HC Deb 21 November 1973 vol 864 cc1457-79

9.36 p.m.

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

I beg to move, That the Iron and Steel Act 1969 (Continuance of Provisions) Order 1973, a draft of which was laid before this House on 1st November, be approved. The order, as I am sure the House realises, continues in force permanently the provisions of the Iron and Steel Act 1969 relating to public dividend capital and the financial duties of the British Steel Corporation which otherwise expire on 30th March 1974. The Act took the important step of introducing public dividend capital into the capital structure of the corporation and recognised its experimental nature by limiting to five years the initial duration of the relevant provisions.

It would seem opportune, therefore, that the Select Committee on Nationalised Industries should have published its report earlier this year following a thorough and valuable examination of the report and accounts of the British Steel Corporation. In its report the Committee pointed to the difference between public dividend and equity capital, stated that the inability to pay dividends had stemmed less from the cyclical nature of the industry than from a lack of profitability and the corporation's lack of reserves, and recommended that the operation of public dividend capital should be reviewed.

As stated in the Government's reply to the Select Committee's report, published in a White Paper in August, this review has been undertaken and the Committee's comments have been carefully considered. The Government's conclusions were that the use of public dividend capital remained desirable and that the guiding consideration for the use of pdc in a nationalised industry should continue to be that the industry was basically profitable but subject to fluctuating returns. Therefore, as the British Steel Corporation fulfils these criteria, public dividend capital should continue for the corporation, which, as the House realises, has a financial objective requiring an adequate rate of return on all its capital.

I accept immediately that the corporation has so far not paid dividends on its pdc. However, I should point out that failure to make dividend payments on the stock of other European steel companies has not been unknown in recent years.

Under the Iron and Steel Act 1972, the corporation's pdc was written down by £200 million and its indebtedness by £150 million in a financial restructuring whereby these sums were transferred to a reserve against which the accumulated losses up to the end of the financial year 1972–73 could be written off. I think, therefore, that everyone will agree that this puts the corporation's capital structure on a sounder and more realistic basis.

No one appreciates more than my right hon. Friend the Secretary of State, my right hon. Friend the Minister for Industry, or myself, that it is important that there should be clear evidence of progress towards profitability.

This year, there is more than a glint of light in the corporation's results for 1972–73. I hope that the House will welcome this. Some might have expected just a containment of its losses within the £70 million limit agreed with the Government, but the BSC achieved a profit, albeit a small one, of £2.8 million. This sum was arrived at after allowing for extraordinary items and compared favourably with the £50 million loss the previous year.

Mr. J. Bruce-Gardyne (South Angus)

Would my hon. Friend remind the House what that sum of £2.8 million represents in terms of a percentage on capital employed?

Mr. Emery

In real terms, the figure is, I think, 3.8 per cent., but I will check with my notes afterwards.

It was only in the second half of the financial year 1972–73 that steel demand began to recover from the depressed level of the preceding two years. It has now reached a level world-wide which producers, both domestic and foreign, are having difficulty in meeting.

In the Government's view, a nationalised industry that, in competition with private firms both at home and abroad, is manufacturing products for which the demand is so highly cyclical should not have all its capital in the form of fixed interest bearing debt. Such a capital structure is likely to result in losses in years of low demand and obviously this can affect management morale and even influence—I should have thought unfavourably—policy decisions.

Despite rising costs and rising demand, the BSC increased its prices by only 9½ per cent. at the end of April and by a further 9 per cent. from 16th November. This is after a long period when they had remained stable. In announcing the increases, the corporation said that it recognised the importance of the Government's counter-inflation programme not only to the economy as a whole, but to its own business.

I do not think that Parliament, industry or the public would wish the corporation to maximise its profits by taking the utmost commercial advantage of present market conditions. The increases announced last week demonstrate that it is continuing to act with a great degree of responsibility.

It is right of course that there should be a requirement that the corporation will earn a return on its capital, whether this is paid in the form of interest on loans, of dividend on pdc, or used for reinvestment in the industry. This is why the corporation has been set a financial objective. Section 5 of the 1969 Act, which is also continued in force by the order, provided the power to set a statutory duty.

The Government consider that a nationalised industry with pdc should have a financial objective requiring an adequate return on its capital over a specified period. The objective which the corporation has been set is to earn over the four years 1973–74 to 1976–77 an average return on net assets of 8 per cent. after charging depreciation but before charging interest, taxation and exceptional costs arising from closures. As the Minister for Industry said when announcing this objective in August 1972, larger average returns will be expected after this period, when the corporation will be getting the full benefit of its investment programme.

