§ Question again proposed.
§ 6.8 p.m.
§ Mr. Barry Jones (Flint, East)
The hon. Member for Canterbury (Mr. Crouch) has made a considered speech and one that will be worthy of serious re-examination. I am with the hon. Gentleman in seeking to make the nationalised industries pay their way fully and have an honoured and effective place in our industrial and economic scene today and for the decades ahead.
I believe that the British Steel Corporation has made a distinctive contribution to the steel industry and to the economy generally, and in very difficult times at that. It has had to put up with price controls and with the worst-ever inflation in costs. I believe that to a degree at least it has suffered from under-investment. All hon. Members are aware of the recession in steel consumption and of the growing commercial opposition abroad. I think that the corporation has been faced with added difficulties in that for a period of time the Government have been unable to announce their long-term plans. It is to the credit of the corporation that it has been able to revise its organisation and planning and that during the last year it has been able to extract from the Exchequer large sums 904 of money for the development of the industry.
The corporation carried out some of the biggest mergers ever in the industrial life of Britain. It has set up new cost controls. Since 1967 management-union relations have improved steadily. I pay tribute here to the major unions in the industry—the B.I.S.A.K.T.A., the A.E.F., the Transport and General Workers' Union and the blast furnace men, with whom I worked for a brief period in the steelworks in my constituency and of whose union I was a member. But it is a fact that the corporation is not something in which I take great pleasure yet. I know that it has made an attempt at improving efficiency and profitability, that some 61 works have been phased out, that last year there was a slimming in manpower of 20,000 men and that in cost reductions this year already the corporation has saved more than £30 million. It is fair to state all this to the credit of the corporation because it suffers criticism from time to time.
The Bill is of enormous importance. I have selected a reasonably localised example of how increased efficiency and profitability could come to the corporation. This is by examining the large steelworks in my constituency employing 13,000 men, the majority of whom are my constituents. I want to see this great steelworks moving further into the black and becoming even more efficient. I should report that it has had new coke ovens recently, that its blast furnaces have been relined and that there is being built a huge tandem mill, potentially the most effective and modern in Europe. That is on the credit side of Shotton. I hope to see Shotton contribute to the increased profitability of the corporation but I must point out the dilemma facing it. There are 12 open-hearth furnaces which are now nearing the end of their efficient life. By the mid-1970s they will need to be drastically altered, which I feel could not occur, or to be replaced.
Immediately there springs to mind the question of the replacement of these furnaces by two B.O.S. furnaces or three L.D. furnaces. That could ensure for Shotton continuation in the making of steel. There is little point in having a steelworks that in effect does not use its own metal. Three thousands jobs are 905 directly involved in the coke ovens, blast furnaces and furnaces for making the metal.
The Bill seems to presage—I do not criticise it—large-scale investment in other parts of the country. The temptation may be to have a number of very large steelworks. One may deduce that steel-making capacity at a plant like Shootton need no longer continue. There is concern in four towns in my constituency, Connah's Quay, Bagillt, Flint and Shotton. No mention is made—perhaps it is impossible—in the Bill of speculation about development of Birkenhead Docks. We would like to hear more from the Government about this development which would make the docks capable of taking ore carriers, transferring ore from Birkenhead to the site just 10 miles away. Such a development could secure a reasonable future for our steelworks. So far, however, we have had no indication of what is to happen at Birkenhead.
It is fair for me to be brief and not labour the issue too long in the localised way I have adopted so far, and I will do no more than show how I see the central dilemma facing the corporation and the Government—the question of enormous modernisation and consequently, in certain parts of the country, the possibility of steel plants being run down, even phased out, in time. In my constituency there is realisation that rationalisation could conceivably mean redundancy and unemployment for certain parts of the country.
My hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) mentioned green field sites and the Common Market and how our entry into the E.E.C. could conceivably affect the long-term investment plans and the location of our steel-making capacity. I spoke in the Common Market debate and felt that I had to be cautious and come out against entry because I could not see how the Scottish and Welsh steel industries in the long term could be well served by our joining. We have heard the opposite case from the Government and it is a matter of contention and debate. I accept the integrity of statements by hon. Members from both sides of the House on this issue. In Shotton, we hoped that we would be considered for a green field site but the indications are that the pos- 906 sibility of such a development in Shotton is receding rapidly.
I join with those who throw their weight behind the need for an immediate, or at any rate a speedy, announcement concerning the long-term investment policy of the corporation. Until a decision by the Government is made it will be very difficult to comfort and satisfy the reasonable complaints and worries of steel-making communities all over Britain, particularly in Shotton.
§ 6.16 p.m.
§ Mr. John Biffen (Oswestry)
The House will have heard with interest the views of the hon. Member for Flint, East (Mr. Barry Jones) on why he thinks the steel industry in Wales and Scotland would be disadvantaged by British membership of the E.E.C. The interest of the House will now be fixed on what the hon. Member for Motherwell (Mr. Lawson) has to say, if he is fortunate enough to catch your eye, Mr. Speaker, as he is a well-known last ditch Eurofanatic. It would liven our proceedings if the debate about membership carried on by the Labour Party so assiduously upstairs could occasionally be played out on the Floor of the House.
My first and immediate thought on this debate was what a genteel way it is proceeding. Indeed, it has the essential dolefulness of an annual general meeting of shareholders who have been called together to hear something about the capital restructuring of their company. But ordinarily in private commercial life, of course, the directors would be obliged to give a proper account of their stewardship. We had the hon. Member for Ebbw Vale (Mr. Michael Foot) doing his best to take on the rôle of the angry shareholder, but he is not the radical he was. When he came to the possibility of actually being confronted at long last by real steel barons he flinched away from any criticism of the corporation. That is a sad demise of the radical professions which we ordinarily associate with the hon. Member for Ebbw Vale.
There is much to be said for the House getting away from the stereotyped steel debate in which the Opposition attack the Government, the Government's supporters attack the British Steel Corporation and the Government maintain a benevolent and neutral silence. We have 907 endeavoured to get away from that today. We are indebted to a number of hon. Members on both sides who have sought to mitigate the stereotypes of party controversy about the industry. I am thinking particularly of the hon. Member for Sheffield, Brightside (Mr. Eddie Griffiths), who very fairly said that we would have to consider whether the choice of a green field site did not imply further contractions in other directions in the industry which would have constituency consequences—consequences which were underlined by the right hon. Member for Newton (Mr. Frederick Lee) and by the hon. Member for Flint, East.
One cannot but feel sorry for a steel corporation and its management which are constantly upbraided for, on the one hand, not pursuing the conventional activities of profit-seeking business and, on the other hand, for not pursuing policies concerning both the nature of the plant and its location which are deemed to be consistent with each hon. Member's constituency interest.
We are none the less obliged to ask ourselves, and to ask the Minister, whether he is happy with the present management of the corporation. I make this point in no personal sense. I am talking about the management structure and whether we are seeing in the Bill the fruits of the activities of an organisation which is not most suitably equipped to deal with the commercial situation in which it has to operate. I ask this as a neutral question. I do not seek to pose the answer. However, on an occasion when the shareholders are called together to write off capital sums of this amount that is the most obvious question to ask, not least because in the debate on the Iron and Steel Bill in 1969 my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), when leading from the Opposition Front Bench, said this:We have the gravest distrust of product grouping. It gives us the impression that, instead of having one centralised monolithic monopoly handling all steel products except those in the private sector, we are going to have perhaps four monolithic monopolies, each responsible for one product group".—[OFFICIAL REPORT, 8th May, 1969 Vol. 783, c. 696]That is dominating evidence of the concern of my right hon. and hon. 908 Friends about the very pattern of management structure which has been adopted by the corporation. All that I am asking—at the very least we deserve an answer to this—is whether the Government are now satisfied that the present management structure of the corporation is the most suitable.
There is the question of the totality of the activities of the corporation. I understood that the corporation was to be encouraged to move into partnership with private capital and to limit its activities in certain directions, to divest itself of some responsibilities. One must remember that companies in the private sector which are confronted with situations of fairly small reorganisation are often associated with ceasing to operate the whole scale of activities in which they have hitherto engaged. I am thinking particularly of B.S.A.
What is the progress report on the policy of divestment or hiving off, or whatever ugly phrase one cares to use to describe it?
That takes me to the second consideration which very properly has concerned both sides, namely, that it would be foolish not to realise that Government intervention in the pricing policies of the corporation is in part, though we know not to what extent, responsible for the corporation's present financial situation. I accept the judgment on this point expressed by my hon. Friend the Member for Canterbury (Mr. Crouch).
None the less, it would be useful to have it on the record that there were a number of people who doubted the corporation's wisdom in applying for the 15 per cent. increases at the very beginning of this year, because in the judgment of those people the market was unlikely to bear increases of that nature. The realities of commercial life seem to have borne out these people rather than the corporation. There must be continuing and, I suggest, growing unease that the policy of direct price intervention in the public sector will create more problems than it will provide solutions.
What I found particularly unnerving about the remarks of my hon. Friend the Minister for Industry was the indication that the price control on the corporation seemed to be extending beyond 909 the limit which has been covered by the Confederation of British Industry's period of voluntary restraint. Are we moving into a situation where there will be fairly rigorous price controls on the activities of the corporation throughout 1972? If so, one of the consequences will be to depress the trading circumstances of the private sector.
I reassure hon. Members opposite. I shall not lapse into a traditional theological argument on the merits as between the private and the public sector. I say only that I happen to believe that on both sides of the House there is very real concern about current levels of unemployment. There is also a belief that those levels can be mitigated, in part at any rate, by an upturn in investment. Therefore, there will be general anxiety to see the billet plant which the private sector wishes to undertake proceeded with as quickly as possible. I believe that the finance for the billet plant is in itself determined, at least in part, by the ability of the private sector to have relatively flexible and free pricing arrangements.
This goes a little further. It takes us into the central point of consideration—namely, just what will be the relationship of the Bill and our intending membership of the Community? Those who argue in favour of Community membership say that, if only the industry can be brought within the wider framework of the Treaty of Paris, there will he restored to the industry a commercial freedom which in reality it does not now possess and that, therefore, it will enter into a more competitive, but none the less a probably much more satisfactory, trading arrangement.
If that be true, in every other aspect of our national life we have talked about transitional arrangements. It would be a real irony if the British steel industry were to be subject to the cloying hand of intimate Government concern in its economic behaviour in a position exactly the reverse of what it is supposed that industry will experience once it begins to operate under the Treaty of Paris. This goes not only for the public sector but also for the private sector.
I therefore hope that the whole policy on the relationship between the Government and the steelmakers, whether they are public or private, will be one which 910 will quite deliberately seek to relax control so that the industry can proceed in circumstances much more similar to those which it will expect to find within the European Coal and Steel Community. If we maintain tight control up to almost 1st January, 1973, to switch from one situation to the other would court unnecessary difficulties.
The very prospect of Community membership must touch upon issue after issue which has been raised in the speeches made this afternoon. First, there is the whole question of the green field site. There has been great and fluent advocacy on this point, first about whether it is desirable and, second, about its location. No one who heard my hon. Friend the Member for Middlesbrough, West (Mr. Sutcliffe), reinforced as he was so cogently by the hon. Member for Brightside, can doubt that there was a very strong argument for the Redcar site. But we should be naїve in the extreme if we did not take into account the existence of large bulk steel construction at places like Marseilles, Dunkirk or Ijmuiden. So we must ask whether this is a decision which will remain within the context of this Government——
§ Mr. Biffen
I am sure that all of us who have argued the desirability of a green field site will be interested to know that in the judgment of my lion. Friend this decision will belong to the Community. He may be right but it would be more helpful to the House if the Minister or the hon. Member for Motherwell answered that question than if I did. It is an answer to which we will look forward.
Let us take it one stage further, to another area where a good deal of interest has been expressed about the corporation's plans. I refer to the River Don works. The plans for the open dye forge and the 200-ton casting foundry are very ambitious. Some might say that in the context of world supply and demand it might be a little hard to make a case. I do not know: I am not here to answer my own question—[Laughter.] That is what we pay the Minister for. But there 911 can be no doubt that the major customers for forgings and castings of those dimensions are the public sector authorities such as the Central Electricity Generating Board.
We know that the Community has rules prohibiting preference in public purchasing for the products of the individual nation State, so it is very important that we understand exactly what will be the relationship between the C.E.G.B. and other potential national State purchasing agencies within the rules and framework of the Community. And we must know now, so that we can make our own appreciation of what investment policies are being pursued.
Let us make no mistake about it: the decision one way or another affects jobs not just in Sheffield but in other parts of the country. If we end up with surplus capacity, we might fractionally increase employment in Sheffield but it will be at the expense of employment in other areas, particularly the West Midlands.
Mr. Eddie Griffiths
Is the hon. Gentleman saying that the motto which we sometimes use in hard times, about buying British, will no longer be permitted in the E.E.C.?
§ Mr. Biffen
We are all well aware of the Community regulations which state that a "Buy British" policy would have to be forsworn by our public sector purchasing agents. I make no more comment than that. It is not for me to say whether or not Community rules are observed in spirit in the real world. These are exactly the questions which must be thrashed out now and not left to emerge after we enter the Community.
There is a well-documented and well-founded record of cynical disregard by my hon. Friends for the whole concept of public dividend capital. No one has a better documented record of cynical disregard than my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). I would like, since so much has been said about my hon. Friend's speeches but no one has yet regaled the House with one, to read a quotation from him:I want almost to confine myself to objecting to public dividend capital. The intention is to pass the dividend this coming year, prob- 912 ably next year and perhaps even the year after that." —[OFFICIAL REPORT, 8th May, 1969; Vol. 783, c. 746.]No forecast could have been more accurate and no one deserves the applause even of this thinly attended House more than my hon. Friend for his perception.
Why then are we maintaining this happy fiction of the public dividend capital? It must be because we believe that it will give some manoeuvre within the prospects of Community membership which perhaps we would not otherwise possess. I suspect that the National Coal Board will want something very similar—again with an eye to Community membership.
