HC Deb 15 January 1981 vol 996 cc1235-52

[Relevant documents: Nos. 8472179 and 6534/80]

10.13 pm
The Minister of State, Department of Industry (Mr. Norman Tebbit)

I beg to move, That this House takes note of European Community Documents No. 10180/80 on Production Quotas for Steel and Nos. 10179/80 and 10879/80 on Social Measures for the Steel Industry. The debate this evening is held on the recommendation of the Select Committee on European Legislation &c., and is for the purpose of considering European Commission documents on two subjects relating to the steel industry. The first subject is the Commission's proposal to declare a state of manifest crisis under article 58 of the Treaty of the European Coal and Steel Community and to impose mandatory production quotas on Community steel producers. With the approval of the Scrutiny Committee, for which I am grateful, the Government's agreement to these proposals was not delayed by the need to wait for this debate, and production quotas under article 58 are already under operation.

The second subject is the Commission's proposals on the social aspects of the restructuring of the steel industry. These proposals are still being considered by the Council of Ministers.

Before I come to the proposals themselves, I shall remind the House briefly of the problem faced by the European steel industry and the steel industries of other developed countries.

The investment decisions that were taken a decade ago were based on assumptions of a continuing growth in the demand for steel industry products. Those assumptions led to the development of new production capacity. Reduced demand in the far less buoyant economic situation since 1973 has failed to match that capacity. The result has been severe pressure on prices, reduced output and losses throughout the steel industry.

Since the end of 1977, the Community has met these conditions with various anti-crisis measures, generally known as the Davignon plan. These have included measures to prevent the collapse of prices to uneconomic levels, voluntary arrangements with the principal steel-exporting countries to restrain exports to the Community and voluntary delivery ceilings under which Community producers agreed to limit the tonnage of steel that they sold to the internal market.

At the beginning of 1980, there were those, especially in Germany, who had hoped that an easing of the steel crisis might be in sight. Although other Community producers maintained production in the first half of the year—of course, they were helped by the British Steel Corporation strike, which reduced output in Britain in the first quarter—it became obvious by the third quarter that demand had fallen away sharply, and prices slumped.

The Commission drew up plans for increased voluntary restraint on deliveries, which it put to the producers. Most were willing to accept these but some, mainly German and Italian, were reluctant, and the position was made worse by a breakdown in mutual confidence among the producers.

The Commission therefore decided to invoke article 58 of the ECSC Treaty, which provides for emergency action in the form of production quotas when the Community is confronted with a period of manifest crisis. Its proposals were produced early in October and were immediately laid before the Council of Ministers. We would have preferred a voluntary system, provided that it was effective and fair, but we recognised that in the prevailing circumstances in the industry that was not possible. The Government therefore gave the proposals full support, and in doing so we had the British Steel Corporation, the independent producers and the steel unions firmly behind us.

All the other member States agreed except the Federal Republic of Germany. Germany was strongly opposed to the degree of interference with the industry which the Commission proposals involved, but in the end, after three Council meetings, all of which were attended by my predecessor, the hon. Member for Bosworth (Mr. Butler), unanimous agreement was achieved on 30 October. Some compromises were necessary to achieve unanimity, but the final outcome was reasonably satisfactory and should have a stabilising effect on the market.

The agreement was reached on the basis that the Commission would allocate mandatory production quotas to each undertaking producing more than 6,000 tonnes per quarter. The quotas were to cover the last quarter of 1980 and the first two quarters of this year and to take the form of a reduction from the best level of production achieved by undertakings in the corresponding months of the previous three years. Smaller firms can produce without a quota, but their output is still monitored. The aim of the quotas was to bring output more into line with demand and to help to stabilise the market. The quotas for the last quarter were calculated by the Commission to hold overall Community production to some 14 per cent. below the level of the last quarter of 1979. In the light of experience, the quotas for the first quarter of this year will reduce production by a somewhat larger amount.

The quotas are for total crude steel production and also for four major product groups covering most ECSC steel products. The Commission has established a system of production supervision which includes returns from producers and checks by inspectors recruited for the purpose. Although the levels may be exceeded for certain alloy steels, my predecessor obtained the Commission's assurance that it would consider prompt corrective action if this caused disruption of the market for any particular products. It has recently issued guidelines to Community producers of special steels and has urged them to reduce exports to the United Kingdom. A few steel products have been excluded from the quotas, notably steels for tube making, but these also are being monitored and in some cased are subject to special Commission guidelines. It is still much too soon to say how the quota system is working, but there are some signs of prices recovering from the wholly uneconomic levels to which they sank last year.

As regards social measures, I should first like to say that the Government have always recognised the special problems associated with loss of employment in the steel industry. The industry is frequently the major employer in an area, and special measures are needed to cushion the effects of a closure destroying a large number of jobs in such a small neighbourhood.

We shall continue to do whatever we can in these difficult circumstances, not least by taking full advantage of help that may be available from the Community. Provisions already in force to this end are contained in the iron and steel readaptation benefits scheme, which is funded jointly by the Government and the ECSC and enables income-support benefits to be paid to eligible redundant steel workers for up to two and a half years, depending on a worker's age. To date, the Commission has allocated some £58 million to the United Kingdom under these arrangements.

In addition, the ECSC provides loans toward the cost of projects creating new employment opportunities in coal and steel closure areas, with interest rebates depending on the number of jobs available to ex-coal or steel workers. Loans totalling more than £36 million were also disbursed by the Commission for such projects in the United Kingdom in 1980.

The proposals contained in Community documents 10179/80 and 10879/80 provide for further ECSC assistance towards the cost of helping steel workers affected by the contraction of their industry.

