HC Deb 16 May 1968 vol 764 cc1550-60

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Harper.]

11.0 p.m.

Mr. Edward Milne (Blyth)

Decisions reached in relation to the siting of aluminium smelting plants in Britain will have a far-reaching effect on the lives of the people of Britain, Europe, and the world, not only in the immediate future but into the next century and possibly beyond.

As far back as late 1966, studies were made of the United Kingdom smelting possibility, and indeed the chairman of Rio Tinto Zinc has spoken of three years of solid talking on this subject. More companies than expected showed an interest in building aluminium smelter plants in Britain, many areas of the country were vitally affected and various authorities played an important part in smoothing the way for the various parties interested in this project.

I can only talk at this stage of the area best known to me—my own constituency of Blyth and the area of South-East Northumberland. I would like to pay a tribute to the North-East Development Council, to the Chairman of the Northumberland County Council and its Planning Officer, the Chairman and Surveyor of the Bedlington Urban District Council, and the various people associated with the Blyth Harbour Authority and many others, too numerous to mention, but all worthy of praise for their efforts, individual and combined.

At the Labour Party conference in October, 1967, the Prime Minister, in a speech at Scarborough, turned the full spotlight onto the matter by stating that the Government were ready to discuss with the industry the provision of one or more giant smelters, and that he was discussing with the Chairman of the Coal Board the possibility of linking the coal industry with this new-type project.

At a Press conference held later the same day by the Minister of State, Department of Economic Affairs, an optimistic estimate was given of the venture. Much has happened since then, but little definite progress can be reported, although it now seems reasonably settled that Rio Tinto are to site a 100,000-ton smelter plant at Anglesea in Wales, that British Aluminium are to site a similar capacity plant at Invergordon in Scotland, together with a 240,000-ton alumina plant in the same area, both powered by nuclear energy, and that in addition Alcan is to have a 60,000-ton per annum smelter in South-East Northumberland between Blyth and Lynmouth, the pit which will provide most of the coal needed for the project

In relation to the Alcan project it is of interest to note the expert figures—not those supplied by the Coal Board—of the capital cost based on coal power. The capital cost is estimated at £49 million—£31 million for the smelter and £18 million for power, including power for standby and contingencies.

It is estimated that capital costs for a coal-fired power station are 30 per cent. less than for nuclear power, and this was its main advantage—a not inconsiderable consideration. The cost of nuclear and coal power was otherwise the same, and this is based on estimates and statements in the Metal Bulletin for 23rd January, 1968.

When it is realised that this capital cost advantage in favour of coal was based on bringing coal from the Northumberland coalfield to Invergordon, how much better economically would the position be in the siting of the smelting plant on the Northumberland coast in the vicinity of the coalfields?

Why, if the figures quoted in relation to smelter capacity are correct, give to the one area of the three most affected by the rundown in the manpower of the mining industry the smallest estimated smelter output, in the initial stages at least?

Those concerned in the smelter issue, most of all the jobless in the development districts and particularly the South-East Northumberland coalfield, along with the folks of the mining communities of Britain beset in the recent past by pit closures and facing further contractions in the mining industry in the near future, have the right to ask the Government the reason for delay. Why, in the first instance, talk about siting the coal-based smelter at Invergordon, far removed from the Northumberland coalfield from where the power to operate the smelter is obtained?

I have no wish to enter into competition with my colleagues from Wales and Scotland, with whom I have excellent relationships, but I wish to put on record the instances of delay in relation to this matter. In the publication British Industry Week of 16th February last it was stated that by the end of the month the Government should make their decision. In a debate in the House on 9th March on the unemployment position in the North-East the Minister responsible for the area was reported to be hopeful of making an early announcement. On 9th May the Prime Minister, replying to a Question, said he hoped to make a statement before Easter.

