§ Order for Second Reading read.
§ 4.0 p.m.
§ The Minister for Industry (Sir John Eden)
I beg to move, That the Bill be now read a Second time.
Hon. Members will have seen the Memorandum on the Bill, published on 7th December, which explains the reasons for it, and, in particular, that the British Steel Corporation needs new borrowing powers to be authorised by Parliament early next year, when the current powers under the 1969 Iron and Steel Act are likely to run out. The Bill also provides for the write-off of capital and clarifies the powers and duties of the corporation. I shall come back to these matters later in my speech.
The House will see that the Bill is a further step in the series of measures the Government have been taking to place the steel industry on a sound and competitive basis.
First, there were the measures to improve the structure of the corporation and to rationalise the boundary between the private and public sectors of the industry. They were the subject of statements by my right hon. Friend the Secretary of State on 27th April and 28th June of this year. Since then the corporation has been engaged in a series of discussions with the other interests that have come forward.
Second, also on 28th June, my right hon. Friend announced decisions on the first stage of his joint Government—B.S.C. review. These included a higher level of investment for 1971–72—that was £242 million at 1971 survey prices—to allow the corporation to proceed with all the various projects it had decided upon, although without prejudging the results of the long-term review. That was substantially higher than in the previous year, when it was £152 million on the same price basis, and about three times the rate achieved over the few years before then.
We have always made clear that the long-term review would examine the main options open to the British Steel Corporation in the light of the demand levels which could be expected over the 864 remainder of the present decade and beyond. As such it would identify the strategic options within which the B.S.C. should plan its main development pattern, so that particular proposals might be put to the Government in the light of an agreed assessment of the longer term situation. We expect this review to be completed—as announced last summer—around the end of the year, and it should be possible to make a further statement shortly after the House re-assembles.
The assessment of the future has been made more difficult by the notable change in the world steel environment over the past year, during which the main producing countries have experienced a sharp down-turn in demand. The forecasts of future growth of demand are being re-examined throughout the industry, and the steel industries of a number of countries are taking a further look at their capacity needs. For example, there is current speculation about the future growth of Japanese production, which may now be very substantially less than the 160 million tons earlier envisaged for the mid-1970s.
Similarly, in Europe the E.C.S.C. Commission now thinks it likely that production will be in the range 137 million to 148 million tons by 1975, whereas it had been thinking of a range up to 160 million tons by 1974. In the United States of America, although the effect on long-term plans is not yet clear, production this year is 8 per cent. below that forecast.
Those changes in the future world environment need careful assessment in relation to the prospects for our own steel industry, and the corporation has not yet reached a firm view as to the speed at which it may wish to introduce new capacity. Accordingly, we do not have firm proposals before us for major new development at a "brown field" or "green field" site, though the corporation is studying its position intensively with a view to being able to present conclusions to the Government by next summer.
In the meantime, we are anxious that there should be no avoidable delay in proceeding with the steel development programme to the extent that the future can be clearly seen. I am therefore able to announce that approval is being given to capital expenditure for 1972–73 of £265 million, that is at 1971 survey prices, 865 subject to the reservation of only about £25 million in respect of certain major iron or steelmaking projects on which the board of the corporation has not yet reached final decisions, and which might pre-empt the question of major new development for consideration next summer. That amount is for the full expenditure proposed by the corporation for 1972–73 and provides for starts on schemes, some of which will come on stream in 1976 or later.
It will therefore enable the strategic development of the industry to proceed as the corporation has envisaged until the beginning of the second half of the 1970s, which is being considered in the current review. There is therefore no question of holding up any project on which the corporation has definitely decided. Moreover, the amount approved has been increased to allow the corporation to bring forward up to £10 million of minor projects which meet its profitability criteria, most of which are in areas of above average unemployment, and which can be started within about six months from now. The approval of £265 million is £23 million higher than even the record level for the current year and will also have beneficial effects for the plant and construction industries.
It is an inevitable consequence of major new investment that old plant should be phased out. The corporation is now proceeding with its plans for rationalisation. I know the necessity for this has always been well uncle stood within the industry—especially as there is the urgent need to get the corporation on to a more competitive basis. Indeed, the extensive reduction in manpower was both recognised and forecast at the time when the Labour Government re-nationalised the industry in 1967; rationalisation on this scale was one of the declared objectives. But it is particularly regrettable that this is now inevitably having such an impact on development areas due to the high concentration of plant in our older industrial centres.
However, both the Government and the corporation are determined that the B.S.C. should move into profitability as soon as possible; and the White Paper makes clear that the corporation has undertaken to make a profit in 1973–74 and to maintain it at a satisfactory level 866 thereafter, subject to the normal uncertainties of the steel industry.
In the meantime, the corporation has an accumulated loss of £40 million, and is expecting to make a loss of £100 million in the current financial year, and a similar loss in 1972–73. When the House was informed of the loss for this year on 28th June, the corporation's plans included the intention to operate a more selective arrangement for steel price increases. This was, however, shortly afterwards overtaken by the C.B.I.s initiative on prices generally. The corporation is currently adhering fully to a strict interpretation of the C.B.I.s initiative and will consequently not be able to increase its prices until next April, and then only by 5 per cent. It is too early to say what will be the position after July, 1972 when the period covered by the present initiative ends. As from the end of 1972, however, the corporation should be operating under the pricing arrangements of the European Coal and Steel Community, under which there will be no statutory provision for the control of prices.
While these and earlier measures of price restraint, under successive Governments, have to some extent contributed to the corporation's financial difficulties, there are other important factors, including the effects of the threat of nationalisation on the steel companies' investment in the mid-1960s and the low level of investment by the corporation up to and including 1969–70, which have had a marked effect. The work involved in the merging of the companies following nationalisation and the successive changes in the corporation's own organisation has doubtless also contributed.
Of course there is still some way to go, but I am sure hon. Members will agree that it is very important for the health of the steel industry that the corporation should operate efficiently and profitably as soon as possible. Meanwhile, we have to deal with a situation in which the corporation is faced with the heavy losses I have described at a time when the essential modernisation programme is demanding substantial investment. These losses might amount to up to £250 million by the end of 1972–73 and there is no prospect that they can be recovered in the foreseeable future. Accordingly, the Government 867 have decided to provide for these losses to be written off from the balance sheet when they occur. The Bill therefore includes provision for writing off part of the capital of the corporation so that a reserve can be created for this purpose.
It is, of course, normal for a large industry to carry a reserve as part of its capital employed in order to meet contingencies and costs of an exceptional nature. This is no less desirable for the steel industry, which has to face special costs, including, for example, the closing and replacing of obsolete plant. The steel industries of other major producing countries have reserves for such purposes and it would be appropriate for the corporation also to have the flexibility that a reserve allows.
We therefore propose that the size of the reserve for the corporation should be increased by a further £100 million after allowing for the provision against losses of up to £250 million—this will give a total reserve initially of up to £350 million. In order to provide for this reserve, it is the intention to reduce public dividend capital by £200 million immediately under Clause 1(1), and the corporation's loans from the National Loans Fund by up to £150 million, under Clause 1(2), when a financial objective has been set.
All these sums—that is, up to £350 million—will be put into a general reserve, the use of which will be controlled by the Secretary of State under Section 17(4) of the Iron and Steel Act, 1967. We expect that up to about £140 million of accumulated loss will be written off from this reserve next summer, to clean the balance sheet to that date, and a further sum of up to about £100 million in mid-1973, though the corporation will be expected to keep this to a minimum. Thereafter, the reserve will continue on a permanent basis of about £100 million and the use of the money provided by the current legislation will continue to be subject to Ministerial direction. Our intention is that it should not be used for writing off further trading losses after 1972–73, but only for meeting exceptional costs.
After returning to profitability in 1973–74, the corporation intends to set aside sums to the reserve from retained profits, after adequately remunerating the 868 Government on its public dividend capital.
§ Mr. John Biffen (Oswestry)
My hon. Friend says that the sum could not be used for writing off after 1972–73. Is this because he is advised that under the Treaty of Paris such writing off would be deemed to be subsidised competition?