Mr. Barry Jones (Flint, East)

I have corresponded with the Minister's office about the fact that redundant steel workers in my constituency are aggrieved because, although women can convert their readaptation benefit into a lump sum or early occupational pension at the age of 50, men have to wait until 55. Neither I nor the male steel workers regret the fact that women can do this at 50, but the men feel that it is unjust that they should wait until 55. Is there any way in which the Minister can help on this matter?

Mr. Tebbit

That will be very difficult. I am aware that the hon. Member has taken this matter up persistently with my predecessor. The problem is that these arrangements are designed to assist those who are within 10 years of normal retiring age. Such is the discrimination in this world against us poor males that in this case things work out more beneficially for women than for men.

Mrs. Peggy Fenner (Rochester and Chatham)

Not in this House.

Mr. Tebbit

My hon. Friend points out that there is one place where we do not discriminate, and that is in the House. I am not hopeful that I shall be able to help in this area. I will certainly look at it again, but I doubt whether my predecessor missed anything that I would be able to uncover.

As I was saying, the proposals take the form of a Community contribution to costs incurred by member States in aiding early retirement, including severance payments and some short-time working. At the same time, the Commission sought agreement to financing this assistance by a transfer to the ECSC budget from the general budget of the EEC.

Commission proposals for mitigating the social consequences of the steel crisis had been made much earlier, but they were unacceptable to most member States as the work-sharing which they included would have added to the production costs of steel undertakings and harmed the competitveness of the industry while tending to delay the necessary restructuring.

The Government have warmly welcomed the revised aid measures proposed by the Commission in the document under discussion, and my predecessor personally supported them in the Council since, as he rightly said, they provide valuable assistance in meeting the high cost of early retirement pensions and severance payments to redundant steelworkers. Indeed, the United Kingdom Government put in a claim last summer for a Community contribution of £85 million.

At the same time, we have argued that Community aid should be linked to restructuring. It is generally accepted in the Community that the restructuring of the steel industry to bring capacity into line with demand and to restore competitiveness is essential. It is right that member States which are undertaking the necessary restructuring should be helped in this way with the heavy social costs. As the House will recognise, restructuring in any one country will bring benefits to all the Community steel producers, and the United Kingdom would be a major beneficiary of any such aid.

This would be expenditure under the terms of the ECSC Treaty. Given the objections to increasing the levy on steel and coal production, which is the traditional source of revenue for the ECSC, the United Kingdom is supporting direct contributions by member States to the ECSC budget as the appropriate means of financing the measures rather than a transfer from the EEC.

I must stress that there is still disagreement among member States both on the principle of the proposals and on their funding. Discussions are, however, continuing in the Council, and I can assure the House that we shall do all we can to secure a satisfactory outcome.

I am sure that the House will welcome the support given by the Government to the Commission's proposals for production quotas to prevent the collapse of the steel industries of the Community in the face of the continuing slump in demand and for additional Community provision towards the costs to member States of the social measures needed to help mitigate the worst effects on steel workers of the inevitable contraction of the industry.

10·27 pm
Dr. John Cunningham (Whitehaven)

I thank the Minister for giving us a careful resume of the history of these documents. There are almost 40 pages in the documents listed on the Order Paper, and by their very nature they are somewhat complex. It takes some time to understand many of the cross-references. The hon. Gentleman explained them with clarity, and we appreciate that.

We also appreciate the Government's apparent conversion to interventionist policies. In document 10180/80 we are really discussing massive Government intervention in the steel industry on a European-wide basis, which is quite contrary to the publicly stated philosophy of the Government, and especially the Prime Minister and the Secretary of State for Industry.

The Minister said that there was a manifest crisis in the steel industry within the Community. This document is a massive and somewhat "Eurocratic" device, firmly based in intervention and control, to produce a regulated market. or a cartel, as some people would call it. We do not complain about that, because we favour Government intervention, particularly when it is aimed at saving important industries, such as the BSC. The whole steel industry in Europe is supported, overtly and covertly, by subsidies. There is no free market in steel in Europe and no market forces operating in steel production and sales. The Government had little choice but to grasp the nettle, but we welcome the fact that they have done so.

It is yet another example of how fatuous some of the Secretary of State's theorising about a free market economy has been. He has stumbled on yet another major hurdle. It must be anathema to many Conservative Members to be asked to support such measures, but without them there would be further damage and a serious collapse in the steel industry in Europe and particularly in Britain, where there is so much penetration of the market by steel produced in Europe.

We are painfully aware, especially in constituencies represented by my hon. Friends from South Yorkshire, North and South Wales, the North of England, and Scotland, of the social consequences and effects on employment of that penetration. We certainly support measures aimed at preventing any more of that.

The Minister said that the quota system set out in the document was already in operation. Does he mean that it is operating only in Britain, or throughout the Community? Has everyone accepted its implementation? It is important to know that, since the previous measures failed because some producers were reneging—perhaps I should say cheating—on the voluntary agreement. It was the old story. We played the game, and our industry and employment were undermined by those who reneged on the agreement. If hon. Members think that my statement is too strong they should read the Commission document, which makes clear that that took place.

If the new system does not work we shall be in desperate trouble. I hope that the Minister will give a firm commitment to monitor closely what happens. Without the detailed supervision outlined in the document we shall find that, by one method or another, people will be trying to get round the provisions, to the detriment of both the public and the private sector of the British steel industry.

