STEEL INDUSTRY

HC Deb 08 May 1972 vol 836 cc909-23

The Minister for Industry (Mr. Tom Boardman)

With permission, Mr. Speaker, I wish to make a statement on the steel industry.

As the House knows, the British Steel Corporation already has approval to invest, in the current financial year, some £265 million compared with about £80 million in the year 1969–70. To ensure continuity of this high momentum of investment, provisional approval is now being given for a further £200 million to be committed towards the 1973–74 programme.

Investment in development of the main existing plants over the period 1970–71 to 1973–74 is now planned to reach, approximately, the following levels:

	£million
Llanwern	90
Port Talbot	45
Scunthorpe (including Immingham Harbour)	250
South Teesside	130
Ravenscraig	55

The expenditure at these principal plants is, of course, in addition to substantial programmes of development elsewhere.

This substantial level of investment provides the background to the second report of the Joint Steering Group covering the BSC's prospects to 1980.

After careful review the Group, which, as the House will recall, included representatives both of Government Departments and of the British Steel Corporation, has reached the conclusion that the British Steel Corporation should, by 1980, aim at an increase in its capacity to a level within the range 28 to 36 million ingot tons.

Mr. Eddie Griffiths

Rubbish! Terrible!

Mr. Boardman

This revised target takes into account the need to ensure an adequate supply of steel to provide for the sustained rate of economic expansion which is envisaged for the years immediately ahead. It also takes into account assessments of future trends of steel worldwide, on which the Government have had separately the advice of external consultants. The British Steel Corporation, like the Government, agrees with this capacity target in its further work on its programme for modernisation and expansion.

The work on this programme is being continued as a matter of urgency, and the Corporation expects to be able to make firm strategic recommendations later in the year. The Government will, of course, be closely involved in the strategic decisions and, in particular, the extent and siting of any major steel developments to come into production before 1980. In reaching these decisions we shall have regional policy factors much in mind. It will be important to maintain flexibility to modify the programme as necessary in later years.

I am glad to be able to tell the House that progress is being made with arrangements for the regular reporting by the Corporation of performance against plans, and for the submission of investment proposals with adequate supporting data to enable the Government to reach firm conclusions on the Corporation's investment plans. These will help to clarify the responsibilities of Government and the Corporation in this area. In the meantime, the BSC is continuing its drive towards achieving greater efficiency.

Mr. Varley

Is the hon. Gentleman aware that, without discourtesy to him, we on this side of the House expected that the Secretary of State for Trade and Industry would make the statement? After all, it was he who set up the Joint Steering Group; it was he who created the uncertainty within the steel industry; it was he who was responsible for the four months' delay in the statement.

Is the hon. Gentleman further aware that the statement does nothing to restore much-needed confidence within the steel industry? Can he say whether at last the Joint Steering Group's work is at an end and that it will be set down, or will it continue further? Can he confirm that we shall not now get the long-promised green field steelworks and that that has been abandoned totally in favour of small, mini-steelworks? If that is so, what evidence is there that that is the right answer?

Will the hon. Gentleman be more forthcoming about the production range mentioned in paragraph 5 of his statement? Does 28 million tons represent the pessimism of the Government and the 35 million tons the optimism of the British Steel Corporation? Even if that is so, has not the British Steel Corporation been beaten down from its original figure?

Finally, what are the estimates of the industry's long-term employment prospects? Surely the Government have made some estimates about this up to 1980 and beyond? Why have the Government so blatantly refused to consult the steel unions, when the Secretary of State a year ago promised that they would be consulted? In view of the seriousness of this statement, on an industry so crucial to the British economy, we shall want to debate this matter as soon as possible in Government time.

Mr. Boardman

On the question of delay, the hon. Gentleman will know that the report of the Joint Steering Group came forward towards the end of February. It involved very major decisions and it was right that it should be fully considered before the statement was made to the House today.

