HC Deb 12 June 1973 vol 857 cc1448-56

3.10 a.m.

Mr Roy Hughes (Newport)

Even at this hour I welcome the opportunity to raise the question of the decision to close the Newport Tube Works. If this decision goes ahead it will be a severe blow to the economy of the town of Newport and all the surrounding districts.

I understand that further discussions took place yesterday between top officials of the British Steel Corporation and the Steel Committee of the TUC. Whatever the outcome of those discussions might have been, this situation cannot be considered in a vacuum. There are serious social implications, for if this works closes 1,100 male job opportunities will be gone for ever, despite whatever palliatives may be offered to the workpeople concerned by way of jobs in other works, early retirement, and so on.

I have no intention of standing aside in this situation. This works has been established in Newport for well over half a century. It occupies an excellent site of well over 100 acres, only one-third of which is used. It has a very good geographical location, closely linked to the two principle motorway networks to the South-East and the Midlands and near to thriving docks and a main line railway centre.

The quality of the product of the works is known the world over, as many customers have testified in recent months. The works has always enjoyed good industrial relations.

According to the original announcement, the British Steel Corporation's decision was based on the pure arithmetic of market forecasts. The tubes group of the corporation is apparently capable of producing 370,000 tons annually. The market forecasts at the time indicated a requirement of 300,000 tons. The Newport works is capable of producing 70,000 tons. Therefore, the BSC reasons that if the Newport works was closed the figures would balance. But this is purely the computer and the bureaucratic mind at work. We must ask ourselves how these figures work out in practice.

I understand that on 27th April a memorandum was issued by the corporation indicating that there was at that time a 26-week to 32-week delivery date for tubes of between 6⅝ in. and 18 in.

Is it any wonder that the IMEG Report—"Study of potential benefits to British industry from offshore oil and gas developments"—states, at the top of page 54: Adverse comments concerning the ability of BSC to supply steels competitively, on time, etc., were a common feature of our interviews with equipment suppliers. The findings of this independent inquiry make it even more difficult to understand the reasons for the corporation's decision to close the Newport works. The original decision was taken when the economy was in a depressed state, but it is unrealistic to impose an output ceiling in the present situation, because flexibility is needed to meet the fluctuation in world and home demand.

Since the decision was taken we have had the floating of the pound, which gives the British Steel Corporation a price advantage which will remain as a result of the flotation even when our steel prices are raised to European Economic Community levels. It is unrealistic to talk of a closure when we have such a price advantage.

A further major factor is that of the Celtic Sea possibilities. It is reckoned that by the end of the summer there will be no fewer than six rigs drilling in the area. Is this the time to close the best oil well casing producer in the United Kingdom?

Dr. David Whitbread, director of a specialist firm of exploration consultants, is quoted in the Daily Express on 10th March as having said this of the Celtic Sea possibilities: I am trying to control my optimism, but my firm belief is that this whole area will be one of the exploration hot spots over the next five years. The closure decision following the IMEG report could be almost said to be against Government policy, because the Department of Trade and Industry has said that it would follow policies to ensure that United Kingdom industry got a much greater share of the oil prospecting development orders than hitherto.

The IMEG report states, at the bottom of page 13: The BSC should be strongly urged to establish the present and future requirements of the offshore oil and gas industry as one of its principal targets in respect of both investment and research and development effort. Investment, not closure, is what the Newport works require.

There is the position of Mr. J. P. Gibson, who has been appointed head of the Offshore Supplies Office of the Department of Trade and Industry. I understand that his function is to advise and direct British firms whose products would be channelled into offshore exploration.

Through the Minister, I ask Mr. Gibson if his office will investigate the well casing market to see whether the recommendations set out on page 10 of the IMEG report for increasing British firms' share of the oilfield development from 40 per cent. to 75 per cent. can be implemented if the Newport Tube Works close. Will the Minister tell us about this?

There is also the important question of transport costs. It is reasonable to suggest that the transport charges for bringing pipes to Welsh prospecting areas from Scotland would increase the price by £5 a ton compared with that for locally produced pipes. Will the Under-Secretary give us information about that aspect also?

In order to justify its decision to close the works the BSC indicated that market conditions were bad. That statement must be qualified, however. What is really meant is that the market is increasing rapidly with the increase in oil prospecting and that the corporation expects to supply progressively less and less because of competition on both price and quality from Japan. Such reasoning does not square with Government policy on the IMEG report.