On these things, as on so many more, whatever our views of membership of the Community, it is clear that it would be to the advantage of the House if we knew a great deal more about how the Bill fits into the broader future foreseen for this industry. My hon. Friends can congratulate themselves that a Bill which in some senses is inherently very controversial has been so quietly and soberly received. But I should like to think that that did not mean that we were not looking, in our interest or our determination, to know much more about the relationship of the nationalised industries with other public authorities. I hope that perhaps one consequence of this debate and this emerging situation is that the Select Committee on Nationalised Industries will shortly turn a searching eye once again on the steel industry.
§ 6.37 p.m.
§ Mr. George Lawson (Motherwell)
The hon. Member for Oswestry (Mr. Biffen) tempts me to enter an argument about the E.E.C. and about how a Scottish Member representing a substantial part of the steel industry sees its benefits for his locality. I would also be tempted to enter into a long argument about the hon. Gentleman's last-ditch free enterprise approach. He is not a simple free enterpriser like his hon. Friend the Member for Keighley (Miss Joan Hall), but I should like to hear him discussing this question with his hon. Friend the Member for Canterbury (Mr. Crouch). If the arguments of both hon. Gentlemen were pushed sufficiently far, they might find that they agreed, although they seemed to be so much at variance.
913 The hon. Member for Canterbury argued that we must give an industry like the steel industry its head, and give scope to the people who run it, that we should recognise the demand in our society for the increasing acceptance of responsibility. He said, however, that one cannot ctxpect the steel industry—I believe that he would apply this to any industry, even the textile industry—to accept all the responsibility that society now demands. Society must accept responsibility, and I agreed with the hon. Member for Canterbury when he told the Minister that he had a major responsibility in this matter.
If the hon. Member for Oswestry is as intelligent as I think he is, he is bound to reach the conclusion that, while industry can be as enterprising and competitive as possible, there is a movement throughout the world away from the idea that any industry can do as it pleases. It must function within society.
This is recognised today even in the so-called backward countries. Responsibility must be accepted all along the line, and we are bound to consider how much freedom industry can have, who must bear certain responsibilities and the need for social factors to be taken into account.
The hon. Member for Bedford (Mr. Skeet) and I have been spending our mornings in Committee upstairs discussing the Mineral Exploration Bill. It is clear that society is demanding that mineral operators should not be given power to do as they please. The hon. Member for Oswestry is, I think, gradually realising this. The 19th century freedom of the purse is nearly at an end. It is becoming unsocial for employers to have the power simply to say, "I gave you your job and that is where my responsibility ends. If I decide to close down, that is too bad." That sort of freedom will not be tolerated, and, with the insistence on a different set of values, the steel industry must be considered in that context.
For a century or more the British steel industry has been developing and growling in a haphazard way. Sections of it have sprung up in different parts of the country, responding to, for example, the availability of coking coal here and there and the needs of mills that have been established in various areas. We have 914 the most widely scattered steel industry in the world. Upon nationalisation we said "Let us make it efficient" and we appreciated that that would entail rationalisation and closures.
As my hon. Friend the Member for Sheffield, Brightside (Mr. Eddie Griffiths) said, we must exercise a sense of social responsibility to see that the people affected by rationalisation procedures are properly looked after. I am not demanding that the British Steel Corporation must bear the whole of this responsibility, although it has a great rôle to play. Society as a whole must see that when unpalatable steps involving workers have to be taken, they are not taken in times of acute unemployment. Equally, industry must not take advantage of heavy unemployment to speed the process of rationalisation. Whenever a major decision must be taken, all concerned must be called in to examine the implications.
The Minister says that we must talk in terms of phasing out older parts of the industry. We must also talk about phasing in alternative means of employment to meet the legitimate social demands of the areas affected. As my right hon. Friend the Member for Newton (Mr. Frederick Lee) has explained, an area like Irlam can be rendered almost desolate by the process of phasing out. Special phasing in measures must be taken to ensure that something new takes the place of something that can no longer be sustained. When steel workers are made redundant, they must be given training for new jobs, and if those new jobs do not give them the same rates of pay, they must be given compensation.
There is nothing novel in this argument. Indeed, the E.E.C. has played a substantial part in this process and has found ways of helping men to be retrained when a coal or steel industry has declined, and it has recommended payments to make up any reduced salary. The very activities of the E.E.C., previously the higher authority, have induced many member Governments to have adequate regional development policies. Although I might be termed a last ditcher, I am ready to defend my beliefs because I think this move will benefit the people I represent.
We in Britain have a lot to offer compared with any other country in Western 915 Europe. I hope that the hon. Member for Oswestry is not claiming that the English, Welsh, Scots and Irish are not as good man for man as the Germans, French and Dutch. We are just as capable of developing and using the same skills.
In my view, the United Kingdom is well located in Europe. We are not on the periphery in a way that will place us at a heavy disadvantage in the E.E.C. We stand astride the North Sea on the Atlantic Ocean. One need only study the map to see how well placed we are, including the narrow waist belt of Scotland, with the Forth to the East and the Clyde to the West. We are ideally suited to export, remembering that there will be no great expansion of the British steel industry if we think only in terms of the home market. We must be confident. We are as good as the Japanese or Americans, and in Europe we shall have no heavy geographical disadvantage under which to labour.
We are sited in such a way that industry can quickly reach the Atlantic. We have some of the deepest water, coming virtually right up to the shore. We can take 500,000 tonners. I do not know what Redcar's maximum will be, but it is clear that deep water is vital. Probably we shall not reach 500,000 tons for a ship. But certainly we could reach 250,000 tons. There is nowhere where such ships can be taken so handily; no tides, good shelter, deep water virtually up to the shore, and adjacent to an industrial area. The hon. Member for Oswestry provoked me into speaking of that matter.
When our industry was at its freest, it was not doing very well. What we are suffering now was caused by our industry being so rapidly overtaken by the industries of virtually all other advanced countries. Let us consider crude steel, taking 1960 as the norm of 100 and 1969 as the figure with which we are concerned—this is not quite up to date but the picture is quite clear enough. The British increase in crude steel production was just under 9 per cent. The Japanese increased theirs by nearly 400 per cent. Every other country far outpaced Britain.
This was partly because of the threat of nationalisation. Even admitting the threat of nationalisation, we had an 916 industry in bits and pieces and on its knees. This was one of the principal arguments for bringing it under public control. We did not expect to make it a heaven on earth for those who worked in it.
Let us take perhaps a better example, that part of the steel industry that was mostly free enterprise and still is to a large extent, the stainless steel and special steel sides. Taking the same years as a measure, the British increase in output was 6 per cent.; the Japanese increase was 422 per cent. The next lowest that I can find was an increase of 84 per cent. for West Germany. In those years we were rapidly overtaken by country after country. If the joint steering group is looking into the future and wondering what the size of the industry should be, if it comes to the conclusion that the industry need continue at only about the same size as it is today with a 25 million to 30 million tons capacity, it will have deliberately decided that we shall be not even a third or fourth rate industrial country.
All the other countries are going ahead. In opening the debate the Minister spoke about the Japanese perhaps changing their minds about the 160 million tons of steel capacity that they had previously been aiming at. Perhaps they are changing their minds about 160 million tons. But we are changing our minds about 30 million tons. Consider the difference. They have reached a tremendously high level; we are down in the depths.
If Britain is to be comparable even with Germany—I should not say "even with Germany"; Germany is obviously a competent country, and we would not wish to be behind Germany—we must certainly push our capacity beyond 40 million tons, for by the time we reach that, Germany will be far ahead. That is the minimum target at which to aim.
On that basis, with many of those problems, there was bound to be a rationalistion. It may be that in some areas we were rationalised out of existence. It is clearly a Government responsibility—in this I support my right hon. Friend the Member for Newton—not only to say that we have a regional development policy and that we hope that industry will come, but also to take deliberate and systematic steps to create in these 917 areas, under inducements offered to industry if it will not come in on its own, industries of a sort which will enable us to mop up problems that have been brought into existence in those areas. That is essential.
I plead with the Government—I might even say I plead with my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot)—when I say that we cannot continue to think of nationalised industries in the old terms. We must appreciate that this is one way of organising the production of goods, services and so on.
The nationalising of an industry is not a social revolution and does not mean that a socialist society is being brought into existence. We could nationalise every industry and be very far from what I consider to be a socialist society. We could strip the country of any kind of private ownership and still be further away from a socialist society than when we began the operation. A socialist society entails increasing participation by the people involved, free people, who maximise their democracy and perfect it. In the process of doing that, we must find ways of handling our industries, particularly the big ones such as steel, which give them scope and freedom at the same time, the industries have to recognise that they are operating in a society and have social responsibilities which have to be carried.
We can quibble about the details of the Bill, but I welcome it as assisting the steel industry to alleviate some of the great difficulties which confront it. We are all waiting very anxiously for the decision on its future size. I add my plea that if we come out for anything less than 40 million tons capacity we shall have decided, as from now, that we shall be a fourth or fifth rate nation in Europe.
§ 6.57 p.m.
§ Mr. T. H. H. Skeet (Bedford)
I always find it a considerable pleasure to follow the hon. Member for Motherwell (Mr. Lawson) because we have had the reverse situation in Committee on the Mineral Exploration, Etc. Bill. He did not observe that one of the reasons why steel had to be taken into public ownership was that it was only under aegis that there would be a vast expansion in production. That is not what happened.
918 The 1966 crude steel figure for the United Kingdom was 24.7 million tons. Taking the 1969 figure, which is a fair comparison, it had risen to 26.8 million tons, which is a very small increase. As my hon. Friend the Minister for Industry indicated earlier, the investment in the industry was much greater prior to nationalisation and it fell away very seriously when the Labour Government took over in 1967. In 1966 the Federal Republic of Germany produced 35.3 million tons of crude steel, and that figure rose by over 10 million tons to 45.3 million tons by 1969. The lesson has been that nationalisation has been a failure, that the industry has not invested and has not increased its production of crude steel. Of course there may be some reason for this. If a country has a stagnant economy, there is no point in producing steel if there is no market for it or no export market to which it can be sent.
I thought that the right hon. Member for Newton (Mr. Frederick Lee) was very genuine when he mentioned that he was responsible for the coal industry when it wrote off £415 million. Taking the Bill into account, I find that the nationalised industries have written off no less than £2,934 million since the war, that advances to the nationalised industries total £10.312 million and that the addition to the National Debt since the war is roughly £10.000 million. Those are staggering figures for the shareholders of the British Steel Corporation and others, which we all are. Unless these industries are metamorphosed into something more efficient, we have not the remotest idea what will occur.
I do not expect profitability to be reached by 1973–74, and I am concerned about what may happen then. We are told that the advances will be about £750 million. The right hon. Member for Barnsley (Mr. Roy Mason), then Minister of Power, said on 8th May, 1969:After very careful consideration, I have concluded that an increase to £650 million is appropriate to carry the corporation over the next five years, and I accordingly invite the House to agree that the present statutory borrowing limit of £400 million be increased ultimately by £250 million.That increase was to carry us well beyond 1971, to 1974. Yet here the corporation is asking for a whopping sum well beyond the £650 million sort in 1969.
919 The right hon. Gentleman said then:The House will, however, wish to review the corporation's requirements some time during the course of this period.When I examine the Bill I find that the House will not review the way in which the moneys are spent over the course of the year. Normally we have a period in which the matter can come before the House and we can express our views, but that is not the case here. A substantial sum will be granted, and that is the last we shall see of it. The Minister will be able to hand it out to the industry concerned.
My hon. Friend the Minister was right when he said that he did not expect that any dividend would be paid on the public dividend capital. The then Minister of Power said in 1969:… we can see a distinct improvement in its trading position. Looking at the next few years as a whole, there would seem to be ample justification for this further experiment with public dividend capital." —[OFFICIAL REPORT, 8th May, 1969, Vol. 783, c. 685–687.]We have had no dividend from it, and we are not likely to have one. The public dividend capital seems to be a special account to which money is transferred prior to being written off. Therefore, we can expect that if the steel industry, the coal industry and the aircraft industry have that sort of thing they will be just putting money aside for eventual elemination. That is one way of deceiving the public but it will not deceive hon. Members.
But I agree with hon. Members that if we are to consider a very short-term plan which is to take us no further ahead than 1974, and if we are to authorise the Government to make advances to the tune of £750 million, we should have before us the corporation's long-term structure and strategy, what will be hived off and what will be kept. In 1969 at least there were before the House a number of documents including, I believe, a White Paper, a document about which way the industry was going. Even though it was erroneous, it was there. All we have now is a factual White Paper dealing with the mechanics of what is to be written off, how the money is to be borrowed and so on, but there is nothing about long-range plans.
It is interesting to examine the matter from another angle. I am concerned 920 about the performance of the industry generally. Comparing the United Kingdom with West Germany, we find that by 1969 the worker in the British industry produced 93 tons of steel while the worker in the Federal Republic produced 184 tons.
§ Mr. James Tinn (Cleveland)
Does the hon. Gentleman agree that that figure is more a condemnation of the industry's failure to provide modern capital equipment than of the workers' inefficiency?
§ Mr. Skeet
I fully agree. I do not know whether the hon. Gentleman has been listening to me but I have looked at the period of nationalisation. Vesting date was somewhere about 1967. The amount ploughed in since has been very small compared with Europe. Only now, extremely late in the day, is more investment coming. The Germans have gone ahead. Let us worry not about the worker but about the structure of the industry. We cannot organise an industry by a disorganising principle, and that is nationalisation. But I do not want to go too far into that tonight.
Throughout the world most companies are going over to the pure oxygen furnaces, including the L.D. and Kaldo furnaces. In 1969, 76.9 per cent. of steel produced in Japan was produced by the oxygen process. The Japanese are quickly closing down the out-of-date open-hearth furnaces. I am grateful to the hon. Gentleman for mentioning West Germany, where 46 per cent. of total steel was produced by the pure oxygen furnaces in 1969, at the expense of basic Bessemer and open-hearth furnaces there. In the United Kingdom the comparable figure was only 28 per cent.