The hon. Gentleman suggested that this would undermine or show lack of confidence in the industry. But I remind him that I have just announced plans which involve a further £200 million expenditure on account for the year 1973–74, in addition to £265 million, the figure spent in the current year, and £242 million the previous year, all at 1971 survey prices, and this is over three times the level of expenditure authorised by the Labour Party after vesting date. This is a fair indication of the confidence that we on this side of the House have in this great industry.

The hon. Gentleman asked whether the Joint Steering Group was now set down. As I said in my statement, we are now waiting for the British Steel Corporation to bring forward its strategic plans in the light of the forecast demand that has now been made. When we receive those plans, then will be the opportunity for the Government to consider them in depth, to have a view on the impact of this upon the industry, upon the regions and on other factors, and then to make a further decision in consultation or after heating what the Corporation has put Forward. No decision is yet made about brown field or green field sites. This is the next step of decision making once the forecast has been agreed and the range has been agreed by the British Steel Corporation, which participated in this throughout and agreed the bracket. It is only fair to say that the Corporation veers towards the top end of the bracket, but it accepts the forecast that has seen put forward.

The hon. Gentleman next asked whether forecasts had been made about the level of employment. I believe that it would be right to say that the most serious implications for employment would follow if we made an overoptimistic forecast of demand. Then. with a commitment to build, perhaps, works that would never be used and vast over-capacity, one would run grave risks of unemployment of a high level in areas particularly sensitive. This is one of the reasons why it is right that the forecasts made should be as realistic as we can make them.

The hon. Gentleman also asked about consulting the steel unions. The steel unions were seen in March by my right hon. Friend who was Minister for Industry, and it was arranged that there would be further discussions with them following this statement. I shall be happy for those to take place.

On the final point about a debate on this subject, that is a matter for my right hon. Friend the Leader of the House.

Sir R. Cary

In the plan which my hon. Friend has outlined, is the Irlam steelworks, in the Manchester area, a benefactor?

Mr. Boardman

I cannot at the moment give the position about individual works. That must follow the outcome of the further strategic planning which is being carried on. At that stage the position of individual works will be considered and then announced.

Several Hon. Membersrose—

Mr. Speaker

Order. Many hon. Members wish to ask supplementary questions. I propose to call first those who had Questions on this matter on the Order Paper.

Mr. Golding

Is the hon. Gentleman aware that the strategic planning must take place as quickly as possible? The uncertainty in North Staffordshire will continue until a decision is taken about whether to invest £4 million in arc furnaces, without which the level of unemployment will rise catastrophically in North Staffordshire.

Mr. Boardman

I accept that the strategic planning should take place as quickly as possible, but it is extremely important that this matter is fully considered and that every effort is made to get it right. As I said in my statement, the very high level of investment in works in the meantime is continuing. The British Steel Corporation has very much in mind the position of individual works.

Mr. J. H. Osborn

Will my hon. Friend indicate the trend in world and European demand and how his plans fit in with it, because expansion without markets will make it difficult to make profits? Will he ask the British Steel Corporation to publish a corporate plan indicating profit forecast, improvement in productivity and return on capital invested?

Mr. Boardman

It is estimated that there will be a general downward trend in world demand. Hon. Members may have seen the article by Dennis Dwyer inThe Timestoday showing the way in which the Japanese are taking a completely fresh look at world demand. I am sure that the Corporation will take note of what my hon. Friend has said about publishing a corporate plan.

Mr. Duffy

Is the hon. Gentleman aware that his envisaged capacity for steel is restrictive in the extreme and will come as a great disappointment, not only to hon. Members on this side of the House but to everyone connected with the industry? Will he encourage the adoption of a flexible approach by the Corporation to the question of invest- ment so that it can take advantage of any unexpected upturn in world demand? Will he also encourage the Corporation to promote the potential of deep-water ore terminals on the East Coast at places like Teesside and Humberside, which are admirably situated to receive raw materials and to service future markets?

