§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Brooke.]
§ 4 p.m.
§ Dr. Jeremy Bray (Motherwell and Wishaw)
It is a pleasure to congratulate you, Mr. Deputy Speaker, on your appointment to the Chair, not only because the House will benefit from your guidance but because we will be saved vast sums of money by not having to sponsor you on any more marathon walks for charity.
Last year, capital expenditure on plant and machinery by the chemicals, coal and petroleum industries increased, and it is expected to remain roughly stable this year. Nevertheless, the value of orders taken by British heavy fabricators, firms which make heavy steel pressure vessels and so on, has fallen sharply in the past six months.
In 1977 and the first nine months of 1978, such orders were running at about £100 million annually, but in the last quarter of 1978 and the first quarter of this year they fell to about £30 million annually. There have been short-time working and redundancies throughout the industry and, in particular, in my constituency.
The last straw was when Amoco UK, through its contractor, Procon, placed the orders for all three major pressure vessels for its Milford Haven refinery outside the United Kingdom. Orders for the 658 reaction regenerator and the main fractionator went to Holland and for the vacuum tower to Belgium.
I wrote as long ago as 17 October 1978 to my right hon. Friend the Member for Swansea, West (Mr. Williams), the then Minister of State, Department of Industry, asking that Amoco and Procon should be requested to give every consideration to United Kingdom supplies. The Department of Industry had been repeatedly informed by the Process Plant Association, the British Steel Corporation and individual private firms of the sort of subsidised competition which they were facing on steel prices and the pricing of steel fabrications from other members of the EEC.
My right hon. Friend wrote to me on 6 April this year, sayingOfficials who had gone into this matter when I wrote to you on 2nd November took it up again very recently in a meeting with senior representatives of Amoco UK and Procon. A detailed discussion took place and this confirmed very strongly Amoco's intentions as I had described them to you. The companies had a clear view of the advantages of buying British and recognised the competitiveness of British firms in the medium and small-sized items being purchased. However they foresee some purchasing from abroad of large items arising from commercial decisions based on technological quality, delivery and price: and a small number of high-technology items is not manufactured in this country.Mr. Parker, the managing director of Amoco UK, subsequently informed me that 75 per cent. of the plant and equipment for the refinery extension had been purchased in the United Kingdom. It is just unfortunate that the remaining 25 per cent. included all the heavy pressure vessels, all of which could have been supplied from the United Kingdom.
I understood that the best United Kingdom price was between 20 per cent. and 30 per cent. higher than the prices in Holland and Belgium, where the level of capacity working, at about 50 per cent., although low, appears to be somewhat higher than in the United Kingdom.
The types of subsidy being offered within Europe, in breach of European competition rules, are widely reported to include the following. The Italian steel industry is offering 20 per cent. discounts on Davignon prices for steel plate by accepting 20 per cent. penalties for late delivery and quoting the impossible delivery period of three weeks. France 659 and Holland have applied shipbuilding steel subsidies to fabrications made in factories on the pretext that they are shipyards, by virtue of having a slipway into the water. French fabricators have received comprehensive insurance cover against inflation, amounting to a heavy subsidy. The Dutch industry is said to be receiving a heavy reorganisation subsidy.
The response of the Department of Industry to allegations of unfair competition by the heavy steel fabricators has for a long time been that it will take action if documentary evidence is available but that none has been forthcoming. The circumstances of the Milford Haven contract were such that the Department of Industry had the opportunity to follow a contract through all stages of negotiation, and so to identify any sources of unfair competition. It seemed to me that quite plainly this monitoring had broken down.
Accordingly, I issued a press release on Tuesday 17 April, embargoed for 6 p.m. on Thursday 19 April, saying that Amoco UK and its contractor, Procon, had withheld information from Ministers which could allow Britain to take legal action against infringers of competition and pricing rules of the European Community. As a matter of courtesy, I sent copies of the press release to the companies to enable them to make whatever comment they cared to at the same time.
Mr. Lauschinger, company secretary and legal adviser to Amoco UK, telephoned me, and I had long conversations with him on Wednesday and Thursday, 18 and 19 April. In the first telephone conversation, Mr Lauschinger said that Amoco had no knowledge and was not entitled to knowledge of the prices paid by Procon for specific items of equipment, and was excluded from seeking such knowledge by United States of America anti-trust legislation.
