§ Order for Second Reading read.4.15 pm
§ The Secretary of State for Industry (Sir Keith Joseph)
I beg to move, That the Bill be now read a Second time.
The Bill has two main purposes. First, by removing the British Steel Corporation's duty to supply iron and steel products it removes any limitations that may exist to the privatisation of BSC activities. This provision—the removal of the duty to supply iron and steel products—will also enable BSC to withdraw from activities on which a profit cannot be made, if this should prove necessary. Secondly, the Bill recognises the financial consequences of past mistakes and losses by writing £3,500 million off the corporation's capital immediately. This is taxpayers' money which can never be recovered.
The Bill provides essential backing to the BSC corporate plan. A report on the plan by the corporation was placed in the Library and in the Vote Office on 24 February, on the same day that I made a statement about the steel industry and the Government's response to the corporate plan. The British Steel Corporation's prime aim, as set out in the plan, is to become internationally competitive. It aims to regain its pre-strike domestic market share of 54 per cent. It aims also to increase its exports over the low levels of recent years. By this action it plans to ensure that its remaining manned capacity at 14.4 million tonnes annually is profitably used.
The substantial reductions in personnel, which have meant that 50,000 jobs were shed in 1980, will have to continue, and it is estimated that a further 20,000 jobs in the corporation will disappear this year. This reduction will be achieved by improving efficiency, but further closures will also be necessary.
BSC also aims to reduce energy costs, which account for about 20 per cent. of total costs, by improved energy usage. In addition, the arrangements for introducing new flexibility into the pricing arrangements of the electricity supply industry in England and Wales, as announced by my right hon. and learned Friend in his Budget Statement last week, will also help reduce the corporation's energy costs.
Capital investment will be restricted to the completion of schemes in progress and essential new items. The corporation's interest burden will be reduced, as I shall explain a little later.
As I said in my statement on 24 February, Mr. MacGregor has described the plan as optimistic. He is right for several reasons, but chiefly because what happens depends to a large degree on factors outside the control of BSC. Effective steel capacity in the EEC has exceeded production by some 40 to 50 million tonnes per year since 1975, and it is unlikely that there will be any sudden or significant improvement in capacity utilisation in Europe as a whole. Excess capacity has kept European steel prices generally at levels below those of 1978–79. BSC has had to respond to this competition, despite inflationary pressures at home. There is no prospect of dramatic improvement in European prices. The strength of sterling, 443 particularly against the deutschemark and the yen, has put the United Kingdom steel industry at a competitive disadvantage.
Forecasts for 1981–82 are that steel demand in the United Kingdom will fall by 5 per cent., as compared with 1980–81, to 12.5 million tonnes, with a modest degree of recovery thereafter. These adverse trading conditions and the history of massive losses over recent years make it essential for both the corporation and the Government to monitor closely the progress made in achieving the targets set in the plan. Mr. MacGregor will give us his assessment of progress by July. If the plan fails, the corporation may not be able to survive in its present form. Further closures and redundancies may be necessary, perhaps on a large scale. That is why the Bill removes the duty on the corporation to supply iron and steel products, thus enabling it to withdraw—if necessary—from sectors of steel production, and to effect an extensive rundown of its operations.
The removal of the duty to supply iron and steel products will also facilitate the transfer of the BSC's businesses to the private sector. This will be an important way of optimising the survival of production and jobs in the steel industry in this country, particularly where there is competition between the private and public sectors.
I welcome the recent announcement by the BSC and Guest Keen and Nettlefolds of an agreement in principle to combine their rod and associated businesses in a new company, Allied Steel and Wire Limited. I hope to receive further agreed proposals for other public sector/private sector joint companies in the other steel making sectors where there is an overlap of operations.
Because of the need to ensure that the corporation competes fairly with those private sector companies, Mr. MacGregor has agreed to consider placing those corporation businesses that are in competition with the private sector in separate Companies Act companies. This will serve to make the corporation's activities more transparent and will also pave the way for further privatisation, which the Bill permits. In addition, as I announced on 24 February, Mr. MacGregor has undertaken personally to investigate any specific allegations of unfair pricing that are put to him by companies or by hon. Members. My hon. Friend the Under-Secretary is monitoring these complaints and keeping me informed of developments.
The modification of the BSC's function is effected by clause 1. This clause has three main parts. Subsection (2) repeals section 2 of the Iron and Steel Act 1975, which imposes general duties upon the corporation and on the publicly owned companies. The corporation will, therefore, no longer have the main duty to promote the efficient supply of iron and steel products or to ensure that the reasonable demands of United Kingdom manufacturers are met. A number of its subsidiary duties will also disappear, such as the duty to promote exports and to promote research and development.
The second substantive part of the clause, subsection (3), modifies section 3 of the 1975 Act, which confers upon the corporation its powers to carry on iron and steel activities, to sell iron and steel products and to carry on certain other activities. This modification will ensure that the corporation retains the legal power to carry on its existing functions, but will also provide that it can carry on its activities through companies in which there is private sector investment. The overall effect of 444 subsections (2) and (3) is threefold. They will facilitate the formation by the corporation of companies to carry on iron and steel activities and non-iron and steel activities, and the holding of shares in companies which carry on such activities. They will enable the corporation to carry on no activities, but merely to procure other companies in which it holds shares to carry them on. Lastly, they will enable the corporation to dispose of its property so as to extinguish public ownership of companies envisaged by the Iron and Steel Act 1975 and to reduce the undertaking of the corporation to minimal proportions.
The third substantive part of the clause, subsection (4), amends section 4(5) of the 1975 Act so as to enable the Secretary of State by order subject to negative resolution of either House to direct the corporation to discontinue or to restrict any of its activities or to dispose of any of its property. These cover iron and steel activities, whereas they were available formerly only in respect of non-iron and steel activities. They are intended only as reserve powers.
I turn now to the second purpose of the Bill, which is to effect a reconstruction of the corporation's finances. As I said earlir, this part of the Bill writes off the financial consequences of an over-ambitious investment programme in the early 1970s which was entirely inappropriate—seen in hindsight—to the level of demand later in the decade, and also a consequence of the delay in allowing the corporation to adjust its capacity to the lower level of demand. The corporation was thus left with investments, some of them in modern equipment, that had no potential value in the foreseeable market conditions. This has compounded the losses suffered by the corporation—in common with most European steel makers—in recent years. In addition, the corporation has been forced over the past year rapidly to adjust its capacity to the market realities, instead of being allowed gradually to contract.
§ Mr. Frank Hooley (Sheffield, Heeley)
The right hon. Gentleman seems to be trying to argue that the process was somehow inevitable. Is the right hon. Gentleman aware that European countries such as Spain and Italy have substantially increased their capacity and output? No other country has slashed capacity in this way.
§ Sir Keith Joseph
Most of Western Europe has experienced large losses. There can be no doubt that the nationalisation and renationalisation of steel was a tragic disaster for the industry.
The investments written off, the generous payments to redundant steel workers and the loss incurred through inefficient operations in the past can never be recovered. The Bill will immediately recognise the cost to the country by writing off £3,500 million from the BSC's capital.
The immediate write-off is effected by clauses 2 and 3 of the Bill. Clause 2 writes off the liability of the corporation in respect of the remaining borrowings from national loan fund, amounting to £509 million. This will provide the corporation with an immediate relief from interest in 1981–82 of £59 million. The corporation's long-term interest burden will, therefore, be reduced from £119 million to £60 million in 1981–82. This latter figure will be interest payable on £622 million of foreign borrowing, which will remain on the BSC's balance sheet.
Clause 3, by virtue of subsections (2) and (3), writes off £3,000 million of the capital invested in the corporation 445 under section 18 of the 1975 Act. When this immediate write-off has taken place there will remain about £1,800 million capital on the BSC's balance sheet. These provisions do not represent the commitment of additional funds, they simply recognise that the large sums invested by the taxpayer in the BSC in the past—or a very large part of those sums—are now worthless.
The remainder of clause 3 makes provision for a further write-off before the end of 1982 of up to £1,000 million of capital subscribed under section 18, by order subject to affirmative resolution. When viability is in sight it will be possible to assess more accurately the economic size and potential earning power of the corporation, and to make further adjustments to the capital structure, if that seems appropriate. At this juncture it is impossible to say whether any further write-off will be required, and if so what its size—within the £1,000 million limit—should be.
Clause 4 seeks to reduce the BSC's borrowing limit under section 19 of the 1975 Act to £3,500 million. It will be possible, by order subject to affirmative resolution, to increase this amount to not more than £4,500 million or to adjust it to a figure between £2,500 million and £4,500 million if a further write-off of capital is effected, as permitted under clause 3. The provision relating to the borrowing limit will supersede the borrowing limit of £6,000 million set by the Iron and Steel (Borrowing Powers) Act 1981, which will be repealed by an amendment to be inserted into this Bill. That Act, which was an interim measure to allow the corporation to be financed during the passage of this Bill, would have allowed BSC to acquire £4 billion sterling additional borrowing without reference to Parliament. After the write-off of £3,509 million capital as provided by this Bill, the new £3,500 million limit will allow BSC to acquire £1,500 million further borrowing without further reference to Parliament.
I have tried to explain the substance of the Bill. By all normal commercial standards the corporation is bankrupt. Under present legislation it cannot be liquidated. This Bill will allow the corporation's activities to be reduced virtually to nil but we have stopped short of introducing a measure to provide for complete liquidation of the corporation. We do not think it appropriate at this stage to take such powers but we do not rule out the possibility of introducing further legislation to wind up the corporation if it becomes necessary. However, we have preferred at this stage to adopt a more positive approach.
§ Mr. Michael Grylls (Surrey, North-West)
If my right hon. Friend is saying that he actually needs further legislation to bring about the liquidation of the corporation in the sad event that the MacGregor plan does not succeed, why does he not put it in his Bill? It does not have to be used, but it would at least convince people outside that we do mean business and that Mr. MacGregor means business when he says to the corporation "This is your last chance."
§ Sir Keith Joseph
I do not think that people outside have much doubt that we mean business. I really do not think that much scepticism could be found about that among those who work for the British Steel Corporation.
This Bill will enable the British Steel Corporation to run down its activities virtually to nil and to remain involved in the provision of iron and steel inasmuch as it does so through partnerships with the private sector. I am 446 explaining to the House that we thought that went far enough and I am simply emphasising that if the residual British Steel Corporation seemed no longer to have justification we should be ready to seek further legislation to wind up the corporation.
I repeat that we have preferred at this stage to adopt a more positive approach. Whilst recognising the possibility that the corporation might need to contract further, and I have emphasised that in what I have said, we have demonstrated our support by providing for financial reconstruction which will enable the corporation to pursue its ambitious plan unencumbered by past debt and with a lighter interest burden.
§ Mr. Peter Emery (Honiton)
I thank my right hon. Friend for giving way. I thought perhaps he would cover my point and therefore I did not interrupt earlier. Does my right hon. Friend realise that when he presented the corporate plan to the House there was talk of the requirement over the next two years of £730 million extra cash for the British Steel Corporation? That was described as an optimistic figure. My right hon. Friend refused to give me the pessimistic figure that might be necessary. Does he realise that Mr. MacGregor gave to the Select Committee of the House yesterday the figure that might be necessary in the event of a pessimistic factor—namely a financial requirement of £1,192 million, which is nearly 50 per cent. greater than the optimistic figure which was put forward by the Secretary of State? Ought not the Secretary of State, in presenting this Bill, to take that situation into account?
§ Sir Keith Joseph
I should like to study what Mr. MacGregor said yesterday. I ask my hon. Friend and the House to accept, that without defending the figures we are using, there can be great confusion. One set of figures may included provision for interest and amortisation but not, for instance, provision for capital expenditure, closure costs and redundancy costs. It may be that the difference can be explained in that way.
§ Mr. D. N. Campbell-Savours (Workington)
Would not the right hon. Gentleman accept that much of this confusion would have been avoided if the Secretary of State had put it to Mr. MacGregor that the corporate plan should be published in its entirety? Much of the confusion that arises stems from the fact that we have not had access to much of the information which was given yesterday, in very curious circumstances, in that Committee. Following Mr. MacGregor's statement yesterday, there is more need than ever before to ensure that the information in the corporate plan is made available to Members. It is possible also that those hon. Members who are on the Committee that reviews this Bill may find that they are speaking in a vacuum because information is only available, as I understand it, to members of the Select Committee who go to the Clerk of the Select Committee on Trade and Industry and ask to look at a document which is not available to other hon. Members of the House of Commons. I must say that I find that situation objectionable.
§ Sir Keith Joseph
It would surely be very damaging to nationalised industries, which already have enough problems anyway, to expose their plans to their competitors I think that our overseas competitors would welcome the publication of the full plan, so I do not think that would be very sensible.
447 In the light of the explanation I have given, I commend the Bill to the House.
§ Mr. Stanley Orme (Salford, West)
This is a Bill of major importance and we must be thankful that, as the Secretary of State has said, at least he is taking a positive approach to the steel industry, rather than introducing a Bill that would damage it even further.
I think that in this debate we must take into account what my hon. Friend the Member for Workington (Mr. Campbell-Savours) has just said about the evidence given to the Select Committee yesterday. I want to come a little later to a point that the hon. Member for Honiton (Mr. Emery) raised with Mr. MacGregor in the Select Committee yesterday, because the meetings of the Select Committee coincide with the passage of the Bill through the House. As the Secretary of State knows, reference to evidence given in private session is not permissible, but reference is permissible when the evidence is given in public session, and I was present to hear the close cross-examination of Mr. MacGregor, certainly yesterday, by the Select Committee.
We must look at the Bill in the context of what is happening in the steel industry and in the economy as a whole. Whether or not our steel industry will survive and prosper will depend upon the context in which it operates. That context is created to a very large extent, although not exclusively, by the Government. Therefore, the current economic situation and the Budget must be taken into account when we consider the future of the steel industry as a whole.
Dealing with the reduction in the MLR and the state of the pound, Mr. MacGregor told the Select Committee yesterday that if he could have the pound at $1.50 he could solve the problems of the Steel Corporation. That rate might not be popular with some sections of industry, but that was the context in which Mr. MacGregor made the remark, and the point that he was making was that the burden that he was having to carry because of the high rate of the pound and the exchange rate was crippling British industry, and not least British Steel. That has to be made very clear indeed.
Whatever sacrifices steel workers make—and they have made many—and however good management may be, unless the Government give them a chance they are lost. It is against that background that we must examine the Bill. In Standing Committee we shall want to go into some of the financial details in greater detail, and later on my hon. Friend the Member for Whitehaven (Dr. Cunningham) will raise some of these matters. No doubt The Minister of State will attempt to reply tonight to some of the questions that I shall put to the Secretary of State but if that is not possible I understand that they can be dealt with in Committee.
We must do all that we can to support this major British industry, which is at the centre of our manufacturing community. Broadly, we support the financial provisions, although we regret that the proposals were not before us earlier. We oppose the clauses that are based on doctrinal prejudice against nationalised industries. I know that it is futile to attempt to persuade the Secretary of State to look with favour on these industries, so I shall focus on some of the practical implications of his proposals. The Secretary of State, who is doctrinally opposed to the public sector, is forced by the reality of life continually to support 448 the public sector, as he has done with the BSC, BL and ICL. We welcome that. These are crucial industries if we are to survive as a major industrial nation, and we can ill afford to do without them.
§ Mr. Hooley
Is my right hon. Friend aware that the Treasury is creating its own poverty trap? The more Treasury policies bite, the more money has to be poured into social security and unemployment payments. The more the policies bite on the industrial side, the more millions of pounds of public money have to be poured into the BSC, BL, ICL and so on. If only the Government would reverse their basic policies they would improve the affairs of the nation and their administration of them.
§ Mr. Orme
I accept what my hon. Friend says. He is saying that the Government have no industrial strategy. The Secretary of State is being forced by one disaster after another to take remedial action to assist industry, but he does not have an overall industrial strategy. The tragedy is that the Secretary of State, who puts money into these industries to save them and to prevent unemployment, does too little too late, and against the overall interest of the nation.
The Secretary of State said that he could not support worthless assets; that these worthless assets in the steel industry must go to the wall. What are these worthless assets? Is the right hon. Gentleman talking about Port Talbot, Llanwern or Redcar? A great deal of public investment has been put into these modern plants, and they produce the goods, yet he is saying that they are worthless assets. I believe that they are priceless assets of the nation. When there is an upturn in industry, there will be a shortfall of capacity and we shall have to depend upon imports rather than producing our own wealth. That aspect has to be taken seriously into account.
The Bill removes the general duties of the BSC to supply iron and steel products and modifies the powers of the corporation. These are the aspects that cause us grave concern. The Bill is not breaking a monopoly; it is breaking the back of the BSC by taking away its exclusive right in many areas to produce as a publicly owned company.
I give credit to the Secretary of State. He has not hidden his desire. He said very fairly again today that his desire was to see the industry move away from the public into the private sector. There is a complete division between us on this issue. We want to reaffirm our belief that a publicly owned British Steel Corporation is still essential to the manufacturing base within our society.
The grounds have been prepared for the denationalisation of the BSC. In October the corporation began to decentralise management authority to semi-independent businesses within the corporation. The purpose is not necessarily to denationalise, but the Government must have seen their opportunity, and the Secretary of State has been very honest with the House this afternoon.
§ Mr. Archie Hamilton (Epsom and Ewell)
Does the right hon. Gentleman not agree that decentralisation improves management?
§ Mr. Orme
I take the hon. Gentleman's point, which is a fair one. That is happening with BL. I am not wedded to the Morrisonian concept that in a publicly owned company there must be a national board for the whole 449 industry and that that structure is rigid and must be retained. I am not saying that. We have to look at the structure of publicly owned industry.
The Secretary of State sees the Bill as a means of hiving off sectors of the BSC. We accept that there may have to be managerial changes. Sir Michael Edwardes is forming four units of production in BL, but he wants the company to remain under the overall control of BL. We want the management structure of the BSC to remain under the overall control of a publicly owned company.
The Secretary of State made it clear that he sees this change as an opportunity to adopt the policies that he wants to adopt. If an integrated organisation is broken up and the head of each sector is given autonomy, the industry can more easily be sold off bit by bit when the economy improves and when people are in a position to buy it. When an industry becomes profitable and the investment of public money begins to bear fruit it is a tragedy that it should be sold, so that the taxpayer does not get a return on his investment.
§ The Minister of State, Department of Industry (Mr. Norman Tebbit)
The right hon. Gentleman is misunderstanding the position. The taxpayer does not throw away the money from the sale when he receives it. He invests it in hospitals, roads, schools and so on, which could not be done by any other person in the community.
§ Mr. Orme
I am willing to discuss this with the Minister. What the taxpayer gets back is a once-and-for-all payment for the asset, whether or not he invests it. If that asset is owned by the State, and, if year after year it produces a profit, the taxpayer gets a long-term benefit from the investment.
§ Mr. Bill Homewood (Kettering)
Much of the Government's expenditure is not on capital projects. At the moment most of it goes on unemployment costs.
§ Mr. Orme
I accept what my hon. Friend says. One could develop the argument about how that affects the public sector borrowing requirement and other aspects. It is worth repeating that it is the Government's intention and the Secretary of State's wish to see the British Steel Corporation broken up and sold to the private sector. If that is not successful, and if the industry falters, we shall be dependent upon imports.
§ Mr. Martin Flannery (Sheffield, Hillsborough)
Does my right hon. Friend remember that during Sir Monty Finniston's time, when one of the present senior Ministers was in charge, I did a programme on this on BBC 2? The Brymbo steelworks in North Wales were bought by us for about £43 million. About £8 million was spent on necessary modernisation, and the works were eventually sold back by the Conservatives for about £23 million—less than half of the amount spent on buying them. No matter how much we welcome the money for the BSC, if that is what is to happen under the Bill it should be deplored, because it means that public moneys will go to private enterprise for private use.
§ Mr. Orme
I take my hon. Friend's point. He gives a valid illustration of what happened in the past, and of what may happen in the future. We do not know what the value of assets will be if the Secretary of State decides to break up the corporation and sell off the various sections. We 450 know that that is the Government's intention. There is no secret about that. The Prime Minister herself has declared that the idea of making the corporation profitable is to denationalise it at the appropriate time.
This raises an interesting point, which Conservative Members should bear in mind. It is said that all public money to be allocated to the BSC under the Bill is being given to the corporation, but if those vast sums are being spent with the ultimate objective of selling off parts of the corporation to private interests it will be those private interests and not the British people who will benefit from the taxpayers' money. Conservative Members who support the £6.5 billion input in the writing-off of assets and so on should consider this. The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) mockingly puts a gun to his head, but he is supporting it. He will not vote against it tonight, and he knows that the Bill will go through. Conservative Members should take that aspect into account.
I ask the Secretary of State to say to what extent Mr. MacGregor is under pressure from him and from the Government to dispose of good assets from the public to the private sector. Is it true, as was reported in The Times on 10 March, that Mr. MacGregoris considering establishing Companies Act companies to run the Stanton and Staveley pipemaking grouping and British Steel Service Centres".We should like an answer to that question. No doubt the Minister of State, who is well versed in these matters, will give us a reply later. I understand that Mr. MacGregor's evidence to the Select Committee indicated that that was the case.
I twin to the Phoenix arrangements with the private sector and the public sector. There is a problem in this for many workers in the public sector who may be moved as a result of the new privatisation and amalgamation arrangements between the public and the private sector. As the Government know, employees of the BSC have an inflation-proofed pension scheme. Will that be protected if they are transferred to the private sector? I know that the Minister of State will be delighted to answer that question.