Mr. Boardman

It is intended that the approach in the strategic planning shall be as flexible as possible to enable changes to be made in the capacity for as long forward as possible if there are changes in demand. But the danger of planning for vast over-capacity could involve very much more serious consequences for areas than a more realistic approach, which the Joint Steering Group has used. The Corporation is considering the question of deep-water terminals.

Mr. Patrick McNair-Wilson

I congratulate my hon. Friend on producing a thoroughly reasonable and achievable objective for the British Steel Corporation. I hope he will not be led away into the fairyland of over-optimistic forecasting. Since he has shown a reluctance to follow limply behind the Japanese, will he give consideration to the building of mini-mills using natural gas for steel production?

Mr. Boardman

I am obliged to my hon. Friend for his support. The question of mini-mills opens up a variety of factors, and they are being carefully evaluated and taken into account in the strategic planning.

Mr. Ashley

Is the hon. Gentleman aware that this is a scandalous situation in that he has failed to give any assurance about the future of Shelton steelworks, which needs only £4 million to guarantee its future? Is he further aware that if this steelworks is closed 2,000 jobs will be lost and Stoke-on-Trent will be turned into a distressed area? Would he take note of my warning that there will be massive industrial unrest in North Staffordshire if the region's future is jeopardised in this way?

Mr. Boardman

I do not think the hon. Gentleman should treat this as a disappointing statement. A statement setting such a high level of investment, projected forward to 1973–74 and, as will be known from previous announcements, with anticipated expenditure at or above that rate beyond then, surely shows great confidence in the industry. The question of individual works and the one with which the hon. Gentleman is particularly concerned will be dealt with in the strategic planning study which is now going on.

Mr. Biffen

Is it not a fact that the more my hon. Friend allows himself to be persuaded by the strident lobbyists on the benches opposite who want massive green field site steelworks, the more difficult it will be to maintain in existence the steelworks which concern the hon. Member for Stoke-on-Trent, South (Mr. Ashley) and my hon. Friend the Member for Manchester, Withington (Sir R. Cary)?

I should like to ask my hon. Friend a question about the £200 million capital expenditure sanctioned for 1973–74. To what extent will the pricing policy of the British Steel Corporation allow at least a reasonable amount of that to come from the retained earnings of the Corporation rather than from the Exchequer?

Mr. Boardman

I endorse what my hon. Friend said in the first part of his supplementary question. On the second part concerning pricing policy, the Corporation has submitted its operating forecasts for the next five years which are now being considered and in which come the estimates of the amount of retained profits which will be available for financing this very high level of capital expenditure.

Mr. Arthur Lewis

To what extent is the cut-back in forward planning by 1980 due to discussions which have taken place with the European Coal and Steel Community? Have there, in fact, been discussions? Has an agreement been made? Is there anything which could prevent the Government from doing whatever they may want to do without reference to the ECSC?

Mr. Boardman

There have been no discussions between the Joint Steering Group and the ECSC. The decisions were made in isolation from that body. But the opportunities which will arise from our entry into Europe and which the Chairman of the British Steel Corporation, my noble Friend Lord Melchett, spoke about in a debate in the other place in October, are considered to be very pertinent factors to the question of forecasting and planning.

Sir G. Nabarro

Will my hon. Friend bear in mind that the production of 28 million to 36 million tons of steel a year about which he spoke should be compared with the production of 120 million to 150 million tons of steel a year by Japan within five years? Can he say whether the Corporation will make a profit in future and what he proposes to do with the piled up losses, now more than £100 million, and to prevent those losses from increasing?

Mr. Boardman

The Corporation plans to make a profit in the future. I am sure that my hon. Friend would expect it to do so, and it intends to do so. My right hon. Friend announced in the House last year that the forecast was that it would come into profit in 1973–74, hut circumstances have since arisen which have put the date back. The present plans visualise the Corporation coming into profit in the mid-1970s.