In the light of all these considerations, the continuation of pdc for the corporation is fully justified. The Government will aim to issue in the form of pdc a sufficient proportion of future advances to the corporation to maintain a reasonable balance in its capital structure between fixed interest bearing loans on the one hand and pdc and reserves on the other. It is important to get the gearing right.

Section 4 of the 1969 Act, which would also be continued in force by the order, enables the Secretary of State, after consulting the corporation and with Treasury approval, to direct that sums from the reserves should be converted to pdc. There has as yet been no occasion to use this power, which complements the power in Section 17(4) of the Iron and Steel Act 1969 to give directions about the establishment and use of the reserves.

Therefore, a fully profitable industry may be expected to finance some parts of its new investment from profits, in addition to normal depreciation. As and when the corporation becomes fully profitable, there may be an occasion when it would be appropriate to capitalise part of any retained profits as public dividend capital.

I hope that I have explained why we have concluded that these various provisions in the 1969 Act should remain in force. Section 6(2) provides for them to continue in force permanently, or for a specified period. To extend them for a specified but limited period would prolong the corporation's uncertainty about its future capital structure by making its public dividends capital as well as powers to determine a financial duty dependent on fresh legislation at the end of a given period. It is the essence of my case tonight that a long-term view should be taken.

That is what the Government are doing. The draft order, therefore, extends these provisions permanently. We are, therefore, setting up the proper capital structure in proportion, for the corporation to be certain and to be able to make the right judgments in the preparation of the 10-year operating plan, the modernisation which I believe both sides of the House regard as essential for the British steel industry to be able to go forward into the last quarter of the century.

9.46 p.m.

Mr. Eric G. Varley (Chesterfield)

I thank the Under-Secretary for the way in which he explained the order and its purpose. However, the hon. Gentleman would be the first to agree that he has not, perhaps, covered all aspects of it. When I and some of my hon. Friends have had the opportunity of putting some questions to him, I hope that he will seek to catch your eye, Mr. Deputy Speaker, in order to answer some of those questions.

I want to direct my remarks to what the hon. Gentleman called the progress towards profitability. This is the first time that we have had an opportunity of a debate on the steel industry since publication of the British Steel Corporation's annual report. The way in which the order has been introduced ought not to obscure the very serious questions about the Government's attitude towards the corporation. Most of us will have to wait for a wider-ranging debate for answers to some other questions which give cause for concern. However, the order gives us the opportunity of examining the burden which the Government have imposed on the corporation through overt and covert price control, certainly as one of its effects will be made permanent by Section 5 of the Iron and Steel Act 1969.

The 1969 Act empowers the Secretary of State to determine the rate of return on net assets required from the corporation. It is an undeniable fact that the constraints imposed on the corporation by the Government are quite incompatible with the return on assets that the Government laid down last year. The Under-Secretary said that he hopes that we shall take a long-term view. But we have had three years' experience, and I hope to show that the Government are not living up to their original intentions regarding the steel industry.

I want to make it clear, however, in case there is any misunderstanding, that the Opposition do not dispute that it is right for the Government to manipulate the pricing policies of nationalised industries to fulfil overriding economic objectives. Perhaps that is where I and some of my hon. Friends will part company with the hon. Member for South Angus (Mr. Bruce-Gardyne). We think that it is right to intervene on occasions. That is one of the arguments used on the Opposition side of the House in favour of nationalisation.

But it is totally unfair for the Government to ask the nationalised industries to depart from their commercial objectives and then to expect from them financial results possible only if the nationalised industries are run on purely commercial criteria. It is intolerable that the Government 15 months ago laid down an 8 per cent. return on assets and then three months later introduced a counter-inflation policy which made that 8 per cent. return impossible.

I shall not refer to the restraints imposed even earlier than that. We all have memories of the Prime Minister's notorious intervention in steel prices one Friday afternoon when he had nothing better to do. Even before that, there was the self-restraint required under the Confederation of British Industry's pact.

This counter-inflation year for the British Steel Corporation has been the last straw. The corporation's annual report published earlier this week states the position poignantly: The financial result would have been better if steel prices in the United Kingdom could have been set at market levels. There were savings in the costs of purchases resulting from the operation of the Government's counter-inflation programme, but these were far outweighed by the effects of the steel price restrictions. The price restrictions arose immediately from the counter-inflation programme".

Mr. Emery

When making quotations it is often useful to finish the sentence. The sentence is: The price restrictions arose immediately from the counter-inflation programme, which the corporation supported, but the general low levels to which steel prices were held reflected the continuation of a restrictive regime which has applied for many years.

