HC Deb 09 August 1972 vol 842 cc1818-30

4.5 p.m.

Mr. Peter Archer (Rowley Regis and Tipton)

The last minutes of today's sitting are ticking away and there are still a number of hon. Members anxious to speak, and so I hope that the House will forgive me if I deliver this speech at a faster than usual rate of delivery.

This is a matter which affects a modestly sized factory in one area, but it is of great importance to the Black Country because it is an area which has seen its prosperity evaporate over the last few years, until short time and unemployment are spectres breathing down the necks of many families and those who lose their livelihoods face the prospect of long-term unemployment. It is of great importance for the country because it raises issues of responsibility extending far beyond the present instance. In view of the exchange at Prime Minister's Question time yesterday, I should like to say a word about parliamentary responsibility.

The complex is situated in Oldbury, in the area now represented by the hon. Member for Oldbury and Halesowen (Mr. Stokes). It is fair to say that he could not be here today, but, notwithstanding what he said yesterday, he has authorised me to say that he supports what I am saying in this debate, and I have every reason to accept what he says. It is an area that I hope to represent along with Rowley Regis after the next election, and may that be soon.

At the moment, it provides employment for some of my present constituents and for some of the constituents of my hon. Friends the Member for Bilston (Mr. Robert Edwards) and the Member for Dudley (Dr. Gilbert). It is important because it is only part of a threatened series of closures affecting the whole of the Black Country—Cookley in Dudley, Bilston, Wolverhampton, Tube Investments in Walsall and so on.

Birchley employs 227 men but the total at risk in the whole series of closures may he between 3,000 and 4,000. I have called it a complex. It is only a small complex, but it consists of three mills, so that technically it is a complex of a seven-inch, a nine-inch and a 21-inch mill, rolling steel bars and producing approximately 1,000 tons a week, and it is part of the Special Steels Division of the British Steel Corporation.

Its probable future is seen by the Corporation as having a limited life, with the 21-inch mill closing in the financial year 1973–74, which means that it may be at risk from next April, while the other mills would be in danger in the financial year 1975–76. The reasons as they have been expressed by the Corporation are that this is part of a rationalisation process, a concentration of special steel production in larger units because smaller units are not economically viable.

We know that a large mill at Rotherham is envisaged producing about 8,000 tons a week[...] This was not announced baldly as a sudden sensation. Our complaint is not that the Corporation failed to cushion a sudden blow, but that it piled the cushions so as to conceal what it was doing, until it was burned through, and it was only when events revealed the process that it was discovered that orders were directed elsewhere and employees suspected, perhaps not unnaturally, that the mills were being quietly run down, and the unions involved formed an action committee to discuss the matter with Corporation officials.

On 25th April, Mr. Bromiley, the managing director of the Special Steels Division, wrote to Mr. Pearsall, Chairman of the Action Committee: I fully understand the apprehension that you and your colleagues are feeling, but I must make is clear that there is no reticence on the part of the corporation to discuss Birchley's future. It is merely that we are not ready. … The hon. Member for Oldbury and Halesowen wrote to the Chairman of the Corporation. On 6th April he received an answer which said: A planning study in depth is now in progress and later in the year we shall be discussing with the Government our alternative strategies and capital investment proposals. Until those discussions are concluded it would not be possible to have any very meaningful exchanges about the future of any particular works… I wrote to Mr. Bromiley on 15th May and received the following answer: I think it is very unlikely that I would have anything more to say than that which is contained in Lord Melchett's letter. Nevertheless, we arranged a meeting for 26th June and before that meeting took place, on 15th June, a notice was exhibited at the premises saying that these decisions had been reached, that the future of the mill was already limited, and specifying broadly in which financial years that future was likely to terminate. So, we have one more example of what has become perhaps a typical way in which large corporations deal with those people concerned. One day it is too early for discussion and the next day it is too late because the matter has been decided.

