HC Deb 16 March 1977 vol 928 cc391-403
The Secretary of State for Industry (Mr. Eric G. Varley)

With permission, Mr. Speaker, I shall make a further statement about capital investment in the steel industry in Wales.

As I informed the House on 19th July last, I asked the British Steel Corporation to carry out a further review of the options for its works at Port Talbot and Shotton in the light of the latest available information. This review has now been completed. I am grateful to the Corporation for the thorough and objective way in which it has carried out this task.

The Corporation has concluded that development of its Port Talbot works remains the most economical course of action in steel-making terms and in supplying United Kingdom users with quality strip mill products on a fully competitive basis. It recommends proceeding with the development at a deliberate pace so that Port Talbot would reach a capacity of 4 million tonnes of liquid steel by 1981–82 and 6 million tonnes by 1985–86. The full cost of this at March 1977 prices is estimated at £835 million. This programme reflects the slower growth which now looks likely in world steel markets up to the mid-1980s. It also reflects what the Corporation can realistically aim at in terms of increased market share and in bringing new plant into full operation.

The first phase would include a 10,000 tonnes per day blast furnace similar to that now under construction at Redcar and a new steel-making vessel, in addition to the developments authorised in July. The second stage would include further investment to support iron-making, up-rating the present steel-making plant, and additional continuous casting facilities.

The Corporation believes that to close Shotton's iron- and steel-making capacity when prospects are uncertain and while Port Talbot is being built up over an extended period might risk a shortage. The Corporation is therefore withdrawing its closure proposals for Shotton's heavy end, and it visualises that iron and steel-making will continue there for many years to come. It will also undertake the necessary expenditure at Shotton to keep the open hearth steel plant in prime condition. This will lead to the maintenance of employment there at close to the present levels. This decision will not be reviewed during the period of BSC's current five-year plan; that is, not before 1982–83 at the earliest. The long-term future of steel making at Shotton can then be reviewed in the 1980s in the light of technical developments and results of our industrial strategy.

The Government welcome the Corporation's proposals as a realistic plan for the development of its strip mills' activities. The proposals also take account of regional and social needs and I have agreed to them. I look to both work force and management in the Corporation and also to those engaged on steel plant construction to make a success of the new strategy.

Sir K. Joseph

We welcome the decision in respect of Port Talbot which is in line with the arguments advanced by my hon. Friend the Member for Pembroke (Mr. Edwards) over the past couple of years.

I have three questions to put to the Secretary of State about Shotton. There will obviously be a welcome for the reprieve for a plant which has had great success and in which industrial relations have been excellent. There will be a welcome for that reprieve provided that it makes economic sense.

The questions that I want to ask are these. First, why has the Corporation changed its mind? It has withdrawn the closure proposals which it pressed upon successive Ministers. What is the reason for the change of mind'? Is it in part, perhaps, that the Corporation recognises the need for an insurance policy in the good industrial relations at Shotton against the risks of the less than perfect industrial relations in some of the new integrated steel plants?

The Secretary of State referred to the open-hearth steel plant being kept in prime condition. I understand that the steel-making capacity at Shotton may need some renewal. What is the cost of keeping the steel-making capacity at Shotton in prime condition?

Finally, when the British Steel Corporation strategy was announced it was expected to cost about £3 billion in total. What is the cost now expected to be equivalent to the £3 billion originally expected?

Mr. Varley

On the last point, the only cost that I can give the right hon. Gentleman today is the cost of the development at Port Talbot—that is, £835 million. Clearly the cost of the whole development strategy has risen. I do not have the figure with me, but I will ensure that the right hon. Gentleman and the House are informed of it.

On the first of the right hon. Gentleman's questions, I emphasise that it is the Corporation's judgment that it will require steel from Shotton for many years to come. In fact, I understand that the Corporation has issued its own statement in addition to the information that I have given to the House.