Mr. Varley

I do not object in any way to that intervention. The hon. Gentleman is right. I wanted to be fair to the corporation in making it clear that it has gone along with the price restraint policy.

Last month Dr. Monty Finniston, whom we all wish well in his new responsibilities, made it known that in the first six months of the year the corporation forfeited £40 million of profit by putting the needs of British industry above commercial practice. He recognised it. We recognise it, too. Dr. Finniston revealed that to help British industry the corporation had deliberately held back for the home market 1 million tons of steel which could have been sold abroad at higher prices. He declared: We think we have a responsibility to the national effort in this time of economic crisis. I do not want in any way to misrepresent the Chairman of the British Steel Corporation. Some people would say that that action by the corporation was magnificent, but it is not very commercial.

That is the point we are making. We think that the Government are having it both ways. The Government still insist on the 8 per cent. return. The Under-Secretary echoed it tonight. Last week the corporation announced its new price increases, which incidentally were far higher than those I warned about from this Dispatch Box in April of this year. The Minister for Industry, who unfortunately cannot be with us tonight, will remember it because he rebuked me for being irresponsible. The Minister for Industry invariably accuses me of being irresponsible when I am being ultra-cautious and when he does not have an argument to advance.

The price increases have come, but they are far below what the British Steel Corporation wants. That is what the Under-Secretary should tell us about. It is a fact that the corporation requires much more and that there is some violation of our Common Market obligations.

The Government have certainly pressurised the British Steel Corporation into slashing the increases which they had planned. In fact, the Economist, for whose reliability the Prime Minister vouched last Monday, tells us that Mr. Erskine Thomas of the British Steel Corporation was on the point of handing over the new price list to the EEC officials in Brussels when the Prime Minister stepped in. The Government's interference may have cost the British Steel Corporation as much as £60 million, yet the Government still insist on the 8 per cent. return. The Government's intervention over the latest price rise delayed the increase by two weeks, and I have seen Press reports which suggest that that delay has cost the British Steel Corporation about £6 million. Yet the Government still insist on the 8 per cent. return.

Mr. Emery

I find the hon. Gentleman's thesis extremely interesting and he is arguing it very well. Therefore, I wonder whether he will continue the argument so that we can have it absolutely complete. How much would he and his party have the British Steel Corporation put up the price of steel above the 18 per cent. increase which there will have been due to the two price rises since April?

Mr. Varley

The hon. Gentleman tempts me. I want to go back to the Conservative manifesto "A Better Tomorrow", which contains a paragraph which I have learned by heart. That states that the Conservatives will not interfere in the pricing structure of nationalised industries, and actually used the words, "such as steel". That is a party which says that it is perfectly proper on occasions to use nationalised industries, and which makes it plain that they need not follow commercial criteria. What we are objecting to is the fact that although the Govern-men are still living in this woolly land where they intervene in a much more vicious way than did the last Government in the pricing structure of the British Steel Corporation, we still have these bland assurances that long-term pricing stability and return on capital are the Government's objective. We want the Government to be perfectly open and honest on these matters.

There was a news story in The Times on Monday on the corporation's annual report, which pointed out that it, … is insufficient to enable the corporation to achieve the financial target, set by the Government, of an 8 per cent. return on net assets". There is now a mass of evidence which demands that the Government must be much more plain and not so disingenuous on these matters, which are very relative to the long-term development plans of the corporation. We were told by the Secretary of State that we should have about £3,000 million-worth of development in the new strategy, and that was announced with a great blowing of trumpets earlier this year. The White Paper said: … more than half the expenditure"— that is, more than half of the £3,000 million— can be met from depreciation provisions and retained profits". That is nonsense, in view of the way we are going.

What will happen if the Government's interference continues to hold down profitability to a level which the corporation describes as inadequate? For example, will the Government make up the shortfall for which they bear absolute responsibility? Will the new development strategy have to be spread over a much longer period than the 10 years envisaged depending upon profitability, which, in its turn, will depend upon the attitude of the Government? Will the strategy, for example, be placed in jeopardy? There are those of us on this side of the House who think that it was on the low side anyway. There was talk on 18th March 1971 by the then Secretary of State for Trade and Industry of £4,000 million of investment and a production target of about 43 million tons, but it was pruned down.

The apostle of optimism, the Secretary of State for Trade and Industry, has continually described the steel industry's future as exciting. To some extent that could be in doubt, unless the Under-Secretary can tell us exactly how he sees profitability going and its contribution to the £3,000 million development plan.

