PAPER AND BOARD INDUSTRY

HC Deb 04 August 1980 vol 990 cc397-488

10.5 am

Mr. D. N. Campbell-Savours (Workington)

Had the Minister taken the opportunity of replying to me when I asked him to earlier, it would not have been necessary for me to rise now and to make the short, five minute contribution that I am about to make. I am indebted to my hon. Friends and others who have made it possible.

SOGAT, the Society of Graphical and Allied Trades, produced a publication some weeks ago on the paper industry, entitled "Action now: Assessment of Trends and Implications for the British Paper and Board Industry". That report graphically drew attention to the considerable problems in a number of sectors of that industry, which over the next few months and, indeed, the coming years, will have the effect of destroying many of the job opportunities in the industry that currently exist.

I want to talk specifically about one of those areas—the problem of energy prices. Energy prices are becoming a problem not only for the British paper and board manufacturing industry but also for much of other manufacturing industry in the country. If the Minister were to take the opportunity to look at today's copy of The Sun newspaper, he will see an article headed "Steel Chiefs Lash High-Price Tories—Energy costs are 'destroying jobs'" It states: The Government was yesterday accused of destroying industry and jobs by pushing up gas and electricity prices. The chiefs of Britain's State and private steel industry joined forces to make the blistering attack on Government policy. British Steel boss Ian MacGregor and the leader of the private steelmakers Alec Mortimer called for an urgent meeting with Industry Secretary Sir Keith Joseph to discuss the soaring costs of energy. Gas prices are set to rise by 10 per cent. more than the rate of inflation and electricity prices by 5 per cent. more over the next three years. But in a letter to Sir Keith, Mr. Mortimer, the director-general of the British Independent Steel Producers Association, warned: 'The very survival of the UK private steel industry'— in this case it is steel, although I am discussing paper and board— 'depends significantly on a more rational and commercial UK energy policy'. The problems in the paper industry stem in part from the inordinately high cost of energy that is paid by the major manufacturers in the United Kingdom. The British Paper and Board Manufacturers Association has produced what I can only describe as a particularly interesting document relating to the energy costs paid by most of our European partners. It also refers to other paper and board manufacturers in different parts of the world. I do not know whether the Minister has seen that document, but in reading it into the record, I can only say that it shows frightening differentials in the cost of energy in Norway and the Scandinavian countries, Canada and North America as against the United Kingdom.

On fuel oil, industrial users in this country pay 11p per litre. In the United States, they pay 4.6p, in Canada 3.8p and in Norway 8½p. If we take gas per therm for industrial use, manufacturers in the United Kingdom pay 23.6p per therm. In the United States it is 12.1p—just over half—in Canada 7.2p and in other parts of the world it is even cheaper. That is before price reductions have been awarded on the basis of continuous process use.

Clearly, great differentials exist in the pricing of energy among the major paper and board manufacturers in different parts of the world.

The British paper and board industry is the sixth largest consumer of energy and, according to its calculations—and those of the union, which has several thousand members in the industry—the consumption of energy in the industry at cost is now even greater than the amount of money expended by those industries on labour. Therefore, any statements made by the Secretary of State for Industry and other Ministers on the question of workers being required to tighten their belts should also take into account the fact that considerably greater amounts of money are spent on another vital component in the production of paper board. In my own constituency, Thames Board Mills is the largest consumer of energy in the county, and will be so when the latest addition to the mill has been made.

My question in the debate—in which I have had to cut my contribution considerably—is: how is it possible for a manufacturer in this country, buying energy at Xp for whatever it may be, to compete with an American, a Canadian and a Norwegian manufacturer of an identical product buying at perhaps half or one-third of that price?

The Minister should address himself specifically to the problem of energy prices and the fact that British manufacturers are now paying through the teeth and forcing themselves into a position of lack of competitiveness.

10.12 am

Mr. Barry Henderson (Fife, East)

I am very grateful for the opportunity to say a word about the paper industry in what may prove to be the final minutes of this all-night, marathan debate on the Consolidated Fund Bill.

