HC Deb 05 April 1971 vol 815 cc29-36
43. Mr. James Hamilton

asked the Secretary of State for Trade and Industry whether he will give a general direction to the British Steel Corporation to submit to him for his approval all future proposed steel price increases; and if he will make a statement.

Mr. Michael Foot

(by Private Notice) asked the Secretary of State for Trade and Industry if he will make a statement on the consequences for the steel industry of the directions he gave to the British Steel Corporation on 2nd April.

The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. John Davies)

With permission, I will now answer Question No. 43 and the Question of which I have had Private Notice.

As I said in my reply to my hon. Friend the Member for Cheadle (Mr. Normanton) on 2nd April, I am satisfied that an increase of the magnitude of 14 per cent. would be damaging to the competitive position of British industry. In taking this view I was influenced by the recommendation of the Iron and Steel Consumers' Council and by widespread representations to this effect from steel users generally. I also took account of the financial position of the Corporation.

My action will clearly compel the Corporation to operate within a greater financial constraint and will thus make it necessary for it to press ahead with its efforts to reduce costs and maximise efficiency. The Corporation's whole finan- cial situation is for clarification and consideration in the review which the Corporation and the Government are jointly carrying out, and I hope that the position as regards the financial year 1971–72 will be clarified within a matter of weeks. This should enable the Government to decide on the main issues affecting 1971–72 including financial objectives for that year and the finance to be made available to the Corporation having regard to the level of capital investment required and the Corporation's cost-saving measures.

These events demonstrate that the present arrangements whereby the B.S.C. consults the Government on major price increase proposals are useful and I do not propose to give a general direction as suggested by the hon. Member for Bothwell.

Mr. Foot

When the Government made this intervention, what was their estimate of its effect on the Corporation's development plans and on the number of redundancies which will have to be announced in coming months?

Mr. Davies

On the first part of that question, I have thought that it was right to see through this review. The review is being undertaken against the background of great difficulty in forecasting the financial out-turn by the Corporation in the past year. Until the first phase of the review is completed—I hope to have the results of it within six weeks—it would be very unsafe to make anything like definitive appraisals of where the Corporation will be in the immediate future.

As to the longer-term development, it is clearly necessary for this review to carry on for its full period, and that will require several months.

The effects on short-term finance, closures and the like will not be very considerable. Closures are unlikely to render any short-term advantage. Any closures must be seen within the framework of a proper long-term programme, which is precisely what we are seeking now to define.

Mr. Foot

Will the right hon. Gentleman now answer the questions that I put to him? Is the answer, therefore, that this intervention will have no effect on the development plans? If it is, there is nobody in the steel industry who will believe it. Will the right hon. Gentleman answer the second question as to how many redundancies will be involved by this cut? What is the figure? Does the right hon. Gentleman say that there will be no increase in the number of redundancies because of what he has said? Does he understand that this intervention by the Government is bound to plunge the whole industry into heavy losses and that that is bound to have an effect on its development programme? Does he understand that even though we have a Prime Minister who apparently does not care how many workers he throws out of work—

Sir R. Cary

On a point of order, Mr. Speaker. Is this not drifting into a debate? If it is, can it be stopped?

Mr. Speaker

I am sure that the hon. Member for Ebbw Vale (Mr. Michael Foot) is well aware that many other hon. Members wish to ask questions.

Mr. Foot

Does the right hon. Gentleman understand that, even though we have a Prime Minister who does not care how many workers he throws out of work, it is the right hon. Gentleman's duty to carry out his duties under the Iron and Steel Act, 1969? Will he tell us when he is going to start to assist the steel industry to prevent the redundancies and carry through its development programme?

Mr. Davies

The hon. Gentleman will recollect that at the time of nationalisation the steel industry formulated a programme which envisaged a great scale of closures. This also provided for a large number of redundancies—to the best of my recollection, about 40,000 men. The redundancies in question have as yet not at all been realised. The point I have sought to make—I believe that the hon. Gentleman has, as I have, the greatest interest of the steel industry at heart—has been, quite consistently, that in the short-term any panic measures in terms of short-term closures will have no effective financial result. So they are not a factor in this problem.

As to the long-term development programme, my impression is that I replied to the hon. Gentleman. The long-term development programme, which involves enormous funds to the extent of a maxi- mum of £4,000 million, cannot be the subject of clear and definitive conclusions on the part of the Government without profound study, which we are now seeking to undertake.

Mr. James Hamilton

Now that the Government have made a decision, will the right hon. Gentleman tell us if his thoughts were in line with the 14 per cent. increase or whether he had to accept the decision of the Cabinet? Now that the Government have taken a decision about prices, are they prepared to say what is the position about investment in the industry, bearing in mind that if the investment programme is not carried out there will be 15,000 redundancies in Scotland? Will the right hon. Gentleman now tell us what the situation is, particularly as regards the industry in Scotland?

Mr. Davies

The situation has not changed. On the first part of the question, I myself gave a directive to the Corporation to contain itself within a 7 per cent. increase.

The matter of development is in two phases. The immediate hold on the existing development programme will be finalised, I hope, within six weeks when the first phase of the review is carried out. The longer-term programme will take considerably longer.

Sir G. Nabarro

Does my right hon. Friend realise that the great majority of people in industry warmly congratulate him on halving the increase to 7 per cent.? Will he now apply his mind to the simple fact that in the year before nationalisation the steel industries before tax made in the aggregate a profit of £80 million, whereas they are now losing money at the rate of £100 million? Is not this a calamitous state of affairs for the taxpayer and ought it not to lead to the replacement of the present chairman by a competent businessman?