I have always been an unrepentant believer in public ownership of the British steel industry. We all know of the failure of private owners to invest, expand and modernise. The works at Newport is a typical example. Every penny of profit has been drained out of it and little investment has been put back in. Nevertheless, from a day-to-day study of the activities of the BSC we must conclude that this is not the public ownership that we envisaged.

There are numerous examples of what I mean. One was the statement by Dr. Finniston, chief executive of the corporation on 13th April after he had met an action committee at the works in Newport. He offered 250 jobs in Corby, Northants—an area which, it might be said, could well be in serious difficulty before the decade is out. The most priceless asset Wales possesses is its people, and it is because we have sought to provide work for the people that we have advocated public ownership over the years. The solution to the problem in the 1920s and the 1930s was for the people of Wales to be packed off to Birmingham, Slough, Oxford and other places. They were forced to pull up their roots and whole communities were left derelict. Dr. Finniston needs to be reminded that people like him are not given their £20,000 a year jobs to advocate that sort of solution.

It means too, that a future Labour Government need to look far more closely at the way our nationalised industries are run and the people that we appoint to lead them. Dr. Finniston is also quoted as saying that the question of closure is not only a BSC decision. He said that it was also a local authority and Government responsibility. I challenge the corporation and the Government to keep the works open until Newport is declared a development area and until at least one new factory is located in the town. Or is Dr. Finniston saying that the works requires a subsidy? This works has been highly profitable over a long period, but if it requires a subsidy it is up to the Corporation to ask for one. Surely this works is even more deserving than Lord Shawcross's BSA. If the BSC is not prepared to act along the lines I suggest, one can only conclude that lost jobs in Newport are of no concern to it.

Whatever the outcome of the situation, the action committee at the works has put up a superb case. Its performance has been exemplary, not least when it presented its case to a Select Committee of the House. In carrying out its task it has been ably backed up by an excellent local trade union official in Mr. John Carberry. Logic and reasonableness have unquestionably been on its side, but these factors may be insufficient in the present situation. Perhaps that is the principal lesson that comes out of the whole episode.

3.26 a.m.

The Under-Secretary of State for Trade and Industry (Mr. Peter Emery)

It is of course right for a Minister to come to the Dispatch Box to set out or to explain the Government's policies in relation to our nationalised industries. The steel industry may at times need such an explanation when we are going through a period of rapid change, rapid change that I hope every hon. Member, whatever his local constituency views, would want to support.

The hon. Member will be familiar with the 10-year development strategy in the White Paper. The aim of this strategy is the production of an efficient, modern industry which is able to compete profitably in international markets and which will assure the future employment of its workers.

The modernisation of the industry involves investment in Wales totalling some £900 million over the next 10 years.

However, the corporation cannot concern itself solely with modernisation. One of the responsibilities of management is to ensure that all the available resources, including labour, plant and finance, are utilised to the best advantage. The retention of surplus labour or plant, other than on a purely short-term basis, must reduce the corporation's competitive ability.

Accordingly, if the corporation considers that it has, or because of modernisation will have, over-capacity for a particular product, it must deal with the situation in order to safeguard the remainder of the industry. This is precisely what the corporation is doing with regard to large seamless tubes, which are the product of the Newport Tube Works.

The corporation's decision to close the Newport works is based on a comparison between the corporation's production capacity, the price of the products and the prospective demand for large seamless tube.

At present there is over-capacity both nationally and internationally for these tubes. The corporation, after careful study, considers that this situation will continue. It has taken into account the demand and the North Sea developments. It has understood the suggestions made by IMEG, but is rightly concerned, as would be any well-managed business, whether nationalised or otherwise, to bring its plant capacity into line with the share of the market which it can reasonably project to meet.

It has accordingly decided that its total capacity must be reduced, and that the most satisfactory solution is to close the Newport works and adopt the modern Clydesdale works in Scotland as the centre of its seamless tubemaking activities. This rationalisation is being supplemented by the replacement of Clydesdale's open-hearth furnaces by electric arc furnaces at a cost of some £9 million. When this modernisation and rationalisation are complete, the corporation judges that it will be well placed to compete profitably in the seamless tube market.

The question has also been raised of the profitability of Newport relative to that of the other tube works. The profitability of an individual works cannot always be taken in isolation, for it is dependent upon many factors, including the product mix and the markets in which the products are sold and the application of central overheads.