Therefore, I accept the hon. Gentleman's view that there was not enough investment. I have been fair to the British Steel Corporation because I have brought the figures up to date to cover the first eight months of this year, when our percentage was 38.1, but we are still lagging behind West Germany and Japan, which are the go-ahead countries. They have realised that the L.D. and Kaldo processes and other pure oxygen processes are the right ones. Progress has been made in the United Kingdom but we have not made enough. Will the trend be such that by 1974 we shall have got 921 round the corner to be able to compete with Europe? I doubt it. Looking at the trend of past investment, I am dissatisfied. No matter what Ministers of either party may have said over the years, very few of the pledges have been honoured. Governments have consistently dragged their feet.
But if we are to have the promised new green field steelworks, I plead that we should have it in the South-East where it will be in a position to compete with Western Europe, with the very powerful French industry on the Dunkirk coast, and where we shall be able to obtain the raw material from Sweden or North Africa in suitable craft coming up the English Channel. It would be right within the magic centre of European expansion. I was perturbed a little earlier by the observation, "If we go into the Common Market …". I think that it is only right that we should.
There is a point that the Minister should consider on the question of his grand strategy. There is a paper circulating—I have not seen it but I have heard of it—stating that since the B.S.C. has 20 per cent. of the total European capacity for crude steel and as the Community is prepared to allow a figure of only 15 per cent., it will look very critically at any future expansion plan. The Community might be in a position to say to the United Kingdom, "You want to expand in a certain way but we feel that you have got enough already because you are a monopoly and hold a dominating position". If the Minister can produce this document, and it was referred to by a gentleman in The Times on 28th October, 1971, he should consider it very seriously.
I pray in aid a recent case which appeared in the Financial Times of 14th December, referring to Continental Can's takeover bids. For the first time the Commission brought into operation article 86 of the Treaty. Article 85 had been considered in previous years but article 86, invoked for the first time, prevents companies from taking improper advantage of a dominant position within the Common Market, or a substantial part of it. The B.S.C. produces over 25 million tons a year. The next largest company is Thyssen/Mammesmann which has about 12½ millions tons a year, well down the ladder. Might it not be said 922 that the Corporation should be examined under articles 85 and 86, assuming we go in?
The Minister might ask where private enterprise comes into this. I understand that he was negotiating a short while ago with the Norwegians, possibly to build a plant in the United Kingdom. I regard this as forward thinking. The plant would be extremely useful if we had a little more competition in the industry. How far has this plan gone? Would the Minister say something about the Japanese steel exports to the United Kingdom which have been rising in past years? I am aware that there has been a voluntary agreement with the Japanese limiting the amount coming to Europe to 1,250,000 tons for 1972. I suppose we have to place our confidence in the Japanese abiding by their decision.
What worries me is the amount of steel that might go to third companies inside the Common Market and then be passed on to the United Kingdom. The Japanese are interested in a plant in Greece and if they put their billets in there they might eventually be passed over to the Federal Republic, France and the United Kingdom because we would all be inside the same free market.
May I mention the United States surcharge. Since one-fifth of the total United Kingdom tonnage of direct;eel exports goes to the United States we must be affected by this. As the President has now agreed to devalue the dollar and other countries have more or less come to an understanding whereby they will revalue their currencies I presume that the surcharge will go. I can see that the British Steel Corporation will be in a very serious position if the surcharge remains outstanding for many more months.
I make a final plea. We have quite rightly had to grant this money because it is necessary to have the right investment quickly. I will not vote against the Bill but I believe the House should have a little more detail of the long-term plans. I am worried about whether the steel industry is heading in the right direction and I would like to be satisfied that it is concentrating on main issues and not bothering about a number of items which should have been hived off many years ago.
§ 7.15 p.m.
§ Mr. James Tinn (Cleveland)
I must confess an interest here. I am interested in that I seek to protect to the best of my ability the workmates who sent me here and to whom I owe a great deal. I react very strongly to suggestions that the blame for any difficulties in the industry rests on the shoulders of the workers. I am sick and tired of hearing the kind of bogus productivity statistics dealing with output per man which have been quoted against the British steel industry. If we look instead at unit costs there is a different story, and if we look at selling price it is a very different story indeed because British steel has consistently been able to sell competitively abroad. Any suggestion that British workers have been in the least Luddite in their approach is at variance with the facts.
§ Mr. Skeet
I did not blame the workers; I spared them any criticism. I said that the system was totally wrong and that nationalisation was leading to these results. We have to accept it. I could give additional figures which would verify what I am saying, but as the hon. Gentleman is making the speech I will not bother.
§ Mr. Tinn
The hon. Member for Bedford (Mr. Skeet) is a little too sensitive. I was referring more to the general attitude rather than to his own contribution. It is no good the Minister—and he has done this in the past when some of us have drawn attention to the sacrifices made by the British steelworker through his acceptance of the costs of change and modernisation—simply acknowledging this and paying tribute to it. The dismal truth about the industry is that redundancies and closures are at least up to or ahead of schedule and the future of the industry in terms of investment and new development is lagging sadly. The responsibility for that can only be laid at the door of the Government through their intervention, their long drawn-out review through the misbegotten study group, in the long-term investment clans of the British Steel Corporation.
Grave damage is being done to the industry by every day of delay. Even disregarding entry to the Common Market, we are in a crucial period. European steel is at a point when great decisions have to be made. Almost certainly the 924 future lies with the large plants on the coast with deep water terminals. There are only 15 such sites in Western Europe, six of which are in the United Kingdom.
We are well situated and have natural assets, not only in the availablity of these sites but—something not so readily available in many of the European markets—in availability of labour. Sadly, we have a surplus of skilled labour traditionally tuned to the industry. We must have 12,000 steelworkers standing in dole queues now. In my area of Teesside, in the last year no fewer than 6,000 steel-workers have become redundant—men who have given their lives to the industry. They want to work but they cannot find it. That is a heavy price to pay for modernisation even if it were coming—but is it?
The trend towards large coastal sites is generally recognised. Any objective study of British sites—and they would have to be brown field sites to produce the quickest return—must come down in favour of the Redcar site, which, although it is in my constituency, can be objectively defended as a natural site. I have every reason to suppose that, had it not been for the Government's intervention and study, the B.S.C. would sometime ago have made this decision and would have announced it.
The loyalty of these men, their acceptance of the sacrifice of technological change, has been disregarded and thrown away, and possibly the future of the industry is being jeopardised. We need a viable, modern steel industry on Teesside, where so much of it developed. Teesside has all the natural assets, and an ore terminal which will by the end of next year be fully operational, in its first stage able to take 200,000-ton tankers and capable of expansion to 300,000-ton tankers, larger than any terminal at present in operation or possibly even envisaged, and with an available work force of 6,000 men unemployed.
Understandably, my right hon. Friend the Member for Newton (Mr. Frederick Lee) did his utmost to draw to the attention of the House and the Minister the threat overhanging Irlam. I do not minimise it. But that is a small community dependent on this industry, and it is a threat to, say, 1,900 jobs. On Teesside there are 6,000 men not merely threatened but out of work, and the Government are 925 still pussy-footing around the decision about a brown field site.
If we are not to have a brown field site, how in the long term can the steel industry continue? Is that question still in the Government's mind? If we are to take the steel industry competitively forward into Europe and into the next century, the decision must be made soon, and I demand that the first decision the Government make should be in favour of this brown field site where work can start at the earliest moment. This would alleviate the savage unemployment position on Teesside and in Hartlepool, give an indication of confidence in the future of the industry and show that the Government are prepared to honour at least some of their obligations to the workers.
§ 7.23 p.m.
§ Mr. Peter Rost (Derbyshire, South-East)
I do not wish to take issue with the hon. Member for Cleveland (Mr. Tinn) except to say that his plea for the future of the industry is widely shared on both sides of the House. However, it is my considered view that the future of the industry can be solved only by a more fundamental approach than any which has been offered by right hon. and hon. Gentlemen opposite.
It gives me no pleasure to be speaking tonight in support of this Bill. After 18 months in the House I should prefer to speak not in support of a salvage operation for the British steel industry but in support of a fundamental sorting out to secure its long-term future. I had hoped to be able to speak in support of many of the pledges made by my right hon. and hon. Friends when they were in opposition to restore the industry to private enterprise. All we are getting is a short-term measure which is nothing more than an admission of the failure of nationalisation.
I want to speak for a moment as one of the long-suffering shareholders and taxpayers. An analogy has been drawn in the debate to an annual shareholders' meeting, but I have been brought up in a much harder school, and have never been faced with voting more than £350 million off my own capital in a business which is not insolvent.
When one considers the balance sheet of the British Steel Corporation, one 926 must admit that it is ludicrous to suggest that it is necessary to write off £350 million from the so-called capital equity. The balance sheet shows fixed assets before depreciation of nearly £200,000 million. The freehold properties alone amount to about £200 million hook value, but they must be worth considerably more. In addition, there are investments, quoted and unquoted, of about £80 million. One must ask whether this is a situation so desperate that shareholders are being invited to write £350 million off their capital? Is there not a case for looking again and, instead of writing-off taxpayers' and shareholders' money, releasing some of the corporation's assets and so providing the capital which is so desperately needed for modernisation?
What does a capital reorganisation do to improve the long-term management problems of the industry? What does it do to ensure that the financial targets which have now been set again will be met? What guarantees have we as taxpayers, and what guarantees have the public, that the consumer will be served any better in the future than he has been in the past? The consumer includes, of course, the whole of British industry upon which our export market is dependent.
Is it not strange that the British steel industry has failed to cash in on one of the biggest growth areas for steel in this country and abroad over the last few years, namely, the industrial gas-pipe industry? Is it not odd that the industry has been so uncommercial that it has failed to produce products which would allow British industry to get in on world markets, or even to supply more than a small proportion of the gas piping that is needed, for example, to develop North Sea gas and oil? Is it not also surprising that imports of steel have been maintained and are increasing at an alarming rate? One example of this is special forms of sheet steel, plastic coated.
Now we hear strange noises that the British steel industry seems to be incapable of producing the product which may be needed for the more advanced type of nuclear power station, and that we might have to import special steel from the United States to maintain our nuclear power development.
For 20 years the industry has been involved in a political dog-fight on this 927 "Clause 4" fanatical obsession of hon. Members opposite for nationalisation. I am pleased to see that some of the fanatical Members have abstained from the debate tonight. During this period it was inevitable that the capital investment of the industry was being run down simply because of the threat and counter-threat of nationalisation. Figures have already been produced in the debate which confirm that under private enterprise the capital invested in the industry was far more adequate than it has been since.
This brings me to my main theme, that nationalisation has produced a self-generating inefficiency in the industry; that it has produced a bureaucratic management structure; that it has developed an uncommercial approach to the production and marketing of steel; and that it has developed unenterprising attitudes to the industry.
Mr. Eddie Griffiths
Would the hon. Member care to spend a moment or two explaining his argument about the nationalised industries? Would he compare them to the situation in Rolls-Royce just prior to the time when his Government came along to save that company? What kind of efficiency was applied to Rolls-Royce before it went bankrupt? Would he compare the two?
§ Mr. Rost
I do not see why my theme should be disrupted. I would prefer to carry on. The hon. Member has had his say, and I have been waiting for four hours to have mine.
As I was saying, the inefficiency, the bureaucratic management, and the uncommercial and unenterprising approach under nationalisation have resulted in a lack of profits. They have deprived the industry of the cash flow which it had prior to nationalisation and have hindered the capital investment programme of the industry. Why, for example, has the steel industry not sold off more of its fringe assets, such as its 928 surplus land and investments, in order to get a better return from which to modernise itself, which would at the same time secure the industry's future?
The return on the balance sheet was ridiculously low. Surely the industry could produce a better return by selling off what it does not require, or what it could do without, and using that cash rather than asking the taxpayers and shareholders to write off vast amounts. Stainton & Staveley owns land in my area, and many of its houses—so-called tied houses—have nominal rents attached to them. Some of this land is desperately needed for development. But because of this paternalistic—indeed feudalistic—attitude, a non-commercial approach, the steel industry prefers to hog what it possesses rather than dispose of what it does not need in order to develop commercially its capital programme and to modernise.
Nationalisation has propped up obsolete plant for many years, so that we are now faced with a sudden problem of having to close more plant than could have been phased out over a longer period of time if the programme had been properly managed. Nationalisation has subsidised inefficiency; it has held back productivity and isolated the industry from competition; it has stifled growth and modernisation. In other words, it has been a catastrophic failure for the industry and the country. It has failed to meet the demands of the market and its customers. It has been a drag on the taxpayer and a liability to the whole economy. How much taxation has the nation been deprived of since the industry was nationalised compared with the annual amount siphoned off in profits tax from individual companies before nationalisation? By comparison, how much taxation has the corporation contributed to the Exchequer since it was nationalised?
This Bill, clearly, is a holding operation. It does not break the wasteful monopoly situation, and the only way in which a long-term solution for the industry's future can be achieved is by a far more radical policy. We must accept that nationalisation has failed, and we should set about returning the industry to private enterprise by breaking it up into three or four independent, integrated groups which would be in competition 929 with each other and through which the industry could become profitable again and serve not only those employed in it but the nation and the economy as a whole.
§ 7.36 p.m.
§ Mr. Brynmor John (Pontypridd)
In listening to the speech of the hon. Member for Derbyshire, South-East (Mr. Rost) I was reminded of "Christmas Carol", which is a favourite story for all of us. One of the scenes in the story portrays Scrooge as the ghost of Christmas past. The Minister for Industry, who now occupies the Government Front Bench, must have felt very much like Scrooge because three or four years ago, when in opposition, he said exactly what his hon. Friend is saying today. But he cannot make that sort of speech now following a year in which we have had crises in U.C.S. and Rolls-Royce. Therefore, the sort of bland, private enterprise, buccaneering speech which his hon. Friend has just made is inadequate to the present situation.
Mr. Eddie Griffiths
Perhaps the hon. Member is not aware that his hon. Friend the Member for Derbyshire, South-East (Mr. Rost) was making a completely different speech and was pleading with his Government to nationalise Rolls-Royce.
§ Mr. John
I was wondering on which side of the House the Clause 4 fanatics were to be found. The fact is that the Government, in this year of trial and tribulation, have found that it is not so easy to carry out a doctrinaire approach as they once believed. Nor is it as easy to get private enterprise to accept back the proferred sweets.