To return to the future of Birchley, the Action Committee made it clear that the employees would prefer to remain within the Corporation but they said that if this were to be denied them they would look for a future within private industry. This situation is probably unique, certainly in the Special Steels Division, because we have had here a number of offers from companies anxious to acquire the Birchley mills. We know of at least two private companies who have stated publicly that they would be prepared to make realistic offers the moment negotiations were opened.

Of course they have not put any specific figure on this because until it is agreed precisely what plant, what goodwill, and what proportion of the order books is for sale, they cannot give a specific figure. They are ready to do so and to guarantee that these mills will continue in production until the 1980s. The British Steel Corporation has rejected those offers. It has declined to discuss the possibility of a sale to private industry on the grounds that when the giant mill is in production it will require the order books of mills such as Birchley.

That admits of a number of comments. One was the comment made by my right hon. Friend the Member for Dudley that it was rather strange, if small mills are to be jettisoned because they are not competitive, that the Corporation should fear competition from them. A further comment comes from a number of local experts who suspect a fallacy in the reasoning that if local customers cannot obtain their orders from Birchley they will go elsewhere in the Corporation. There are three fallacies. Local customers can be supplied cheaply and quickly at the moment because there are no transport problems. If they have to be supplied from Rotherham there may well be such problems.

Secondly, this is a field in which there are so many variations in size and quality of steel that stockholders are not always capable of meeting a particular requirement. There is a need for what in the industry are called jobbing mills. This is an area of diverse industry—"You name it, we make it". Local customers are likely to ring up at 10 a.m. and say, "We have a small order which we require at once. Can you deliver it by four o'clock this afternoon?" It is mills such as Birchley which can meet that kind of need.

Then there is the matter of cost. I have a report by a working party from within the Corporation. I say at once that this report is confidential and how it has found its way into my hands is a matter which I do not think it would be wise to disclose here. If the Corporation is less than frank about its decisions, it must not be surprised if these documents do change hands. Because it is confidential I do not propose to quote from the contents of the report except on one matter, which I do not believe the Corporation would consider to be confidential, and it is an argument rather than information. What it says is: A problem mainly, but not entirely, confined to Special Steels Division is that of the difficulties of ensuring an adequate customer service if too large a proportion of the capacity is in high capacity mills which require large batches (100 tons+) … it is necessary to ensure that sufficient capacity is retained in mills which can roll small batches at a cost which allows adequate return.… On the Corporation's own argument it may find that orders denied to Birchley may be lost to foreign competitors rather than being replaced within the Corporation.

The House may ask whether the fate which threatens Birchley is the conclusion of consistent unprofitability or is the nemesis of unhappy industrial relations. The answer is that it is neither. It has consistently shown a profit and there is no reason why it should not continue to do so. This is not a "lame duck". This duck is laying golden eggs and shows every prospect of continuing to do so.

Nor is there any problem of industrial relations. The management has admitted that it could not have a better work force. So far as I have been able to ascertain, there has never been any form of industrial action, go-slow or industrial dispute. Recently the light mill had its production interrupted for a time and the whole force, without being asked, went to the heavy mill, got their jackets off and helped. The proposed closure is the employees' reward for loyal and profitable service.

I turn to the question of the impact on the locality. It cannot be often that a situation affecting a works of this size has gone to the heart of a community so completely. All the Members of Parliament in the area have demonstrated their concern, irrespective of party. The Action Committee consists of all the unions concerned. They are watching events here very carefully, and I have a telegram here about today's debate which I would read if time permitted. There has been a campaign by local residents called "Keep Birchley Rolling", and a mammoth petition is in the course of preparation. The president of the campaign is the Mayor of Warley. I have a letter from the town clerk setting out a resolution of support from the local council. Again, I would read it if time permitted. The local Press and the broadcasting and television services have given enormous and unstinted support and, through them, we have even had coverage in the national media.

I come to the point of the debate. I hope that the Minister will tell us the Government's attitude. The overall picture begins with the Government. We know from the Government that the target of steel production in 1980 is between 28 million and 36 million tons. In view of the time I shall not be tempted, as I might otherwise have been, to engage with the Minister in discussing how much pressure was placed by the Government on the Corporation to accept the lower end of the range. The Minister announced on 23rd May—and I accept what he says—that there was a complete understanding between the Government and the Corporation, and it is on that that I rely. In terms of legal pleading, I admit and adopt that argument.

