an important subject. It is a matter which affects possibly £18 million in four months. When we are striving every day to get more exports, and while there are people willing to carry out orders from abroad, believe the Government should allow them to do so.

§ Mr. F. H. Hayman (Falmouth and Camborne)
I am sure the House is grateful to the hon. Member for the Heeley Division of Sheffield (Sir P. Roberts) for raising this subject, and particularly for emphasising that there seems to be some inequity in the way in which these applications for licences are handled.
It seems to me from such evidence as has come to me that the small man finds it difficult to get an export licence as against the large firms, which can hand in to the Ministry very large applications almost immediately they find it necessary. I have in my hand an application for a licence—I had better not give the figure—for a small firm in my constituency. The granting of a licence would mean a tremendous amount to that firm. It has a firm overseas order, but, because of the way in which licences are issued, this firm has been denied one. I would add only that in my constituency unemployment is now running at 8 per cent. and in this particular area the figure is 9 per cent. I hope, therefore, that the right hon. Gentleman will give some thought to the argument and the plea which has been put forward by his hon. Friend.

§ The Paymaster-General (Mr. Reginald Maudling)
I am grateful to my hon. Friend the Member for Heeley (Sir P. Roberts) for raising this matter, which is an important one, to which the Government have been giving a good deal of thought as a result of representations which we have received from him and from other sources.
It is a fact that the export of scrap from this country has been controlled by the Government since 1939 and still is subject to a licensing system. As the 1154 House well knows, this Government is not a lover of control for control's sake. In fact, we are usually attacked from the other side of the House for abandoning controls too easily. We feel, however, that it is necessary to maintain this control over the export of scrap for this very practical reason. All the other steel-producing countries on the Continent and the United States exercise control over the export of scrap from their own country. There can therefore be no proper international market in scrap, and if we simply became the only steel-producing country to abolish export control on our sources of scrap, the effect in times of scarcity would be that scrap would be cleared out of this country into other steel-producing countries. We would then be dependent for replacements for our steel manufacturers on scrap bought at import prices far above the general levels of scrap prices in this country. We should have to pay the high prices ruling for marginal quantities if we were to move into the international market. In conditions of scarcity which have existed until recently, the case for the maintenance of export control over scrap is an overwhelming one.
There has, however, been quite a change in the situation and, as my hon. Friend pointed out, so far from there being an acute shortage of scrap, there are now substantial quantities of scrap available. In fact, I believe, as I think my hon. Friend has said, that sometimes the amount of scrap available is causing difficulty by accumulating and cluttering up places which could be cleared. So the situation has considerably changed in the course of this year. We have recognised this by instituting a system of export licences whereby merchants have been entitled to apply for and receive licences to export quantities of scrap. In other words, thereby we have allowed the export of scrap in substantial quantities under control, but not in complete freedom. I know that there have been complaints about the actual system of issuing licences.
I would say to the hon. Member for Falmouth and Camborne (Mr. Hayman) that the method we have used has been really fair between firm and firm, though I agree it is not entirely satisfactory. It may be roughly described as a system of first come and first served, but we have 1155 not been able to think of a better one and I rather doubt whether anybody else could suggest a better one.

§ Mr. Hayman
Would it be possible to reserve 10 per cent. or 15 per cent. as the case might be, for smaller firms against the very large firms?

§ Mr. Maudling
I think that would be quite impossible. How are we to define small and large, and why should a firm be treated differently because it is small?
Unless we have some base period to work on, I cannot see how we can have an allocation system which is fairer than the one we have operated, but we recognise that there has been complaint and that the strap position is a good deal easier. Therefore, my noble Friend the Minister of Power, in consultation with my right hon. Friend the President of the Board of Trade, has decided to allow for the next two months the free export of all kinds of iron and steel scrap, subject to two exceptions.
The first exception is scrap derived from armaments, and we all realise the need to maintain control of that because very strange scrap can sometimes get exported if it is of that character. We are also keeping control on scrap at an f.o.b. value exceeding £25 a ton. This is intended to exclude from freedom of export stainless steel and other alloy scrap be-.cause, as my hon. Friend the Member for Heeley pointed out, the situation of alloy steel scrap is rather different from that of common scrap. We are keeping the figure at £25 a ton. This is a substantial 'margin above the current market price for common scrap. Therefore, it will enable people to export freely common scrap without enabling them to export these special alloy forms.
1156 Specific licences will be granted for people who want to export scrap of a higher value than £25 a ton. Effect will be given to this decision by an open general licence which will be issued by the Board of Trade on 5th December. This will be valid from that date until 4th February, 1959. That means that, effectively from 5th December, the export of iron and steel scrap of all kinds, apart from the highly valued scrap, will be freed as hon. Members have asked should be done. That is for a period of two months, and before the end of that period we shall review the situation and decide how to carry on from there.
I am sure that we cannot abolish control in the long term. I am equally sure that it would be wrong to make a long-term decision now, but to free it for two months would enable us to judge the effects of freedom and to see how many of these orders can be realised in practice, and get away over that period from the difficulties of the allocation of individual licences. I, therefore, welcome the opportunity which this short debate has given me to make this announcement. I am glad to think that in doing so we shall have met the wishes of my hon. Friend the Member for Heeley.

§ Sir P. Roberts
I should like to say briefly how grateful I am to my right hon. Friend for the very expeditious and thoughtful way in which he has dealt with this matter. I am most grateful to you also, Mr. Speaker, for having allowed me to raise it on this occasion.