HC Deb 26 June 1980 vol 987 cc754-65
The Secretary of State for Industry (Sir Keith Joseph)

With permission, Mr. Speaker, I wish to make a statement on the British Steel Corporation.

As the House was told on 10 June, for the last financial year the BSC estimates a loss before adjustments of £450 million from ordinary activities. There are also extraordinary items, consisting of redundancy and other closure costs and a writedown of over £1,100 million of fixed assets. Final figures will be available in a few weeks' time. That was all for the last financial year.

I now turn to this financial year. As the House knows, the Government have made £450 million of taxpayers' money available as the external financing limit. The chairman has warned me for many months that without corrective action the BSC's needs would greatly exceed the external financing limit. However, he also told me that he was seeking remedies and that he was not asking for more cash. On 6 June, however, he wrote to me that, even allowing for the remedies being pursued, his board foresaw an additional cash requirement of about £400 million in the financial year 1980–81 over and above the external financing limit. He wrote that unless the Government agreed to the factoring of home debtors and the sale and leaseback of major assets outside the external financing limit—to provide the £400 million—the BSC could not carry on trading, and the board would have to recommend the liquidation of the business.

Measures such as the BSC has proposed would, of course, only postpone the day of reckoning. As for liquidation, the Iron and Steel Act 1975 makes no provision for this. The £400 million figure is based on provisional trading forecasts. A firmer figure, which may well be larger, will have to await an up-to-date assessment of the BSC's trading position.

Over the past year, the market has fallen away both at home and abroad, with a depressive effect on prices. Meanwhile, the BSC's costs have been rising sharply. The long strike has, as I warned the House—[HON. MEMBERS: "We warned the right hon. Gentleman"]—made the BSC's sales and job prospects and the cash problems worse.

We are not satisfied that the corporation has yet taken with sufficient speed and determination all the action open to it to reduce its cash requirement in 1980–81. Mr. MacGregor, who takes office as chairman next week, will need time to produce new proposals.

Until Mr. MacGregor has made his proposals, and until we are satisfied that the corporation is taking the necessary measures, we are not prepared to reconsider the level of the external financing limit. Should the Government decide to advance additional funds, any money required would involve a winter Supplementary Estimate and if needed before then would be provided by a repayable advance from the Contingencies Fund. I shall report to the House again later in the year.

Meanwhile, having considered the corporation's concern about taking on fresh financial commitments, I have asked the BSC to continue trading as an ongoing business. I have told it that in the last resort the Government would have to ensure that creditors of the corporation had their claims met in full.

The BSC has for years suffered from political interference and insulation from market realities. The taxpayer has already contributed over £4,000 million to BSC over the past five years. A further £450 million is being made available in the current year, and we are now being asked to consider yet further calls on the taxpayer. The BSC is still faced by excess capacity and a lack of competitiveness in an intensely competitive market. It is for the new chairman to use every practicable means, including a further review of capacity and disposals, to bring the corporation's cash requirements as close as practicable to the external financing limit and to see whether it is possible to restore the corporation's financial and trading position.

Mr. John Silkin

Is the Secretary of State aware that the statement will cause great unhappiness and uncertainty particularly in areas such as Scotland, Wales and the North, which are suffering from the worst unemployment since the war? Is he complaining about the cost of redundancies and closures—as he seems to be—despite the fact that he demanded them and blamed the previous Labour Government for not instituting them? Opposition Members have warned the right hon. Gentleman for over a year that his cash limits were unrealistic and impossible. Is he now telling us that that is true, and that he became aware of it only on 6 June? If he had listened to our advice and taken steps before last December there would not have been a steel strike and this situation would not have arisen.

Despite his indecision, and despite a year of dithering, will the Secretary of State state clearly and unequivocally whether he is in favour of a British bulk steel industry?