The paper industry is extremely important in and around my constituency, with three sturdy independent firms which are well managed and, I am happy to say, enjoy excellent industrial relations.

I shall not detain the House with a lengthy explanation of the problems of the paper industry, many of which it shares with other industries. I know that my hon. Friend the Member for Basildon (Mr. Proctor) and others who took part in yesterday's debate were able to bring a number of facts to the attention of the House. I should like to concentrate on two very special matters of significance to the paper industry about which I believe the Government could do something.

The first is concerned with energy. Inevitably, the paper industry is a major consumer of energy. In many other countries where its competitors are, energy is very heavily subsidised, and our own industry does not benefit from the fact that we are producers of oil on a major scale.

I hope that the Government will conduct a very serious review of the energy position as it applies to major industrial consumers of energy. In the short term, I believe that it might be possible to arrange for a national tariff on energy with an appropriate discount structure which would recognise the problems of these major consumers. In this case, it would be of particular help if any such policy could be backdated to the start of the year.

In the longer term, we must consider making a much more generous contribution to energy-saving schemes within the industry which could do a great deal for the national economy.

There has been an influx of new competitors from abroad—not traditional competitors, with whom our industry can cope very competently, but new competitors, principally from Belgium, Holland and France. These countries have increased their exports to this country by over 100 per cent., in many cases within the last year. It is believed that these industries are heavily subsidised and are carrying out a Japanese style blitz to grab a share of our market, with prices which many people in the industry believe to be indefensible in terms of normal consumer costs.

I hope that the Government will demonstrate today, when my hon. Friend replies to the debate, that they are determined to take all possible steps to defend the interests of this vital industry. There is great concern that the printing industry is in danger of striking itself out of work. In the long term, that will have a serious effect on the jobs of those who work in the paper industry. I hope that people in the printing industry will take on board the importance of the struggle that the paper industry is now facing.

10.16 am

The Under-Secretary of State for Industry (Mr. David Mitchell)

The hon. Member for Workington (Mr. Campbell-Savours) and my hon. Friend the Member for Fife, East (Mr. Henderson) are to be congratulated on their tenacity in securing this debate at this hour after an all-night sitting. I noticed my hon. Friend coming into the Chamber regularly during the night.

The Government are very much aware of the difficulties that the industry faces. On 21 July, my right hon. Friend the Secretary of State saw senior representatives of the industry. The Department maintains an ongoing contact with the trade association, the British Paper and Board Industry Federation. There is no lack of understanding of the position and the real challenge that the industry faces.

It is an industry that is important to the national economy. Paper and board, together with the allied industries of printing, publishing and packaging, account for 8.3 per cent. of manufacturing industry's contribution to the gross domestic product and employ about half a million people, some 60,000 of them in the paper industry. It has a turnover of £ 1,300 million. It has a good labour relations record and its record as an industry entitles it to respect. I salute it. It is highly capital-intensive, much of it working round the clock, with a special place for specialist producers, among which I cannot fail to mention Portals Mills in my constituency, which prints a piece of paper best known to all hon. Members—namely, bank note paper. There are the giants of the industry such as Reid's, Bowater's and Wiggins Teape.

The industry is in the forefront of competition from imports, especially from North America, Scandinavia and the EEC. Even before the Second World War, 30 per cent. of consumption in Britain was imported, so imports are not a new phenomenon. The main increase in imports has been in bulk low-grade newsprint, Kraft liner, some types of printing and wrapping paper. These items can be produced more economically in a large-scale integrated plant in Scandinavia or North America. In such mills newly made pulp is fed directly on to a paper machine. This gives significant production advantages.

Since the 1960s, the Scandinavians in particular have sought to exploit this natural advantage by adding to their wood products and moving increasingly from pulp production towards paper production. Unlike North America and Scandinavia, the United Kingdom has had limited timber resources and the price of North American wood is substantially lower than that of the United Kingdom, or even of Scandinavia.