Three weeks before Easter my right hon. Friend told a meeting of hon. Members who represent the North-East that the decision about smelters could be given in a matter of days rather than weeks, and as recently as 11th May the Financial Times was informing us that Britain had postponed for at least a fortnight any decision on plans to site three aluminium plants in development areas. In considering the question of siting and some of the reasons for the delay—and I hope that at least some of these questions will be answered tonight—it is interesting to note that British Industry Week for 13th October maintained: Politics rather than economics dominates the whole question. Expediency rather than principle will decide the outcome. Quite apart from Mr. Wilson's … speech … at Scarborough when announcing the smelting project—he knitted together the most agreeable elements of import saving, aid to development areas and to the science-based, power intensive industries and his prospect of state-private links—politics is the core of the matter. Like the great aluminium war of 1958 when Reynolds Metals with Tube Investments won control of British Aluminium, the present situation smacks of a struggle for power by the world's aluminium giants for the most convenient low-cost location for smelting close to the fast-growing market of Europe. There seems no real justification for delay. This was a straight-forward commercial project. I believe that there was a report from the Industrial Reorganisation Corporation strongly urging a rapid start. I have formed the opinion, as a result of talks with Ministers, that there has been some confused thinking on this matter. I do not want to appear unfair, but straight talking is obviously required.

If we had been presented with a firm policy and clear commitments to the industry—and I have particularly in mind the Prime Minister's speech at Scarborough in October—and some Government partnership in the project, there is no reason why the smelter could not have been under construction by now. The importance of import saving has been a major factor in the smelter issue, and different figures have been given of the loss caused by the delay. One industrial expert has reckoned a figure approaching £50 million in terms of imports. Whatever the correct figure, our balance of payments will be the sufferer.

The rôle of Norway, an age-long friend of Britain and one of our partners in E.F.T.A., has been called into question on the reason for the delay. This was dealt with categorically by the Prime Minister in the House when he replied to a Question on 9th May. The Prime Minister said: My hon. Friend will understand our disappointment at not being able to give an answer earlier, but the delay arose not so much from our discussions with E.F.T.A. as from the very detailed negotiations of the three firms with which we have been in negotiation regarding proposals to build all three in development areas. There are still some difficulties to be sewn up. The fact that there are three and we want to be fair as between the three and the need to be extremely careful about commitments in regard to Government expenditure or Government assistance on the project are the reasons why the matter has been delayed longer than I should have wanted. He went on to say: It would not be particularly helpful to talk about discussions now going on in the E.F.T.A. Ministerial Council. There have been difficulties here, and there are some views expressed by some of our E.F.T.A. partners on the matter to which we do not agree. The main reason for the delay—and I had hoped that we could have had an announcement before Easter—is the reason I have given; not so much our discussions with our E.F.T.A. partners as detailed and intricate negotiations which my right hon. Friend the President of the Board of Trade has been carrying out with the three firms."—[OFFICIAL REPORT, 9th May, 1968; Vol. 764, 622.] I am certain that our Norwegian friends need not be unduly disturbed about the effects of our entry into the aluminium smelter field. All the steps taken by the Government are in keeping with our long declared policy of aid to the development areas of this country. Norway has everything to gain in my view from a general improvement of conditions in the Northern Region. Full employment and an expanding economy in South-East Northumberland can bring great benefit to both Britain and Norway by providing expanding markets that the economies of both countries need. The difficulties should be finally resolved in the talks in Oslo next week.

There is no real reason to prevent the Government—I hope my hon. Friend will pass this point on to his right hon. Friend the President of the Board of Trade—going ahead with the aluminium fabricating plants which will be needed when the smelters go into production using aluminium from Norway in the interim period and building around South-East Northumberland a complex of industries based on this vital raw material. This, coupled with the expansion of the Port of Blyth to berth the 40,000 ton ore carriers to ship the raw materials needed in smelting, would give the area the type of job opportunities it so urgently requires. Because of the existence of two excellent sites at Lynmouth and Sleekburn, there is no reason why an alumina plant similar to that proposed at Invergordon could not also be sited in the area. The urgency of the matter is further underlined when we read in the trade journal of 26th January this year: In the last day or two, Alusuisse has made a coal based proposition to the United Kingdom Government, still at its original smelter size of 60,000 tons per annum. Since this Swiss firm was one of the original firms to survey the possibilities on the Northumberland coast, it becomes all the more necessary to ask the Government, particularly the Board of Trade, what was done in the early stages of the discussions in regard to this project to speed up the introduction of this valuable project of aluminium smelting to Britain's economy and to Britain's industry.