Therefore, in this instance, what is much fairer is to make comparisons based on costs, because we want to make a fair comparison. This is what the corporation has done, and in such comparisons it has found that Clydesdale is the lower-cost producer.

I stress that I am only too conscious that the Newport workers derive little consolation from the assured employment prospects at Clydesdale. But it is important that we all understand that, without these steps, the future employment at all seamless tube works would be imperilled, and not just the employment at Newport.

The Select Committee, in paragraph 47 of its report, recognised that the corporation may from time to time read the market wrongly and that the performance of a plant will not always match its theoretic efficiency. But the Select Committee went on to state that the corporation has the duty to take decisions on job reductions or closures, and that in the Newport case it did so only after consultation with the workers and a careful re-appraisal of the proposals.

I know that the proposed closure has aroused strong local feelings ever since its announcement in January 1972. The hon. Gentleman has sought to persuade the corporation to reverse its decision.

Mr. Roy Hughes

Will the hon. Gentleman tell us something about the quality of the products of the two works, and also something about the profitability of the Clydesdale works?

Mr. Emery

I do not wish to run down what has been done at Newport. I do not think that does anyone any good. The management has decided that Clydesdale is better. Let us just leave it at that.

Following the closure announcement in January last year, the corporation held detailed consultations with the unions, as the hon. Gentleman knows. There have been many consultations as well with Dr. Finniston, Lord Melchett and other senior members of the corporation, who have met the hon. Gentleman and the right hon. Member for Cardiff, West (Mr. George Thomas), and a deputation has been received by my right hon. and learned Friend the Secretary of State for Wales. The works action committee gave evidence before the Select Committee on Nationalised Industries and the hon. Gentleman has raised the matter in the House in Questions and on the Adjournment on 8th May 1972. The matter is, therefore, not new to the House, and has been carefully considered.

The corporation has already delayed the closure by over six months. I am sorry, but I have to say that there is no justification for further delay, nor is there any reason to accede to requests for further inquiries which would, in my view, only have the effect of delaying the closure.

However, there is a brighter side to Newport's affairs and it would be wrong not to mention it. The closure is not the severe blow to Newport that the hon. Gentleman suggests. In the last thirteen months, the number of unemployed in the Newport travel-to-work area has fallen by almost 40 per cent., and the unemployment rate has fallen from 5.4 per cent to 3.3 per cent.—a figure below that for Wales as a whole. This is an encouraging and proper trend.

There is the continuing major expansion by the BSC of its Llanwern works, which will continue to provide employment for many thousands of steelworkers in Newport in the years to come. In recognition of Newport's problems, the Government have announced the construction of an advance factory and talks are in progress with BSC officials on the possible use of the tube works site for this purpose.

These developments mean that the employment prospects for the men now being declared redundant are far more favourable than when the closure was first announced. The corporation has also made a great contribution towards mitigating the social problems produced by the closure.

Firstly, it postponed the closure by six months. Secondly, the rundown in the labour force has been progressive. The illustration of this is that in January 1972 there were 1,120 employed at the works. By 12th April 1973 this had fallen to 615. By last week it was down to only 450. Thirdly, considerable success has been achieved in providing alternative employment.

About 70 per cent. of those who left the works between January 1972 and April 1973 were redeployed either within the corporation or with other firms. For the 450 who now remain there are about 160 vacancies at Llanwern and 130 men will be retained for up to nine months on site clearance work. For those men who are prepared to move there are 600 vacancies in tubes division outside South Wales. In particular, there are opportunities for redeployment at Corby, where the tube making plant has an assured long-term future.

Thus there is a story of Government and management really caring and carrying through policies for dealing with redundancy problems and dealing with them in a way which really works. Indeed there is every reason to expect that the closure on 7th July will not produce a major increase in the number of unemployed in Newport. This is what Government policy set out to do and it will be a major achievement to bring it about.

The corporation made its decision in the exercise of its judgment to manage an efficient steel industry for Britain and has conducted itself in a most responsible manner. It is for the Government to support this decision and not shirk their responsibilities. It is only by such action that we will ever get a really modernised and competitive steel industry that can live with the rest of the world.

I realise the problems that this will bring for those who have worked at the Newport Tube Works. None the less, it is right that we should go forward in a way that will allow the corporation to provide the best steel industry in Britain that is humanly possible.

Question put and agreed to.

Adjourned accordingly at twenty-two minutes to Four o'clock.