The United Kingdom depends for over 40 per cent. of its raw materials on imported pulps supplied by overseas competitors. This is not an inconsiderable difficulty for the industry. It has reacted by concentrating on the specialist and higher value papers. That must be the right way in which to proceed. There are a number of substantial success stories, including Wiggins Teape's success in its development of carbonless copy papers. There are smaller and highly efficient companies.

We are discussing an industry with considerable strength. It is also an industry that faces strong and growing opposition and competition from overseas. That competition is likely to increase. The paper industry is not alone in that respect. The Government understand the problems faced by companies in the industry, especially in sections of newsprint. I know that these sectors of the industry rely heavily on waste paper. They are now having a difficult time. They face tough competition from imports of virgin pulp-based grades, particularly Kraft liner. Kraft liner sets the price in the market place for the United Kingdom made waste-based grades, which are traditionally sold at a discount. The strength of sterling has put a great deal of pressure on margins.

In the packaging board sector, demand has been particularly weak. However, Thames Board is pressing ahead with its new £ 100 million machine in the hon. Gentleman's constituency of Workington. The prospects in this sector may be difficult in the short term, but the investment, which is securing substantial Government aid, will prove rewarding.

The newsprint producers face particular difficulties. I accept that margins in the industry are under great pressure as a result of import competition, inflation, interest rates, the strength of sterling, and in particular, energy costs. Of the total production costs of the industry, 10 to 15 per cent. are derived from energy costs. The hon. Gentleman, and others in the industry, have highlighted the relationship between the cost of energy and the industry's ability to compete. I understand that point.

We face a particular problem, namely, that this country has pursued a policy of conserving our natural energy supplies from the North Sea. The United States of America has taken a virtual non-conservationist view. In the long term, the United States of America will face serious problems. The question arises of how far we should mitigate our correct conservationist policy, which was designed to ensure that we did not use up our scarce natural resource within a short time, and so run the risk of facing disastrous consequences in the longer term. Canada and the United States of America run that risk.

I listened carefully to the points raised by the hon. Gentleman. I shall discuss them with my right hon. Friend the Secretary of State for Industry, who is very much in touch with the industry. Several important points were raised by the hon. Member for Workington (Mr. Campbell-Savours) and by my hon. Friend the Member for Fife, East (Mr. Henderson). In the light of their remarks, we shall pay particular attention to this problem. My hon. Friend the Member for Fife, East drew attention to the loss of market share.

Mr. Campbell-Savours

rose—

Mr. Mitchell

I do not wish to give way to the hon. Gentleman, as I have already tried the patience of the House by speaking for so long.

Mr. Campbell-Savours

I am sorry to press this point, but we have not received the substantial response that industry and the trade unions expected. Many hon. Members feel that this debate is the key debate. What can the Government do to protect the 7,000 jobs that will probabay disappear before the House returns after

the recess? That question must be answered this morning. We cannot be expected to go away with a statement to the effect that the Minister is in touch with his right hon. Friend the Secretary of State for Industry. That will not resolve the difficulty. Will the Minister write to members of the paper industry group during the recess, and make a statement about the type of action that the Government will take during the recess to protect those jobs?

Mr. Mitchell

I shall give careful consideration to the hon. Gentleman's suggestion. I have been trying to deal with a point raised by the hon. Member for Fife, East. He drew attention to the loss of market share and to the direct relationship between the printing industry and the market available to the British paper industry. That is an immensely important point that should not be overlooked. The printing industry in Britain has a very low level of productivity. It is riddled with restrictive practices. As a result, the cost of printing in Britain is way above that of our competitors. Much of the printing that could be done in Britain is being lost to continental countries, and even to America. Where there should have been a semi-captive market for British paper manufacturers, that market is being denied because of inefficiency, lack of productivity and the high cost of restrictive practices in the printing industry.

I hope that hon. Members who have intervened will take that on board.

The Parliamentary Secretary to the Treasury (Mr. Michael Jopling)

rose in his place and claimed to move, That the Question be now put.