My own experience as a Minister in the Ministries of Power and Technology, in the 1960s and subsequently, is that American oil companies, and indeed British oil companies, frequently appeal to United States anti-trust legislation when wishing to withhold information or refuse co-operation with the United Kingdom Government, and I understand from conversations with Ministers of other European 660 Governments that the oil companies display similar attitudes in dealing with their Governments. I told Mr. Lauschinger that I did not believe he was right about United States anti-trust legislation, and he showed little knowledge of competition rules within the European Community. He also had no knowledge of the meeting which had taken place very recently between the Department of Industry representatives and senior representatives of Amoco and Procon, of which I had been informed by the Minister. Nevertheless, his ignorance, both of the legal situation and of meetings that had taken place between the Department of Industry and Amoco, did not prevent him from threatening me with writs for libel, and also from threatening to prosecute any newspaper which published my press release.
On the Thursday morning, Mr. Lauschinger withdrew his statement about the access by Amoco to information on the prices of individual components, and also admitted his lack of knowledge of European Community competition rules. He told me that at the meeting with the Department of Industry officials they had not raised any of the questions which I pressed in the press release. He did not think it was Amoco's business to monitor the competition rules.
Because Mr. Lauschinger was in fact saying that the Department of Industry officials had failed to press Amoco and Procon in any depth about current allegations widespread in the British steel fabrication industry, I revised my press release by adding a sentence putting the onus of responsibility for the failure to secure specific information on the breach of competition rules either on Amoco and Procon or on Department of Industry officials. The revised text of the press release Mr. Lauschinger acknowledged to go some way towards meeting their objections, but this did not stop him, without any notice to myself, from having solicitors write to the editors of the newspapers that I had out of courtesy named to him, threatening libel action. There were consultations between editors to my knowledge, and the only newspapers that published any report were the Financial Times on 23 April 1979 and The Scotsman, and they did not name Amoco, Procon, or the Milford Haven contract.
Action by an American oil company, to threaten a libel writ against a Labour 661 candidate during a general election campaign, when the oil company was expecting to gain substantial tax benefits from the return of a Conservative Government, seemed to me foolish. If there had been no substance in my allegations, Amoco could simply have issued a denial with supporting evidence, and that would have been an end of the matter.
I spoke to Mr. Parker, the managing director of Amoco, to make sure that he understood the position to suggest that he sought advice on Government and public relations as well as legal aspects of the matter. I told him of British parliamentary practice, and that big companies did not generally resort to legal threats against Members of Parliament, not least because of the protection of parliamentary privilege. But Mr. Parker chose to take no notice.
The action by Amoco, by threatening writs instead of answering allegations, might have been merely silly, but the failure of officials in the Department of Industry to undertake serious investigations is deplorable. It is quite clear that, with the type of subsidy being used by heavy steel fabricators in Europe, firm and detailed evidence of the kind demanded by the Department of Industry simply will not be forthcoming. To monitor competition in consumable or mass production goods is a simple matter, because prices can be compared, and goods shipped between countries- and customers. However, to monitor competition in major one-off capital goods requires an altogether different type of monitoring. Steel fabricators are in the unfortunate position of not supplying units as large as power stations, where Governments inevitably get involved, or as standard as commodities.
The danger is that our capital goods industries will be so exposed to unfair competition by the aloof traditions of the British Civil Service that they will decline to the point where they require total protection and total subsidy if they are to survive at all. The steel fabricators have by no means been reduced to that level yet, and they have a very creditable export record.
In a letter dated 1 May, approved by my right hon. Friend but drafted by the Department, he said that at the time of the meeting with Amoco the detailed 662 allegations in my press release had not been raised. That is simply untrue. They have been the common currency of complaint for some time, and the letter goes on to note the discussions in the Process Plant EDC of concealed subsidies. The Process Plant EDC itself seems regrettably to have run out of steam. The position is grossly unsatisfactory. An industry is being strangled by the inaction of the Department of Industry, with the mute consent of the chemical and oil industries.
My practical suggestion is that the Department of Industry should put in independent accountants, Price Waterhouse or someone, to work in co-operation with Dutch, Belgian and Italian accountants, if need be, to investigate the bids and costing behind the bids in the Milford Haven and other contracts, from the customer, to the contractor, to the fabricator, on major units of plant. I have not consulted Amoco, but informal soundings I have made in the chemical and steel fabrication industry confirm that this is the sensible way to deal with allegations of unfair competition, which cannot be checked in any other way. If voluntary inquiries do not establish fully the facts on concealed subsidies and do not lead to their eradication, anti-dumping action should be taken immediately to exclude imports of major steel fabrications into the United Kingdom which can readily be supplied within the United Kingdom.
In the short term, some workers in the industry, including constituents of mine, may be protected by the temporary short-time working compensation scheme, which pays them very nearly a full week's wages for working only four days. But this does not help companies, the long-term security of employment or the British Exchequer.
I am afraid that my reluctant conclusion after many years of seeing this problem in industry, in Parliament and in Government is that British civil servants regard the heavy engineering industry as troublesome, and the chemical and oil industries as virtuous, when the reality is that the latter are simply in a more favourable market position. I regret that it may also have something to do with the fact that chemical and oil companies have given many more civil servants jobs, ranging down from Sir 663 Paul Chambers and Sir Frank McFadzean, than have ever been offered jobs in heavy engineering.