Sir K. Joseph

I accept that the statement will be distressing to those in the regions, particularly to those connected with the steel industry. It will also be distressing to taxpayers, because they hoped that their large payments to the BSC would result in a profitable industry. I was not complaining about the redundancies and closures. The Government have made special provision for those costs from the taxpayer. I am being asked to accept that if we had followed the Opposition's advice and bought off the strike, or avoided it by relaxing the cash limits, all would have been well. When the Labour Party was in office it continually deferred the closures that were clearly needed. It therefore delayed making redundancies until a time of relatively high unemployment. If it had not delayed, the job losses could have been absorbed easily, because there was then less unemployment than the world situation has now created. The right hon. Gentleman asked whether I was in favour of the bulk steel industry. The answer is "Yes", if it can be made profitable.

Mr. Patrick McNair-Wilson

Does not my right hon. Friend agree that the corporation's target became unrealistic on the day that the strike started, and that no buying-off of the strike could have altered that? Will not he further agree that, as a result of the world recession, substantial losses will continue in the bulk steel industry? Will he consider undertaking a far-reaching financial reconstruction of the industry which includes the introduction of private capital?

Sir K. Joseph

I am not sure that I accept the point that the target was unrealistic when the strike began because I believe that the purpose of the British Steel Corporation to achieve greater competitiveness and less overmanning was an important component of any attempt to cease to be a burden on the taxpayer. I certainly accept that steel companies all over the Western world are in difficulty, and it is for the new chairman to consider whether there is a part for private capital to play in various areas of the steel industry.

Mr. Beith

How can the new chairman persuade any group of steel workers to make their units profitable when they see that the price of profitability is closure? To add insult to injury, the cost of closure is added to the present difficulties of the corporation.

Sir K. Joseph

I think that the steel workers will well understand that it is in their own interests to make the industry in which they serve profitable.

Mr. Kenneth Baker

Will not my right hon. Friend agree that the grave statement that he has made this afternoon means that a large part of the financial position of the British steel industry is a direct and tragically inevitable consequence of the strike earlier this year? Does my right hon. Friend agree that the unions and the BSC must bear a large degree of the responsibility for the strike for imposing upon their industry such a grievous self-inflicted wound? Is it implicit in my right hon. Friend's statement about the additional support that the Government now envisage for the BSC that as we come out of the recession in the next two to three years there will be a slimming down for a viable British steel industry?

Sir K. Joseph

I agree with my hon. Friend that the strike and its consequences in the lost share of the home market bear a large responsibility for the problems now facing the BSC. I also agree that it is possible, under the new chairman and with the co-operation of all concerned, to build a satisfactory steel industry in the future.

Mr. Gregor MacKenzie

Will the Secretary of State say whether the measures taken by the BSC are in line with the comments made by the chairman-designate in his recent utterances in Wales and elsewhere which created a great deal of bitterness throughout the country? Secondly, does the right hon. Gentleman ever think about the social cost rather than the profits involved in these closures?

Sir K. Joseph

I cannot answer for the recommendations that the chairman will make or the actions he will take when he has had the time to consider the matter. His actions are bound to include a review of capacity and disposals, and I am sure that they will also include other possibilities, such as a review of overheads, buying and stocks and so on.

As for the social costs, I hope that the right hon. Gentleman will realise that the country, the economy and the taxpayer have handed over £5,000 million in the last five years which could have stayed in people's handbags and pockets, or could have gone in part into public services. That is a measure of the social cost that has been invested in the British Steel Corporation in the hope of making it profitable.

Mr. Grylls

Does my right hon. Friend agree that the deteriorating position of the BSC, which he has announced today, indicates the deplorably inadequate financial control within the corporation and more than justifies his own determination to secure the best man for the job as chairman, almost irrespective of cost? He has done the right thing, and what he has said today simply proves the need to have the very best man as chairman.

Sir K. Joseph

I note what my hon. Friend says, and I am glad that he agrees with me that the BSC deserves the best man that we can get.

