§ The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. John Davies)
With permission, Mr. Speaker, I will make a statement on steel. I must apologise for the length of the statement.
A further important stage has been reached in the consideration being given by the Government to the future of the industry in consultation with the British Steel Corporation and other interested parties. Having on 27th April announced our conclusions about the maintenance as an integral part of the B.S.C. of the bulk iron and steel-making activities, I am today able to deal with the short-term financial and investment prospects and the objectives for restructuring the industry upon a more logical and efficient basis. In due course I look forward to completing this series of announcements when the longer term plans for the industry have been appraised and agreed.
After nearly breaking even last year, the prospects of the industry for the current financial year involve a loss after depreciation of some £100 million. However, I have decided that, nevertheless, the investment needs of the industry make it necessary for me to authorise the B.S.C. to proceed with capital expenditure this year at a level of £225 million at 1970–71 prices—that is some £40 million more than the total authorised last autumn. This level of investment allows the B.S.C. to proceed with all the various projects it had decided upon, including expansion at Ravenscraig and Llanwern, but does not prejudge the results of the long-term review now in progress.
The combination of the loss and the higher level of capital expenditure has implications of a major kind to financing needs. I have accordingly agreed that the B.S.C. may increase its net borrowings to a level of £300 million this year and a draft Order has been laid before the House to increase the Corporation's borrowing limits from the present £500 million to the full £650 million provided in Section 3 of the Iron and Steel Act 1969.
The anticipated loss makes the setting of a statutory financial target difficult, but the Corporation has agreed with me that, subject to major and unpredictable eventualities, it will work within the loss levels 34 and borrowing limits agreed. Arrangements are being made for quarterly reports.
The need to move into profitability is recognised by both Government and B.S.C. As regards prices for the B.S.C.'s products, the Corporation wishes, in future, to be more selective in its price changes, dealing with its products individually rather than upon an across-the-board basis. I am in favour of such a change in practice, which will still be subject to the normal procedures involving the Iron and Steel Consultative Council and informal consultation with the Government.
My hon. Friend the Minister for In-dusty has been engaged with the B.S.C. and other interested parties in extensive discussions concerning the future structure of the industry. A broad measure of agreement has been reached between all concerned in four fields of restructuring.
First, in the boundary area between B.S.C. and private industry, agreement in principle has been reached between the Corporation and Firth Brown Ltd. as to the initial steps necessary to rationalise their overlapping interests. Further steps are currently in negotiation to strengthen the Sheffield steel industry.
Second, the Corporation fully recognises the need to find a solution to the problems of private sector re-rollers and others who are substantially dependent upon the Corporation for supplies of billets while at the same time competing with it in finished products. B.S.C. is prepared to open discussion with interested parties with a view to the creation of one or two new jointly-owned steel and billet-making companies. In addition, the B.S.C. has told G.K.N. of its preparedness to discuss the future ownership of the Brymbo Steel Works, which makes high-quality billets. Moreover the Corporation has agreed to discuss with private interests whether further action may still be required to ensure adequate independent supplies and fair competition, particularly for higher-grade billets.
Thirdly, major parts of the B.S.C's constructional engineering and chemicals divisions are to be established by the Corporation as Companies Acts' companies with a view to the introduction of private capital by direct subscription or 35 as a result of mergers. Action upon broadly similar lines will be taken in wire making to create a really strong wire group capable of holding its own in foreign competition. Similarly, the B.S.C. has agreed to establish a company with Companies Acts status, to hold its B.S.C. stake in all the various joint public/private steel companies, into which it is intended that private capital will be introduced.
Fourthly, the B.S.C. sees industrial advantage in disposing of a certain number of peripheral interests at a fair price: these include its bright-bar, stamping, tool and tool-steel making, a small engineering works, some industrialised housing and certain of its brick-making operations.
Finally, I have appointed two new part-time members to the Board of the Corporation with effect from 19th July. They are Sir Matthew Stevenson and Mr. Ralph Bateman. In addition, Sir David Barran has accepted an invitation to serve with effect from the beginning of next year. I am discussing with the Chairman what additional Board members would be appropriate.
These measures, together with the long-term study of the B.S.C.'s future development, represent important progress towards establishing the foundations for a much strengthened and profitable British steel industry. There are great opportunities ahead for the Corporation and for the industry as a whole and I am confident that, among both men and management, there is every determination to make the most of them.
§ Mr. Michael Foot
Does the right hon. Gentleman appreciate that, even after the months of uncertainty in the steel industry, which he and the Government have created, this statement still leaves a host of ambiguities and uncertainties which we will have to examine in the debate on Wednesday? Will he first say what is the target figure which has been accepted under paragraph 4 of his statement? Will he give the exact figure?