Mr. Davies

I am as deeply concerned as is my hon. Friend about the future wellbeing of the industry, which is fundamental to the country as a whole. However, the present rate of deficit clearly cannot be allowed to continue and sustain a programme of the kind of which we are speaking. It must be a matter of proper study and exact and correct forecasting, which at present is not practicable.

Mr. Thorpe

Now that the Government have completed their first act of nationalisation of a private firm, namely, Rolls-Royce, and have by implication accepted that they will have to pay a subsidy to a present nationalised concern, namely, steel, and accepting that for this Government this is breaking rather new ground, can the Secretary of State tell us how long it will be before we shall know the extent of the subsidy which they will have to pay to the Iron and Steel Corporation so that it will break even?

Mr. Davies

Perhaps the right hon. Gentleman will be prepared to wait, as I am constrained to do, for the result of the review which I am currently undertaking. The right hon. Gentleman's earlier remarks were not conducive to trying to consider the future prosperity of this great industry.

Dame Irene Ward

I congratulate my right hon. Friend on his decision. Without waiting for the review, could he let us have the detailed figures over the last 10 years to show how the steel industry previously made a profit and now makes a loss so that the country may judge the wisdom of his decision?

Mr. Davies

If my hon. Friend will put a Question down on that subject I shall give her all the details I can. I am bound to say that a comparison of the revenue results of the industry in its previous hands with the position now would not, perhaps, be entirely illuminating. I am, however, prepared to give what figures I have.

Sir G. de Freitas

As the Government have now arranged for an enormous subsidy of cheap steel to private industry, will the right hon. Gentleman at least tell us that private speculators will not have handed over to them sections of the publicly-owned steel industry such as those in Corby, Northants?

Mr. Davies

I must refute the suggestion that there is a vast subsidy. This is not so.

Sir G. de Freitas

Of course there is.

Mr. Davies

Of course there is not. There would be a vast subsidy if the industry were to continue to operate at a deficit without any endeavour to restrain it, but that is neither the intention of the Chairman of the Corporation nor mine.

Mr. Patrick McNair-Wilson

Does my right hon. Friend recall that in May, 1969 the then Labour Government intervened in a price rise asked for by the British Steel Corporation, and does he not find it somewhat strange that the Opposition, who are always demanding price controls, should behave in this hysterical and hypocritical manner when the Government take action of this sort?

Mr. Davies

Yes, Sir, I find the contradictions which come across from the other side from time to time slightly opaque.

Mr. Eddie Griffiths

Could I remind the right hon. Gentleman of his words at the weekend, when he said that the Corporation should be responsible for its own deficit? As I understand it, this can be brought about in two ways. I accept the right hon. Gentleman's point that closures—because six months' notice has to be given for a plant closure and two years' notice for a works closure—will not solve the coming financial year's problems. Those problems, therefore, can be solved, as I say, in two ways: either by giving the Corporation the price increase which it wants, which the right hon. Gentleman has refused to do, or—and here I ask the right hon. Gentleman to stop messing about and tell us exactly which way his thinking is going—by having the B.S.C. put its house in order through selling off some of its assets. Will the right hon. Gentleman now tell the House, the steel workers and the taxpayers which part of the British Steel Corporation he and his friends want to sell off to private ownership?

Mr. Davies

No, Sir.

Mr. Lane

Is not much of the steel industry's present difficulty the result of the disruption and distraction caused by the nationalisation policy of the party opposite ever since the war?

Mr. Davies

There are great problems; my concern is to try to overcome them and to try to get an effective steel industry. I am sure that both sides of the House conspire in this concern.

Mr. Harold Wilson

As the right hon. Gentleman seems unwilling—to use his own phrase—to illuminate the minds of his hon. Friends, will he at least tell them that in the last year of private ownership, on the same depreciation basis as is now used by the industry, private ownership had a total loss of £56 million? Second, will he explain how it is that it is widely believed that the Board felt that he had himself agreed in principle to the price increase for which it asked, and tell us what intervened to cause him to change his mind? Third, as the right hon. Gentleman referred to the opacity which, he said, he noticed on this side of the House, will he tell us in which case he has intervened to stop a price increase in the private sector?

Mr. Davies

I have promised to give all the statistics I have in response to any Question put down about the figures previous to nationalisation and subsequently; I shall not try to anticipate those. [Hon. MEMBERS: "Oh."]I have promised to give the figures which I have been requested to give. I am afraid that I cannot effectively deal with the right hon. Gentleman's queries about views expressed about my views without any consultation whatever with me.

Mr. Harold Wilson

Although the right hon. Gentleman will not comment on my second question—the House will judge from his refusal to answer—will he now answer the third: when has he intervened in the private sector to stop price increases? Will he specify all the cases in which he has intervened?

Mr. Davies

I have intervened by seeking to increase the level of competition in the private sector.

Mr. John Mendelson

Will not the right hon. Gentleman agree that what people in the steel industry and in the country at large are most interested in is that there should be agreement that this country needs an expanding steel industry? If that be so, will he agree, also, that there are only two ways of financing the expansion—either allowing the steel industry to charge the same prices as are charged in Europe for steel or, if the Government are not prepared to sanction that, by providing public funds for that expansion? Surely, the people who work in the steel industry, away from the propaganda which we have had, are entitled to a serious answer from the Secretary of State.

Mr. Davies

As to the hon. Gentleman's first question, what I seek to see is an efficient steel industry. I hope that that means an expanding steel industry, but it must be first and foremost an efficient steel industry. As to the second part, the whole question of price levels is fundamentally involved in the review into the Corporation which I am currently undertaking.

Hon. Members

Where is the money to come from?

Mr. Michael Foot

I beg to give notice, Mr. Speaker, that at the appropriate time I shall seek leave to move the Adjournment of the House under Standing Order No. 9.

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