Mr. Abse

Is the Secretary of State aware that his statement today will be clearly interpreted in Wales as a characteristic incitement on his part to further savage cuts and further redundancies in Wales? Does he have any idea of the social tensions that he is creating in the Principality? Is he aware of the consequences for the coal industry that could flow from further cuts? Does he have any realisation of the consequences of the fanatical Messianic course that he is taking, which is leading Wales to believe that the Government have taken leave of their senses?

Sir K. Joseph

The hon. Gentleman does no service to his constituents by devoting his eloquence to the concept that people can continue at work making goods that nobody wants to buy.

Mr. Kenneth Lewis

Is my right hon. Friend aware that there is no doubt at all on the Government Benches that the horrendous losses that he has announced today arise largely out of the legacy that he inherited? I believe that my right hon. Friend indicated that he was not prepared at this stage to ease the cash limits and therefore this matter would be reviewed in the autumn. In the meantime the British Steel Corporation would have to pay its bills as best it could. Will my right hon. Friend make sure, when he discusses these matters with the BSC, that the corporation does not withhold payment of bills to the private sector? That would only make the position worse with private industry. There is certainly a danger that the BSC may do that.

Sir K. Joseph

I agree with my hon. Friend, but I do not envisage that that situation will arise. I accept the possibility that it will be necessary to announce an extension of this year's cash limits, but I do not accept that finally, nor do I put a figure to it until the new chairman has had time to consider the position.

Finally, I must agree with my hon. Friend that not only I but my predecessors in the Labour Government have had to face the problems inherent in nationalisation of a great trading activity. Nationalisation removes the spontaneous capacity and willingness to adapt that exists in the private sector.

Mr. Campbell-Savours

In considering the international price structure for steel products, does the Secretary of State believe that the BSC is in a position to pass on to its customers the increases in energy prices being required by the nationalised industries?

Sir K. Joseph

That is one factor in the trading position of all firms. It leads to the need in all firms, including those that are nationalised, to operate as efficiently as possible.

Sir Anthony Meyer

Is my right hon. Friend aware that for those of us who are even more concerned about unemployment than about inflation—and that goes for any of us representing Welsh seats—his grave statement must further increase our fears that by pouring more and more money into propping up what remains of the steel industry we may be endangering more jobs than we are saving?

Sir K. Joseph

My hon. Friend is right in referring to this tragic diversion of money that could be fertilising new activities into the support of activities that are not making a profit. I must quarrel with him for suggesting that we can put unemployment as a priority above inflation, as if the two were unconnected. I adopt the words of the right hon. Member for Huyton (Sir H. Wilson), who said that inflation was the father and mother of unemployment.

Several Hon. Members


Mr. Speaker

Order. I propose to call those hon. Members who have been rising in their places from the beginning of supplementary questions.

Mr. Armstrong

Is the Secretary of State aware that people in Consett, Durham and Wales pay taxes just like anyone else? Does he realise that his statement this afternoon, which was quite devoid of any reference to the consequences for hard-working men and their families, will be regarded as a short-term petty punishment of those who reluctantly—in fact, they felt they had no option—went on strike earlier in the year? Does he not recognise that to write off the steel industry, which is so vital to the future of this country, in such an offhand way in order to support his own theories will be seen in the country as completely beyond comprehension? Does he recognise what is happening to families in Durham?

Sir K Joseph

But the right hon. Gentleman understands as well as I do that other jobs will be destroyed if money is taken to support people producing what others will not buy. Of course we feel for Consett. We announced last week the availability of taxpayers' money to support new industries in Consett.

As for the strike, it was a most misguided strike, as we warned from the beginning.

Mr. du Cann

In the context of the most grave statement about an industrial matter that I have heard in the House, with its frightful economic and family implications, and the appointment now of a new chairman, I should like to put two points to my right hon. Friend.