In paragraph 6 he says that: "a broad measure of agreement has been reached between all concerned in four fields of restructuring". Does that mean that there are no further proposals to be made by 36 the Government about restructuring, that this is the conclusion of such discussions? Does he realise that, under the second proposal in paragraph 6 for the establishment of one or two new jointly owned steel and billet-making companies, he is creating exactly the confusion which he seeks to remove in the first part of his statement containing the "hive-on" proposal enabling B.S.C. to take over the parts specified?
Is he aware that the Government have already accepted that, in the case of any proposed hive-off in the National Coal Board, the matter shall be brought before the House on an Order? Will he accept that any proposals under this scheme would be similarly brought forward? Is he further aware that we do not see any reason at all why the British Steel Corporation should be interfered with in the conduct of its constructional, engineering, chemical or other divisions in the way in which the Government are proposing? Surely he accepts that the House of Commons must have the right to express its view on these matters, particularly because there is the question which arises in some of these proposed transfers, ambiguous as the statement is, that they may be transferred to those who have contributed to Conservative Party Funds?
§ Mr. Foot
If it is not so, the right hon. Gentleman can repudiate that at once. If there is no danger of any transfer to contributors to Conservative funds taking place, he can say so right away.
Will he inform those concerned of the declaration which the Labour Party has made that where hiving-off has been carried out in a way which we consider to be contrary to the public interest re-nationalisation could take place without compensation? Will he take that into account in his proposals? Above all, will he recognise that in the interests of the steel industry it is necessary that all these ambiguities should be removed? Will he give us an absolute guarantee that no action will be taken to force the Corporation to make a sale without first having the courage to bring the matter before the House of Commons?
§ Mr. Davies
The hon. Gentleman has not responded in the sense of my statement. All the measures which I have 37 proposed here have been the subject of the most careful discussion with the Corporation, which is wholly in agreement with carrying them out. Therefore, when the hon. Gentleman refers in rather threatening terms to re-nationalisation without compensation where matters are forced on the Corporation, may I set his mind at rest by saying that no such matters have been forced on the Corporation. It is as well to make that clear beyond any doubt at the start.
The hon. Gentleman speaks of uncertainty, but my endeavour has been to try to create a total arrangement which seems to me, the Corporation and the private sector of the industry to lean towards a sanely organised and potentially very prosperous industry. It is with that in mind that all this work has been undertaken. Therefore, it is a little unreasonable to talk either of uncertainty or of my having proposed arrangements which have no industrial sense. They are all scrutinised with a view to procuring industrial sense. I hope that the hon. Gentleman will take them carefully into consideration in that sense.
As to hiving off, as the hon. Gentleman calls it, the truth is that what is proposed in the large number of cases other than those where there is a sensible rationalisation, which both sides of the industry consider necessary, is to move into the field of Companies Act companies with a certain number of activities and not into what the hon. Gentleman called hiving off. Of course, it is very desirable from the Government's point of view and, I think, from the country's point of view that such measures should give rise to a larger amount of finance coming from private sources rather than perpetually from the national Exchequer.
§ Several Hon. Members rose—
§ Mr. Speaker
Order. The Chair is in a difficulty. There is the full day's debate on Wednesday. That debate is on the Adjournment, so I think that any matter in connection with the steel industry can be raised. Well over 30 right hon. and hon. Members want to speak in the very important debate today. Therefore I can allow only a very few questions now.
Mr. Eddie Griffiths
The Secretary of State has surpassed even his normal ambiguity. This statement could have been drawn up by any of his lawyer friends sitting behind him with a view to bringing a little more sense into the industry. The right hon Gentleman said that the British Steel Corporation must make a quarterly report to him, yet he has told the House that it would have its commercial independence once the short-term review had taken place. Second, will he say where the strengthening of the Sheffield industry is to lake place in relation to billet production? As I understand it, the right hon. Gentleman is suggesting that the Corporation and the private sector become part-owners of a billet producer. Is the suggestion that that should be a new plant or that they should share in an existing plant? Third, the right hon. Gentleman referred in his statement to Guest, Keen and Nettlefolds. Is that a case of giving unto Caesar what belongs to Caesar, in that in a statement on steel he found it necessary to mention only that one private steel firm? It is well known in the House that that firm has been a very good contributor to Conservative Party funds—
§ Mr. Speaker
Order. The hon. Gentleman is going on for a very long time and may be prejudicing his chances on Wednesday.
Will the Secretary of State insist that when G.K.N. makes an offer for the Brymbo steelworks it also makes an offer for the East Moors works in Cardiff?
