HC Deb 23 October 1979 vol 972 cc335-92

10.2 p.m.

The Minister of State, Department of Industry (Mr. Adam Butler)

I beg to move, That this House takes note of EEC Document No. 4627/79 and of the Department of Industry's memoranda dated 20 July 1979 and 18 October 1979 on State Aids for the Steel Industry. It is some nine months since the House last debated the European Commission's proposals on the control of State aids for the steel industry. Since then, as the House knows, prospects for the steel industry have not improved and the long looked for major upturn in demand has not taken place. The British Steel Corporation, in common with the rest of the European steel industry—

Mr. David Watkins (Consett)

On a point of order, Mr. Deputy Speaker. There seem to be a number of conversations going on around the Chamber, and those of us who are anxious to hear the Minister are having some difficulty.

Mr. Deputy Speaker (Mr. Bernard Weatherill)

That is a legitimate point of order. Will hon. Members who wish to leave the Chamber kindly do so quietly?

Mr. Butler

I was saying that we have not debated this matter for nine months and that since then the prospects for the steel industry had not improved. Indeed, the British Steel Corporation, in common with the rest of the European steel industry, is still not generating the funds needed to make an adequate return to the taxpayer for the massive investment which has to be made in the business and to justify a continuing high level of expenditure.

Furthermore, unless the corporation ensures that it is viable and competitive, it can neither rebuild its home market share nor secure vital export orders. The Government have made it very clear to the House on a number of occasions that we are determined that viability should be restored as quickly as possible and we look to management to achieve the targets that they were set, both by the previous Administration and by this Government.

Steel is an international business, and it is now clear that we cannot proceed in isolation from what is happening in the rest of the world, and, in particular, other parts of the European Community. The House has frequently paid tribute to the anti-crisis measures introduced under the guidance of Commissioner Davignon. I accept the need for them, if temporarily, because I am a firm believer in the free market philosophy. But I remind the House that these measures were not intended to provide a permanent cushion of protectionism. They were designed as part of a wider plan to tackle the problems of the European steel industry. They were conceived to create a breathing space while steel undertakings could carry through their own restructuring plans consistent with Community general objectives. I believe that those crisis measure were welcomed by the corporation, private producers and, indeed, the unions.

If this restructuring does not take place, the stronger steel producers will refuse to renew the measures and we shall lose the opportunity for orderly change in our own industry. I do not believe that that is an empty threat, as Ministers who were previously involved in negotiations on steel matters within the Community will readily recognise.

We in the United Kingdom have come a long way down the restructuring path and are well ahead of most other European countries. The previous Administration published a White Paper and endorsed moves in this direction, though it seems to me that when the going became tough they did not stick to their last, or follow the logic of their own arguments. Even so, I must remind the House that in the last two years 5 million tonnes of steel-making capacity has been eliminated, with the loss of about 15,000 jobs which, if we add the losses in British Steel Corporation product mills at the finishing end of the business, amounts to some 24,000 jobs.

Among the closures that were accepted under the previous Administration were operations at Hartlepool, East Moors, Ebbw Vale and a number of others. It is a long list and there is no rejoicing about that. I believe that I am stating a fact when I say that it was under the Labour Government that the Corporation announced its proposal to discuss with the TUC committee the future of iron and steel making at Corby.

The British Steel Corporation's current production capability of some 22½ million liquid tonnes a year compares with an actual output of over 26 million tonnes in 1971. In the last decade no other European country has actually reduced capacity and output by as much as we have. Indeed, some countries have expanded their capacity. Despite the low level of demand that has prevailed since late 1974, other member States still seem to be thinking about how they should respond to present problems. That is not a healthy situation.

It is because of this lack of positive action throughout the rest of the Community that the Commission has proposed the decision which we are debating, in its latest form, tonight. Throughout Europe, capacity utilisation is, on average, just under 70 per cent. Under-utilisation of capacity has been exacerbated by the coming on stream of large plants in this country and elsewhere, because construction was well in hand before the depression in the steel market.

The Commission, after consultation with the member States last year, set general objectives for the European steel industry. It sees the State-aids decision as a means of preventing member States from using aids in a manner which could stand in the way of such Community objections.

Dr. Jeremy Bray (Motherwell and Wishaw)

The Minister is quoting figures about crude capacity in Europe by comparison with this country. Is it not misleading to quote the total figures? Surely what is more important is the wholly modern capacity in BOS steelmaking, where we have a very much better record than other European countries in terms of the modernity of our own capacity? What is really needed is the scrapping of a lot of obsolete capacity in Europe.

Mr. Butler

I do not think I disagree with the hon. Gentleman. I was using the figures to demonstrate that there is considerable over-capacity at present. We know our own position and we believe that there is capacity which ought to be scrapped within the Community. But it is one of the considerations which the BSC has in hand at the moment in considering what it should do with its surplus capacity.

If this decision is not accepted by the Community, the restructuring that is necessary, and the need for which the hon. Gentleman has just underlined, will persist in a slow and haphazard fashion if it proceeds at all. I hope that the Opposition will give the Government their support tonight in taking note of the decision. They should do. Last January, when in Government, they asked the House to "take note" but made clear many reservations about the decision as it then stood, and the Conservatives agreed with them on quite a number of points. They expressed considerable doubts and reservations.

I hope that tonight the Opposition need have no doubts and reservations, because the decision we have finally negotiated is, in our view, acceptable. In the past, the United Kingdom has resisted the State-aids proposals on the grounds that these would effectively give the Commission overall control of the BSC's investment plans and the annual operating plan. In that event, the BSC would have been denied the capability of restructuring in the way it thought best, and would have been denied the capability of negotiating closures at its own discretion and in consultation with the TUC steel committee and local work forces. That passage repeats almost word for word what was said from this Dispatch Box last January.

This is no longer the case with the decision now before the House. In response to the United Kingdom's insistence that we retain the right to control the pace and size of our restructuring, the Commission has substantially modified its proposals. The present decision is materially different from the one debated in January.

Member States are now required only to seek clearance of specific aids, which, being aids under a Community scheme, are to be regarded as Community aids. Investment on a commercial basis, including advances of working capital to the BSC, no longer requires prior notification and clearance, although the Commission retains the right to make inquiries about advances which come to its attention in order to see that the decision is being observed.

Specific aids granted by member States to the steel industry are contrary to article 4(c) of the Treaty of Paris—this was very much a stumbling block previously—and in so far as the decision empowers the Commission to block such aids it is no more than a procedure for enforcing the existing provisions of the treaty.

This brings me to the legal questions which have been raised about the Commission's earlier proposals. As originally drafted, the decision was objectionable on legal grounds. This was, first, because it could have had the effect of altering the existing balance of power between the Community institutions. As amended, EEC document 4627/79 now proposes that any action by the Commission to enforce the decision must be taken through article 88 of the European Coal and Steel Community Treaty. That, combined with the deletion of the provision that previously gave the Commission power to require repayment of any aid of which it did not approve, means that the existing balance of power between the Community institutions is effectively unaltered.

Secondly, earlier drafts of the decision purported to authorise as lawful those aids which, by virtue of article 4 of the ECSC treaty, are recognised as incompatible with the Common Market for coal and steel and accordingly are prohibited within the Common Market. The document before us is so drafted that it authorises only what it calls "Community aids".

The Commission's lawyers have argued strongly that such Community aids are not covered by the prohibition imposed by article 4, and that argument has been accepted by the other member States. I am advised that, although that argument could rightly be challenged, there is no authority to prove that it is wrong. It is acceptable as a ground for our consent to the decision but only on a strictly temporary basis. The House knows that the decision runs only until 31 December 1981, and I have made it clear to the Council that any renewal or extension of it would necessitate proceeding by way of Treaty amendment.

There is a further important difference between the text that the House debated on 25 January 1979 and the document before us. The former required prior notification to the Commission of aids and interventions in favour of the steel industry. These included regional and general aids and capital advances to publicly owned undertakings. It also gave the Commission power to approve such aids and, by means of a decision addressed to a member State, to require the repayment or other withdrawal of such an aid. The combined effect of these provisions would have been to detract from the powers previously enjoyed by member States to finance their steel industries, and would thus have materially altered the balance of power between the Community institutions. These arguments were presented with some force during that debate.

The present text deals only with specific aids to the steel industry, and not with general or regional aids which benefit the industry and which fall within the scope of article 67 of the ECSC Treaty or articles 92 and 93 of the EEC Treaty. Arrangements are being finalised for the notification to the Commission of general and regional aids for steel, but without accepting any extension of the Commission's existing powers under the Treaties.

The present decision, which was a late introduction but supported by us, says at article 1(3) that any risk capital contributed according to standard company practice in a market economy is not an aid at all and as such not subject to control. The Government are reinforced in their intention not to notify advances they make under section 18(1) of the Iron and Steel Act 1975 on the basis described in the White Paper "British Steel Corporation: the Road to Viability". As hon. Members will know, section 18 is currently the sole vehicle for Government advances of capital to the BSC.

As I have said, other member States have accepted the argument that the Community aids postulated by that decision are not contrary to article 4 of the Treaty of Paris. Similar decisions in favour of the coal industry have been adopted on previous occasions and have enjoyed the support of many hon. Members. These decisions have sought to legalise aid for coal production by member States on the basis that that was subject to a Community regime. Discussions are taking place on amendments to the coal decision, and plainly whatever the House decides tonight on the steel aids proposals will have a bearing on our attitude on coal aids.

In the light of the safeguards that have been introduced into the decision, the acceptance of previous coal aids decisions, the need for the Community to adopt a common discipline as regards steel and the importance of achieving successors to the present Davignon measures, the Government have indicated their willingness in principle to give assent to the decision. I have made it clear that the legal position is not as satisfactory as we would wish. Nevertheless, the Government are satisfied that the legal considerations are not such as to preclude us from playing our part in the wider Community effort to tackle effectively the problems of the steel industry. These problems remain considerable, and on this account I ask the House to support the motion.

10.21 p.m.

Dr. John Cunningham (Whitehaven)

I thank the Government for providing time so early after the recess to debate this document as well as the even wider issues of steel policy, which some hon. Members may wish to raise. I also thank the Minister for the careful way in which he introduced the document. This is a complicated situation and he has gone some way towards clarifying it. However, there are still a number of questions I wish to put to him.

The Minister began by saying that we had gone further than any other country in the EEC in restructuring steel. Most hon. Members on this side would agree with that, and some would say that perhaps we have gone too far, given the circumstances in other countries, and the peculiar and very difficult social circumstances with which we are faced in many regions where unemployment is high and industries associated with steel are in great difficulty. The Minister was careful not to say that the Government intended to go no further in running down the capacity of British Steel and that concerns the first question that I put to him. Would it not be justifiable for the Government to tell our EEC partners that we have already suffered a great many closures, with all the social economic and political consequences, and we do not intend to go any further, bearing in mind the point that has been made about the well-established fact that much of the capacity that exists in other EEC countries is grossly inferior to our steel making capacity? Therefore, on political and economic grounds, and in view of the inefficiency of the European steel industry, the Government would be justified in taking that stand and we urge them to do so.

The last Labour Government clearly stated their views on these matters. The Minister has urged us to agree to this document tonight. We shall agree with what he has said in the context of the document if we can have some assurance of Government support for British Steel.