We should like some straight answers to those questions. I think they are easy questions. Perhaps the hon. Gentleman can fill us in on them, so that we know exactly where we stand when we have a much fuller and wider-ranging debate on the steel industry, which I think we ought to have in the very near future.

10.1 p.m.

Mr. J. Bruce-Gardyne (South Angus)

I confess that I find the attitude of the hon. Member for Chesterfield (Mr. Varley) a little hard to follow. He was berating the Government for making it difficult, if not impossible, for the British Steel Corporation to achieve the financial targets which have been set for it. Yet my hon. Friend the Under-Secretary established that he believed—certainly this is in accord with what the right hon. Member for Leeds, East (Mr. Healey) told us on television the other day—that, far from the price increases permitted to the corporation being inadequate this year, they were too great and they should have been reduced by the purposive intervention of the civil servants; in other words, that we should have made the 8 per cent. target even more unattainable than it may be as things stand.

One must, therefore, draw the conclusion that the right hon. Gentleman would have us scrap the target. I have some news for him. We have been spending the earlier part of today listening to the furious tirade of Opposition Members against the Government for having scrapped the financial targets of other nationalised industries. I must confess that I expressed some despondency about this myself. It is impossible to find anything consistent between the attitude which the hon. Gentleman has advanced and that advanced by the right hon. Member for Bristol, South-East (Mr. Benn) a few hours previously.

I have to confess that I do not like anything which gives an aura of permanence to the British Steel Corporation. I cling to the perhaps fond delusion that we should be a great deal better off with the steel industry in the private sector. I cling to that fond delusion because if the steel industry were in the private sector, many of the interventions whose financial consequence the hon. Gentleman was criticising would have been much less likely to happen.

Ideally, I should like the corporation taken out of the way of temptation of the civil servants in Whitehall and their conviction that they know at any given time what the national interest may dictate. That may be in an ideal world. For the moment, we have to live with a situation where it is not fashionable to consider the scope of the restriction and containment of the public sector. So we have to look at this order against that background.

My hon. Friend gave us an extremely clear and detailed description of what was intended by the order and what lay behind it, and I join the hon. Gentleman in thanking my hon. Friend for that. I thought he performed a valuable service in setting the order in its proper perspective. He drew our attention to the fact that the main purpose of the order was to perpetuate the concept of public dividend capital in the steel industry.

We all understand what public dividend capital means. In the light of our experience, it means capital on which no form of interest or yield to the taxpayer need be offered. It is a way of endowing the nationalised industries with assets on which they are required to make no return. I know that we talk about cyclical performance and how in the coming years the nationalised industries will be able to pay a dividend. We sing for the good years. We hope for them, but they do not come. That is because the worthy civil servants in Whitehall have intervened once again in the national interest. It has happened before and it will happen again. We must be honest with ourselves about the meaning of public dividend capital: it is a non-yield-bearing capital asset.

The desirability of continuing with such an arrangement with the corporation does not seem to be a matter of great significance. What matters is the conduct of the Government, and successive Governments, and the civil servants in Whitehall in their dealings with the corporation. It is in that respect that I have some questions to put to my hon. Friend. I hope that he can shed some light upon them if he has the opportunity to do so.

First, what has been happening to the profitability of the corporation in recent months? We have been going through a period of almost unprecedented demand for steel not only in Britain, but throughout the world. We all know that the corporation is totally incapable of meeting the demands which are placed upon it and that there is perhaps precious little chance, because of the limit on its commercial capacity, for it to increase its prices.

Is it true that against that background and since the conclusion of the period to which the annual report referred, to which my hon. Friend the Under-Secretary of State and the hon. Member for Chesterfield referred, the corporation has been plunging again into the red? If it is true, it is a horrifying situation at a time of thriving demand.

Can my hon. Friend further enlighten us as to the interesting story of the exports of steel? Of course, the calculation has been made that the corporation has forgone highly profitable exports of 1 million tons of steel. There are reports that the steel went abroad even if it did not go from the corporation. As a result of the pricing structure, during the course of the summer those fortunate customers who were able to obtain steel were able to flog it on the Continent and take advantage of much more attractive prices. That, as my hon. Friend knows, has been reported widely in the Press and commented upon by Dr. Finniston.

It would be interesting to know whether my hon. Friend has any comment to make about that. That obviously has a powerful and direct bearing on the financial performance of the corporation as affected by the order. Can my hon. Friend shed any light on how the Government view the entitlement to intervention in the financial circumstances of the corporation, bearing in mind our obligations under EEC legislation?

