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§ The Minister of State, Department of Industry (Mr. Norman Tebbit)
I beg to move, That the Bill be now read the Third time.
This short but important measure has been debated in a constructive, though vigorous, fashion. I do not believe that opposition is diminished by concentrating arguments in the way that the Opposition have concentrated theirs on the issues at stake in the Bill. As ever, we have concentrated on the points of difference between us rather than on those on which we are all, or at least most of us, agreed.
The financial clauses have been not fought over but cried over. To some extent, that was a pity, although I suspect that the Opposition were none too anxious to kick at a ball that was likely to finish in their own goal. I must confess to feeling rather less than comfortable at legislating to write off as lost and gone for ever £3½ billion of taxpayers' money. Nevertheless, it is well to remember that the Bill was necessary because the policies pursued by previous Governments, the actions of board members, managers and other workers had left the British Steel Corporation bankrupt. These write-offs, these reductions in interest burdens on the BSC—because the unhappy taxpayer will go on paying the interest—and the commitment of further large sums of taxpayers' money are the cause, the reason, the motive and the necessity for the other provisions in the Bill beyond the financial clauses.
The provisions of the original clause 1 and the greatly strengthened new clause 1, which we discussed last week, arise from the sad history of the BSC. They are not to be read, in the way that some hon. Members have read them, as a statement of intent to shut down the steel industry.
As my right hon. Friend the Secretary of State said on Second Reading, the Bill will allow the corporation's activities to be reduced "virtually to nil." As ever, my right hon. Friend was totally frank and assiduous in explaining to the House the possible implications of the powers that we seek. But, of course, every trading company has the power to reduce its activities to nil. That does not compel it to do so. Similarly, the removal of the duty to supply does not proclaim the intention to cease to supply across the board. But it puts the British Steel Corporation on notice, and implies to the hard-pressed taxpayer, too, that there is a limit to the extent to which loss making can be subsidised and supported. Is there anyone on either side of the House who would disagree with that? If so, in the words of the marriage service,let him now speak, or else hereafter for ever hold his peace.No one seems to be inclined to speak, so at least we are agreed on that.
The mere removal of the duty to supply will not close down the BSC, nor, unhappily, will it of itself introduce private sector capital into the industry. At present, the trend seems to be for private sector capital to be leaving rather than entering the steel industry. The subsections of the new clause 1, giving powers to require the BSC to set up Companies Act companies, are designed to help stem that private sector capital withdrawal.
68 I have no reason to believe that the powers will be used. I believe that Mr. MacGregor will be perfectly willing to use Companies Act companies to improve the management of the corporation, to introduce private capital to what are at present public sector operations, and to give greater transparency and, therefore, assurance of fair play in the corporation's dealings with private sector companies.
We have already created Phoenix I—Allied Steel and Wire—and I assure the House that the reorganisation of the engineering steels sector, which is intended to lead to Phoenix II—or Phoenix II and III—is being pursued. Allied Steel and Wire will be a private sector company, although 50-50 owned between GKN and the British Steel Corporation. The pattern or form of the engineering steels company, or companies, is not yet decided. There are still difficult decisions to be taken by those who are, or might be, involved in such a new company or companies. My aim will be to ensure that, so far as it is within my gift, the new companies which may be created will not become pensioners of the taxpayer.
The Bill is intended, by the organisational changes that it makes possible, by the reserve powers granted to the Secretary of State and by the financial provisions within it, to maximise the prospects of success for the steel industry in Britain. Prudently, it makes possible contingency plans in the event that success eludes the British Steel Corporation in its present form.
I have every sympathy with those in the whole industry, private or public sector, who have or will become victims of the mistakes of the past. The private sector has every right to call for fair play in competition with the State sector, which enjoys access to public funds. The Bill will help towards that end.
Finally, I should say that the chances of success depend greatly upon how the European Community and its steelmakers arrange their affairs. I shall continue to do all that I can to encourage the steelmakers to reach voluntary agreements on production quotas for their various products. If full voluntary agreement cannot be reached by all or most of the significant producers, we may have to help them to reach agreement. Such production cutbacks and devices can only be short-term responses to the problems caused by the continued expansion of subsidised steelmaking within the European Community.