Perhaps I can reply to the right hon. Gentleman in this way. The British Steel Corporation says that it will want the Shotton steel-making capacity for many years. Of course the Corporation is worried about upturn and possible shortages, and it does not want to be in difficulties as it was a few years ago. It says in its statement, released today, that the Shotton option remains open for technological progress, commercial requirements and the potential development of hot rolled coil in the second half of the 1980s.

Industrial relations have been good at Shotton and it is for the British Steel Corporation to determine what weight to put on that. I acknowledge that the relations are good. The question of the cost of keeping the open hearth steel making at Shotton in prime condition is for the Corporation. It has not been fully worked out but I can confirm that it is the Corporation's intention that it should be kept in prime condition.

Mr. Cledwyn Hughes

Is my right hon. Friend aware that his announcement will be received with relief and satisfaction in North Wales? Is he further aware that the preservation of the work force at Shotton at a time of recession, which is crucial in an area of high unemployment, is a tribute to the excellent productivity and industrial relations record of the steel workers at Shotton? Can he confirm that the possibility of installing modern equipment towards the end of the period to which he has referred will not be precluded? Is he aware that this result reflects great credit on my hon. Friend the Member for Flint, East (Mr. Jones), who has worked hard for this, and who cannot speak for himself?

Mr. Varley

I know that because of the ministerial responsibility of my hon. Friend the Member for Flint, East (Mr. Jones) he cannot speak on this matter. I certainly agree with the tribute that has been paid to him and I thank my right hon. Friend the Member for Anglesey (Mr. Hughes) for the comments he has made. The British Steel Corporation's own judgment is that the Shotton steelmaking option should remain open for the technological developments that are bound to take place in the 1980s. The Corporation will review the situation at that time.

Sir. A. Meyer

I fully endorse the tribute paid to the achievements of the work force at Shotton and to the heroic efforts of the hon. Member for Flint, East (Mr. Jones). Could the Secretary of State enlighten us about the necessary expenditure to keep the open hearth steel-making plant in prime condition? Does this mean renovating that plant and installing BOS equipment or does it mean attempting to maintain it in the present form as can best be done?

Mr. Varley

The operations of the present open hearth capacity at Shotton are profitable and there are profitable open hearth steel-making processes elsewhere in this country and throughout the world. The British Steel Corporation intends to keep Shotton in prime condition because, in its judgment, it will need the steel. I have nothing to add to what I have said already about my hon. Friend the Member for Flint, East and I know he will welcome the fact that job levels will be broadly maintained in this part of Wales as a result of the announcement. As my right hon. Friend the Member for Anglesey said, this is a matter that concerns us very much. It was not the sole point on which the Corporation based its judgment, but the fact is that the situation in that part of Wales is serious and today's statement will help.

Mr. Richard Wainwright

The Secretary of State has just announced piecemeal certain major changes in the British Steel Corporation's strategy without giving any picture of the overall new strategy that must arise. Can he explain to us how it is that simply maintaining the present open hearth steel-making plant at Shotton gives that excellent work force any real chance of producing steel that is competitive in price and quality for five years ahead?

Mr. Varley

The hon. Member is being a little unfair, and I know that he always tries to be fair. The British Steel Corporation has judged that it will require the steel from Shotton for many years to come. That is its commercial judgment. It says that its plan is commercial, practical and prudent. I am often charged with interfering with the judgment of the nationalised industries. In this case, that is the Corporation's judgment. On the technological changes taking place in the steel industry—that is a matter for the Corporation and it is one that is under constant review. I am sorry that I cannot provide some of the financial information that hon. Members require and that I can only relate directly to the Port Talbot end. I shall take steps as quickly as possible, if the House thinks that this is an important ingredient, to provide the information.

Mr. William Ross

Can my right hon. Friend tell us what effect this important decision and the conditions given as justifying the change will have on the policy of capital developments of the British Steel Corporation elsewhere in the United Kingdom? Can he give a categorical assurance that the development already projected at Hunterston, in Ayrshire, will not be detrimentally affected?