Is the public interest served by the BSC-GKN arrangements? The House has no information. How can we know? The lack of information has been mentioned already. We have not seen the corporate plan, for instance. We do not know the details of Phœnix II and III. The information has not been given to us. We have to wait for press statements from the Department or from the BSC. I do not accept that purely commercial considerations are involved, because Mr. MacGregor told us yesterday that he is having great difficulty negotiating, not least with the private sector, about the proposed amalgamations.
§ Mr. Stan Crowther (Rotherham)
Having seen the corporate plan, as I am a member of the Select Committee, I assure my right hon. Friend that it would not have told him anything about the matters that he is raising.
§ Mr. Orme
If that is so, it is an interesting proposition. The Secretary of State might care to put a copy in the Library tomorrow so that we may judge for ourselves.
I turn to another important factor. The Secretary of State will appreciate that we are here dealing with the private as well as the public sector in steel making. I wish to make clear the Opposition's standpoint with regard to the private sector. The arguments about the long-term arrangements were put to Mr. MacGregor yesterday in the 451 Select Committee. He was asked whether this was leading to an amalgamation of public and private sector firms which could then be denationalised, or whether the reverse might apply so that this could lead to more public ownership of private firms. I think that that sums up the two points of view put to Mr. MacGregor in the Select Committee.
The position of the Opposition is very clear indeed. Our main priority at present is to save jobs equally in both the private and public sectors. We are not arguing about what is better or what are the long-term objectives. Our concern is to save jobs. During the past week or two I have been able to look at some of the problems facing the private sector. I visited the Firth Brown company in Sheffield. As my right hon. Friend the Member for Llanelli (Mr. Davies) knows, only this week I met the workers from Duport when they came here to lobby Members. No doubt the Secretary of State and his Ministers are aware of the problems in the South Wales valleys.
In Sheffield, in South Wales and in other areas there is concern that firms with an international reputation will go to the wall. It is not just a question of unfair competition from the BSC. Not the least important of the issues involved is that of energy costs, to which I shall turn in a moment. The Bill means that assistance can be given to firms in the private sector. I refer the Secretary of State to clause 1(3)(c), which provides thatthere shall be added the words 'and may, instead of themselves carrying on any iron and steel or other activities, promote the carrying on of any of those activities to such extent as they think fit by other persons none of whom need be a publicly-owned company'".Those powers are given in the Bill.
Certain firms under Phoenix II will be protected. Will the Secretary of State tell us tonight what will be done to assist the firm of Duport in Llanelli? We feel that there is a justifiable case for State support being given to ensure that that company remains in being and that there are not wholesale redundancies in an area of high unemployment, as my right hon. Friend the Member for Llanelli can verify. Having met the workers there, I believe that their plea for assistance is justified, and we support that call.
The Secretary of State said that he was concerned about energy costs. The Budget also refers to energy costs. When I visit steel plants, I am told that energy costs are of paramount importance. The report of the energy task force implies that 50 per cent. of electricity and 85 per cent. of gas is taken by less than 5 per cent. of industrial consumers. The figures for 1979, which are the latest available, show iron and steel as the largest industrial consumers.
The concessions in the Budget do only the minimum to sustain the steel industry. They do nothing to reflect the needs of major industries that depend heavily on energy and will not offset the devastation in the economy created by Government policies. That devastation is underlined by heavy energy costs. The BSC or Firth Brown in Sheffield will get little help from the Budget.
§ Mr. Grylls
I presume that the right hon. Gentleman is thinking particularly of electricity for the steel industry. France has encouraged the use of nuclear energy for electricity production and now has a great advantage over the remainder of Europe. Is the right hon. Gentleman in favour of speeding up our nuclear policy to give us that advantage?
§ Mr. Orme
That is an interesting question. I do not oppose a nuclear element in electricity generation. Irrespective of the source—coal-fired, oil-fired or nuclear generated—the steel industry should have a tariff reduction at source, as we have stated previously. That is of prime importance. The private sector tells me that energy costs are a bigger worry than competition from the BSC.
Turning to imports and the EEC, the Secretary of State or another Minister will be attending an important meeting later this month. The BSC has achieved about a 52 per cent. share of the domestic market—almost the corporate plan target. That achievement is in jeopardy unless the Government take steps to expand the economy.
On 24 February the Secretary of State said:We intend to ensure that reductions in capacity are equitably shared among the members of the Community".;[Official Report,24 February 1981; Vol. 999, c. 747.]That is of fundamental importance. The matter was discussed at the Council of Ministers on 3 March. The meeting was adjourned to 26 March. The Government must make the point that we have slimmed down our steel industry to a greater extent than has any other member of the ECSC.
As the Secretary of State said, the BSC lost 50,000 jobs last year. In 1981, under the corporate plan 20,000 more will go. It is not easy to get the figures, but, on an accurate assessment, over 10,000 jobs have been lost in the private sector of the industry, and the Secretary of State has told us that further closures and redundancies may be necessary.
We are bearing an unfair share of the burden of overcapacity within the Community. Will the Government assure us that they will fight our corner? On every issue in the EEC we play cricket, while our opponents do not. We are disadvantaged in so many areas. Whether or not we support the Common Market, it is time to say that enough is enough. Britain wants her fair share.
§ Mr. Tebbit
I am glad to tell the right hon. Gentleman that on 3 March I told the other EEC Ministers most strongly that we were continuing to slim down our industry. We expect other countries that are subsidising their industries to do the same. The right hon. Gentleman need never accuse me of being soft with our opponents.
§ Mr. Orme
I welcome that statement. I hope that when the Minister goes to Brussels in the near future he will feel that his argument is strengthened by the views on both sides of the House.
I noted Mr. MacGregor's words in the Select Committee yesterday:Work for the night cometh."They were directed at those who work in the BSC. We all want the BSC to survive and jobs to be maintained. We make no distinction between the private and public sectors. Mr. MacGregor's words meant that if the plan was not workable we should face the consequences. However, he is not taking work people into his confidence. He appears to be running a one-man band. The Steel Board is of no value. I do not know what it does. I doubt whether even members of the Select Committee have seen the corporate plan. The board has not.
We want to see the corporation survive and prosper, but Mr. MacGregor cannot achieve that by diktat. He must have co-operation. The damage done by the strike has not healed. It will be difficult to heal the damage, when he is making 20,000 more people redundant this year.
453 Mr. MacGregor was asked by the hon. Member for Honition what other proposals he had if things got difficult. He replied that he had personal proposals. When the hon. Member for Honiton said that the Committee was entitled to know those proposals if the targets had not been met, Mr. MacGregor said that at the moment they were locked away in his mind and that he was not prepared to disclose them. That is not the way to get the co-operation of the work people.
I make an appeal to Mr. MacGregor to adopt a fresh approach to the workers, both the staff unions and the manual workers, to try and achieve an understanding so that they are fully conversant with what is happening. I hope that Mr. MacGregor is prepared to show that he is not simply a one-man band and that he is prepared to work for a situation in which the British Steel Corporation will prosper. I hope that the Secretary of State will also take on board this important point.
The Opposition will not vote against the Bill. We have been pressing for the financial proposals for some time. We shall, however, continue to oppose those parts of the Bill that undermine the future of the British Steel Corporation. Our objective is to see a thriving British Steel Corporation and a thriving steel industry in the United Kingdom. That is essential. Without that major industrial base we cannot be independent as a major trading nation. We are playing for high stakes. No doubt many of the points that I have raised will be pursued in Committee. I give the assurance that we shall not rest until we see the British steel industry once more viable and, we hope, profitable, in the interests of the British economy and the British people.
§ Mr. Michael Grylls (Surrey, North-West)
A large part of the speech of the right hon. Member for Salford, West (Mr. Orme) touched chords that find a response througout the House in relation to the great concern felt about the future of the steel industry. I agree with my right hon. Friend the Secretary of State, who, in answering questions on his statement today, defined the word "strategic" as representing dangerous and rather boggy ground. Of course, the steel industry is essential to a manufacturing country. I listened, almost with amusement, when the right hon. Member for Salford, West was winding himself up increasingly into a fury about the measures of denationalisation. Clearly, his speech could not be entirely partisan. That would not have worked at all.
The right hon. Member for Salford, West let a little light into the hearts of Government Back Benchers who otherwise might have been assumed by my right hon. Friend the Secretary of State to be a rather gloomy set of people in view of the figures to which reference has been made. The right hon. Gentleman had to take to task my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark), who was about to shoot himself thinking of the size of the figures involved in the Bill. Part of the approach is partisan and part reflects the different policy that would have been followed by the right hon. Gentleman if he was Secretary of State introducing a Bill in which the figures would probably be roughly of the same size. We can take some comfort from that situation.
My right hon. Friend the Secretary of State was not as forthcoming as some of us might have liked on the 454 question of ultimate liquidation if the MacGregor plan does not succeed. I accept that the Bill goes a long way to take away the duty from the Government to provide money for the BSC. The fact that Mr. MacGregor himself asked for this power was a clear signal to the BSC, and perhaps to everyone else, including hon. Members that if the plan did not succeed it would be the end of the road. Something would have to happen. Either a receiver would have to go in or there would be liquidation. That would not necessarily mean the end of steel making. If receivership took place, steel making would be divided up. The good bits would be preserved, but the others might have to go. It is a pity that my right hon. Friend has not gone further and taken this ultimate power. He may not be surprised if, in Committee, some of us table an amendment to toughen up those powers.
The taxpayer will have to accept the Bill today because the House is not to divide. Perhaps that is right. I believe that we should tell the taxpayer that if this proposal does not work we have the best man in the world to run British Steel. We have some wonderful plant. I believe that the right hon. Member for Salford, West was unfair in his remarks about Mr. MacGregor and consultation. My information is that since taking over last June Mr. MacGregor has tried supremely to carry out a great deal of consultation and to ensure that he took the work force with him. I believe that he has largely succeeded.
§ Mr. Campbell-Savours
Is the hon. Gentleman aware of the case being heard in the courts brought by the workers of Velindre in South Wales?
§ Mr. Grylls
Perhaps for that very reason, I do not wish to commnt on it. I am talking in generalised terms. Those who have visited British Steel and talked to Mr. MacGregor and other executives will accept that he has tried hard and, I believe, succeeded to a great degree. There have been some results. For example, in South Wales productivity levels are improving. This indicates that Mr. MacGregor has succeeded to a large extent in that area. The power to liquidate at the end of the day, if that unhappy event should happen, should exist as a signal to the taxpayer that there would be an end to all this business.
I wish to refer to the private sector. I considered the remarks of the right hon. Member for Salford, West fair, but I should like to go further. The right hon. Gentleman rightly expressed his concern over the 70,000 people who work in the private sector of the steel industry and their remarkable record of producing profits and preserving good jobs over the last 13 or 14 years. We must ensure that they do not disappear. This is clearly an area in which the House speaks with one voice.
The Bill does not go far enough in ensuring that as far as possible fair competition takes place. Our objective should be to ensure that over the next few months we do not see more private sector companies disappearing and going into receivership. It is important that the Secretary of State should give a clear direction to the British Steel Corporation about setting up future phoenixes so that what are described as the competition or overlap areas are clearly defined, and so that the corporation acts quickly.
Mr. MacGregor has gone only as far as suggesting that he will consider setting up further Phoenixes. That is not good enough. While he is considering setting up further Phoenixes and worrying, perhaps rightly, about the asset value of the parts that the BSC might put in, it is possible 455 that parts of the private sector, involving 70,000 people, could get into trouble and disappear like the tragedy of Duport.
An amendment should be tabled in Committee to provide clear powers of direction to ensure that where the BSC competes with private sector companies it forms Companies Act companies forthwith. Their establishment should not be left to the whim of the BSC or the speed at which it decides to proceed. That will not be good enough. My right hon. Friend the Secretary of State cannot adopt a "hands-off' approach and say "Let British Steel get on with it". He has a duty to ensure that it moves fast.
§ Miss Joan Maynard (Sheffield, Brightside)
Firth Brown is a large private steel company in Sheffield. Its largest customer is the BSC. There is no question of competition between the two organisations. Firth Brown wants the BSC to be successful because it is in its interests that it should be successful. I ask the hon. Gentleman to consider the position of GKN, which has lost a vast sum. He should not try to argue that only publicly owned industries are losing money.
§ Mr. Grylls
I think that there is no difference between us. In steel making, some nationalised assets, as well as privately owned assets, are losing money. The object of the Phoenix I operation, which was set up on 17 February, was to bring the two together. The assets brought into the new Phoenix I company were roughly equal in terms of assets. It took three weeks to set up that company.
The areas that the Government should be examining to ensure that Companies Act companies are brought into being quickly are the following: cold rolled strip, commercial quality flats, light sections and low alloy billet and bar. If the plant producing these products can be brought together quickly in Companies Act companies, I believe that we shall be successful in getting the nationalised assets and the privately owned steel assets—I make no differentiation between them—together in Companies Act companies so that they may survive in future. If this process is delayed it will be a great mistake.
The right hon. Member for Llanelli (Mr. Davies) and I have talked about the Duport works. On one occasion he and I had the opportunity of meeting some members of the Duport work force in his constituency. Their case was tragic. They said "We have done everything that you have asked. We have invested. We have made ourselves more productive. We have reduced our work force. We have a good productivity level, but the company has to close down." It was a tragic and heart-rending story.
That is an example that causes me to be worried about the future groupings of phoenixes. Developments took place at a slow pace. The BSC and, to some extent, the Department of Industry dragged their feet at various stages of the proceedings. It was the Bank of England that really made things move for Duport. The Bank intervened and speeded up the process. That means that the non-steel making process at Duport—it produces articles such as Slumberland beds—is able to continue and 3,200 jobs in the hard hit Black Country will survive. However, the process was too slow. That is past history, but I am deeply concerned that future developments will proceed at too slow a pace if matters are left to take place at the BSC's speed.
I hope that the Government will think about taking clear powers to direct the corporation to set up Companies Act 456 companies forthwith. We have not much option but to deal with the financing of the nationalised sector in the way that my right hon. Friend proposes—it is a fait accompli—but we can do something about the delicate state of the private sector, which is outside in the cold, with no taxpayers' money to support it. That is a fact of life against which no one can argue. We must put pressure on the BSC to move as quickly as possible.
§ Mr. Hooley
A few years ago the private sector in Sheffield had a brilliant opportunity to obtain public money through the National Enterprise Board but it decided to go for Lonrho instead.
§ Mr. Grylls
Given the State of the NEB now, it may be that Lonrho was rather a safer home. However. I do not want to be involved in that argument.
§ Mr. Grylls
I hope that my right hon. and hon. Friends will consider my arguments about liquidation and strengthen the Bill accordingly. I hope that they will bear in mind my argument about Companies Act companies. The Government should not allow the BSC to sit on its hands. The process should be speeded up and we should be able to see Phoenix II rise quite quickly. The sooner that that happens the sooner we shall achieve the preservation of as many profitable and secure jobs as possible. With that prospect, the House will be happier than it would otherwise have been on rather a gloomy day, a day that is gloomy at least for the taxpayer.
§ Mr. Denzil Davies (Llanelli)
The hon. Member for Surrey, North-West (Mr. Grylls) referred to the tragedy of the Duport works, in my constituency, as did my right hon. Friend the Member for Salford West (Mr. Orme I. I think that it will come as no surprise to the House if I use this opportunity again to advance the cause of the Duport steelworks. The works have almost closed, and almost all the members of the 1,100 work force have gone home. In a few weeks no more steel making will be taking place at Duports at Llanelli. In the language of the book-keeper, which the Secretary of Slate for industry used when introducing the Bill on Second Reading, the asset, which comprises one of the most modern works in Europe, is now worthless. That is the language of the book-keeper and not the language that one would expect from a Secretary of State who is presiding over a basic and vital national industry.
The House well knows of the efforts that have been made to save the steelworks. Those efforts have involved the Prime Minister. We have had sympathy but no help from the Government. I do not intend to go over that ground again, as I think that it is well known. I wish to make it clear to the Minister of State and to the Government generally that they have not heard the last of the Duport steelworks in Llanelli. The fact that it is now about to close does not mean that the fight will not continue to reopen it and to preserve the asset of the works for the nation.
The Bill contains a provision that seems to be directed at the phoenix-type arrangement about which we hear so much from the Government. No doubt the Minister will tell us whether that provision is directed to that end. When the Minister replies I hope that he will tell us more about 457 the Government's intentions for the phoenix arrangements. They are important, especially to the Duport steelworks.
We were told that there were to be two phoenixes, but so far we have seen only one, and a fairly small one at that. It is only recently that the Minister said that there might be three or four phoenixes. It seems that the ashes of British industry will produce a flock of phoenixes. I do not believe it, but I hope that it is true. I hope that the Minister will tell us more about his plans for the phoenix enterprises, and how many of them there will be. I understand that in ancient Egypt the phoenix appeared in public only once every 500 years. I hope that the Government will demonstrate rather more urgency than in the past and will not take the example that I have quoted from the phoenix.
My first question is: when shall we see the next Phoenix manifestation? When will Phoenix II appear, and who will be involved? Are talks going on? If so, with whom? As we have heard so far in the debate, no one seems to know what is going on either in the British Steel corporate plan or the private sector. Surely that is not how a Government who are concerned about the steel industry should carry on. I hope that we shall be told when we shall see the next stage of the phoenix operations, and which companies the Secretary of State and the Government expect to be involved in that operation.
The second and perhaps more important question concerns public accountability. If the phoenix arrangements get off the ground, they will do so only with public money. There is no hope of reorganising the private sector without an injection of public money, and that money will come either directly from the Government or indirectly from the British Steel Corporation. Who will decide now that public money is to be spent? What are the criteria for using public money, either directly or indirectly? What criteria will be used to decide which firms are to be helped? Will they be commercial criteria? Will they be on the basis of productivity, the costs of producing steel, or the efficiency of the plant?
If, when the Minister announces the phoenix operations, I find that they involve many firms that are less efficient than the Duport works in Llanelli, in my constituency, and if Duport is not included, I shall want to know why. I do not have anything against the other firms, but Parliament must know on what basis public money is to be spent and what the criteria are to be, so that we can judge for ourselves whether the criteria are purely commercial or whether politicial factors are involved.
After all, certain interests are represented in the House. Members of Parliament, mainly Conservative Members, are involved in private steel companies. I do not criticise them for that, and they do not attempt to conceal their interests. I hope, therefore, that we shall be told clearly tonight which criteria will be used in deciding which firms are to be involved in the phoenix operations.
Thirdly, may we be told to whom we are to put our case? I want to put the case of Duport, in Llanelli, despite the fact that it is now closed. After all, the assets are still there. Do I go to the Department of Industry, the Welsh Office, the Minister of State, or the British Steel Corporation? Who is in charge of the phoenix operations? Is it to be left to Mr. MacGregor, of the British Steel Corporation? I have a duty to my constituents and I want 458 to know whom I approach next to argue the case for Duport. Duport is a very efficient works, and should be included on Phoenix I, II, III, or whichever operation is appropriate. Those questions are all unanswered, and that is not the way to help the steel industry—both the private and public sectors.
I have been told that it is possible to put steelworks into mothballs. I suppose that that is possible for a short time, but time passes, skills develop, work forces gradually move away, and it is difficult to get them back. Time is short. In the case of Duport, the Government have acted wrongly. They could have done a service to the nation and at the same time to my constituents and the private steel industry by helping one of the most efficient steelworks in Europe. I still hope that it is not too late. We need action, and we need it fast.
§ Mr. Richard Page (Hertfordshire, South-West)
What we have to face tonight is the real and desperate position of the British Steel Corporation, in that, as my right hon. Friend said, it has been declared bankrupt, in commercial terms, and the estimated losses of 1980–81 that were announced yesterday, of about £660 million, bear sad testimoney to that fact.
However, in the Bill we have a recreation of the corporation—I suppose that one could call it a true phoenix—on a new financial foundation, coupled with a new corporate plan, so that it has another chance of achieving some form of viability, but I must remind the House that, again, it is supported by taxpayers' money.
I do not believe that anyone in this Chamber or in the British steel industry underestimates the difficulties that lie ahead. Unless there is co-operation on all sides—unions, management, the private sector, and the Opposition and Government Benches—it will not be possible to overcome the difficulties that lie ahead, especially when the projected losses for 1981–82 are about £318 million. I shall come back to some of those difficulties later.
I also feel that there will be little point in conducting post mortems and compiling lists of past errors and mistakes. The only thing that we should recall before continuing our debate on the corporate plan's chances of success is that it is again the poor taxpayer who has supplied the billions of pounds now being wiped off the slate in this measure.
I have studied the corporate plan and compared it with past projections, and have found that for the first time there seems to be a mood of realism in British Steel. It is facing the reality of the market place and is starting to bite the bullet of operating in a reduced market, which will mean reducing overheads and, more painfully than anything else, reducing employment possibilities.
We must also face the fact that, tough as the plan is, it is based on calculations that could be regarded as overoptimistic. First, I must draw attention to the exchange rate that is used in the calculations of the corporate plan. The plan is based on an exchange rate of 2.20 against the dollar and, more important, of 4.20 against the mark. A variant on that exchange rate can mean tens of millions of pounds on the profit and loss account.
I do not tonight advocate a fixed exchange rate. However, it is only fair to say to my right hon. Friend and to Ministers on the Treasury Bench that this is not the only State industry that has based its future calculations on that 459 limit of exchange rate. That factor must be borne in mind when they are considering the various operations within the money markets.