§ Sir J. Eden
No. It is because the corporation itself will be contributing to the reserve, hopefully, from its own retained earnings which it will use for these other purposes. Naturally, as my hon. Friend points out, the new environment in the European Coal and Steel Community, into which the corporation will be entering, undoubtedly has a very marked bearing on the extent to which it will be possible for the corporation even to appear to be subsidising its operations. So it will have to perform in a normal commercial manner in this respect, as in all others.
§ Mr. Eddie Griffiths (Sheffield, Brightside)
I am intrigued by the criterion that the corporation must go into profit in 1973–74. I find this hard to fathom; I am not an economist. It expects to lose next year £100 million, which means that it will have to earn at least £100 million more in the fateful year of 1973–74. What is likely to happen next year and in 1973–74 to bring about this great turn-round in the earnings of the corporation? Is it going to put up prices? Is it going to accelerate the closure of unprofitable plant? Will the hon. Gentleman say more on this subject?
§ Sir J. Eden
The corporation will certainly in the years ahead—in each year—be able to trade at a profit. The question of accumulated losses from the past is provided for in the writing off proposals of the Bill. I think the hon. Gentleman will see that, as a result of clearing the decks, as it were, the corporation will be in a better position in future, as though it had made provision in each year for the building up of its reserves out of its earnings.
§ Sir J. Eden
I do not know whether the hon. Gentleman wishes to argue this point backwards and forwards now, but I think it would be more convenient if he were to make his own speech later on.
869 The use of this reserve will provide, for example, a means of making a contribution towards the additional cost of replacing fixed assets, arising because of the effect of inflation.
As the White Paper explained in paragraphs 12 and 16, it is not the intention to use the power to reduce the National Loans Fund's loans by up to £150 million until a financial objective has been set. The objective will be determined in the light of the long-term review and the corporation's next five-year financial and development forecast, due next spring. It will require the corporation to earn a satisfactory return on the capital invested in it over a period of about four or five years, starting in 1973–74—the period to, say, 1977–78. To this end, over the coming months I shall be discussing with the corporation the implications of various rates of return and other possible indicators of performance.
The borrowing limit proposed in the Bill is £1,250 million to cover the period to 1974. This is a net increase of £600 million on the previous limit of £650 million under the 1969 Act. But, because up to £150 million may be written off outstanding borrowing, the effective increase is up to £750 million of additional borrowing. The new limit is intended to cover the same period—to 1974 or so—as the previous limit, because we are not yet in a position to chart more precisely the future lines of development of the industry looking to years beyond. But it will enable the corporation to get ahead with all the schemes it has in hand or may propose for the immediate future, subject to the Secretary of State's approval of the general programme of capital development under Section 4 of the 1949 Act.
Finally, I should explain that we have taken the opportunity of this Bill to include a clarifying provision designed to put beyond legal doubt that the B.S.C. has normal freedom to dispose of iron and steel assets when it believes it to be in its own interests to do so; and also to cease to supply iron and steel products if, for example, this becomes uneconomic. No such doubt exists in respect of the corporation's non-iron and steel assets.
Hon. Members will note that the Clause does not give the Government new powers; it is no more than a clarification. It does not enable the Government to 870 direct the corporation to do things it is not minded to do voluntarily as being in its own best interest. It merely puts it beyond doubt that the corporation can cease to supply and can dispose of assets if it wants to. This will enable the corporation to sell plant as a going concern instead of closing it, with more serious consequences for employment, and to proceed without legal reservation with the implementation of the structure proposals it has agreed with the Government.
We look ahead to the prospects for the corporation in the enlarged European Community. There is no doubt that, while the competitive pressures will be greater, the opportunities for the industry will be equally real. We shall certainly take these into account when working out the long-term strategy for the industry. Meanwhile, the provisions of the Bill will enable the corporation to prepare for the future, unencumbered with the burden of past debt, backed by an adequate operational reserve, and with the benefit of a high current level of investment. I have no hesitation in commending the Bill to the House.
§ 4.21 p.m.
§ Mr. Michael Foot (Ebbw Vale)
The Minister for Industry has moved the Second Reading in a non-controversial tone. I cannot guarantee that I shall speak entirely in that sense except to the extent that that is my normal custom and nature.
However, there are features of the Bill which we are happy to welcome, which makes a nice change. We are glad that the Government have come forward with proposals to alter the capital structure of the British Steel Corporation and to improve its borrowing facilities. We are glad that the corporation is to have the reserves which it will be accorded under these arrangements. There are other consequences of the Bill which we welcome.
However, there are also features of the general situation in the industry which we find distinctly disturbing, to put it no higher. We wish to raise some of these matters in the debate because they are covered by the Bill. The Bill deals with huge sums and the huge sums are an indication of the central place which the industry occupies in the British economy. It is because we on this 871 side have always held the view that there should be a strongly supported expanding steel industry that we believe that it is so important for these matters to be properly investigated, and the Bill gives us an opportunity to do that. We therefore propose to raise these matters both on Second Reading and in Committee, where some detailed questions will no doubt be raised.
I am not sure that Clause 2 is as innocent as it looks—and it does not look all that innocent—for two reasons, on which we hope to secure more information during the debate, because the replies may well influence the Amendments we may wish to table in Committee. The disposal of assets and the rights and duties of the corporation and of the Minister are specified in previous Iron and Steel Measures. Under those Measures, when the Minister wished to influence the corporation to dispose of any assets he had to make an order which was subject to the negative procedure of the House of Commons.
Will Clause 2 alter in any sense the powers of the House or those of the corporation qua the disposal of assets? If the argument is that this provision is merely a clarifying statement, it is a rather cumbersome way of proceeding. However, this matter can be further discussed in an effort to ensure that the corporation is not being given greater powers in the disposal of assets and that the Minister is not being freed from the control of the House of Commons.
An even more important aspect is that if the Government propose to proceed with their plans to secure entry into the European Economic Community, they will have at an early date to introduce a Measure to deal with this industry. Most of us on this side are strongly opposed to the House surrendering the authority it has over the steel industry. If that power is to be surrendered, as it must be if we are to enter the Community, it must be done by Act of Parliament. We are not prepared for it to be done by some backstairs huggermugger manoeuvre. I am sure that the Government would not attempt that once the matter had been brought to their attention, as it is being brought to their attention now.
872 When such a Bill is introduced will be the appropriate time to deal with any question affecting the disposal of assets or the relationship between the Government and the industry. What could be more appropriate than a Bill dealing with the corporation's authority and that of the Government and their respective responsibilities? Perhaps it would be simpler to delete the Clause from this Bill and put it into the new Bill. I hope that before we reach the end of tonight's proceedings we shall be told that the Government are to introduce a major Bill affecting the future relationship between the Government and the corporation. We should also be informed whether the coal industry is to be dealt with in two Bills or in one.
There is also the question which has been raised by the hon. Member for Oswestry (Mr. Biffen) and to which he received such a succinct, aphoristic reply from the Minister. I hope that we shall have replies of equal bevity throughout the rest of these proceedings. The answer is that if we were a member of the Community it would not be possible for the Government to introduce an essential Measure of this kind, as the Minister described it, for the relief of the steel industry, an essential Measure for the provision of the necessary investment in the industry, an essential Measure for the protection of the employment of those working in the industry.
Both sides of the House will approve the Bill; there will be no vote against it, not even by the two hon. Members on the Government side who were so passionate in their opposition to any proposition such as this when they were in opposition. Everyone will agree that these financial provisions are necessary and essential to the health of the industry. Will the Government acknowledge what cannot be gainsaid, namely, that a Measure which is so essential for the industry's salvation would not be possible if we were a member of the Community? We could not engage in such a rescue operation to help a major industry such as steel or coal, and my hon. Friends representing the coal constituencies have also recognised this.
The kind of provision we had to have some years ago to assist the coal industry to overcome great difficulties was essential for its survival, but that kind of provision 873 will not be possible if we enter the Community. I hope that it will be well understood by everyone that this kind of Measure to help a key industry in our economy will not be possible if by any mischance the country makes up its mind in the last resort to enter the Community.