Another side advantage, but one of major importance, which this country will gain from the siting of the smelter plants in Britain is the repayment of the loan made to Alcan during the Second World War. This was a wartime arrangement whereby the United Kingdom made a loan to Alcan to finance capacity expansions of aluminium for Britain's war effort. In return, the United Kingdom secured a call option on 250,000 tons a year of aluminium from Canada. The loan terminates by stages from 1971 to 1974, but it has been stated that the loan would be repaid in three stages beginning almost immediately and concluding well before the scheduled terminal date. I think that this is a matter that ought to be taken into consideration, because as a dollar payment of no mean importance this would obviously have a significant immediate effect on Britain's precarious balance of payments—another telling reason for the need for urgency and quick decisions in this vital matter.

Although we do not expect tonight my hon. Friend to give us some definite news, we nevertheless urge him to prevail upon the Government to give us within a few days a definite decision which will gladden the hearts of my constituents and the people of the development areas of Britain and usher in an era which will be of inestimable value to Britain's economy and the future well-being of its people.

11.16 p.m.

The Minister of State, Board of Trade (Mr. Edmund Dell)

I am very grateful to my hon. Friend for raising this subject on the Adjournment, since it provides me with the opportunity to give the House some of the background to this question of expanding aluminium smelting in the United Kingdom. I should like to say, first of all, that this question has woven into it threads from most of the important economic policies of the Government, as well as vital political, local and international considerations.

I must first broaden the horizon of my remarks, since we cannot look at our own industry except in the context of the world situation. Aluminium smelting is essentially an internationally-based industry and a large part of world production is in the hands of relatively few companies. World consumption is increasing over the long term at about 12 per cent. a year and the metal-producing companies install new capacity in many countries to keep step with this very rapid increase in demand. World production in 1967 was about 7 million tons and, on present trends, is expected to reach 8 million tons to 9 million tons a year in the early 1970s. Estimates for 1980 vary between 15 million and 17 million tons.

Although, as a leading industrial country, we are one of the world's largest consumers of aluminium, we alone among the large consuming countries have no significant domestic production. In fact, we import almost all our consumption of about 400,000 tons a year. The reason why this industry has not developed to any great extent in this country is simple. Vast amounts of power are needed to produce aluminium from alumina, and the aluminium companies have sought to locate smelters in areas of the world where cheap power is readily available. Aluminium smelting has, therefore, developed faster elsewhere in countries which have, in the main, access to the cheapest form of power supply, and production has gone ahead rapidly in such countries as Canada, the United States and Norway. British finance, both Government and private, has contributed to these developments.

The position may now be changing. The economics of moving bulk commodities and the development of new sources of power are felt by many to operate in favour of installing smelting capacity near to the markets for metal.

It has been these considerations, in particular the development of nuclear power, which led a number of companies to examine very seriously the possibility of installing new aluminum smelters in this country, and to take the initiative in putting various proposals to the Government.

The Government recognised that the possibility of producing electricity on an economic basis substantially more cheaply than at present opened up the prospect that some kinds of industrial production, of which aluminium smelting was the obvious example, would become economically viable in this country for the first time. It was this that led to the arrangements announced by my right hon. Friend the Prime Minister on 4th October of last year. Under these arrangements, the Government undertook that in certain circumstances where it was in the national interest they would authorise the electricity generating boards to negotiate special contracts to supply new large demands for power to establish in this country industries which needed exceptionally large quantities of electricity. Under these arrangements, the users would be required to meet the capital cost of the necessary generating capacity, together with the actual operating costs. On this basis, the Government invited a number of interested aluminium companies to submit proposals for erecting new smelters in this country. This is where we come to the question of siting.

The Government made it clear that any smelters which might be established should be located in development areas. Subject to this condition, the companies were free to propose sites based upon their commercial judgment. Such sites, however, are few, for the criteria are stringent. An aluminium smelter basically requires a large area of level ground, ready access to deep water port facilities, good transport link to the fabricating outlets and a supply of suitable labour.

In the light of these requirements, the companies selected various sites. R.T.Z./B.I.C.C. chose Holyhead, on Anglesey, Alcan chose Invergordon, and the British Aluminium Company, while mentioning other sites, also indicated a strong preference for Invergordon. The proposals from the companies were evaluated, at the Government's request, by the Industrial Reorganisation Corporation. At the same time the Government themselves made certain studies of the social costs and benefits involved in each of the locations chosen by the companies.