The Secretary of State for Industry, when he was Minister of Housing and Local Government in 1962, was good enough to see me very soon after I became a Member regarding allegations about improper practices in housing in the North-East of England, which later became the Poulson scandal. Had we been able to root out abuses at that time, that tragedy could have been nipped in the bud, to the benefit of the nation, of Reggie Maudling and many others. I ask the Under-Secretary to consult his Secretary of State on the question whether serious investigative action, which must necessarily be tough and will probably be unpleasant, should not be undertaken on competition within Europe before further capital goods industries in Britain go to the wall.
There are plainly benefits, too, in establishing better trading relations between the process and process plant industries within Europe, Mr. Maurice Hodgson, the chairman of ICI, Sir Raymond Pennock, the deputy chairman, and others have recently been complaining about the extent of buy-back deals with Eastern bloc countries, under which highly subsidised plant is supplied to Eastern Europe in return for accepting part payment by shipment of their products back into Europe, flooding the European market. This plainly will become a major issue with the developing world, too.
Then, again, suggestions have been made that petrochemical investment in the United Kingdom should be increased to take advantage of available feedstocks from the North Sea. In particular, there is a current proposal for a major polyisoprene synthetic rubber plant, combining oil, chemical and process plant interests.
It will not be possible for the market beloved by the Secretary of State for Industry to sort out sensible solutions on matters such as these while there are the present grave and unanswered allegations of unfair competition from Europe in capital goods and in steel fabrication in particular going unanswered.
The Under-Secrtaary of State is new to his job, and I wish him well. I do not 664 expect a full reply from him this afternoon, but I urge both him and the Secretary of State not to accept the whitewash with which, no doubt, they have already been served up in their short time in office without much closer examination and practical investigation.
§ 4.15 p.m.
§ The Under-Secretary of State for Industry (Mr. David Mitchell)
I begin by congratulating you, Mr. Deputy Speaker, on occupying the Chair. I look forward to serving under your chairmanship for many years.
On my first apppearance at the Dispatch Box as a junior Minister I might have hoped for a bigger audience than is present in the House this afternoon. I am glad, however, that Scotland is the cause of my replying to the debate. I share with the hon. Member for Motherwell and Wishaw (Dr. Bray) the fact of being an Englishman with a love of Scotland. I express appreciation to the hon. Member for his courtesy in offering to meet me before the debate earlier this week. Unfortunately it was not possible to fit in a meeting in the time available, but I was grateful for his offer nevertheless.
Like the hon. Member, I recognise the importance of industrial success. I do not think that there is any disagreement on that between us. Only by that success are we able to create the resources that both sides of the House want to see spent on helping the needy and in so many areas such as hospitals and other facilities, many of them in Scotland.
As the hon. Member for Motherwell and Wishaw will know, process plant fabrication is an important industry which provides between 60,000 and 70,000 jobs. Although the hon. Member has raised specific issues with which I shall deal, I think it important to set his remarks in the context of the position in which the industry finds itself. It is overwhelmingly involved in an international business in which it has to be competitive. That business is passing through a period when demand has been satisfied in many areas. I am uncertain whether one should be pleased or sad about the fact that it is a business in which the developing countries are increasingly able to make for themselves the less complex sorts of plant which they need. That means that 665 there is a need for us in this country perhaps to concentrate more than before on the technologically advanced products at at which we can excel and in respect of which the developing countries find it more difficult to compete with us.
There are good prospects for new demand, particularly in the Middle East and the Far East. We must all profoundly hope that that demand will hold up and that the opportunities will present themselves for the industry to be able to tender. There is an overwhelming need for those who tender to be competitive. It is against that background that I wish to discuss the matters which the hon. Member for Motherwell and Wishaw has raised. It is no use our seeking to ensure that there is fair competition—I agree wholly with him about the need for that—unless our own industry is able to compete successfully in an atmosphere of fair competition.
I should like to define more closely what I have in mind in respect of competition. I am speaking of three principal areas. The first concerns technical performance. In an industry such as this, which involves integrated construction of the plant, the ability to maintain and meet technical performance standards is crucial. British industry, on the whole, has a very good record in this area, but it still remains an area in which, against the background of rising sophistication and rising technological standards, we have to ensure that our equipment is able to reach the required technical standards and to maintain them once it is installed.