I now come to some of the other matters on which the Minister touched and which he did not elaborate but should have elaborated. We have had a White Paper, the Minister's speech and the Bill, but many matters affecting the steel industry's finances are still concealed from the popular gaze. The hon. Gentleman skirted around them today.
For instance, what is the effect of the Government's interventions over prices? The Minister referred to this, as does the White Paper. They acknowledge, as they must—just as they have to acknowledge that we could not do this in the Community—that the interventions by the Government in fixing prices in the steel industry have had a big effect on its profitability.
It is ironic that the industry was denied the right, which most private industries had for a number of years, to be able to fix its prices as it wished. Then there was the arbitrary intervention of the Prime Minister, resisted by the Secretary of State for Trade and Industry—but he was overborne—which stopped the industry putting up its prices last year as it wished to do. We then had the arrangements announced when we last debated steel, that the industry would now be permitted the kind of freedom in fixing prices which it had desired. Within a few weeks or months, the corporation was told that once again the Government had altered their plans and that there would be direct intervention to ensure that the industry did not go beyond the arrangement which was being made with the C.B.I. and some other industries.
We have never objected to Governments taking powers at certain times to interfere in the price levels of nationalised or private industries. We have never said that we are against all forms of price control. Of course not. But what we do object to is unfair intervention against publicly owned industries, coupled with attempts later on to pillory those industries for not making profits. That has been the situation of the British Steel Corporation and it would have done credit——
§ Mr. Foot
The hon. Gentleman shakes his head. Then let him put it in his White Paper, for it is not there. His right hon. Friend is to wind up and he will be the proper person to discuss this matter. I have here great chunks of his speeches saying that he was opposed to any intervention in the price levels of these industries, that they should be free to fix their prices as they wish.
I am only asking for an estimate of the burden imposed upon the British Steel Corporation—if the Government think that it will make the calculation more palatable for publication—by both the previous Government and the present Government. In the current year, what are their calculations of the losses of the corporation as a result of this intervention? This is a very appropriate figure to make public, since it affects the whole question of whether the steel industry has been working efficiently or not. So I hope that the Minister will state these figures much more plainly.
Then there is a whole series of other figures which we would like to have, about which the hon. Gentleman and the Government have been so bashful in preparing for this debate. What have been the economic or financial consequences for the British Steel Corporation of the Government's investment grants policy? The Minister made great play, as he is entitled to do—not as a Government statement but as a general proposition—with the £265 million investment programme for the coming year. Certainly, all of us from steel constituencies are strongly in favour of the increase in the investment which has gone into the steel industry.
One of the main reasons why we favoured public ownership was precisely that we believed that there had been much too little investment. When the industry was taken over, investment was about £60 million a year in 1971 prices, quoted by the Minister. Last year it was up to £152 million and now it is to be £265 million. I am all in favour of this increase, particularly because many of these items of investment have been voted by the Government. I am not saying that that makes it more certain that they are correct, but it means that the Government cannot cavil at such moneys being spent.
875 I am in favour of the increase in investment, but what is the extra burden which has been put upon the corporation by the change from investment grants to investment allowances? How much of that £265 million this year would have been written off or taken into account in investment grants because so many of the great steel companies are in development areas? The Government wished to present a clear picture of the steel situation to the country and the House, yet they produced a White Paper without even mentioning investment grants and the effect of the change.
The hon. Member also discussed, again in very meiotic terms, the lack of orders for the steel industry and the difficulties that it was encountering in the world situation. The hon. Gentleman is entitled to describe that and also the weakness of our situation. Because of the general malaise of the British economy, which has had one of the most serious effects upon the steel industry, there has been a fall in steel production of about 19 per cent. from last year to this year, and a fall in home consumption from 15 million to 13 million tons. These are heavy falls, due no doubt to the general fact that the Government have not properly conducted the affairs of the economy as a whole.
Thus, in such a debate as this, even when Conservative spokesmen have abandoned most of their attacks upon publicly-owned industries—there may be a few bleats from the back benches on this subject—we must take into account the factors which have influenced the figures which made the Bill necessary. The first is the intervention on prices, the second the withdrawal of investment grants and the third the general weakening of the economy as a whole and the demand for steel.
All those factors together have produced a serious situation for the industry but could have produced a catastrophic situation in the country as a whole if the steel industry were now in private hands. But for the fact that we have had a publicly-owned industry fighting to protect is rights and directly contesting the "lame duck" logic of the Prime Minister—[Laughter.]—it is all very well for hon. Gentlemen opposite to laugh; it is clear 876 that what I am saying it true—we would have had in the past year under the Conservatives a dozen Upper Clyde situations in the steel industry.
§ Mr. David Lane (Cambridge)
Before the hon. Gentleman takes off further into these flights of fancy, may I ask him to accept that the steel industry would have been in much better shape to face the difficult economic circumstances of today if there had not been so much distraction in the last 20 years or so because of the Labour Party's obsession with nationalisation?
§ Mr. Foot
We have had this argument before with the hon. Gentleman. It would take a long time to develop the point in detail and he is wrong to adduce it in this case.
Prior to the industry being brought into public ownership the old steel masters—and I seem to recall the hon. Member for Cambridge (Mr. Lane) being involved in those arguments—were telling us how efficiently the industry was being run, how unnecessary it was to have any change in ownership and how everything was going ahead splendidly. That was being said at a time when investment in the industry was running at under £60 million a year. They were known as the famine years from the investment point of view. We do not have to go over this argument and I am surprised that the hon. Member for Cambridge even raised it. Anybody who knows anything about the steel industry will not attempt to defend the record of the old steel masters.
§ The Under-Secretary of State for Trade and Industry (Mr. Nicholas Ridley)
I am perplexed by the hon. Gentleman's reference to the famine years for investment. The figures of investment for the steel industry are as follows: 1960, £167 million; 1961, £230 million; 1962, £193 million; 1963, £107 million; 1964, £93 million; 1965, £86 million; 1966, £90 million; and then the figures are £93 million, £73 million, £74 million and £39 million. The famous year was 1969–70 when it never exceeded £39 million.
§ Mr. Foot
I do not know whether the Under-Secretary is seriously suggesting that that counters my argument. He must know that major steel investment in this 877 country in the 10 years prior to nationalisation at Llanwern and Ravenscraig took place primarily because of the plans that had been drawn up by Richard Thomas & Baldwin, which at the time was in public hands. In other words, major investment took place in the one sector of the industry that was publicly owned.
§ Mr. Patrick McNair-Wilson (New Forest)
I must correct the hon. Gentleman. He is leaving out the complete restructuring of the entire Consett works with new furnaces during this period.
§ Mr. Foot
Hon. Gentlemen opposite must get themselves sorted out. First we are told that there was not sufficient investment in the steel industry during this period and now we are told that for one reason or another investment was perfectly satisfactory. I am saying that on any basis investment was nothing like sufficient. We are now getting back to a level approaching something rather better, but the figures of £265 million about which the Government are boasting will be nothing like sufficient to do the job.
§ Mr. David Watkins (Consett)
I intervene simply to put right a point made by the hon. Member for the New Forest (Mr. Patrick McNair-Wilson), who referred to investment in my constituency. I remind my hon. Friend that the Benson Report was held up by the Conservatives as a so-called alternative to nationalisation, and that envisaged the phasing out and closing down of the Consett steel works.
§ Mr. Foot
My hon. Friend's intervention reinforces my argument. Hon. Gentlemen opposite are anxious to draw attention away from the fact that many of the nation's great steelworks have been running at a loss in the last year and a half, largely because of the influences I have described and, in particular, the way in which the Government have been running the economy as a whole. If the Government had applied their "lame duck" logic of not subsidising anything because everything must make a profit, we would have had a dozen Upper Clyde situations in steel at the River Don, at Shotton, perhaps at Ebbw Vale and elsewhere. Hon. Gentlemen opposite cannot deny this.