My hon. Friend will have seen that Japan has cut back on its forecast of demand. I draw my hon. Friend's attention to what was said on this point by Dennis Dwyer in his article inThe Timesthis morning. My hon. Friend will bear in mind that the danger of over-capacity can be very acute and it would be very acute in areas in this country where we would not wish to inflict its consequences.

Mr. Eddie Griffiths

I ought to begin by echoing the remarks of my hon. Friend who accused the Secretary of State of hidine behind his hon. Friend's skirts. I think that that is true, and if I were the right hon. Gentleman I should be ashamed of coming forward 18 months late with such a statement as we have heard today. It is an insult to the intelligence of this House, to the intelligence of the steel industry and to the intelligence of the country.

May I put three short questions to the hon. Gentleman who has had the unfortunate job of presenting this non-event of 1972? First, the present capacity of the British Steel Corporation is about 27 million ingot tons. The hon. Gentleman spoke of an expected tonnage by 1980 of 28 million to 36 million tons. Bearing in mind some of the plants which have come on stream, what the hon. Gentleman is saying is that there are to be no capital development schemes of which we do not know already. Those that he has mentioned are the schemes that we have been told about before. Will he confirm that this was a confidence trick worked by his right hon. Friend to prevent the BSC from making decisions before entry into the Common Market?

Mr. Boardman

The only point of the hon. Member's question to which I might perhaps reply is that about capacity. The increase in capacity up to 36 million ingot tons at the top of the bracket of 28 million tons to 36 million tons shows a rate of growth which is three times the rate of growth over the last 10 years.

As for my right hon. Friend allowing me to make the statement instead of making it himself, may I tell the hon. Gentleman that it gives me great pleasure to be able to announce a programme of this massive level of investment.

On the hon. Gentleman's last point about the lack of new capacity, when he studies the statement he will see that the investments referred to are those which were known beforehand. The amount of the investment, which is substantial, will be additional to anything further that may arise as a result of the strategic plan coming out later in the year.

Sir H. Legge-Bourke

While congratulating my hon. Friend on his supplementary answers, may I ask, first, whether he will ensure that his initial statements are as direct and as clear as his supplementary answers have been?

Secondly, will my hon. Friend assure the House that the profitability of this investment, which is obviously of great importance, will be no less than that of the European Coal and Steel Community?

Mr. Boardman

I am obliged to my hon. Friend for what he has said. I hope that we can aim for a level of profitability that will be no less than in any other part of the Community or any other part of the world. Our intention must be to help the Corporation to make this a profitable, viable, good employer industry, because it is an essential part of the nation's economy.

Mr. Eadie

Is the hon. Gentleman aware that he will be hard put to convince the people of this country that the icy hand of Britain's proposed entry into the Common Market has not descended on his statement? Can he say precisely how many jobs are involved or are likely to be retained in the development areas?

Mr. Boardman

I cannot tell the hon. Gentleman how many jobs will be involved, except to this extent, that if, as has been known to the House for a long time, there are, inevitably, closures of the older plants and redundancy in some areas, it is well known that the Corporation is a good employer in giving notice and in having consultations about redundancy terms. The extent of the redundancy will depend on the final outcome of the strategic plan. The level of investment which has been announced will, I hope, give some confidence that this problem and also what was said about regional policy are very much in the mind of everyone concerned.

Mr. Skeet

While congratulating my hon. Friend on facing economic realism, something which the Opposition have not done, may I ask him to persuade the Corporation to produce the right products at reasonable prices and endeavour to make this a customer-orientated industry, because through that it will be able to gain the most success on going into Europe?

Mr. Boardman

I am sure that the Corporation will try to comply with what my hon. Friend has said. It might be noted in the announcement today that the Corporation has achieved a remarkable contract in Mexico, where it faced international competition. It has landed a technical consultancy for a major operation which, according to the Press, will produce a fee of about £10 million.