We read in The Guardian this morning that the private steel industry is complaining that it no longer can afford to buy back any assets which are hived off. It has also been suggested that the Government should lend it the money to buy the assets from the Government. If that is the sort of efficiency generated by the private steel industry it is no more immune from the hon. Member's tongue than any other industry.
I should like to comment on the speech made by the hon. Lady the Member for Keighley (Miss Joan Hall) who brought in the analogy of the cotton industry. When the Minister for Trade presented 930 the G.A.T.T. recommendations in the House recently, the hon. Member for Oswestry (Mr. Biffen) and I made certain comments. The complaint then made was that the cotton industry was being protected at the expense of the Third World. Therefore, the hon. Lady cannot argue that the industry is facing the undiluted wash of competition with tariff quotas, import percentages and so on whereas the steel industry is not.
My point is directed to Clause 2 of the Bill. It is worth probing what is meant by that Clause. As I understand it the iron and steel activities in our publicly-owned companies go to the heart of what the corporation is about. They are what it exists to carry out. If the Minister suggests that this is merely a clarifying Clause, we must scrutinise it more carefully.
The Explanatory Memorandum states that the Government have been advised that the Iron and Steel Act could be interpreted as giving the British Steel Corporation more limited powers than had previously been supposed. It goes on to say, first, that the narrow interpretation could call in question the corporation's right to dispose of any iron and steel assets that it might not wish to retain and, secondly, that it could be regarded as requiring the corporation to maintain the supply of every kind of iron and steel product instead of leaving the corporation reasonable freedom to decide this according to circumstances.
Under what statutory provision does the corporation believe that it had that power? Which of the statutory powers is now being called in question? The provision involved may be Section 2(4) of the 1967 Act, which gives a right to the corporation to enter into any transaction for the acquisition of any property or rights or the disposal of any property or rights. Is it that provision which is being clarified and strengthened in Clause 2 of the Bill? If it is, what advice has been given to the Government about the validity of it? Is it beyond peradventure that the intention of the 1967 Act was to confer such a wide measure of freedom upon the corporation?
The power which the Government now seek in Clause 2 would be a vital one if there were no other way in which the corporation could dispose of its assets 931 or cut down on activities which no longer seemed profitable. However, as the hon. Gentleman knows, by Section 4 of the 1949 Act, which was resuscitated in the 1967 Act, a way for the corporation to dispose or divest itself of assets and of unwelcome or unwanted activities exists in Ministerial direction. It exists subject to two safeguards. The first is that a Ministerial direction can be given only if it can be done without prejudice to the proper discharge of the corporation's functions. The second is one which the House may want to examine more closely. It is that such a Ministerial direction is subject to the negative Resolution procedure of this House.
As I understand the Clause, if it is giving to the corporation, by way of apparent clarification of an earlier power, an unlimited right to divest itself of any assets or of any iron and steel-making activities, it is doing it in a way which will circumvent another procedure which provides for parliamentary scrutiny of its actions. That may or may not be a good thing. But it should be argued by the Minister and he should not put it through in this enigmatic form without explaining the Government's thinking on the matter.
If the hon. Gentleman feels that this should go through, will he bring in a provision, possibly in Committee, to make a decision of the corporation on what could be a major issue to divest itself of some of its assets subject to parliamentary scrutiny? If the corporation is allowed to do it without parliamentary scrutiny, all sorts of unofficial pressures from outside may be put upon it to persuade it to divest itself of any of its assets.
Hiving-off is a political decision. As with any political decision, it should be subject to open scrutiny and political scrutiny. I believe that the Government should remove the suspicion which arises in the minds of some of us that their idea is to circumvent parliamentary scrutiny by Clause 2. If they will explain fully the thinking behind the Clause and undertake that Parliament will still have a rôle to play in scrutinising any proposals of the corporation, I am sure that they will remove our suspicions and. in consequence, dictate some of the Amendments that we table in Committee.
§ 7.45 p.m.
§ Mr. David Lane (Cambridge)
I am sure that there is no ground for the suspicions which have been voiced by the hon. Member for Pontypridd (Mr. John) and that my hon. Friend will be able to clarify the position.
I support the Bill. But, for anyone who has had any connection with the industry, it is sad to be debating this legislation at a time when the industry is still in such great difficulty. In spite of the protestations of the hon. Member for Ebbw Vale (Mr. Michael Foot) and other hon. Members opposite, I am certain that it would have been better if nationalisation had not taken place. However, I am less concerned with the ideological arguments than with making the best of the present situation.
Our concern is primarily for those who work in the industry. They are not much interested in the argument about ownership. Above all, they want to concentrate on making a success of the industry and keeping it in its traditional place among the leaders of world steel makers.
I believe that the Government's strategy for steel is the right one. It will help towards this success and get the industry into a profitable situation as soon as posible, ready for entry into the Common Market and ready for the progressive injection over the years ahead of more capital and the disciplines that that will bring.
Given this strategy, the Bill in necessary. Certain of the financial provisions are distasteful, but they underline yet again that we have a Government which are not doctrinaire but practical. I support my right hon. and lion. Friends in this step forward that they seek for the industry.
I welcome the firm commitment to settle, in the early months of next year, the long-delayed financial objective for the industry. This is a necessary discipline that we want to see as soon as possible. I hope also that my right hon. and hon. Friends will spare a thought for the situaition of the independent steel producers. In many ways they are hitched to the Brititsh Steel Corporation's chariot and squeezed between increased costs and price restraint, but they have not the 933 beneficial capital write-off that the nationalised sector will enjoy.
Mr. Eddie Griffiths
To the best of my knowledge, the private steel producers are not squeezed in any way on prices. They are free to charge whatever prices they choose. There is no control on private steel prices.
§ Mr. Lane
Technically, that is right. But, naturally, they are affected in the same way as everyone else in manufacturing industry by the C.B.I. initiative. Their difficulty is that they may have to maintain price restraint, whatever the market may do in the next few months; at the same time, they have not the advantage of the capital write-off that this Bill will confer on the nationalised industry. That is a matter that my right hon. and hon. Friends must take seriously.
Above all, the industry has two needs. The first is more confidence. The second is more competitive strength.
As for confidence, surely it is urgent now that at all levels of the industry, starting at the top, there should be less time directed to Whitehall and Westminster and more time directed to the steel works and the markets of today and tomorrow. We must avoid a continuation of this shareholders' meeting at the centre, because that is what this debate is. That is the worst possible atmosphere for a large industry to be in when it is atempting to tackle its many problems.
Let us try to speed up the necessary process of disengagement, so that, from the top through all levels of management and workpeople, more time can be concentrated on the practical job. This will also help to counter one of the unfortunate features that have arisen since nationalisation. I mean the number of promising managers, especially in the middle ranks of the industry, who have left steel for other jobs because they have been frustrated and have felt that they were spending too much effort on non-productive work. I hope that we are about to begin a happier chapter in terms of morale and satisfaction with the job.
Turning to the competitive strength of the industry, I want to put forward four suggestions based on conversations which have had with former colleagues who are still engaged in the industry.
934 First, organisation. Despite what has been said in one or two speeches, the idea of product divisions is probably right. The distinction between line and functional management seems to be establishing itself satisfactorily. The reason for doubt and uncertainty is the variable quality of management in the different divisions. I gather that things work well in the general and special steels divisions, but possibly less well in other divisions. This is a matter to which the corporation should attend urgently.
Secondly, all is still not well at the centre of the industry. There is a need for further strengthening of the calibre of management at the senior levels of the corporation; for less decision-making in London and more decision-making nearer the works; for more people at the centre with direct works experience and fewer of those who have none
Thirdly, we want a sharpening of decision-making throughout the nationalised side of the industry. The corporation is still far from achieving the excellent ideals with which it began of making individuals responsible and clearly accountable. Compared with the time before nationalisation, line managers feel further from the point where decisions are taken. Decisions seem to come from the machine, not from identifiable human beings. This is one of the snags of nationalising any industry. In a large industry it is bound to set up some kind of bureaucracy. The least we can do is to make sure that it is efficient bureaucracy. We are still far short of that in the steel industry.
Fourthly, towards greater competitive strength, investment, expansion and greater efficiency have been mentioned in nearly every speech. I hope it will not be long into the New Year before we hear the results of the long-term review. We realise how complicated it is by the latest forecasts affecting all steel industries—Japanese and others—which are having to lower their sights for the remainder of the 1970s. The problem of forecasting with the size of investment involved is very difficult indeed.
I welcome the go-ahead which is being given to a steadily increasing level of investment in the immediate future. It is vital that we should keep up a steady momentum of investment and expansion, 935 not erratic fluctuations, whatever the decisions may be about brown field and green field sites—I do not want to enter into that controversy today. It is essential not only to the morale and wellbeing of the steel industry but also to the plant-making industry, for which the worst thing is the stop-and-start policy which it has had to endure so much in recent years. I was glad to detect that general tone in my hon. Friend's opening speech.
The paramount need is to press on with modernisation, which means a steady momentum of rationalisation and, regrettably, of closures. Some courageous things have been said on this matter by hon. Members on both sides of the House. There is a risk that, with all the pressures which develop, particularly at a time of high unemployment, we may find ourselves forced into a number of half-baked compromises in particular situations where the necessity is to go boldly ahead towards our objective of a steadily more efficient and modern industry.
The Bill, with considerable aid from the taxpayer, will give a boost to the B.S.C. and the whole steel industry. In return, we, the shareholders, have a right to expect new urgency from the corporation in getting its own house in order in such ways as I have suggested.
My hon. Friend's general approach to the prospects for the industry was optimistic, and I welcomed that. I hope that the Government will continue to make clear, whenever they can, their determination that the British steel industry will be second to none in quality, in service, and in commercial enterprise, an industry in which its employees can take pride and enjoy good prospects in the years ahead.
§ 7.55 p.m.
§ Mr. John Mendelson (Penistone)
I sometimes follow the hon. Member for Cambridge (Mr. Lane) in debate. One difficulty which I always find is that his general sentiments seem all right but that he is sometimes short on detail. On other subjects I sometimes have the suspicion that he does not want to expose his less than radical views or the fact that he does not have all that much knowledge about the subject. However, on this occasion I harbour no such suspicions about him on this subject. If he has not gone into great detail I am sure he must 936 have his own good reasons, because he could have drawn on his experience and thrown some light on the ideas which are under discussion in the joint steering group. I should have been greatly interested, because of his experience, to have heard some of his ideas on this subject. After all, although we are told that the report is almost ready, this is the last opportunity that Parliament has to try to bring some influence to bear upon one of the members of the joint steering group—Her Majesty's Government. The hon. Gentleman could have been helpful in trying to urge upon his colleagues in the Government some of the ideas which he might hold about the future development of the industry.
There can be no doubt that if there has been uncertainty in the industry in the last year or two, it has had nothing whatever to do with any past arguments about public or private ownership to which so many hon. Members have referred this afternoon.
I do not mind the hon. Member for Keighley (Miss Joan Hall), who is a neighbour of mine and lives in Barnsley, making a general speech which seemed more suitable for the Conservative Party conference than for a steel debate in the House of Commons, because there is and must be room for general contributions even on a specialised subject like steel. However, I object very much when hon. Members who ought to know better nip in here, make doctrinaire speeches attacking the management of the British Steel Corporation and the basis of the steel industry and condemning the public ownership principle on which it is based, and then nip smartly out again and do not even stay for the rest of the debate. These hon. Members will be noted by those who are engaged in the industry. Whatever excuses those hon. Members might make and whatever engagements they might plead, it is no excuse for making an attack upon the British Steel Corporation and then disappearing before the end of the debate.
Hon. Members who do not represent steel constituencies, such as the hon. Member for New Forest (Mr. Patrick McNair-Wilson), who have no direct responsibility to people who earn their living in the industry, ought to be very careful about the kind of attitude which they adopt concerning this subject. If 937 we are all agreed that this is a serious subject which should be seriously discussed, I should expect hon. Members to wait to hear whether other hon. Members might want to discuss the matter with them and to stand on their own two feet if that were to occur.
A deliberate attempt is being made by some hon. Gentlemen on the Government side to misrepresent the position at the time when the steel nationalisation Bill was being discussed in Committee. There are now on the Government Front Bench some of the hon. Members who were present then. The hon. Member for Scarborough and Whitby (Mr. Michael Shaw) was also a Member at the time. The Minister will remember that the Committee stage lasted for more than 10 weeks because some of the hon. Members who were then in opposition and are now on the Government side used every possible opportunity to prolong the proceedings and have fierce debates on many subjects. The result was that there was plenty of time for us to contact people at all levels in the industry.
What impressed me most from those contacts was the near-unanimity among directors of the major steel companies. One reason why they were not prepared to put up a great fight against public ownership of the industry was that they had no idea where the money which was required for large-scale investment was to come from if the industry was not nationalised.
I see that the hon. Member for Bed-ford (Mr. Skeet), who was also a member of the Committee which considered the nationalisation Bill has now come into the Chamber. I remember that many people in the industry spoke about the need to invest between £800 million and £1,000 million within the next few years. Their view was that, the decision to nationalise having been made, the Committee stage should be allowed to proceed and long-term investment decisions should be made as soon as practicable. That was the view, with very few exceptions, of those who worked in the steel industry. It is, therefore, nonsense for hon. Gentlemen opposite to argue that the necesary investment would have been forthcoming from the privately-owned steel companies, that they had no investment problems and that they had the capital ready and were prepared to put 938 it into the development of the industry. The opposite is the case.
The absence of the necessary capital was one reason why there was no great fight against nationalisation. It is the reason why the Spectator, in its well-known survey before nationalisation, came down on the side of public ownership, with some qualifications. I knew of some of the people responsible for that survey. It was known that the necessary capital would not be made available if the industry remained in private hands.
§ Mr. Mendelson
The hon. Gentleman is indulging in party conference talk, and I thought we had moved away from that kind of thing. That is the slogan which he can repeat at his party's conference when his 4,000 representatives—there are no delegates—meet at Blackpool or Brighton. It will go down well there because only a few of those who will assemble there will know anything at all about steel and they will keep quiet, while the rest will not know any better. The shortage of capital for investment in the steel industry built up over many years under Conservative Governments and had nothing whatever to do with the threat of nationalisation.
