BRITISH STEEL CORPORATION (PRICES)

HC Deb 21 May 1969 vol 784 cc433-42

The following Question stood upon the Order Paper:

73. MR. EDDIE GRIFFITHS

TO ask the Minister of Power, in view of increased cost of production and the need for increased capital investment over the next six years, whether, following the recently published National Board for Prices and Incomes Report on Steel Prices, he will now authorise the full price increases applied for by the British Steel Corporation; and whether he will make a statement.

The Minister of Power (Mr. Roy Mason)

With permission, Mr. Speaker, I will now answer Question No. 73.

The Government have considered the report of the N.B.P.I. on Steel Prices Report No. 111) which is being published this afternoon.

The Board's main recommendation is that the B.S.C. should make price increases to bring in additional revenue of £40 million per annum as against the £50 to £55 million which the Board estimated as the effect of the Corporation's proposals.

The Government accept this recommendation and are still considering the other recommendations in the Report.

Mr. Speaker

Mr. Eddie Griffiths.

Several Hon. Members

rose—

Hon. Members

He is not here.

Sir K. Joseph

On a point of order. How did the Minister come to answer a Question that had not been asked, Mr. Speaker?

Mr. Speaker

The Minister should have informed the hon. Member for Sheffield, Brightside (Mr. Eddie Griffiths)—I hope he did—that his Question was to be answered. This is most irregular.

Sir K. Joseph

May I protest against the business of Ministers answering Questions, if they have been asked, and no doubt giving to the Press—I have not evidence of this—the Answer, but giving no information to the Opposition or to the House? We have not seen the Report of the National Board for Prices and Incomes, which I have no doubt is a long one, nor have we had time, obviously, to study the Report or the Minister's response.

If I may try to formulate some questions that I have obviously thought about in preparation for this matter, may I ask the Minister whether he will agree that this is, once again, a case of a nationalised industry, vital for our export trades, being far quicker to raise prices than to cut costs?

Secondly, how does the Minister reconcile this apparent subsidy—that is, the cut in the rise in prices that the B.S.C. thought was commercially necessary—with our international obligations, on the one hand, and with all the brave talk of commercial discipline, on the other?

Thirdly, is it not monstrously unfair to the private steel industry to have to compete with a nationalised and subsidised competitor?

Finally, are not the Government embroiled in all these dilemmas only because they chose to nationalise steel instead of removing the Steel Board and leaving individual companies to compete and make their own prices?

Mr. Mason

The right hon. Gentleman did not do bad for someone who has not had a glance at the Report. There has been no general increase in steel prices for the past three years. Meanwhile, the industry's materials and services have increased in cost by £60 million. Further, between 1961 and 1968 steel prices rose on average by 10 per cent. whilst private manufacturing prices, on which they have thrived, went up by 21 per cent.

As to our international obligations, the proposal for an additional revenue of £40 million, when the B.S.C. went forward for an increase initially of £58 million and reduced it to £55 million during the course of the examination, is not in contradiction with any of our international obligations.

When the right hon. Gentleman reads the Report, he will see that the private sector is given licence on almost all of its products to quote prices below, on a par with, or above those of the nationalised steel sector.

Mr. Michael Foot

Will my right hon. Friend accept that many of us who come from steel constituencies will be very concerned about the Report of the National Board for Prices and Incomes, which appears to impose limitations on a publicly-owned industry which would not be imposed on a privately-owned industry?

Is it also the case that the further parts of the Report, to which my right hon. Friend referred, contained detailed proposals for interfering in the arrangements between the Steel Corporation and its customers, interferences which would be contradictory to the Statutes passed by the House, in defiance of the legislation which is now before the House, and in contradiction of the recommendations of the Select Committee on Nationalised Industries?

Will my right hon. Friend therefore undertake that neither he nor the Government will accept from the National Board for Prices and Incomes recommendations which substitute the whims of the Board for the will of Parliament?

Mr. Speaker

Order. Long questions mean fewer questions by other hon. Members.

Mr. Mason

I am not aware that we shall be torn between the two stools to which my hon. Friend referred in the latter part of his question; so I would not worry unduly about that.