Mr. Varley

I can give that assurance. The Government are formally committed to the principles of the strategy laid before the House following the review by Lord Beswick undertaken when we were elected in 1974. It is our intention that Hunterston should be Britain's next major steel works in the period after the completion of the current development strategy. That is nothing new at all. The Corporation's plans announced today for Port Talbot and Shotton lie within the current strategy and do not stand in the way of future developments at Hunterston. That is a categorical assurance.

Sir K. Joseph

May I press the Secretary of State further about Shotton? We would be delighted to be convinced that it makes economic sense to keep this excellent labour force in action making steel. But we want to know what has changed since the Corporation pressed successive Governments to close the steelmaking capacity at Shotton. After all, world demand for steel has fallen rather than risen in that period. What has changed that the Corporation now requires the steel-making capacity at Shotton when it did not before? Also, surely the right hon. Gentleman must know the cost.

Mr. Varley

On the cost of keeping Shotton in prime condition, a note has just been spirited into my hands and it says that the cost will be £10 million to £20 million, but I do not know over what period. When the Conservative Government reviewed the development programme—and the right hon. Gentleman was a member of the Cabinet that took the decision—they said that Shotton would be closing and they gave certain projections for steel-making capacity over the years ahead. What has happened is that there has been a major world recession in steel making, affecting not only this country but other steel-making countries as well. In addition, the build-up at Port Talbot is not going ahead as quickly as was envisaged either under the Conservative Government plan or under the review that we undertook. It is the Corporation's judgment—and we accept it—that steel making at Shotton will be required for many years, and even then technological process and development will be taken into consideration.

Mr. Ifor Davies

Is the Secretary of State aware that this anxiously and long-awaited statement will be scrutinised in great detail, not only by steel workers at Port Talbot but by tinplate workers in my constituency? The two industries are interdependent and both depend on the success of the programme announced this afternoon. I accept the statement with pleasure, but does the Secretary of State agree that constant review of investment in the steel industry will be necessary if we are to hold our own in the markets of the world, and if our steel industry is to be efficient in the face of mass world competition?

Mr. Varley

We are utterly determined to support the Corporation's investment plan. Indeed, the investment in the British steel industry is the highest in Europe and is running at record levels. While investment in some other parts of British industry has not been as much as we would like, investment in our steel industry and in the public sector generally has been maintained and increased. The development at Port Talbot will help a great deal in relation to the tinplate industry and in producing the quality of steel necessary, not only for the activities that take place in my hon. Friend's constituency but in the motor industry as well.

Mr. D. E. Thomas

The right hon. Gentleman's decision will be warmly welcomed by hon. Members representing constituencies and by local authorities in that area, and also by the local authorities on Merseyside. My only regret is that it could not have been announced earlier. A dark shadow has been hanging over the steel-making communities in Wales for a long time, partly because of the proposed decision by the Conservative Government. May I press the right hon. Gentleman on the question of the date that the Corporation gives of 1982–83 for when the decision could be further reviewed? My concern, in view of the deferments and the anxiety that there have been for such a long period over the future of Shotton, is that that should not represent a further deferment.

Mr. Varley

I thank the hon. Gentleman for his general welcome of my statement and for the constructive part of his question. I am sure that this announcement will be welcomed in Wales. He is right about that. We have to focus our attention now on the fact that the Corporation has withdrawn the closure decision. It has said that it will require the steel for many years to come and will take account of technological developments in the industry over many years. Within the current strategy and the current five-year plan of the Corporation, investment per head is higher in Wales than in any other part of the United Kingdom. That fact should be recognised by those representing steelworkers in Wales.

Mr. Roy Hughes

I congratulate my right hon. Friend and the Corporation on the wisdom of their decision. Shotton can now play a major part in Britain's economic recovery in the immediate years ahead. Is it not ironic that, four years ago, the Conservative Government in their White Paper were proposing many thousands of redundancies among these workers, and in doing so were supported by local Conservative Members of Parliament?