Secondly, agreement must be reached quickly with other countries within the EEC to accept more sensible levels of plant production against their capacity. That must be achieved if we are to avoid a continual glut on the market, with consequential uneconomic pricing, as is happening now. If there is no agreement, the huge losses that are occurring in every plant and every country will continue within the EEC.
I therefore urge my right hon. Friend, when he goes to the Council of Ministers on 26 March, to maintain the tough stance that he has already taken and drive home the fact that unless we have demand and supply in more economic balance there will be economic disaster for every steel plant within the EEC. The Council must appreciate that fact far more than it has done so far in the voluntary pact that is now coming to an end.
In asking for this form of protection, I do not say that British Steel should stop the continual drive towards efficiency and toward reducing the number of man-hours per tonne of steel produced. I should point out here that some encouraging figures are starting to emerge from British Steel, on which the corporation should be congratulated. I have no doubt that, with the capital reconstruction removing the burden of interest charges and some of the high gearing, together with increased efficiency, we shall see a shift towards reduced losses and, with luck, profitability.
I turn to the difficulties facing the private sector. There is no doubt that its difficulties have been created by the drop in world demand and a most aggressive sales campaign by our EEC competitors. We must remember the rather artificial price umbrella that the BSC held over the market place for many years—an umbrella that was ripped away in the damaging strike of January last year.
That strike showed a lack of appreciation of conditions in the real world by the Iron and Steel Trades Confederation, which let in foreign competition and damaged both State and private industry. I would like to think that the ISTC is now being a little more co-operative and appreciative that only together shall we overcome the difficulties. We shall not do it by fighting each other.
I am told that the overlap on operations between the BSC and the private sector is about 20 per cent. Both groups are being hurt in the aggressive pricing of the market place. If we want the BSC to be aggressive to increase its market share and to reduce its demands on the taxpayer, we cannot ask it to protect and give a price advantage to the private sector.
Though we should welcome the commitment that any complaints about price cutting will be referred to the Under-Secretary of State for Industry, we must accept the almost impossible position in which he will be placed and the difficulty of obtaining meaningful results from an investigation.
Probably the most realistic assessment of the position was by Mr. Clancy Scheuppert, the chief executive of Sheerness Steel. When he was asked if the BSC was deliberately cutting prices to put the firm out of business he replied that the corporation had to match Continental prices to stem imports. He said that the BSC had been forced to bring down prices and that, as a consequence, private steel makers were hurt. That is different from 460 saying that the BSC is deliberately driving the private sector out of business, although I am sad to say that the result may be the same.
The only practical way is to encourage joint partnership with the private sector, in such arrangements as the phoenix operations to which reference had been made, so that there is a united approach to fight off foreign competition. I agree with the remarks of the right hon. Member for Llanelli (Mr. Davies) about financial arrangements being made public so that the private sector, the BSC and we know exactly how funding will he made available.
Whilst this corporate plan faces the realities, I have to say that many of the actions being taken now would have been far less painful if the people involved four or five years ago had had the guts to take the decisions then. Although we are starting out from a precarious foundation, I wish Mr. MacGregor and his team every success and cooperation in tackling this most difficult of tasks.
I should now like to draw attention to the activities of the British Steel Corporation (Industry) Ltd., which I describe as the social conscience of the BSC. It is now being run by the previous chairman of the BSC, who is taking a most enthusiastic and conscientious view of his duties. I should like to believe that its activities in providing job opportunities in areas faced with inevitable closures will continue to be actively encouraged.
To date BSC (Industry) Ltd. has operated in 12 areas of concern. It has established representatives to deal with business men interested in setting up companies and providing job opportunities. The present position is encouraging. Out of about 5,000 applicants, BSC (Industry) Ltd. has decided to support about 500 with management advice and start-up finance. When they are all up and running they should provide about 15,000 job opportunities. That is an area of hope that we should encourage and bear in mind.
There is not time to deal with each area in detail and to give a progress report. However, one of the most difficult areas that we can envisage is that of Consett. It already has 60 serious offers, with inquiries coming in at a most gratifying rate. It is hoped that by the end of this year 1,000 job opportunities will be offered in Consett. Finance is coming in and is being provided from within the EEC social fund, the European Investment Bank and the European Coal and Steel Community.
§ Mr. Donald Coleman (Neath)
I am interested to hear the hon. Gentleman say that help is being made available through BSC (Industry) Ltd. to Consett, Corby and other places with BSC works. What about Llanelli and the private sector? What will the Government do to help, because it employs steelworkers too?
§ Mr. Page
I should like to spend more time talking to the hon. Gentleman about the need to set up small firm investment banks such as operate in the United States to give small firms the opportunity to go into depressed areas and to start real growth opportunities instead of some of the present artificial job schemes, worth while as they are.
The British Steel Corporation has gone through a difficult phase. We are wiping out a lot of taxpayers' money. I hope that in the reconstruction the parties involved will not fight each other but will co-operate to ensure that taxpayers' money is spent profitably and economically, so that we have a viable steel industry.
§ Dr. Jeremy Bray (Motherwell and Wishaw)
I am sorry that the Secretary of State has not seen fit to sit out the debate, because we all have many points to put to him personally.
§ Mr. Tebbit
That is an unnecessary remark. My right hon. Friend has other extremely important and urgent responsibilities, of the type indicated by his statement this afternoon. He will return to the Chamber at the earliest opportunity. In the meantime, I hope that the hon. Member for Motherwell and Wishaw (Dr. Bray) does not find it offensive to put his points to me.
§ Dr. Bray
I do not believe that the business of the House can be less important than other matters. The Secretary of State is calling for enormous sums. He is responsible for a major industry. He is a force in the Government, who have set the economic background against which the industry must operate. He ought to take the medicine.
The prospects of the BSC depend in part on circumstances outside its control. The most important circumstance is Government policy. I should like the Secretary of State to do the sums the other way round. He has set his economic policy and he has seen, painfully drawn out in the public and the private sector, the consequences of that, not only for the BSC but for ICI, GKN and the whole of manufacturing industry. He could have done the sums the other way round. He could have examined the massive investments programme in the BSC, ICI, the chemical and oil industries and the other great capital-intensive industries. He could have asked what sort of economic policy was necessary to validate the technological changes and capital investments that have been made in the past. He would have arrived at a totally different set of conclusions from those with which we are confronted in the House today.
We should consider what we are doing writing off the £3,500 million that the Minister of State brushes away as a minor matter, which does not deserve the attention of the Secretary of State. It is only the accumulated losses that British Steel has made over recent years which must be considered but the fact that the assets of British Steel—the modern steel plants that have been built—have never been operated in the environment for which they were designed.
I refer hon. Members to the notes in the BSC annual report last year on the revaluation of assets that took place on 1 April 1979. At that time, the write-down of assets was calculated in relation to(a) Specific plant items for which there is no expected need in the forseeable future. (b) Assets which will go out of use due to works closures which have been announced since 31 March 1979, some of which have already been effected. (c) General over-capacity throughout the Corporation, comparing current installed capacity (after taking account of the two categories above) with an expected annual requirement of 15 million tonnes of liquid steel.On 29 July last year British Steel was planning at that level, which has now been confirmed in the corporate plan.
As the note says, it is wholly proper to write down assets under the provisions of Statement of Standard Accounting Practice No. 12, which requires thatWhere the unamortised cost of an asset is seen to be irrecoverable in full, it should be written down to the estimated recoverable amount, which should be charged over the remaining useful life.462 However, that is the accountancy of the doss-house. If one is running an industry that, on its record, one expects to maintain profitable viable operations, far from writing down assets to a recoverable level, under current cost accounting procedures one should write up assets to their replacement value and depreciate on that basis. If the BSC had done that we would be writing off not £3½ billion but much more. That larger figure is the measure of the disastrous policies followed by the Government. It is not £½ billion, but a much larger sum. The Minister of State shakes his head. Perhaps he would like to say why.
§ Mr. Tebbit
I shall reply to the hon. Gentleman's speech later, when the Secretary of State is here.
§ Dr. Bray
I do not think that the hon. Gentleman understands the argument.
The fact is that we are facing an industry that has been placed in an environment in which financial discipline cannot operate. Any realistic financial disciplines that could have made sense have been destroyed by the economic policies of the Government. Therefore, in that context it is useless for them to deliver sermons about having to break even in this industry by a certain date. The industry knows that it is totally vulnerable to the economic environment in which it is set.
Let us be clear about what the Secretary of State said. He said that the Bill wrote off the overestimated investment programme in the early seventies. That is not a physical operation. With a few exceptions, the plants that were built are taking the base load of the corporation, for example, those at Thrybergh, Redcar, Port Talbot, Llanwern and Ravenscraig. Those assets, which were built in the seventies, are operating. We are physically writing off plants that were built many decades before that.
§ Mr. Nicholas Lyell (Hemel Hempstead)
Will the hon. Gentleman explain why this industry is more vulnerable to the economic climate than any other industry?
§ Dr. Bray
First, it is highly capital-intensive. Secondly, it is the basic supplier of the capital goods industry. An industry like ICI is capital-intensive, but it supplies across the whole spread of the gross domestic products, and not just investment.
Therefore, when one hammers GDP and it goes down by 10 per cent,. ICI output goes down by 10 per cent. When GDP goes down by 10 per cent. and investment goes down by 40 per cent. steel demand goes down by 40 per cent. That is why the steel industry is the advance indicator of what will happen to the whole manufacturing industry today. Does the hon. Member agree?
§ Dr. Bray
I am grateful to the hon. Gentleman.
Therefore, I hope that there will be less mindless slanging from the Secretary of State and Conservative Members who are simply concerned with putting their knives into public enterprise and who say that British Steel has been particularly incompetent. By normal technical operating yardsticks, it has not. It has been efficient, it is improving its efficiency, and it is needing to make further improvements. However, hon. Members should realise the particular nature of the industry's markets and the capital intensity of the industry, which have caused the results with which it has been faced.
The Secretary of State said that the industry was effectively bankrupt and that it could not be liquidated 463 under present legislation, but under the Bill he is making provision virtually to reduce the activities of the Corporation to nil. He is not exactly holding out an encouraging prospect for the reconstruction of the operation of the corporation, nor is he reflecting the point of view put across by Mr. MacGregor and his colleagues on the BSC board, who are having to keep the ship afloat. No chairman could speak as the Secretary of State does and keep his head above water for one day.
The Secretary of State went on to compound the mischief that he has done to the industry by saying that further legislation would be introduced if liquidation was necessary. The Secretary of State is a business man, because he cannot help being a business man. He is a business man on a massive scale. He is a banker on a tremendous scale. However, he is the most disastrous business man that this country has ever had. Every 10 years or so the Secretary of State has an enlightenment. I have watched him have two enlightenments since I have been in the House. His first enlightenment was on the nature of the social services and his concept of accumulative disability. The second was the enlightenment that led to the disastrous economic policies of the Government.
Every time, the Secretary of State realises his mistakes afterwards and confesses them in the most engaging manner. Conservative Members face the problem of whether they can afford to wait for his next enlightenment. If the right hon. Gentleman is allowed to run his harum-scarum course through British industry, not only the BSC, ICI and GKN will suffer; the whole of manufacturing industry will be unable to recover without total financial reconstruction of the kind that we are having to carry out today for this part of industry.
Will Conservative Members consider the political implications of such a Bill not just for the BSC or the public sector but for Unilever, ICI and GKN? Bills such as this will flock in if we have another two years of this sort of economic policy. Conservative Members have had a gutless reaction. They will vote billions away to this disastrous Secretary of State and will not have the courage to vote against him in the Lobby.
§ Mr. Michael Ancram (Edinburgh, South)
Is the hon. Gentleman saying that he will vote against the Bill tonight, in view of the need to protect steel in Scotland?
§ Dr. Bray
Of course I shall not vote against the Bill. I am talking about Conservative Members not voting against the economic policy that has made the Bill necessary. The Bill is an inevitable consequence of the Secretary of State's policy. That is where there is the real measure of the lack of courage on Government Benches. They see the disastrous course of manufacturing industry, but they just sit there like dummies, letting it all flow over their heads.
§ Mr. Grylls
Is the hon. Gentleman really saying that the losses have occured only during the past two years? He cannot expect the House to take that seriously. Some losses occured during that time but others occured during the 12 years since nationalisation. They are a result of mismanagement after nationalisation.
§ Dr. Bray
The figures for the losses contained in the statement on the corporate plan show that the highest losses occured during the past two years—some £1,200 464 million of the accumulated £2,800 million. They were high because of the intolerable exchange rate and the drastic cut in investment in Britain.
§ Mr. Richard Page
I appreciate what the hon. Gentleman is saying, but does he accept that the figures for productivity per man—the tonnes per hour produced—puts Britain at the bottom of the league rather than in the middle, which is where it should be in view of our equipment?
§ Dr. Bray
I represent Motherwell, the home of the Ravenscraig works, which has international manning standards. Motherwell also has a special steelworks, and the condition of the investment was that it would not be made until the unions had agreed on full international manning standards. The unions have agreed to the manning standards required by the corporate plan. I constantly discuss manning problems and inter-union problems frankly and freely with both sides of management in the BSC. Further improvements are needed in a number of works. I hope that the hon. Gentleman will not fail to pay tribute to the achievement that has been made, especially in the large flat products works at Port Talbot, Llanwern and Ravenscraig.
I shall conclude with three specific points about the immediate position. First, there is the impact of the closure of Linwood on the future of the strip mills in general and the cold and hot strip mills in Scotland. Mr. MacGregor is reported as saying that there will be a loss of 15,000 tonnes a year from Gartcosh. That is relatively small in relation to the total output. There is no reason for any immediate threat of closure of the Gartcosh strip mill. I hope that there will be no such suggestion. We must have, and maintain, a complete cold strip and hot strip capacity in Scotland, which means maintaining the Gartcosh works.
Secondly, various statements in the corporate plan refer to the rundown of research. That is a dangerous development. If the corporation runs down its research not only the long-term work but the current operating efficiency of the works will suffer. Unless the industry maintains the absolute frontier of technological capability across the whole area, from metallurgy to instrumentation, it will inevitably suffer in the operating results and efficiences of the works.
Thirdly, the corporation has been given licence to compete with import prices. It assists its major customers by matching prices for fabricated goods in export markets where steel is a large proportion of the total export order. Let us take the example of the Esso project at Moss Morran, with its 150 pressure vessels and 200 heat exchangers. A large proportion of the cost of that project relates to steel. If that steel is purchased from the BSC at the home market price the fabricators will be in a difficult position to bid against foreign fabricators who have obtained steel from Japan at a much lower price.
Once it becomes necessary to trim and match prices to match the prices of imported steel in order to support fabricators in export markets—which represents a large proportion of their steel orders—there is no limit to the amount of support that must be given. The complaints of the private sector are wholly justified. The Government have got themselves into an impossible position in their support for prices. The cure is not to lean on the BSC because of its pricing practices but to get the exchange rate 465 to a level at which British industry generally can compete. Not only the BSC is suffering; we have seen all firms suffer, across the board. In the long run there is no cure for the difficulties of the BSC which is not equally a cure for the economy as a whole.
This is a sobering Bill. It is a small Bill, and we shall not divide the House on it. It is sobering because it is a condemnation of the whole economic policy of the Government.
§ 6.6 pm
§ Mr. Hal Miller (Bromsgrove and Redditch)
I hope that I shall not aggravate the apparent annoyance of the hon. Member for Motherwell and Wishaw (Dr. Bray) if I do not follow all his arguments. My remarks are intended to pursue a slightly different line. I hope that he will forgive me, but, having been described by him as a gutless dummy, I feel entitled to make some form of reply.
When the Labour Party was in office, at a time when there was not a world-wide recession—that is an important point to bear in mind—the BSC's losses for 1975–76 were £255 million; for 1976–77, £95 million; for 1977–78, £443 million; and for 1978–79, £309 million. Where was the hon. Gentleman then? What was the state of world trade? His remarks took no account of the significant decline in the number of customers.
There has been a world-wide reduction in capacity in the motor vehicle industry, by no means confined to Britain, but experienced by other countries following other economic policies. As I come from the West Midlands I am qualified to say that our workers have experienced a loss in real wages during the past decade compared with most other occupations, regardless of the economic policies followed by the Governments of my right hon. Friend the Member for Sidcup (Mr. Heath), the right hon. Member for Huyton (Sir H. Wilson), the right hon. Member for Cardiff, South-East (Mr. Callaghan) and my right hon. Friend the Prime Minister. I do not feel that the hon. Gentleman has established a case.
§ Mr. Miller
I have been supporting the policies of my Government in the Lobby, in the same way as he claims to have done—
§ Mr. Miller
I am not giving way to the hon. Gentleman. I do no wish to increase his wrath. As he described me as a gutless dummy, I feel obliged to point out some of the apparent inconsistencies in his argument.
§ Mr. Deputy Speaker (Mr. Bernard Weatherill)
Order. The hon. Member for Bromsgrove and Redditch (Mr. Miller) said that he would not give way.
§ Mr. Miller
The line of argument that I want to pursue relates to the argument put forward by the right hon. 466 Member for Llanelli (Mr. Davies) and the right hon. Member for Salford, West (Mr. Orme). I wish to draw the attention of the House to the difficulties of the private sector in the steel industry. To be fair, the hon. Member for Motherwell and Wishaw touched on that point. I wish to ask some questions about the nature of the phoenixes that are to rise. I am not sure how we should domesticate these birds. My hon. Friend the Member for Hertfordshire, South-West (Mr. Page) raised the question, as did the right hon. Member for Llanelli, of how they were to be accountable. Whether we take them with a pinch of salt, put salt on their tails, or however we treat them, I hope that the Minister will enlighten us when he replies.
The first point that I want to make relates to the private sector of steel making—including the downstream activities. Far too much attention has been concentrated on primary steel making. One of the difficulties that we face is the large range of activities conducted by British Steel inside its overall total of 40.4 million liquid tonnes equivalent of steel and the expansion of its activities downstream from steel making into new areas of competition with the private sector.
The industry, both public and private, is faced with the need to reduce capacity and to become more competitive, but it is difficult for the private sector to stomach that. Whereas the public sector is enabled to obtain financial assistance from the Government for the necessary adjustments in capacity or for redundancies and, indeed, even for competing with imports, that assistance is not available for the private sector.
The Opposition have fairly pointed out that heavy losses have been sustained in the private sector regardless of the comparative efficiency of those installations. It is no secret that several firms in the private steel making sector are losing £1 million a month. They naturally find it difficult to understand the Government's policy in supporting the losses of the BSC and the redundancy provisions, which are a great deal more favourable than any offered to workers in the private sector, and subventing competition with imports on a basis that is not available to them. In the end that will inevitably drive them into bankruptcy.
In the case of Duport that virtually happened, until a last-minute rescue operation was arranged with the assistance of my hon. Friend to whom I pay tribute. The details of that rescue have not been tied up. There are still important points of principle to be resolved, one of which concerns the valuation of the assets of the Llanelli steelworks, which were built in the wrong place as a result of Government policy diverting investment away from the West Midlands, where the works should have been placed to supply downstream activities and to take advantage of the works in the constituency of my hon. Friend the Member for Dudley, West (Mr. Blackburn).
I welcome the principle of the Bill, as put forward by my right hon. Friend. It removes the duty on the British Steel Corporation to supply iron and steel of all kinds to all sorts of customers. That seems to open the door to dealing with and limiting the range of the corporation's activities. I shall return to that.
I also welcome the fact that the Bill, as my right hon. Friend says, provides a route to enable the corporation to sell off its assets or to go into partnership with the private sector with part of its assets. I find it difficult to understand how that will be achieved by the phoenix route.
467 We originally heard of Phoenix I in connection with Guest, Keen and Nettlefold. Phoenix II was to deal with Duport, Hadfields and Round Oak. The difficulties with Duport meant that its case had to be considered with rather greater rapidity and separately from the others, but, from the information that I have, it does not seem that the Government are making real progress with Phoenix II. I should be grateful if my hon. Friend would give us some information and say whether he still thinks that that is a viable form of bird or whether there will have to be a more limited regeneration of operations, perhaps involving fewer private companies. My present information is that the BSC will not be in a position to take part in Phoenix II, or even to conclude an agreement on it, until the autumn.
If private firms continue to lose £1 million a month until the autumn, there will be a great many disgruntled shareholders, quite apart from disgruntled workers, managers, customers and suppliers of the private firms involved. People in the private sector feel that the Government's policy, whether consciously or unconsciously, is resulting in an expansion of the public sector at the expense of the private sector.
My hon. Friend the Member for Hertfordshire, South-West said that the overlap between the BSC and the private sector was only about 20 per cent. However, that is on the present scale of operations. Once the BSC has acquired the assets of Duport, which it wants to obtain—the bright drawing, the rolling and the stockholding—it will increase its competition in the downstream sector.
The mention of Phoenix III and IV has led private industry in the downstream sector to conclude that there will be a further strengthening of competition from the BSC or from the phoenix units in the downstream business. That raises the question of the basis on which the phoenix schemes compete. They may be part of a Companies Act company, but that does not mean that the Government, as a major shareholder, will not support them in the way that I have tried to illustrate to my hon. Friend is considered to be unfair by many in the private sector. The private sector is not afforded any aid to compete with imports, to make the improved redundancy payments and to effect the necessary closures.
There is also the question of energy prices, whether supplies are on an equal footing between the BSC and the private sector, quite apart from the wider issue of energy prices raised by the right hon. Member for Salford, West.