§ Mr. Davies
The quarterly report relates to the performance of the industry in relation to the targets. The targets set in this financial year are difficult to put in normal form, because they are negative. But I shall still expect there to be a quarterly report. In our last debate on steel, I said that we were devising new methods which allowed a greater disengagement to the Corporation but also allowed the Government to be aware of the development of the Corporation in the light of the targets. This is such an arrangement.
I do not know the situation with regard to East Moors, though I know that the Corporation is quite prepared to entertain an inquiry on the subject.
39 In Sheffield there will be a combined operation between B.S.C. and private interests. It will comprise existing facilities, but they may well be increased.
§ Sir R. Cary
Can my right hon. Friend say a word about the future of the Irlam steelworks, which is to create another 5,000 unemployed in the Manchester area? Is it possible by the installation of electrical firing to save a part of that work force?
§ Mr. Davies
I am very conscious of the concern among many hon. Members about Irlam, as is the Chairman of the B.S.C. I know that he is fully prepared to entertain specific inquiries covering the whole field of work in that facility, and will be open to discussions about them.
§ Mr. Frederick Lee
Now that the right hon. Gentleman has announced that private capital is to be invited to go into the wire group, of which Irlam is easily the biggest, does that mean that the notice of 4,300 people being rendered unemployed is to be withdrawn in order that discussions with private enterprise can go on? The right hon. Gentleman says that the problem is the unprofitability of the B.S.C. How does it become profitable by closing down the profitable sections?
§ Mr. Davies
There are already substantial private interests in wire-making. Thep resent proposal would embrace the wire activity in Irlam. That does not mean and what I said before in no sense means that all is arrested with regard to Irlam. I simply say that the Chairman of the Corporation is quite prepared to entertain serious proposals for the acquisition or other use of the total of the Irlam plants. I can go no further at this stage. Generally speaking, this is a matter for the Corporation and not for me.
Is my right hon. Friend aware that the substantial additional charges which it seems will fall upon the National Loans Fund will interest many of us and make us welcome the prospective partners he is providing for the Corporation with private capital? Does he recognise that one of the preconditions for the interest of that private capital must be the absence of arbitrary 40 political interference in the pricing structures of the Corporation?
§ Mr. Davies
I take that very much into account. What I said about pricing is a clear indication of the Government's desire to move to a somewhat freer situation with regard to the Corporation.
§ Mr. Callaghan
I thought that I heard the right hon. Gentleman in an answer to a supplementary question refer to the East Moors works at Cardiff. If he did, could he give a little more detail—it was not mentioned in the main statement—about what sort of proposition the British Steel Corporation would be willing to entertain? Is the right hon. Gentleman aware—no doubt he is—that 5,000 men there are living in a state of day-to-day uncertainty?
§ Mr. Davies
Yes, I am as concerned as the right hon. Gentleman is about the situation in East Moors, but I am not in a position to say much more at this stage. It is clearly for the Corporation and not for me to deal with this question. However, I repeat that the Corporation would be perfectly prepared, and indeed is anxious, to discuss with those who may wish to discuss with it the use of that plant.
§ Sir G. Nabarro
I congratulate my right hon. Friend upon the introduction of a substantial source of private capital, which is long overdue. What urgent steps is he taking to abate and eventually to extinguish at the earliest possible date the continuing loss at the rate of £100 million a year by the British Steel Corporation? Having regard to the fact that there have been four across-the-board price increases for steel, all of which have been highly inflationary throughout British industry, what steps are to be taken to stabilise the prices of rolled and rerolled steel products?
§ Mr. Davies
I ought in fairness to say that the performance of the industry last year was approximately to break even, and so it is not right to say that the loss was running at the rate of £100 million a year. There will be a loss in the current year of approximately £100 million, and that is undeniable and serious. Turning a loss into a profit is not only a matter of pricing, but of the efficient use of plant, and this is clearly one of the matters with which I am now 41 deeply concerned with the Chairman of the Corporation.
§ Mr. O'Malley
Is the right hon. Gentleman aware that these vague but nevertheless disreputable hiving-off proposals will be seen in the steel areas as loot for the big business friends of the Tory Party and contrary to the long-term interests of the steel industry as a whole? Secondly, is the right hon. Gentleman aware that the deliberate vagueness of his statement, causing further confusion in the steel areas, will further reduce morale in those areas, which have already suffered terribly since he became the Minister responsible?
§ Mr. Davies
That is another faulty assessment of the situation. From what I know of the Chairman of the Steel Corporation, I am bound to say that he would certainly not be party to arrangements in the deliberate disinterest of the steel industry, which is exactly what the hon. Gentleman said.
§ Several Hon. Members rose—
§ Mr. Speaker
It is clear that we have moved into the area of debate; these comments must be continued on Wednesday.