Under this Bill the Government are providing extra money from the State or 878 community, in my view rightly, to subsidise—I use that horrible word for the benefit of hon. Gentlemen opposite—and ensure that industries might might otherwise go out of business can be sustained for the benefit of the nation.
I cannot imagine how the Under-Secretary had the gall to intervene when in discussing the previous Measure he was one of the "bowling alley boys" who demanded that we should not give any extra money to the steel industry if it was not making a profit. He would have cut it off without a shilling, if not a penny.
I come to another aspect of the way in which the Government have been dealing with this question, and in so doing I imagine that I shall have universal approval for my case. It is clear that the way in which the steel industry has been conducted in detail in the past few months is something that Parliament should tolerate no longer.
The Minister told us that he would be producing a new statement very soon on the findings of his joint steering group. I understand that that will be done soon after the recess. It is a strange way of proceeding that we should have this Bill dealing with the borrowing powers of the industry for two or three years ahead, then a report in January or February on the results of the joint steering group, which is supposed to govern the whole future of the steel industry in the next 10 to 20 years, if not longer, and later next year we are to have a further Bill to hand over the affairs of the steel industry to the high authority in Europe. This is a most muddled way of dealing with these vital issues.
I have said to the Government before that the joint steering group method of running a great industry should no longer be accepted. It is a procedure which has been condemned in every quarter of the House. Businessmen have condemned the idea of having blurred responsibilities between those of the State and those of private industry. The Committee on Nationalised Industries, which examined these matters in great detail, said that in the relationship between Government, Parliament and the nationalised industries we should try to draw the responsibilities as clearly as possible so that everyone knows what to do. That is quite different from the way in which this joint 879 steering group has been running the steel industry during this period.
As it is the Christmas period, perhaps the best way I can describe the joint steering group is as a constitutional pantomime horse; nobody knows who is looking after the front legs or the back ones, and there is a congenital lack of cohesion between the two, with a sag in the middle where the right hon. Gentleman the Secretary of State is accustomed to sitting.
§ Mr. Foot
That is quite wrong. The Tories promised disengagement and said that they would not run the steel industry on a day-to-day detailed basis, with Civil Service intervention, but the joint steering group is presided over by civil servants. The group has a civil servant in that Ministry, with representatives from the Iron and Steel Board. Lord Melchett goes to the meetings, with this body sitting there. They are discussing matters of paramount importance for the industry's future.
When the Secretary of State generally described what the joint steering group was doing in the debate on 24th May, he said:It will be a mammoth task to perform. It will cover the following matters: the expansion of, and consequent investment by, the Corporation at home, including the principle of a major new green field site.He goes on to detail the various matters that will be looked at and ends by saying that it will be a major exercise andIt will concern itself with the critical importance of the industry to the Government's regional policies, bearing in mind that, today, about 50 per cent. of the Corporation's manpower is employed in development areas."—[OFFICIAL REPORT, 24th May, 1971; Vol. 818, c. 74.]So a report about these major questions governing the whole future of the steel industry is to be incorporated in a statement to be made to the House as a result of the findings of the joint steering group. When that report is made, how shall we know which recommendations are supported by the Government, or which are the recommendations of the British Steel Corporation, or whether there has just been a compromise between the two? How shall we know whether it is the 880 Government which have brought pressure on the British Steel Corporation to do something that it has not desired or vice versa?
That is why I say this is the very worst way of running a nationalised industry. It is no use hon. Gentlemen opposite saying, "Oh no, this is nationalisation". This is not nationalisation. It is a system devised by the right hon. Gentleman, certainly in complete breach of everyone's election pledges. Not only did the Conservatives break their pledges, but they broke everyone else's pledges as well. They said that they would have a period of disengagement. No one could call this disengagement.
If Ministers are not prepared to accept their responsibilities, it is an affront to the constitutional procedures that we normally accept in the House. That is what it amounts to.
The real reason for this system is that, partly, the Government want to shield behind the British Steel Corporation for many of their proposals. We have seen how they have done that before. It is partly because they have not thought out properly the part that the steel industry should play in the general future economy of the country. It is partly because they are still obsessed by the doctrines of right hon. and hon. Gentlemen on the Front Bench. I will not quote the speeches they made in Committee, in which they denounced the whole idea of going forward with major investment in the steel industry unless it could be proved immediately profitable.
We on this side of the House take the view that the joint steering group should be brought to an end immediately, and that such an experiment for running our nationalised industries should never be attempted again. I am sure that the British Steel Corporation is thoroughly opposed to this method of running the industry. That would be the view of anyone who has any experience of running a nationalised industry. It is civil servant government of the worst type. It should come to an end immediately.
We are particularly eager that the responsibilities should be defined because the whole future of the industry may now be at stake. Some alarming questions have arisen about what has been discussed in this joint steering group. Some alarming rumours have circulated about the 881 scale being considered for the steel industry in this country.
When the joint steering group was set up, and when the Secretary of State made his announcement in May, he said that the report, when we had it, would include a major new green field site: and I assume that he also considered then that it would include proposals for going ahead with a brown field site, which has been previously discussed. All these matters we hoped would have been clarified by now between the British Steel Corporation and the Government. Declarations could have been made to the country and to the steel industry as a whole that we proposed to go ahead and build up an industry producing at least 40 million tons a year. That was what the British Steel Corporation had in its original development plant. Everyone understands that the cost of that plan must have increased. It would be bound to increase. The longer one delays it, the more expensive it will be, in one sense. But we would hope that there is no departure from that plan, and, therefore, what the steel industry requires is plain statements from the Government and the corporation together that there is no retreat from that major expansion scheme and that the Government are to provide the money necessary for the major scheme and not for some pale imitation of it.
That is why we say that it is a very clumsy, second rate way to deal with a great industry—to have the Bill dealing with the finance for the next two or three years now, then to have an announcement about the major scheme in January, and then to have later proposals which will take away authority from the House about whether we shall have a major expansion in the industry.
Moreover, it is not only a question of the steel industry but also one of the whole future of many of our regions, as the Minister acknowledged in May. He said:It will concern itself with the critical importance of the industry to the Government's regional policies."—[OFFICIAL REPORT, 24th May, 1971; Vol. 818, c. 74.]We know very well that during the last few weeks there has been a major change in the thinking of many people about these regional policies and how they will be affected by our entry into the Common Market, if by any mischance that 882 happens. People are beginning to understand that if we are moving towards a monetary union of some kind, or back to fixed parities of some kind, it will be very dangerous for many of our regional areas, which could then be assisted only by subsidies or by aid on a far bigger scale than previously contemplated. The Governor of the Bank of England is coming around to this view, saying that we have to have a much bigger regional policy if we are thinking of going into such a contraption as the monetary union which might be established. So the whole perspective is changing.
The steel industry must play a major part in our development of the regions. I am sure that the House will have read what was said in the statement issued by the BISATKA, the biggest union in the steel industry, in which it protested—as others have protested before—at the idea that the Government or the British Steel Corporation should engage in discussion about entering into arrangements for building a new steel industry on the Continent of Europe or outside the regional areas where it is so essentially required.
The decision as to where to build steel works is a matter which should be settled in the last resort by the collective representatives of the people or by people answerable to them. That is what we on this side of the House claim. But that will not be possible if we are not to have the detailed proposals of the British Steel Corporation and of the Government laid before the country as a whole so that they can be discussed and so that we can see exactly what is being done.
We are deeply dissatisfied with the way in which the Government have sought to conduct the affairs of the steel industry. The abortion of a joint steering group should be brought to an end at once. The House should be furnished with the clearest account of what it is that the Government recommend and what it is that the corporation recommends, and then the House should pass judgment upon it. There are many of us here, and, I believe, an increasing number throughout the country—we already have a majority, and that is a flying start—who will be opposed to saying when we have the debates during 883 the coming year that we should hand over the control of such an essential industry, which can play such a big part in our regions, to an authority not answerable to the House. Therefore, the Government had better make preparations very soon to give the House much fuller explanations than they have given us today.
§ 5.1 p.m.