The Minister referred to exports. There has been a major and rapidly growing penetration of the British market by steel produced in other EEC countries. I referred to that on 16 December 1980. The figures are not contested. If that level of imports can be reduced it will be a good opportunity for the British Steel Corporation and for private steel producers to claw back some of that significant share of the market that has been lost. I hope that we can be assured that the Government will give the BSC every possible assistance to do that.

I turn now to one or two more detailed questions about the document. I have asked about the decision being accepted universally. Pages 19 and 20 of document 10180/80 refer to the need for extensive additional measures of a social nature. The document states: In these circumstances, we must not only devise and implement new measures, as the Commission has already proposed, but also provide for sufficient financial resources so that the conventional measures can be applied fully. There is no denying the fact that large-scale redundancies and short-time working may seriously affect the economic and social climate and even cause severe social conflict, with deleterious effects on the restructuring of the steel industry and on society as a whole. That is a grave statement. It is the sort of statement that Labour Members have been making about the rundown in steel for many months. It has often been criticised, and in most cases refuted, by Ministers and other Conservative Members. Here, we have the Commission saying exactly that to the Council of Ministers. I hope that the Government will accept the reality of that statement, and the need to give the commitment that is called for in terms of resources.

Sir Anthony Meyer (Flint, West)

Like the hon. Gentleman, I shall be interested to hear the Minister's reply to the question. It would also be interesting to know the official attitude of the Opposition to this request by the Commission for additional funds in order to meet these social needs. As I understand it, it is still the policy of the official Opposition to resist any demand by the Commission for larger funds to be made available for use at its discretion for this purpose.

Dr. Cunningham

I shall not be side-tracked by the hon. Gentleman's intervention, except to say—I am almost sorry that I gave way to the hon. Gentleman—that the questions are for Governments to answer. The Opposition are not making these decisions. No doubt the situation will be different when we again—sooner rather than later—occupy the Government Benches. The position of the Opposition on the disbursement of resources within the Community budget is well established. We have argued for many years for a reallocation of these resources within the EEC budget and for direct contributions on a larger scale from our Exchequer to deal with these problems. The hon. Member for Flint, West (Sir A. Meyer) knows about this probably better than many hon. Members because of the closure of Shotton, in his area. I should have thought that he would be the last to want to make that kind of point about that kind of matter.

In document 10179/80 a figure of 58,000 redundancies, or job losses, is quoted. It is not clear to me from the document whether those redundancies are additional to the ones that have already been declared. The figure is mentioned in the context of France and the United Kingdom. Will the Minister of State tell us exactly what those figures mean?

I now turn to the documents relating to proposals for social assistance. There are several of them, and they go back over many months. They contain a number of quite impassioned appeals by the Commission to the Council of Ministers for action in this area. This follows exactly on the point that I have just been making in quoting from the document about intervention in the industry.

As the Minister of State candidly said to the House, there is as yet no agreement. The documents date from September 1979 until the latter part of 1980. We are now in January 1981. I gave the Government some credit a little earlier for their efforts on intervention. Although it is their stated policy to try to get agreement in this area, they have failed—and failed consistently—to achieve any progress. In the light of prognoses about the industry and the redundancy figures—not simply the ones to which I have referred but the likely redundancy figures because of the slim-line exercise of the BSC and because of the further proposals within the MacGregor plan—this is a matter of the utmost urgency. I barely need to impress that upon the Minister of State, but it will be wholly unacceptable to the Opposition if no agreement is reached and if no major provision is made for the social consequences of what is happening in our communities in regard to the rundown in the steel industry.

It is just not on to put to us that we should accept proposals for restructuring an industry in the absence of adequate finance for the social measures that will be necessary to deal with the situation in Shotton, Consett, and in other such places. There is inadequate provision at the moment, given the magnitude of the task, so we cannot impress too strongly on the Government the need to redouble their efforts to get some agreement.

The Government are in a doubtful position here, because one of the reasons why there has been no agreement is that they have questioned the legality of one of the proposals for a transfer payment between budgets—from the general budget to the European Coal and Steel Community budget—made by the Commission. The Government's position hitherto—it may have changed recently—has been that they were not clear on the legality of the proposal, so they are themselves partially responsible for the fact that no progress has been made. I hope that the Minister will clarify that. It is like fiddling while Rome burns to argue about what may be a legal technicality and to hold up such an important decision.

It is clear that the Commissioners are appalled by this failure to reach an agreement. In December, when the Council refused to let the Commission have the 112,000,000 units of account requested for funding social measures under the restructuring plan, Vice-President Vredeling and Commissioner Davignon expressed their profound dismay about the failure to agree in no uncertain terms. An EEC bulletin states: Mr. Davignon and Mr. Vredeling … did not mince their words in expressing the deep disappointment of the Commission faced with a council which refuses to shoulder its responsibilities and observe its social obligations. These obligations stem not only from the ECSC Treaty but also from its own adaption and restructuring policy in the steel sector. It would be an illusion to expect the next January's Council session"— that is a reference to this January's session— to establish all the social consequences and the resulting financial implications". There can be no doubt of their grave disquiet about that failure to agree. We share that disquiet.

I understand from the Minister's remarks—with which I agree—that that failure to agree is the most crucial outstanding issue. It is at the heart of this debate. I do not think that the Minister told us when he expected any likelihood of progress on this subject. If he did cover that point,. I hope that he will forgive me.

Mr. Tebbit

I did not refer to that. Only today I heard that it was unlikely that this subject would come up for discussion at this month's meeting of the Council. I hope, and I am assured, that both the steel industry and these measures will be the prime items at the February meeting. As the hon. Gentleman can imagine, that causes me some anxiety. I should prefer to get on with the matter at once, but am not my own master on this issue.