The view that we took when we were in office—and it remains our view today—was set out in the memorandum of 19 February, which my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) introduced. In that memorandum we said that we did not have specific aids for steel in the United Kingdom. We do not regard our regional policies as being specific aids in any way. Thus, the second assurance that I seek is whether we shall make it clear to the Commission that in no circumstances will our regional policy measures in the United Kingdom be regarded as being covered by the provisions of this document. Certainly they are not specific to steel. However, they make a major contribution to British Steel because of the nature and location of steel plants in development and special development areas. As the House well knows, the provisions have much wider implications for our regional policy and it would be intolerable for the Commission to try to control that aspect of our regional policy. We should like a categorical assurance that the Government will not accede to any such request or attempt on behalf of the Commission.

The Minister of State said clearly that he believed that the document left totally in the hands of the Government the ability to control the financing and development of British Steel. We welcome that important provision. There are problems in Britain and Europe in the steel industry, but we could not accept, in any circumstances, that decisions about capacity, investment and how we finance our industry should pass in even small measure to the EEC, particularly in view of my earlier remarks and what the Minister said about the situation elsewhere in Europe.

The Minister said that the Labour Government strongly supported the Davignon measures. It was ironical to hear him say that he was in favour of a free market economy in the same breath as welcoming what the measures had done for the steel industry. It is difficult to maintain that in the context of Europe intervention is welcomed but that in the context of our domestic economy it is not. That is trying to ride two horses at the same time.

Mr. Adam Butler

I should not like to be misunderstood on the matter. I made clear that we support the Davignon proposals at this time because they provide a breathing space. The Government are trying to get the British Steel Corporation into a state where it can compete without any form of protection or subsidy. That is the objective.

Dr. Cunningham

We understand well what the Government are trying to do. What we are saying is that it is unrealistic to suppose that they will do that in the foreseeable future without considerable assistance being provided for the steel industry and, indeed, other industries. As ever, the proof of the pudding will be in the eating and we shall see how successful or otherwise the Government are in the matter. We believe that not only will they not be successful but that they risk doing much damage to the steel industry and the many large communities that are so heavily dependent upon the industry for employment opportunities. I refer to areas where unemployment is already unacceptably high.

I turn to a consideration of the documents in more detail. I hope that I am not alone in admitting that I always have to spend at least 50 per cent. of the time before these debates finding my way around the various documents and the other 50 per cent. of the time trying to understand them. I shall refer to document 4627/79 of 19 February 1979 and document 4627/79 of 20 July 1979. Those are the documents associated with this decision that were issued by the previous Labour Administration and the present Government.

There are differences, which may or may not be important, under the heading " Impact on United Kingdom Law"—paragraph 3 of the first document and paragraph 6 of the second. The second document refers to enlarging opportunities for the United Kingdom Government to give aid to the steel industry. What do the Government mean by that? We hope that they will take advantage of any such opportunities. If they exist as a result of the decision, will the Government take advantage of them?

That may be of interest in other ways. Does it relate to indirect aid? We all know about the disparities in the Community in coking coal subsidies. Shall we have the opportunity to give aid for coking coal? Germany gives much greater assistance in that way to its coal industry and thus indirectly to its steel industry.

There also appears to be a major difference under the heading "Policy implications"—paragraph 5 in the first document and paragraph 8 in the second. I hope that we may be reassured that our fears are unfounded. The Labour Government's document insisted that there was no legal basis for the action proposed by the Commission. It said: The proposal to apply Articles 92 and 93 of the Treaty of Rome to regional aids for steel has no sound legal basis in the light of Article 232 of that Treaty. That conclusion was not reached lightly by the previous Government. It was a categoric statement. We suggested that the proposal was ultra vires the powers of the Commission, which had no authority to proceed in that way.

The present Government's memorandum says something different and I should like the Minister who is to reply to explain why. The Minister of State touched on the matter and referred at some length to a written answer that he gave yesterday, in which he said: The decision as originally drafted was objectionable on legal grounds, firstly because it could have had the effect of altering the existing balance of power between institutions of the Community and member States. That implies a de facto amendment of the Treaty. The Minister continued—and this is curious: The Commission's lawyers have argued strongly that such Community aids are not covered by the prohibition covered by article 4, and this argument has been accepted by the majority of member States. I infer from that that at least we have not accepted the argument. It does not make it clear whether we are alone in this regard. The Minister's answer goes on: I am advised that, although this argument could rightly be challenged, there is no authority to prove it wrong". Of course not, because it has not yet been challenged. That is a fairly obvious statement. Presumably there could be no authority unless we challenged it in the court. But since apparently there is a strong case for saying that there is no authority to proceed in this way, we would be grateful to learn what has changed. What is the opinion of the present Attorney-General? Perhaps we could be told about that.

The Minister of State argued in the final part of his answer yesterday: it is acceptable as a basis for our consent … but only on a strictly temporary basis and have made clear to the Council that any renewal or extension of the decision would necessitate proceeding by way of treaty amendment".—[Official Report, 22 October 1979; Vol. 972, c. 14–15.] If that is the feeling now, why agree to it? Why take the risk? The risk is that if we agree to it now, because it is a pro tem agreement, it will become a de facto situation and we shall have lost the argument. That seems to me to be a very real danger, and we need to be convinced that that is not a serious risk that we are running.

If that were the situation, there would be no going back. We should have comprehensively sold the pass on this matter and we should then possibly be in some difficulty. Therefore, we should like greater clarification of that point. This is a major question and I make no apology for going into it at some length. The House is certainly not in a position tonight to agree to anything resembling a de facto change in the Treaties. That is why I have spent so much time dealing with this point.

We want to be assured that our regional policies, particularly regional development grants, which are of such importance to steel, are not jeopardised, that our ability to control, finance and determine the size of our own industry remains within our own control and that we are not agreeing tacitly or implicitly to the changes to which I have just referred. I hope that when the Under-Secretary replies he will be able to give us assurances on those matters.

10.38 p.m.

Mr. John H. Osborn (Sheffield, Hallam)

It is almost ironic that I should have spoken for the Conservative group in the European Parliament for so many years about the British steel industry and its position vis-a-vis the European steel industry, and have urged time and again the need for a plan such as the Davignon plan and the proposals that we are now debating relating to State aids for the steel industry.

There has always been a suggestion in the European Parliament that meetings within an industry—in this case the steel industry of Europe, often through the auspices of Eurofer—could go against the policy of promoting competition. Indeed, in the European Parliament I have kept a wary eye on Commissioner Vouel, who is in charge of DG4 and competition policy, and who has maintained a brief to ensure that Commissioner Davignon does not provide an umbrella for steel cartels. It has come out in debates in the European Parliament that there should be no brief for Commissioner Davignon to provide such an umbrella, but on the other hand it is better for competitors and their Governments to come together under Commissioner Davignon to restructure the steel industry than to unleash a free-for-all at this time.

We are debating the draft decision of 1 February which has been prepared by the Commission and is to be considered by the Council of Ministers in the near future. There is also the attitude of the Government to the outcome of this debate, bearing in mind that an earlier debate took place last January. These are issues that we should want to examine carefully.

The hon. Member for Whitehaven (Dr. Cunningham), speaking for the Opposition—I am aware of his knowledge of the subject—has talked about British regional aid. The hon. Gentleman said that regional policy should be in our own control. That is fine when talking about the steel industry at the present time. For many years I was on the Regional Policy and Regional Planning (Transport) Committee of the European Parliament. Lord Thomson was the Commissioner for regional development. No one considering his proposals would have suggested they were purely British for the British. This regional committee of the European Parliament has tried throughout to look at development in a European context. We have been talking in this House about the fact—certainly yesterday if not today—that there has been a deficit, or will be a deficit which Britain will have to meet on the budget of £1,000 million. This may be due to the drain of the common agricultural policy. But let us have no illusions. The Community regional policy has been of benefit to Britain, particularly its regions.

Dr. John Cunningham

I do not want the hon. Gentleman to be in any doubt about the Opposition's view on this matter. We welcome regional aid from the EEC, but the hon. Gentleman has to acknowledge that it is trivial in comparison with the impact of our own regional policy. In no sense could we accept that the latter should be put at risk because of some vague promise from the former that has yet to materialise.

Mr. Osborn

I am interested to hear that statement put forward at this time. Many years have gone by since we advocated this programme. The Minister of State went on to claim progress in the restructuring of the steel industry. He has even said that restructuring in Britain has gone ahead of the rest of the Community. His predecessor might have said exactly the same. If we have gone ahead with our restructuring, this is to be welcomed. But there are other issues of concern to us. It is ironic that The Star in Sheffield this weekend had the headline City steel forge to axe 93 jobs. Tonight in this debate we are tending to concentrate our minds on the British Steel Corporation.

Sheffield may be renowned for its steel, cutlery and engineering industries, but there are many ancillary industries, including the iron and steel foundry industry and the refractory industry, in my city. To resolve fair and unfair competition, say, between the British Steel Corporation and the private sector of the steel and foundry industries has always been difficult for us to do in this country alone. When the British Steel Corporation continues to make substantial losses, even if less than those reported in the accounts of 1978–79 of some £450 million, its main competitors, whether in the private sector of the British industry or based on other EEC countries, will inevitably question Government aid given to the State industry and whether the previous Government, let alone the current Conservative Government, have given an unfair advantage to their own State industry.

I raise this matter because the latest industry to question the British Steel Corporation is the refractory industry. It is represented by its trade association, the National Federation of Clay Industries. The industry has companies throughout the United Kingdom.

One reason why the steel industry was established in Sheffield was the presence not only of iron ore, coal and the original water power but of the limestone, and, of course, the raw materials which are essential to provide the refractories. The industry has a turnover of about £200 million a year and exports £50 million worth of goods. This British industry, let alone its competitors in the EEC, is concerned that the refractories division of BSC is using its position to add to BSC losses while undercutting prices at home and abroad.

The biggest single customer of the British refractory industry is BSC, which is almost a monopoly purchaser. It is under pressure to use the products of its own refractory division.

The Secretary of State will receive a dossier about this matter from the private sector of the refractory industry. In the context of State aid to the steel industry we should move cautiously in the House. However, I understand that the Community refractory industry is equally anxious about this aspect of competition, even if this concern moves out of the basic steel industry.

I urge the Minister to explain what procedures exist for examining such complaints and what options are open to the Secretary of State for Industry. Will Commissioner Davignon be able to hear complaints from the European refractory industry, which shortly is to charge the refractory division of BSC with overseas dumping?

It might be said that I am attacking BSC again. I am not. If one big industry is in an advantageous position, country-wide concern is caused, not only to its competitors in an ancillary industry, such as the refractory industry, at home, but overseas, too.

It is essential that an understanding between the various aspects of the private sector and the BSC exist not only in Britain but throughout the Community if we are to benefit from a large scale restructuring of the industry. Some companies believe that the British Steel Corporation has received the largest benefit from aid. We must be certain that the Minister will consider the steel industry, and its ancillary industries as a whole when weighing up their plight in competition with Community companies.

I welcome the Commission's decision to examine some of the issues raised in the January debate. I hope that the Minister will reach a successful compromise and ensure that we discuss Britain's steel industry in the context of the dilemmas facing the steel industry in the Community. Members of Parliament from Germany, France and Italy are equally anxious that employment be safeguarded in cities where there are steel plants. We should take note of that in the House.