§ Mr. Patrick McNair-Wilson (New Forest)
When the hon. Member for Ebbw Vale (Mr. Michael Foot) referred in his closing sentences to an authority not answerable to this House he was talking about the steel industry which I and my hon. Friends would have liked to see, one which is not in Government hands. Whilst I agree that the British Steel Corporation will not always be subject to some element of political control, the only way in which we could have established the freedom which the hon. Gentleman desires and I certainly desire would have been to leave it as a private enterprise industry. The hon. Gentleman is very naive if he suggests that we can ever have a nationalised industry without an clement of Government control.
I share many of the views the hon. Gentleman expressed. In the debate on the Civil List a number of Labour hon. Members were quick to point out that we are the guardians of the taxpayers' money. I hope, therefore, that I shall carry them with me in my brief remarks on the steel industry today.
It is no secret that the nationalised industry came into being for political rather than commercial reasons. The late Lord Dalton, in his book "High Tide and After", said that he was responsible for the introduction of the nationalisation of the industry into the Labour Party's policies. Be that as it may, we have lived with the shuttlecock for a long time.
We are discussing a Bill to restructure the industry's finances. I cannot help remembering the words of the right hon. Member for Barnsley (Mr. Mason) when he opened the Second Reading of the 1969 Iron and Steel Bill. He said:The Bill puts the industry in a position to master the industry's problems and achieve successs …In asking the House to give the Bill a Second Reading we are enabling the B.S.C. to weld itself into a strong, internationally-viable 884 steel industry …"—[OFFICIAI. REPORT, 8th May, 1969; Vol. 783, c. 692–693]That was over two years ago, and unfortunately, but predictably, the industry is back here today asking for more money.
It is because the failure to achieve the objectives which the right hon. Gentleman set out, with which I wholeheartedly agreed, that we find ourselves faced with a desperate rescue bid. We know that under the rules of the E.C.S.C. unfair subsidisation is forbidden, and if we do not do the financial restructuring of the industry now we shall run into serious trouble when Britain enters the E.E.C. Reading between the lines of what my hon. Friend the Minister for Industry said, we saw clearly that that was in his mind, too.
The sum of £350 million is to be written down. It is not to be dismissed from the record altogether, but the charge is merely to be handed on to the taxpayer. Borrowing powers are now up to £1,250 million. What a far cry that figure is from the £300 million when the industry was nationalised! If the Bill will provide the necessary rescue operation, well and good. We shall all be delighted. No one wants to vote the Bill down, because we all hope that it will provide that rescue.
But there are certain questions which my hon. Friend will have to answer. The first relates to the financial objective. It is beyond the capability of any hon. Member to talk intelligently about the industry without knowing what that objective is to be. Until it is set, it is impossible to know whether the figures we shall be voting in the Bill are the right ones.
Second, we must also know what the investment policy is to be. The sum of £1,250 million may seem a lot of money, but against a background of a lot of investment policies of which we have no knowledge it may be inadequate. My hon. Friend said that early in the New Year we shall be given the long-term background, setting out what the investment plans are to be, but it nullifies part of today's debate if we do not know how the money is to be invested.
The third question is perhaps not so important, but it is relevant since we are talking about spending taxpayers' money. 885 What savings can be made from hiving off? Figures have been suggested, but no firm figure has been given by the Government. We should have such a figure to set against the very large sums which are to be spent.
The fourth question concerns the pricing policy. How can we have a nationalised industry competing on all fours with commercial enterprise if the prices are to be fixed in an arbitrary way? I said when the first attempt to fix the prices was made some months ago that if we had had real flexibility of pricing which the industry so desperately needs we should have been able to take advantage of the shortage of structural steels when that situation occurred about 18 months ago and the industry could have recouped some much-needed money, but because we were unable to do so that opportunity passed us by. There was a Press report the other day that there are to be price cuts. So be it. But just how flexible is the pricing policy? I believe that it will be central to the industry's commercial success.
§ Mr. Eddie Griffiths
Is the hon. Gentleman aware that the industry generally, in Europe and in this country, is at a low ebb? People requiring structural steel, other reinforcing bars and so on are shopping around the world for job lots at give-away prices, and then when boom conditions return to the industry and European producers are charging blackmail prices because they can sell anywhere those consumers blame the corporation because it cannot provide what is wanted. If one does not stick by one's producer in bad times, is it not right if the producer tells one to go to hell in good times?
§ Mr. McNair-Wilson
I am grateful to the hon. Gentleman for his intervention, because that is exactly the point I was coming to next. The chairman of the corporation said at the annual luncheon of the British Independent Steel Producers' Association yesterday almost exactly what the hon. Gentleman has just said. He threatened those who bought their steel elsewhere that when boom times returned they need not look to the corporation to supply them. That is not the sort of talk that will restore the con- 886 fidence which I should like to see in the industry.
It may well be that there was a time when people were shopping around. They naturally bought here because our prices were so low. That is why I was saying that if we had put up our prices we would have been able to take advantage of that situation. I do not think the chairman of the corporation was wise to level threats of that sort at customers who buy their steel elsewhere. We have to produce a product at the right price, of the right quality, at the right time. This ultimately is what will decide the corporation's future. I can understand the concern being expressed by the British Independent Steel Producers' Association and the particular companies.
Mr. Halahan asked yesterday at the annual meeting how independent companies were to survive when the Government provided lavish hand-outs to the British Steel Corporation but the independent producers got nothing. He has a good point, and I will read a couple of sentences from his speech. He said:The writing-down of capital debts by the Government for one part of a competitive Industry and not the other is unfair to say the least, and furthermore may not endear our industry in the new European scene. But for this to be used to ensure that price increases will be restrained to 5 per cent. next April, and further restrained throughout 1972, whatever the market circumstances, would be a savage blow at the financial prospects of the private sector, on whom cost increases already bear no less hardly than on the Corporation.If we want a total steel industry package—and the Secretary of State has pointed out that for as far as he could see bulk steel making would be in the hands of a nationalised corporation—and if at the same time we also want to enjoy the benefits of the private sector—and no one has suggested that we should not—it cannot be fair to give the public sector all sorts of advantages withheld from the private sector. Mr. Halahan has a real point. If we have to compete in Europe we shall need to have the industry in tip-top shape right the way through, not just odd individual elements.
I return to this financial objective. While I hesitate to remind my hon. Friend the Minister for Industry, he has always made this point most strongly 887 and his remarks during the Second Reading debate on the last Iron and Steel Bill on 8th May, 1969, were clear beyond doubt. He said:It is most important to get this right, for unless the target set represents a reasonable return on assets, the servicing of capital will be inadequate and the corporation will have further unfair advantages over the private sector." —[OFFICIAL REPORT, 8th May, 1969Vol. 783, c. 778.]I am sure that my hon. Friend has not forgotten that. I know him to be a man of great integrity and I am sure that he will honour this because it is of great importance.
We have to remember that it is the management of the corporation which must ultimately bear the responsibility for its success or failure. If my hon. Friend will establish with the chairman and the board of the corporation the financial objective which they and he accept, it is then desirable to say to the chairman and board, "If you do not achieve this objective you will be replaced by another chairman and another board." The people of this country have since nationalisation accepted a lot of promises and false horizons with this industry. They have a right to ask the management to get the situation right, and if it cannot, to say that it should make way for someone else.
This is fundamental. We must be clear about the objectives and if they are not met we must replace top management or once again we shall see a nationalised industry travelling down that well-trodden path—[Interruption.]—that much loved path to the taxpayers' pocket. As I said in the debate on public expenditure—and I apologise to the hon. Member for Penistone (Mr. John Mendelson) who apparently raised a point of order after I left the Chamber to attend a meeting with the chairman of the Forestry Commission—the taxpayer will pay for excellence and good value and he has a right to both. As yet the corporation has not provided either.
§ 5.15 p.m.