My hon. Friend should be aware, as no doubt the House is aware, that the N.B.P.I. is the chosen instrument when there is a major price increase confronting a nationalised industry. The Board has looked at it all and has recommended generally an increase up to £40 million. The Iron and Steel Consumers' Council also proposed a scaling down of the initial proposal. Therefore, we must take note of both those bodies.

Sir G. Nabarro

As the N.B.P.I. recommended increases which will bring in £40 million against the British Steel Corporation's request for £50 to £55 million, will the Minister tell the House how an increase in steel prices of £40 million will, first, help our export trade and, secondly, help the policy of import substitution, because it places British steel in an uncompetitive position now with equivalent imported steels?

Mr. Mason

If the hon. Gentleman follows these questions very closely, he will have noticed that Europe and Japan, during the past six months, have already taken advantage of this trend in steel and have increased their prices. Therefore, this proposed increase will not have the effect on imports that the hon. Gentleman refers to.

Mr. Tinn

Has my right hon. Friend noted that the British Steel Corporation achieved a reduction in costs of £15 million in one year? Will he bear in mind that the White Paper—" Nationalised Industries: A Review of Economic and Financial Objectives"—required that prices should be related to long-run marginal costs and that the proposed price increases asked for by the Corporation would still have been below those marginal costs?

Mr. Mason

When my hon. Friend reads the Report, he will notice that reference is made to long-run marginal cost and to the financial objectives set out Command 3437. My hon. Friend is also right that the return on capital last year from the B.S.C. was most unsatisfactory, and that is why we must establish this £40 million increase.

Mr. Lubbock

Is the Minister aware that it is very inconvenient for hon. Members to have to deal with this statement when they have not had a chance of reading the Report? Why could not he have asked the hon. Member for Sheffield, Brightside (Mr. Eddie Griffiths) to table an Oral Question which could have been answered tomorrow, which would have given us at least 24 hours in which to study the findings?

May I ask the Minister, in detail, how he justifies the difference of £10 to £15 million between the recommendations of the Prices and Incomes Board and the actual price increase he has allowed? Further to the question asked by the hon. Member for Worcestershire, South (Sir G. Nabarro), what assessment has his Ministry made of the effect on our balance of payments of this price increase on the major steel-using industries, such as the automobile industry?

Mr. Mason

It is not easy to make a calculation of that kind in relation to the balance of payments, because the prices will vary from product to product. The British Steel Corporation has carried out a major review of pricing, the first major review affecting British steel for 30 years. There are 50 schedules, and there are hundreds of prices in each schedule affecting different types of product. On average, steel will go up by 5 per cent., but to a big steel user whose product contains 20 per cent. of steel the increase in price will be 1 per cent.

Mr. Shinwell

Is my right hon. Friend aware that hon. Members on both sides who are concerned about the competitive position of the shipbuilding industry are disturbed about an increase in steel prices? Was this taken into account by the Board and by my right hon. Friend before a decision was reached?

Mr. Mason

I cannot go into the shipbuilding industry, the car industry or separate industries, because, as I said in my original Answer, we are giving consideration to how the £40 million should be spread. The N.B.P.I. suggests that we should take note of 12 special products, but the Government have not yet decided that this is the best course.

Second, as to why it is essential to make the statement today on the date of publication, the Corporation has been losing £1 million a week during the examination and could lose up to £4 million a month while we are making up our mind. Therefore, we had to state quite clearly that the £40 million is accepted, and the method is still to be urgently considered.

Mr. J. H. Osborn

Will the right hon. Gentleman say which are the other recommendations he has accepted, in addition to the recommendation in paragraph 84 of the Report, and what is the reaction of the private sector to the recommendation in paragraph 87?

Mr. Mason

I have already pointed out that if the private sector thought that there were unfair practices, then, under Section 30 of the 1967 Act, it would be obliged to appeal to me. Therefore, I could not prejudge any decision on that.

Second, once the method of abatement has been agreed, the private sector will, according to the Report, be able to quote prices below, on par, or above the British Steel Corporation's prices.