The necessary capital of between £800 million and £1,200 million just was not available. That is the amount that was considered necessary at the time when the Spectator carried out its survey. That was the view of the directors of many privately-owned companies. There must be some hon. Gentlemen opposite who had contacts among the directors of privately-owned companies. The Labour Party had no monopoly of contacts. There must be some hon. Gentlemen on the Government side who can confirm that the capital was not available and that there was no prospect of getting it on reasonable terms. It is nonsense to argue that investment decisions were influenced by political attitudes.
When the Bill was being considered in Committee the hope among those in the privately-owned steel companies was that, the decision to nationalise having been 939 taken, we would have done with doctrinaire attitudes and try to build up the industry as fast as we could. That is the consideration before us in this debate, and I therefore want to deal with this problem of long-term investment.
It is essential for the sake of people in the industry, at all levels, that the Government should quickly take the country into their confidence and make known their long-term strategic investment plans for the industry. From what has been said so far, it seems to me that it will be extremely difficult for hon. Members and, indeed, for those in the steel industry to distinguish between what is Government-imposed, and what is proposed by the corporation. Whatever view one takes of who should own the industry, I think hon. Members will agree that it would be highly undesirable if those who are voting the sums of money that we are being asked to vote today, and those whose livelihood depends on the future of the industry, were not told what the steel industry itself is proposing and what the Government are trying, to force it to do.
That matter is of great importance in two respects, the first being that of political accountability. It would be a serious matter indeed if the Government were to conceal from us what the corporation itself has done and what they have imposed upon the corporation in the joint steering group. This is not a mater of party controversy. How, when the report is published, will hon. Members know what the corporation wanted, and what the Government imposed, if we are not given the Government's point of view? I refer deliberately to the Government's point of view because it would be easy for them to let us know what they have in mind.
It was the Government who insisted on the setting-up of the joint steering group. I have no information that the corporation asked for it, but if I am wrong perhaps the Minister will correct me. My information is that the Government have imposed this group on the corporation. The corporation had made its plans and put forward its proposal. I am glad that the Secretary of State for Trade and Industry has taken his seat on the Front Bench because I am arguing that if there is to be accountability 940 to Parliament it is essential that we be told what proposals the corporation made to the joint steering group and what modifications the Government imposed.
My information is that during the last two years the Chairman of the British Steel Corporation and the members of the board supporting him have put forward proposals for the expansion of the industry. The proposals include the build-up of the industry by the mid-1970s to a total annual production of 35 million tons, rising to about 41 million or 42 million tons by the end of the 1970s and the beginning of the 1980s.
As Members of Parliament we knew from various contacts with members of the board over these last two years that they had precise ideas where this expansion would take place. Not all the final decisions had been made. Many were still being considered. But they had a fairly good idea of how they wanted it to go.
Here I return to the cautionary and, to me, disappointing approach of the hon. Member for Cambridge when he talked, from his knowledge of the industry, of the Japanese industry and others having to put back by a couple of points their existing plans. That is no guideline for our steel industry. The hon. Member knows that our modern steel industry, unless in the next 10 years we go for a major expansion, will fall behind internationally altogether. It is not possible to say that we will cut expansion plans and still remain competitive with major steel producers. That approach is much more possible for an industry with a considerable number of large plants than it is for us.
It would be highly dangerous if the Government were to impose on the joint steering group, when it comes to make its report, a half-hearted decision to go ahead with perhaps only one of the major projects, deciding to postpone for 10, 12 or 15 years or more the second large project. The Government should accept the proposals of the corporation as we know them and as we have heard about them and should give the steel industry the go-ahead. That is what all the people working in the industry are hoping for and what they are entitled to expect.
Despite the serious immediate difficulties of the steel industry, this is the most 941 important subject for debate today because this is the last occasion when we can hope in any way to influence the Secretary of State in the final decisions that have to be made.
I turn to the intermediate position between now and the long-term planning period for the industry. There is no doubt that a number of projects need preparing and thinking about very early on. There is a general principle here which has always been accepted by the people who work in the industry on both sides and which is often quoted to us both by the Government and by some of my hon. Friends who know a great deal about the industry. The general principle of modernisation and rationalisation, accepted by both sides of the industry, is an incomplete statement of the position if one leaves it at that. We on this side of the House and the trade union side have always accepted the principle of modernisation and rationalisation on the clearly stated condition that new jobs for the industry must be provided pari passu alongside those that might have to go and that we would never accept the position of proceeding with the process of modernisation and rationalisation if there should be any slowing down in the development of new jobs in the industry. As the Secretary of State well knows, these are the two parts of the same principle. One falls without the other.
Here again it is essential that the House and the industry should know whether the original intention of the corporation to adhere to this principle and its two parts is in any way being interfered with by the Government because, as I understand it, the position of the chairman and other members of the board, in the encounters which I and others have had with them in recent years, was that the corporation accepted the two parts of the principle—that it was anxious, both as a good employer and in the interests of those making a contribution at all levels of steel-producing, to see to it that new job opportunities were created on a much more modern level and that there would be a vast programme of retraining to help those who had worked the old methods so that they could be brought forward to work the more modern plant.
Humanitarian grounds are a very important consideration because we do not want to throw people on the scrapheap. 942 It is important to the long-term viability of the industry to retrain the personnel in the modernisation of plant and this has had full support from everyone in the industry, who felt part of the process.
We hear a great deal about financial long-term viability but there are two aspects to viability. The first is the accountancy, the financial prosperity, aspect. The other is the human material within the industry. An industry which does not have really good long-term prospects and which is prevented from pursuing the large-scale expansionist policy which the corporation wants discourages the very people whom the industry must retrain if it is to have a long-term viable future. It is not just a matter of humanitarianism but of good hard-headed business sense, giving the industry the prospects that will ensure that its people are ready for retraining.
It would be a dangerous development if people were being asked to retrain within the industry without any certainty of employment in more modern plant because that more modern plant might not be there. Some of them would feel that it would be better to go outside the industry. It must be established that steel is a major growth industry and, therefore, the long-term decisions which the Government are to announce will set the task for the industry over the next 15 or 20 years.
I want now to move to a perhaps more geographically limited problem. Within the whole prospect of the industry I am vitally concerned with the future of stainless steel, as are some other hon. Members. On this occasion it is essential for me to look at the whole of the Sheffield area, however, and not just at Stocksbridge which happens to be in my constituency. As the right hon. Gentleman knows, in the whole of the Sheffield area we have excellent personnel with great technological experience and knowledge in the making of stainless steel. This is one of the major national assets in the industry but it is clear that over a number of years not half enough new capital has been invested in that part of the industry in the Sheffield area. Therefore, from the national point of view the Government should examine the problem and make quite sure that over the next few years a considerable amount of new capital is invested in the area.
943 But here we come to another point which is of considerable importance. No policy can succeed if it is determined by ideas about hiving-off or changing about purely on the grounds which were indicated by some hon. Members opposite. Another principle is involved here which is worth recalling at this stage. It was the principle that, whatever might happen in the future, if there are to be changes on the borderline because a sector was left in private ownership when we nationalised the industry, the rationale of any changes was always to be the most rational organisation of the industry.
Therefore, the Government would be doing a disservice to the future of the industry if, either for short-term financial reasons or to please some of their supporters, they were now to substitute a doctrinaire principle when considering this part of their policy.
Some of my hon. Friends have raised the question of Clause 2 which refers to this subject. I hope that the Government will give a firm assurance that their future policy will be as envisaged at the time of nationalisation—that there may be adjustments on both sides of the line and that in some cases it will be essential to take a further part of production capacity into public ownership whilst it may occasionally be necessary to have an adjustment where there is rationalisation on the other side of the line. It was always understood that such adjustment should be kept to a minimum and should never be decided for financial reasons but only to improve the technological efficiency of the industry. There is a considerable weight of opinion in the Sheffield area in favour of extending public ownership rather than the other way round.
§ Mr. Mendelson
I am encouraged to have the support of my hon. Friend, who knows a great deal about the industry in his area and in the whole of the Sheffield area. This is an understanding that we in the Sheffield area—trade unions and Members of Parliament alike—had reached with the corporation. A few years ago we had a meeting in Sheffield with the chairman of the corporation at 944 which this was the main question under discussion and at which we reached the understanding which I have outlined. The Government would be embarking on a dangerous course if on doctrinaire grounds or on short-term financial grounds they were to depart from this policy.
I turn to the consequences of the figures mentioned in the Bill. The hon. Lady the Member for Keighley mentioned the amount of money which would result if the additional financial provision made by the Bill were to be divided by the number of citizens of the United Kingdom. This is not a serious consideration. These sums are of great importance because the future of the industry is at stake. We are discussing the proposition whether there is to be a modern British steel industry in 12 or 15 years' time. Obviously we do not get far if we divide the sums mentioned in the Bill by 50 million. We must consider whether sufficient provision is made in the outline that the Government have given us.
I was disturbed by the Minister's statement that he expected the corporation to limit itself severely in its policy to increase the price of its product. The Minister is not comparing like with like. It is understandable that the Government should think that if industrialists reach agreement to accept a proposal made by the employers' organisation to limit themselves in their price increases, everybody should be encouraged to follow suit.
Among the many privately-owned concerns which have accepted the proposal of the Confederation of British Industry are some which were increasing their prices considerably at the time that the Government told the corporation that it was entitled to only half the price increase which it had suggested. The Minister for Industry knows this because he had to announce the decision to the corporation and to the House. Therefore the corporation has been forced to fall behind. It was not able to increase its prices sufficiently at an earlier stage.
The Government have argued that one main reason for their adopting that course at the time, though many of us disagreed with their decision, was that by forcing the corporation to go for only 50 per cent. or 60 per cent. of the increases it had proposed it would be possible to keep the 945 price of steel cheap for the rest of British Industry.
This has been the history of the coal industry, too. For years the coal industry has been required by the State to keep its product cheap and has thereby provided the basis for success for large numbers of British firms which, if they had had to pay the market price for their fuel over the years, would have had a different !ale to tell in their balance sheets.
If the Minister were to argue that it was essential to ensure that the price of steel was kept not too high for consumers, he must now give additional consideration to the corporation's request that, as it was not allowed on good, sound national grounds to increase its prices when it wished to, it should be given a special dispensation now to increase its prices by more than the 5 per cent. which was proposed by the Minister this afternoon.
It is important, from the point of view of the future of the industry and of inspiring confidence in those working in the industry, that it should not for ever have to ask the House for additional credits when there has been additional deficit. It does not help to maintain morale in the industry if the Government have to come back to the House time and time again. It opens the door to all those ignorant attacks upon the industry which we have heard this afternoon.
My last point concerns the policy of the corporation. I will not conceal the fact that, although I have so far mainly criticised the Government, in recent months I have been beginning to think that the corporation also could do more to obtain confidence among those who work in the industry. In a number of factories, including the Stocksbridge plant in my constituency, there are what I would call creeping redundancies. The Corporation is under constant pressure to produce more steel with fewer people but it must adhere to its chairman's original pledge that it would not succumb to these pressures. This is a field in which responsibility cannot be easily determined. The Minister likes the corporation to make all the announcements of redundancies, so that he can say that it has nothing to do with the Government.
We must know the truth of the statement, which I have heard a number of times, that the Government are putting 946 pressure on the corporation to accelerate redundancies so as to make the financial picture more acceptable. This would be a disastrous policy on any account but it is particularly disastrous now. If there are any grounds of public policy on which the Government should change their course, it is here. There is no improvement in unemployment and no alternative jobs are available. I am informed of a proposed total of 248 redundancies in three months at Stocksbridge steelworks, spread over five sections. Even skilled men cannot be certain of alternative jobs.
The union is doing all it can to reduce those redundancies but the Government should assume their responsibilities and urge the corporation not to yield to the pressures to go on with the slimming-down process. There is everything to be said on grounds of public policy for deliberately slowing down the process and keeping people at work. The Minister should defend that decision to his back benchers, who may know no better and attack him because of the corporation's financial position.
I am fortified in this view by what the Government are themselves doing. All the work-producing projects which we have urged on them for over a year, and which they have adamantly refused to consider, they are now bringing forward on precisely these grounds of public policy. They are urging local authorities to hurry up with local works for which we could get no support from them a few months ago. They are beginning to show some understanding of the public industries and are asking them to spend more, so there is surely an equally strong case for discouraging the corporation from going too fast in this slimmingdown process and for encouraging it to keep people at work until the industry picks up.
The steel industry's level of output is determined by the general level of economic activity. The steel users and their requirements determine the level. But within that general consideration there is also the peculiar way in which the development of steel production has been observed over a number of years. This proposal too was discussed in Committee when the industry was nationalised. I recommend the Government to re-read our discussion on this subject 947 and to encourage the corporation, on the lines of an earlier proposal, to stock certain quantities of steel.
The Government should tell the corporation that the amount of money required to stock—it would be far less than coal because steel needs less space—and all the financial considerations involved would be taken care of. The steel stocked will not be sold now, so there will be no income from it, but it is well known that the industry has its ups and downs. At present, people are reluctant to order, but if there were an upturn in the economy, as we all hope, in six or nine months, those who want steel will want it in six, eight or four weeks, and that is when the producers will say, "Sorry, you cannot have it because we have not got it".
Not every kind of steel can be stocked but the specialists agree that some types, including the major bulk products and some special steels, can well be stocked. I hope the Government will urge the British Steel Corporation to stock quantities of steel and so keep people at work when they would otherwise be made redundant. When the upturn in the economy comes, which we hope will be soon, those stocks can be sold. I commend this idea to the Government and hope that some observations on it will be made when the Minister replies to the debate.
§ 8.35 p.m.
§ Mr. Brian O'Malley (Rotherham)
I hope that hon. Members will forgive my absence during the earlier part of the debate. I have been taking part upstairs in the Committee deliberations on the commercial radio Bill, which the Government regard as important. I regard it as more than unimportant. It is a disgrace that the House of Commons is having to waste time discussing a trivial Bill of that kind when unemployment is at its present high level.
I therefore apologise for not being here earlier, and, as those Committee deliberations may be continuing later, I apologise in advance because I shall have to leave before the end of this debate.