§ Mr. Frederick Lee (Newton)
My hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) and the hon. Member for the New Forest (Mr. Patrick McNair-Wilson) mentioned two matters which the Government must clear up. The question 888 of what control the House will have over the reconstruction of capital in a nationalised industry if and when we enter the European Economic Community is of vital consequence. The hon. Member mentioned differences between nationalised industries, where we reconstitute the capital in this House, and private enterprise. Private enterprise is quite used to reconstructing its own capital. Would there be any difference upon entry to the Community in the ability of private enterprise to reconstitute its own capital, especially in the circumstances described by the hon. Gentleman where reconstitution of the nationalised sector may have repercussions on the other part of the industry?
No one is quarrelling with the reconstruction suggested in Clause 1, and I would be the last person to disagree. My hon. Friend reminded us that I wrote off about £415 million in the coal industry. I had nothing to do one afternoon and it seemed to be a good idea that we should do it. I am not quarrelling with the Government's decision. My hon. Friend mentioned the relevance of getting the global target right; but what is it we are aiming at? In my day at the Ministry of Power we certainly thought in terms of an industry exceeding 40 million tons.
I know that at the moment steel industries throughout the world are depressed and it is wrong to talk so gloomily about the situation in the British steel industry as if it were something happening in isolation. If we delay a decision or, worse, announce a decision of a global figure influenced by temporary depression that would be a great tragedy. I must ask the Minister to say that the Government are not seeking to bring down the totals of steel production because of a temporary recession which is causing the industry, certainly the British Steel Corporation, to lose money on a scale which would not have been the case if the economic conditions of two or three years ago had persisted.
At the moment some of my constituents are receiving a New Year present from the Steel Corporation in the form of redundancy notices to take effect at the end of the month. While I welcome the £265 million of capital development for the industry, it is precious little consolation if I cannot be told that after the 889 unanswered case we have made for the continuation of steel-making at Irlam there is to be no capital investment there. Now that we are faced with a redundancy figure of 1,900 people in a small area, it is time the corporation made a decision to continue steel making at Irlam. Phase 2, which would have cost another 2,400 jobs, has been abandoned. Unless it is said that the objective is to modernise the steel works at Irlam and bring in electric arc furnaces to replace the obsolete rubbish which is being got rid of, I cannot view the £265 million with any great glee.
Clause 2 casts doubt on whether the B.S.C. has been acting legally in closing the many branches of the industry which have been closed. Do the Government and the B.S.C. believe that a case taken before the courts based on the 1967 Act would show that they had no right to close down certain works which have been closed? I should like some further explanations on this from the Minister.
When the Labour Government took over the steel industry, I drew up a list of firms which would go into the public sector. Everyone knew that one reason for nationalisation was the large amount of obsolescent plant in those firms which private enterprise either could not or would not find the money to modernise. It was to modernise those plants and so to achieve the 40 million tons we aimed at that we took those firms into the nationalised sector. Is there now concern in the Government and the B.S.C. that, whereas the House of Commons took that decision on nationalisation so that those firms could be modernised, the B.S.C. in some instances, instead of modernising obsolescent equipment, is closing firms? The Government owe the House an explanation for the words in Clause 2(1):Nothing in sections 2 and 3 of the Iron and Steel Act 1967 … shall be construed as imposing on the Corporation any duty to carry on, or secure the carrying on by the Corporation and publicly-owned companies, of iron and steel activities …".Why are we asked to do this? I can only think that there is legal doubt whether the corporation is acting correctly within the ambit of the 1967 Act in doing what it has done. Or is the explanation that if the corporation were allowed to take account of losses the Government could then say, "It is your own fault 890 because you did not close down more of the older plants."?
I hope that we shall have an assurance that the global figure of £40 million is still the objective of the Government and the B.S.C. and that they do not see it as their duty to close down obsolescent works which we knew all about when the House of Commons decided to nationalise and which it is their duty to modernise rather than close down.
In the reconstruction of the capital of a great industry like this there is a twilight area. We are now seeing the onset of technological unemployment. Can the Government in 1971 calmly contemplate the situation where, in a comparatively small community based on one huge firm, that firm walks out of the economy and the whole community collapses'? The Government know full well that it would cost the taxpayer far more to try to reconstruct the economy of that area and to pay unemployment and other benefits than it would to provide temporarily the money necessary to keep the firm running until modernisation brings it to economic health. In Irlam this argument goes beyond the steel industry and can be applied to the coal industry. I humbly tried to get something going in this respect when I got the Cabinet to agree to the expenditure of £30 million.
At a time when technological unemployment is showing and the Chancellor of the Exchequer has failed in his fifth attempt to get the pump re-primed, the Government should look at what technological unemployment is about. When the Government say to the nationalised industries that they must behave in a thoroughly commercial way, those industries are entitled to say that it is no concern of the Government if they close down. On the other hand, can the Government afford to sit back and allow that to happen?
In the greater Manchester area, where, normally, redundant steel workers would get other employment, in the last 12 months unemployment has almost doubled and the tendency is still further in the same direction. The B.S.C. has said that it studied the social consequences of closures at Irlam. The social consequences having been studied, the decision was still taken, and the results are now so catastrophic that a person losing his job in Irlam is unlikely to get 891 another job anywhere in the greater Manchester area.
It is now a matter of public accountability. It is no good either the Chancellor of the Exchequer or the Prime Minister saying how concerned the Government are about the terribly bad unemployment figures unless they are prepared to do something about them. Where we have a nationalised sector in which the capital structure can be adjusted and in which we can look at the consequences of closure, it is not good enough for the Government simply to say that nationalised industries must be run on a purely commercial basis if the result will be wide-scale devastation and unemployment.
I therefore ask for some adjustment in this twilight area between commercial viability and the catastrophic results of standing back and allowing closures. There must be an adjustment of Government policy to allow plants which could become viable with the injection of capital to remain open in the meantime by means of Government financial assistance to the British Steel Corporation.
§ 5.30 p.m.
§ Miss Joan Hall (Keighley)
I should like to address my remarks particularly to the question of paying off the sum of £350 million. Such a large sum of money is not always understood by people at first glance, and it is better to bring it down to a level which can be understood by an ordinary person. This sum represents £7 for every person in the country. This worries me intensely, particularly when one compares the steel industry with other industries which do not receive subsidies in this form and simply go out of business. Those industries do not hit the headlines because they do not employ as many people as are employed in the steel industry.
In the textile industry and in engineering over the last five or ten years a number of companies have gone out of business, not because they have not been go-ahead firms—many of them have been forward-looking—but because they have faced a difficult time with cheap goods coming in from overseas, lack of investment, and the additional difficulty of obtaining investment from banks and other sources. They have simply gone 892 out of business; they have not expected the Government to subsidise them. In this respect the steel industry is something of a spoilt child in the favouritism which is accorded to it. I fail to see why the steel industry should receive assistance by as much as £350 million when other industries have not had the same preferential treatment.
Obviously it is not appreciated just how hard competition is in the textile industry. Yet firms in Keighley, for example, have not asked to be subsidised; they neither expect nor want to be subsidised. But such firms are no less important to the industrial and commercial life of the country than the steel industry. I would not wish to be thought to be a Job's comforter, but I was interested to hear the Minister say that he hoped that the steel industry would move to profitability by 1973–74, subject to the normal uncertainties in the steel industry. This comment could apply to any industry in which there are always normal uncertainties. However, I am not happy that the steel industry will go into profitability. What will happen if it does not do so? Who will write off the loss?
I was interested that the Minister should say that the British Steel Corporation expected to keep this loss to a minimum. But everybody knows that if a bottomless purse is available there is not much incentive to keep things to a minimum. I should like to be assured that there will be some means of control to keep these losses to the minimum.
I end as I began. Although there are other industries in this country which have not been subsidised, and which do not wish to be subsidised, such industries have as difficult a time as the steel industry and face far greater competition. Therefore, I hope the Minister will clarify the situation about profit and loss and will give some of us a little more hope that we shall have a healthier steel industry.
§ 5.35 p.m.
§ Mr. Eddie Griffiths (Sheffield, Brightside)
I wish at the outset of my remarks to point out to the hon. Lady the Member for Keighley (Miss Joan Hall) that if the British Steel Corporation had the same freedom as is enjoyed by the average private business I am sure we should not be discussing these matters today. But if the hon. Lady and her party insist on 893 price restriction and vetting committees which delay capital investment for up to two years, she should know the problems which this creates.