The range of 28 million to 36 million tons is pretty wide. Production of 28 million tons would mean virtually no expansion at all. The industry is already producing 27 million tons a year. Did the Corporation base its calculation on the upper end of the bracket or on the lower end? In other words, is it calculating for any increase in special steels, or is the mill at Rotherham merely intended to keep production static?

Yesterday, I asked the Prime Minister what was the Government's attitude, and he replied that the Government would not stand in the way of the Corporation selling Birchley to private industry if it wished to do so. We want the Government to go further. They should not be neutral in a matter of this kind. Will they say that an employment situation of this sort is too important to be left to the accountants, even assuming, which we do not accept, that the accountants have their figures right?

The Prime Minister pointed out, quite accurately, that under the Act the Government had no power to give the Corporation directions. He also pointed out, perhaps not surprisingly, that the Act had been introduced by the Labour Government. Some of us felt that in the Act we made too many concessions to opinion from right hon. and hon. Members opposite. Perhaps we shall not make that mistake again. But even accepting that the Minister does not have power to give the Corporation directions, we find it hard to believe that, if the Government have a view, the Corporation would ignore it.

If the Government genuinely wish to go further than merely saying that they will not stand in the Corporation's way, will they indicate that they accept social responsibility for this matter? Or do they simply abdicate all responsibility? If they do, those in the locality may very well conclude that the Government do not care about jobs, and that would surely be a fair inference.

4.19 p.m.

Mr. Robert Edwards (Bilston)

I am very grateful to my hon. and learned Friend the Member for Rowley Regis and Tipton (Mr. Peter Archer) for the fact that, with his usual generosity, he has reduced his speech to the minimum in order to allow some further comments, even if they can be only one or two, in this debate.

Here we are discussing an establishment owned by the people, the kind of establishment which one dreams about. where there is a completely harmonious relationship throughout the factory. We have not had an industrial dispute there in 30 years. For the last 10 years there the average surplus of each worker has been over 1,000 tons a year. Yet this establishment, profitable, a harmonious unit, serving the local Black Country industry, is threatened with closure. We just cannot understand the logic of this decision.

I have been making some inquiries about what is happening in the steel industry in America and in the steel industry in Germany. I discover from my trade union friends that in those countries they are moving away from the great mass-production steel factories and developing mini-steel factories catering for local demand. They are moving away from the whole concept of mass production in large massive factories towards mini production in the two major steel-producing countries of the world, America and Germany. This development is taking place based upon experience. I hope that we are not going to have to learn this lesson based on our bitter experience by closing down establishments like this.

I have an interest in that not merely do some of the workers live in my constituency but the mill has a close link with the Bilston steel works and the special production of the Bilston steel works—as have other works. For example, the great tube works at Newport, where 1,300 workers are employed, is also threatened with closure. That works uses or has used for many years the special steel produced at the Bilston works. I met a deputation from Newport. The men at Newport tell me that they received from Bilston the best steel in the world for the purpose for which they needed it, and that is, producing tubes for oil drilling—and for those there is an increasing demand today. They used to received 2,000 tons a week from Bilston. This has been reduced to 200 tons a week. Those men know their business because they love the steel industry and they are very wise and knowledgeable about it, and they say that the steel they are getting today, and not coming from Bilston, from the Black Country, is inferior steel, and that they have great difficulty in using the steel which is sent to them instead.

We just do not understand the policy of the British Steel Corporation. We do not accept that the Corporation has complete autonomy to run the business as it likes, when people's jobs are being put in jeopardy in the Black Country, where every day we hear of redundancies and of small factories closing down in the very heart of Britain.

The Black Country, the West Midlands, is the strong arm of Britain. The Industrial Revolution started there. It cradled the iron and steel industry; it cradled coal production; and it cradled great engineering work. The whole area is now threatened, in our opinion, with very serious redundancies, and we believe that one of the contributory factors in that is the policy of the Corporation. Steel is the barometer of British industry and of Britain's future, and that is what troubles us today.