Dr. Cunningham

In that statement and in what has gone before, the strengths and weaknesses of the Community are cruelly exposed. In some respects its strength has been its ability to reach some agreement, even at the eleventh hour, on intervention measures. Its weakness is its hopelessly inadequate response to the social consequences within the Community. More than 8 million people are already unemployed.

We were told ad infinitum that membership of the Community would be our economic and industrial salvation. Not only has that vision turned out to be a mirage; there is a failure to grapple with something that has been building up for a long time. It has not built up under this Administration alone. The Government should redouble their efforts. We shall not be satisfied until a major package of proposals has been agreed.

As with other industries—fishing and motor cars—our steel industry has been outmanoeuvred and probably even cheated in a number of regards because of failure properly to adhere to agreements within the Community. We cannot afford to see the people who are thrown out of work also cheated of some support by and from the Community. That would be intolerable, and judging from his remarks I believe that the Minister of State would find it intolerable, also. He must get on with the job. Unemployment is mounting inexorably. That is the heart of the Government's task in dealing with these documents.

I must say one thing in defence of the other Governments—the Federal Republic of Germany is probably the outstanding candidate—who have been stumbling blocks throughout the discussions. I refer to the situation in West Cumbria, where my constituency is located.

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

Copeland.

Dr. Cunningham

As the hon. Gentleman says, Copeland, which is the metropolitan borough worst affected by the Government's rate support grant proposals.

There is a steel plant at Workington where many of my constituents work. Other Governments are bound to think it odd when they are asked to provide resources for the restructuring of the industry but see decisions being taken like that recently announced to close Distington foundry. The foundry was opened early last year, after investment of between £10 million and £11 million of the public money that the Government tell us so much about and that they say is so important. Within months of its being opened amid fanfares as the most modern and best-equipped foundry in Europe, we are now telling our partners that we are closing it and that we want even more public money to do so. That is fatuous. People in West Cumbria can barely believe that it can happen. I am not surprised that some people in other Community countries are objecting to putting in even more money when they can see the wrong-headedness of such decisions.

In the debate on 16 December the Secretary of State made a curious statement in response to a point made by my right hon. Friend the Member for Salford, West (Mr. Orme). He said, referring to the involvement of the unions in decision-taking in the corporation, The law on the subject was introduced by a Labour Government. He was referring to the 1975 Act. It is for the corporation to decide its performance under the law and to take such other action in relation to trade unions as it judges fit."—[Official Report, 16 December 1980; Vol. 996, c. 267.] That is curious. It is not for the corporation to judge its performance under an Act. Surely it is for Parliament and the Secretary of State to make judgments on the question whether the corporation is carrying out the provisions of an Act. I raise this issue now for two reasons. One of the arguments about the closure of the foundry at Distington concerns the facts and information. We should be told the facts behind the decision and, for that matter, behind decisions for other closures, such as in South Yorkshire. Without them, how are we to make proper judgments about the performance of the corporation?

I raise the point for another reason. Mr. MacGregor came to the corporation, as I said in the debate at the time, with a very high reputation. I said then, and I repeat now, that he has got off to an unbelievably bad start. He has not carried out the provisions of the Act which require him to involve the unions in discussions about his plan. Not in the tiniest sense could he claim to have done so. The Under-Secretary of State, the hon. Member for Arundel (Mr. Marshall), shakes his head. If he believes that Mr. MacGregor can make such a claim, I shall be interested to hear how he justifies it. We were promised a capital reconstruction—

Mr. Tebbit

I hesitate to intervene at this stage in the hon. Gentleman's remarks. I am not sure that they are close to the heart of the matters we are discussing. I am conscious that I took over these responsibilities only recently. I must say, however, that one of the most useful documents that I have found in learning more about the British Steel Corporation was a document prepared in order that the management could tell the unions what was going on in the corporation.

Dr. Cunningham

I do not deny for a moment what the Minister says. It is not the point I am making. The hon. Gentleman was politely suggesting that my remarks were not perhaps in order in the context of the documents we are discussing. I believe that he is wrong. All these matters will be to no avail if the corporation fails to grasp the opportunity provided. The corporation will not be best placed to take that opportunity if there is no coming together of the unions and the management in a positive approach to the future of the industry.

It is known that the Government are committed to a capital reconstruction. It is known that there is a statutory requirement to involve the unions in discussion of fundamental decisions about the industry. Why do not the Government call Mr. MacGregor and the unions together in what we would call tripartite discussions? It does not matter really what they are called. In financial terms, the slate is in some sense to be wiped clean. This is a golden opportunity to get a fresh start, given the support that will come from the intervention plan, developed and successfully implemented, we hope, by the EEC.

What can be lost by the Government trying to take the opportunity to get some measure of agreement and to enhance the possibility of future success for the British Steel Corporation? With or without the success of the EEC measures, we recommend strongly that course of action to the Government.

10.58 pm
Mr. Tom Normanton (Cheadle)

This debate, as may have flashed through the minds of hon. Members as the Opposition Front Bench spokesman was speaking, is concerned with a series of Commission documents. I was greatly surprised when the hon. Member for Whitehaven (Dr. Cunningham) said that he regarded the documents as highly complex and requiring a considerable amount of experience to find a way through the cross-references. I would have thought that that was a confession of the Opposition Front Bench's lack of depth of experience and knowledge of documents that have been available to the Opposition and to industry as a whole ever since the date that is recorded in the documents themselves. That point needs to be emphasised. We are dealing not with a matter that has suddenly come out of the secret archives of a Government Department in Whitehall but one that has come through the many public channels of the European Community, which are available to all who have the wit, will and intelligence to gain access.