Question put, That the Question be now put:

The House divided: Ayes 170, Noes 36.

Division No. 443]	AYES	[10.25 am
Ancram, Michael	Bottomley, Peter (Woolwich West)	Channon, Rt Hon Paul
Atkinson, David (B'mouth, East)	Bright, Graham	Chapman, Sydney
Baker, Kenneth (St. Marylebone)	Brinlon, Tim	Clark, Sir William (Croydon South)
Baker, Nicholas (North Dorset)	Brittan, Leon	Corrie, John
Banks, Robert	Brocklebank-Fowler, Christopher	Costain, Sir Albert
Beaumont-Dark, Anthony	Brooke, Hon Peter	Cranborne, Viscount
Bell, Sir Ronald	Brown, Michael (Brigg & Sc'thorpe)	Dorrell, Stephen
Bendall, Vivian	Bruce-Gardyne, John	Dover, Denshore
Berry, Hon Anthony	Buchanan-Smith, Hon Alick	Dunn, Robert (Dartford)
Bevan, David Gilroy	Buck, Antony	Durant, Tony
Biffen, Rt Hon John	Bulmer, Esmond	Dykes, Hugh
Biggs-Davison, John	Butler, Hon Adam	Elliott, Sir William
Blackburn, John	Carlisle, Kenneth (Lincoln)	Emery, Peter
Boscawitn, Hon Robert	Chalker, Mrs. Lynda	Eyre, Reginald
Fairgrieve, Russell	Luce, Richard	Sainsbury, Hon Timothy
Faith, Mrs Sheila	Lyell, Nicholas	Shelton, William (Streatham)
Fell, Anthony	Macfarlane, Neil	Silvester, Fred
Finsberg, Geoffrey	MacGregor, John	Sims, Roger
Fletcher, Alexander (Edinburgh N)	Major, John	Skeet, T. H. H.
Fletcher-Cooke, Charles	Marland, Paul	Smith, Dudley (War, and Leam'ton)
Fowler, Rt Hon Norman	Marlow, Tony	Speller, Tony
Fry, Peter	Marshall, Michael (Arundel)	Spicer, Jim (West Dorset)
Gardiner, George (Reigate)	Marten, Neil (Banbury)	Spicer, Michael (S Worcestershire)
Garel-Jonea, Tristan	Mawby, Ray	Squire, Robin
Goodlad, Alastair	Maxwell-Hyslop, Robin	Stanbrook, Ivor
Gow, Ian	Mayhew, Patrick	Stanley, John
Grant, Anthony (Harrow C)	Mellor, David	Stevens, Martin
Gray, Hamish	Meyer, Sir Anthony	Stewart, Ian (Hitchin)
Griffiths, Peter (Portsmouth N)	Miller, Hal (Bromsgrove & Redditch)	Strading Thomas, J.
Gummer, John Selwyn	Mills, Iain (Meriden)	Tebbit, Norman
Hamilton, Hon Archle (Eps'm & Ew'll)	Mitchell, David (Basingstoke)	Thomas, Rt Hon Peter (Hendon S)
Hampson, Dr Keith	Moate, Roger	Thompson, Donald
Hawkins, Paul	Monro, Hector	Thorne, Neil (Ilford South)
Hawksley, Warren	Montgomery, Fergus	Thornton, Malcolm
Henderson, Barry	Moore, John	Townsend, Cyril D. (Bexleyheath)
Heseltine, Rt Hon Michael	Morrison, Hon Peter (City of Chester)	Trippier, David
Hicks, Robert	Mudd, David	Vaughan, Dr Gerard
Hill, James	Murphy, Christopher	Viggers, Peter
Hogg, Hon Douglas (Grantham)	Myles, David	Waddington, David
Hooson, Tom	Needham, Richard	Wakeham, John
Howe, Rt Hon Sir Geoffrey	Neubert, Michael	Waldegrave, Hon William
Howell, Rt Hon David (Guildford)	Newton, Tony	Walker, Rt Hon Peter (Worcester)
Howell, Ralph (North Norfolk)	Onslow, Cranley	Walker, Bill (Perth & E perihshire)