10.49 p.m.

Mr. Stan Crowther (Rotherham)

I thank the Government for making time available for this debate. It would have been disgraceful if we had not had an opportunity to debate this matter again, in view of the decision made by the House in the last Parliament. It would have been even more courteous if the Government had allowed us to debate the revised document before they committed the country to accepting it.

I am not as sanguine as my hon. Friend the Member for Whitehaven (Dr. Cunningham) and the Minister appear to be. The document ties us hand and foot to the Commission. There have been a few changes since we last discussed the matter, but they seem to be of a minor nature. The fundamental principle remains unchanged. We are told that certain aids to the steel industry will be allowed. But the real catch is in the third part of article 2, which tells us that these aids in support of investment may be"— note that it is only "may be"— considered compatible with the orderly functioning of the Common Market in certain circumstances which are outlined, but—and it is a big but—only if the investment programme itself conforms to the general criteria for the restructuring of the steel industry elaborated by the Commission. So at that point, anything which is related to an investment programme that does not conform to the criteria elaborated by the Commission is out under this document. I look forward to hearing the Minister's reply to the question put to him on this very point by one of my hon. Friends. The word "restructuring" is a euphemism for closure. It is the modern habit to use slightly more pleasant terms for very unpleasant events.

I heard Conservative Members say many times in the last Parliament when we debated steel that we no longer really had a British steel industry, only a European steel industry. I always found that sad and upsetting. Although that doctrine is repugnant to a great many people, it is clearly now being implemented. The document now before us spells that out very clearly. It brings home the extent to which Britain has ceased to be independent. It may be that this handing over of sovereignty, this sacrifice of the right to make our own decisions about a vitally important industry, would be more acceptable if any good had ever come of our membership of the EEC. However, British membership of the Common Market has been nothing short of catastrophic for many British industries, as it has for the British public.

I accept that we shall not come out of the EEC, at least during the lifetime of this Government, but perhaps even in the Community a little more backbone in our dealings with the EEC or a little more Gaullism, a little more attention to the national interest, might not be a bad thing. It seems that the French, the Germans and the Italians are able to break the rules with impunity whenever it suits their purpose to do so. No doubt it is because we play cricket that we always observe the rules.

The steel industry, especially the private sector, has been severely hit by imports of special steels from EEC countries, particularly Germany, at prices which seem to come very close to dumping, except, of course, that within the EEC there is no such thing as dumping. There is no possibility of carrying out proper investigations by looking at invoices, and so on, to see whether producers are dumping.

The process plant industry, which is a major customer of the steel industry, has been put in serious danger—this cannot be over-emphasised—by foreign competitors, especially those in Italy. They have been gaining contracts for work in Britain, often in development areas where the taxpayers are putting in substantial sums, by submitting tenders that lead us only to the conclusion that they are subsidised. Various firms, including one in my constituency, have quoted examples where tenders submitted by foreign firms, especially Italian firms, do little more than meet the cost of materials. Clearly somebody is breaking the rules, but it seems that once we are in the EEC there is no means of investigation.

I do not imagine that the Government will have the guts to take us out of the EEC or to hold another referendum, but it is time that we started showing some teeth. The Prime Minister has recently been making appropriate noises about the scandal of the budget contribution, but I do not believe that the right hon. Lady will do anything when our so-called partners tell her to go and jump in the lake. She made it clear as recently as this afternoon that she had no sanctions in mind to back up her brave words.

I fear that we shall continue to face grave difficulties. The document, small in its scope within the totality of EEC arrangements and operations, although important to the steel industry, seems to symbolise the loss of our right to make decisions on matters that are vital to British industry. The British lion has become a puppy dog begging to lick the hands of its masters in Brussels. It is a sad spectacle. It is one that my constituents and I view with concern.

The British steel industry gains nothing from membership of the EEC. It does not need the EEC. It is capable of standing on its own feet if it is given the right support inside Britain. It faces immense problems, and so does every other steel industry in the world. However, we have ample proof that British steel workers, given the right level of investment, good management and the right support from the Government, can beat competition from anywhere in the world. There is proof of that in the Rotherham works, where my constituents and those of my hon. Friend the Member for Rother Valley (Mr. Hardy) have shown that they can lick the pants off the Japanese, the Germans or anybody else if they are able to compete on equal terms. All that they need is a decent opportunity.

I fear that the document will hamstring the necessary development of the industry. I am glad that capacity level has been mentioned. I look forward to hearing the Minister's reply. We are running into grave dangers by tying ourselves still further to the EEC Commission.

10.58 p.m.

Mr. Michael Brown (Brigg and Scunthorpe)

I feel that I am in a unique position. I had the honour of serving my hon. Friend the Under-Secretary of State as a research assistant for a period in the previous Parliament. On some occasions he accepted the suggestions and work that I brought before him. I sincerely hope that he will be able to listen and respond favourably to some of my remarks.

I shall take up a number of the matters raised by the hon. Member for Rotherham (Mr. Crowther). The hon. Gentleman referred appropriately to Gaullism, which adequately sums up the position that we should be taking.

I approach these matters in a slightly different manner from the hon. Member for Whitehaven (Dr. Cunningham). To some extent I turn the document round the other way. I accept the need for Britain to take note of the document, but I suggest that we should loudly be saying to other EEC countries that they should take note of it, and that perhaps they have even greater cause to do so.

The hon. Member for Whitehaven mentioned an item which should be given greater attention in the House this evening. He referred to coking coal subsidy, in particular in relation to West Germany. This causes considerable problems with regard to British Steel Corporation management. In Scunthorpe, in my constituency, strenuous representations have been made to me. The Minister of State, who very kindly visited my constituency last month, will confirm the tremendous representations which were made to the effect that the steel industry in this country is very happy to do everything it can to meet the Secretary of State's requirement, but that it is having great difficulty in doing so when there is such great import penetration from countries such as West Germany. Part of the reason for this is the indirect aid to the steel industry in other EEC countries, which seems to have escaped the attention of the EEC document.

I tabled several written questions to my hon. Friend the Secretary of State for Trade before the Summer Recess. In one of them I asked whether he was satisfied with the powers available to him to prevent the dumping of steel from other EEC countries". As has been pointed out, there is a great problem in the EEC in deciding what is meant by dumping. The answer that I received was: The concept of anti-dumping action between member States is not compatible with the fundamental principle of free circulation of goods in a unified market".[Official Report, 10 July 1979, Vol. 970, c. 164.] I agree with that entirely. Our difficulty is in trying to identify dumping. I feel sure—and in saying this I believe I have the support of other hon. Members who represent steel constituencies—that there is dumping within the EEC. We cannot call it dumping because that is against the EEC terminology, but that is what it is, for want of a better word.

I also tabled some questions to ascertain the level of import penetration from other steel-producing countries in the EEC in the form of rods and bars. I was horrified at the information I received, relating to the period from April 1978 to March 1979. The figures relate to the percentage of rods and bars by weight. The figure from Italy is 10.53 per cent., from France 9.87 per cent., from the Federal Republic of Germany 9.16 per cent., from the Netherlands 6.50 per cent., and from Belgium and Luxembourg 1.63 per cent. They add up to a horrifying total import penetration of 37.79 per cent. That can only be because unfair aids are being given by other member State Governments to their steel industries. The coking coal in West Germany is a particular example about which we should take some action in the Commission.

Will the Government please bring some influence to bear on other member States in regard to these peculiar indirect aids? We cannot identify them, but we know that they exist. Heaven knows the position that we could be in if we were able to subsidise our coking coal. I am not suggesting that it would be right for the United Kingdom to subsidise coal for the BSC. I am suggesting that perhaps the BSC should have the fredom to purchase coal on the open market from the cheapest available source in any part of the world. That could well take the BSC to a market beyond the EEC, much further into the southern hemisphere.

It is very important for the two sides in the debate to draw some common thread from it. That common thread should be for the Government to use very strong endeavours and to suggest to other member States that if they are to take note of the document, as our Parliament is being asked to do, there should be some sanction imposed on other member States if they continue to persist in what I would only describe as unfair competition which is clearly causing tremendous problems for the BSC in achieving the requirement set down by the Secretary of State. It is a requirement which I support and I sincerely hope that it will be achieved by the BSC. It will be difficult to meet in the light of answers of the sort that I have received, and when other countries are able with impunity to continue taking the sort of action I have described.

My message to the Under-Secretary of State and to the Minister of State is that I sincerely hope that, in agreeing to this document and through our representation on the Commission, we shall be able to use some sanction on other member countries also to honour the document.

11.6 p.m.

Mr. Bill Homewood (Kettering)

It is obvious from the speech made by the hon. Member for Brigg and Scunthorpe (Mr. Brown) that he comes from a steel, not a coal, constituency. Otherwise, some of his comments would not have gone down very well.

I understand that we on the Opposition Benches will not push this motion to a Division. I am not unhappy about that state of affairs. Had it been otherwise, I should have been in an awkward dilemma between my abhorrence of the Common Market, stated so succinctly by my hon. Friend the Member for Rotherham (Mr. Crowther,) and my conviction that the British Steel Corporation's intention to close the Corby iron and steel works is an act of stupidity bordering on criminality. The reason will become clear as I move through what I want to say.

In addition, I do not believe that the communities which are being savaged by steel closures will imagine that justice is being done to their position by a three-hour debate on an EEC decision at this time of night. Many of them will not understand and will wonder why the Government are not prepared to allocate time for a full debate on the steel industry when a new town, such as Corby, stands on the verge of disaster.

I understand, Mr. Deputy Speaker, that I have to address myself to the decision or, as it has been put tonight, at least wait until you shift uneasily in your chair and then refer to it.

I contend that article 4, indents 1 and 2, is of particular interest: Aids to facilitate the continued operation of certain undertakings or plants may be considered compatible with the orderly functioning of the Common Market if they meet the following criteria: they form an integral part of a restructuring programme designed to assist the undertaking or plant in question to become competitive and able to operate without aid, the said restructuring programme taking into account the general criteria for the restructuring of the steel industry referred to in Article 2, third indent"— that is the EEC steel industry— they are of limited duration or are progressively reduced at a sufficient rate for them to be eliminated within a reasonable period having, regard to the restructuring programme undertaken". It is my belief that compliance with these undertakings would write off not only the whole of the British Steel Corporation or the British steel industry but most of the European steel industry to boot. That is because, in the present situation, and with the forecasts that we are facing recession in industrial activity throughout the world, there is no way in which any steel industry in Europe or anywhere else will be able to meet those criteria within the "reasonable period" referred to in the document.

First, we must look at what is meant by the term competitive and able to operate without aid". Usually the word "competitive" relates to prices, or quality or customer service, but in this instance it has no relationship to any of those things. It relates to the ability of the Community's steel industries to sell their product in sufficient quantities and at prices that eliminate their present enormous losses.

I was interested to hear that the Davignon plan was an exercise in competitiveness. In fact, it is the creation of probably one of the largest manufacturing cartels in the world, not as significant as OPEC, but then it exists for the opposite reason. It exists to prop up low demand rather than to control high demand.

In the year ended 31 March 1979, the BSC lost £304 million, so one assumes that "competitive" in its case means that when it breaks even it meets the EEC criteria, and, of course, the corporation is committed to this Government to break even at the end of its current financial year, ending 31 March 1980. That is an exercise in fantasy that even Dr. Who will never emulate.