My hon. Friend emphasised that the corporation had itself expressed its support for the prices and incomes policy. The hon. Member for Chesterfield (Mr. Varley) implied that the corporation was in its financial operations bound by the prices and incomes policy. That is not the case. Under the European Communities Act, it is not allowed to be so bound. However, the difference is perhaps more of theory than of spirit, because one has the impression that, in practice, the degree of arm-twisting, nudging, winking and rib-pushing between civil servants and the corporation about its pricing structure is hardly, if at all, less comprehensive than it is with the other nationalised industries.

Indeed, it might be argued that, because the other nationalised industries are clearly subject to the code and the Price Commission is obliged at least to award them the price increases to which they are entitled by the code, the degree of interventionism which the Government enjoy in the instance of the British Steel Corporation is even greater than it is in the instance of the other nationalised industries, because it is more direct.

To me, this has worrying implications for our obligations under the European Coal and Steel Community Treaty. As the hon. Member for Chesterfield pointed out, it has equally clearly worrying implications for the fulfilment of the corporation's financial objectives. Therefore, I think that this, too, is highly relevant to the order, and I hope that my hon. Friend will be able to lift a corner of the veil that has obscured the comings and goings between Grosvenor Place and Victoria Street in recent months.

10.13 p.m.

Mr. Barry Jones (Flint, East)

It is always good to follow the hon. Member for South Angus (Mr. Bruce Gardyne). We know him to be graceful in style, and I appreciated the pointed ways in which he put his questions. He knows that I do not agree with his political philosophy, but I certainly agree with him to the extent that he thinks that the Under-Secretary of State is a valiant man if he has the will to soldier on in this Government.

I want to take up one of the points raised by my hon. Friend the Member for Chesterfield (Mr. Varley) in which there was a hint that in the current economic problems, perhaps the strategy announced in the White Paper for one reason or another, most of them academic, may not go ahead in its current shape. The Chancellor of the Exchequer's stainless steel scissors may well snip away at the outlined £3,000 million over the 10 years in the strategy for development. If that were to be the case—and in some respects it might give a little hope for perhaps one or two of the now doomed steel towns—obviously it would raise the question of the continuance in office of the Secretary of State for Trade and Industry, for unless he were to be moved I suppose that it would be impossible to change the strategy, for, by confirming Dr. Finniston as Chairman of the British Steel Corporation, the right hon. Gentleman underwrote and underlined in total the whole strategy.

Before I come to the main stream of my argument, I would like to know where the Liberals are in this debate. The Liberal bench is empty when our benches are populated. These great apostles of participation have gone away, it seems, to sip their Ovaltine. Yet only recently the high command of that minority party sent one of their weightiest colleagues, the hon. Member for Rochdale (Mr. Cyril Smith), to my constituency to visit Shotton steel works, his task there being to create as much mischief as he could, which he did with all his admittedly gruesome capacity.

I am sorry that no representatives of this growing party are here tonight to discuss an important matter for the steel industry. I register my deep disappointment that those great participators of British politics, the king-pins of community politics, are no longer to be seen in the Chamber, although they are on record as being greatly concerned with the affairs of my constituency.

I have lately been a fierce critic of the British Steel Corporation on some aspects at least of its development strategy, with particular reference to Shotton steel works. I think that I shall remain a critic, and a critic also of the Government's timid refusal regarding Shotton to investigate an injustice of tragic proportions. But credit should go, I believe, to the late Lord Melchett and to my right hon. Friend the Member for Barnsley (Mr. Mason) for getting the public dividend capital scheme through the Cabinet, albeit after a trial run with BOAC. Perhaps I should give credit also to the corporation for dragging, albeit kicking and screaming, the near-bankrupt private enterprise steel barons into modern technical production. We have the finest steel producer in Europe, and certainly one with remarkable potential. I hope to see an effective return on pdc in the years ahead.

The background to the order in heavy industry today is sobering. There is a world shortage and a national shortage of steel. Apparently, there is a form of unofficial rationing. I am told that steel stockists are going out of their minds trying to lay their hands on steel. There are even rumours of a steel racket, the export of steel and then the importation of that same steel at a higher price. Moreover, steel workers in parts of Britain are edgy and suspicious at some of the proposed redundancies. Some of them, I know, have formed themselves into an unofficial national action committee. In these circumstances, perhaps, with the developing miners' dispute and the existing pockets of discontent within the steel work force, we have a tricky situation.