In the background to the corporate plan dated 23 February supplied to the House it was stated that the BSC still had an estimated energy cost penalty of between £50 million and £70 million a year relative to EEC producers. I do not think that the measures announced in the Budget will have remedied that to the extent that many expected. The Budget measures did not deal at all with foundry coke.
The competitive situation is very important, in my view. For instance, in the scope of the BSC's operation I cite as an example the Stanton and Staveley foundry. My hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) has already submitted evidence of extremely unfair competition from that foundry with a private foundry in the West Midlands. Reports have come through to me of other activities by that company which no private company would be able to sustain. That may have been set up as an independent, autonomous unit, 468 perhaps to be converted into a Companies Act company, but I do not think that either the administrative or the legal measure will answer the point that I am trying to make.
There is a serious doubt in the private sector about the course of policy that the Government are taking and how the phoenixes will evolve. There is already a widespread concern and a deep sense of injustice about the unequal treatment meted out between the public sector and the private sector on the points that I have mentioned—reductions of capacity, redundancies and competition, and possibly also on the energy question. How is the private sector, particularly downstream, to consider its business plans on the basis of the information and the likelihoods presently apparent to it? Will not private companies seek to go further into trading and less into processing and manufacture in Britain? Will they not import more rather than be tied to the BSC as a monopoly supplier? What answers will they give to their work forces, which must, naturally, be concerned about the future of their jobs?
I come finally to the political point. Private sector companies are saying "How, under a Conservative Government, are we getting into a condition in which even the steel companies denationalised by the Labour Government are now at risk and the only solution proffered to them is that they should be swallowed up once more by the BSC, in whatever guise that may be put forward?" That is the sort of political question that private concerns in the West Midlands are asking me. I should be very grateful for anything that my hon. Friend the Minister can do tonight to help me to give them an effective reply in order to set those real fears and resentments to rest.
§ Mr. James Tinn (Redcar)
I shall resist the temptation to join my colleagues in the exhilarating sport of chasing after the Secretary of State, not only because he is rather a large target and easy game, but also because, in any case, I have been a lifelong opponent of blood sports. I go even further. I would support a close season on the hunting of the Secretary of State—although even if my colleagues were to go along with that, I am afraid that the right hon. Gentleman himself, by his actions, would ensure that it was a very short close season.
I want to address myself to two major points. First, I should like to take up strongly the accusation, the smear, that steel workers have in any sense been featherbedded—cushioned by the taxpayer—and have been a burden to the taxpayer, in the way that unfortunately, has been so often suggested and even, occasionally, plainly alleged from the Conservative Benches. I react pretty strongly to that, having worked in the industry.
Anyone who thinks for a moment that steel workers or blast furnace men have ever been feather-bedded should try a short spell in the industry. He should set off at half-past five on a winter's morning, perhaps climbing up the hill to the works for the first shift, or coming home shortly after six o'clock in the morning after a night shift. He should have a walk around the bottoms of the blast-furnaces, and around the smelting shops, BOS plants, continuous casting plants, and so on. He should then ask himself—he should certainly not dare to ask the workers—whether the workers appear to be featherbedded or cushioned in any sense, and whether they are doing a fair day's work for the money that they are earning.
469 I used to climb a hill to the steelworks. It used to stand overlooking the river Derwent, across the border into Northumberland. It looked almost like a Vesuvius with the slag cascading down the sides of the tips, with beautiful country surrounding it, moorland, rivers, and so on. It was the heart and life blood of the town. But now, if one is on the moorland roads looking eastwards towards Consett at night, one will not see in the works so much as a 40-watt bulb glowing. The furnaces are cold. They are already being dismantled. One will see plenty of men out walking their dogs, as men did in the thirties, because that is all they have to do. Those men were never feather-bedded in their working lives. They are certainly not feather-bedded now, although the full and savage impact of that murder of a town is still fully to be felt because they are still benefiting from the redundancy payments—not wasting them—which at present are to some extent anaesthetising the surgery, the butchery, that has been done on the town.
There is no doubt that the steel industry has had massive amounts of money over recent years. Everyone is entitled to ask "Where have those amounts gone, and how have they been used?" I have looked over the figures today. Rounding them off slightly it is interesting to find that two-thirds of the money has gone on public investment. I readily acknowledge that a very substantial part of that has gone in my constituency at the Redcar complex—in investment, though, for the future, as my hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) has pointed out. This investment is not wasted money. It is not feather-bedding the workers. It has established steelworks of a technological level to match the best in the world, and with manning levels comparable and competitive with the best in Japan, or elsewhere.
Those investments cost money. Sadly, a very considerable amount of money was spent on building those plants at times when none of us on either side of the House, in Grosvenor Place or elsewhere, could guess or appreciate the catastrophic impact that the world recession would have on the steel industry. Many of the plants that have been closed, including that at Consett, have been closed partly as a price that is being paid for the massive investment that the corporation undertook, and which, in the long run, will be shown to have been rightly undertaken, although in ignorance of the immediate future that lay ahead.
Two-thirds of the money has gone on investment in new plant. That is a good bet by any standards—unless we are prepared to write off any British steel industry altogether. A quarter of the rest of the money has gone on interest payments. I welcome the easement that the Bill provides in that regard. It is absolutely essential. I should have liked to see it sooner, but nevertheless I give a very warm welcome to it now.
The rest of the money, about 10 per cent., is taken up in redundancy payments. They are a necessary charge on the conscience and the pocket-book of the industry for men who have devoted their lives to it. It is ironic that the industry should have to bear that burden, because the men would far sooner earn their livings in the industry in which they grew up and developed their skills. Despite the bad conditions and the risks involved, they have a feeling for the industry. There is a close family relationship in terms of commitment. The feeling is, perhaps, akin to that felt 470 by the miners for their industry. The men would far sooner work than draw redundancy payments. Less than 1 per cent of the money has gone on job creation.
I do not want to dwell on the negative aspects of the issue for too long. We must consider how the industry's future should be determined. I am happy to report that the workers on Teesside are equipped with modern plant that is comparable to that of the Japanese. Indeed, the blast furnace was designed by the Japanese. In Redcar, steel workers have been given the tools. I am glad to say that they are breaking records. The Pellet plant attached to the blast furnace is breaking records. The blast furnace itself has a capacity of 10,000 tonnes a day. It has fully recovered from the setbacks of the industrial dispute. It is achieving, not only record output ahead of target, but record figures for low fuel consumption. The oxygen steel making plant at Lackenby and the continous casting plant are also doing well.
I have tried to inject a more positive tone into the debate. Given the period that we have gone through, it is inevitable that many of our debates have been negative and critical of one party or the other. Hon. Members have tried to attribute responsibility for this and that. They have tried to fix the blame where they think it lies. On Teesside, at Ravenscraig and at modern plants in Wales the same situation applies.
Even in the depths of its greatest recession, the industry is demonstrating that if the workers are given the tools and the equipment to produce steel, they will out-produce the best in the world.
§ Mr. Gerry Neale (Cornwall, North)
Through my hon. Friend the Minister, I apologise to the Secretary of State, as I was unable to be in the Chamber when he addressed the House. Many hon. Members come from or have constituencies with steelworks in them. There are no steelworks or steel workers in my constituency and I have no knowledge or experience of them. I have no hesitation in saying that, with one exception, the constituency of Cornwall, North has little sympathy with, or concern for, the plight of the steel industry. However, like the vast majority of constituents, they pay for the steel industry's losses.
§ Mr. Neale
It is important that the views of so many people should be borne in mind. I accept that those who have steelworks in their constituencies are faced with considerable problems. Many of their constituents are faced with the loss of their jobs, short-time working, and so on. My constituency is third in the league of constituencies with the greatest number of small businesses. The constituents of Cornwall, North do not need to be told about the problems of unemployment. They know about unemployment. It is one of the worst areas for unemployment.
The hon. Member for Redcar (Mr. Tinn) spoke with great sincerity about the problems of working in a steelworks. He spoke about the difficulties of turning out early in the morning, and so on, as though those difficulties were unique to the steel industry. I do not wish to belittle the hardships involved in working in the steel industry, but people in my constituency work through the 471 night lambing on Bodmin moor. Others spend the night fishing. In emergencies, men go out in lifeboats. Such people feel that their jobs are just as difficult and as vital as those of the steel workers.
§ Mr. Neale
Cornwall's industry has suffered the most drastic structural changes during the past two centuries. There have been considerable alterations in the basic structure of local industry. Unashamedly, I shall direct my remarks to those areas that interest my constituents, and many of those in rural areas.
All small business men realise the economic realities. They know that they have to provide a good service to their customers. They know that they must provide the services or the goods when they are required, and at a price that the customer can afford. If they do not do so they will go out of business. Many small business men will argue that they have to live with a simple truth, namely, that the Department of Industry will not bail them out if they run into problems.
Whether Opposition Members like it or not—if they do not, there may be a presentational problem that needs solving—there is a strong belief in constituencies such as mine that the steel industry and its workers should live with that very truth. [HON. MEMBERS: "Farming."] There are other examples of the same thing. Two, three or four wrongs do not make a right.
At present, there is a considerable amount of frustration. I have great respect for my hon. Friend the Minister. I know that he is determined to bring a greater sense of reality into the public sector, and particularly into the steel industry. In addition, I have great respect for the BSC's new chairman.
I welcome the Bill in many respects. I think that the way that it allows the steel industry to be run down to a trimmer and fitter size, bearing in mind the world recession, makes sense. It makes sense also that it will be possible to sell off various parts of the corporation in due time. But I come back to what I sincerely believe to be the reaction of many people in this country to what we are doing in the Bill. We are, among other things, proposing to write off £509 million, the remaining debt to the national loan fund. I suppose that that makes sense. Then we read that another £3,000 million of the BSC' s capital is to be written off. I have to confess that when constituents put this to me I am somewhat bemused by these figures. Then we read that yet another £1,000 million can be written off on top of that. Worse still, there seem to be powers to invest another £1,000 million as a result of amending the 1975 Act, and more powers to invest yet another £2,000 million.
I have to tell the House that the fury of the people in my constituency is mounting and has reached a stage at which it has become almost unchallengeable. In fact, one constituent approached me quite recently and said "You look an honest sort of chap." I do not know, Mr. Deputy Speaker, how you cope with that sort of remark, but I find it very difficult to argue with it, particularly when it is said a second time, as it was by my constituent. Then he paused and it was in that pause that I realised that either he had 472 no idea whether or not I was an honest sort of chap or he was pretty sure that as a breed politicians are not, but that he wanted an honest answer on this occasion.
He said "If you had £5,000 or £10,000, would you invest it in British Steel?" I had to admit that I would not. He said "You are a solicitor and presumably a trustee on occasions. As a trustee of a fund, would you invest money for the trust fund in British Steel?" I had to admit that. I would not, and he said "You would probably go to prison, would you not, if you put that money into British Steel?" Then, of course, the inevitable question followed. He asked why I had put taxpayers' hard-earned money into British Steel.
§ Mr. Campbell-Savours
The hon. Gentleman may well guide his constituents when they read the reports of his speech tomorrow in the papers in his constituency, to which he will no doubt circulate it, but he might indicate to them that tens of thousands of steel workers descend on the national park in his constituency annually and spend their money propping up the economies of Devon and Cornwall. His area exists on the money earned by industrial workers in the Midlands, the Northern region, and Scotland, and he would do well to draw his constituents' attention to that before he starts knocking hard-working steel workers.
§ Mr. Neale
My constituents in North Cornwall would, of course, be very quick to remind me that they have already partly paid for the money that they are getting back in payment for holidays. They would see that as at least some return on the so-called investment that they have made in British Steel.
We really have to encourage the view that the taxpayer must be borne in mind in the negotiations and decisions that are made along with these vast injections of cash and when we come, as successive Governments have, to a position like this, in which it has recently been announced that this vast sum of about £1,121 million is to be put into British Steel this year. A constituent pointed out to me last weekend that the sum that was to go into British Steel was pretty closely equated to the sum that we were proposing to raise through the Finance Bill by petrol and diesel duty.
To show the frustration that exists—I repeat that I do this only because I feel that hon. Members from the steel industry constituencies must appreciate what the feeling is—that constituent said to me "If it had been necessary for the Secretary of State to go before the House when asking for this money and ask at the same time for the money to be raised on a particular item, what chance would there have been of this money going into British Steel? If, first, he had asked that the money should go into British Steel but had then said that it was to be raised by a 20p tax on petrol and diesel fuel, would it have gone through?" I leave that thought with hon. Members.
It may also be said by my hon. Friend that if we did not aid steel at the cost of, say, 20p on petrol, it would cost 25p just to let the steel industry find its own level in these very difficult times. But the argument that is then presented to me is that, presumably, five years ago the figures would have been 5p and 7½p; two years ago it would probably have cost us 10p on petrol duty and 15p if we had allowed it to find its own level. I think that the problem that we now face is that on the track record of the losses that have been referred to—and there was some 473 discussion of these across the Floor—we could well find, in another year or two's time, that the figures were even greater.
I have to say, in the absence of the hon. Member for Motherwell and Wishaw (Dr. Bray), that he made a point about the last two years' losses, but, looking at the figures for 1977–78, I can assure the House that it would be a great comfort to my constituents to know that while losses are running at £2 million a day at the moment they were at that time only £1.5 million a day.
On that point, therefore, it seems to me that there is a built-in incentive to guarantee that the problem gets larger and larger each year, on the basis that the likelihood gets less and less that any Government of any persuasion will have the courage really to tackle it. The position seems to me to be that, as my right hon. Friend the Prime Minister said in an answer at Question Time regarding redundancy payments to coal miners, however justified may be the solution to the problem that exists in these industries—and I concede not only to my hon. Friends but to hon. Gentlemen on the Opposition Benches that the problem is considerable—there is major frustration, exasperation and even anger among many ordinary people—people who are totally unrelated to the steel industry—about the sheer size of the sums going into it.
Therefore, while I welcome what my hon. Friend is seeking to do and wish him and my right hon. Friend the Secretary of State every success in their efforts to bring a far greater sense of realism to the industry at an early date, and while personally, as a Member for a rural constituency, I take great heart from the general optimism that seems to be expressed that this is now achievable, I cannot see that it would be serving the best interests of my constituents or of the country to go on for much longer funding these vast losses by inflicting on people like them the petrol and diesel duties and taxes of the high order that we are now seeing.
§ Mr. Stan Crowther (Rotherham)
I shall try later to reply to the important point raised by the hon. Member for Cornwall, North (Mr. Neale). I was amused earlier to hear the hon. Member for Surrey North-West (Mr. Grylls) expressing profound confidence in Mr. MacGregor's enthusiasm for trade union negotiations. Unfortunately, the hon. Member is out of the Chamber. I was about to suggest to him that he should read the report of last week's meeting of the Select Committee on Industry and Trade. On that occasion I put it to Mr. MacGregor that Mr. Sirs of the ISTC had said "How can I be expected to support a plan I have never seen?" When I suggested to Mr. MacGregor that a little more consultation with the trade unions might have been desirable, he said "I did consult, but unfortunately Mr. Sirs was out of town that day." The significant words are "that day". Apparently, he thought that one afternoon's meeting with the TUC steel committee was adequate consultation. It is hardly what I would regard as adequate consultation on a matter that profoundly affects a major industry and will put 22,000 people out of work.
I am unhappy with the first part of the Bill. I cannot agree with the hon. Member for Bromsgrove and Redditch (Mr. Miller) that the scheme is designed to extend public ownership. On the contrary, it is a form of back-door 474 denationalisation. I am reluctant to accuse the Secretary of State of misleading either me or the House, but what is now being proposed is in total contradiction to earlier assurances given by the right hon. Gentleman.
The Under-Secretary of State for Industry, the hon. Member for Arundel (Mr. Marshall). assured my hon. Friend the Member for Penistone (Mr. McKay) in July 1979 that the Secretary of State did not intend to hive off the profitable parts of the British Steel Corporation Sheffield division to the private sector.
A little later I asked the Secretary of State for a firm assurance that the Government would not be denationalising Rotherham works. I said that I asked that question because of anxiety expressed by my constituents. The Secretary of State said in reply:We certainly do not intend any attempt at wholesale denationalisation in the steel industry."—[Official Report, 23 July 1979; Vol. 971, c. 3.]I pointed out later that I had not raised the question of wholesale denationalisation, but in his opening speech today the Secretary of State was getting on to the point of wholesale denationalisation. He made it quite clear that the proposals in clause 1 could well result in the BSC owning no steelworks; so he is now in favour of wholesale denationalisation.
When I wrote to the Secretary of State and pointed out that I had not raised the question of wholesale denationalisation but asked only about Rotherham, he replied to the effect that the assurance given by the Under-Secretary of State to my hon. Friend the Member for Penistone certainly applied to Rotherham works. He added:I hope this will enable you to allay any anxiety and uncertainty among steelworkers in your constituency.I shall not go through the whole catalogue of questions and answers and letters. The position has gradually changed. We have had to squeeze information out of the Government on how they have been shifting their position. They have not said in the Chamber that they have completely changed their views and are now in favour of wholesale denationalisation. Not until the arrival of the Bill has that been admitted.
On 16 December at a meeting in the Secretary of State's office in the House he admitted that he was "encouraging" the setting up of joint companies, in which the private sector would have a majority interest, to take over BSC assets. He also made it clear that the reason for this complete change of position between July 1979 and December 1980 was to save the private sector. He made no bones about it. He was anxious to prevent private sector companies being extinguished.
That is what the Bill is about. It is about taking valuable, potentially profitable assets of BSC, especially in the special steel sector, and handing them over to companies in which, if the Secretary of State gets his way, private interests will have the majority shareholding. He also said on 16 December that, as far as he could, he would insist on the new joint companies being 51 per cent. private sector and 49 per cent. BSC. That would take their borrowing out of the public sector borrowing requirement. On the first company that has emerged, Allied Steel and Wire, there is a 50/50 split. How Mr. MacGregor has managed to prevent the Secretary of State enforcing his views on that one I am not sure.
§ Sir Keith Joseph
It is still private sector, not public sector, because BSC has asserted that it is not seeking to control Allied Steel and Wire. Thus, its activities fall outside the PSBR.
§ Mr. Crowther
Yes, I know that because I raised the question with Mr. MacGregor in the Select Committee. It has been taken outside the PSBR without the need for BSC to accept less than half of the interest in it. Perhaps that will apply to cases that arise under the Bill—I do not know.
I am very unhappy about what I regard as the denationalisation by stealth which has been going on until now. The Secretary of State's assurances to my hon. Friends in 1979 have proved to be entirely worthless. That part of the Bill causes me no joy, although I welcome the principles underlying the financial restructuring. However, there are some matters on which I have considerable reservations.
For example, I am sorry that the Government are not taking over responsibility for the outstanding foreign loans, which will continue to impose a hefty interest burden on the corporation, although the size of it is apparently in dispute. What the Secretary of State said that afternoon does not accord with what Mr. MacGregor told the Select Committee about the size of the remaining interest burden after the restructuring. Mr. MacGregor was clear that it would be £100 million per annum. The Secretary of State said that it would be £69 million. There is a substantial difference.
If Mr. MacGregor is right, the interest burden per tonne of steel will be reduced from almost £14 to about £7, which will put it roughly in line with the position in West Germany but still much worse than that in the United States. Nevertheless, the general idea of restructuring is right. It is a pity that the Secretary of State has been so tardy in recognising the need for a realistic attitude towards Government support for major industries such as the British Steel Corporaion. If in December 1979 he had adopted the attitude that he is now adopting, there would never have been a strike. That must be clearly understood.
Under the proposal now before us, Government money will be available to the BSC for operating costs as well as for capital investment and redundancy and closure costs. Had that been the case in December 1979, a very damaging strike would not have taken place. However, I realise that there is more joy in Heaven over one sinner who repents than over 99 just men. I should not, therefore, be churlish about the Secretary of State's late conversion.
Unfortunately, however, the Secretary of State will now have to take his conversion a little further. This will be difficult, because it will involve breaking away from his ideological view that the Government are not responsible for ensuring that British industry is able to meet competition on equal terms. That is the point at which the Government seem to differ from everyone else—if not from Conservative Back Benchers, certainly from the Opposition. They are at odds with the TUC, the CBI and nearly all the employers' organisations on the fundamental point of whether they have a responsibility to ensure that British industry is able to operate in fair, competitive conditions. They say that they have not. I am afraid that the Secretary of State will have to change his mind on that as well, because capital restructuring of the 476 BSC will be a waste of time and money if the factors which make the British steel industry and steel-using industries uncompetitive are not dealt with quickly and effectively.
I was glad that my right hon. Friend the Member for Salford, West (Mr. Orme) referred to these matters at some length as they are extremely important. I shall not go over them in detail. The exchange rate cannot be mentioned too often. It is the most important matter of all. When the CBI came to the Select Committee on Industry and Trade a year ago today, on 19 March 1980, I asked how much of the loss of competitiveness of British industry over the past five years or so was due to changes in the exchange rate. The CBI said that about half was due to that. That is a significant answer, but that was a year ago.
The position has become worse in the last 12 months. I cite just one instance. In the six months to January this year the change in the position of the pound sterling in relation to the German mark and the French franc resulted in a loss of competitiveness for a typical product of BSC 's special steels of £50 per tonne. That is more than the total labour cost in producing that tonne of steel. Mere changes in the relationship between sterling and other currencies have caused a competitive loss amounting to more than the total labour cost. That is the measure of the problem that we face.