Mr. Varley

I wanted to strike a harmonious and happy note today, but what my hon. Friend says is true. Had the original White Paper proposals produced by the Conservative Government been carried through in their entirety, Shotton would be closing about now. But as far as we are concerned, it is the Corporation which runs the steel industry. It has concluded that it will require the steel, and I welcome the decision.

Mr. Wyn Roberts

Can the Secretary of State explain further the slow-down in development at Port Talbot, and give an assurance that the £10 million to £20 million investment in Shotton will be adequate to keep it in prime condition?

Mr. Varley

If the £10 million to £20 million is not adequate, it is for the Corporation to decide. I am not going to tell it in precise detail exactly where investment should go and at what level it should be. I am not equipped to do so, and nor is my Department. But we have regular meetings with the Corporation and will listen carefully to what it has to say on the matter. The development at Port Talbot is going ahead with all the benefit not only to that part of Wales but in terms of quality and benefit to the steel plant manufacturers. I understand that the steel plant manufacturers will broadly welcome my announcement.

Mr. Lambie

I welcome the successful outcome of the campaign by the steel workers of Shotton to maintain steel making in North Wales. But will my right hon. Friend explain what effect the decision will have on the future of steel works, similar to Shotton, where we have major production targets and good industrial relations but where open hearth furnaces are threatened with closure, such as Glengarnock in my constituency? There is considerable feeling among some of us that important decisions affecting investment are being made in constituencies represented by members of the Cabinet and Ministers in the Department of Industry but are not being made in constituencies represented by Back-Benchers. May I have an assurance from my right hon. Friend that the future of Glengarnock will be just as assured as the future of Shotton, which is represented by Government Ministers?

Mr. Varley

I refute the charge my hon. Friend has made. I am sure that, on reflection, he will realise that his allegation is totally unjustified. He must recall that we have undertaken a very painstaking task in reviewing the White Paper proposals of the Conservative Government. We had to review them, and we came up with proposals. We took them stage by stage. In some respects, the Port Talbot-Shotton proposal was never adequate at that time. It was reviewed because of all the complexities involved, and this decision is a result of the review. I cannot give my hon. Friend any guarantees that the decisions already taken in the review can be changed at all, but I can give him an assurance that, as far as Hunterston is concerned, the next stage of the development will not be affected in any way by the decision I have announced.

Mr. Lambie

But what about Glengarnock?

Several Hon. Members

rose—

Mr. Speaker

Order. May I seek the help of right hon. and hon. Members? There is another major statement to come, there is a point of order, there is an application under Standing Order No. 9, there is a Ballot for Notices of Motions, and there is a Ten-minute Rule Bill, all before we get to the main business of the day. I therefore would be deeply grateful if right hon. and hon. Members would make their questions as brief as possible.

Mr. Fairgrieve

In the light of his statement, will the right hon. Gentleman give us some idea of the date when development at Hunterston will go ahead?

Mr. Varley

I cannot give the date of that. I cannot add very much to what I have said in reply to the question asked by my right hon. Friend the Member for Kilmarnock (Mr. Ross). The Corporation has told the Government that it is its intention that Hunterston should be Britain's next major steel works in the period after the completion of the Corporation's current development strategy, and I do not think that I can add to that.

Mr. Heffer

Is my right hon. Friend aware that had Shotton closed it would have been a disaster, not only for North Wales but for Merseyside as well? Is he further aware that the people of Merseyside will be delighted with the decision, particularly as trade unionists on Merseyside gave their full support to the Shotton workers, along with the county council and local authorities from all parts of the area? We do not take a parochial view of these matters. Is my right hon. Friend also aware that the grudging attitude of the Oposition will be noted? It is almost as though they do not like the decision, as though they wanted to see more and more workers put out of work in that part of the country. Their attitude will not go unnoticed by the people of North Wales, Merseyside and elsewhere.