My long-term aim, which I believe is widely shared within the Community, is to eliminate such subsidies and, with them, the excess capacity and misuse of resources which they have brought about. At the last meeting of steel Ministers in the Community, we were close to agreement. It was mainly a matter of time scale which divided us, and I believed then, as we all did, that we could bridge that gap. Of course, we now await the formation of the new Government in France, and I look forward to meeting my new French colleague. The presidential election and change of Government have delayed matters, but I hope that the substance of the policies pursued in this area by the French Government so far will not be changed.
The British steel industry and its workers are working together now with a determination, skill and unity of purpose between the shop floor and the board room that we have not seen for many years. With the Bill and its write-off of past mistakes and debts, let us hope that we can all put the past behind us and create a successful steel industry in Britain. I believe that the Bill will assist to that end, and I commend it to the House.
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§ Dr. John Cunningham (Whitehaven)
Now that we have reached Third Reading, no one can complain that the steel industry has been ignored by hon. Members. Since last December there have been more than a dozen statements and debates on the industry.
When he introduced the Bill on Second Reading, the Secretary of State spoke, among other things, of the possibility of running down the BSC to nil. However, in Committee, the Minister of State spoke about the public sector of the steel industry having a substantial role in future. We endorse that view. We often say that Bills, statements and speeches have stings in the tail. In this case, the reverse is true. The Bill had a warhead in clause 1, and was strengthened by a new clause that was introduced at almost the eleventh hour. Clause 1 and new clause 1 gave powers to the Secretary of State to follow. a route to privatisation. We opposed not only those powers, but privatisation. Among other things, the Bill allowed for the removal of a trade union's statutory right to consultation. We were fundamentally opposed to that.
As hon. Members know, we did not vote against Second Reading. Indeed, we shall not divide the House tonight. As the Minister generously said, we have concentrated our opposition on the provisions in clause 1 and in new clause 1, which we strongly object to. Of course, we welcome the Bill's financial provisions. We offer our hopes for the success of the corporation's future. Clearly financial reconstruction was long overdue. That aspect of the Government's measures is welcome not only to us, but to the thousands of people associated with the industry. It would be churlish not to acknowledge that.
There are far more important issues for the industry's future than clause 1 or new clause 1. We have registered our opposition to those measures and I should not like anything that I say tonight to detract from what we have said. However, I shall not dwell on those provisions in great detail today. Three things are important to the future of the industry. A combination of events has thrown both the public and private sectors of the steel industry into a deep crisis. The economic and industrial situation is causing public and private steel plants grave difficulties. Although Governments are not usually wholly right or wrong, or wholly to blame for circumstances, this Government cannot escape the fact that they hold a significant measure of responsibility for the conditions that prevail.
The Government introduced unrealistic cash limits, which had a substantial impact on the industry. They were largely responsible for last year's disastrous strike, which had a serious effect on the industry. As the Minister rightly said, the crisis of the European steel industry has had an important bearing on us. The appointment of Mr. MacGregor, the introduction of his corporate plan, capital reconstruction and the EEC agreement constitute the grounds for real hope for a more stable and successful future for both the public and private sectors. Those two sectors are almost inextricably linked, together with their fortunes. Such things are far more germane to a debate about the future of the industry than the provisions for privatisation.
As he has done before, the Minister said that we should regard the proposals that we object to so strenuously as reserve measures. The hon. Member for Knutsford (Mr. Bruce-Gardyne) is not in the Chamber, but last week I 70 think that he said that he did not invisage the proposals being used. Perhaps clause 1 and new clause 1 are not so much warheads as heatshields with which to protect the Minister from the Government's re-entry into the real world, where the BSC is recognised as being crucial to our industrial well-being.
The Minister quoted lines from the marriage service. Some of his hon. Friends may speak not about marriages, but about shotgun weddings, when they discuss what has been happening in the interface between British Steel and the private sector. On behalf of the Opposition, I welcome proposals to rationalise the industry where possible, and to save not only jobs but the steel industry's capability in various important areas. We have strong reservations about the possible enforced disposal of public assets. However, we are not against what both the Minister and I have described as new joint ventures. They may turn out to be successful. We hope that they will be.
I hope that the Minister will not take too much notice of complaints to the effect that the public corporation is being too aggressive or unfair in the market place. I reiterate what has often been said, namely, that Mr MacGregor was appointed to revitalise the corporation and too make it aggressive. His stated aim is to win back the BSC's share of the market. As the Minister said at Question Time today, that market share largely fell to foreign competition and not to the private sector of British steel.