Mr. Harold Wilson

Is the hon. Gentleman aware that the House has been kept waiting not four months but 18 months since the intervention of his right hon. Friend in these matters, and that there is still no greater clarity about the size of the steel industry, even in the 'seventies?

Having admitted that there is this difference between 28 million and 36 million, will the hon. Gentleman say whether the investment programme which he has announced is related to capacity of 28 million tons in the late 'seventies, or 36 million tons? Is he aware that the difference between 28 million and 36 million is more than 25 per cent., and that we are talking in 1972 about decisions which must become effective in capacity terms before 1980?

Will the hon. Gentleman say whether there will be any green field sites, at Hunterston or elsewhere, by the late 'seventies, or whether sticking to this unacceptably wide bracket of 28 million to 36 million is designed to prevent a decision and hold down capacity? We congratulate the hon. Gentleman on postponing an announcement on this until after the Scottish municipal elections.

Mr. Boardman

I am surprised that the right hon. Gentleman should refer to delay, because the House will recall that there was a delay of three years between 1964 and 1967 when the Steel Act was brought in which caused considerable delay and uncertainty and added to the uncertainty which was so disruptive to the industry in the period prior to the vesting date. It is to enable the industry to recover from that and to set it on the right course that the Government have taken a careful, well-balanced appreciation of what is involved.

When the right hon. Gentleman reads the statement he will see that the majority of the points raised by him have been covered. I made it clear that no decision had been made on green field or brown field sites. Nor can a decision be made until we have the result of the strategic studies being carried out by the Corporation. The investments now being made at Ravenscraig and so on are going ahead. There has been no limit on such investments and they will cover a large part of the requirement, but whether they go at the top or the bottom of the bracket will depend on what additional capacity is built, where it may be needed, and to what extent changes are needed in the present production plants.

Mr. John Morris

Is the hon. Gentleman aware that there is deep concern in South Wales about steel investment? Will he tell the House why he and his predecessor refused to see my colleagues and myself from South Wales before this statement was made? Will he now tell us the implications of his statement in South Wales and at Port Talbot, Newport and Cardiff, which are so dependent on the steel industry?

Mr. Boardman

I shall be happy to see the right hon. Gentleman and his colleagues, but it was thought that it would be inopportune to see them shortly before the statement was made. I repeat that I shall be happy to see the right hon Gentleman at any time.

The implications for individual plants must be left to the Corporation, and they will be considered by the Government when the Corporation puts forward its plans. They will be considered in the context of regional matters, and so on.

Mr. Rost

Is it not irresponsible for some hon. Members opposite to criticise this realistic assessment of the growth prospect in the industry reached in cooperation with the British Steel Corporation? What possible social or economic advantage can there be in developing vast over-capacity in excess of estimated demand?

Mr. Boardman

I am obliged to my hon. Friend, who has put the answer rather better than I did.

Mr. Lawson

May we be told whether the £55 million to be spent at Ravenscraig is additional to the present expenditure or is an improvement on the present level of expenditure? Will the hon. Gentleman bring to the notice of the Corporation that it is vital in Scotland that any old steel-making capacity which is extinguished should be replaced by new steel-making capacity, since it will be a bad day indeed for Scotland if the Corporation sends from the South crude steel to be rolled in Scotland?

Mr. Boardman

The announcement of the £55 million expenditure at Ravenscraig is part of the continuing expenditure which is covered by the figure of £265 million in the current year and the provisional £200 million on account in the following year. The point raised by the hon. Gentleman about the planning of any new steel complex in a way which will mean steel having to come to Scotland from elsewhere will weigh heavily in any consideration of the matter and will be taken into account in any strategic plan.