§ Mr. John G. Blackburn (Dudley, West)
The hon. Gentleman is developing an important argument relating to the value of sterling in world markets, which I believe has increased by about 24 per cent. Under the Labour Government, the price of the pound in relation to the dollar was $1.56. It is now $2.20. What would the hon. Gentleman regard as the value of the pound which would help the steel industry?
§ Mr. Crowther
I think that a reduction which would take us roughly half way back to the appallingly low figure that the hon. Gentleman quoted would probably be realistic. But I am not an economist. I am concerned with the effects of the changes that have taken place. I realise that there are disputes between members of the Government, and certainly between individual Conservative Back Benchers, as to whether the Government can do anything about the exchange rate.
Many hon. Members are satisfied that if the Government set their mind to it they could do something important in that direction. I do not pretend to be able to pick out a certain value of the pound which would be ideal for the British Steel' corporation. There must be an ideal value at which the BSC would gain the most benefit from a reduction in its export prices as well as in its import costs for raw materials. No doubt somebody could give the answer to that.
I emphasise that these factors bear not only on the British Steel Corporation but on its customers and on the whole of manufacturing industry. The output of manufacturing industry suffered an appalling drop of about 14 per cent. in 1980. That was the worst drop in this history and lies at the heart of steel manufacturers' problems. The BSC does not sell its goods in Woolworths, but to other manufacturers. When manufacturing industry goes into the doldrums, the primary producers suffer.
I shall not go into the details of the many other factors which give all kinds of competitive advantages to foreign steel makers in the EEC and elsewhere. These were 477 brought out in detail in the sector working party report and in the British Iron and Steel Consumers Council report, which I strongly recommend to any hon. Member who has not read them. They make it clear that competitors in other countries receive assistance with financing research and development, rail freight subsidies, low interest loans and coking coal subsidies, which have been mantioned many times in the House, as well as many other forms of assistance.
The net effect for the BSC has been a smaller share of a smaller market. This is where the difficulty lies. It is not merely that the BSC's share of the market is smaller. The market itself is smaller, because the BSC's manufacturing customers are themselves going out of business. This is where we must tackle the problem. It is no good putting more and more money into the BSC unless conditions are created in which it can operate effectively. I hope that one day we shall have a full debate on the report on imports and exports produced by the Select Committee on Industry and Trade. We made 29 recommendations, all of which stem from the same basic message. We are not asking for a policy of protectionism. We are saying that British industry should be allowed to compete on equal terms, which is manifestly not the case at present.
Anyone could be forgiven for believing that the Government's policies were deliberately designed to give the maximum advantage to overseas competitors. Some time ago the Prime Minister did a remarkable turnabout on the question of coal industry closures. That problem arose simply because there were 37 million tonnes of coal on the ground and the Government automatically assumed that the NCB was producing too much coal. It was not. The customers were not buying enough coal because of the general decline of industry.
The steel industry is one of the biggest customers of the coal industry. When the steel industry declines it does not buy as much coal because its own customers are not buying enough steel. The problem can be remedied only by a different approach to the management of the economy. It is the economic climate in which all of those industries operate which is causing the problem.
The Government's present industrial policy can only be described as economic lunacy. They persist in running away from their responsibility to ensure fair trading conditions for British industry. They then have to dig deeply into the public purse to pay the price of their own negligence by way of the massive cost of unemployment and periodic rescue operations for individual industries or companies. Another one was announced only this afternoon. Those operations would be either unnecessary or, at least, far less expensive had the Government not neglected their duty in the first place. That is what the hon. Member for Cornwall, North should tell his constituents who complain about being required to contribute to these industries out of their own pockets.
If the economic climate were changed so that industries could operate profitably there would be no need for this to happen. No one in the BSC wants to drag more money out of the public purse. If the BSC was given a chance to operate competitively and effectively in a sound economy, there would be no need for it.
§ Mr. Crowther
The hon. Gentleman referred to the considerable difference in amounts. The other major difference is that in the earlier period that money went almost entirely into investment, as my hon. Friend the Member for Redcar (Mr. Tinn) pointed out.
§ Mr. Peter Hardy (Rother Valley)
Perhaps my hon. Friend will remind the hon. Gentleman that the works in his constituency, as well as mine and some other South Yorkshire constituencies, had never been unprofitable until the present disaster. We and our constituents are saddened at the fact that the State must pay enormously to support people who are not allowed to work full time in modern plant which had previously broken world records with unfailing regularity.
§ Mr. Crowther
My hon. Friend is absolutely right. Rotherham and other works within the special steels groups were, and potentially still are, profitable plants, but they must be given the chance to operate in the proper economic circumstances.
I do not know how the Secretary of State can imagine that the British steel industry, both public and private—however much it is restructured and rationalised—will ever return to real prosperity and profitability while all the dice are loaded against it as a result of the Government's policies.
I am sometimes accused of being over-optimistic about the potential prospects for the steel industry. That may well be due to the fact that I am well aware that in Rotherham and the other plants production records have been achieved many times. We know that they can be achieved if those plants are given the chance. I firmly believe that the publicly owned steel industry is capable of again becoming a competitive and profitable industry and that it can achieve a level of production substantially higher than that proposed in the MacGregor plan.
That depends on what the Government are prepared to do in order to create the right competitive conditions. The Secretary of State has a duty which goes far beyond the mere financial measures proposed in the Bill. I hope that he will soon begin to appreciate that simple point.
§ Mr. Deputy Speaker
Order. Before I call the next hon. Member, I remind the House that six hon. Members still wish to speak before the wind-up speeches begin. Long speeches will make it difficult to accommodate all of them.
§ Mr. Archie Hamilton (Epsom and Ewell)
I should like to say something about the Keynesian views of the hon. Member for Rotherham (Mr. Crowther). Clearly, if we were to stimulate demand for products steel stocks would be used up, steelworks would to some extent come back into production and no doubt existing coal stocks would be reduced. It is unfortunate that the hon. Gentleman has not learnt a lesson from the experience of the right hon. Member for Leeds, East (Mr. Healey), who, when Chancellor of the Exchequer, accepted that there was a direct relationship between stimulating demand and creating inflation. I have no doubt that if we created the 479 sort of inlation about which most Labour Members are talking we would in the medium term destroy far more jobs than we ever thought of in the past and create far greater economic problems than we have yet seen.
The Bill, which asks for extra funds for the BSC, is yet another chapter in the sorry tale which has now lasted for some years. British Steel has had to come back to the House to ask for more funds to keep going. These problems can be traced back to the nationalisation and renationalisation of the BSC, which basically changed a number of relatively small companies into a gigantic and unmanageable organisation, which in turn has resulted in its being unresponsive to changes in the market place, indifferent to customer demands and held to ransom by the monopoly unions which, inevitably, control such large organisations.
As a result, the labour force has refused to implement new plant and processes. The industry has also been beset by overmanning. The productivity of the BSC, relative to our competitors, has been bad, and remains bad today. The latest figures for man hours per tonne of steel show that in the United Kingdom it is 11.7, in France, 7.2 and in Germany 6.5, which does not reflect well on the United Kingdom.
The problems of the past were compounded by the actions of Sir Monty Finniston during his time as chairman of the BSC. He introduced an expansion programme which increased the capacity of the BSC to a staggering degree at a time when, in practice, foreign competition was increasing and the steel market was shrinking.
The BSC has been one of the worst examples of nationalisation. It is remarkable that the national executive of the Labour Party is today calling for more nationalisation, especially when we look at the examples that we have which in anyone's mind are disastrous. I do not see how an increased programme of nationalisation would in any way result in increased benefit to the nation.
As always happens, nationalised industries are basically controlled to a large degree by politicians. Therefore, there are political pressures in constituencies not to announce redundancies when elections are looming. For some time there has been a need to run the industry down, and it is a great sadness and tragedy for the people involved that that was not done slowly and gradually over a, period of years.
When my right hon. Friend the Secretary of State inherited this industry, it was in need of major surgery. Last year there were massive redundancies, totalling about 50,000. There are more to come in 1981. It is expected that there will be about 20,000 redundancies this year. The problems were compounded by the 13-week strike, which cost the industry about £200 million. That strike had all the hallmarks of a kamikaze pilot, because it was inconceivable that people should strike for higher wages when their industry was basically bankrupt. It would have been impossible for that to happen in the private sector, because there would have been no way in which the workers could be paid. As a result, these redundancies are now taking place at a time of rising unemployment, which merely increases the human tragedy of the people involved.
As my hon. Friend the Member for Cornwall, North (Mr. Neale) said, the taxpayer has to fund all these activities. During the five years of Labour Government, £2,750 million was put into the corporation. Under this Government, £2,000 million was put in up to the end of 480 last year. There is now need of another £100 million to carry the corporation through until April 1981, and £730 million to see it through until April 1982. Up to the end of December last year, the corporation was losing £800 million a year—a rate of £30 a second.
If we take £500 million as representing 1p on the standard rate of income tax, without steel losses it would have been possible for the standard rate to have been 1p lower during each year of the Labour Government. During the period of this Government, it would have been possible for the standard rate to have been 2p lower. The resulting reduction in demand may have saved what are basically non-jobs in the BSC, but it has destroyed proper jobs in other manufacturing industries. When it comes to it, I doubt whether it will have saved any marginal seats either.
We cannot always dwell on the past. We must look forward with optimism, and hope that the future holds more than the past, although the picture is not very exciting, with the over-capacity in most European steel corporations, as mentioned by my right hon. Friend. I welcome his statement that the corporation's progress will be closely monitored. We cannot let this one step by. We must from now on watch carefully how the group performs. I am glad that my right hon. Friend has grasped the nettle.
If the group does not perform better, the business will have to be run down. I do not see that as the end of the road, as many Opposition Members do. Out of the liquidation of the BSC a number of ventures in the private sector may rise and have a good future. I am encouraged by the prospect of having separate Companies Act companies in competition with the private sector. I hope that I can count on my right hon. Friend to maintain separate accounting, so that it will be possible to compare the performance of those companies with the private sector. My right hon. Friend's realisation that the corporation may have to be wound up is courageous.
We must give all possible encouragement to Mr. MacGregor. His policy to decentralise is sensible. Almost everyone in the industry recognises that building vast groups with centralised management has not worked Diversifying and decentralising the management organisation can improve management control. It will also improve labour relations in the separate parts, together with marketing and customer relations.
The phoenix projects are exciting and offer enormous possibilities. If they are a form of back-door denationalisation, I support them fully. The future of our steel making lies in the private sector. The taxpayer has already been asked to contribute far too much. He cannot be expected to continue contributing endlessly. Private sector steel making will be much more competitive and productive and offer a far more secure future for people in the industry.
The right hon. Member for Salford, East (Mr. Orme) is worried that the taxpayer will not get a return on his investment if the companies are sold to the pivate sector. To date the BSC has cost the taxpayer almost £6,000 million, so he may well be prepared to forgo his return if he does not have to produce more money.
§ Mr. D. N. Campbell-Savours (Workington)
I spoke for 50 minutes in the previous steel debate and made out the case for Distington in detail, so I shall be brief.
481 It is my party's policy to support the measure, but I am inclined to object. Unless the Government are willing to set up machinery to monitor the BSC's decisions, the public interest is not being served. The Government were prepared to allocate £1,120 million for the trading losses of the BSC last year and are now introducing capital restructuring of the corporation and writing off further moneys. The taxpayer should be able to feel that the BSC's decisions are sensible and that his interests are being protected.
I do not seek to undermine Mr. MacGregor's ability as a manager. I was one of the few hon. Members on the Opposition Benches to support his appointment. However, until he comes to terms with the fact that managers not capable of taking reasonable decisions still hold office in the regions, strategy will not succeed. While such people exist in the BSC, the Secretary of State should intervene to protect the public interests.
The Government have already made U-turns on Leyland and, to a certain extent, on ICL today, when they announced that they were giving further support to the company, having sold it at a high price last year. Many people who bought shares must be shaking with anger. Having allocated vast sums, however, the Government have not yet made a U-turn to intervene in the decision's of the BSC.
The Secretary of State and Ministers at the Dispatch Box and on television repeatedly state that they will protect the public interest when money is expended by the State and that they are determined to ensure that the money is seen to be well spent, yet the Secretary of State remains wedded to the principle of keeping out of decisions made by mammoth companies like the BSC. Mr. MacGregor may be a good manager, and some of the decisions may be acceptable to the whole House, but Workington is a prime example of a decision made by a tier of management of the BSC that does not stand up to realistic commercial assessment.
Even before I spoke in the previous debate the right hon. Member for Taunton (Mr. du Cann) asked the Government to look more closely at the BSC's decisions. Presumably as a result of representations made, the Secretary of State appointed a conciliator, whose function appears to be simply to arbitrate in price disputes between the private sector and the BSC. His role seems to be limited to establishing in minds of private sector producers the fact that the base import price of iron and steel products is fair and that if the BSC is willing to meet the target prices the private sector should do the same. The conciliator should also act in disputes between trade unions and action committees—as at Distington—and the BSC.
In the event that Mr. MacGregor, in his remarks yesterday to the Select Committee, and the right hon. Gentleman the Secretary of State, at the Dispatch Box, are correct, and that there may be a further retrenchment of British Steel Corporation operations over the months to come, there will increasingly be more disputes. It seems that unless the Secretary of State is willing to intervene to ensure that people who dispute the judgments and decisions of the corporation have their cases heard, there will be only further difficulties in the future.
It is not only at my own plant where these disputes have taken place. An argument has now broken out in the courts 482 over an attempt to put aside the decision to close the Velindre plant on the basis that the unions were not consulted under the 1975 Act. I am told that the referral to the courts might not have taken place had the Secretary of State set up machinery to ensure that people had a right to seek an outside arbitrator in their disputes with the British Steel Corporation.
There is a crying need, especially during this period of retrenchment, for the Secretary of State to provide an arbitration service to ensure that people feel that justice is being done in their areas. I can appreciate the sense of grievance over the position at Velindre. I was born in Swansea. The feelings among people who work at that plant can only be further aggravated by the fact that they are directly affected not only by the Velindre announcement but by the situation at the Llanelli plant of Duport, which also provides work for people from the Swansea area. This shows the great need for the Secretary of State to provide the machinery to intervene where disputes occur.
The right hon. Member for Taunton, supported by some of his hon. Friends, said that the best way to rejig the economy and to reflate to a certain extent would be to set up a programme of public construction. I believe that the right hon. Gentleman mentioned the possibility of the Channel tunnel, or the rebuilding of the construction industry. Those proposals would be highly beneficial to the British Steel Corporation. The true potential of productivity of the British Steel Corporation cannot be established by quoting figures from a European assessment, or an assessment by certain bodies in the United Kingdom when demand has been deflated. The potential of the BSC can be evaluated only in conditions of a reflated economy. The best way to bring about that situation is to enter upon the programme of public construction put by the right hon. Member for Taunton, increasingly supported by his hon. Friends.
Instead of pressing the British Steel Corporation to close plants, a better approach might be for the Government to urge it to retain that capacity, to mothball plants and to give special relief from local authorities where rate liability exists. Where it is clear that plant closures will take place, there is a feeling that the Government should intervene to ensure mothballing, if only to make certain that capacity is retained within the corporation for the time when an upturn occurs.
§ Mr. John G. Blackburn (Dudley, West)
This is one of those occasions in the House of Commons when there is little happiness on either side of the Chamber. It would be wrong to say that we are holding an inquest on the British steel industry. It is, however, the case that we find ourselves in a very sad situation. I am sure that the Secretary of State finds no happiness in the fact that his name is attached to the Second Reading of the Iron and Steel Bill, but I believe that he displays a remarkable sense of courage in taking these steps on behalf of the industry.
I should like to deal with the effect of the Bill on my constituency, its impact on the people and its future effects on the steel industry corporately. I am humbled at being the Member for a constituency that is dominated by a steelworks. The steelworks was founded in 1867 by the Earl of Dudley and now stands alone in the West Midlands as a major steel producer. The company was acquired in 1953 by Tube Investments Ltd. to provide a secure source 483 for the high grade carbon and alloy steels required for the seamless tube-making companies. Its history is interesting.
With the nationalisation of the industry in 1967, the newly formed British Steel Corporation took a half share, along with the Round Oak company itslf. The expression "half share" that is to be produced under the phoenix scheme is familiar to hon. Members. This period of joint ownership has been successful. The owners have encouraged the local management team to enter into a widespread and costly modernisation scheme. As I gaze across the Opposition Benches, I see that there are some who are familiar with that scheme of modernisation and who played a greater part in it than I have done.
A total of £24 million has been invested in this company. That is the background. It has been nationalised. It has been denationalised. It has been renationalised. The investment programme that was produced by the Labour Party when in Government was over-ambitious. Time and again during this sad debate we have had brought to our attention the tragedy of the steel strike in 1980. This was a strike for a pay increase that was not justified because, as has so often been said, the company should have been placed in the hands of the receiver.
Nine months later I was in the Indian Sub-continent. I visited India, Bangladesh and Malaysia. As an engineer, I visited engineering works to see the construction that was taking place. I asked where the steel had been purchased. I was told that until the strike the steel had come from Britain, but that orders had now been placed with German producers. I found no comfort in hearing those words. We had given this valuable export market of one of our basic industries on a silver salver to the competition. There followed a partial shedding of jobs in the steel industry.
I do not apologise for speaking about my constituents and my people. We have been ravaged by unemployment in the steel industry. At the north end of the constituency there was the closure of the Bilston steelworks. At the southern end of the constituency there was the closure of the Cookley steelworks during the administration of the Labour Government. By good management, sound common sense and a wonderful relationship between union and management, which is a credit to the company, the Round Oak steelworks is still in situ. Without that works my constituency would be savaged right across the centre.
Steelworks in both the public and private sectors have shed labour quickly, especially over the past 12 to 18 months. I think that it took courage to do that. Some of them have reduced the total work force by nearly one-third. They will not increase the work force significantly to higher levels for plant utilisation. The gains in the private sector are about £20 a tonne.
I had the opportunity to speak to the newly appointed chairman of the BSC, Mr. MacGregor, prior to the announcement of 19 December. I applaud any man who says that he will sell the BSC's product. That is the voice of a business man who is anxious to develop the corporation that has been placed at his disposal. However, that is not enough. He must declare the market in which he will sell his steel, against whom he will have to compete and the products that he will sell. For example, is Mr. MacGregor moving into tube manufactures or engineering steels?
484 It is critical for the private sector to know more about Phoenix I and II. I find it unacceptable to be told that we shall have a statement in the autumn. I speak with some feeling, as the steelworks in my constituency is losing more and more money day by day and is paying interest upon interest. It is critical that the decision is made with great urgency so that the private sector knows the exact position and can plan for it.
I do not accept that the private sector is asking for special treatment. Historically, it has never done so. However, it wants parity in finance, financial security, the cost of energy and investment. We have had an opportunity to think about the investment programmes that have been accomplished by the BSC. Investment programmes in the private sector have come from private sources, and the sector is looking for parity.
Can we salvage anything from the Bill that will give us encouragement when we return to our steel making constituencies this weekend? I am pleased to read the phrase "Financial reconstruction of Corporation". I am not entirely happy but the Bill becomes acceptable when I read in clause 3 of £3,000 million. We do not solve the problem by throwing money at it as that will not remove the root cause of the problem.
My remarks are saturated with sincerity. By means of the Bill the House will make £3,000 million available to the industry. The nation is entitled to proper monitoring. It is the nation that is picking up the bill and investing in the corporation. We are entitled to say that we expect this to be a once-and-for-all occasion for a Bill of this nature to be brought before the House. I have a great deal of faith in the steel workers in my constituency and throughout Britain. I pray that they will accept the challenge and the opportunity that will be presented to them tonight when the Bill is given its Second Reading.
§ Mr. Bill Homewood (Kettering)
I am pleased to be able to take up the remarks of the hon. Member for Dudley, West (Mr. Blackburn). I am not too sympathetic towards some of his arguments but I sympathise with him in the situation in which he finds himself. For a good many years I was a full-time trade union officer at the Round Oak works. It is true that if those works were to close the hon. Gentleman would find himself in exactly the same situation as that with which I am faced in Corby and that faces my right hon. Friend the Member for Llanelli (Mr. Davies) at the Duport steelworks.
I am at odds with some Conservative Members about the steel strike. There can be little doubt that the industry was damaged by the strike. However, we must be careful in apportioning the blame. If any body of workers at that time had been faced with an insulting offer of a 2 per cent. increase in earnings a strike would have been inevitable, whatever the industry or the employment position within it.
§ Sir Keith Joseph
The hon. Gentleman knows as well as I do that the offer, which was the management's affair, was a 2 per cent. increase plus 10 per cent. to be earned by increased productivity, making 12 per cent. in all.
§ Mr. Homewood
The Secretary of State and I could carry on a debate about what constituted the productivity side of that offer from now until midnight, and I am sure that we would still not agree about what the BSC meant. 485 Ultimately, the productivity element that came out of the final deal, as the Secretary of State knows, was much less than 10 per cent.
I want to talk about the industry in general, and the difficulties that we are facing. Labour Members welcome the Bill. We shall not vote against it, because from the point of view of my trade union, anyway, it substantially meets what we have been asking for for a long time.
We are discussing an industry that has shed about 262,000 employees in 13 years—that is 58 per cent. of its work force. Moreover, it is now envisaged that a further 22,000 jobs will go in the public sector, under the so-called MacGregor corporate plan.