The simple fact is that the BSC's strategy is geared to the existence of five large coastal plants, with an estimated capacity when fully on stream—and when they are not fully on stream but are commissioned they cost more money—of 25 million to 26 million tonnes of liquid steel. Last year, the corporation produced 17.4 million tonnes, and this year the current estimate is between 14 million and 15 million tonnes. Yet, to break even, all of the five large plants have to operate at about 80 per cent. capacity, that is to say, 19 million to 20 million tonnes.

The 10-year plan of the BSC, with its requirement of 35 million tonnes by the mid-1980s, appears to have been a colossal blunder. I say "appears to have been" because I think that experience in all cases has shown recently that periods occur when history proves to be a doubtful asset in forecasting future trends.

I am not critical of the error. I am aware that the trade unions at the time were arguing for an even larger capacity to be created. Who knows but that either the BSC or the unions will not look so wrong in five years' time as they appear today? For we have a number of instances where an apparent over-estimate of supply has been corrected only for us to find that acute shortages occur because of a change in the economic atmosphere.

It is my belief that only one publicly owned steel undertaking in this country could have the provisions of articles 4 and 5 of this decision applied to it without qualms, and that is an undertaking that the BSC is intent on closing—the Corby iron and steel works. Thousands of words have been written and spoken about the effects of closing the Corby iron and steel works. Even if an economic argument for such closure existed, I should not apologise for bringing a simple social case before the House, but no such argument does exist. Nor do I apologise for having recourse to the support of an EEC Commission decision, despite my feelings about the EEC.

Since the closure of Corby was mooted, the BSC proposal has been under scrutiny from innumerable people. The BSC would have liked them all to consider one simple principle. Given that all else was left untouched, and accepting all the assumptions without question, would money be saved by closing the Corby iron and steel works and supplying the feedstock for the tube mills from Redcar?

BSC does not want to involve itself in detail, but whilst that may be good thinking in the BSC board room it is not good for the people of Corby or of this country. BSC's attitude begs many questions. Describing that attitude, one top Corby manager recently resorted to the old cliché of "We have made up our minds, so do not confuse us with facts." However, as it ties in with article 4 of the decision that we are discussing, I shall address myself to the BSC principle. Corby is a completely integrated iron, steel and tube works, using its own iron ore and indigenous coking coal. The savings that would result from closing the iron mines, blast furnaces and steel making and rolling plants and supplying the strip feedstock from Redcar were estimated at £46 million by BSC and £6 million by Warwick university. Both figures related to current iron ore, fuel and transport costs. Both also admitted that Corby's costs could be substantially reduced by a small amount of investment to produce a far better production practice.

In the BSC estimates a number of costs relating to the Redcar undertaking have been ignored. The 14 metre furnace is accorded the ability to stockpile in anticipation of its recline period but no cost of such stockpiling is quoted. How much spare manpower has to be carried for the emergency of bringing on other blast furnaces if that furnace runs into difficulties?

There are also large question marks over Redcar's ability consistently to supply Corby. Corby uses its own ore. Is it unreasonable to believe that if our steel industry is entirely dependent on foreign iron ore—which it will be if the Corby mines are closed—an iron ore cartel similar to OPEC will grow up? I ask Conservative Members whether it is good thinking that, in the Government's sense of country security, whilst we put nuclear weapons all around the place, we leave ourselves in the position, in the face of conflict, of having to import every ounce of iron ore for the steel industry. If the cost of fuel is prohibitive to the production of steel at Corby, surely consideration should be given to the escalating costs of fuel for transporting strip from Redcar. What happens if there is a rail strike?

Even more important is the fact that this demonstrates just how little attention is being paid to the needs of the steel industry in this country. There is no evidence whatsoever that Redcar continuous cast steel will be suitable for the production of strip that is amenable to the edge-to-edge welding that is necessary for the production of tubes in the Corby tube mills. In fact, the Corby technologists state quite categorically that at present the strip produced from "con-cast" steel is unsuitable. Also, it must be remembered that Corby tubes have a 70 per cent. monopoly in their section of the tube market in this country. What happens to that competitive situation if there is a breakdown in supply?

The BSC's case for closing Corby on a strict commercial basis exists only in the egos of those people who took the wrong decisions in 1973. There is an inability to admit that wrong decisions were made. Of course it will not be the decision makers—either among the politicians or the industrialists—who pay the price. It will be the people of Corby.

The other day I read on the wall of a probation office that the motives of the therapist were always more important than the motives of the client. That puts in a nutshell the BSC's attitude in threatening to close Corby. The Corporation is more concerned with protecting its own mistakes in the past than it is with curing the ills of the steel industry.

My aim tonight is to show that if this House accepts the motion Corby is the only steel industry unit that can comply with the requirements involved—receiving aid of a very limited amount, becoming competitive, or profitable, and not needing the aid any longer. It could do that within a reasonable time. It seems that I have to resort to the Common Market to prove the point that I have been trying to make for many months in other ways.

This brings me to article 5 of the document, in which emergency aids to cope with acute social problems are deemed acceptable to the Community. Not only would Corby suffer acute social problems arising from the proposed closure, but so would the Government. It has been estimated that the continuing costs of loss of taxation and payments to the unemployed amount to £30 million a year. In the Corby setting of a one-industry town this situation would not diminish rapidly, and there is no doubt that the closure would be a massive imposition on the taxpayers. That is not a happy thought for a Government elected on a mandate to cut taxes.

Acute social problems apply mainly to the people affected. Therefore, some reference to the background is necessary. In Corby at present there are 1,400 local authority owned houses and flats. Many have been boarded up to keep out vandals—not squatters. In fact, we could do with some of the latter if there were work for them. The Corby council has just taken a decision to pull down 200 houses, many of them less than 10 years old.

About 12½ per cent. of the population of Northamptonshire is in Corby and yet 50 per cent. of the county's suicides and non-accidental injuries occur in Corby. Corby's infant mortality rate is 66 per cent. higher than that in the rest of the county while its illegitimate birth rate is 5 per cent. higher and its crime rate is 20 per cent. higher. It does not need much imagination to realise that the article 5 requirement about "acute social problems" would be more than satisfied if the iron and steelworks closed. That would create a further 20 per cent. unemployment above the existing 7 per cent.

I contend that if the House accepts the decision—I am sure that it will—to close Corby that would be something that the Corby population could challenge in the international courts and win the case.

11.25 p.m.

Sir Anthony Meyer (Flint, West)

I agree with much of what the hon. Member for Kettering (Mr. Homewood) has said about the strategy of the British Steel Corporation, in particular the way in which he based his case for the retention of steel making in Corby on strategic arguments—the risk of having a steel industry entirely dependent on uncertain supplies from outside.

The debate has been one of the most depressing that I have listened to in the House. The British steel industry, before and after nationalisation, has failed massively because of the constant interference by us politicians. To listen to hon. Members blaming everybody else for everything that has gone wrong—the fault of Parliament, the fault of our allies, the fault of world conditions—has been one of the most depressing tasks I have yet had. The failure is ours. It is up to us to find solutions. We should not entertain fancy ideas that if we could only indulge in a partnership with Fiji, for example, everything would be all right. We are members of the European Coal and Steel Community and of the EEC and it is within those communities that we have to and can find an answer. The document addresses itself to that problem.

It seems odd to have the debate tonight without the presence of the hon. Member for Nuneaton (Mr. Huckfield). Those hon. Members who were present on the last occasion when these documents were debated still cherish the memory of the manner in which, having implored his hon. Friends to withdraw an amendment which purported to wreck totally the document before us, he found himself supporting that amendment in a Division he had begged his hon. Friends not to call. That is a memory that we shall long cherish. It is still green in the Department of Industry.

I support the decision in the document before us. At the same time, I express the doubt whether it will be adequate for its purpose. Like many hon. Members who have spoken in the debate, I am opposed to the British Steel Corporation strategy. I do not believe that it will produce an internationally competitive industry, because it pursues the cult of bigness without any critical faculty and because it puts all the eggs in five overlarge baskets. I accept that there must be a strategy for steel in the United Kingdom and that that strategy should be based on an orderly contraction of capacity and a steady process of modernisation. Modernisation does not necessarily mean turning all the works over to the steel making technique that happens to be fashionable at the moment.

It may be that other methods of steel making which at present are in an experimental stage will prove to be far more effective than the basic oxygen process, which is the currently fashionable method. It would be far more prudent to hedge our bets, to hold back on switching everything over to BOS and to be prepared to adopt newer technologies, particularly for some of the smaller works. For those reasons, and for the strategic reasons I spoke of earlier, I shall go on arguing for the retention of steel making at Shotton and others will go on arguing for the retention of steel making at Corby. We shall do the best we can.

But it is not by the clash of opinions among those arguing for the retention of steel making at Corby and those arguing for its retention at Shotton and those who maintain, with good figures to support them, that steel making at Redcar is coming along nicely that a coherent policy will emerge. Nor will such a policy emerge in Europe by means of the "Gaullism" which speaker after speaker has called for. What will emerge from the aggressive Gaullism of the six steel producers in Europe will be a dog's breakfast and a recipe for disaster for the whole of the European steel industry.

The British steel industry can survive only in a protected European environment. We must hope that such protection can be phased out in time. If there is not to be swift and major disaster, there has to be protection on a European scale. That involves a process of give and take.

Let us not suppose that we are the only people suffering because of the contraction of the steeel industry. Those who argue thus must have short memories indeed if they do not recall the scenes which took place in Lorraine, France, in the area of Longwy, where whole communities were sentenced to death by the necessity to modernise the steel industry. Of course, it is a painful process and it will be no less painful if each of us stands on his soap box and demands that he has the whole share for himself. There has to be a coherent European approach.

In that process we are not in a position to lay down the law or demonstrate our superiority. Figures showing the number of man hours worked to produce a ton of crude steel are not very encouraging for this country. In West Germany it takes 5.9 man hours, in France it takes 6.4, but in the United Kingdom it takes 10. I do not have the Japanese figure, but it looks as if the figure is about three man hours. The steel industry is in crisis, in this country and in Europe generally.

We can, just, save a great deal from the wreckage if we co-operate with our European partners. It is because this decision marks a step, in my view an inadequate step, in this direction, that I support it. I believe that it will be necessary to give more powers to the central regulating organisations, to give the Community more powers if it is to be effective. Subject to that, I support the document.

11.33 p.m.

Mr. James Tinn (Redcar)

I express my appreciation of the fact that the Government have given us the chance to debate these documents tonight. I do not complain about the hour. My colleagues and I are prepared to debate the situation in the steel industry at any hour of the day, so long as this is not taken to suggest that there has been any removal of the urgent need for a full debate on the position, unrestricted by the requirement to remain within the limitations of the documents.

In considering the documents, we must bear in mind the position of the steel industry in the context of its development over the past few years. I was glad that my hon. Friend the Member for Kettering (Mr. Homewood) was sufficiently frank to recall that the modernisation programme of the industry was based on estimates of steel demand which, unfortunately, had proved to be over-optimistic. One hopes that this will not be a permanent situation.