The Bill before the House is being considered at a time when the steel industry and the British Steel Corporation are in a period of crisis and depression. 948 That state of affairs springs largely from the policies pursued by the present Administration, policies which in my constituency have produced an unemployment situation which we have not witnessed since the thirties. At the latest count for which I have figures, on 8th November last. 3,118 men and boys were out of work, representing a total of over 8 per cent. male unemployment, a significant part of which has been due to the Government's policy towards the B.S.C.
I appreciate that throughout the non-Communist world steel producers have in the last 12 months been experiencing diminished order books. Wherever one looks one sees a picture of steel companies in difficulty. That applies in Germany, Italy, America and even Japan. But compared with the fall in the total production of steel in the E.E.C., Japan and America, we in Britain have not only suffered from the general fall in world demand for steel but have suffered twice as badly. The official journal of the Iron and Steel Trades Confederation, Man and Metal, stated in its November. 1971, issue:the cut-back in Britain is far more drastic with a 10.3 per cent. reduction in output—twice as high as the free world figure.This is where Conservative policies have led us. They are largely responsible for the 8 per cent. or higher male unemployment rate in my constituency.
I have never known a time in the steel industry in my constituency when there have been such low hopes and depression. If the Secretary of State questions this, I recommend him to go to the Park Gate Iron and Steel Works, which is partly in my constituency and partly in that of my hon. Friend the Member for Rother Valley (Mr. Hardy). There is a crisis of confidence which has resulted from the policy of the Government towards investment and from the well-known intentions they have had to sell off wherever they can.
The steel workers in Rotherham are well aware that the Government would like to sell Steel, Peech and Tozer to private enterprise. If ever they tried to do so, the troubles they had at the River Don works in Sheffield would be repeated. My steel workers are in no mood to tolerate such a policy.
I have two proposals to make. My area is traditionally an area of heavy 949 steel production. A skilled labour force had been built up over many years. At a time when hon. Gentlemen opposite are always eager to talk about the strike records of this industry or that industry, the strike record of the steel industry in my area is virtually a non-strike record, whether one looks at the last couple of years or the last three decades. There is a highly-skilled labour force, year after year, week after week, put on to the labour exchange. As a result of the Government's policies, already men have been declared redundant in an area where it is almost impossible to get another job. There has been a speeding up of closures which should not have occurred until the mid-1970s at least, and in January, 1972, more men will lose their jobs and go to the labour exchange because of the Government's policies.
Lord Melchett, according to Press reports, is said to be in favour of a consortium with European steel producers. One possibility is that there will be a jointly owned steel works somewhere on the Continent. I hope that the right hon. Gentleman will tell Lord Melchett that the steel areas of Britain will have none of it. If the British Steel Corporation has a responsibility, it is to be putting up new plant and using its new investment in these Islands.
A very high priority should be given to the existing steel areas. I see very little point in developing a massive new steel complex in the south-east corner of England, the area with the greatest build-up of population and in which, by the end of the century, there will be enormous problems of housing and communications. If a steel complex were to be set up, what does Lord Melchett want? Does he want another massive migration from the Ebbw Vales and Rotherhams? We saw that kind of migration in the 18th and 19th centuries. There is no reason for it any longer; nor is it the most sensible and economic way to carry out such a project.
If there is to be a green field site, I hope that it will be within reasonable distance of the existing steel areas where all the expertise and the labour force are concentrated. In my constituency we hear very little about investment programmes from the British Steel Corporation. This is one of the reasons why 950 morale is so low at the Park Gate works. I understand the attitude of my constituents in those works, who are now faced with a situation, as Press reports are indicating—I believe them to be true—that some of the electric arc furnaces installed only a few years ago at Steel, Peech and Tozer are to be taken down the road to the Park Gate works. The Park Gate works needs some electric arc furnaces, but I am not prepared to accept that there has been a sufficient fight by the local management of the British Steel Corporation if it accepts that situation when it is clear that expansion is needed at both Park Gates and Steel, Peech and Tozer. I hope that the hon. Gentleman will be able to give some comfort to my constituents.
The Government's policy on many matters has changed in the last 18 months. Their earlier policies have produced such a shambles that they have had to go back on them. They have been discussing with the British Steel Corporation the situation of the River Don works. There has been a big turn-around there. Certainly hon. Gentlemen should not assume that even the revised proposals which allow for hiving off of part of the River Don works will go through with the acceptance of the shop stewards and the work force. Any firm that believes that it can take over part of a nationalised industry should understand that it could well lose that part without compensation.
My hon. Friend the Member for Peaistone (Mr. John Mendelson) said that there was a case for extending the public sector steel industry in Sheffield. I agree. But what is more important is that the steelworkers in the Rotherham-Sheffield area also agree very strongly. When a Labour Government are returned to power there will be strong pressure from the steel areas to extend the public sector. Any firms that think that they can push their snouts into the gravy bowl and take over some of the most profitable parts of the corporation when a Tory Government are in power should be aware that there will be strong pressure for the sections taken over at least to be taken back into public ownership, where they belong.
I am concerned to see that the Rotherham area gets its proper share of investment, but there is no indication 951 that that is what will happen. I hope that the Minister will say something about that.
My last point concerns the level of some types of steel imports. We are discussing a Bill which increases the corporation's borrowing powers, a Bill which meets a financial crisis of the corporation. One of the reasons—I do not say that it is a major reason—why the corporation has such depressed order books in some sections is the level of imports. In Man and Metal, the journal of the Iron and Steel Trades Confederation, the principal subject in November was steel imports from Japan. The journal said:According to Mr. Ridley, Under-Secretary of State for Trade and Industry. imports of crude steel from Japan during the first eight months of this year reached a total of 26,560 tons—nearly thirty-two times the amount of 842 tons imported from that country in the same period last year.Apart from crude steel there was a fourfold increase in imports of bars and rods from Japan, a fivefold increase in tubes, while plates and sheets increased eight times and strip twenty-seven times more than the 1970 figures. Altogether the Japanese sold us £3 million worth of steel and steel products in the first eight months of last year and £11 million worth by August of this year.The challenge which all the European steel producers face as a result of the difficulties the American market now presents to Japan is well known. It is a source of worry to steel producers in the rest of Europe as well as to the B.S.C.
The conventional wisdom on free trade versus protection swings relatively slowly, but it does swing. It has swung in this country, from the great debates in the House during the 1840s and onwards. I have never been philosophically attracted to either proposition. I am sure that the purpose of any nation's trading policy and any restrictions that its Government put on imports should be based not on a philosophical stand on the matter but on how, consistent with the general national interest, a particular industry, a particular section of the country, is affected by its relations with the industrialists of another nation. I do not believe that merely for the B.S.C. to send representatives to Japan to seek a voluntary agreement is adequate. I have serious doubts about the value of any such voluntary agreement. It would be proper for the Government to consider the possibility of putting firm 952 upward limits on steel imports from Japan and other countries.
§ Mr. O'Malley
That is the second time in successive debates on the steel industry that the hon. Gentleman has intervened in my speech, but he must start doing his homework. He knows the situation in Japan where their products are sold at one price on the home market and their surplus capacity at almost any price they can get overseas. If the hon. Gentleman is saying that the real difficulty is that the British Steel Corporation is inefficient or its prices are too high, he is forgetting that the private enterprise European steel producers are facing exactly the same difficulties. For a long time British steel prices have been lower on the home market than continental steel prices on their home market.
I do not think I ought to blame the Government too much, because this goes beyond them. There is a view in the world that there are great advantages to be gained through trade liberalisation. I agree, but in many areas there are not only no advantages but positive disadvantages. I would be failing my constituents if I did not say that I am not prepared to see experienced steelworkers out of a job as a result of unduly high levels of imported steel. It is not only the Japanese, because we know that the European producers are looking forward to the day when this country is a member of the Common Market so that they may try to flood our market with European steel.
Lord Melchett—I think he is wrong—takes the view that it would be to our advantage to join the E.E.C. so that he can play at the same game. No one gains from this. I hope that the Government will look at the whole policy of steel imports, particularly Japanese imports. I have never noticed that the Japanese domestic market was open to all salesmen and industrialists. The Japanese have one of the most highly protected home markets in the world. 953 Voluntary agreements are not enough, and the Government have a clear responsibility to act.
A large number of steelworkers have either lost their jobs or been on short-time working as a result of the Government's policies, which inevitably hasten the process of rationalisation which the British Steel Corporation was carrying through. I do not believe that the British public will in future tolerate a situation whereby men are thrown out of jobs in large numbers and there is no alternative employment. The steel industry in future will have a somewhat smaller labour force. If the industry is allowed to expand, it can provide a large number of new jobs in our existing steel areas. We have a right to ask for that, and I hope the B.S.C. will be allowed by the Government to carry out that policy.
§ 8.55 p.m.
§ Mr. Eric G. Varley (Chesterfield)
The debate has nominally been about a Bill which, as my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) said, we shall not vote against. The critical issue is the injury inflicted on the British Steel Corporation by the Government's damaging and inconsistent policies.
The first inconsistency is that what the Government have done completely contradicts what they said they would do. The Conservative manifesto at the time of the General Election said:We will progressively reduce the involvement of the State in the nationalised industries—for example, the steel industry.Yet during the last 18 months the Government have not left the industry in peace for one moment. They have not left the industry free to make and sell steel and to provide secure employment for those who produce it. The corporation has been subjected to continuous interference by the Secretary of State for Trade and Industry and to a good deal of mischief by the Minister for Industry and the Under-Secretary of State.
The Government came into office hostile to the nationalised steel industry and their approach to the industry has been motivated by that hostility. Confirmation of this can be obtained by reading the proceedings of Standing Committee A of May to July, 1969 which contain the speeches of the Under-Secretary, the 954 hon. Member for Cirencester and Tewkesbury (Mr. Ridley). If he serves on the Standing Committee on this Bill, I hope that he will be prepared to swallow many of the words he used then.
The Government have apparently abandoned that approach and they have done so for two overriding reasons. The first is their panic at the shocking unemployment figures, the latest sombre instalment of which we have seen today. The second is the need to reconstruct the corporation's finances before membership of the Common Market hands over control from Bournemouth and Cirencester to Brussels. This was summed up in the Financial Times of 30th November as follows:Because the rules of the European Coal and Steel Community prohibit unfair subsidisation, the Government dare not risk entering the Common Market in January 1973 with the Steel Corporation still in a deficit situation.That confirms what was said by the hon. Members for Oswestry (Mr. Biffen) and Bedford (Mr. Skeet).
Every few months we have had a new Tory solution to the problems of the industry. First, we had the B.P. solution but that was ruled out by the Government's interventionist pricing policy, observed at its most shrill on that famous Friday afternoon when the Prime Minister petulantly decided to intervene and instruct the Secretary of State to issue the directive. That was the end of the B.P. solution. Then we moved to hiving off. In their first few euphoric months, Government briefings suggested that there would be immediate and large-scale disposal of the corporation's assets, but this was scotched by the Secretary of State's announcement to the House confirming the product division structure which had been devised by the corporation. That looked like the end of the second solution to the problems of the steel industry.
We still have our suspicions about Clause 2 of the Bill. We shall want to look at this more closely in Committee since this matter was not cleared up by the Minister today. There are many ambiguous assurances which need to be made clear.
I am sure that my hon. Friend will have read the interesting remarks of Mr. G. E. D. Halahan, retiring Chairman of the British Independent Steel Producers' 955 Association, at its meeting yesterday. He complained that 87 separate hiving-off negotiations which had been going on had had little result. We do not know about these 87 hiving-off operations, and perhaps the hon. Gentleman in his reply could say something about them. Mr. Halahan gave as the reason the fact that there were no buyers and that there was a shortage of cash.
Most ironic of all, it emerged that the private companies would like the Government lo set up a new industrial reorganisation corporation to help them buy up bits of the B.S.C. When the Labour Government set up the I.R.C., Conservative M.P.s became quite neurotic about what they called "backdoor nationalisatiton". It now seems that Mr. Halahan would like the State to finance backdoor denationalisation.
In any case we have now moved to a new phase in which the Government see the nationalised industries and increased public expenditure as instruments for arresting growing unemployment and managing vital sections of the British economy. Even today the Minister for Industry announced that £10 million of minor works would be brought ahead in time for the B.S.C. to create job opportunities. We welcome this conversion.
Perhaps the most urgent reason for the Bill from the Government's point of view is our possible entry into the Common Market. Assuming that we enter it, this exercise will never be possible again. The Financial Times clearly pointed this out, and other people also believe it.
There are three reasons why the Bill is required now. The Government must bear responsibility for all three. The first is the economic recession in this country which has reduced the demand for steel and so cut down activity in the industry. The second is the Government's interference in the industry's pricing policy which, as the Daily Telegraph said on 8th December, has "seriously worsened" the situation; and the Minister admitted this this afternoon.
The third is the arbitrary decision to end investment grants—a decision which was mentioned by my hon. Friend the Member for Ebbw Vale, and cogently denounced by the right hon. Member for Stafford and Stone (Mr. Hugh Fraser) 956 in this House on Monday of this week in debating a Motion on exports. It is worth noting what the right hon. Gentleman said about the need for investment grants:I beg Ministers to reconsider the whole question of investment allowances, free depreciation and investment grants. We can no longer afford to be doctrinaire about it. It is not a question of what we said in the manifesto or in our speeches. It is a question of what needs to be done now. I am all the more convinced today that the investment grant, especially if arranged in a more refined fashion, with precise emphasis on new, British, and preferably manufactured equipment, is an instrument which we should use once more."—[OFFICIAL REPORT, 13th December, 1971; Vol. 828, c. 106.]In a statement worded with studious moderation, the latest annual report of the British Steel Corporation mentions the hardship that the corporation has suffered and will suffer as a result of the need for investment grants. It said that the corporationwill not benefit substantially therefore from the supposed changes in the method of calculating allowances on capital expenditure in replacement of investment grants and will suffer a considerable reduction in cash flow.Before the debate finishes, the House has a right to know in precise terms how much the corporation has lost as a result of the abolition of investment grants. Various estimates have been made. It has been put at as much as £100 million in a full year. The calculation must have been made in drawing up the Bill. There must be a figure in the minds of the Minister and his Department. We expect the Under-Secretary of State to give it to the House when he replies. The calculation must have been done.