As the Secretary of State said in opening, 50,000 jobs were lost in 1980. When I hear some Conservative Members talking about subsidies for rural constituencies I feel somewhat cynical, bearing in mind the vast subsidies that have been given to farmers since time immemorial.
The loss of jobs in the steel industry is concentrated in small areas. Last year in South Wales about 12,500 jobs were lost. In Shotton the figure was 7,250; in my constituency, Corby lost 5,500; in Consett, 3,700 jobs were lost; in Scunthorpe 2,300 were lost; and there were sundry others, making up the figure of 50,000.
In the decade 1970–1980, crude steel production in this country fell from 28.3 million tonnes to 11.3 million tonnes—a drop of about 60 per cent. Even if the 1980 figures were influenced by the strike, if we ignore those figures and use the corporate plan figure of 14.4 million tonnes, we find that the drop in output in the 10 years was 49 per cent.
In the same decade—the strike had little effect here, because it was a gradual change in position over the whole period—imports rose from 3.73 million tonnes to 6.36 million tonnes—in percentage terms an increase from 15.53 per cent. to 39.88 per cent. Imports from the EEC rose from 25.5 per cent. of our total imports in 1970 to 66 per cent. of our imports last year.
During that time, while the British steel worker was thrown out of work and denied wage increases because of over-capacity, what was happening to his counterpart in the Common Market? In the decade 1970–1980, Belgium crude steel production fell by a mere 2.4 per cent.; French CSP by a mere 2.5 per cent.; and West German CSP by a mere 2.7 per cent.; and the Italian CSP rose by 51 per cent.—a matter to which my hon. Friend drew attention earlier today.
The Secretary of State believes that all these difficulties stem from the fact that the industry is nationalised. I do not know how that squares with the contention that we now hear from the Government Benches whenever we have a debate on steel—the contention that the private sector is now complaining that the BSC is being unfairly competitive. I am not sure how far the taxpayers' money subsidy may be used as an argument in favour of private steel production.
Let us consider how the money has been spent over the past 30 years. About £5.6 billion was poured into the BSC in that time, of which £3.6 billion has been invested, £1.3 billion paid in interest, £5.2 million spent on redundancy and £40 million spent by BSC (Industry) Ltd. on job creation. Not a penny has gone on the day-to-day running of the industry, or on its workers' wages.
486 When my hon. Friend asked whether the phoenix propositions were an extension of nationalisation or whether they were back-door nationalistion, the question was easily answered; it depends on whether they become profitable. If they are unprofitable the public will bear the cost. If they are profitable they will, of course, be sold or given away to private enterprise.
That brings me to my main point. The present catastrophic situation of our steel industry—this was confirmed by what the Secretary of State said in opening—is due to the mammoth investment errors that have been made over the past decade. I am not talking just about incorrect demand forecasting, because that happens in almost every industrialised country. I mean it more in terms of big being beautiful, the Japanese model, and work and productivity arguments, no matter what the cost of the capital equipment.
I am sorry that the hon. Member for Dudley, West (Mr. Blackburn) is not here, because I believe that the company that he mentioned invested too much money and created exactly the same sort of situation. I believe that capital equipment has replaced labour on the basis of diminishing returns in the steel industry, even if one discounts the unemployment costs at a level of 20 per cent. in Corby, 20 per cent. in Llanelli, 18 per cent in Shotton and wherever steelworks have been closed.
I think that a long look should be taken at our European competitors. My hon. Friend the Member for Workington (Mr. Campbell-Savours) said that the comparisons that are now drawn concerning cost and productivity are difficult on the basis of different levels of activity in the various countries. We have poured about £3 billion into the steel industry over the past decade. To employ a steel worker in this country now costs only half as much as it does in West Germany or Belgium, 50 per cent. less than in France, 25 per cent. less than in Italy or Spain—of all countries—and a little over one-third of the cost in America.
With the massive investment that our industry has received and its enormous labour costs, it is impossible to argue that the import difficulties are based on fair competition. The subsidies on fuel, coking coal and transport in other countries play a substantial part in our difficulties.
It is obvious from the figures that we need only a marginal upturn in economic activity to put our steel industry in an impossible position in relation to helping the balance of trade. The industry has difficulty in producing the crude tonnage allowed under the EEC quota. I find it difficult to listen to Government Members. They are extremely defence conscious and yet they talk as though they would not mind if no bulk steel making were left in Britain. I hope that the Secretary of State will apply his mind to that and see whether he can find better answers.
§ 8.2 pm
§ Mr. Tom Ellis (Wrexham)
I apologise in that I shall not be able to be present when the Minister replies to the debate. My absence will be unavoidable.
This has been a sad debate. I felt that we were experiencing the funeral rites of the British Steel Corporation. We do not have a corpse, but we have a patient on a life support system. There is a sombre air about the House. The conventional stimulii have not provoked the usual Pavlovian response. When reference 487 is made to nationalised industry or free enterprise everybody accepts that we are in extremis. The Bill is accepted as a last resort.
The steel industry has failed the country. I do not blame anybody. The job of all politicians it to be realistic. The failure should not be measured by comparisons with European Community countries in the last few years. The citizens of Britain should ask how it was that in the early 1950s we produced 28 millions tons of steel and Japan produced 2 million tons whereas now we produce about 1 million tonnes and Japan produces 90 million tonnes. That is a good question which cannot easily be answered. Any answer will be complex, especially since Japan is an island with no coal or iron ore.
§ Mr. Hooley
I can give three answers. The first is the low value of the yen which has been deliberately maintained for years. The second answer is the massive and continual high investment in steel making capacity in Japan, which we did not have in Britain. The third is Japan's rigorous policy of keeping out foreign imports that it did not want. Those are the three classic ways in which the Japanese developed their industry.
§ Mr. Ellis
I regret that the hon. Member did not give us the benefit of his experience earlier, so that we could be producing 90 million tonnes this year. The hon. Member over-simplifies the problem. Japanese workers receive wages worth about 50 per cent. more in real terms than British workers. We tend glibly to put many issues on one side. We have to accept the Bill. There is little else that we can do. The only good that will come out of it will be a few lessons about industrial problems generally.
Management must bear its responsibility. In normal commercial enterprises, management is responsible. If a firm goes bust, management is to blame. However, the issue is more complex in the steel industry. However good or bad management is, it does not have the same responsibility as it has in private industry. Politicians tend to intervene. If there is a lesson to be learnt from the last 30 years it is that if responsibility lies other than with management it lies with this House.
Tonight hon. Members asked to see the corporate plan as if they were to run the steel industry. Only two or three years ago a parliamentary Sub-Committee demanded that the then chairman of the BSC should explain why he had miscalculated the losses that the corporation was due to make. I said at the time that the Serjeant at Arms should have marched him at sword point down Whitehall so that the whole world could see how we go about the business of running the steel industry. For two hours parliamentarians scrutinised the affairs of the British Steel Corporaion. After two hours with the chairman, politicians thought that they could put everything right. That is a travesty of the truth. The capriciousness of intervention demonstrates that many lessons have still to be learnt.
My hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) talked about accountancy technicalities and asked whether the assets to be written off had been valued correctly. In the light of what has happened for 30 years and of the enormous influence that we have had, I could not help but feel that his arguments were a little specious. Indeed, his main argument was about the economic situation. Much is wrong and much blame must be attached to the Government, but we are dealing with 488 the steel industry. Even if the economy improves overnight, the organisaion and well-being of the steel industry is a separate matter.
I shall give an illustration. The Secretary of State said that we were talking with the benefit of hindsight about the market. However, in 1973, some voices pointed out that a figure of 35 million tonnes was not on. Some hon. Members even talked about 45 million tonnes. I do not wish to be immodest, but I remember that when a lobby came from Shotton steelworks in 1974 all hon. Members made the same speech. They said "Good lads. Backs to the wall. Man the barricades." One could almost see the machine guns being set up around Shotton. At the time 1,700 of my constituents worked at Shotton. I told them that they would not sell even 23 million tonnes let alone 35 million tonnes.
President Nixon had suspended dollar convertibility in 1971. The situation was obvious and yet politicans were arguing for a 35 million tonnes share of the market. The sheer irresponsibility of that stuck in my throat. I told my constituents "Look, you would be better off to accept." Today I believe firmly that they would have been better off if they had rejected the advice of all the politicians and accepted the advice of just one. I do not pretend to be an expert, but it was blindingly obvious. I could not understand how politicians could say that we should aim for 35 million tonnes or 45 million tonnes. They plucked figures from the air. That is not shouldering the responsibility of one's job in the House. Therefore, all sorts of lessons are to be learnt.
The hon. Member for Sheffield, Hillsborough (Mr. Flannery) talked about the Brymbo steelworks. He spoke about it on television—on BBC 2, if you please. So he really knew about it. I played a modest personal role. The facts were contrary to what the hon. Member said. For a long time, British Steel valued the works according to a valuation by its financial department. GKN had the works valued by a merchant banker and the discrepancy was enormous. GKN said that a figure produced by any merchant banker anyone cared to name should be settled on. It said that it would accept whatever figures resulted. In the event, the deal went through after the death of the former chairman of British Steel. The works have just finished investing £49 million in the steel industry.
At that time, I was severely criticised by my constituents because I was trying to obtain something for free enterprise. The argument about free enterprise versus the nationalised industries is a sterile one. Some industries should be nationalised and some should be privately owned. All sorts of complex questions are involved. However, simply to rear up on one's hind legs and say that one industry should be nationalised and another should be private misses the point.
At that time, my duty was to try to safeguard the future of those who were employed at Brymbo. Brymbo did well but now, because of the economic crisis, it is in difficulties. The firm has sacked 600 people out of a total labour force of about 2,400 during the last few months.
Brymbo steelworks has electric arc furnaces and is a major consumer of electricity. In April, there will be a 16 per cent. rise in electricity charges. The chairman of the works says that that is crucial. He is a good chap and I believe what he says. He says that, as a result, the works could finish. He desperately pleaded with me to use whatever influence I could with the Government to see 489 whether something could be done about the electricity charges. The same applies to many industries. I hope that the Minister will be able to do something about it.
The issue is not wholly concerned with economics, as the hon. Member for Motherwell and Wishaw said, although that matter is relevant. Nor is it concerned with technical accountancy arrangements, although, again, those are important. It is as if a patient were on a life support system and one either raises or lowers the purity of the oxygen content. An important decision has to be made, but the patient is still on a life support system. The real issues are much more profound. Essentially, they concern the political structure of the country. No one should make any mistake about that. The political governing system of nationalised industries is in the balance tonight. That is an illustration of what has gone wrong. That system is completely outmoded. If we learn that lesson from the Bill, we might go into the next decade with more confidence than we have had over the last 20 or 30 years.
§ Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)
I apologise for missing the last hour of the debate—I was on other parliamentary duties—but I have heard much about what has taken place this afternoon. I am pleased that I heard the hon. Member for Wrexham (Mr. Ellis), who spoke much common sense.
I do not believe that all money given to State industry is a sort of evil. There are times, when one is talking about great and structural changes that must take place, when one cannot say that if the industry cannot make a profit nothing should be done, or that it should not be run. For example, there is a good logic that railways and the railway system are of great and abiding importance to a country such as ours.
The same applies to the steel industry. I do not look upon all money that we spend on the steel industry as if it were a wicked waste. It is true that every time one puts a subsidy into an industry, someone somewhere has to be making a profit for that money to be spent. However, I thought that the hon. Member for Wrexham was right when he said that very often, with the best intentions in the world, politicians tend to spoil industry. The good intentions for the steel industry and the people who work for it have paved the way for the thousands of millions of pounds that the people in this country have had to put into steel.
Since the corporation was set up more money has gone into it than it took to fight and pay for the whole First World War. That must be an incredible proposition. Perhaps more incredible is the fact that we have ended up with a steel industry in a greater crisis today than when steel nationalisation took place, with all the optimism that existed at the time. One of the greatest problems that faces the industry—this is one of my great worries—is that which arises from the fact that we were concentrating on the problems of the nationalised steel industry and some of us felt at the time that it was to the exclusion of the real and even more telling problems of the private steel manufacturers. Other hon. Members share that worry.
I should like to place on record my personal thanks to the Secretary of State and the Minister of State for the tremendous amount of time and effort that they have put 490 into talks about the problems that face the private steel makers. The outcome of Phoenix I—although I think that GKN will not look upon it as a great victory—avoided a situation that was not of its making. The new system has the making of a genuine and proper wire, rod and bar industry, which can and will prosper.
Those who are against public money say that they do not care what good comes out of that money and that they have put enough in. They consider that if the industry cannot prosper immediately it should be bankrupted. One cannot talk about great enterprises and hundreds and thousands of jobs in that cavalier fashion. We must consider each matter on a more long-term basis.
I have no political or other objection to spending the people's money on building a better, more viable and prosperous industry, as I hope it will be in the end. That does not apply only to steel, but it is steel that we are discussing tonight. Mr. MacGregor must come up with the goods, in view of what we are paying. If he can ultimately produce a genuinely viable steel industry—and I believe that he can—in which the private sector can play its vital and profitable part and the great steel-producing BSC can also play its part, the thousands of millions of pounds that have been invested will have been worthwhile. I am positive that, ultimately, no country can afford to place itself hostage to Europe, Japan or Korea. We need a steel industry. The pains that we are suffering now are reducing the steel industry to a sensible and viable whole.
Phoenix II will probably cause more troubles. I hope that the same good sense will apply to those talks as applied to the talks on Phoenix I. It will be a tragedy if the Llanelli works have to be closed, but it would have been an even greater tragedy if Duport, as a private company, had had alone to bear the burden of all the loss involved. Once again, I pay tribute to the Minister for his work in that area.
The problem faced by the private steel makers—although they produce only 20 per cent. of the total steel capacity in Britain—is the sense of mistrust and distrust built up over the years that almost naturally exists between private manufacturers and the State. That is not unusual. A private manufacturer faces the bank manager every Friday, wondering whether he will meet his bills. State industries face the bank manager when the Minister says that they must, but at the same time they know that he will pick up the bills. There is a natural feeling that the one can do so much better than the other.
I applaud the imaginative concept now being put forward that we will pluck out and set up, almost as separate identifiable entities, those State companies that compete with the private sector. That is the right thing to do. I have received correspondence after correspondence from intelligent and hard-working business men continually saying that the BSC' s Stanton and Staveley plant, or some other plant, has been competing unfairly. If that could be proved not to be so—if it could be proved that the one is competing fairly with the other—it would be good and proper.
The optimistic plan is that British Steel will cost another £730 million. The pessimistic plan is that it will cost an additional £432 million on top of that. I wish British steel well, meaning not only the BSC but the whole identifiable mass of the steel industry—both private and State. We need it because we need the jobs, the prosperity and the exports that it brings. Knowing the Minister as I do, I am sure that he will be bold and blunt in his talks with the EEC 491 on the manifest crisis. Never has anything been better named. There is a manifest crisis in the steel industry not only in Britain but world-wide.
Steel was built on the idea that, somehow, the Western world would grow and grow and grow. It will not now do that. It cannot do so, because of the price of oil. The Arab countries do not need our money. They can afford to keep their oil. Every time that we, as the Western world, appear to become more prosperous and need more oil, the Arab States raise the price of oil and cut back our prosperity and growth. We must live with what we need. If we can achieve a steel industry that produces 10 million, 11 million or 12 million tonnes instead of the 28 million tonnes that it produced in 1950, if it can do that well, and if the industry is run properly it will result in good steel jobs, and a good investment for Britain.
The money that we lose now does not matter so much. What matters is that we grasp the reality of the position, namely, that we in the House cannot produce steel. With the best of intentions, we cannot produce steel at Merthyr Tydfil simply because tens of thousands of people have nothing else to do. We must produce a good and viable industry. If we do that, other industries and jobs will grow around it.
Change is not painless. The trouble is that we have told people that it can be. If the debate about the new crisis facing the British steel industry has shown us anything, it is that somehow or other the House—we, as politicians—must make people face the truth. I believe that they can do it, provided that we can do it.
§ Mr. Frank Hooley (Sheffield, Heeley)
I do not necessarily regard this as a tragic occasion or as some sort of funeral or wake. The reconstruction of the capital of the British Steel Corporation is very important. It is overdue. We are considering a great public corporation, with a capacity to produce real wealth to the value of £3,000 million. That is the value of the turnover of the BSC. If people talk airily about liquidating, they must explain where that wealth will come from, or what we shall export to buy the equivalent amount of steel from abroad if we intend to run down this huge operation, with all its magnificent assets and its highly skilled work force.
The British Steel Corporation has superb assets. We have a highly skilled work force and a very good management. I object to the sneering and jeering about British Steel's management, because there are many dedicated and highly skilled men in the BSC who have worked extremely hard at building up their sections of the enterprise, and have done it with great success under considerable difficulty.
There has been much talk about profitability. Until the present Government came into office, the special steels division at Sheffield made a profit year after year, so there is no question of its not being profitable. The present economic climate and the economic policy pursued by the Government have created two-thirds of the difficulties.
The first message that we have to get across is that in no circumstances must the capacity of 15 million tonnes be cut further. This business of cutting back and back must stop. The capacity must be preserved. The closing of steelworks such as Shotton, Corby, Duport and the others must be halted.
The Government have tried to argue that there is an inexorable decline in the British steel industry. Perhaps 492 they can explain why Germany has not slashed its steelmaking capacity by 50 per cent. and why France, Japan or the United States have not massacred their steel-making capacities. In Italy and Spain, far from cutting capacity and production, those were increased in 1980. In spite of the so-called world depression and the economic forces that we cannot resist, we find that other countries have adopted policies that have made their steel industries flourishing and viable. Of course we know that they are working below their full capacity, but they have not destroyed capacity on the scale that we have, and for good reason. Steel is a basic industry fundamental to the economy of any advanced industrial country.
Therefore, the message must go out, and to Mr. McGregor above all—I believe that he is anxious to hold to the capacity that he has—that there must be no further cutbacks and that we are determined to maintain the capacity of 15 million tonnes and build on that a steel industry that can expand in the future.
I should be interested to know how the Government are approaching the European negotiations, which I understand will take place in May or June, about future quotas and allocations. I do not know whether I am correct, but I have been told that the Germans do not wish to participate further. They want to go their own way and do their own thing. I want to know whether the British Government will tamely accept some diktat from Brussels that we should cut back because we have too much capacity and that the capacity must be lowered to 11 million tonnes, 10 million tonnes, 9 million tonnes or whatever is decided by Brussels. That would be unacceptable. I am sure that it would be unacceptable to Mr. McGregor, and it is unacceptable to the House.
We are entitled to be told on what basis the British Government are going into those negotiations. No doubt they will say that the detail is a matter for private discussion, but are we prepared to say that we are willing to shed another 4 million tonnes or 5 million tonnes? As I understand it, the agreement runs out at the end of May or June.
We are constantly being told that world demand for steel has slumped. I do not believe that that is true. I think that there has been a slight decline in the past couple of years in world steel usage and world production—possibly about 10 million or 15 million tonnes from a total of about 790 million tonnes—but it is simply not true that there has been a massive slump in world demand for steel, and that is not the explanation for the present situation in Britain.
Why is it that the British steel industry has run intro these difficulties in recent years? We know that in other countries coking coal has been subsidised. We know that freightage and the railways in Western Europe receive public subventions on a far greater scale than anything that we give in Britain. We have had reference to energy prices and costs. We know that these are serious problems in steel making and that they have been aggravated by deliberate Government policy. There are some signs that, under massive pressure from the CBI and industry, and from the NEDC and other bodies, the Government are modifying their attitude on the question of energy prices. However, we ought to be assured firmly tonight that this will be a real change that will be of help to the steel industry, and that we shall see some move in that direction.
Another problem is interest rates. The Prime Minister boasts that she has brought these down by four or five points. That is certainly welcome. It was long overdue. 493 High interest rates have caused massive problems for the steel industry over the past two years. Unless the process of reducing interest rates is continued, matters are not likely to improve in that direction.
The exchange rate has also been mentioned. I have seen figures produced in Sheffield on this matter. They show the appalling effect of the rate of sterling on the cost per tonne of certain special forms of alloy steel. This is an impossible burden for the steel industry to carry if it is to compete abroad against other producers. Therefore, the Government owe us some explanation of those matters. Is there to be a genuine effort to reduce energy costs? Will interest rates come down further, and quickly? Is a serious effort to be made to bring the exchange rate down to a more reasonable level?
Then there is the question of the reorganisation with the private sector. Obviously this is a matter of considerable concern in Sheffield, because there are certain major private sector steel making firms that are in desperate trouble and would like to know what is going on in these phoenix operations.
I inquired the other day about the extent to which the trade unions that would be involved in these matters would be consulted. The Secretary of State brushed off the suggestion that the trade unions had any right to be consulted. That was an astonishing attitude from my point of view. Shareholders, the banks, the institutions, investors and managers have had a say in what is going on, but the people whose livelihood is involved are to be shut out; they are to have no say. Apparently they cannot be trusted with being told what the arrangements are to be. These are the people who will be most directly and severely affected by reorganisation plans as between the public corporation and the private sector.
I have no special objection to a reorganisation involving public capital and private industry. I think that what is now happening is that the Government are using the BSC as a substitute for the National Enterprise Board to strengthen or shore up certain private steel companies. I should have no objection if that would save jobs and make viable those private companies that would otherwise collapse. Rationalisation between the public and private sectors is probably overdue. I see nothing fundamentally objectionable in that, provided that if public and private assets are merged in some way there is fair and proper public control of them. After all, the taxpayer has paid for them.