Mr. Hooley

Will my right hon. Friend agree that a 5 per cent. increase over a period of five years compares very reasonably with other major industries in this country; second, that a limitation on the price increase is of major importance for major steel using industries in Britain, including shipbuilding, and is of great importance for our export competitiveness?

Mr. Mason

I am much obliged to my hon. Friend; he is absolutely right. Although the Corporation has not got what it initially proposed, if prices had not moved at all it would over the next five years have lost £100 million on revenue which it was anticipating.

Mr. Biffen

Will the right hon. Gentleman confirm that he would regard it as thoroughly undesirable if the steel industry or any other nationalised industry were required to subsidise its customers? Can he confirm that one of the consequences of Mr. Aubrey Jones having overturned the commercial judgment of the Steel Corporation is that the chairman of any other nationalised concern will put in an extra amount in his application in the expectation that it will be specifically scaled down by the Prices and Incomes Board?

Mr. Mason

I cannot anticipate what another nationalised industry may do in the future. That will be up to the industry in the light of this Report.

Mr. John Mendelson

Will my right hon. Friend accept that there will be appreciation in all the steel-producing areas for his having taken the earliest opportunity to make his statement to the House, regardless of any technicalities about which other hon. Members not representing steel constituencies might be concerned?

Second, will he tell us whether, having varied the application, he is now satisfied that the steel industry will be fully provided with the necessary capital and all the other requirements for its expansion over the next five years?

Mr. Mason

Even with the abatement and without any additional cost savings—it is obliged to look at that, and the Report makes a strong point about it—the Corporation's gross profit in 1970–71 before depreciation is forecast at £180 million, which is a rate of return not out of line with what has been earned by major steel undertakings elsewhere.

Mr. Edward M. Taylor

Will the right hon. Gentleman confirm that the new price schedules are United Kingdom schedules and that there is no question of introducing regional differentials for this nationalised industry?

Mr. Mason

That has not come before me so far, and there is no mention of it in the Report.

Mr. Dempsey

Is my right hon. Friend aware that Continental steel prices are already climbing over the tariff wall and conquering certain markets in this country? What assessment has he, therefore, placed on the effect which the increase will have on the competitive ability of British steel and employment in other industries?

Mr. Mason

I referred to this earlier in reply to the hon. Member for Worcestershire, South (Sir G. Nabarro). The European steel industries have taken advantage of the recent cyclical trend and have increased their prices. Therefore, we do not have to take so much note of the import seriousness of the point which my hon. Friend refers.

Mr. Geoffrey Lloyd

Does the Minister's supplementary answer a few moments ago mean that the motor industry, as a big user, will not have to pay more than 1 per cent. more for its steel?

Mr. Mason

It depends entirely on the percentage of steel going into the final product. If it is 20 per cent. in the final product, the increase will be 1 per cent. in the final price.

Mr. Ashton

Does my right hon. Friend agree that the steel industry has for many years required a massive injection of new capital and capital equipment, and will he try to ensure that the revenue from this increase is used on new capital equipment in order to put the industry in a better position to compete with European manufacturers?

Mr. Mason

This will be in the forefront of the Corporation's mind.

Mr. McMaster

Will the right hon. Gentleman note that the shipbuilding industry, because it has been such a large user of steel, has always been quoted special prices, and will he note, also, the many anxious questions put to him today relating to the Upper Clyde and the large order books of the shipbuilding industry, orders which will have to be taken at a loss unless a specially favourable price is quoted to shipbuilding?

Mr. Mason

Is the hon. Gentleman suggesting that I or the B.S.C. should subsidise British shipbuilding? He ought to put the matter in proper perspective in relation to the figures. The British shipbuilding industry, the whole of it, takes 450,000 tons of plate per year. The British steel industry produces 27 million tons of steel a year. It is a very small user.

Sir G. Nabarro

It is very important to shipbuilding.

Mr. Mason

It may be; but the rate of return on capital throughout the whole of the shipbuilding industry last year, including some just struggling yards, was 2.8 per cent., but the Steel Corporation's rate was down to nil.