First, is it possible to ensure that the House has a further statement on the matter before we rise for the recess? Secondly, as we, fortunately, still have a viable, strong and prosperous steel manufacturing idustry in the private sector, will my right hon. Friend give the House the undertaking—on a matter about which I have corresponded with him—that the corporation will do nothing at taxpayers' expense to make that private sector unprofitable or to put its future in jeopardy?

Sir K. Joseph

I fear that I cannot give my right hon. Friend the assurance that he wants about the timing of the next statement, because there are only a few weeks before the recess and Mr. MacGregor becomes chairman next week. He must be given the chance to assess the position.

I should like to give my right hon. Friend the assurance that he seeks in his second question, but I cannot do so without qualification. All that I can assure him is that both sectors, the public and the private, operate under commercial imperatives, and, as he knows, we are restricting the subsidy as much as we humanly can.

Mr. David Watkins

Reverting to one of the right hon. Gentlemen's earlier answers, may I ask whether he is unaware of the fact that in Consett the steel workers co-operated in making the works viable to the extent of negotiating the sacrifice of 2,500 jobs, and that their reward has been to be told that the works is to be closed? Will he impress on the new chairman of the BSC that a major contribution, among others, that he can make towards making the corporation viable is to avoid paying out more than £30 million in redundancy money and to keep open the works, which is now forecast to make a profit of £7½ million in the current year?

Sir K. Joseph

I pay tribute to the cooperation of the work force concerned. I must point out that they made a profit only for a very few months in the past few years. I shall of course, ensure that the chairman reads the exchange of views in the House today, but I would not want to give false hope to the work force of Consett that the decision that has been made will be reversed.

Mr. Ian Lloyd

No one would wish to minimise the massive social, political and economic problems that these figures reveal, but may I ask whether they do not point in the most dramatic and stark was to a massive opportunity forgone, as my right hon. Friend has himself hinted? Has my right hon. Friend or his Department made any estimate of what might have been created in terms of new employment, new exports and new prosperity had £5,000 million been invested in silicon rather than steel?

Sir K. Joseph

I am not absolutely sure that it would have occurred if it had been routed through the Government or a nationalised industry, but I agree with the general concept.

Mr. Barry Jones

Has not the policy of the strong pound destroyed the potential for exports of the corporation? As 7,000 jobs have already been lost at Shotton, can the right hon. Gentleman give some indication that the remaining 3,000 jobs are safe? Does his statement presage that he is considering the large-scale selling off to private enterprise of some of the corporation's assets? Linked to that, has he any news of the possibility of the Lonrho bid for Shotton?

Sir K. Joseph

The strong pound has some advantages, as well some disadvantages, in reducing the price of imported material that British Steel uses. It is not within my power under the Act to initiate or ask for any sale of main-line assets, nor is my consent needed. It is up to the management. I cannot give any information about the Lonrho bid.

Mr. Lee

Does my right hon. Friend agree with the following three observations: first, that the figures that he has announced are absolutely appalling; secondly, that we are paying the price of the Labour Government's failure to slim down the industry in time through political weakness; and, thirdly, that as far as Conservative Members are concerned, Ian MacGregor cannot arrive a moment too soon?

Sir K. Joseph

I agree with the first and third part of my hon. Friend's comments. On his second comment, I suggest that deferment of difficult decisions costs jobs and does not save them.

Dr. Bray

Is the right hon. Gentleman aware that the evidence behind his statement will be examined very carefully in this House and elsewhere to see whether it is a piece of window dressing to give the new chairman of the BSC a low base line from which he can hardly fail to improve? Is the right hon. Gentleman also aware that as banker to the corporation he owes a duty to the House to inquire into the detailed causes of these figures. [HON. MEMBERS: "Nationalisation."] Having done so, will he say exactly what figure is due to the strike and what figure is due to the disastrous consequences of his economic policy?