§ Miss Joan Hall
I wish only to comment that the steel industry has not had to face the tremendous competition which has beset the textile industry in the face of the cheap goods with which it has had to compete.
§ Mr. Griffiths
The hon. Lady may be interested to know that yesterday I took a deputation of cutlery manufacturers, who are an offshoot of the steel industry in Sheffield, to see the Secretary of State for Trade and Industry on this very problem.
I wish to touch on three points. I wish, first to look at the financial situation of the British Steel Corporation; secondly, I wish to examine the borrowing powers of the corporation; and, thirdly, I should like to draw attention to the present situation in this country's city of steel—Sheffield. When we are told that the corporation expects a loss of £100 million this year and next year, we must look at some of the reasons for this situation since this might help to keep the matter in perspective.
The corporation in the last two years has continued to invest when it has been losing money. Even now it is investing hard-earned capital so that in years to come it can get some of the fruits of that investment. It has not followed the example of the private companies prior to nationalisation which did not invest at all, but it is just because the industry has invested its capital that it has fallen into the present situation.
There have been continuing restrictions on price increases by both Labour and Conservative Governments. The story has been the same ever since nationalisation. Price increases have been too small and too late to have any appreciable effect.
Another reason why the corporation faces a £100 million loss is that it is charged with a social responsibility as well as with the task of making a profit. During the last 12 to 18 months it has deliberately been maintaining old, unprofitable plant in existence because of the social consequences which it would have to face if it made a normal straightforward commercial decision. I believe we as politicians must make up our minds 894 whether a nationalised industry is to be charged to make a profit and whether the Government should take over the social responsibility; or we must decide whether the Government are showing due regard for the social consequences of their actions when profitability will suffer accordingly.
I have already mentioned what happened to investment before the industry was nationalised; and we all know of what happened when the Government interfered in the steel industry when part of a major complex went to Ravenscraig and the other half to Llanwern. If those two units had been combined, it would have been the most modern plant in the country.
Another factor which has contributed to the £100 million loss is that the corporation, like the industry at large, has passed through possibly the worst economic climate for many years. Finally, there is the continually increasing threat of Japanese competition. The Japanese do not have to face up to the social consequences which we face, are able to put their plant exactly where they want it, and are able to move workers to any location in conditions which would not be tolerated in this country.
I am intrigued by why everybody is so optimistic about 1973–74. We shall lose £100 million next year. We shall lose a further £100 million next year. Even if the accumulated losses to the beginning of 1973 are wiped out, the fact remains that there has to be a sufficient turn-round in trade for the corporation to earn at least £100 million more in 1973–74 before it moves into profitability. I should like to know what are the contributory factors. What will bring about this substantial change in the economic climate? Will inflation halt altogether? Will the Government release the corporation from interference in its proposals for price increases? Will there be a contraction of capital investment so that, instead of the corporation reinvesting in a brown field or a green field site, the money will appear as profit? Why are we so optimistic that life will get better from 1973 onwards?
We are told that it may be that we shall go into the Common Market. The hon. Lady made a valid point in that connection. At the moment, the joint 895 steering group scrutinises everything that goes on in the corporation. It tells it how it may spend every penny. If we go into the Common Market, will there be someone in Brussels telling the corporation where it can or cannot expand?
I want now to say a few words about Sheffield. In a general debate of this kind, normally I do not address remarks towards the city of Sheffeld, part of which I represent. However, there have been certain developments there in recent months which are worth relating. Right hon. and hon. Members opposite often refer to profitability. The Special Steels Division, which is centred in the main in the Sheffield-Rotherham area, has shown a consistent trend of profitability. The last financial statement of the corporation on a full year's activity shows that if it had not been for special steels the corporation really would have been in the doldrums. On the basis that it is important to preserve, maintain and improve the main source of profit, there has been a sad lack of capital investment in special steels in the Sheffield-Rotherham area in the last two or three years. Compared with the money spent or scheduled to be spent at Ravenscraig, Llanwern or Ebbw Vale, the money which has been spent in the Sheffield-Rotherham area has been a mere pittance. But this is the area and these are the products providing the small amount of cream which the corporation has.
I hope that a substantial part of the money allocated for borrowing purposes will be used to strengthen the position of the Special Steels Division in the Sheffield-Rotherham area. However much is spent on bulk steel making, the profit margin in the face of Japanese and European competition will always be relatively small. If we put substantial sums of money and expansion into special steels, I believe that they will always be the mainstay of the corporation.
We have heard mention on previous occasions of the River Don works. The really black cloud hanging over that works has lightened somewhat. But the people of Sheffield still want to know how much capital investment is to go into the works. People in Stocksbridge and Rotherham want to know how much 896> money will be invested there and what their future is likely to be.
The point has been made already that we have not yet had the report of the joint steering group. I believe that this is deliberate policy. The Bill has been brought forward just to take care of the position until 1974–75. It is clear from all the indications that we have had to date that the only expansion envisaged by the Government for the corporation up to 1975 is a possible extension of the Heritage schemes. Those schemes have now been started. But there is no mention of a brown field site or a green field site. We are told that these matters will be dealt with in the report of the joint steering group. However, I am prepared to look into the minds of the Government and predict what will be in that report. I am prepared to guess what the Minister will say in April. It has a hearing on this Bill and on the borrowing powers and finances of the corporation.
I believe that the Government's conclusion will be that the expected capacity and sales of the corporation in 1980 have been over-optimistic and that they do not see the necessity for both a brown field and a green field site. I believe that the Government will tell us next spring that we shall not see a green field site up to 1985, although there may possibly be a brown field site before 1980.
On the basis of optimism that we shall get a brown field site, I have been putting my steel experience to good use and looking round the country to see where it should be in order to give the maximum return on the capital invested by the corporation. I have plumped for a site at Redcar. There is a deep-water terminal, and the infrastructure, the schools, the houses and the skilled manpower are there. It is an area which has been clobbered out of all recognition by redundancies in the steel industry in the last few years. Certainly I suggest that an early decision should be made that the brown field site should be at Redcar.
I now wish to put one or two points to the Minister about the enlightenment that he gave us on the 1967 Act. The hon. Gentleman has confirmed that it gives unlimited authority to the corporation to sell off any part of its assets that it finds unprofitable or any part of its 897 assets of which it wishes to rid itself for other reasons. It also removes the corporation's obligation to maintain a supply of every kind of iron and steel product if it does not want to produce it. Will the hon. Gentleman take that a stage further and confirm that the consumers of products which the corporation may stop producing will be entirely in the hands of foreign producers? That is all very well when demand is low, as it is possible to buy job lots at fairly low prices. But do the Government realise that when there is a boom in the steel industry, in effect, more than normal prices have to be paid for such products? Do they also realise that this again will bring about an abdication of the Government's responsibility to provide jobs for our work people? Every time this country goes out of any area of activity, we give our European competitors a stronger hold on the consumers of those products, and we put British steel men out of work.
I have one final point. I find that any discussion of green field and brown field sites always leads to a great deal of woolly idealism. Even with brand new large-scale plants in ideal geographical situations, unless there is a fantastic increase in demand it is logical that it is possible to keep those modern high-cost plants in production only by closing unprofitable plants. To those who say that we must have green field sites and brown field sites, I suggest that we must also recognise that places like Consett, Corby, Shelton and Irlam may cease to be steel-making centres. We cannot have it both ways. If we have brand new, expensive, high capacity, low cost steel making, say, 15 million ingot tons per annum, a lot of these places which we define as integrated steel plants will simply become finishing mills.
I look forward to the statement by the Minister in the spring about the proposals and findings of the steering group, but I am afraid that my forecast will prove correct. I believe that the Government are deliberately restricting the expansion of the British Steel Corporation and are probably preparing it for an arduous existence in the Common Market.
§ 5.50 p.m.