We have heard the usual diatribe about the nationalised industries coming from the backwoodsmen opposite and from the backwoodslady, the hon. Member for Keighley (Miss Joan Hall), about how the nationalised industries have been discredited and the rest of it. However, I believe that we ought to spare the blushes of the hon. Member for Derbyshire, South-East (Mr. Rost) by not reminding him of the headlong recourse to nationalisation in the case of Rolls-Royce.
The ills of the British steel industry are not due to nationalisation. They are due to the mess which mismanagement by private enterprise left behind for the British Steel Corporation to clear up. In 957 every major steel-producing country in the world, whether the industry is publicly or privately owned, the need for rationalisation has been accepted. An interesting article on this matter by Colin Jones appeared in the Financial Times on 15th November. It said:The creation of one dominant company in Britain may have been the result of nationalisation. But there has been almost as dramatic a degree of concentration on the Continent in recent years, resulting in virtually only four steelmaking groups in West Germany, two in France, and one each in Belgium, Luxembourg, the Netherlands and Italy. There have even been some important mergers in the Japanese and U.S. steel industries.Only the British privately-owned industry failed to take the necessary action, and the net aggregate loss of the corporation in the first four years since vesting has been £39 million. Calculated on the same basis, the aggregate loss of the companies now nationalised in the year before vesting would not have been £39 million over four years, but £50 million in one year.
During the middle 1960s the ratio of investment expenditure to annual production in British steel was about half that of European countries and less than half the amount in the United States and Japan. We are pleased that over the next year it is planned that the corporation's capital expenditure should rise to about £250 million and even beyond that in 1972–73. But that is in the immediate short term. What every hon. Member on this side of the House who comes from a steel-making constituency cares about are the Government's long-term prospects embodied in the development plan. We have heard very little about them today. Everyone seems to have gone suspiciously quiet about them, including the corporation.
The Minister has announced today that a deep-seated review will be completed by the end of this month and announced to the House next year. That leaves a number of questions unanswered. Will the review give the go-ahead for the corporation's long-range development plan or will a new development plan have to be worked out? Is the whole exercise to be started again or is this protracted review simply a smokescreen to hide the abandonment of any development plan? Certainly the centre-piece of that plan was a new greenfield steel works costing over £1,000 million.
958 Now there are stories, which have been increasingly substantiated, of planned British Steel Corporation participation in what The Times on 25th October described asa massive European steel-making complex".In the same report a senior executive of the British Steel Corporation is quoted as describing such a venture as "very, very certain". My hon. Friends the Members for Rotherham (Mr. O'Malley) and Penistone (Mr. John Mendelson) mentioned that aspect.
If that were the case, where would it leave Hunterston, which sees a new green field site as the very heart of its hopes for economic regeneration in West Central Scotland? Where would it leave any other high unemployment traditional steel-making area in Britain which might also regard itself as a candidate for a new green field steel works?
Can the British Steel Corporation—this is absolutely crucial to the whole exercise—maintain a long-range development plan which includes both a green field and the brown field plant for which Teesside is hoping—my hon. Friend the Member for Cleveland (Mr. Tinn) mentioned this matter—and at the same time make what The Times says will be a "large investment" in a European complex as well? Is that what the Government think that the British Steel Corporation can do? Can it maintain its green field site plan, the centre-piece of its development plan, its brown field site and also major investment in a European complex as well?
Certainly the Iron and Steel Confederation, which no one would accuse of being one of the most militant of trade unions, has this week issued a grave warning against any move to locate a new steel works outside Britain at the expense of one in Britain, and it has directly accused the Government in these words:The delay by the corporation in announcing their findings and in giving the go-ahead for the construction of new capacity is obviously being influenced by the Government's deep-seated review of the steel industry.I hope that the Government will take the opportunity tonight of removing all grounds for suspicion by flatly denying that they are either encouraging or acquiescing in any British Steel Corporation project which will take jobs out 959 of Britain. I must tell the Minister that an industry like the steel industry not only depends on capital investment and sound imaginative management—these are extremely important and absolutely essential—but is vitally dependent upon maintaining the confidence and morale of those employed within it.
If the Government were to connive or acquiesce in any decision to export expansion and job prospects to some fortunate country in Western Europe, it would be a slap in the face to those men and communities who have invested their lives in the future of British steel. The devotion of these men to their industry has been tellingly demonstrated by the successful fight of the men of the River Don works in Sheffield to save those works and maintain job prospects in their area. All the experts said that they could not win. That weekly authority on everything, The Economist, wrote the River Don works off while Dr. Finniston was actually in the city announcing its reprieve.
That reprieve was the result of a campaign ounted by the shop stewards in close co-operation with my hon. Friends who represent Sheffield and the Sheffield area constituencies in this House and the Labour-controlled Sheffield City Council led by Sir Ronald Ironmonger. They were prepared to back the River Don works immediately, and that was crucial.
It would have been an act of folly—the hon. Member for Oswestry agreed with this—to close down those works which are the only establishment in the country turning out the type of heavy forgings required by British heavy engineering. The men of the River Don works, my hon. Friends and Sir Ronald Ironmonger deserve the thanks of the Government and of the corporation for saving them from themselves.
That is a fine start, and in the coming months—it would be even better if the Minister could announce it tonight—we look forward to the news that the original development plan of the corporation will go ahead. My right hon. Friend the Member for Newton (Mr. Frederick Lee) emphasised that that is the news which those who work in the steel industry need tonight. We look forward to con- 960 firmation—we hope that we can get it from the Minister—that there will be expanded development and that it will be in Britain.
The reprieve of the River Don works sounded the retreat as far as the steel industry is concerned, of the Government from their discredited lame duck policy with which the Secretary of State will always be associated. The Bill, by conceding a new capital structure for the steel industry, involving hundreds of millions of pounds, helps to turn that retreat into something of a rout. With one or two provisos which we shall explore in Committee, we welcome the Bill as a token that the Government have been forced, by the failure of their policies, to abandon some of their discredited dogmas.
§ 9.16 p.m.
§ The Under-Secretary of State for Trade and Industry (Mr. Nicholas Ridley)
We have had a good and interesting debate, rather than a doctrinaire battle which has been a feature of previous steel debates. But, having said that, I must say that the hon. Member for Chesterfield (Mr. Varley) exposed himself as living in a world of fantasy. He dreams up policies which he believes the Government held, although they never announced them, and then claims it as a victory when the Government do something different. As far as I can make out, the hon. Gentleman seems to see a Conservative under every bed.
The hon. Gentleman went on to talk about a European steel complex about which he has read in the newspapers, or somewhere, but he is again dreaming up a fantasy. It was almost as good a suggestion as that made by my hon. Friend the Member for Bedford (Mr. Skeet), that there should be a grass roots steel works in the South-East. I think that my hon. Friend meant a green field steel works, but the idea of a grass roots steel works is interesting.
§ Mr. Ridley
I must first deal with the fantasy of the hon. Gentleman that there is something sinister in Clause 2. The right hon. Member for Newton (Mr. Frederick Lee), the hon. Member for Ebbw Vale (Mr. Michael Foot), and the 961 hon. Member for Pontypridd (Mr. John) saw something suspicious about Clause 2. I must make it clear that the powers which my right hon. Friend has under the 1967 Act allow him to direct the British Steel Corporation to dispose of non-iron and steel assets by laying an order which can be prayed against if it is objected to.
My right hon. Friend has no power to order the disposal of steel assets. On the other hand, it has always been assumed that if it so wished the corporation could dispose of them, and under our predecessors there were several disposals of iron and steel assets—notably Round Oak—and nobody questioned whether they were possible or right, because they were management decisions by the corporation. Certain legal doubts have come to light about the extent to which it is correct for operations of that kind to be carried out, and the Government are simply taking the opportunity offered by the Bill to clear up the legal doubt beyond any fear of contradiction. Therefore, I think that hon. Members need have no worries about the contents of Clause 2.
My hon. Friend the Minister for Industry opened the debate with a discussion of the world steel situation and the cut-backs which are taking place in Japanese production as well as Japanese investment planning. The same applies in Germany, where production has been cut back by 20 per cent. and 8,000 workers are on short time. There is the same picture in France and the United States. Indeed, it is world wide.
I was asked for figures about the British situation. The corporation's production of finished steel in 1968–69 was 18.2 million tons; in 1969–70 it rose to 19.2 million tons; in 1970–71 there was a tiny drop to 19.1 million tons; in 1971–72 it is running at the rate of about 17 million tons, a figure which may have changed when we get to the end of the year. This shows that there has been a drop of about one-eighth in the demand upon the corporation, and this is the cause of short-time working, a lot of the redundancies and a lot of the current financial losses of the corporation.
I do not understand how hon. Members opposite can say with such venom and certainty that it is all the Govern- 962 ment's fault. The picture of world steel decline is clear. I do not see what the Government have done to cause it, and I would have thought that it would have been more constructive as well as more honest of hon. Members to admit that we live in a difficult phase for the steel industry and that we must be very careful to take the right decisions for the future.
I ask the hon. Member for Ebbw Vale and others who talk about Government price intervention in the industry one question, and I would like the hon. Gentleman to answer it. What would have happened if the price of steel had been higher in the last few months? The demand for steel would surely have been lower and there would have been more unemployment. So, every time the hon. Gentleman stands up and screams at the Government, asking for price regulation of the steel industry to be abolished, he is calling for less production and less employment in the industry.
§ Mr. Michael Foot
In previous debates the hon. Gentleman called for the removal on doctrinaire grounds of any controls over any prices. I have never done so. What I have said is that, whether it applied to coal, steel or any other nationalised industry, if the Government thought it right to intervene to hold prices down in the interests of the country as a whole, they should state the financial consequences for that industry and not turn in the next breath and pillory it by saying, "You are responsible for running heavy losses".
§ Mr. Ridley
The hon. Gentleman is not in form tonight. That was the weakest answer I have heard for a long time about the fundamentally inconsistent position he has insisted on taking tie time and again.
I go further. I will examine this question of price levels which the hon. Gentleman has talked about. Under the Labour Government and their Prices and Incomes Board, two price rises of the corporation were denied in full measure. In June, 1969, the proposed rise was reduced from 7 to 5¼ per cent.; in January, 1970, the proposed rise was reduced from 12 to 10 per cent. The first cut was worth £13 million and the second £20 million. The corporation's prices throughout the period 963 from nationalisation to the General Election were consistently below the prices of steel in the European Economic Community. Demand was buoyant. It was boom time. All of that money could have been gathered. What was the sense of price restraint in a period of boom?
The present Government allowed the first increase of 5 per cent. which was asked for by the corporation in October, 1970. The only increase we stopped was the 14 per cent. increase in April this year which we cut to 7 per cent. But by then the market had gone, and there are many—indeed, I am one of them—who believe that a 14 per cent. increase would not have stuck. If it had stuck, it would have created more unemployment than we have had and we have had bad enough unemployment as it is. Hon. Members have mentioned that the corporation has just cut the price of reinforcing rods, yet it was the corporation's intention further to raise the price of reinforcing rods.
There is all the difference in the world between using powers of price control in a boom period, when one is throwing away profits which could be used for the benefit of the industry in the future, and using price control when the market is slipping to ensure that too much of the share of the market is not lost.
I know that the hon. Gentleman would like to have an argument with me about the pros and cons of using price control at all. He finds it odd that I am advocating these policies. I find it even odder that he is advocating free market policies in relation to steel prices, which would have the effect of creating more unemployment.
§ Mr. Michael Foot
The hon. Member must have studied too deeply to have listened if he suggests that I have been advocating free market policies in this matter. I have not. I was suggesting that the Government, particularly the hon. Gentleman, had no right to claim that they and their civil servants had a better competence to judge price changes than the corporation. The hon. Gentleman in particular cannot claim that, especially when he and his' Government took credit in the middle of the year for saying "We are now grandly going to give the corporation the chance to settle its pricess". The Secre- 964 tary of State took credit for that as well. A couple of months later the Government said "We are clamping down restraint on the corporation's prices". They have changed the policy again. The hon. Gentleman is now defending price control, which is what he spent most of his parliamentary life attacking. This is what he must try to explain.
§ Mr. Ridley
The hon. Gentleman himself has become a non-interventionist. He asks us to go in for more disengagement. He has attacked us consistently for trying to get the country's price structure more under control. That does not come at all well from his mouth.
I have been asked by several hon. Members what has been the effect of all this price intervention. It is impossible to quantify exactly. The best assessment that we can made of the effects of Government intervention on actual price applications from 1967 to March this year is about £50 million to £80 million, before taking account of the benefit of price restraint on the corporation's own costs—for example, on its wages, purchases from other nationalised industries and the private sector, and so on.
A large part of this cost was due to delay in implementing increases during the investigations of the National Board for Prices and Incomes in December, 1968, and June, 1969. The lower figure allows for a normal delay of about one month between application and implementation to allow for the consumer council process.
The corporation says in its annual report for this year that, if it has been possible for the corporation to operate on the price basis of the European Economic Community since nationalisation, its results would have been transformed: the difference would have been about £250 million up to March this year. The corporation's proposals as submitted throughout have generally not been intended to match European price levels.
Nevertheless, allowing for everything, the corporation's prices have increased by an average across the board of about 32 per cent. since nationalisation, which is a sufficiently large increase. It shows that the application of E.E.C. prices would solve the problem about which the hon. Members for Ebbw Vale and I 965 have been arguing, that we would have a competitive market and that this would provide the substitute for Government intervention which the hon. Gentleman seeks and would indeed provide higher prices, and would have provided very much higher prices, to the benefit of investment, morale and the finances of the corporation.
Several hon. Members have asked why we expect profitability to come in 1973–74. There are three good reasons. First, we shall be subject to the European Coal and Steel Community pricing régime. Second, by then there will probably be an up-turn in steel demand: the signs are that there will be. Third, some of the new plant now being installed will be coming into service and will make a contribution to the profit.