It should not be forgotten, therefore, that labour disputes this year have directly affected the pdc situation, and, naturally, one hopes that policies would always be adopted, so far as possible, to avoid the possibility of further disputes.

I want to see the corporation and the nation overall getting a good return on the capital invested. I have looked at Section 2(1), (4) and (5) of the Act, and I shall now, if I may, give the Minister a little advice for the occasion when he next has financial consultations with the corporation on the rate of return. If he wants a good rate on pdc, he should say to the corporation, "Are you sure that your strategy for steel making is correct?" He should point out that, in order to guard against a poor return on capital, the corporation should not put all its eggs into the one basket of Japanese-style concentration of production. It is possible—in some cases almost inevitable—that all the huge sites proposed in the strategy for development may be late coming into production. Indeed there is a school of thought which believes that they may never reach their full potential. There may well be malfunctioning and commissioning costs may soar.

I hope that in his frequent consultations the Minister will emphasise in regard to the corporation's financial duty that there is a school of thought in the steel industry—indeed it may exist in the British Steel Corporation—which believes that the £3,000 million investment programme may, when all is taken into account, cost £5,000 million. It would be fair to say that before the flood of public money begins—and indeed before the consequent redundancies begin to bite—there should be a last-minute check by the Department of Trade and Industry, and particularly by the Minister for Industry, on the small print of the corporation's plans for expansion. It is absolutely vital that this should take place.

We all know that return on capital will bear a direct relationship to the soundness or otherwise of development plans. I know that the Minister is desperately keen to get value for money in the steel industry and, after last week's activities in the economic sphere, I am certain the Chancellor of the Exchequer and his Treasury colleagues will insist on that. The Minister knows that if for any reason—and I have hinted at some—one of the proposed huge new steel works grinds to a halt or comes into production late, this nation, with its critical and recurring balance of payments problems, is in dead trouble.

I conclude by offering a piece of advice to the Minister. He should augment the known Japanese-style policy of the Steel Corporation for huge complexes with an insurance policy. This insurance policy will help to bring a better return on capital. The insurance policy I propose involves a medium-sized steel plant producing 3 million tons a year. That is a glaring omission in the current strategy. The fact remains that at present there is no insurance.

I suggest the ideal location for such a plant could be the current Shotton works in my constituency. I shall not develop this part of my argument. I merely say that if the Government do not take out this insurance, it will cost the nation dear, because as the steel industry becomes more technological, it also gets more and more vulnerable.

I ask the Minister to institute a public inquiry into the future of steel making at Shotton. I hope that he and his governmental colleagues and also officials in his Department will give this request the most serious consideration. I think he knows that if he will not move on this matter I shall seek one way or another to involve the Ombudsman in clearing up what many steel workers in my constituency regard as the very phoney figures which currently doom steel making at Shotton.

When the Prime Minister instituted a last-minute investigation into whether steel making at Shotton should continue he was told that to modernise steel making there would require the expenditure of £200 million. That figure is hotly disputed, and management staff at Shot-ton believe that for a little more than £80 million steel making at Shotton can be fully modernised. For that reason I am still prepared to back the prospects at Shotton should we get a reprieve and be allowed to help the corporation to produce a much better return on capital.

10.25 p.m.

Mr. John Golding (Newcastle-under-Lyme)

The Minister referred to the First Report from the Select Committee on Nationalised Industries dealing with the British Steel Corporation which was published on 13th February 1973. I wish to refer to one statement in it which appears in paragraph 53: The Corporation has suffered from ministerial interference in its commercial operations, having been frustrated from charging what it thought proper and delayed in carrying out the capital investment programme which it thought necessary. The benefit to the national interest from these interferences is dubious: the damage to the Corporation is patent and it is a tribute to its management that its morale and confidence seem to have suffered so little. I refer to that because I believe that to be still the situation and because I think that my hon. Friend the Member for Flint, East (Mr. Barry Jones) did Dr. Finniston a disservice when he said that the ratification of his appointment meant that the strategy of the British Steel Corporation would thereby be fixed. I believe that it is not the strategy of the Corporation that is fixed; it is the strategy of the Government. I notice the Minister laughing. I have read carefully the report of the Select Committee, having myself served on it. In that report I find two statements of interest. The first is to the effect that the corporation had previously been working to a higher target than the 36 million tons. The second says that the independent consultants brought in by the Government recommended an output of between 22 million and 24 million tons. Having read the evidence contained in that report, it seems to me that the targets to which we are working at present of between 28 million and 36 million tons are some sort of shoddy compromise between 22 million and 43 million tons.