I was interested when the Secretary of State said that, although the BSC held a 50 per cent. share in the Phoenix I reshuffle, it would have no control. The Secretary of State or the Minister should explain why the public sector has no control when there is a 50 per cent. public stake in a reorganised company. Who represents the taxpayer? In what way are taxpayers' interests protected? I would understand if the public had a minority stake of 20 or 25 per cent. The position might then be different. However, I understood the Secretary of State to say that there was a 50–50 share. That suggests that control has passed out of the hands of the BSC. The Government should explain how public investment is being protected and controlled, and what responsibility the Secretary of State has.
The House should also be told what progress has been made on the so-called Phoenix II discussions. We know that private firms are queueing up to knock at the Secretary of State's door for help. They want to know how they can 494 be saved from toppling over the brink in such an economic climate. The problem is particularly acute in areas such as Sheffield, where many companies are running into serious trouble. If it is possible to rescue those companies and to keep them afloat through some form of reorganisation between the BSC and the private sector, action should be taken. However, the House is entitled to know on what basis such action would be taken.
If there is any reorganisation, how will the public interest be safeguarded? Who will exercise control on behalf of the taxpayer and the public? The Government's overall economic policy is responsible for two-thirds of the steel industry's problems. Deflation, the cut in demand and the monetarist policies that the Government have pursued over the past two years have had a disastrous effect on powerful, enormous corporations such as GKN and ICI.
Thousands of smaller companies that are not so famous cannot survive the blizzard. Therefore, we need a change in the economic strategy.
It is important to know whether the BSC's capacity to produce at least 15 million tonnes of steel a year will be protected, and if necessary enhanced. In addition, we want to know about the reorganisation plans in so far as they affect the private sector.
§ Mr. Roger Moate (Faversham)
I apologise for coming into the Chamber at this late stage. Indeed, I have been able to attend only because the Standing Committee on the Transport Bill finished earlier than had been expected. Therefore, I apologise if I repeat arguments that have already been made, or make points that have already been answered.
I was privileged—if that is the right word—to hear the speech made by the hon. Member for Sheffield, Heeley (Mr. Hooley). With respect, he is living in a fool's paradise. He argued for massive subventions to the public sector on a European scale. He referred to transport and to the steel industry. Where does he think the money for the Bill will come from if it does not come from individual taxpayers or from the wealth created by private industry.
My main desire in speaking today is to emphasise to my hon. Friend something that he has already heard very often from the Government Benches—the strength of feeling that exists generally throughout the country that there is a limit to how much support we can continue to give over and over again to the public sector. At a time when private companies are going bankrupt, the hon. Member for Heeley should understand the strength of their feeling when they see what the State-owned companies can achieve. They can simply go along to the Secretary of State and be bailed out to the tune of the sort of figures we have got in this Bill today.
It makes no difference to the employees whether they are employed by a nationalised industry or a private sector company if they are declared redundant or their employer is going bust. If they are going to lose their jobs they, too, deeply resent the fact that others are being bailed out while they are going under. It is one of the welcome signs from many Opposition Members and, I hope, from hon. Members on this side of the House that during the recent debates on the steel industry there have been fewer arguments about the public sector versus the private sector; there has been a general desire to protect the steel industry and to try to ensure that a steel industry, both 495 public and private—though personally I would prefer it to be mostly private—will emerge from this present crisis. I hope in a few moments to turn to the future, because that is really what the Bill should be about.
§ Mr. Hooley
Where does the money come from? Does it make more sense to pay £7,000 million to keep 2½ million people doing nothing or to put £7,000 million into productive industry in order to create jobs?
§ Mr. Moate
I was just going to agree with the hon. Gentleman, but now he has taken me back to a point of fundamental disagreement. It is no good having people producing steel that nobody is buying. It is the hon. Gentleman's quite clear contention that the crisis today is a British crisis, generated by the policies of this Government. Has he missed the point that this manifest crisis—that is not a British phrase, although the words are English—affects the whole European situation; that it is the whole of European industry that is in a state of manifest crisis, with a few exceptions? It is on a European dimension. I will not go into all the other economic facts of life that are grimly staring in the face Belgium or Ireland, or other nations that have very different sorts of economic policies.
We are in a recession. It is certainly a European recession, and I would say that it is a world-wide recession. The hon. Member for Heeley tries to pretend that it is somehow created by current policies here, but he knows full well that he is indulging in a little dogmatic party mud-slinging, and that really does not help us at all.
The hon. Member was right in saying that he did not feel that this was in any sense a funeral, or a wake. Indeed, if every capital reconstruction of a State industry were a funeral these corpses would be being buried over and over again, because this is by no means the first time that we have engaged in a capital reconstruction of this kind. It is a realistic thing to do. I have said before that it is utter folly, year after year, to leave many of our State-owned corporations paying interest charges on totally unrealistic capital debts. We have to do this; we have to face it, and what we are now doing, in the words of the Secretary of State, is dealing with the mistakes of the past. The great point is that when the State makes a mistake it makes it on a mighty scale. Here we are writing off £3,500 million of taxpayers' money that has been lost.
I do not want to be ideological or dogmatic about private or public ownership, but I would say to right hon. and hon. Gentlemen that had the steel industry never been nationalised the taxpayer today would not be involved in writing off debts of this kind. It is possible that the steel industry would not have expanded to the point that it did. I concede that. But nearly everybody now concedes that the plans of the time were totally unrealistic. To talk about 35 million, 40 million or 45 million tonnes capacity was to live in the dream world of politicians, and not the real world.
§ Mr. Crowther
Does the hon. Gentleman recall the Benson report, which preceded nationalisation and which clearly showed that the investment plans of the then private steel companies were totally inadequate to meet the level of investment needed? But for nationalisation, that investment would not have taken place and the British steel industry today would be largely dead.
§ Mr. Moate
I recall the many years of being lectured about the inadequacy of investment levels, but in the end 496 the test of adequacy is whether people are prepared to put up the cash to produce a viable industry. The very fact that the taxpayer had to step in to carry out the theories of the report demonstrates the strength of my argument.
Surely we are all agreed that we must have a viable steel industry. It will be smaller. Even the hon. Gentleman said that we would have to stick at 15 mililion tonnes. The difference between that figure and the 14.2 million or 14.4 million tonnes is not of fundamental long-term significance, the latter figure, I understand, being that adopted by Mr. MacGregor and the BSC. We are talking of a viable steel industry, be it publicly or privately owned. That means that there must be a reasonable rate of return on the capital invested, whether by the taxpayer or the private sector.
We do not want any more long-term public involvement that will repeat the mistakes that were made in the past. Today we are footing the bill for yesterday's mistakes. The hon. Member for Wrexham (Mr. Ellis) spoke of the failure of the steel industry. The steel industry has not failed Britain, it is the politicians who have failed the steel industry by nationalising it in the first place.
I will try not to be too ideological. Ownership is about financial control and making sensible investment decisions that will produce a viable industry giving a healthy return. We have only to see what has happened in the private sector in the past five or six years. It has produced profits of £700 million at a time when BSC produced about one and a half times as much as that in losses. It can he done. Had the industry been in private hands the taxpayer would not be having to pay this bill today.
I want to take up with my hon. Friend the Minister of State a few key points. I want him to explain the extent to which the BSC will separate off those parts of its business that are seen to be viable and can be free-standing companies competing without subsidy. I do not know whether we have been given that information or whether it is part of the corporate plan that is still rather elusive. I regard it as part of the key to the future.
We are in a terrible situation and we want to see the way out. It is not a funeral. We are recreating a viable and profitable BSC for the future, I hope, having in two or three years' time no public money in annual subsidy. Let us hope that we can talk less of the desperation of today and more of the prospects of tomorrow. Let us think more optimistically about the MacGregor plan and the private sector.
I would like to hear my hon. Friend tell us that a substantial slice of BSC will be separated off and ultimately privatised or denationalised. Admittedly that will leave parts of BSC that might need support for longer, but in the end those parts, too, should be privatised and the disciplines of private capital and the private sector applied. Will my hon. Friend tell us more about those proposals?
I was very impressed to learn from the recent statement on the coal industry that the Government were to deal with the question of coal imports. We were told in an earlier debate about BSC that its pricing policy was based upon the price levels of imported steels.
As we have pretty well entirely destroyed the free market for steel, a similar argument could be applied to steel imports as to coal imports. If my hon. Friend has time, I hope that he will deal with this question. If the EEC can work out a quota system on production, as it did—a system that may well be renewed—I do not see why it 497 cannot work out a quota system, within the Community rules, for steel imports. That might give the breathing space that the private and the public sector need at present. I should be grateful for my hon. Friend's comments on that, too.
On pricing policy, Mr. MacGregor undertook personally to investigate any accusations of unfair price cutting or undercutting of the private sector through taxpayer subsidies. I expressed scepticism about that at the time, and I do so again. According to today's papers the BSC is losing £2 million per day. If the Corporation is losing that much money as a generality, I cannot see how it is possible to identify the way in which the taxpayers' money is being used. I am therefore sceptical about Mr. MacGregor's abilty to prove that the money is not being used to undercut private sector products. I believe that the House is entitled to seek a more specific way of dealing with those complaints.
I must ask my hon. Friend once again about energy prices. The steel company in my constituency asserts that it is paying about £9 million per year for electricity while its Continental competitors are paying about £6 million on a comparable basis. That is an additional burden of £3 million being carried by that company. The Chancellor of the Exchequer has made announcements about ways of relieving the burden of electricity costs on intensive energy users. I have given a classic example. I should like to know more clearly how the new system will work and how it will help the whole steel industry, but particularly the type of example to which I have referred.
Many of us have criticised the Government for the way in which they seem to have been supporting the public sector at the expense of the private sector. In doing so, we have perhaps been unfair, in that the Government really had no choice. They had their backs to the wall. No one could really argue that they could have done anything but give the BSC the support that they gave, although many of us said that they must then meet the consequences of those policies. In other words, if they distort the market to that extent, they must offer help to those who suffer the consequences.
It is nevertheless only fair to congratulate the Government upon the courage with which they have faced some of the roughest, toughest and worst decisions that any Government could have to take. Bearing in mind the views of my hon. Friend the Minister of State and my right hon. Friend the Secretary of State, I believe that the praise should be even greater. If we sometimes vent our criticism forcefully, it is because we feel strongly about the need for survival of the private sector, which in the end will be the long-term guarantee of jobs for much of our hot steel industry.
In asking my hon. Friend to keep up the pressure on the Government to find solutions to the problems of the private sector and the public sector, I end on a note of optimism. We are at the depths of a recession. Both sectors have encountered fearsome difficulties. Let us hope that the Bill before us is not, as the hon. Member for Heeley suggested, a funeral or a wake but the basis of a new beginning, and that in a year or two, when we are out of the recession and growth has started, we shall have a profitable, viable and substantial steel industry, which will produce the steel that we need and provide security and jobs for the many people employed in both sectors.
§ Dr. M. S. Miller (East Kilbride)
On a number of occasions the hon. Member for Faversham (Mr. Moate) repeated his faith in the private sector of the steel industry. He also said that we are in a deep recession. It seems to some of us that when things are going well the private sector in most industries does well, but when the going gets rough it tends to run away.
As my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) pointed out, one of the reasons for nationalising steel was due to the necessity to pump more into the industry to produce more steel. The hon. Member for Faversham said that we were in a recession. I believe that we are in a depression. He merely stated the truth. However, when we see that recession, or depression, emasculating one industry after another, do we sit back complacently and preside over the total annihilation of other industries or do we make a comprehensive effort to save them?
I realise that I am not speaking for one of the great steel towns, but I appreciate the tragedy of those towns. It is a tragedy for people in towns such as Corby, Shotton, and to some extent, Sheffield and Motherwell, which is near my own constituency. I make no apology for intervening in this debate, because many of my constituents work in the steel mills of Motherwell. In any case, all of us who represent industrial constituencies are involved in what happens to steel.
We indulge in platitudes when we constantly talk about the rundown of British industry. The hon. Member for Faversham said that we should try to make up for the many mistakes of the past. At one time, we were the only country that produced the goods that nearly everyone now produces, and we must accommodate ourselves to that fact.
The Secretary of State for Industry indicated today that this was pretty well the last chance for the BSC. So be it. But it indicates the necessity on his part to keep this industry going. Although there is an over-capacity in most of the industrial countries of the world, we must accommodate ourselves to the share of the goods that we can produce. We must not allow ourselves to be browbeaten, inveigled or hammered into giving up and letting others produce what we should produce ourselves. That goes for steel, just as it applies to many of the other industries that are currently under threat.
Steel used to be, and still is, an index of a country's industrial power. Some of the developing countries have taken that dictum to heart. They are also trying to produce steel. If it is an index of our industrial power, it ill-behoves us to give up the part that our industry can play without a fight.
It is a tough world, which is getting tougher all the time. The developing countries, as well as the other industrial countries, are now able to produce goods of which we had the monopoly at one time.
I do not object to having a certain element of private sector involvement, if the private sector wishes to play a part in revitalising the steel industry. But the industry requires the injection of large sums of money. We are asked where the money will come from. We could better spend the money used to keep a large number of people unemployed on aiding production. We must look beyond the next year or two in revitalising many industries. The steel industry will play an important part, as the Secretary 499 of State indicated, so we must hold on to it. Through the public sector we have the authority, power and industrial muscle to help industry to re-enter the race for markets all over the world. We must hold on to what we have. Many people would be willing to grab what we relinquish.
§ 9.1 pm
§ Dr. John Cunningham (Whitehaven)
In this debate we have discussed not only the proposals in the Bill but what we know of the corporate plan, Mr. MacGregor, the new chairman of the BSC, the industrial recession raging around us, the influence on the industry's prospects of the Bill and the plan, prospects for investment in other public and private sector industries, and the situation in the EEC generally. We have also discussed the proposals in the Community for a European restructuring of steel. The debate has been important and wide ranging.
We welcome the proposals for financial restructuring of the corporation, so we do not propose to divide the House. To fit in with their philosophy, the Government have cleverly included other provisions hi the Bill such as that to terminate the statutory duty of the corporation to fulfil the market. The Bill also includes proposals on disposals. The Secretary of State is taking power to instruct the corporation to dispose of assets. The great non-interventionist is taking yet another power to intervene, despite his protests to the contrary. As my right hon. Friend the Member for Salford, West (Mr. Orme) made clear, we oppose the latter proposals and in Committee we shall be moving amendments.
Turning to the Secretary of State's attitude to public industries, as my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) said, it does not make sense to mount a massive financial reconstruction of an industry and almost in the same breath to speak in terms and tones damaging to the morale of the people in the industry. That does not make any sense to the Secretary of State or to anyone else. If he intends the corporation, however slimmed down or changed, to succeed, he ought to be speaking in terms that at least help morale in the industry. I am talking about the management. The man the Secretary of State appointed, Mr. MacGregor, has made this point. Other appointees of the Secretary of State in public sector industries make the same point. It is in the Secretary of State's interests, as well as the interests of the industry, that an attempt should be made to improve morale. Nowhere is that more true than in the British Steel Corporation.
I hope that the Secretary of State will in future resist the temptation to indulge his tendency to denigrate public enterprise. Whether he likes it or not, within his tenure of office—I do not speculate about how long or short that may be—he has to go on dealing with significant public sector industries. It is not in the country's interests, nor his, that morale should continue to be damaged and eroded whether from the Government Dispatch Box or by comments from his right hon. and hon. Friends on the Back Benches. That is an important point.
§ Mr. Richard Page
I take on board what the hon. Gentleman says. I hope that he will express a view that the ISTC, particularly in its publication "The ISTC Banner", should be publicising support and encouragement for the plan so that a confident work force can help to make the plan succeed instead of the virulent attacks that are at present being published.
§ Dr. Cunningham
I listened to the hon. Gentleman's speech. I had taken note of the point that he made, which was similar to the point he has just expressed. I assure him that I shall come to that matter. I recognise that there is some importance in what he says about the attitude of the unions towards the future of the industry.
I should like to say, in regard to the speech of the Secretary of State and the speeches of some, although not all, of his hon. Friends, that the steel communities and the workers in the industry need no lessons from any quarter of this House about facing the realities of the industrial situation in Britain. The steel communities and the unions representing people in the industries know the reality. More than anyone, they have felt the damage that has been done and sustained by themselves, their families and their communities. It ill behoves hon. Members, especially the hon. Member for Cornwall, North (Mr. Neale), to make the kind of speech that the House heard about the steelworkers and the communities in which they live.
It is a simple and long-established fact that productivity in any industry is primarily determined by output. The steel workers want to be as productive as any of their competitor companies, whether in the private sector in this country or elsewhere in the EEC. It is extremely difficult, if not impossible, with the best investment and with the best plant running so far below capacity, as is the case in some of our plants, to make meaningful comparisons about productivity with our competitors abroad or in private sector industries. A lot of nonsense has been talked in criticism of the workers in the industry.
The Secretary of State made a curious speech. He began by talking about privatisation. I suppose that he wanted to maximise his political position. He talked about the disposal of assets and the withdrawal of the corporation from certain operations. I assume that he was referring in part to the powers that he will take to direct the corporation on what it must do. That is a curious position for the right hon. Gentleman of all people to be taking. He has appointed Mr. MacGregor, who has an aggressive business record, to take control of the corporation. There is a tremendous conflict when the right hon. Gentleman appears to be taking power for himself. I assume that he will use it as he has done with the NEB and in other circumstances. That is a conflict. I shall return to that theme in referring to certain provisions in the 1975 Act.
The right hon. Gentleman talked about the capital reconstruction of the industry which, as my right hon. Friend the Member for Salford, West said, we greatly welcome. It is long overdue. It has not made sense for the industry to continue carrying unrealistic burdens. We all knew that sooner or later there had to be a capital reconstruction if we were to make any sense of the corporation's industrial position, so the proposal is welcome.
The industry lost 50,000 jobs in 1980. The MacGregor proposals envisaged at least a further 20,000. That is one of the reasons why we are sceptical about the proposals contained in the corporate plan in conjunction with the Bill. We are not convinced that continual rundown will save the industry. The right hon. Gentleman and Mr. MacGregor have said from time to time that the industry will be run down to such a point that it becomes profitable. There is little profit for anyone in taking that view. One would not have to be a genius to reduce the corporation to a size when it could be said "This plant will be viable". It could be done with significant sections of the industry 501 in Sheffield or Rotherham. However, that would not be in the taxpayers' interest. It would be against their interest and against the national interest.
Demand for steel is likely to fall again in the next 12 months. That will make the achievement of the MacGregor proposals difficult. Although we say that we shall oppose further closures, we recognise that we must advance arguments to sustain existing capacity. A number of my hon. Friends have done that. My hon. Friends, the Members for Rotherham (Mr. Crowther) and for Heeley, for example, have argued cogently for maintaining existing capacity in the industry. I shall not rehearse their arguments.
The right hon. Gentleman appeared to have left his interventionist hat on the peg of his earlier ICL statement when he began to talk about non-intervention, the disadvantages of public enterprise and other similar phrases. He cannot have it both ways. I understand his trouble with Conservative Back Benchers. In some ways the Opposition have done him a favour by not dividing the House. If there had been a Division, he may have found himself on the wrong side if some of his hon. Friends had had the opportunity to vote. Of course, it is right that he should be intervening. There is no reason for him to apologise for so doing.
The right hon. Gentleman mentioned the public interest, as I have done. What is the public interest in these matters? The right hon. Gentleman asserts that it is not to have public enterprise. We contest that. He asserts—I think I understand him correctly—that the present size of the corporation is unlikely to be maintained. He knows, and his hon. Friend the Member for Faversham (Mr. Moate) reminded him, that imports of steel into this country are significant. The corporation and the private sector are not meeting the demand for steel in the British economy, even at present. The concomitant of further reduction in capacity for the BSC is more imports into the British economy, and that is not in the national interest.
We are debating a strategic industry. The Secretary of State said today that it was important in the national interest to sustain ICL; and, similar, if not identical, arguments can be used about the British Steel Corporation. We need a construction industry—that requires steel. We need an engineering industry—that requires steel. We need defence—that requires steel. We need a shipbuilding capability and a capability to produce goods for the exploitation of the British sector of the North Sea—that requires steel. We have a coal industry that requires steel. We have an electricity industry that requires steel, and a nuclear power industry which requires steel. Our railways, too, require steel.
Let us not pretend that liquidation of the steel industry—that, in effect, was what was being suggested by a number of Conservative Members—would be in the interests of the taxpayer. Liquidation would be an expensive exercise. As my hon. Friend the Member for Heeley reminded us, we are discussing significant national assets, an organisation with a turnover in excess of £3 billion. It would be no soft option for the taxpayer or anyone else to liquidate the BSC.
In 1969–70, the corporation had a 70 per cent. share of the market. The hon. Member for Bromsgrove and Redditch (Mr. Miller) expressed concern about the corporation's share of the market. It is less now than it was 502 a decade ago. It fell to below 50 per cent. last year. Now it is coming up again, as Mr. MacGregor said in evidence to the Select Committee last week. In fact, one of the reasons why the Secretary of State appointed Mr. MacGregor was to make the corporation aggressive again so that it would have a larger share of the market than it has now.
§ Mr. Hal Miller
Does the hon. Gentleman accept that there are real fears that this aggressive competition by the BSC, supported by public funds, is extending downstream from steel making into secondary activities? That is one of the main causes of concern.