The debate is not about the reorganisation of the British steel industry, whether by the MacGregor plan or a plan that has been pulled out of a pigeon-hole in a Government Department. It is about these particular documents which deal with one significant aspect of the steel industry of the Community as a whole but which are of more direct interest to us in the steel industry in Britain.

We should be very ill advised indeed if we in this House or those engaged in the British steel industry allowed ourselves to believe that the strongest emotion of the Community draftsmen who drafted these propositions was sympathy or a burning desire to run to our rescue. Right hon. Gentlemen on the Labour Benches, who when in Government were responsible for handling—some would say mishandling—our affairs, are regrettably and conspicuously not in the Chamber to hear about the consequences of their actions. They were responsible for one achievement—alienating such prospects of understanding and sympathy as were available when Britain joined the European Community in January 1973. The subsequent five years rapidly dispelled those prospects.

What is being achieved by my right hon. Friend the Prime Minister and her right hon. Friends is in large measure due to her resolute rejection of the previous Government's policies, ideas and attitudes and her insistence that we are in the Community and are determined to remain members. That forms the foundation on which policies can be formulated, agreed and implemented on a Community basis to help to reduce the more painful consequences of the crisis in our steel industry in particular and in the steel industry of Europe as a whole. At the same time, it will enable us to help to create a much more hopeful prospect for an efficient industry in the future.

The social measures referred to in the documents provided by the Community, though by no means adequate in themselves, at least provide help which the British Steel Corporation or the Government alone could not provide.

In that context, I remind the House of the role and work of the European Parliament. It is not simply to generate a plethora of words or to create papers, as some critics suggest. It is to demand and get Community funds made available within the budgets of 1980 and 1981 for such projects. The Parliament, which has been derided by some right hon. and hon. Gentlemen, is the joint authority for the Community budget, together with the Council of Ministers. The European Parliament takes the joint duties and powers seriously in general and in particular in relation to the British steel industry.

In such political situations, there must be considerable compromise if agreement is to be reached. Members of the European Parliament have been striving on account of the social fund and within the Coal and Steel Community to increase the resources available to relieve the blow of unemployment and to help to retrain people who are able and willing to be retrained. In no circumstances should the British steel industry or the House expect that aid to be given by insulating the industry from the cold, crude economic realities of a competitive world.

The introduction of quotas for steel plant production is an interim measure to stabilise production until longer-term and major reorganisation has been worked out by the industry in co-operation with the Commission and the Coal and Steel Community. Not for the EEC are the State management of industrial undertakings and the interventionism to which the Opposition are so totally committed. The proposals enshrined in the documents for the commercial aspects of coal and steel policy are realistic in that at least they are aimed at stabilising a desperately critical situation which applies not only to the British steel industry but to the industry throughout the Community.

The proposals are realistic, but they are not the remedy. They are a tonic. The breathing space provided by that tonic must be used to restructure on a vast scale with only one objective—to be competitive. Any hon. Member who believes that Britain's steel industry can and should continue in an atmosphere which impedes its ability to compete in the world is irresponsible.

Mr. Peter Hardy (Rother Valley)

The hon. Gentleman uses political medicine which is particularly unpalatable when one has to take it. He has chided the Government for appearing to ignore the documents produced on 8 October last. He refers to competitiveness. Will he note that the Government were presented with hard evidence from the private and public sectors of the industry in South Yorkshire which demonstrated that our potentially and past successful steel industry in South Yorkshire could not compete because of its appallingly unfair energy costs compared with those of its French and German neighbours?

In addition to seeking to perpetuate that energy cost advantage, some European competitors will not be particularly keen to co-operate in the crisis measures. Does the hon. Gentleman agree that if the dilatory approach of the Government—

Mr. Deputy Speaker (Mr. Bernard Weatherill)

Order. It is unfair to make a speech in the middle of a speech.

Mr. Normanton

In response to the hon. Gentleman's intervention—not his speech—I must say that it is stretching imagination beyond breaking point to touch upon that red herring of the cost of energy supplied to the British steel industry. There are many other aspects of the way in which the industry has operated in the past. Output per man-hour is only one of many relevancies from which the Opposition have consistently, and with political forethought in mind, turned away their heads. Those are the Achilles heels from which the Opposition rigorously turn their sense of realism and purpose. That is not the matter before the House tonight. The debate concerns the Commission documents.

I wish to repeat a point that I have made on many occasions during debates of this sort. Those of us who believe that our scrutiny procedures for Commission documents and these late night sittings are not the means to influence the drafting, the formulation and the finalisation of Community legislation believe that the sooner the procedures are changed, the better. They are little better than a charade. The Government and the Opposition should be using a potentially useful and worthwhile method to draft EEC documents—namely, our representatives in the European Parliament. I regret that we still have that lesson to learn.

My right hon. Friend the Prime Minister and those of us who serve in the European Parliament are increasingly aware of and appreciate the role that the elected Members of the European Parliament can play in going through the whole range of intensive scrutiny of proposals emanating from the Commission. This operation tonight, by way of scrutiny or contributions to the debate, is a charade.

11.12 pm
Mr. Stan Crowther (Rotherham)

Two matters puzzle me considerably. I hope that I receive some explanation of them when the Minister replies. First, why is it that we are only now, in January 1981, debating a matter that was raised by the Commission in October 1980? The House sat for several weeks before the Christmas Recess. It is disgraceful that Members representing steel constituencies are only now being given the opportunity to debate a matter that is of great concern to us.