In a previous Parliament my colleagues attacked the cutback in the programme. The programme of modernisation that remained has proved to be over-optimistic, not because of the ordinary trade cycle in steel from which the industry has always suffered but because of new factors, including especially the emergence of competitive steel industries in parts of the world which previously no one in the industry could have expected to spring up. My hon. Friend the Member for Kettering and myself are two of only three Members of the House who not only have worked in the industry but represent constituencies where steel is produced.

The industry must be examined in the light of the catastrophic and unpredictable fall in demand. The modernisation programme which was undertaken and which many of us at the time legitimately criticised as being inadequate is now coming on stream, as I know from developments in my constituency. For the first time the British steel industry has capacity second to none in the world and is competitive in every sense. We have one of the world's finest blast furnaces. This is the road along which the industry must travel if it is to become truly competitive and survive.

On the question of concealed subsidies and aids, the Government must ensure that the competition which the industry faces is fair and open. If it is not, the Government must ensure that our steel industry has at least the same kind of under the counter or behind the back assistance as that enjoyed elsewhere.

I am a strong supporter of the proposition that the industry must be modernised. It would be the worst of all worlds if, after the investment of the considerable sums which have been invested, there were to be no beneficial outcome. About three-quarters of the investment in European steel has taken place in the United Kingdom. This is a tremendous point to be made in favour of the British Steel Corporation, because such investment could not have happened under private enterprise. I am glad to say that much of the investment has taken place in my constituency.

A price must be paid for modernisation. The documents we are discussing make the point that it is legitimate to protect to some extent, but not permanently, the areas that suffer. As the representative of Redcar I am in favour of modernisation. At the same time, the town where I was born and which is ably represented by my hon. Friend the Member for Consett (Mr. Watkins) is in a different situation in that it is now totally dependent upon steel. It is facing the same sort of consequences as Corby and other towns are facing.

In defending the modernisation programme and spelling out its inevitability and economic reality, I join my hon. Friends in urging on the Government the need to ease the transition. It is indefensible for the Government to stick to March 1980 as the deadline for the BSC to break even. That is unrealistic. The date was fixed by the previous Government, but if we were still in power we would ease the transition. That does not mean merely assisting—as we all try to do—in the provision of alternative employment. That can never be a quick way. We need to protect existing plants. In a period of unpredictable and rapid transition to a desirable state of modernisation, it cannot be wrong to ease that transition by extending the deadline by which the BSC must break even. That is my major point.

People in my home town and my constituency have grown up in the industry and have given it tremendous loyalty and commitment. In many areas, such as the constituency of my hon. Friend the Member for Flint, East (Mr. Jones), there is no alternative employment. One of the features of the industry—even under private ownership—has been the commitment and loyalty of the workers. They have invested not only their own working lives but the lives of their sons and daughters. There has been commitment to the industry from whole communities.

The situation that I have described surely imposes a compelling moral obligation on the Government to ensure that those communities are protected, and the most obvious way of doing that is by extending the deadline by which the BSC must break even. It is unfair for the Government to stick to 1980 and thereby force the BSC to make closures ahead of time, with all the consequences that I have outlined.

11.44 p.m.

Mr. Hugh Dykes (Harrow, East)

The whole House will have listened with immense respect and understanding and much sympathy to what the hon. Member for Redcar (Mr. Tinn) said about local problems, where in respect of individual plants the steel industry faces very grave and worrying problems of closure or reduction of capacity and, therefore, of employment. The same applies to the sentiments, ideas and proposals put forward by the hon. Member for Kettering (Mr. Homewood).

So often the industry is represented in those human terms more by Labour Members, but the tragedy is that we have to come to different conclusions when we consider the industry in a global, national and Community scale. That is a measure of the human tragedy, yet, as the hon. Member for Redcar had to concede when appealing for the break-even target to be set aside or postponed, it was the previous Government—with even less of an attachment to a more robust economic philosophy than the new Government—who had to reach a decision and a target for the essential future health of the steel industry. How much more important is that target now when we see that the situation since that date has worsened considerably? The worsening situation in the steel industry of recent months is the same as the progressive worsening that has occurred in other European countries. There was something of a revival in 1973, but it has not persisted.

That is the measure of what my hon. Friend the Member for Flint, West (Sir A. Meyer) said, and I agree with him. Up to that point the debate had been depressing, because despite the overwhelming realities of the gravest crisis facing any heavy industry in Europe for many years, which is the crisis now facing the whole of the European steel industry, we had a worrying upsurge of narrow-minded nationalism from several Labour Members against the entire Community interest, and against our interests as members of that Community. That is no way for this House to rind solutions to these grave industrial problems.

What we surely need is positive and constructive co-operation between all the steel industries of the member States. Indeed, we must allow the Commission to have the necessary authority and powers—no more—to take decisions. This has already begun under the Davignon plan, and it has worked much better than many imagined when it commenced. All that we can ask for in these difficult circumstances is a reduction in the excessive capacity of the steel industry in all countries.

As a believer in the European Community and its future, despite all the warts and problems, nothing depresses me more than the awful nationalism that keeps emerging from Labour Members. What a slur that is on the crisis affecting French, German and Belgian steel workers! Where is the old solidarity that used to manifest itself in the Labour Party with all other similar political and social groups?

Mr. Homewood

rose— —

Mr. Dykes

I prefer not to give way, because of lack of time.

That is one kind of solidarity. We now need the operational solidarity which only the Community can provide through a document such as the one that we are discussing. This document represents a decision, not a piece of legislation. It provides an essential flexibility. Some of its clauses are rather vaguely drafted, but I welcome that. I think that the latest revision is a substantial improvement on the original document and I hope that it will get the full approval of the Council of Ministers at its meeting next week. That is the sort of welcome progress that emerges when members of the Community begin to work together.

What I bitterly resent is the idea that the EEC is a wicked, evil Community, that we are members of it and that this alien body is inflicting its unwelcome, foreign decisions on a hapless United Kingdom. We are part of that Community. British officials are involved as European-minded officials—not with nationalist sentiments as a prerequisite—in the decisions behind this and other documents as well as the whole of the Davignon plan. The idea that it is inflicted upon us by an evil Belgian aristocrat who wishes to ensure the total reduction of the British steel industry and no reduction in any others is a monstrous slur on what the Community stands for.

Without the previous proposals and without this document, the situation not only of the British Steel Corporation but of the whole of the British steel industry would be much worse in coming months. The tragedy for British steel was the short-sighted ideological approach of the previous Government. There was a decision to create over-large units at a time when world demand for steel products was beginning to turn down and our own capacity was to become too large in relation to internal demand and export capability. This has also happened in other member States.

Big units were no longer applicable in this industry, the heaviest of our industries, as in many other industries. It is the extent to which each member State now supports the Commission whole-heartedly and the considerable panoply of aid capabilities of national Administrations, which are not contradicted by this document, which can help indigenous steel industries.

This is one of the best things that has come out of the Community in recent years. We may be prone and willing to grumble about everything. Nationalism is creeping in everywhere. The French are grumbling about us. We are grumbling about them, and the Germans are grumbling about both of us. The issue is building up into a most unwelcome attack on what is not only a fine ideal—we need that in our political society—but a whole series of practical proposals for the genuine resuscitation of the entire European economy, including the steel industry.

I support this document. I hope that my hon. Friend the Under-Secretary of State can also negotiate successfully with our partners in the Council of Ministers on one or two of the flaws that may still exist. Nevertheless, this is a great improvement on the original draft. A lot of work has been done and the House should give it its wholehearted support as well as just take note.

Mr. Tinn

The hon. Gentleman seemed to be attacking the idea of large plants. Surely, even given the fall in world demand, it cannot be wrong for us, as a result of investment by the steel industry, to have large plants, able to produce steel at a cost competitive with our competitors anywhere in the world, including Japan and Korea. That must be right even if the original calculations of demand were wrong. The fact that this industry is now modernised must be good.

Mr. Dykes

I entirely agree. The situation now warrants that large scale structure. I am talking about the original calculations. That was the tragedy.

One of the indications of the way we get into a muddle on these matters and in this debate is that hon. Members, particularly on the Labour side, were not sure whether they were in favour only of national protectionism and disapproved of Community-wide protectionism, which is what this is. Any industry that is not facing a situation of expanding demand must be protected on a downward path as its capacity is reduced through deliberate action. They were in an equal muddle about condemning competition at home but wished presumably to see some competition in the Community because they wanted the British Steel Corporation to be untrammelled, on the one hand, but apparently, by inference, heavily subsidised, on the other. Those contradictions can be eliminated from the debate only by the support this House gives to the Community proposals.

I regret that I disagreed with my hon. Friend the Member for Brigg and Scunthorpe (Mr. Brown) when he referred, understandably, to dumping and hidden subsidies. My hon. Friend mentioned only one example—German coking coal. I hoped that he would refer to other examples. My hon. Friend the Member for Sheffield, Hallam (Mr. Osborn) suggested that the British Steel Corporation was dumping refractories not only internally but externally. We can all argue that. On the evidence one must say that dumping might be taking place—and I am not sure that it is limited to the other member States.

I hope that the House will not think that I have made a speech against the BSC—far from it. The House must be realistic. This document provides a central realism, and the Government are being realistic.

11.55 p.m.

Mr. David Watkins (Consett)

I have always had a regard for the hon. Member for Harrow, East (Mr. Dykes), but it is a bit much for him to be so scathing towards my hon. Friends who represent steel constituencies. They are doing what they were sent here to do they are speaking up about the problems in their constituencies.

A couple of weeks ago a group of French steel workers visited my constituency. If the lion. Member for Harrow, East thinks that he has heard narrow nationalism from the Opposition Benches tonight, he should have heard what some of the French workers said about the effects of the Davignon plan and the closures of plants in their areas.

The draft decision has clearly been reached only after considerable thought and after much revision of the original documents.

I recall the debate on 25 January this year, on an amendment moved by my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley), when exception was taken by Labour Members to proposals contained in draft documents to restrict Government support for the steel industry. With one honourable exception, there was near-total acquiescence from the Tories to the plan to restrict what could be done by any EEC Government to help the steel industry through its world-wide difficulties.

The sentiments expressed here and elsewhere have contributed at least marginally to the different approach in the document that we are now discussing. Many questions have still to be answered, but I do not recall any EEC document which did not raise at least as many questions as it purported to answer.

My hon. Friend the Member for White-haven (Dr. Cunningham) made a valid criticism about regional policies. The document moves in the right direction. It gives Governments greater freedom to aid the steel industries, especially in regions where difficult problems are caused through the contraction of the industry.

The document enables not only Governments but regional and local authorities to give aid to the industry. That is of particular interest today, when a number of local authority general powers Bills are in the pipeline. They give local authorities power to encourage development to replace the rundown of old industries.

It is ironic that whereas in the last Parliament the Labour Government were fighting to aid industry against restrictive EEC policies, now, with a slightly easier attitude in the EEC, the new Conservative Government are determined not to support the steel industry.

The Government have placed the British Steel Corporation in a financial straitjacket. The sole criterion of their policy is that the industry must make a profit, and quickly, regardless of all other considerations. This point was made very clearly by my hon. Friend the Member for Redcar (Mr. Tinn). My hon. Friend is also my constituent, and I am most grateful for his kind words. I wish that all my constituents were as fulsome in their tributes.