Mr. Varley

I thank my hon. Friend for his general welcome of my statement. I have made one comment about the Opposition's attitude today and I do not think I need go further on that. But I can tell my hon. Friend that I have received deputations not only from North Wales but from Merseyside about Shotton and I think we have been able to take their views into account. The Corporation also, which ultimately has the responsibility, has taken their views into account.

Mr. Stradling Thomas

While being very pleased for the Shotton workers, may I ask the Secretary of State—without any question of carping—what are the implications of this statement of strategy for the Spencer steel works at Llanwern in Monmouthshire?

Mr. Varley

There has been no change as far as Llanwern is concerned. The statement I have made relates specifically to Port Talbot and development there and the prospects for the continuance of Shotton. What I have said in no way affects Llanwern.

Mr. Anderson

Is my right hon. Friend aware that this is the most important decision affecting the economy of South-West Wales for a decade? For Port Talbot it means the difference between progressive decline and an assured future. There will be hymns of praise tonight for my right hon. Friend the Secretary of State.

Mr. Grist

Would the Secretary of State care to explain the reason for the delay in the announcement of the inevitable expansion of Port Talbot, which has cost the British Steel Corporation several hundreds of millions of pounds?

Mr. Varley

I am afraid that the hon. Gentleman, again, is giving grudging support to my statement. The hon. Gentleman really should be more welcoming. The British Steel Corporation is going ahead with development at Port Talbot, and this is important for steel making not only in Wales but for the whole of the United Kingdom. The plant makers who require this work will be delighted and will take full advantage of it. It was right that there should be a review, in the light of changes in the steel market and the world recession in steel, and it is right, now that the review is completed, that development should take place.

Mr. Wrigglesworth

Is my right hon. Friend aware that, while there will be a general welcome for his statement, there is still great anxiety in other steel-making areas such as Teesside about British Steel Corporation developments? When will my right hon. Friend be able to make an announcement about future plate mill developments on Teesside?

Mr. Varley

We have not yet received the British Steel Corporation's proposals for Redcar, on Teesside, but we expect them shortly and I hope that we can make a decision soon after we receive them.

Mr. Hooson

Does not the fact that the British Steel Corporation now requires steel making at Shotton put the Corporation's forecasting system in grave doubt? Four years ago it regarded this as unnecesssary, although many hon. Members thought that it was necessary to continue with Shotton.

Mr. Varley

I think that the hon. and learned Gentleman is a little unfair. I have confidence in the management of the British Steel Corporation and in the way in which it is proceeding in most difficult circumstances. I do not think that four years ago the Corporation could have envisaged the effects of the world recession and all the changes that have taken place, such as the hardening in commodity prices and the five-fold increase in oil prices. These are all factors that the Corporation has had to take into account. I would not blame them too much.

Mr. Loyden

Does my right hon. Friend agree that the decision on Shot-ton was not merely a question of jobs? The statement today and the decision of the British Steel Corporation will be widely and warmly welcomed, because the decision on Shotton affected not only jobs but the whole community. Labour Members fully support the Corporation's actions in taking into account the social consequences of their decision.

Mr. Skinner

Is my right hon. Friend aware that the main reason why the right hon. Member for Leeds, North-East (Sir K. Joseph) is only grudging in the so-called support that he is giving to the statement is mainly that on this occasion he has not been able to convince the Cabinet of the need to cut back. This is a welcome diversion for the Government and one which we hope will be a precursor of many more.

Now that my right hon. Friend has been able to satisfy one devolutionary need, presumably he will satisfy others. Will he take account of the problems in our own area and seek to ensure that we restore the public expenditure cuts in order that pipeworks and other firms which use steel can build houses and do all the other necessary jobs to take people off the dole?

Mr. Varley

My hon. Friend is ingenious in getting the subject of public expenditure cuts—which are relevant in many respects—into a statement on steel. He was referring to a problem affecting his constituents and my constituents in the steel industry in North Derbyshire. The steel industry in North Derbyshire is never far from my thoughts. Again, the British Steel Corporation is helping the situation in the discussions which it has had with regional water authorities. I hope that further progress can be made in that direction.