Secondly, why are we being asked only to take note of a document that is merely a letter sent by the Commission to the President on 7 October, but not to take note of the decision that was made on 31 October? Unlike the hon. Member for Cheadle (Mr. Normanton), who also has the benefit of representing East Cheshire—a world-famous steel making area—in the European Assembly, I do not profess to be an expert on the convolutions of EEC legislation. It may be that there is some obscure legalistic reason why we are asked to take note not of the decision but only of a letter that was sent in advance of the decision. I shall be interested to hear why we are not debating the decision itself.

The two points are relevant, because the quota system has been made retrospective to 1 October, and therefore the first quarterly period has been completed before we debate the matter in the House. That is deplorable. The decision, of which I have a copy, does not entirely accord with the proposals set out in the letter of which we are now being asked to take note. The letter of 7 October proposed to divide into four categories the products that are covered by the quota system. The categories are set out on page 11. The proposed rates of reduction within certain tolerances for the four categories are set out on page 13.

The decision of the Commission of 31 October set out four categories that were defined in terms slightly different from those that appeared in the letter. It proposes a rate of reduction which in three of the four categories is greater than that proposed in the letter that we are debating. There are significant differences, and I still do not understand why we are not debating the actual decision.

I could ascertain no ground on which we could oppose the principle of a quota system in the present dire circumstances that face the industry. I am rather worried about some of the exclusions that have been made for special steels. I gather that the exemptions have been made at the insistence of West German producers. It is alarming that the Commission has found it necessary to introduce the system. It is especially unfortunate from the British point of view that the quotas will be based on percentages of production levels during a period when the British steel industry was suffering from problems more severe than those faced by its European competitors. These are problems that have been referred to on many occasions by Opposition Members, including the problem mentioned in an intervention by my hon. Friend the Member for Rother Valley (Mr. Hardy)—namely, energy costs. There are other almost equally severe problems faced by the British steel industry that do not confront its European competitors—for example, the transport and coking coal subsidies and the general decline of our steelmaking industries.

It appears that for the time being we are to freeze the British steel industry in a position in which it is at a disadvantage, in both private and public sectors, when compared with its European competitors as the result of British Government policies. That cannot be avoided. If we are to have a quota system it must be based on percentages at some period in the past. However, it is especially unfortunate for British industry that it is to be frozen into a disadvantageous position.

I find it difficult to understand how the Commission—I am talking of the decision and not the letter—arrived at the precise percentages that it has laid down. I hope that the Minister will offer an explanation when he replies.

I do not wish to say much more. It is nothing less than tragic that the position that has given rise to these measures arose in the first place. I hope that it will bring home to the Government the fact that British manufacturing industry needs a more positive Government attitude towards the management of the economy so that the steel and steel-using industries are not constantly at a disadvantage vis-a-vis their overseas competitors. If the present rate of decline of British manufacturing industry continues much longer we shall see it contract to the point at which Britain is no longer a major manufacturing nation.

11.18pm

Sir Anthony Meyer (Flint, West)

Like the hon. Member for Rotherham (Mr. Crowther), I shall not defend the procedure under which we are debating the documents that are before us, or under which we debate any of the EEC's activities.

I was heartened to hear the hon. Gentleman welcoming the application of quotas in the manifest crisis in which the European steel industry finds itself. I was interested to hear so redoubtable an opponent of the EEC positively welcoming these quotas, and I shall be particularly interested in the Minister's comments on the extent to which the quotas that have been applied are fair to the British industry. My understanding—I should be grateful for the Minister's reply to this—is that up to now we have not even been able to fill the quota that has been allotted to us.

The crisis of the European steel industry encapsulates the European crisis itself and Britain's own crisis within Europe. The European steel industry is becoming less and less competitive with the steel industry of Japan and with those of the developing countries.

A sobering figure is that continuous casting, which must be the steel technology at any rate for the rest of this century, is now in operation in, I think, about 47 per cent. of the Japanese industry—a rise from 20 per cent. in 1973—whereas in this country only about 15 per cent. of the steel is produced in that way. Surprisingly enough, the figure for the United States is no better than our figure. That suggests that the newer steel industries are rapidly distancing themselves from the industries of the traditional producers.

Within the crisis-torn European industry, the British industry, crippled by the self-inflicted wound of the strike, is still less able to meet competition—certainly not able to meet on level terms competition from the rest of the world, and not even able to meet competition from the European steel producers, with their higher wage costs. So it comes about that we, more than any other producer, want these compulsory quotas, and it is not surprising that Germany does not. In that situation, it is fascinating to hear the views of Labour Members.

I listened with increasing difficulty to the long, confused and dull speech of the hon. Member for Whitehaven (Dr. Cunningham), hoping that at some stage he would make it clear where the Opposition stand. The Government have made it plain that despite their unfriendliness towards intervention they accept the need for it in the manifest State crisis. There has been no such unambiguous declaration from the Labour Party.

On the other part of these documents, referring to the special social measures for redundant steel workers, it is perhaps the Conservative Party that finds itself in the more awkward situation. If there is to be effective aid of this sort, and if, as we must recognise, there is no early prospect of a dramatic reduction in the amount spent on the common agricultural policy the Community will clearly need larger funds in order to provide the social aid that is necessary. That manifests itself in one particular transfer of funds from the EEC to the ECSC in this context.

I suspect that once again, despite its great reluctance to admit a large expenditure by the Community, it is, as ever, the Conservative Party that will show itself pragmatic and the Labour Party that will persist in its dogmatism.

I finish this brief speech with one thought. The object of these measures is to secure an orderly rundown of the steel industries in our countries. We should not lose sight of those words—"orderly" and "rundown". The object is to avoid the distress that comes when peole who have spent their lives in an industry suddenly find themselves without employment.