I am sorry for having taken so much time in this short debate, but I hope that we shall get serious answers to the serious problems which confront our people in the Black Country.

4.25 p.m.

The Minister for Industry (Mr. Tom Boardman)

I am sorry that time prevents hon. Members who I know wish to take part in the debate from doing so, and that I may not be able to deal as fully as I should like with the arguments put forward by the hon. and learned Member for Rowley Regis and Tipton (Mr. Peter Archer). I recognise the concern that there is for the 230 or so men whose jobs at Birchley may be threatened. It is right that these views should be ventilated on the Floor of the House, as they have been by hon. Gentlemen opposite and by my hon. Friends outside the House.

The debate raises a number of interesting and important issues, and it is to these that I should like to turn. There is the entirely different issue as to the nature of the responsibility that nationalised industries have in our society. There is the question whether we have a right to expect the BSC as a publicly-owned enterprise to behave differently in this context from the way in which private sector interests behave.

By implication the debate has focused attention on how far the Government can or should press a nationalised industry to act contrary to what it considers to be commercially right. There have been many debates in the House on the steel industry which seem to have been based on a misconception—a misunderstanding of the nature of the Government's powers over the British Steel Corporation. In certain ways these are extensive. We appoint the board members, we approve the Corporation's general programme and we control the advances of public money to the Corporation.

These, of course, are broad powers. The whole concept of the nationalisation Statutes is that day-to-day management of the industry should be left to the board. It could not be otherwise. That is not to say that a Minister cannot question the wisdom of a nationalised industry's decision or make inquiries as to the reasons lying behind a managerial decision, but the fact remains that management must take managerial decisions and be responsible for them.

I turn now, against that background, to the points made in the debate. The Corporation has said that it has taken no decisions to close Birchley in whole or in part but that it cannot go on as it is and that its life is limited. I believe that to be a fair summary of the somewhat confusing messages that have come across. The hon. and learned Gentleman referred to a BSC confidential document which mentioned certain closure plans and reasons for closure in that part of the country. I have not seen the document and I have read only the comments on it that have appeared in the Press. I understand that the document is 18 months old and that it has been superseded by further studies.

While I repeat that to the best of my knowledge no decision has been taken about Birchley, we all know that rationalisation of the steel industry is absolutely essential if we are to become competitive by international standards. This must take the form in many instances of building new, bigger plants and phasing out older, smaller ones. Rationalisation cannot take the form of freezing the pattern of steel making and fabrication at the same localities for all time. A proper rationalisation was one of the major reasons given by the Labour Party for nationalisation. We must get productivity up and manpower per unit down.

Much of the debate has concentrated on urging the BSC should sell its Birchley plant to private sector interests. The hon. and learned Gentleman referred to two companies which were interested. I know of two that have a general interest and there are more which have expressed an interest, but I am not aware of any offer having been made or of any price being discussed. Again, this is not a matter for which I should be responsible. The hon. and learned Gentleman said that it all depends on what part of the order book is included, and I lay stress on that.

In so far as criticism has been made that the British Steel Corporation is taking a dog-in-the-manger attitude in stating that it did not intend to sell the plant—I think that is a fair summary of the criticism made—it is not my job to defend the BSC decision in detail. It is not my job to comment on the facts and figures on which the BSC bases its assessment of the course that it considers to be commercially right. I say "commercial" because we cannot have it both ways. We cannot lay down as a policy objective that the BSC shall attain profitability in 1973–74 and pump vast sums of the taxpayers' money into steel with a view to modernisation and efficiency and, at the same time, try to countermand managerial decisions which undermine those objectives. It would be commercial madness to put vast investment into new plant and then find that there were no orders because the order book had been sold with the written-down assets of the old mills, thus allowing a competitive position to be created where the Corporation were bound to be the losers. I do not believe that in this matter we can expect or indeed demand the corporation to act unlike any other large commercial user.