There is much to welcome in the Bill as well as much to criticise and oppose. The Bill will pass on to the statute book. We join with the Minister in hoping for a better future for our steel industry, and for a more rational situation as between the British steel industry and the steel industries of the competitor countries of the EEC. I make no apology for repeating that there is much evidence to show that other countries have been ruthless in their determination to allow their steel industries to survive at all costs, regardless of the cost to others.
We must be vigilant. I notice that the Minister is nodding his head. I am pleased that we agree on that as well as on several other points. No one can believe that the Secretary of State's talk of running down the corporation to nil is wise or justified, given our circumstances, our position as a maritime nation, our defence commitments and all that the use of steel in the British economy entails. It would be a sad day if the provisions in clause 1 were ever implemented. Although I welcome much of what is proposed, there is a great deal to be done in revitalising, rejuvenating and recreating the demand for steel in the British economy. The Government will be responsible for the ensuing success or failure.
§ Mr. Edward du Cann (Taunton)
The hon. Member for Whitehaven (Dr. Cunningham) always speaks with care and authority on industrial matters. I agree with him that the fortunes—if "fortunes" is the right word—of both the private and public steel sectors are inextricably mixed.
I agree especially, as did the whole House—and the Minister of State was careful to challenge us to deny it if we thought it not true—that there is a limit to the subsidisation at public expense of the publicly owned steel industry in the United Kingdom. I also agree with the striking phrase that my hon. Friend used a moment later, when he said that we cannot allow the publicly owned steel industry to be, or to become, as it is, the pensioner of the 71 taxpayer. I have a high regard and admiration for my hon. Friend. I give him notice that many of his right hon. and hon. Friends will hold him and the Secretary of State to those clear and specific undertakings.
I have a commercial interest in the steel industry. I am a director of a company which has an important subsidiary in the engineering steel sector. Therefore I have a practical involvement in this great British industry. I take pride in that. I have always admired the men in the British steel industry. As I come to know them better, I admire them and their great skills even more. They and their skills are a magnificent asset. The House has a duty to ensure that we maximise their use in the interests of the nation and of all those who live in the great steel towns such as Sheffield, Scunthorpe and Llanelli. We are not doing that. It is a standing indictment of the way in which we are managing our affairs. I repeat my implacable view that our aim must be to ensure that this fine asset is better used.
This is a Third Reading debate and we must talk about the Bill. As my right hon. Friend the Secretary of State said on 19 March, the Bill has two purposes. They were outlined in the speeches by the Minister of State and the hon. Member for Whitehaven. Privatisation is the first, and financial support the second. We have not fought over that, but perhaps we should have. As I stand strongly behind the first objective, so I object to the second.
I hope that either the Minister of State or the Under-Secretary of State, for whose talents I also have great regard, will be prepared to say a litte more about plans in that regard. Redpath, Dorman, Long should be the first candidate for privatisation. I hope that that will come about before long. Talking about privatisation in general is one matter, but we should like progress to be made to that end.
If privatisation is the first objective of the Bill, one must ask a question—and I pose it plainly and with feeling. Why in the meantime have the Government thought it right to be apparently indifferent to the existing private producers? Vast sums have been afforded by the taxpayer to the public sector, but the private producers, one after another, are going to the wall.
Duport was the first and most obvious, and, for the people of Llanelli, the most tragic, example. One does not have to be a great logician to know that it cannot be right to argue for privatisation and at the same time to be watching and conniving at policies that result in the existing private sector becoming smaller.
Some statistics might interest the House. The general position is that in May 1979, the month when I was proud to celebrate the election of a Conservative Administration, of the total crude steel production in the United Kingdom, the British Steel Corporation State sector was producing 82 per cent, and the private sector 18 per cent. Two years later, of the total crude steel production in the United Kingdom the public sector is producing 86 per cent. and the private sector's share has fallen to 14 per cent. In other words, the private sector's proportion has fallen by about 20 per cent. It is likely to fall further.
What of the future? If one asks whether the achievement of the commercial objectives set for the BSC by the Government is more likely because of the difficulties in the private sector, or perhaps the elimination of large parts of it, the answer, alas, is "Yes". That is a wrong policy. There were reasons and historic accidents 72 that led to it. Perhaps the House has not watched sufficiently changes of mind by the Government, admittedly before my hon. Friend had responsibility. The position is wrong. It needs urgent re-examination.