We must not kid ourselves that there is any long-term future for bulk steelmaking—I am not talking about specialist steels—in this country or any of the countries of the EEC. This is an industry in which the value added is extremely small. We should be thinking much more in terms of industries that use steel in order to produce goods of high added value rather than clinging to the remnants of a bulk steel industry.

Some capacity will have to remain for purely strategic purposes, but we should never lose sight of the fact that, as The Economist said in one of its business briefs: The trade that counts is trade not in steel itself but in goods made of steel. Much steel goes around the world in small boxes known as cars, or big boxes known as ships. If we lose sight of that and concentrate solely on maintaining a large steel capacity, we condemn ourselves to being economically second-rate.

Several Hon. Members

rose—

Mr. Deputy Speaker

The Minister has intimated that he would like an opportunity to begin winding up the debate at 11.;35 pm.

11·26 pm
Mr. Frank Hooley (Sheffield, Heeley)

The Minister said that the policy was to cut capacity in line with demand. I should have thought that it would be more far more intelligent to expand demand up to the capacity that we have. That, alas, would require a total reversal of this Government's economic policy and a wider reversal elsewhere.

I take it that when we talk about quotas we are talking about production quotas and not capacity quotas. It would be disastrous to slash capacity by 40 per cent., and then by more and more, so that when we have a change in the economic climate or in Government policy, which is bound to come eventually, there is not the capacity to make the steel that we need.

I should like some information on just what the quota system is for the alloy steels, because they are important for the Sheffield area. As far as I can judge from what the Minister said, there is no clear policy on that. Is it a fact that we shall have to go on importing alloy steels—not from Brazil and similar places, but from our Community partners—seriously damaging our home market?

Because of the shortage of time, I should like to put just one or two precise questions. First, when shall we receive the money? The Minister said that he had not the foggiest idea. The matter is not even to be discussed this month. It may be discussed next month. In other words, we are really talking about a hypothetical system, and we have no real assurance that this money for social purposes will be forthcoming at all.

The second and more serious question is whether the money, assuming that we get it, will be extra. If we receive the £85 million, or whatever it is, will the Treasury swallow it up, saying "We do not need to spend on redundancy, and so on, all the money that we were going to spend on the steel industry. We have this Common Market money, so we shall make a saving in public expenditure"? Will it in fact be additional money for the British steel industry over and above what the Treasury would have had to expend anyway on redundancy payments, and so on? That is an important question.

Thirdly, will our Community partners argue, if we receive the money, that it is part of the famous rebate package that the Prime Minister has been prattling about ever since she negotiated it? Will they say "We promised you a £600 million rebate. Here you have £85 million"—or £50 million, or whatever it is—"for the steel industry, and you have to take that out of the total. We shall count that as if it is part of the retour"—or whatever they call it—"in the settlement that the British Government negotiate"? We should be clear about that, because it could be a nasty bit of double-dealing if that kind of argument were advanced, as I am pretty sure it will be.

Because of the time. I come to what must be my final point. There is no mention of retraining in the scheme. I take the point about the great importance of the redundancy payment and the temporary short-time working payment, but we are talking about retiring people 10 years before their working lives are ended. I refer to women aged 50 and men aged 55, or perhaps a year older. Surely, given that they have 10 years of working life left, we ought to be talking not solely in terms of redundancy payments but in terms of comprehensive and substantial schemes of retraining, financed by public funds and if possible, by some of these Community funds. If the Minister could pick up one or two of those points in his reply should be grateful.

11.30 pm
Mr. Roger Moate (Faversham)

I, too, shall be brief, because I want other hon. Members to have the chance of speaking. The debate has one thing, in common with other Common Market debates, and that is that it generates a lot of paper–60 pages. As I have both paper and steel interests in my constituency, in one way or another some minor benefit might accrue.

I wish to comment briefly on the quota system. It seems that while hon. Members have welcomed the mandatory quotas, that is, in effect, only because they see that the system is not affecting the United Kingdom because of the major cutback we have experienced. They feel that it will not apply to British Steel and, therefore, it is harmless enough in itself in its application to the United Kingdom. Were it in any way to require any cutback in production at any steel plant in any constituency represented in this House, I think that people would be objecting strongly in principle to the application of mandatory quotas.

The problem with a system of this kind is that it penalises the successful. There are very few successful steel firms in this context just at present, but there are some. I very much hope that the system will not impinge on their success or result in any cutback in the production of any steel firm in this country. It alarms me that we have here a brand new system, produced very quickly, and yet, even in such a case, this new bureaucracy is able to spawn inspectors immediately. I know of an instance when three inspectors have suddenly and miraculously appeared to check the production levels of a particular steel company. Bureaucracy can always do that.

My main point is that I am genuinely puzzled about the amount of political discussion that this issue has generated and the amount of importance attached to it by hon. Members when the scheme is scheduled to finish on 30 June 1981. It is a very short scheme indeed. As I understand it—my hon. Friend the Minister should deal with this—there is no intention or likelihood of the mandatory scheme continuing after 30 June. Given the levels of stocks no doubt held in the German steel industry and the like, it seems, without arguing about the principle, that a quota application over such a short period of time will have very little relevance to production levels in Britain. It will produce very little benefit for us. Is it really worth it? Does it have any significance at all? Or is it the case that there will be something which will follow this mandatory quota system?

We are entitled at this early stage, because the scale of operation is so short, to know whether there is evidence that the Germans are cutting back in accordance with their obligations under the quotas. If they are not, and I have a suspicion that they are not, the whole thing has not been worth the amount of political discussion that has been generated.