Sir J. Eden

Was not the Corporation's assessment of its forward capital requirements based on its receiving the full £55 million, and did not the Minister give this recommendation for a price increase his full and personal backing? Does not the outcome now mean that the Corporation will have to come back sooner than it otherwise would have done to ask for a further tranche of capital?

Mr. Mason

What is means is that, as regards borrowing powers and the Bill now before the House, borrowing is not affected at all. The figures in the White Paper and the Bill still stand. But it might mean that there will be a smaller dividend from the p.d.c. than we planned hitherto.

Mr. McMaster

In view of the unsatisfactory nature of the Minister's replies, I beg to give notice that I shall raise the matter again.

Sir T. Beamish

On a point of order. Mr. Speaker. May I raise with you two matters arising out of the statement just made? First, this is the first time I have ever known a Minister make a statement to the House in reply to a Question when the hon. Member who put the Question down was not here. I should like to know, Sir, whether that was in order.

Second, even if it be in order, is it not a great discourtesy to the House and an attempt to steal a march on the House by making a statement on this important matter when no one has had opportunity to read the material in question, which was not in the Vote Office until exactly 3.30?

Mr. Speaker

I shall deal with the points of order seriatim. First, this is not the first time that a Minister—[HON. MEMBERS: "Hear, hear."] Order. I need no encouragement from one side. This is not the first time that a Minister has answered a Question on the Order Paper when the hon. Member who had the Question down was not there to ask it.

I said at the outset that it was quite irregular. I should have thought that, if the Minister proposed to answer a Question on the Paper out of turn, as has been done today, he would let the hon. Member know—I would imagine that he did—

Mr. Mason

indicated assent.

Mr. Speaker

—and the hon. Member should have been here to put his Question. But it has happened before.

On the broader issue, it is in order for a Minister to answer any Question on the Order Paper whether it is reached or not and, a fortiori, the Minister could have made a statement to the House. What apparently the right hon. Gentleman did was tell the hon. Member for Sheffield, Brightside (Mr. Eddie Griffiths) that he would make his answer in reply to the hon. Gentleman's Question. That is as far as the Chair can go.

Mr. Peyton

Further to that point of order, Mr. Speaker. Had the Minister made a statement—and we accept that he had the alternative of doing so—he would have been under some obligation to make a copy available to my right hon. Friends. This is a very serious statement, delivered against a background of considerable discourtesy.

Mr. Speaker

There is something in what the hon. Gentleman has said, but it is a fact that a Minister can answer a Question on the Order Paper at the end of Question Time if he chooses to do so. I can do nothing about it.

Several Hon. Members

rose—

Mr. Speaker

Order. I hope that we can get on. We have a lot of business before us.

Mr. Tinn

Further to that point of order, Mr. Speaker. It may assist the House if I say that my hon. Friend the Member for Sheffield, Brightside (Mr. Eddie Griffiths) had been informed by the Minister and intended to be present. I can only assume that he has been prevented from being here by circumstances beyond his control. I am sure that he intended no discourtesy.

Several Hon. Members

rose—

Mr. Speaker

Order. I am willing to listen to points of order, but I have to consider the business of the House. We have a lot to do.

Mr. Lubbock

Further to that point of order, Mr. Speaker. Since a Minister has the option of answering a Question which he has stimulated an hon. Member to put down on the Order Paper the night before or of making a statement, a copy of which would be available through the usual channels, and since on this occasion the right hon. Gentleman has chosen, to the great inconvenience of the House, to adopt the former course, will you refer this matter to the Select Committee on Procedure so that, on all future occasions when important matters of this kind are to be the subject of an announcement by a Minister, it is done in the proper form by means of a statement?

Mr. Speaker

I can deal only with points of order. I cannot deal with the hon. Gentleman's charge that the right hon. Gentleman stimulated an hon. Member to put down a Question That is a matter of esoterics and philosophy and not of order for Mr. Speaker. If the hon. Member for Orpington (Mr. Lubbock) wishes to raise the question whether a Minister can answer a later himself take it up with the Select Com-Question than is arrived at on the Order Paper during Question Time, he can mittee on Procedure.