It is not for me to defend BSC's reluctance to sell the plant. There are, however, reasons which I could put forward why it would be wrong for the Government to intervene. Hon. Members opposite have constantly criticised the Conservative Government for excessive intervention. We have heard today criticisms of the Government's attitude about the Joint Steering Group as a review body. But surely there can be no question of the Government's right to intervene as bankers and approvers of the industry's investment plans.

Then, somewhat inconsistently with the other view, the hon. and learned Gentleman presses us to intervene when it is clear that it is the BSC's managerial responsibility which is involved. The hon. and learned Gentleman said that Birchley is too important to be left to the accountants, yet he said that the decisions should be made by the Joint Steering Group. The implication of his remarks appeared to be that future strategy would be best left to the accountants. I find that I am unable to go along with him. These are managerial decisions and hon. Members opposite must be careful in how far they expect management decisions to be moved from the Corporation—a corporation which was set up under Labour legislation to take these very decisions—and back to the Floor of the House. I believe that if we tried to run the nationalised industries from the Floor of the House we would find that we were creating an instrument which was difficult to control.

It is quite justifiable that the BSC should be resistant to moves which would imperil the loading on its new expensive plant, built with public money. I understand this attitude, although I neither defend it nor support it. But do we expect the public sector to act differently from the private sector?

It has been said that Birchley is profitable. I have not the information to confirm or deny this, but accepting it as true, it is not the whole of the story. I am asked why there is no information. Because the BSC does not produce detailed management accounts for the consideration and approval of the Government. That requirement is not in the Iron and Steel Act nor is it part of the nationalisation strategy proposed by hon. Members opposite. I have not time now to go into whether it should or should not be part of that strategy.

On the assumption that the information on profits is correct, it is not the whole story. The corporation must look at the effect of the operations as a whole and must concern itself with the comparative profitability of its various options.

Mr. Robert Edwards

Without any social considerations?

Mr. Boardman

The BSC takes into account, as does any other employer, social considerations. It would be most irresponsible for any employer, particularly one as large as the BSC, not to do so.

I must make it clear that the Government's rôle is critically important. We must accept Government responsibility for the social consequences of management decisions which may be made. We have never attempted to shirk that. We have brought in measures of regional assistance. There are now more powerful instruments to deal with these problems than has ever been the case before, and we intend to utilise them as and when we think appropriate.

This kind of industrial problem is not new. Hon. Members will remember that a similar situation arose in respect of the textile industry. The need then was recognised on both sides to close down old capacity in the cotton industry under the Cotton Industry Act, 1959. That provided for both the Government and the industry to pay for the scrapping of old plant and for the re-equipment of continuing firms.

I said at the beginning that the Government have no power to compel the British Steel Corporation to sell iron and steel assets. As hon. Members will recognise, this would be contrary to the spirit of the Act which was framed to leave day-to-day management as a matter for Corporation. However, I stress that there is no objection on the part of the Government to the sale of Birchley to a private re-roller. A sale would be in accord with the Government's wish to see the private sector competing with the British Steel Corporation. Thus it is open to any firm to make an offer to the Corporation. But it must be for the Corporation to assess such an offer and to decide whether to accept it. I have given some of the reasons why the Corporation may not want to do so, but the decision must be for the Corporation.

Hon. Members opposite were critical of what they called the hiving-off proposals for the corporation. But obviously they want to hive-off Birchley. Although Birchley did not feature in the statement made by my right hon. Friend the Secretary of State on 28th June, when reference was made to such sales, the state- ment met with considerable opposition from the Labour party. In our debates on the Iron and Steel Act, 1972, when we removed any doubt about whether the corporation was free to make the sale for which both hon. Members now press, hon. Members opposite were opposed again to the proposal. They cannot have it both ways.

We do not have the power of compulsion. But no doubt the British Steel Corporation will consider carefully what has been said today. I accept fully that both hon. Members have a sincere and proper concern, as have the Government, for those who work in the industry. I do not challenge all the tributes paid to them. However, we must define clearly what are the Government's powers, and hon. Members opposite must be consistent in their demands upon the Government. They cannot with one breath say that the Government must intervene and, with another, say that we must stand back and do nothing.