Sir K. Joseph

I wish that there were such an explanation—or, rather, I do not wish it, because it would be dishonourable. I wish that the explanation were as simple as the hon. Gentleman suggests. Does he really think that the board of British Steel—and he can look up the names of the members—would have written solemnly to the Government saying that unless some cosmetic device were adopted British Steel would have to be liquidated, if there were not real problems? No, indeed. The market has fallen. The strike has caused grave damage to the industry. Of course the House will want to examine all this in detail.

Mr. Bruce-Gardyne

Reverting to the question from the hon. Member for Flint, East (Mr. Jones), may I ask my right hon. Friend whether he agrees that in the circumstances of the statement, which is bound to have extremely sombre implications for taxpayers and the PSBR, whatever the statutory position may be, there is a case for the Department urging the corporation to take very seriously the possibility, wherever it arises, of the disposal of assets to the private sector?

Sir K. Joseph

We certainly shall not stand in the way.

Mr. Allen McKay

Does the Minister realise that his statement that the steel strike played a great part in the present position is an indictment of himself and his Government for their sheer neglect and their inability to recognise an industrial relations problem? If he looks back through Hansard, he will see that many Opposition Members warned him exactly what the consequences would be, and that had he been able to recognise the situation he would have got away with at least a lower increase in wages than he got away with eventually.

Sir K. Joseph

The hon. Gentleman wants the Government to continue the practice of recent years, which has led to the country to its present position.

The strike was more about how any pay increase could be financed than about the size of the increase. The argument on which the strike was based was whether the bulk of the pay increase would be financed by higher productivity or should be financed by the taxpayer. It seems to me that it would have been absolutely wrong for the Government to step in to stand between the implications of what the strikers were wanting and the results. If we had intervened we would have given a further setback to realistic bargaining between employees and employers.

Sir Ronald Bell

Are there not steel industries in the world with strikingly different manning levels which are not in such dire troubles as the BSC? Do not the huge figures announced by my right hon. Friend show that year after year, probably for social considerations, the challenge of international comparison was evaded?

Sir K. Joseph

Yes, but I must say that there are individual parts of the BSC in which manning is at international standards. If those standards had been allowed from the beginning, instead of being resisted by the unions and not insisted upon by management, there would not be this situation today.

Mr. Ioan Evans

Is the Minister trying to denationalise the steel industry without compensation, and was that one of the reasons why he sought to provoke the strike in the industry? Does he not realise the repercussions that this is having on the coal industry in South Wales and on numerous industries in the private sector, which will be suffering as a consequence of the action that he is taking?

Sir K. Joseph

Does not the hon. Gentleman realise that low productivity and uncompetitiveness in any industry repercusses on all industries, pensioners and patients in hospitals throughout the country?

Mr. Marlow

Does my right hon. Friend agree that the figure of £5,000 million which he mentioned amounts to over £300 for every family of four in the country? Is not this the enormous price we must pay for having a publicly owned monopoly? As a first step to putting things right, will he allow the people of Consett, should they so wish, to take the assets of Consett, add the redundancy payments that they will receive, and operate this as a private steel works, to give them some hope for the future and increase the size of private steel-making capacity in this country?

Sir K. Joseph

I agree with the first part of what my hon. Friend said. The second part is for the people of Consett.

Mr. Skinner

Will the Minister explain why he can always find time to bring forth statements on sacking workers, or attempts to sack workers, especially those who work in heavy industry? I instance his statement today. He speaks about the horrific figures associated with the operations of the British Steel Corporation. However, have there not been many occasions, including one recently, when Stone Platt Industries, for instance, was on the verge of collapse and a group, together with representatives of the Bank of England, was hurriedly set up to rescue it?

Does that not compare badly with the announcement made when the Minister was in office under the previous Tory Prime Minister, when a fund of £1,300 million was set up to bail out a few property speculators, including the right hon. Member for Taunton (Mr. du Cann)?

Sir K. Joseph

The hon. Gentleman uses his position in the House to throw aspersions all over the place. The fact is that the problems of the steel industry flow from management and labour producing steel uncompetitively.