Hunt, David (Wirral)	Page, Rt Hon Sir Graham (Crosby)	Waller, Gary
Hurd, Hon Douglas	Pawsey, James	Ward, John
Jenkin, Rt Hon Patrick	Percival, Sir Ian	Watson, John
Johnson Smith, Geoffrey	Pollock, Alexander	Wells, Bowen (Hert'rd & Stev'nage)
Jopling, Rt Hon Michael	Porter, George	Wheeler, John
Joseph, Rt Hon Sir Keith	Prior, Rt Hon James	Whitelaw, Rt Hon William
Kilfedder, James A.	Proctor, K. Harvey	Whitney, Raymond
King, Rt Hon Tom	Raison, Timothy	Wickenden, Keith
Knight, Mrs Jill	Rees, Peter (Dover and Deal)	Wiggin, Jerry
Lang, Ian	Renton, Tim	Wolfson, Mark
Langford-Holt, Sir John	Rhodes James, Robert	Young, Sir George (Acton)
Lawson, Nigel	Rhys Williams, Sir Brandon
Le Marchant, Spencer	Ridley, Hon Nicholas	TELLERS FOR THE AYES:
Lester, Jim (Beeston)	Rifkind, Malcolm	Mr. John Cope and
Lloyd, Peter (Fareham)	Roberts, Gwilym (Cannock)	Lord James Douglas-Hamilton.
NOES
Alton, David	Foot, Rt Hon Michael	Price, Christopher (Lewisham West)
Beith, A. J.	Freud, Clement	Skinner, Dennis
Bennett, Andrew (Stockport N)	Hamilton, W. W. (Central Fife)	Smith, Cyril (Rochdale)
Callaghan, Jim (Middleton & P)	Haynes, Frank	Spriggs, Leslie
Campbell-Savours, Dale	Heffer, Eric S.	Steel, Rt Hon David
Clark, Dr David (South Shields)	Home Robertson, John	Taylor, Mrs Ann (Bolton West)
Davis, Terry (B'rm'ham, Stechford)	Hooley, Frank	Wainwright, Edwin (Dearne Valley)
Deakins, Eric	Kaufman, Rt Hon Gerald	White, Frank R. (Bury & Radcliffe)
Dean, Joseph (Leeds West)	McNally, Thomas	Young, David (Bolton East)
Dewar, Donald	McTaggart, Bob
Dixon, Donald	Marshall, Jim (Leicester South)	TELLERS FOR THE NOES:
Dubs, Alfred	Mitchell, Austin (Grimsby)	Mr. Bob Cryer and
Eastham, Ken	Orme, Rt Hon Stanley	Mr. Michael English.
Fin, Gerard

Question accordingly agreed to.

Mr. Christopher Price (Lewisham, West)

On a point of order, Mr. Deputy Speaker. Is there any way that I can seek your protection? Before the debate started I received a letter from the hon. Member for Wokingham (Mr. van Straubenzee), whose debate was next on the stocks before the closure, saying that he intended to make personal remarks about me during his speech. As a result of the closure, I have been prevented from replying—

Mr. Deputy Speaker (Mr. Bernard Weatherill)

Order. That is a good end-of-term joke, but it is not a point of order.

Question, That the Bill be now read a Second time, put accordingly, and agreed to.

Bill read a Second time and committed to a Committee of the whole House; immediately considered in Committee pursuant to the Order of the House this day.

cc407-88
1. Consolidated Fund 6 words
1. Clause 1
cc407-79
1. ISSUE OUT OF THE CONSOLIDATED FUND FOR THE YEAR ENDING 31 MARCH 1981 26,878 words, 2 divisions
2. Clause 2
cc479-88
1. APPROPRIATION OF SUMS VOTED FOR SUPPLY SERVICES 3,034 words