§ Dr. Cunningham
The corporation has been involved in what the hon. Gentleman describes as downstream or secondary activities for a long time. Some Conservative Members, including the right hon. Member for Taunton (Mr. du Cann), argued to much the same effect in the last debate that we had on steel. Labour Members do not accept that the corporation should be pushed back into being simply a bulk steel producer. There is no good commercial, economic or political argument for that. We recognise the problems of the private sector, and those problems are caused, in the main, by imports from countries such as the Federal Republic of Germany.
Ministers have been fair to their Back Benchers in the stand that they have taken. They have said that they are willing to investigate any evidence which suggests that the British Steel Corporation, as a policy, is unfairly trying to undermine the private sector. Hon. Members cannot ask for anything fairer than that. It will be interesting to see whether any of the claims can be proved.
The problem is that the Government's wider policies and lack of industrial strategy will make it difficult for the proposals to come to fruition and for the corporate plan to meet success. The construction, chemical and engineering industries are facing grave difficulties. We have just heard of GKN's position. The chemical industry, traditionally, is one of our most successful industries. Figures produced by the Chemical Industries Association predict a 16 per cent. fall in real terms in investment this financial year. That is very damaging, not only for our industrial prospects but for the construction industry and, hence, for the steel industry.
We have been told that shipbuilding has had its worst year for many decades. The railways face unrealistic cash limits. Even the CBI is calling for public capital investment. All those factors are damaging to the prospects of the corporation and the private sector.
It must be a long time since a leading article in The Times—which cannot be described as the village voice of the Labour Party—drew attention to the need for industrial strategy, as it did on Friday 20 February. It described the present position as a "lacuna at the centre" of Government policy. It went on to say something even less kind about the Secretary of State of which I shall not bother to remind him. My purpose in referring to the article is to show that there is a widespread recognition that the ad hoc approach, the one-off interventionist approach of the Secretary of State, who intervenes here and intervenes there with no overall strategy, is not in our national interest.
I cannot understand why he has not reached the conclusion that it is not only in the national interest to have a national strategy but in his interest. We certainly urge 503 a strategy on him. That is the best chance of success for the major financial proposals—for the public sector, the taxpayer and the British industry as a whole.
I turn to the manifest crisis in the Community. I understand that discussions on the restriction proposals, State aid, the social fund and existing quotas are ongoing but that little progress is being made. Perhaps the Minister of State will explain. I understand that he is to resume discussions on 26 March.
Are the British Government one of the Governments responsible for the failure to reach agreement on the social fund provisions because of their attitude to the legality of that which is proposed? The Minister of State shakes his head. That was so until recently. I am pleased that is no longer the case.
§ Mr. Tebbit
That was never the case We think that the method proposed is the wrong method. We have considerable doubts about it. We have not blocked an agreement. We are searching for an agreement. When other countries come forward with firm proposals we shall not let anything stand in the way.
§ Dr. Cunningham
I listened carefully to what the Minister said. He said that the Government had not blocked an agreement. If he means that in so many words, I accept what he says. I hope that he was not denying that the British Government was one of the Governments which was questioning the legality of the proposed transfer of funds between budgets. That is a matter of record. It was one of the the things which prevented an agreement. I do not wish to become involved in wrangling about that matter.
Will the Minister tell us a little more about the monitoring of EEC quotas? Have any problems developed? What does he think will happen to the existing mandatory quota system when its six months period expires? That is important for the future prospects of both the public and the private British steel industry.
The Secretary of State was right to ignore some of the more doctrinaire calls from Conservative Members to liquidate the corporation. I hope that, far from doing that, he and the Minister of State will re-emphasise their support for Mr. MacGregor in his efforts to sustain the corporation, although we do not agree with all of them in detail. The Government are responsible for that. They went to a great deal of trouble to get Mr. MacGregor and at no little expense. Therefore, they can hardly justify not supporting him to the hilt, having appointed him.
The major capital reconstruction will not be one of the contentious issues which we discuss in Committee. It must be supported. We must try to ensure that the new start for the industry succeeds. That relates to the point made by the hon. Member for Hertfordshire, South-West (Mr. Page)—I nearly said "Workington". We used to be constituency neighbours for a little while. I did not regret the termination of that arrangement. Nevertheless, for a time the hon. Member was involved with the BSC plant there. He and others have emphasised that the trade unions should now support the MacGregor proposals. I should like the trade unions to be able to support a future for the industry. All Opposition Members would like that.
In that connection, I refer now, as I have done before, and as have a number of my right hon. and hon. Friends, to provisions in the 1975 Act, which place a statutory 504 requirement upon the corporation. The Act states that before reaching conclusions in consequence of a review undertaken in pursuance of subsection (1)the Corporation shall seek consultation with organisations appearing to them to represent substantial proportions of the persons employed by the Corporation or the publicly-owned companies or of any class of such persons.That is an Act of Parliament. It places upon Mr. MacGregor, the House and the Secretary of State a duty to ensure that the unions are taken into all confidences and are party to discussions about major changes in the industry. If Mr. MacGregor steadfastly refuses to do that he can hardly complain if they refuse to accept what he is saying. The same is true of the position of the Secretary of State. If the Secretary of State steadfastly refuses to see that that provision of the 1975 Act is implemented—it is not repealed by the Bill, so it will persist—how can the unions be critised? The reality is that they want to see success for their industry. They would rather be part of an industry that is making a profit and—to coin a phrase used by several Conservative Members—is off the backs of the taxpayers. They would welcome that. They should be given the chance to discuss the detailed proposals for the industry, not only because the Opposition say so, but because the law says so. That is the law, and I call upon the Secretary of State to ensure that it is carried out. That section is germane to the question raised by several hon. Members about the discussions taking place on Phoenix I—about which we know a little—and on Phoenix II. Section 5(1) states:It shall be the duty of the Corporation, so often as occasion seems to them to require it or as the Secretary of State may require it, to undertake a review of their affairs for the purpose of determining whether the carrying on of the activities that have fallen to be carried on under their ultimate control is organised, so far as regards the direction thereof, in the most efficient manner, and to report their conclusions to the Secretary of State.I see that the Minister is indicating that I am running over my time. I apologise, but it is an important point. Mr. MacGregor should report the details of the discussions about the reorganisation of the steel industry. My hon. Friends the Members for Rotherham and Kettering (Mr. Homewood) and others referred to section 5(7). It states:The Secretary of State shall lay before each House of Parliament a copy of every report made under subsection (1) …above".My right hon. Friend the Member for Llanelli (Mr. Davies) raised that point in connection with Duport. To quote one of his famous forebears,Why look in the crystal ball when you can read the book?The Act says that these matters should be reported to the Secretary of State and to Parliament. We want the Act to be implemented in respect of Phoenix I and II—not because we are not necessarily opposed to them, we are not, but because we are entitled to know—as is the taxpayer—exactly what is happening.
I shall be brief. I apologise to the Minister for exceeding my time limit. There are two views about what is happening in industry. One is that the Government will, once and for all, make us face reality, that industry will be dealt with, that a climate for enterprise is being created, that competiveness and productivity will improve, and thereby the Government will lay the basis for our future prosperity. That sums up the Government's view. The Opposition do not share that view. That view is not shared by the CBI, nor by many economic commentators. That view is not borne out by events since the Government took office. The excessive reliance on monetarism, on the size 505 of the public sector borrowing requirement, the control of the money supply, the protection of an over-valued sterling and high interest rates are causing a holocaust for British manufacturing industry, in which the British Steel Corporation is being caught up.
§ The Minister of State, Department of Industry (Mr. Norman Tebbit)
I shall do my best in the time that is left—I am not criticising the hon. Member for Whitehaven (Dr. Cunningham)—to answer as many points as I can. That will present some technical difficulties at this stage in our proceedings.
The hon. Member for Whitehaven criticised my right hon. Friend for, in effect, giving a warning with the money. It would have been more correct to criticise my right hon. Friend had he not given a warning at the time that the money was made available. It would have been extremely damaging for the morale of all those involved if the money had been given without some pretty straight talking. There must be some pretty straight talking when one is writing off £3,500 million of taxpayers' money.
As the hon. Gentleman and the House know, many trade unions are dedicated to having the extension of public ownership as a political objective written into the rule books. I recollect the words of the right hon. Member for Manchester, Ardwick (Mr. Kaufman) during passage of the Aircraft and Shipbuilding Industries Bill. He excused what he was doing on the ground that it was for the advance of Socialism. In the face of dogmatism of that kind the hon. Gentleman must not be surprised if, from time to time, Conservative Members take a slightly different view.
The right hon. Member for Salford, West (Mr. Orme) said that the clauses to which he took exception were based on a doctrinaire dislike of nationalised industries. Those feelings are not doctrinaire. They are entirely empirical.
Cash-hungry, profitless, wealth-consuming industries are objectionable, whether they are in public or private ownership. In private hands the agony is normally short-lived and the cost to the taxpayer is minimal. In public hands a loss-making industry has an agony that is protracted and intense, and the taxpayer pays. Whether the humane killer or the life support system is used, it is a very expensive operation. The task that my right hon. Friends and I have is to decide whether it shall be the humane killer or the life support system. We hope, by whatever means we choose, to restore the industry to viability.
The right hon. Gentleman is not alone. People in the private sector who think of themselves as entrepreneurs have the same problem. The right hon. Gentleman has not yet learnt to tell the difference between an asset and a liability. An item is not an asset because one has paid a lot of money for it. It is an asset only if it is earning its keep, and if, potentially, it can be sold to somebody else. If it cannot, it is a liability. The sooner that is understood, both in the public and the private sector, the better. I have had to tell people in the private sector "Gentlemen, what you tell me are your assets are, in fact, your liabilities. You cannot tell the difference."
I was glad of one thing in the right hon. Gentleman's speech. He said that he was no defender of Morrisonian nationalisation. God be praised. That is another U-turn, and we must be grateful for them when we see them. I say 506 that it is a U-turn because it was only about four years ago that the right hon. Gentleman voted to trap the aerospace and shipbuilding industries precisely into the Morrisonian glue-pot of nationalisation in exactly the same form as had been used in 1945. He did that in 1977–32 years later.
I am glad that the right hon. Gentleman has had a revelation in the past couple of years. I welcome his support in getting rid of Morrisonian nationalisation wherever it is found. I hope that he will promise never to go in for it again if he finds himself in the position of being able to do so.
§ Mr. Orme
I am enjoying the hon. Gentleman's rhetoric, but what I said was that the Morrisonian mould that has been used for the public sector should be broken. There should be other forms of public ownership and control. That is my point. That can be brought about with industrial democracy and other measures.
§ Mr. Tebbit
Yes, it is always going to be a great new idea tomorrow, is it not? What a pity it is that the right hon. Gentleman did not use the great knowledge that he now has to reform some of the nationalised industries when he was in office. He was not interested in doing it then. He has only just invented it. What is the matter? Is he afraid of the Social Democrats? Is that why he has invented this? He does not have to be afraid of them. We shall help him. He should stand up to them and be a man. As the right hon. Gentleman knows, they too are being infiltrated from the Left these days.
One of the most important things on which I should spend a few moments, because it is at the heart of many of our problems, is the question of the actions that we should take in Europe in order to help solve the problems of the steel industry. There are three things that must be done. The first is to come to the point at which, in the short run, we can get the price of steel in the market back to one at which efficient steel makers can be profitable—not the inefficient steel makers, not those that have to have subsidies, but the efficient ones. That is the first and most immediate task, because unless we achieve that we shall have calls for protection and subsidy from the steel makers that are at present unprotected and are relatively—I emphasise "relatively"—unsubsidised, and that way lies disaster.
Secondly, we have to move towards a longer-term solution. I am convinced that that longer-term solution lies in our phasing out public subsidies of steel making across Europe. If we achieve that, the question of capacity will adjust itself automatically in the longer term. That is the second task, and that will be another very difficul one.
§ Mr. Tebbit
I would rather not give way. Many questions have been asked, and I want to answer as many as I can. I have already lost a few minutes.
The other part of this argument is that we must work for a package of what, in the Community, are now usually called social measures in order to lessen the impact on those people who will lose their jobs during restructuring. I assure the House, first, that most of the other Ministers in Europe take views similar to those that I have expressed.
§ Mr. Tebbit
The hon. Gentleman keeps prattling "They cannot make it work." We certainly cannot make the present system work, and we had better find a better 507 one pretty quickly. If the hon. Gentleman is to start on the basis that there is no salvation through the present method he will have to come to the conclusion that there is no salvation through any method.
As I said, the other element is that we must have a package of social measures. I believe that that is generally accepted among the Ministers. It will be particularly difficult to sell this package in countries that are still expanding production and dumping steel at great public expense. It will present a very difficult political problem for them to deal with that policy. I assure the House that I have pointed out to other Ministers that the British steel industry has declined dramatically in size. I think that much of that is due to our own shortcomings. I have given them good reason to understand that when the public sector of the steel industry has just lost 50,000 jobs and it is proposed that another 20,000 jobs will be lost this year, it would be objectionable if they were to ask British industry to bear a further heavy burden of closures. In particular, it would be objectionable if they were to ask us to do that when others who have been producing subsidised capacity on the European market did not do their share of carrying the can for their misdeeds of subsidising and producing excess capacity. I shall go to Europe in order to achieve that end. I do not know how much I shall achieve next week. Events will be coloured by what happens during this week's talks between the steel producers of Europe. Indeed, I think that those talks will commence tomorrow.
§ Mr. Tebbit
I am sure that my hon. Friend will forgive me if I do not give way, because I have little time left in which to deal with the points that have been raised. Hon. Members raised the important subject of progress with the phoenix companies and the Companies Act companies within the BSC.
That problem was raised by the right hon. Member for Salford, West, by my hon. Friend the Member for Surrey, North-West (Mr. Grylls), by my hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller), by my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark), by my hon. Friend the Member for Dudley, West (Mr. Blackburn) and by the right hon. Member for Llanelli (Mr. Davies). In response to the right hon. Member for Salford, West, I should point out that those employees of the BSC who will become employees of Allied Steel and Wire will have to discuss the question whether they will continue to enjoy inflation-proofed pensions—[Interruption.] The hon. Member for Liverpool, Walton (Mr. Heffer) does not have to be silly when we are talking about serious matters.
Mr. Eric S. Heifer (Liverpool, Walton)
I remember when the hon. Gentleman was in Opposition.
§ Mr. Tebbit
I remember that the hon. Gentleman is now in Opposition and I am now in Government. I advise him to remember that and not to interrupt in a debate that he has not attended.
Pensions are to be negotiated between the employees and management of Allied Steel and Wire Limited. It is not for me to say what the arrangements should be. They will be made between the parties directly concerned.
We are making progress in forming the Phoenix II consortium. Beyond that, there is the possibility of 508 Phoenix III. My hon. Friend the Member for Surrey, North-West asked me to make the BSC move quickly. He asked me to take powers to force it into the phoenix arrangements. Uncharacteristically, he has not thought the problem through. If I took such powers, the Government would inevitably set up the consortium, would pick the partners and the plants. I and my advisers in the Department are not the best equipped for that job. We shall not have to carry the can as the management will. If I am to adopt powers to direct the BSC about plants, terms and prices, perhaps I should have the powers to direct the private sector too. It would do me no good to have only half the powers required. Therefore, it is better not to take that point further.
§ Mr. Denzil Davies
Which companies are being considered for inclusion in the consortium for Phoenix II? Who will decide which companies are to be included?
§ Mr. Tebbit
The participants must make the decision. When the BSC acquired the assets from Duport, it had in mind that they would be used in Phoenix II. There have been discussions between GKN and Tube Investments Ltd., and possibly other companies, too. I think that it would be best if I did not, in advance, perhaps, of the shareholders of the companies being told, go through a list of the companies that are negotiating. They are not my companies.
§ Mr. Tebbit
Clearly, it is decided by agreement with the parties concerned. I do rot decree who goes in or who stays out. It is a commercial judgment.
§ Mr. Denzil Davies
The parties concerned presumably include the British Steel Corporation. It decides in the end which assets it wants and which it does not.
§ Mr. Tebbit
It is not a question of which assets British Steel wants and which it does not want. Curiously enough, it takes two to make a bargain. That answers also, I think, the question raised by the hon. Member for Sheffield, Heeley (Mr. Hooley). He asked why the British Steel Corporation is in a 50-50 owned company and does not have control; it has got 50 per cent. of the shares. I do not know whether it has occurred to the hon. Gentleman that somebody else has got 50 per cent. of the shares and has not got control either. It is a straightforward mathematical matter and I do not see why it is causing him such a problem.
§ Mr. Grylls
The point surely is that in the overlap areas it is the British Steel Corporation's businesses that are in danger of competing by using Government subsidies. The hope was that my hon. Friend could put some pressure behind them, because they are the ones that could potentially do the damage, and in some cases already have done the damage, to the private sector companies.
§ Mr. Tebbit
My hon. Friend is right, of course, but both British Steel and the private sector are bleeding at the moment. Both sides acknowledge that there are areas in which there is excessive capacity, both sides have an interest in seeing a more efficient set-up, and both sides want to come to agreements. That is why we got an agreement on Phoenix I and that is why we shall reach agreements on Phoenix II and III. We just have to say that it must be left primarily to the parties concerned. I will do my part in encouraging the corporation to enter this type 509 of company, and I shall also do my part, as my hon. Friends the Members for Bromsgrove and Redditch and Faversham (Mr. Moate) particularly wanted, on the question of the Companies Act companies within the corporation.
My right hon. Friend the Secretary of State said on 24 February that Mr. MacGregor would be putting some businesses in Companies Act companies, and I can confirm that the corporation has already put in hand arrangements to place the Stanton and Staveley business and the BSC stockholders' operation-British Steel Service Centres—into separate Companies Act companies and that that reorganisation will take place shortly. So I think that there is real progress in these areas.
In the last few minutes available to me I should deal also with some of the other points that were made. I should like particularly to comment on the speech of my hon. Friend the Member for Hertfordshire, South-West (Mr. Page), because he mentioned something that I think almost nobody else did, namely, the role of BSC (Industry) Ltd. in helping former steel workers into new jobs. This is an important and worthwhile task and I hope that it will continue to go well—indeed, better than it has in the past.
It may be particularly appropriate this evening to refer to the news, in the papers this morning, of the remarkable success of five former steel workers in Wrexham in obtaining the franchise for a commercial broadcasting station. I am sure that the whole House, whatever hon. Members' views on commercial broadcasting, will want to wish them well and say how glad we are that that sort of thing is happening. I had considered saying something about the speech of the hon. Member for Motherwell and Wishaw (Dr. Bray), but on reflection I think that I should not do so. It was dealt with extremely well by the hon. Member for Wrexham (Mr. Ellis), and if I added anything to that it might tend to spoil it. What the hon. Member for Motherwell and Wishaw said about my right hon. Friend was unworthy, ill-considered, intemperate, dogmatic, ill-informed and thoroughly discourteous. The discourtesy was further marked by the fact that, having delivered his attack upon my right hon. Friend for not being present to listen to him, the hon. Member walked out of the Chamber and has not been seen since.
Anyone who is interested and who wishes to follow up the point that the hon. Gentleman made when he tried to amaze the House with erudite remarks about inflation cost accounting should turn to the BSC accounts for 1979–80, from which it will be seen, on page 45, that the hon. Member for Motherwell made a fool of himself.
My hon. Friend the Member for Bromsgrove and Redditch said that it was unfair that we should support only the public sector. He thought that we should help people with losses in the private sector. When times were good and Hadfields was making profits we did not expropriate Lonrho's profits. When times are good in the steel industry we hope that it will make profits, which will accrue through the BSC to the taxpayer until we denationalise it. Equally, when it makes losses, we as taxpayers have to carry the can.
510 Competition between public sector and private sector can never be entirely fair. I have heard both public and private sector chairmen shout "Foul" about it. There is a great deal to be said on both sides. That is the purpose of forming the phoenix companies. They are private sector unsubsidised companies that will stand on their own, but with a share from both public and private sector.
The hon. Member for Redcar (Mr. Tinn) must know we are all aware of the physically hard life of steelworkers. However, for too long the industry has produced far too little steel per man, not just in bad times but in good times. Of course, it is up to international standards, but oh, how late it is, and how much better it would have been if it had happened five or 10 years ago.
I understand the feelings expressed by my hon. Friend the Member for Cornwall, North (Mr. Neale) when he spoke for the taxpayers. We have to accept that this year's cash requirements for the BSC are roughly equal to the 20p tax on petrol. There is consistency on the part of those who agree with both or disagree with both, but we cannot regard as credible politicians those who call for one without the other. The hon. Member for Wrexham said that in the past the industry had suffered far too much from politicians. We have all intervened, with- the best of motives, some eagerly, some reluctantly, but few of us successfully.
I want to end the debate on a positive note, as the hon. Member for Redcar asked. Let us try to cease recrimination and look forward to the future. There are things to be done by all of us. The workers in the industry must make steel, shape steel and sell it more efficiently at lower cost than ever before. When I say "workers", I do not distinguish between Mr. MacGregor and the other workers in the BSC. They are all workers wherever they are. Mr. MacGregor is not a one-man band; the reverse is true. One of his principal tasks is to develop the new management talents that have been needed for a long time. I have the greatest confidence in him, and I believe that he has the support of all those who are prepared to put their backs into making the industry a success. If they produce steel right across the board at German prices they have a good chance of success in Europe, after the politicians have done their bit in the discussions next week.
I commend the Bill to the House.
§ Question put and agreed to.
§ Bill accordingly read a Second time
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).