Mr. Barry Jones

I hope that my hon. Friend understands that when I referred to the strategy of the corporation and the underlining of it by the Secretary of State I had very much in mind the large number of redundancies and that to that extent the appointment of the present chairman meant that there would be no change in the rate or the place at which they occurred. That was my point.

Mr. Golding

It is my hope that in the certain event of Labour forming the next Government the redundancies and closures will be halted immediately for reconsideration, including reconsideration of the changing financial structure and investment programme and the present world shortage of steel. The steel men of my constituency cannot understand how they can be under threat of closure at Shelton when there seems to be a shortage of steel. They think it ironic that the National Coal Board, which until recently was closing pits, is advertising in the locality for men to go down the mines. We could reach the situation where steel makers are recruited into an industry which a short while ago was declared to be obsolete and declining.

My constituents believe that the steel target should be reconsidered in view of the situation at Shelton. One issue which is important to the men there concerns the advertisements published by the British Steel Corporation on the future of steel. It was in the worst possible taste that photographs of Shelton should be used in the newspapers to illustrate the bright future for steel. I hope that the Minister will apologise on behalf of the BSC to the workers concerned.

In its advertising the corporation has failed to put across the case for the mini plant. The Shelton men, who have just received their closure brochure, think there has been inadequate consideration of the future for mini plants. They believe that the opportunities for mini plants have been given to private industry to keep it quiet. They believe that they have been sacrificed in the interests of private enterprise. They point to the creation of plants from the Midlands to Lancashire as proof of that.

The men want Shelton retained. They believe that the mini plant has a future and the kindest word they have for the BSC brochure is "rubbish". If they lose their jobs they want alternative work. My hon. Friend the Member for Flint, East, seemed to indicate that the men in his constituency at the Shotton works had the offer of alternative employment. That is not the situation, as I understand it in North Staffordshire. We were first disappointed not to get a task force, but we have been more disappointed not to be offered alternative employment, as have the workers at Shotton. In numerical terms the problem is greater at Shotton, but the situation at Shelton is still severe. The men there would prefer to remain steel makers. But at least if they are to lose their jobs there should be identifiable alternative employment. They should have the chance of something more than a job in the pits—pits which were recently under threat of closure.

Mr. Barry Jones

My hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) mentioned that the workers at Shotton have the prospect of alternative employment. Like the workers at Shelton they have in exchange for the substance of a steel-making job only the shadow of alternative work. They have no clear and certain prospects. I am sure my hon. Friend would like to know that because he has made an effective speech and that additional information will help him strengthen his contribution even more.

Mr. Golding

I thank my hon. Friend for that intervention. I ask the Minister to try to prevent these closures taking place. If that is not possible, then I ask for alternative work to be provided as quickly as possible for the men affected.

10.36 p.m.

Mr. Emery

With the leave of the House, I should like to answer some of the questions that have been posed in this concise but important debate. As the order affects the British Steel Corporation, it is not surprising that some of the questions have gone a little wider than might have been expected.

The hon. Member for Chesterfield (Mr. Varley) asked for a public inquiry into the competitive business situation of the British Steel Corporation and its financial position. He seemed to suggest that there should be disclosure of information about prices and the pricing structure.

On Thursday, 15th November, in a Press release, the BSC stated: In considering its own price levels, the Corporation has had very much in mind the need to contribute to the national and the European fight against inflation. The corporation makes its own decisions on pricing. In making this announcement the corporation referred to the views and judgments that it took into consideration. This is understood not only by the corporation but by the Community.

That is why I was perhaps a little brash in asking the hon. Member for Chesterfield what prices he would have suggested. We have had no answer to that question. It is necessary to underline that point. I understand the hon. Gentleman's difficulty. He wants to ride two horses at the same time. He wants to be able to suggest that the Opposition are doing everything possible to encourage the BSC to be profitable and at the same time are not creating increasing inflation. Of course, he will not answer the question, and it is fair to point out that he did not.

The hon. Member thought that there were considerable constraints on the BSC to make its statements compatible with Government policy. I do not think that that is the case. It is the corporation alone that has made the decisions about its pricing.

My hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) talked of an ideal world in which there would be no aura of permanents—I liked that phrase—about the BSC. But I have to disillusion him. There is such an aura, supported by both Front Benches. I want the BSC to be one of the most successfully operated steel manufacturers in the world, and I hope that this reconstruction will help. My hon. Friend asked me earlier about the rate of return represented by the £2.8 million profit. I said 3.8 per cent., but it is in fact 3.4 per cent. I wanted to set the record straight.