'But then hon. Members, particularly those who join forces across the Floor of the House in not being absolutely certain about the wisdom of our decision to join the Common Market—amongst whom I would number the hon. Member for Ebbw Vale—asked "What happens if we do not go into profitability?" My hon. Friend the Member for Oswestry (Mr. Biffen) asked this question: "Shall we ever be able to do this again?"
I hate to suggest that it will be necessary again, but, just for the sake of argument supposing it were, I do not think there is anything in the Treaty of Paris to prevent the writing-off of losses against capital. If it is a fact that losses have been accumulated, nothing could stop the balance sheet being purified by such a write-off. What would be unacceptable would be a balance sheet adjustment deliberately engineered to subsidise the price level charged by one of our companies or nationalised corporations.
But I could not have better evidence than what the Community says about the White Paper which accompanies the Bill. My officials have been in touch with the officials of the Commission, who have already studied the White Paper. Their reaction is to regard the steps which we are taking as very sensible. But there is no need for the hon. Gentleman——
§ Mr. Michael Foot
I am sorry to interrupt the hon. Gentleman again, but we have a little time and this is a very 966 important question. So many authorities on the subject, including, for example, the writers in the Financial Times, have said that this would be regarded as unfair subsidy. The hon. Gentleman says that his officials have inquired the view of Brussels of these proposals, and it is that they are very sensible. But that is not quite the question. The question is, would such an operation be regarded as unfair subsidy if we were in the Common Market? Was that question put specifically to the officials? Since the hon. Gentleman was in touch with them, presumably the question was asked, so perhaps we could have—if not today, in the OFFICIAL REPORT—a full official statement of what the reply from Brussels was to all the questions which the hon. Gentleman and his Department put to Brussels on this matter of unfair subsidy in relation to this White Paper
§ Mr. Ridley
I have made a very fair distinction, which the hon. Member can study by reading HANSARD tomorrow, between a deliberate subsidy in order to create an advantage and the need to write off the losses which can occur in any industry in the public or the private sector. I am sure that this is general on the continent when companies have suffered a lean period. That is a long way for me to go.
Mr. Eddie Griffiths
Is it not true that, if the B.S.C. is not financially sound on entry of the Market, in effect the E.E.C. would frown on any of its expansion programmes, and that the Government are now providing the corporation with the money for this type of expansion?
§ Mr. Ridley
The short answer to that is "No". My hon. Friend the Member for Bedford asked a similar question: whether the European Commission would control the expansion of the corporation so that it did not reach a size to threaten true competition within the Common Market. I do not think my hon. Friend need worry about this. The power that the Commission has taken is to prevent mergers which would lead to units so big as to dominate the steel market. But normal expansion through investment and growth is not a matter which it would consider checking and I do not believe that there would be any question 967 of the B.S.C. not being able to expand as it was required or wished to do.
My hon. Friend the Member for Oswestry may be interested to know that there is no control over the siting of steel works in this or any other country under the Treaty of Paris. One need only look at examples of steel works in the South of Italy and France, sited for regional purposes, to see that national steel works can be sited wherever Governments want them to be established. I can therefore assure the House that a lot of the European bogies erected during this debate can be conveniently forgotten.
My hon. Friend the Member for Oswestry described this debate as a doleful annual general meeting of shareholders, and certainly the figures before us are not at all pleasant. The corporation has already lost just under £40 million, we expect to lose £100 million in the year to come and there will be a loss of about the same order during the year ahead of that.
It is not expected that any public dividend will be paid on any of the corporation's. public dividend capital This, on the basis of the beginning of the P.D.C. to the end of March, 1973, will, as it were, lose the Exchequer a further £250 million, money that would have been received if the capital had not been converted and had been remunerated at 6½ per cent., which is the average National Loan Fund rate.
This means that the actual and expected loss, together with dividends forgone, will total about £500 million up to March, 1973. This is sufficient reason for the House to agree to the write-off proposed in the Bill because it clearly must be taken care of if the corporation is to have a healthy balance sheet in future.
The debate has been constructive in the sense that all hon. Members have recognised that to get out of this situation we must do more to increase the efficiency of production, which must mean more investment. The hon. Member for Sheffield, Brightside (Mr. Eddie Griffiths), the hon. Member for Ebbw Vale and many others asked a number of questions about this subject.
I must make it absolutely clear that the famine years for investment in British 968 steel were 1967–68, 1968–69 and 1969–70. Private sector average investment was well over £100 million until, curiously, it dipped below that in 1964, when hon. Gentlemen opposite came to office. It then drifted slowly downwards until nationalisation was put through, when it fell even further, finally plummeting to only £39 million in 1969–70.
Mr. Eddie Griffiths
The hon. Gentleman is deliberately misleading the House because when he talks about investment he should make it clear that the money spent in any given year is in respect of projects planned for and begun two or three years earlier. In other words, money now being spent by the corporation is concerned with plans, ideas and schemes originated some time ago, which means that the actual expenditure in the current year was started at least two and a half years ago.
§ Mr. Ridley
There is, of course, a time lag in investment. I am simply saying that in the middle and late 'sixties we in this country, through delay over the argument about nationalisation, had a very steep dip in investment in steel. The figures are incontrovertible. I have given them to the House once and I shall not give them again. But there is no doubt that this is one of the difficulties with which the steel industry has to cope.
I should like to talk about what is taking place because, as my hon. Friend the Minister for Industry said, investment is considerably higher this year and it may be helpful to hon. Members who have constituency problems and have raised them in the debate if I deal with them at this stage before coming on to the long-term future of investment in the corporation.
The right hon. Member for Newton referred to Irlam. The corporation is continuing its discussion with the trade unions and other interested parties following the recent agreement whereby the first phase of closure was accepted by the unions. The B.S.C. agreed to withdraw the second phase of the closure, and it will be willing, I am sure, to continue to consult fully as it has already done. It has also indicated that it is prepared to consider proposals for the works and private sector interests.
The hon. Member for Flint, East (Mr. Barry Jones) asked me about Shotton. 969 As he is not present I will only say that an investment of £20 million is going on at present.
§ Mr. Lawson
My hon. Friend the Member for Flint, East (Mr. Barry Jones) had to leave but wished to apologise for not being present.
§ Mr. Ridley
I felt that it would not be worth my while to go into Shotton in depth as the hon. Member was not present.
The River Don was mentioned by several hon. Members and everyone accepts the fact that the proposals for the prospects of the works are now much more hopeful. I am afraid that there will probably be some redundancy. The B.S.C. has decided that it wants to keep its heavy forge going so that, subject to the outcome of further discussions with the unions, the jobs of the whole workforce of some 4,500 men are no longer at risk.
I should like to give the House some thoroughly good news at this stage which I am sure will be welcomed on all sides. In his statement on 28th June, my right hon. Friend referred to further steps under negotiation to strengthen the Sheffield steel industry. I can now tell the House that the firms of Brown Bailey Steels Ltd. and Rotherham Tinsley Steel Ltd. have agreed on a merger between the two companies and are announcing the terms tonight. The Government, as a majority shareholder in Brown Bailey Steels, regard the merger as a desirable rationalisation of the private steel sector in Sheffield.
I want to spend the last few minutes of my time talking about the future.
§ Mr. Lawson
The hon. Gentleman has talked about different areas that have been raised in the debate. The Scottish area was mentioned but he has said nothing about it.
§ Mr. Ridley
I apologise to the hon. Gentleman. I do not know the particular problem he put, but I will write to him if there is some point I have missed. One cannot deal with every point put during the debate.
Mr. Eddie Griffiths
The hon. Gentleman rather took me aback when he mentioned the merger in Sheffield. He said it was to be Rotherham Tinsley 970 with Brown Bailey. This is rather surprising because I understand that a week ago an announcement was made that Brown Bailey and Sheffield Rolling Mills were in discussions and that these had broken down. If the talks broke down with one firm it is rather surprising that less than a week later Rotherham Tinsley is brought in.
§ Mr. Ridley
Whatever may be the rights and wrongs of that, the Government are quite certain that this will lead to a strengthening of the private sector in Sheffield. I should have thought that that would have been welcomed on all sides for the future.
I should like to say a word about the joint study steering group. A great deal of nonsense has been talked about it. The hon. Member for Ebbw Vale spoke about a pantomime horse, which was a colourful description from a first-class trapeze artist. There is no interference with the structural relationship, with my right hon. Friend's responsibility to manage his powers under the Iron and Steel Acts and to decide on the corporation's future investment programme. I do not believe that anything has taken place in regard to the planning of investment which is in any way contrary to the report of the Select Committee on Nationalised Industries or which in any way blurs my right hon. Friend's responsibility to settle the investment programme while the B.S.C. carries out its task of management.
Nothing that has arisen as a result of the deep studies has interfered with the B.S.C.'s current investment programme, with the saver of the £25 million worth of schemes which my hon. Friend mentioned earlier. The investment programme is mounting; it is gathering momentum. It cannot be said that the B.S.C. has been held up by the existence of the deep study. It does not take decisions. It is under the authority of my right hon. Friend, and it does not supervise every penny spent, as the hon. Member for Brightside seemed to think. Its purpose is to do the basic spadework on such matters as demand, exports, the world environment, the competitive position of the B.S.C., likely technological changes and some of the main consequences of alternative strategic options. The main purpose is to form a background for the 971 B.S.C.'s major development proposals which will require assessment and decision by the Government in the next year or so. It will be for the corporation to identify the relative advantages of further development expenditure at the existing Heritage sites as against a new site. By increasing the capacity of the Heritage sites there is always the risk that scope for a major new development may be reduced.
§ Mr. Michael Foot
This is a very important matter. The hon. Gentleman seems to describe the joint steering group as if it were perfectly normal—indeed, a process so estimable that it should be extended to every other industry. But is it not the case that the corporation is eager to bring the arrangement to an end as speedily as possible, and that it regards it as a derogation of its proper responsibilities under the Act?
§ Mr. Ridley
The hon. Gentleman seems to know more about what the corporation thinks and wants than I do, because that is the first I have heard of that.
My right hon. Friend is in the position of investment controller or banker to the industry. He has every right and every duty in investing the large sums of public money involved to determine for himself the rights and wrongs, the truth and accuracy, of all these matters. It seems to me that hon. Members today have been trying to do the work of the joint steering group without half the expertise, time, knowledge or facts that are at its disposal. Some hon. Members have said, "We must expand and conquer world markets." Others have been saying that a new steel works must be built at Sheffield, on the South-East Coast or at Ebbw Vale. Others have said that we must have a new green fields site, or even two. Hon. Members have been deciding these questions without having done their joint steering group work.
§ Mr. Ridley
The hon. Gentleman nipped in, made a nippy speech and nipped out. I will not give way to him now. I will only say——
§ Mr. Mendelson
On a point of order, Mr. Deputy Speaker. The hon. Gentleman has just made a false accusation.
§ Mr. Deputy Speaker (Sir Robert Grant-Ferris)
Before the hon. Gentleman raises his point of order, it is clear that the Minister has said he will not give way. The hon. Gentleman knows that in those circumstances he cannot intervene. If he has a point of order I will be glad to hear it.
§ Mr. Mendelson
It is that I have been here since the beginning of the hon. Gentleman's speech. He has just made a false accusation against me and he ought to withdraw.
§ Mr. Mendelson
Will the hon. Gentleman allow me to intervene, on investment? He ought to give way. I was here all day.
§ Mr. Deputy Speaker
The hon. Gentleman knows that he cannot intervene unless the Under-Secretary gives way.
§ Mr. Mendelson
I thank the hon. Gentleman for giving way. On this point of investment, does he not know that the corporation made precise proposals to the Government over a year ago and that the chairman of the corporation has maintained ever since that the delay made it more difficult for the corporation because it increased the cost of the projects?
§ Mr. Ridley
I am glad that I gave way because I can tell the hon. Gentleman that what he is saying is simply not true. There are no specific proposals before the Government which have not been approved. The plan nut forward earlier was not in a form which could be approved at that stage. There can be no doubt, from my experience, as well as from my right hon. Friend's strong feelings, that without this deep, searching analysis of the industry it would be wrong to reach decisions which might be bitterly regretted and for which we would have to pay in taxes. That is why we are making sure this will not happen. If it was not for mistakes made in the past, we would not have the Bill before us now leading to increased Government subvention to the industry. I hope that this will be the last time we need to bring this sort of Bill before 973 the House and that the steel industry will be able to create a prosperous, expanding and successful job environment as well as being an earner of foreign exchange.
§ Mr. Michael Foot
May I intervene before the hon. Gentleman sits down? He has a moment to spare although he said that he was pressed for time when be refused to give way to my hon. Friend. Will he tell us whether the joint steering group arrangement, which he has been advocating as if it is a general system of which he approves, is to be brought to an end? When I and my lion. Friends representing steel constituencies visited the right hon. Gentleman he said he would bring the first joint steering group to an end as swiftly as possible. As far as I can recall, he gave an undertaking that as soon as this operation was ended, the second joint steering group would be brought to an end. He certainly did not defend it on the basis that the hon. Gentleman has done. I say it is quite wrong that the responsibility between the Government and the corporation should be blurred in this way. That was the view the Secretary of State gave us earlier. If there is a departure from that and the joint steering group is to continue, we want to be told what is the Government's policy. When is this group operation to be brought to an end?
§ Mr. Ridley
My hon. Friend the Minister for Industry told the hon. Gentleman in opening the debate that he expected the report would be with his right hon. Friend in a short time and he hoped that a statement could be made to the House soon after we reassemble in January. By definition, if the report is in my right hon. Friend's hands, the work of the steering group comes to an end and there is no change from the original position. The first report has been received, the second will be received soon and a statement made to the House in the New Year.
§ Mr. Deputy Speaker
Order. Is the hon. Gentleman giving way to the right hon. Gentleman, or has he finished his speech?
§ Mr. Lee
On several occasions the question has been asked from both sides of the House as to the global size of the steel industry. A figure of 40 million tons has been mentioned. Are the Government in a position to say that there will be no diminution of that global figure which has been estimated in the past to be the size of the steel industry?
§ Mr. Ridley
I cannot possibly anticipate the results of this review. The global figure has no time scale, it is meaningless. It depends how many years are taken. The last thing I would wish to do would be to make a statement which my right hon. Friend will make in the New Year when I have not the slightest idea what that statement will contain.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).