If the ordinary commercial criteria had been applied in the last two years, substantial parts of the British Steel Corporation would have gone out of business. The more efficient private sector, a substantial part of which did not join the steelworkers' strike, would have survived and would now be prosperous. However, instead of the private sector being prosperous and surviving, the reverse has occurred. The private sector is steadily going out of business while the State sector continues on its merry way.
That is why I laid such emphasis on the fine, important and trustworthy words by my hon. Friend at the beginning of the debate. Of course the hon. Member for Whitehaven was right to stress the general trading difficulties, which are severe. There is a severe recession here as there is throughout the Western world. There is over-capacity in Europe to which the hon. Gentleman correctly devoted a large part of his speech.
Another fact was inherited and requires emphasis. Neither side of the House has yet found a universal solution to the immense problem of managing any nationalised industry. That applies in particular to a complex organisation such as the BSC. However, my right hon. and hon. Friends and much of the nation take pride in the theme of the Government and their activities, which have found an important practical result in our economy. I am referring to the need for realism, the need to face our economic problems and to understand, as my right hon. Friend the Prime Minister, in a striking phrase has declared, that pennies do not fall from Heaven and have to be earned here on Earth. What is sauce for the goose is sauce for the gander. There is, as there has to be, plenty of realism in the private sector. What is needed is more realism in the public sector—a substantial dose of it.
The financial provisions of the Bill provide for a write-off of no less than £3,500 million. That is a vast sum. One vow that the House should make is that never again shall we allow a situation of this sort to develop. My hon. Friend the Minister of State was right to emphasise that although the BSC may be saved interest in actual or potential terms, the taxpayer will still have to continue paying interest on that sum of money. It is extraordinary—I make this remark not for the first time in the House—that when somebody, some group of people or a succession of people are responsible for losing money on that scale, nobody seems to lose his job and nobody seems to be criticised. Nobody, as happened in the case of Admiral Byng, even gets shot. It is perhaps a pity that greater discipline does not prevail in our financial affairs.
A second financial aspect of the Bill is the continuing support about which I should like to make one or two points. I wish, first, to make what I think is a reasonable complaint. I do not know how many hon. Members have had the opportunity to read the document, dated 23 February, published by the British Steel Corporation on the background to the corporate plan. It consists of 13 pages and some appendices. The pages are double-spaced and there are large gaps on some pages. It is, I must inform my hon. Friend, the sketchiest and most inadequate prospectus that I have ever seen. If one published a document of this sort in the City, one would not be allowed to raise a sum as small as half a crown with it. I am told that it was impossible to publish more information because 73 the British Steel Corporation would be giving away commercial secrets. I find that excuse wholly inadequate. If one of our great British companies in the private sector wished to raise money, it would have to publish a much more detailed paper. Why are the public protected while hon. Members are not given the information which any intending stockholder would regard as his natural right and which those acting for him would see that he obtained?
§ Mr. Bill Homewood (Kettering)
The right hon. Gentleman in his last remark strikes a chord that was constantly raised in Committee on the Bill. It seemed to most hon. Members in the Committee to be complete and utter nonsense to spend so much time talking about a corporate plan that none of us had seen. The right hon. Gentleman is correct in what he says about the document. It is complete and utter nonsense and says nothing. I can assure the right hon. Gentleman that many hon. Members in the Committee posed the question whether the document really existed.
The right hon. Gentleman has touched on what I believe is the reason why we have never seen the document and why there is a tendency to hide behind commercial confidentiality. The right hon. Gentleman is on the wrong side of the fence. The corporate plan, I suggest, would prove more in favour of the public sector than the private sector that the right hon. Gentleman defends. I ask him to believe that what emerged in Committee was that Mr. MacGregor had been more successful in his operation of commercial activities within the iron and steel industry than had those on the private side of the industry whom the right hon. Gentleman seeks to defend.
§ Mr. Du Cann
I do not think that that is the reason. My experience is that the private sector, at any rate in the engineering steels section of the industry, produces at a considerably cheaper price than the BSC can produce.
Leaving that issue on one side, I am glad to make common cause with the hon. Gentleman over information. I have a simple view. We are privileged in this place to be the people's representatives. We are the guardians of the public purse. We are accountable for what happens to the taxpayers' money and how Ministers spend it. We have a responsibility to demand and to see that we get the fullest possible information. With full information, judgments can be made. With full information, those judgments will be fair. I am not concerned with the cause that such information supports. We should have the information. Our approach should always be that we shall vote no more money for steel, the National Health Service or anything else unless we have all the information that we need to determine whether the taxpayers' hard earned crust is properly spent.