The policy that has been forced on the British Steel Corporation takes no account of the consequences for areas that are heavily, near totally, or totally dependent on the steel industry. My hon. Friend the Member for Kettering (Mr. Homewood) pointed out graphically the tremendous problems facing Corby, which is apparently to be allowed to die. The same situation arises in Shotton.

The consequences for my constituency, however, are potentially even more serious. Last Friday the plate mill at the Consett works was closed, in pursuance of the policy with which the Government have saddled the corporation. More than 400 jobs were lost at a stroke. The works in Consett, which once employed 6,500 people, now employ fewer than 4,000, and face considerable further contraction. In the town 50 per cent. of all the registered employed people work in the steel works. Another 25 per cent. are in jobs that are directly dependent upon the existence of the steel industry. No business of any description in the town of Consett could carry on as a viable proposition if it were not for the wealth injected into it by the spending power of people employed either directly in the steel industry or in industries directly dependent upon it.

Over the years the area has lost 15,000 jobs as a result of the total disappearance of a once flourishing coal mining industry. It is relatively remote from alternative sources of employment. These circumstances, therefore, exactly fit the conditions for the giving of aid by Governments as laid down in the document. Article 2 specifically refers to the need to take account of structural and regional problems. Those are just the problems that I have been seeking to outline. Article 4(2) instructs the Commission—the very pinnacle of the pyramid of Common Market bureaucracy—to take account of these sorts of regional problems in assessing Government proposals.

Article 3(2) refers to expenditure for redevolping sites, buildings and/or infrastructures of steel plants that are closed down, and of redeveloping them for alternative industries. I referred to the closure of the plate mill at Consett, which leaves a site available for exactly that sort of development. The regional significance of that site is very great. Its importance goes far beyond the town of Consett and well beyond the boundaries of my constituency. It is the only truly large site that is available in a very wide area for potential industrial development on any major scale. It is a hilly area, where problems of subsidence remain, notwithstanding that the coal mines have ceased working. There is literally no other comparable site for many miles in any direction towards which anyone might wish to look. For regional reasons it is essential that it should be redeveloped.

All experience in the North-East shows that in the assisted regions redevelopment will take place only if there is Government aid and encouragement to assist it. In the widest sense we are talking about regional policies, and tonight we must know the extent to which we are dealing with a narrower interpretation or a wider interpretation. The Minister of State has said that both ways are open. Let me make it clear to the hon. Gentleman that the interpretation must apply to regional aid in areas that are severely hit.

At Question Time the Prime Minister indicated that she conceived it to be a prime duty of the Goverment to obey the edicts of the EEC. At a time when the potential edict shows some marginal moves towards support for Government intervention, it will be interesting to see how far the right hon. Lady's words will apply to the edicts from the EEC that refer to the iron and steel industry.

The document indicates that the EEC is showing welcome signs of recognising that there is an unanswerable case for Government aid and intervention in all member countries where there are problems. However, the Government are determined not to help the steel industry. Seemingly they are determined not to help the regions that are heavily dependent upon an industry that, for reasons we all understand, is in a state of severe contraction.

I have no doubt that when it comes to the crunch on EEC directives and edicts circumstances will alter cases. It will be interesting to see how the Government react to, and what interpretations they put upon, the edicts, as the Prime Minister called them, that are increasingly in favour of Government intervention—something that the Government have set their face against. If the Government persist in their attitude and present policy, it will bring nothing but misery to steel communities throughout the length and breadth of these islands.

12.8 a.m.

Mr. David Crouch (Canterbury)

I am glad that the hon. Member for Consett (Mr. Watkins) reminded us of the comments of the hon. Member for Whitehaven (Dr. Cunningham) concerning the problems that might affect the Government's application of regional aid. It is a question that was not answered in my hon. Friend's explanation of the so-called decision.

In the memorandum issued by my hon. Friend the Minister of State, dated 20 July, it is stated in paragraph 2: The draft decision is intended to ensure that actions taken by member States individually do not impede the overall process of restructuring the Community steel industry. It relates solely to specific aids (i.e. those of a type or with terms peculiar to the steel industry)". So far so good. Paragraph 6 says that: the impact of the decision is to enlarge and not to restrict the powers of HMG in relation to assistance to the UK steel industry". It seems that there is some conflict. There is a conflict involving the application of structural aid on a regional basis, which is not necessarily structural aid to the steel industry but to a region itself. Is that infrastructural aid?

Article 2 of the Commission's decision refers to: account being taken of the structural problems of the region where investment is to be undertaken, and … limited to that which is necessary for this purpose". It seems to make an exception of that type of regional aid. When the Minister replies it would be helpful, in view of the points raised by the hon. Members for Whitehaven and Consett, to have these matters clearly stated.

We are considering tonight not just the British steel industry. I am not speaking, as has every other hon. Member tonight—with the honourable exception of my hon. Friend the Member for Harrow, East (Mr. Dykes)—of concern about the steel industry and about the constituents whose interests must be emphasised in the brief three hours of the debate. Hon. Members have been fighting for the interests of their constituents and for the interests of one of the basic industries of Britain. I have no such industry in my constituency, apart from one company, which distributes steel in the South-East. With the greatest respect to my hon. Friend the Member for Harrow, East, a distinguished spokesman for Conservative thought on European matters, and his respect for Count Davignon, I have to say that I have more respect for the people who are losing their jobs today than I have for any Count Davignon. I really mean that.

My hon. Friend the Member for Brigg and Scunthorpe (Mr. Brown) spoke sincerely about his constituents who are losing their jobs because of these Community and Commission decisions emanating from Brussels. There is no stronger European than myself. In the last 20 years I have been almost blind to any of the deficiencies that might emanate from the Community. I am not blind to them any longer. I still believe as passionately as ever in Europe, but I have grown older and perhaps a little wiser. Today, after being involved for years in Community affairs, I am prepared to say that this worm will start to turn. This worm will start to speak up for this country.

This is not only a debate about steel, Mr. Deputy Speaker; it is a debate about Britain in Europe. It is a debate about a draft Commission decision establishing Community rules for this Parliament to accept. I was not present this afternoon to hear my right hon. Friend the Prime Minister describe such decisions from Brussels as edicts, but there is today no stronger critic of Brussels than my right hon. Friend, as I am sure the whole House and the whole country know.

It is not a question of Britain turning against Europe, either in the middle of the afternoon or late at night; it is a question of Members speaking in this House—still the first Parliament in the world—where Members represent so many interests so passionately and, if I may say so, speak with such care and with such good briefing as the hon. Member for Kettering (Mr. Homewood), among many others.

I have listened to all the speeches in the debate tonight. There is a multitude of words emanating from Brussels. I hope that some of the words spoken in this Chamber will in turn be read in Brussels, so that it will be known that these things are being said not merely by spokesmen on the Front Benches or by members of the Council of Ministers from this member State, including our Prime Minister, but by Back Bench Members who also speak today for Britain, speak for their constituents, and are concerned about their constituents' future in this country and about this country's future in Europe.

We have to have restructuring, of course, and I accept that it is painful. I have seen the closure of coal mines and I have seen our coal industry diminish. I cannot say that I know how painful it is, as I have not been a coal miner, but I have had miners as my constituents, and I can only reflect—and have done so in this House—to the best of my ability the pain that they have felt in the economic restructuring of a major industry.

I have met steel workers in the Lobbies of this House—men who came to me when I used to speak on industrial matters, knowing that I had nothing to do with the steel industry. But we are all concerned with the steel industry if we speak in this House. We all have a right to be lobbied. We all have a right to listen. We all have a duty to speak.

We do not have a duty to destroy. No one tonight has sought to destroy the grand plan—the grand strategy—that has come out of Brussels and has largely been agreed by all the member States. However, a few warning shots have been fired across the bows of Brussels, saying in effect, "Before you move, remember that people feel passionately about this problem in Britain today. Please, before you act, remember that it is not you in Brussels who lay down the law." My hon. Friend the Member for Harrow, East says that Brussels lays down the law. I cannot accept that Brussels lays down the law. The Council of Ministers agrees to a certain structure plan and to certain decisions in the interests of the growth of the Community, but from the Government Back Benches I fire a small warning shot over to Brussels—I do not hold a big gun—and say "Watch out. This House still speaks for the people of this country."

12.16 a.m.

Mr. Allen McKay (Penistone)

I am grateful for the opportunity of speaking in the debate tonight. It has been a good, level debate, because many hon. Members have spoken with sincerity and conviction according to their feelings.

The irony is that the Government are defending a planning agreement—because it is an agreement to plan the Community's steel output. Hon. Members have referred to protection, and give and take. I feel that recently we have been giving and everybody else has been taking.

There has been talk of solidarity. Hon. Members have talked about solidarity on the Labour Benches and in Europe. The solidarity is still present, but we look at it in a different way, possibly, from the hon. Member for Harrow, East (Mr. Dykes). I did not accept the Labour Government's advice and decision in the last debate, to take note of the document, because I did not agree with what was in that document. Indeed, I was tempted to seek a Division on this motion to take note, because I saw very little change in the document.

For example, the only thing that I get out of the supplementary explanatory memorandum is the statement that the Decision should not affect advances of capital to BSC". I am sure that many of my constituents will be grateful for that statement, because the latest announcement by the Secretary of State for Industry put fear in their hearts that the capital investment recently made would be taken away as a result of the slight hiccup in the economy.

It saddens me to hear talk of the steel industry not reviving and of the hiccup in the economy not being followed by an upturn. Similar arguments were put forward about the restructuring of the coal industry in the 1960s. It was said that it was not necessary any more; we did not need the coal any more; the outlook was different. Indeed, Europe restructured its coal industry more severely and viciously than we did. I cannot think of any hon. Member who would not like to go back to the 1960s and think again about the coal industry and the closures that took place for economic reasons.

I look back at those debates on the coal industry and relate them to the steel industry's situation now. Can we be sure that in the 1990s we shall not look back to the 1970s and say "We were wrong about steel, for the protection that we should have given it but failed to give would have meant a powerful steel industry for Britain"? Are we to take the same notice of Europe's rundown of its steel industries as we did of Europe's rundown of its coal industries? Are we to fall into the same trap over steel as we did over coal?

Many hon. Members have talked about the dumping of steel in this country, and it is true enough. Hon. Members from Sheffield asked to see Ministers in the Labour Government about the situation, and they accepted the arguments that we put forward, realising that there was some merit in them. The effect of the dumping is not entirely confined to the BSC; it affects the private owners. The private special-steel undertakings are suffering from what we allege to be dumping.

The hon. Member for Brigg and Scunthorpe (Mr. Brown) suggested that the steel industry should look elsewhere for its coking coal. That would be a road to disaster, not only for what remains of our mining industry supplying coking coal but, in the long term, for the steel industry. To run down the mining industry and depend on imports would mean that we would not be far from killing the steel industry also.

The fact remains that European steel is heavily subsidised by its coking coal. This has a ripple effect on all our industries, because European coking coal is subsidised to the rate of about £28 a tonne, compared with our 2p per tonne. It means that the Europeans can produce steel more cheaply than we can. That is why they can produce steel more cheaply for their cars than we can for ours. The ripple effect is tremendous, and needs careful consideration.

I ask the Minister to look at some of the effects of the articles in the document and question whether the freedom that he suggested is really still there. Article 6 says: The Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter the aids referred to. To me, that means that the Commission can at any time veto what we decide is a British prerogative.