Secondly, the installation of plant process equipment is generally part of a larger construction operation. For this reason, delivery dates are crucial. The hon. Gentleman is well aware of the critical path techniques and the more advanced techniques which now operate with installations of this sort. If delivery does not take place at the time that it is expected, the ramifications of that on every other part of the construction project concerned are enormous. The cost consequences for the construction company and those who placed the contracts which have led to the construction work being programmed are quite appalling. It is, therefore, tremendously important that installation delivery times should be adhered to.
666 If there are instances—they happen from time to time—where, because of no fault of the plant process fabricator, delivery time cannot be adhered to, it is crucial that the customer, the client company, should be notified to that effect. Regrettably, there have been times when that has not occurred, with unfortunate consequences which, at least in part, could have been avoided had the notification been made.
The third area of competition is that of price. I entirely agree with the hon. Gentleman that it would be wrong if United Kingdom companies were to quote a keen price and then lose the order because of unfair competition. However, I felt that one of the hon. Gentleman's allegations, to the effect that the oil companies were expecting substantial tax benefits from the election of the Conservative Party, is a somewhat inappropriate and extraordinary allegation to make. It is almost as wild as his allegations about civil servants being less than impartial in their work of investigating the areas of unfair competition. Civil servants in my Department are not able to answer for themselves, and I find it a particularly unfortunate charge to make. I hope that on consideration the hon. Gentleman will feel that he does not wish to leave that remark and will take the opportunity of withdrawing or substantiating it. If he wishes to do that, I hope that he will write to me about it.
In his press release in April, and in his remarks today, the hon. Gentleman alleged that the price of steel has been artificially lowered in another member country of the European Community, thus disadvantaging a British company in competition with a fabricator in that country. In the functioning of the Community's Common Market there is a basic requirement that competition shall be undistorted, and the Treaty of Rome contains specific provisions against such distortion.
Article 85 prohibits agreements which, by restricting or distorting competition, affect intra-Community trade. Article 86 deals with anti-competitive behaviour based on dominant market position. Article 92 defines State aids that are compatible with the Common Market and those that are not, the latter distorting or threatening to distort competition.
667 Although the provisions of those articles would not necessarily and totally cover the allegations made by the hon. Gentleman, which I agree are important and worrying, the Common Market Commission has found itself prepared to come to grips with unacceptable pricing of steel and effective action has been taken against the Brescia producers for failing to respect the minimum price mechanism. However, I should point out that that was for steel production, which is substantially different from that for process plant fabrication. The latter appears not to be subject to mandatory price levels, although guidelines exist and might be used as a basis for complaint.
The Commission cannot be expected seriously to consider any complaint of distortion or competition such as that now alleged other than when it is founded on sufficient evidence of adequate quality. That is a critical point in relation to the allegations under discussion today, because Government Departments have to date not received information which constitutes evidence of substance.
There has been a series of allegations; for example, that tax rebates have been made. When these were investigated by embassy officials they were found to be groundless. There have been various other allegations about arrangements in foreign countries between one firm and another, or within one large group. However much our embassy officials may wish to investigate that kind of activity, it is not within their ability in a foreign country to command information which the companies concerned do not wish to give.
Therefore, it means that there is a clear requirement for information, which may amount to real evidence of objectionable practices, to be secured. I think that it has to be secured by commercial intelligence. That was made known to the Process Plant Association—the industry's trade association—some time ago. I understand that it has accepted responsibility for pursuing the acquisition of such information through its member companies.
The hon. Gentleman said that this required a different form of investigation. 668 He may be right. But surely that is exactly the role which should be fulfilled by the trade association in this instance. I hope that it will do so. If it succeeds in producing evidence which is adequate for us to take as solid evidence to the Commission as the basis for complaint, I assure the hon. Gentleman that I shall be ready to interest myself and to follow it through to see what we can do to secure redress. If he or the trade association will ensure that my Department is presented with information of adequate quality which will enable us to pin down the charges which he has made this afternoon, and which he made during his election speeches in his constituency, I shall consider what action can be taken.
Finally, I refer briefly to the United Kingdom client company concerned in this matter and its cracker project. The plans for sourcing equipment for Milford Haven are now well advanced. The latest information may be of interest to the hon. Gentleman. Of the total cost of £88 million, £33 million is in equipment and materials, purchasing being handled by the contractor's procurement department, and £55 million, representing management services and employment of many kinds, goes virtually entirely to British companies. I am sure the hon. Gentleman will wish to have that assurance. Indeed, British companies have secured 80 per cent. of the £33 million. That perhaps sets in context the allegations made by the hon. Gentleman this afternoon, to which I have listened with great care.
I think that I have shown the hon. Gentleman a picture of an industry in which the client companies are giving British manufacturers a fair crack of the whip but where we must ensure that there is fair competition. If the hon. Gentleman will give us the right evidence, I shall ensure that—
§ The Question having been proposed at Four o'clock and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
§ Adjourned at half-past Four o'clock.