11.33 pm
Mr. Bill Homewood (Kettering)

I can make the point that I wish to raise in a couple of minutes, and I shall have to throw away the rest of my speech. I want to apply myself wholly to the question of the social payments and to say that there is a strong feeling in industry that the Government are not pressing the EEC for money that is available for readaptation payments.

I should like to give a specific instance concerning 26 men in Corby who work for the Pipe Erection Development Company, which is wholly owned by the BSC. These men are to lose their jobs some time this month but are not eligible—according to the Government—for readaptation payments.

That is complete and utter nonsense, because these people worked cheek by jowl with the pipe fitters who were employed by the BSC. They work cheek by jowl with people employed by other contractors, in many cases doing exactly the same job. The readaptation payments are being paid to people who have jobs remote from the actual production of steel. In some cases those payments have been made to bar staff, yet people actually working on furnaces are deemed to be ineligible. I am convinced that this is the Government's fault entirely and that the ECSC does not examine these matters in sufficient depth. The matter is in the hands of the Government.

11.35 pm
Mr. Tebbit

As there is not sufficient time for me to deal with all the points that have been raised, may I express the hope that hon. Members will understand if I write to them setting out some of the longer explanations that I wish to give.

On the general point raised by the hon. Member for Whitehaven (Dr. Cunningham), may I say that I agree with him that this is economic intervention. As he knows, I am not an interventionist by nature. The problem is that there has been long-term intervention in the steel industry by Governments of all political complexions who, over a long period, have subsidised the creation and the maintenance of excess capacity. We ourselves have not been guiltless in this respect. However, it is now necessary to intervene to deal with the intervention of the past. The sooner we get out of the cycle of intervention, the better.

The hon. Gentleman asked whether we would seek to avoid the cheating. Of course we will. I have heard it said that there are corners of the Community in which people say that they have never heard of Davignon. It is our purpose to ensure that those people are brought to hear of him and to understand that there is compulsion in these quotas.

As my hon. Friend the Member for Faversham (Mr. Moate) has said, we are talking of a quota scheme which extends only until 30 June of this year. I shall do my best to persuade the other member States of the Community that we should continue with some form of control upon the excess of capacity which there is in the Community. I simply do not know whether I shall be successful, but I shall do my best and I am confident that I shall have the support of the House in my efforts.

That brings me to a general point which has been made by several hon. Members. The question has been posed of why we are debating these documents in this manner. I do not accept the assertion of my hon. Friend the Member for Cheadle (Mr. Normanton) that if only the matter were debated in the European Assembly all would be well. Whatever opinions we may have about the structure of the Community, it is this House to which I am responsible; and it is to this House that I look for advice and consent as to what I should do in my negotiations in the Council. We are in the main agreed upon that. So it is entirely appropriate that we seek to have these debates in advance of discussions in the Community—sometimes it is not possible—so that the House should know what I shall be trying to achieve in the negotiations.

The fact that we have not been able to get an agreement upon the social measures has not detracted from what is being done already in the United Kingdom in that respect. It is true that these measures will not of themselves add to what we are doing at present. They will ease the general financial problems of the Government. We hope that that will help to enable us to deal with the demands for money from the steel industry, along with many other nationalised industries and the private sector, which has great problems.

Like all hon. Members, I regret the closure of good steel-making facilities, but there is no point in making steel for which there is no market. We cannot eat the stuff. We have to sell it to someone, and none of our steel producers has been damaged by the quotas, because none has been able to sell as much steel as it is allowed to produce under the quota.

I agree strongly with the hon. Member for Whitehaven that the unions and the management must work together if the industry is to survive. I hope everyone will accept that the one thing that Mr. MacGregor has brought to the industry is the enthusiasm of a man who believes that it can survive provided he has the full co-operation of all involved in the industry.

Dr. John Cunningham

Will the Minister give way?

Mr. Tebbit

I will not engage in a discussion on that point. That discussion took place on 16 December, and I am sure that the matter will be debated again. Let us at least agree to close the debate on the agreement that the two sides must co-operate, or there will be no future for the industry. Let us emphasise that common ground.

The hon. Member for Sheffield, Heeley (Mr. Hooley) was naturally anxious about alloy steels. He is right in saying that the position there is not hard, but guidelines have been given to producers and they have been urged to reduce their exports to the United Kingdom by 20 per cent. in consideration of the shrinkage of the United Kingdom market.

The hon. Member for Kettering (Mr. Homewood) raised a case which I know he has been active in raising before. I do not think that we shall be able to help him. We shall write to him, but it would be wrong for me to deal with a particular case in the short time at my disposal.

I should emphasise particularly that it would be wrong for me to attempt to oversell the value of these considerations. We are not certain that we shall be able to extend the quotas, but I will do my best. I am not certain that we shall find a way through the thicket to get money from the Community, but I will not hesitate to negotiate hard. I know that the hon. Member for Whitehaven would not want me to say too much about the negotiating position that I will take up, but I assure him that it will be a practical one.

My hon. Friend the Member for Flint, West (Sir A. Meyer) was right to caution against the hopes of Europe ever having a bulk steel industry again. We shall have to look closely—

It being one and a half hours after the commencement of proceedings on the motion, Mr. DEPUTYSPEAKERput the Question, pursuant to Standing Order No. 3 (Exempted Business).

Question agreed to.

Resolved, That this House takes note of European Community Documents No. 10180/80 on Production Quotas for Steel and Nos. 10179/80 and 10879/80 on Social Measures for the Steel Industry.