I should like an assurance from the Minister that there will be a continuous report to the House on the progress of the corporate plan. May we have full information at all times? May we have a progress report now, before passing the Bill, on the financial results of the BSC for the first quarter of this year? What passes for a prospectus indicates the likelihood of a loss for the year of £318 million. How are we doing? Are we on target? It would be splendid if hon. Members could be given the figures by my hon. Friend. If progress is broadly on target, I rejoice, but we should be given the information.
I could not discover from the document the purchase costs of the Duport plant and details of investment in the 74 Round Oak plant which it is understood BSC will buy from Tube Investments. Are those items included in the total figure of £730 million? If one is short of cash, or if one is taking cash from unwilling suppliers of it, one has an especial duty to be careful what one does with it. I do not want to interfere in the commercial judgment of those responsible for running the BSC. Are we sure, however, that the BSC is being careful? I wonder whether the House knows that the BSC is topping up to a substantial extent the temporary short-time working subsidy that it gets from the taxpayer. I wonder whether the House knows that it is selling steel, in various cases, at a loss. I wonder whether the House knows that it gives redundancy payments that amount to very much more than the statutory minimum. Are we sure that the BSC always spends our money as reasonably as any company in the private sector would be obliged, by its finanial situation, to do? It would be helpful to be given guidance on that matter.
None of us can take much pleasure in the Bill, as my hon. Friend indicated when introducing it. I do not think that hon. Members should be asked to vote these sums unless it is clear that the money is to be well and carefully spent. In all our constituencies and, indeed, in the nation, there are other priorities. I want a new hospital in my constituency. I wish to be certain that the right sums are spent on defence. I want to be sure that the right sums, are spent for social purposes. I want to see a reduction in the debt burden instead of continuing increases. What I loathe most about debates such as this, when we provide huge amounts of taxpayers' money for loss-makers, is the negative atmosphere in which we are bound to conduct them. They are bound, to some extent, to be inquests, and many of us feel that it is a case of throwing more good money after bad.
The fifth report of the Select Committee on the Treasury and Civil Service in this Session shows how fixed capital expenditure at 1980 survey prices has decreased over the years—from £15.8 billion in 1975–76 to an estimated £9.93 billion in 1980–81. As a proportion of total expenditure, it has fallen from 19.4 per cent. to 12.5 per cent. and is expected to fall further. We should be chary of voting so much money for the payment of salaries, administrative costs and so on rather than for items of capital expenditure. We should be looking—to emphasise the note of optimism struck by the hon. Member for Whitehaven and my hon. Friend the Minister of State—to find ways of regenerating the use of steel in our economy.
I should like to see us beginning an economic revival based on capital investment. I have nothing but admiration for Mr. MacGregor and those working in the BSC. I had the pleasure of taking the chair for him at a recent meeting in the House when we were discussing the possibility of a Channel link. I do not know whether hon. Members have had time to look at that possibility, but the project could be privately financed to the extent of £3 billion and would provide 500,000 man years of work. In other words, it would employ a peak of 100,000 men in steelmaking. Would it not be better to discuss that project rather than the negative business of continuing to fund the losses of a corporation, the management of which has, in the words of my hon. Friend the Minister of State, made a continuous series of mistakes?
I should like to see my hon. Friend the Minister of State, with all his energy and competence, and his colleagues in the Government, with the support of all hon. Members, leading a crusade to take down from the shelf 75 all the capital projects that have lain there for so long and are so necessary, especially those that could be privately funded. Let us get them going and begin the process of recovery.
I wonder whether the House has heard of a young engineer called Robert Moses. Mr. MacGregor reminded me at our recent meeting that Mr. Moses put forward the proposals in the years of the depression in the 1930s that led to the privately funded bridges and tunnels being built around New York. Look how that great city has benefited from that foresight, determination and work.
We all know that the same thing is necessary here, whether we talk of a Channel link, a Severn barrage or whatever. I hope with all my heart that this debate will be the last of its kind. I shall not be willing to vote for another such Bill and I hope thay my colleagues on both sides of the House will take a similar view.