Subsequently the Government also invited the companies to consider coal as a possible source of fuel for power generation, having regard to the existence of coal stocks, and one of them, Alcan, has in fact proposed that it should follow this route under a contract negotiated direct with the National Coal Board. At the Government's request—I emphasise that it was at the Government's request—Alcan agreed to consider the suitability of alternative sites in North East England, adjacent to sources from which I understand that N.C.B. proposes to supply much of the coal which would be provided to this company for use in its power station.

In the light of the I.R.C. recommendations and the results of their own studies, the Government have entered into detailed negotiations with the companies with a view to enabling smelters to be established in various locations, so as to make the maximum use of national and local resources, having regard to the needs of each area, particularly in employment terms. These negotiations are exceedingly complex and raise many important economic financial and international problems. Moreover, substantial sums of money are involved, both from the companies and from public sources, by way of investment grants and other forms of assistance available in development areas. If in addition to finance from commercial sources special financing proves unavoidable to get this industry going, there will be powers available under the Industrial Expansion Bill. It is not surprising, therefore, that our talks with the companies are still continuing. I hope that we shall soon bring them to a satisfactory conclusion and no one will be more pleased than I if we can.

I am aware that there has been criticism of that length of time taken. I noticed with regret that the chairman of Rio Tinto Zinc has felt obliged to comment publicly on this aspect today. But there is a lot at stake on all sides, and it is important to get the answers right.

Before I close, may I say a few words about the international position in E.F.T.A. At the request of our E.F.T.A. partners, we have explained the basis of the proposals in considerable detail to the Norwegian authorities, who have argued that Norway's exports of aluminium to the United Kingdom may be adversely affected by the developments proposed by the companies, on the basis of regional grants which the Norwegians consider excessive. These discussions have taken place both bilaterally and within the E.F.T.A. Council, and while I cannot pretend that we have satisfied our Norwegian friends, we ourselves are prepared to accept the assurances of those companies which wish to smelt here, that with the expected growth in the British and world markets there will be plenty of room left for Norway's metal. It cannot be stated too often in this context that this is an international industry and that the pattern of the trade in aluminium depends very largely on the policies of the international companies which produce it in many parts of the world.

Further meetings are to take place next week with Norwegian representatives, and my right hon. Friend the President of the Board of Trade is flying to Oslo for talks with Norwegian Ministers. We shall seek once more to satisfy Norway on the basis of our understanding of their reasonable expectations. We have undertaken at the recent meeting of E.F.T.A. Ministers to report the outcome of these discussions to the Permanent Council of E.F.T.A., and for that reason if no other I cannot at this date announce any of the anticipated decisions.

I cannot tonight say when it will be possible to make a more comprehensive report to the House. All I can say now is that the Government and the companies are working on these intricate problems as fast and as hard as we can. But the stakes are high and the rewards in terms of the benefit to the economy through bringing much-needed new industry to areas of high unemployment and the substantial savings which are involved in our import bill are very worth while.

I can, however, assure the House that the needs of those areas which have been mentioned in the debate are fully recognised by the Government and we will try to reach a just and equitable decision in the light of what is best for the economy of the country as a whole.

11.26 p.m.

Dame Irene Ward (Tynemouth)

I have listened with great interest to what the Minister of State has said and I congratulate the hon. Member for Blyth (Mr. Milne) on the tremendous efforts he has put in to obtain an aluminium smelter on the North-East Coast.

I listened to Sir John Coulson at the recent meeting in the Westminster Grand Committee Room on this problem in relation to E.F.T.A., and I find it rather difficult to understand why we were unable, at an earlier stage, before the complexities arose as to siting and other problems in this country, we did not arrive at a satisfactory arrangement with our E.F.T.A. partners. I gather that there was something in the E.F.T.A. Agreement which made our entry into the aluminium smelting project rather complicated and difficult.

It seems to me very disappointing that after all the hard work put in by the hon. Member for Blyth and others who have supported him so well, we should not have been able to smooth out the problems with E.F.T.A. before we entered into the complexities that obviously arose in this country between the Government and the companies concerned.

Question put and agreed to.

Adjourned accordingly at twenty-eight minutes past Eleven o'clock.