§ Mr. David Crouch (Canterbury)
I listened with great interest to the closing 898 remarks of the hon. Member for Sheffield, Brightside (Mr. Eddie Griffiths). In fact, I listened to him most closely throughout his speech, but I thought that in his closing remarks he made a positive contribution to the thinking that is necessary as we consider the whole pattern of British industry, in particular nationalised industry.
The hon. Gentleman spoke with great authority on the steel industry. He was brave enough to suggest that we had to make economic decisions in industry and that, in so doing, we faced grave social consequences. Not everyone in this House is so brave. There is a confusion which inevitably descends upon politicians as all kinds of social as well as economic pressures are put upon them.
§ Mr. George Lawson (Motherwell)
While appreciating much that has been said, I think that in the presence of my hon. Friend the Member for Sheffield, Brightside (Mr. Eddie Griffiths) we should say that although he talked about what might happen in other areas, when he talked about his own area he spoke of the need for considerable expansion.
§ Mr. Crouch
I accept that. I do not deny that we shall undoubtedly see Sheffield remaining on the map as a major steel industry city in the world.
§ Mr. Eddie Griffiths
I was calling for greater capital investment in Sheffield, because it is profitable and would put the corporation in a much better position than it would be if it were not for the special steels.
§ Mr. Crouch
I understand. Perhaps I should return to my general remarks having followed the hon. Gentleman to a certain extent in some of his previous observations.
The hon. Member for Ebbw Vale (Mr. Michael Foot) cast doubt on whether we know how to run and manage nationalised industries. I am sorry that he is not in his place because I should have liked to direct some of my remarks to him particularly.
There is still considerable confusion in our minds about the administration and management of the nationalised industries from this House. For many years I have served on the Select Committee on Nationalised Industries. A 899 recommendation made to Parliament by that Committee some years ago was very clear about separating the economic requirements of the nationalised industries from the necessary social obligations when such decisions are made. The Committee's report made it clear that the nationalised industries could not succeed unless, to use the words of the right hon. Member for Newton (Mr. Frederick Lee), we took out the twilight area and stopped the fudging between an economic advantage or reason and a social obligation.
Unfortunately for too long uncertainty has been hanging over the steel industry. As we go forward with this valuable Bill, I believe that there will continue to be some uncertainty in the industry, not any longer because of insufficient investment—the Bill makes good that deficiency—but because it is still not clear what the position of the Secretary of State and the Department of Trade and Industry will be in relation to the board and management of the British Steel Corporation. I should like these definitions of the relations between this House and the boards of nationalised industries to be clearer.
My hon. Friend the Minister for Industry said that in a few years the British Steel Corporation will perform in a normal commercial manner. But the hon. Member for Ebbw Vale said that decisions by the British Steel Corporation must be subject to the wishes of this House. I suggest that neither is completely right. I can understand the hon. Member for Ebbw Vale saying that this House must have a say in the determinations and decisions of nationalised industries. They are nationalised so that Parliament shall have a say.
The right hon. Member for Newton is personally involved in his constituency about the decline of an old part of the steel industry. He must be under great pressure. He speaks with great sincerity in many debates expressing the views of his out-of-work and potentiolly out-of-work constituents. We should listen to him with respect and take account of what he says. Equally, the Ministers responsible must take account of what hon. Members say at any time, not for economic reasons, but for constituency and social reasons and true representa- 900 tion of the people's problems in this place. The responsibility lies on the Minister's shoulders to take those representations properly into account.
We cannot expect to see the re-emergence of a great steel industry in this country if we put too much of the social responsibility on to the British Steel Corporation. This is not to say that that board, headed by its chairman, should never consider the social effects of any decision, however big or small. Every employer, whether private or public, will always have such a responsibility. Every employer makes an impact on society by his decisions. When an employer makes an impact on society, he must take into account what the result of that impact will be.
When such major industries as our nationalised industries cause a complete social and economic change in an area by their decisions, the dichotomy, the argument which goes on, is wrong for future economic success. We should relieve the British Steel Corporation, as we should relieve the corporations of the other great nationalised industries, of having to take too much account of these social obligations. They should know and recognise them but they should not be deflected from their strategic course, which is to achieve success, viability, profitability and expansion.
My hon. Friend the Member for New Forest (Mr. Patrick McNair-Wilson) made this point too when he asked the Minister to establish clear financial objectives and to give them to the chairman and his board and to say, in effect: "Can you do it? Are you prepared to take on this challenge? If so, you can have the job. We will see how you get on, and we will support you. From time to time we may have to come in and say that for social reasons we do not like your decisions, but do not be deflected. We recognise that you are following a proper strategic course. We shall take care of the problems. That is our duty. That is our responsibility. It is our responsibility to spend taxpayers' money in this way."
I should like this Parliament and this Government to get clear the way in which we should run our nationalised industries. I am not one of those who think first and foremost about denationalising our nationalised industries. I think first and 901 foremost about making them a success, and we are now making some of them a success. The air corporations compete around the world and they are not unsuccessful. The British Airports Authority is not unsuccessful. I could list others. Perhaps we shall one day see British Railways competing effectively as they link up on the Continent and modernise themselves still more. However, I do not today want to debate other industries as the subject before us is the iron and steel industry.
The Bill gives the corporation and the industry generally a fresh start. It puts the corporation on a proper financial footing. I should like to see real economic objectives put before the House and the corporation, objectives which can be seen by hon. Members and by the public. I want not only to give a fresh start to the corporation, to its board, to its managers and to all those who work so well in the industry, but I want them to know that they are being given a fresh chance and a fresh challenge, because only in that way will they meet the challenge.
Above all I want the public to know that we have faith in this industry as we vote today to give it greater investment powers and to write off debts. That is the fresh start. We must not let the debate go by and the Bill go through to become an Act without letting people in the industry, and those outside it too, know that this a fresh start and that the industry is being put on its feet and being given a chance to compete. It should be made clear that we are not going to bow our heads and admit that we are frightened of competition from the Japanese, the French, the Belgians, the Dutch or the Germans. This is the turning point for the British steel industry. We must ensure that we give the industry the enthusiasm which I am trying to express and that we tell the public about it as well.
I am a little concerned at the continuing intention, as expressed in the Bill, of the Minister to intervene in and interfere with the commercial operations of a nationalised industry, though I realise that is being done because we in the House of Commons are allowing the industry to write off debts and to set up a reserve fund. The steel industry is to have reserves, which every industry should have. The industry's house is being put in order, 902 and I appreciate that, as with all other nationalised industries, the Minister wants to have a say in how its funds shall be administered.
Only yesterday I was inquiring in a Standing Committee about why the Minister concerned should have a say in telling the I.T.A. how to run its affairs. I happen not to like this sort of intervention. It is the kind of intervention that we have always had but it is my view that it should be brought to an end.
I was not one of those who welcomed the Secretary of State's intervention on the issue of price reductions. The intervention was a move in the wrong direction. I understand and accept my right hon. Friend's reasons for what he did and they have been explained to the House. The industry was not quite in order. Its affairs were not in proper shape. Its forward estimates were wrong. It was expanding, or proposing to expand, and at the same time carry a great loss. Some re-examination was necessary. Nevertheless, I do not welcome intervention. I do not like to see a Minister automatically assuming power to control the industry's reserves.
I conclude by reiterating what I said at the outset. It is no solution to our problems to push the corporation into perpetuating incorrect economic and industrial plans or programmes. If great social reasons made us push it that way, we should relieve the industry of having to move in the wrong direction because of having to consider with too great weight the wrong factors. As I said earlier, that is where the Government must come in. They must come in to safeguard the community against the consequences of correct economic decisions.
I believe that with the Bill we have a chance to move in that direction and to create a case example of how we should administer our other nationalised industries. We have a chance to make a fresh start. I hope that the Government will now begin to think about the overall problems of administering our nationalised industries across the board. We cannot go on as we are. We have to give our nationalised industries a fresh start. We have to give them the chance to succeed. I believe that that will be done only by having less interference and by the boards being made 903 more responsible to the people they serve—the public, industry and the community at large.