My hon. Friend also asked what had been happening to the corporation in recent months. Within the last two or three weeks, the BSC has published a statement showing a consolidated profit for the six months ended 29th September 1973 of £3 million, before providing for the costs of closures, which are allowed for in the offset against the general reserves. This compares with a loss of £4 million in the corresponding period of the previous year and a profit of £2.8 million over the whole year. Thus some of my hon. Friend's fears are not justified.

Mr. Bruce-Gardyne

My hon. Friend will accept that the £3 million profit over the six months to the end of September is not necessarily inconsistent with the proposition in the Press that the BSC was once again in a loss-making situation in the weeks preceding the latest price increase.

Mr. Emery

It is possible to contend that that is so, but it is also possible to contend that it is not. Let us leave it at that.

I have seen several times in the Press and in letters from hon. Members the suggestion that people have been exporting and then re-importing steel, thus making a nice profit, a dual mark-up, from the prices that the British manufacturers are paying. There are many assumptions here, but proof is difficult to get. If anyone has concrete information about this, I and my Department would very much like to receive it.

I sometimes think of the hon. Member for Flint, East (Mr. Barry Jones) as the hon. Member for half of Shotton. Two hon. Members represent Shotton, from both sides of Flint.

Mr. Barry Jones

Shotton steelworks is entirely within the constituency of East Flint. It is estimated that 70 per cent. of its work force live in East Flintshire. Very largely, the townships that serve the steelworks are Connah's Quay and Shotton.

Mr. Emery

If the hon. Gentleman has told me that once, he has told me seven or eight times, both in writing and orally. But there is another hon. Member who represents part of Flint, my hon. Friend the Member for Flint, West (Sir A. Meyer), who is also interested in the workpeople there. The hon. Gentleman would be the first to admit that.

The decisions on the strategy are the decisions which were put by the corporation to the Government. Time and again we have heard from the Opposition Front Brench and elsewhere that this is a strategy devised by Government and superimposed on the corporation. That is basically what has been said. It was said by the hon. Member for Newcastle-under-Lyme (Mr. Golding).

I say most positively that the decisions and the whole aspect of the 10-year programme were the work of the corporation. The whole preparation of the strategy was put to the Government and the Government saw fit to approve it.

Mr. Golding

I may be wrong, but from the evidence contained in paragraph 36 of the Select Committee report it is quite clear that it was the joint steering group, which included representatives of the Treasury, the Department of Trade and Industry and the corporation, which considered the long-term plans and the financial and economic prospects of the corporation. It is also clear, from reading the evidence of Lord Melchett and the Select Committee's Report, that the advice of Government consultants was 20–24 million tons and that the corporation had previously been working to a higher target than 36 million tons, which we know to be 43 million tons. We know that what came out of the joint steering group was 28–36 million tons. It does not do for the Minister to keep denying the work of the joint steering group. We know that the Government leaned on the corporation in that committee.

Mr. Emery

The hon. Gentleman says that he knows. He was not a member of the Government. He was not in my position. He may infer that from the figures that he has given, but it is an inference and not a fact. He must not talk in the House as though it were fact, because that is not correct. However, I do not wish to raise the temperature of the debate. I reiterate clearly that it is not a fact and I hold to that position. I was there and the hon. Gentleman was not. Let us take the matter no further.

The hon. Member for Flint, East and the hon. Member for Newcastle-under-Lyme raised the question of redundancy. The Government have gone to considerable lengths to ensure that where there are possible closures and problems of redundancy, there shall be a task force, and that every aspect of the problems of redundancy shall be considered.

I was at the Stanton and Staveley works the other day. There had been a considerable problem about redundancy involved in certain of that firm's closures. But I am delighted to be able to say that the problem of redundancy is one which, feared originally, has now been entirely overcome. The men have been absorbed within the working of the plant and elsewhere. Where the management had a problem, that problem has been overcome to the extent that the management is now looking for labour in certain areas. That is how it can be done through co-operation. That is how I hope the corporation will be able to continue to deal with the overall expansion of the industry.

The object of the exercise is to confirm the re-structuring of the capitalisation of the corporation, to allow it to know what its future position is so that it knows that there are no limitations which could have arisen under the 1969 Act of the timescale affecting private dividend capital. We are abolishing that and allowing the corporation to have the confidence which is necessary for it to embark on the 10-year plan to obtain as efficient a steel industry in Britain as is humanly possible.

Question put and agreed to.

Resolved, That the Iron and Steel Act 1969 (Continuance of Provisions) Order 1973, a draft of which was laid before this House on 1st November, be approved.