I am still a great believer in Britain; I am still a great believer in the British people; I am still a great believer in the idea that we could make our own way without the Community. I accept that we are in the Community, but that does not mean that I have got to like it. I am sure that if we send this warning shot out from the House to Brussels we will renew our faith not only in our steel industry but in its work force. In these times, that is the least that we can do We certainly owe it to them.

12.23 a.m.

Dr. Jeremy Bray (Motherwell and Wishaw)

I, too, pay tribute to the sincerity and eloquence with which hon Members have spoken of the steel in dustry. It is natural for those who represent steel constituencies to reflect the strength of feeling expressed to them in their constituencies. I welcome the contributions of the hon. Members for Canterbury (Mr. Crouch) and Harrow East (Mr. Dykes). However, it is not simply the wicked alien Community over the Channel that we are worried about, it is the wicked alien Government that we have here, because that Government are really the source of the difficulties that our steel industry is facing.

There is a need for effective Community review of the steel industries in the EEC countries. Indeed, the EEC has a bigger job to do in other member States than in Britain, and I would not wish to discourage it from getting down to work in those countries.

The greater realism of the redrafting of the decision is helpful. It will make the Community's review more effective in its influence upon the steel industry. When we debated the previous draft I appealed for a wider basis for steel policies in the Community, which would draw in the relations between the trade unions and the industry. These are developing in a thoroughly healthy way, in which British steel workers are contributing as much as are those in other European countries.

There is, however, a danger that as we become clearer and more articulate about the state of the steel indutry we may drive subsidies in different countries upstream, on the one hand—as with coking coal—and downstream on the other, to the fabricators and users of steel. Once steel reaches a heavy steel fabricator or the motor industry, the network of discounts, delivery conditions, quality premiums, and so on, that are applied in the Community conceal a host of subsidies.

I have been conducting a campaign against the Department of Industry over the extremely lax way in which it has allowed our heavy steel fabrication industry to be murdered by unfair competition from Europe. Every major contract for large steel pressure vessels in this country goes to European suppliers, but the steel industry and the fabricators in this country have ample capacity to cover these. They are thoroughly competitive in every technical and measurable economic sense. But because the Department of Industry requires strict accounting conventions—which one would never get from a French or Italian company—a thoroughly unhealthy position is developing in the steel market.

Extra political clout is brought in upstream from the miners. When in Europe or in this country they talk of subsidies for coking coal, it carries weight. In our engineering industry we are not used to subsidies being sharply highlighted, but they are a major factor, particularly on capital goods, in the Community. I hope that the Department of Industry will continue to seek ways in which a more effective oversight may be taken.

In the restructuring needs of the steel industry there is the negative aspect of closures. Fresh initiative is needed over Corby and Shotton. The closure of the steel plate mill in Consett has been referred to. In the steel industry generally in this country there has been remarkable collaboration from workers with the restructuring efforts of the British Steel Corporation. Today, trade union officials met BSC and effectively agreed on the closure of Lanarkshire steel works and steel mill, in my constituency, with the loss of 4,000 jobs.

There is, however, the positive side of restructuring, which makes us accept the negative side. Massive investment is taking place in the British Steel Corporation and it is bearing fruit. At Ravenscraig the new capacity is coming on extremely effectively and efficiently, and the new plant is performing well.

There is the appalling problem of the failure to open the Hunterston ore terminal. I frankly admit that that failure is due to an inter-union dispute, which puts trade unionism in the worst possible light and in a position that no hon. Member on the Labour Benches could possibly defend. We are bringing all possible influence to bear on the trade union through a committee appointed by the TUC. The Under-Secretary of State will understand that from the communications that we have had throughout the recess.

Mr. David Lambie (Central Ayrshire)

My hon. Friend stated that the dispute at Hunterston was an inter-union dispute, but the Government could help solve it if they designated Hunterston a scheme port, which would give the dockers some security at work. At the end of the day that dispute could harm the entire Scottish steel industry. The Government should give a lead.

Dr. Bray

My hon. Friend is entirely right about the importance of the designation of Hunterston as a scheme port. Ministers have said that they are prepared to consider this once the question of job designation between the unions has been resolved, and the unions have accepted that they must first reach a prior agreement. I hope that when they have reached it the Government will be forthcoming. We on the Labour Benches have assured the unions that we will give them all possible support on the designation issue, when that arises.

The restructuring extends beyond the closure of steel plants and the opening of new investment to embrace the redevelopment of steel sites. We are not making proper use of Community facilities in that direction. Under the European Coal and Steel Community legislation massive funds are available for what are called conversion loans, which have not yet been taken up in this country.

We have an activity in the BSC itself—BSC Industry—which has done some useful work in Glengarnock and Cambuslang, but it has done practically nothing in the Motherwell area, where the major problem exists. We have a nasty feeling that this is because BSC is a little reluctant to bring new jobs into an area in which it has a continuing major interest because this would increase the competition for employment of scarce technical skills. I have told the BSC management over and over again that that is an extremely short-sighted policy. We want to see a major effort by BSC Industry to help fill some of the 4,000 job losses that we have suffered as a result of the rundown of employment in the town's steel industry over the past five years.

I put two specific points to the Minister about the European Coal and Steel Community funds that are available under the restructuring programme. First, will the Government give a fair wind to applications for ECSC funds specifically for conversion loans for proposals from local authorities in areas affected by steel closures?

Secondly, will these conversion loans for redevelopment go to private ventures or joint ventures between private and public agencies, if need be? Will these conversion loans be excluded from the general needs capital allocation to local authorities, or, more broadly, within public sector accounting, from the public sector borrowing requirement? Where these loans are from the European Community—outside the country—to private bodies undertaking redvelopment, surely they can reasonably be exempted from the capital programmes of the local authorities and the wider public sector borrowing limits. If there were some such move on the part of the Government they would find an enormous release of new initiatives from the steel-making areas, including my own. A lot of lively initiatives are coming forward to create new employment, and it is absolutely vital that these succeed and be given every support by the Government.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

There are four hon. Members who have indicated that they wish to take part in the debate. I remind the House that Front Bench speeches will begin at 12.45 a.m.

12.34 a.m.

Mr. Martin Flannery (Sheffield, Hillsborough)

This debate is almost a re-run of the one held on 25 January last, and I wish to complain, as I did last time, about such an important matter being discussed at this time of night. This happens with all the Common Market documents. They engulf us. There are far too many to read properly.

I wish to comment on some of the contributions that we have heard tonight. Last time I defended the proud record of internationalism that we have on the Labour Benches against the very same speech of the hon. Member for Flint, West (Sir A. Meyer), who is besotted with the EEC and seems to see nothing wrong with it at all. The hon. Member for Sheffield, Hallam (Mr. Osborn) is in a similar category. I congratulate the hon. Member for Canterbury (Mr. Crouch), who has seen the light about the matter and has realised that one can defend one's country and still be an internationalist. One should not be accused in the terms that have been used. The hon. Member for Brigg and Scunthorpe (Mr. Brown) made his courageous contribution because, like many of us, he feels the pressure of a great steel constituency and therefore sets out the reality of the matter.

I am ashamed that the Labour Party will not be voting against the document. It is totally wrong that our Front Bench is colluding with the Government Front Bench, as happened on the last occasion. When a similar document was discussed last time and our spokesman resumed his seat we did not know which way he would vote. The hon. Member for Flint, West was absolutely right about that. There was then the ridiculous spectacle of the Labour Government voting for an amendment that was put down by the hon. Member for Sheffield, Heeley (Mr. Hooley), among others. Let me refresh the minds of Conservative Members, for they have nothing to be proud of. They mustered five votes, and two of those votes were Liberal.

This is an arbitrary, peremptory measure. It is almost an Order of the Day, with militaristic connotations. It is entirely in line with the give-away statement that was made by the Prime Minister this afternoon, when she inadvertently slipped into using the word "edict"—an order from on high, telling us what to do. The language of the document reads: the amount and intensity of aid are justified by the importance of the restructuring effort involved. In other words, how many people have been sacked and how many steelworks have been closed down in Scunthorpe, Sheffield, Rotherham, Corby and Shotton? I am surprised at the joyful agreement of the hon. Member for Flint, West to the measure. The people in our constituencies will lose their jobs. We are being literally ordered by the Government on this matter. We should be clear about the fact that there is no democracy in the Common Market; there is a group of Commissioners, who issue edicts. We are told in documents like this that we must obey them because they, in some way or another, know what is best for us. Apparently, our constituents do not know what is best for them.

The document further states that: Member States shall with effect from …, submit six-monthly reports to the Commission on aid decided upon in the course of the previous six months. These reports must be forwarded within the two months following the end of each six-month period and shall contain the following information on each closure:

  • —an identification of the undertaking or plant closed;
  • —the amount and precise nature of eligible expenditure due to the closure;
  • —the amount, nature and other particulars of the aid."
As on the last occasion, the document states that we are being told not to invest money in our steel industry without the permission of the Commissioners. That is why we produced the amendment for which the Government eventually voted and against which a few Tories voted. In this document the statement has been muted a little but the reality is that we are being told that we shall not receive aid unless we fulfill the criteria that have been undemocratically laid down from the Community. That is what we are being told. Our Front Bench is colluding with the Government Front Bench, as it colluded with the then Opposition Front Bench, until we pulled it to order last time and got it to vote in an intelligent manner.

We defeated this proposal six months ago, late one night, as usual. The debate began at 10.18 p.m. and ended at 12.47 a.m. It will be similar this time. I ask the Labour Party: why is there no vote tonight? Why are we not voting against this? No one consulted us. No one asked us what we thought about it. We received an edict. Let us be clear. Even at this late stage we few here should go into the Lobby against the proposal, so that we can tell our people that we are totally opposed to this document. It is a peremptory, arbitrary edict, worded in the way in which orders from on high are given to lesser people. I do not see that as an order that we have to carry out. It is against British industry. It is like the common agricultural policy.

The hon. Member for Flint, West says that he is against national protectionism. But he is for international protectionism, apparently, in the Common Market. I heard another hon. Gentleman say that he was passionately against protectionism, but he was for it on a European basis, as in the Davignon plan, or as in the proposal before us. This document and others like it, strike a terrible blow against us and the British steel industry. It is disgraceful that the Labour Party is not voting against this document tonight.

12.42 a.m.

Mr. Frank Hooley (Sheffield, Heeley)

In the course of the debate on 25 January the hon. Member for Arundel (Mr. Marshall), who is now on the Government Front Bench holding the rank of Under-Secretary, said: I start by making the assumption that in looking at these four documents —there were four of them— we are concerned with matters which go to the very heart of the future of the British steel industry."—[Official Report, 25 January 1979; Vol. 961, c. 863.] The speech that we heard tonight from his hon. Friend the Minister of State gave a totally different presentation of what we are discussing. He argued that the decision had now been so drastically modified that it meant practically nothing at all. I would be interested to know what aids he thinks are now covered by this document He says that it does not affect risk capital or the advancement of public capital by Government to the British steel industry. I gather that he said that it did not affect regional aids. We had an ambiguous statement from him about the legality of this argument as between articles 232, 92 and 93 of the Treaty of Rome. If I understand him correctly, he was saying that it was legal until 31 December 1981 but not thereafter. That struck me as being an odd form of legality. Perhaps he can expand on it.