Mr. Frederick Lee

Is the hon. Gentleman aware that his answer that the plans of the Labour Government were not known until 1967 is quite wrong, since all the details were debated in this House in April, 1965? Is he further aware that we were then basing ourselves on a figure of 40 million t0ons. How can he now expect us to believe that the Government are interested in expansion when he has produced a figure of only 28 million tons? In regard to the social consequences, will the Government take much more interest in this matter than they seem to have done up to the present since we were told that the social consequences at Irlam were being considered, despite the fact that we now know that if closure takes place, there will be 20 per cent. unemployment?

Mr. Boardman

In regard to the right hon. Gentleman's point about the original forecast of 40 million tons of demand my answer must be that they did not get it. Had the then Government been right in their forecast, some of the problems we inherited would not have arisen. The social consequences must weigh heavily in the strategic plan. When this is considered regional policies and the like, will weigh heavily with the Government. Today's announcement seeks to assess the demand which is likely to arise in the world with a somewhat depressed steel industry.

Mr. Bottomley

On a point or order, Mr. Speaker. Are we to assume from your earlier ruling that only those who have questions on the Order Paper are to be called, to be followed by Members without constituency interests? Why is it that no Teesside Member has been called from such an important steel-producing area?

Mr. Speaker

In such a situation as this, it is difficult for the Chair to satisfy all hon. Members.

Mr. Normanton

May I add my welcome to my hon. Friend's statement. Will he take this opportunity to confirm that in formulating his statement he has enjoyed the full-hearted co-operation of the BSC? Does he not agree that the statement will help to dispel the malicious rumour-mongering which has prevailed in the country for many months?

Mr. Boardman

I am happy to give my hon. Friend that assurance, and I confirm what he has said.

Mr. John Mendelson

The hon. Gentleman has said several times that the British Steel Corporation will make final proposals. Will he now admit that Lord Melchett in his own statement delivered to a group of Members of Parliament in a Committee room of this House only two years ago had submitted detailed proposals for the expansion of the industry by 1975 to 35 million tons and by 1981 to 41 million tons? Does he not agree that the Government have now destroyed that plan and superimposed a different policy? Does he further admit that the Joint Steering Group has now severely limited the ability of the Corporation to be master in its own house? Finally, will he also admit that when considering the future of the British steel industry by the 1980s this will not be so much a question of producing a little less or a little more but will mean, in terms of capacity, that expansion below 40 million tons will not allow the BSC to compete with the production of any other major steel-producing country?

Mr. Boardman

I am aware that the noble Lord and his colleagues at one state throught that the demand would be at a higher level than they now accept. However, I repeat that the bracket which is now being put forward, in the range of 28 to 36 million tons, is one in which the Corporation fullly participates and which it accepts. I went on to say that there is no question of imposing on the Corporation any particular figure, and those who know the noble Lord will know that to impose on the noble Lord a figure such as was suggested would not be the easiest of tasks. It was a figure which was freely accepted. I went on to say that the Corporation veered towards the higher end of the bracket. The Corporation was a major participant in the Joint Steering Group, it accepted the situation, and there is no question of any imposition of these figures.

Mr. Tinn

Is the hon. Gentleman faintly conscious—[HON. MEMBERS: "No.")—I doubt it—of the shocking disappointment that will be felt by the 6,000 steel workers on Teesside who are now unemployed, when one bears in mind that the steel unions have co-operated with the Corporation in the modernisation of the industry? Is not a decision to settle once for all the question of the development of Redcar and the new steel complex there absolutely essential to this country if we are to preserve our position in the European steel world, particularly bearing in mind the promised merger between German and Dutch interests which migh pre-empt the interests of British steel?

Mr. Boardman

It would be wrong for me to comment on individual plants, but I feel that the disappointment is completely misplaced. The concern would be very much greater if a target had been accepted well above the figures which are realistic, with the consequences of possible over-capacity which could be used only at the expense of the closing down of some very fine plants with the result of putting out of work many thousands of people who now look forward to continued employment in the present modern plant.