All in all, I was at a loss to understand what the controls and restrictions now were in terms of this decision. One of the curses of this type of debate is that we never know what document we are discussing. My hon. Friend the Member for Whitehaven (Dr. Cunningham) quite properly drew attention to discrepancies between the Government's explanatory memoranda earlier and later this year. There are also discrepancies in the draft decision appended to document 4627 and what is here called the unofficial text of that Community decision—whatever that is supposed to mean—which is in many respects quite different. The House has no official document telling us exactly what the provisions of the decision are.

In reporting the Government's change of attitude the Financial Times said that the Commission would place strict limits on specific financial aids to steel producers and have authority to examine and reject regional aids and subsidies. That was the construction that the report in the Financial Times put upon it. However, it was not the impression that I gained from the Minister earlier. He gave me the impression that there was a whole range of capital—risk capital, and all sorts of things—that it would be perfectly easy for us to inject without any limitations from the Commission. The hon. Member for Arundel, who previously thought that this was a matter of fundamental importance, should now explain whether this is or is not a matter of fundamental importance to our industry, and does or does not give the Commission wide-ranging powers to restrict the supply of funds to our steel industry either in the public or the private sector.

My hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) said that restructuring had a positive as well as a negative aspect. I am glad that he said that, because I want briefly to touch on that part of the question of the restructuring of our steel industry. We have had harsh and bitter decisions about Shotton and Bilston, and we may be faced with savage decisions in respect of Corby, though I hope that that will not happen.

There are other aspects to the work of the British Steel Corporation particularly. During the Summer Recess I had the great pleasure of visiting the fine, modern complex at Aldwarke and Thrybergh, in the constituency of my hon. Friend the Member for Rotherham (Mr. Crowther), where it was a pleasure to see the steel flowing steadily through one of the most modern plants in Europe, if not in the world.

In Sheffield we have the great stainless steel complex at Shepcote Lane, which has cost about £150 million to produce and is now steadily beating output records week after week and month after month. This is because the British Steel workers there have got the equipment that they were denied for so long under private enterprise. Now that under public enterprise they have the equipment they are showing that we can produce steel as effectively as any of our international competitors.

I mention the River Don works in Sheffield because it has been a matter of concern and uneasiness in Sheffield and, I believe, was the subject of some comment by the hon. Member for Arundel recently. There was an interesting headline in the Steel Corporation's magazine the other day to the effect that investment in the works was beginning to pay off. The magazine referred to the forging of rotors for the heavy electrical plant and pointed out that in certain important respects—in the heat treatment of ingots, in the hours spent on forging, in the hours spent on machining, by the use of new equipment—the works was steadily becoming more and more efficient and more and more competitive in the international market in this important respect and was fulfilling orders within eight months as against 11 months a year or two ago, and would soon be able to fulfil orders within six months. Exports have been won to Brazil, France, Germany and Sweden, and there has recently been a major breakthrough in the American market with railway bogies, with a contract worth £3 million.

This has been achieved by hard work, by new investment and by enormous sales effort, but it is possible that the River Don works will not break even financially by the end of this year and perhaps not for 18 months or two years.

I want to know whether, in such a case, the Government will be able and willing to aid this important plant, which is doing great work in securing valuable export orders for this country and, if the Government are so willing, whether the document will prevent them from so doing by some edict from Brussels. This is a matter of great importance to Sheffield and to BSC.

In view of the time, I shall not go on to discuss questions concerning the private sector of the industry. However, there are considerable structural problems in the private sector in Sheffield as well. It may well be that that sector, too, will need some form of aid from public funds within the next few years. I wish to know from the Minister whether that sort of aid will be forthcoming under the terms of the document before us.

The Minister of State painted a rosy picture of what could be done under the directive, but it was in contrast with the words of the opening article of his unofficial text: Specific aids to the steel industry financed by Member States or through State resources in any form whatsoever may be considered Community aids and therefore subject to control by the Commission. We need more clarification from the Government about what powers the directive will give to the Commission.

12.50 a.m.

The Under-Secretary of State for Industry (Mr. Michael Marshall)

An hon. Member said earlier that in many senses we had had a re-run of our January debate. I find myself again in the difficult position of having to make a concluding speech in just over 10 minutes. I shall have to move fast over a number of the valuable points that have been made.

Two speeches rang a bell with me. The first was by my hon. Friend the Member for Flint, West (Sir A. Meyer), who spoke about the problems that we politicians have created for industry generally and for the steel industry in particular. The other speech was that of the hon. Member for Redcar (Mr. Tinn), who referred to hon. Members who have had the privilege of working in the steel industry. I am one of those Members.

I left the steel industry and came to the House because I was concerned about the increasing political dimension. I hope that the House will accept that I mean it as a compliment when I say that the debate has been constructive. Hon. Members on both sides have faced realistically the background to the debate, which is that we are still, alas, in the middle of the longest and deepest recession that the steel industry has known, certainly since the war. That overshadows much of what we have had to consider and explains many of the great human problems of closures to which many hon. Members have referred.

The hon. Member for Whitehaven (Dr. Cunningham) raised a number of detailed questions. I compliment him on the way in which he addressed himself to a number of key issues in a difficult subject. I hope to be able to return to his speech, because he summarised many of the queries raised by his hon. Friends.

My hon. Friend the Member for Shetfield, Hallam (Mr. Osborn) brought in the wider perspective of his European experience and reminded us of some of the difficulties. The Government realise that there are problems in looking at dumping cases, which were mentioned by my hon. Friend the Member for Brigg and Scunthorpe (Mr. Brown), where evidence is not always easy to find. Like our predecessors, we shall pursue with the utmost vigour approaches made to us in instances where it is possible to make a dumping case.

Part of the problem that we face in present trading conditions relates not so much to dumping as to the growth of other trading countries outside the Community. The whole dumping argument must be widened into the agreements made within the Community not just on price levels but on voluntary restraint with third countries. That is an increasingly complex and difficult area, but no hon. Member has suggested anything other than the accepted fact that the Davignon plan has provided a valuable breathing space and contributed substantially—by many millions of pounds—to the earnings of all steel makers in this country. That view is shared not only by the BSC but by the British Independent Steel Producers' Association, and it is urged on the European Coal and Steel Consultative Committee by the trade unionists who take part in its deliberations.

The hon. Member for Rotherham (Mr. Crowther) spoke about meeting the Commission's criteria for restructuring, but he must understand that we are in a negotiating situation. There are many involved in this process. It is fair to say that Mr. Roy Jenkins is not someone whom the hon. Gentleman would assume in some way to be automatically inclined to play favourites or not to see the balance of advantage being fairly argued out. This kind of general negotiating background must overlie many of the problems mentioned tonight. It is not a static situation. It is right that hon. Members should refer to problems, and we are willing to play our part in seeking to resolve them.

In giving a general assurance to some hon. Members who have raised particular difficulties, it must be remembered that in all that we do there lies behind the provisions of this draft document the Council of Ministers. There are many opportunities to make our views felt. As my hon. Friend said when opening the debate, this is, after all, a trial period. It is because of this Government's insistence that we have sought to put a limitation on the period under which these arrangements should run, and as a result I believe that we have seen a step forward from what we debated last January. In another sense, it is because of views expressed from all sides that in this draft document we see a number of changes from what was proposed in January, about which I and others expressed reservations.

Mention was also made of the competition in subsidy. A number of hon. Members mentioned coking coal. Here is a situation in which other countries are entitled to say "You subsidise in your way; we subsidise in ours". The whole point about trying to get agreement on steel aids is that we should cut out wasteful competition on subsidy. A war of subsidy is something that this country simply cannot afford. I believe that most hon. Members know in their hearts that that is the case.

The hon. Member for Kettering (Mr. Homewood) made a speech that we well understand. He has made many approaches and representations. We appreciate the problems of Corby. Likewise, the hon. Member for Consett (Mr. Watkins) highlighted the problem of closures and reminded us that this was a real and human element in the situation.

However, I was a little surprised at something that the hon. Member for Red-car said. If he cares to read the Official Report he will see that I spoke in somewhat glowing terms about part of his speech. However, I think that he brought out the dilemma that is facing the British Steel Corporation. After all, if the new Redcar blast furnace, which is one of the largest in the world, is not allowed to operate quickly at the full-scale production that is necessary to achieve the kind of economies that are necessary to make the plant work effectively—

Mr. Tinn


Mr. Marshall

The hon. Gentleman will have to forgive me, but I have very little time. Perhaps we can chat about it later. The point that I am making is that he will well appreciate that the problems faced by the British Steel Corporation include the way in which morale is sapped if new plant is not allowed to move into full and effective operation. That is part of the difficult balance that lies behind this problem.

The hon. Gentleman went on to argue for a delay in the break-even date. The point that must be faced, as the hon. Gentleman fairly did, is that his own Government had underwritten the target of break-even which the British Steel Corporation had set 18 months ago. The difficulty is that if one begins to say that Government should in some way intervene so that the self-imposed target is set aside, one is on a slippery slope. The question that then arises is for how long should it be set aside and what more exceptions should be made. We are back to the point that my hon. Friend the Member for Flint, West made. We must be willing to let the BSC and the trade unions work out these matters.

Dr. John Cunningham

Will the hon. Gentleman clarify the question that a number of my hon. Friends have asked? If the BSC does not break even next year, and has a loss, how will that loss be treated under the provisions in this document?

Mr. Marshall

The question of loss is not related to this document. The hon. Gentleman knows perfectly well that that is a matter that we shall have to consider if the situation arises. It is right to remind the House that at present the chairman of the corporation is expressing his determination to maintain that target. I do not think that it helps him or the country at large for us constantly to go on picking at this and trying to imply that in some way the target is unrealistic.

I want to move quickly to some of the points raised by the hon. Member for Whitehaven, who, in a sense, summarised a number of points raised by many hon. Members. He sought assurances on no further closures. He knows, in asking the question, that that is a matter for the British Steel Corporation. Nobody welcomes closures. Closures at this stage, we hope, have reached just about the end of the line. When we speak of Corby, the hon. Gentleman well knows that the Government of which he was a supporter felt it right at that time to let the British Steel Corporation and the trade unions go ahead with their negotiations. This is the view that we have had to take in the matter of Shotton.

Regional aid goes much more towards the heart of the document before us. I assure hon. Members that we do not in general accept the principle of Commission control over our freedom to pay regional aids. On the other hand, there are certain sectors of industry—this is where hon. Members must be aware of the need to get down to cases—where sometimes we find that there are advantages in placing some restriction on regional aid. The example of dairy products has been raised. We must look at these matters on a case-by-case basis. It is for that reason that the Government felt it right to put a limitation on the period to which the present document is related. There will be ample opportunities for us to monitor the situation as we go along.

In addition to dairy products, I mention shipbuilding, an area of more direct comparability with steel, where sectoral restrictions have been seen and understood by the House to be of advantage. On the question of not controlling restructuring, it is important to remind the House again that we are simply here relating the advances of capital under Section 18 (1)—

It being three hours after the commencement of proceedings on the Motion. Mr. DEPUTY SPEAKER put the Question, pursuant to order this day.


That this House takes note of EEC Document No. 4627/79 and of the Department) of Industry's memoranda dated 20th July 1979 and 18th October 1979 on State Aids for the Steel Industry.

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