Enough of this negative atmosphere. We have had far too much of it. We need constructive ideas for the future, not to keep men in work for the sake of keeping them in work, but to give them something realistic to look forward to. That is why I shall continue to argue strongly for an economic recovery—capital-led and without inflationary consequences—to give our people the hope that the wretched management of some of our nationalised industries in the past have so little afforded them.
§ Mr. Donald Coleman (Neath)
My hon. Friend the Member for Whitehaven (Dr. Cunningham) and the Minister of State expressed the hope that, arising out of the Bill, we would see a reinvigorated steel industry in this country. I join them in that hope, because the Bill is not all bad. We welcome some parts and we will not vote against it. It is a pity that the Secretary of State for Industry was afflicted with deafness this time last year when Labour Members were saying that it was necessary to carry out an examination of the capitalisation of the BSC.
The right hon. Member for Taunton (Mr. du Cann) spoke about things being wrong in the BSC. My hon. Friend the Member for Kettering (Mr. Homewood) probably has more experience than any other hon. Member of the failures of the BSC. Before coming to the House he was a full-time official of my trade union, the Iron and Steel Trades Confederation, and he did not have to look far to find the failings in the corporation that brought about the situation of which the right hon. Member for Taunton rightly complained. The difficulties were not brought about by the working people in the BSC or by public ownership. They were caused by incompetence and lack of reality on the part of those whose management of the industry was highly questionable.
I hope that, now that the Bill is making it possible to deal with the problems of the financing of the industry, we shall see a future for British steel making, but it would be wrong for us to dwell only on that aspect of the measure. My hon. Friend the Member for Whitehaven said that clause 1 and the new clause added to the Bill on Report will wreak havoc with the BSC because they contain the real intentions of the Government.
It is the Opposition's responsibility to make clear the contents of the Bill and how the early part of it will affect the operations of the steel industry, so that when the Government are consigned to the dustbin of electoral 76 defeat and steps have to be taken to restore our iron and steel industry, nobody will be under any illusion as to what we are talking about. This Government have coined a new word for the English language—privatisation. For insertion in future dictionaries I put forward this definition of the word privatisation: to plunder the assets of publicly-owned utilities.
Clause 1 and the added new clause do precisely that in respect of the BSC. They will permit the corporation to be run down until it becomes nothing but a name. All the massive capital investment which the right hon. Gentleman complained has been put into our great publicly-owned steel industry will be thrown away, and I suggest that it will be thrown away to suit the will of Tory dogma. All this will have been done in a Bill that provides the legislation which is necessary to provide the much-needed finance to meet the massive burden of the interest rates which have crippled the BSC. The price that the Government are exacting is the destruction of the BSC. It will bring about the selling off of profitable sectors of BSC operations. To whom? That is anybody's guess.
The Bill reduces the corporation's duties and responsibilities, which were designed to safeguard the supply of strategic steel to the United Kingdom manufacturing industry and also to ensure the safety, health and welfare of its employees. The Prime Minister often postures about defence. A steel industry is of paramount importance to defence. A potential aggressor must be quietly smiling when he contemplates what this Bill does to the BSC.
The time will come when the Government and the Conservative Party will be swept away. When that time comes, so, too, will come the time when this legislation will have to be swept away, because it will be the duty of those who then have responsibility to look to the health of the iron and steel industry in Britain. Despite all the brave words of the Minister and all the hopes of my hon. Friend, this Bill will make the iron and steel industry very sick.
§ Mr. Hal Miller (Bromsgrove and Redditch)
The hon. Member for Neath (Mr. Coleman) will not be surprised if I do not agree with his analysis of the situation. I hope that he will forgive me if I do not take up his argument as I have a personal statement to make. I am about to make remarks that are critical of the Government that I support.
I am a Conservative. I came into politics to play a part in helping in the creation of wealth. I have taken a particular interest in trade and industry—matters in which I have personal experience. It is no coincidence that I represent a constituency where those are the main interests. I come from the West Midlands, a region that has been known as the manufacturing and trading heart of this country.
As a Conservative, I have fought five elections on the platform that the Government's primary duty is to defend the realm, to uphold law and order within the borders, and to maintain the value of the currency. One of the strongest planks in my platform has been that private rather than public enterprise provides the best avenue for the creation of the wealth and the best assurance of those liberties that we in this country hold dear.
I also subscribe wholeheartedly to the Prime Minister's view that we need to bring about a change in attitudes to build economic security, upon which so much else depends. For that reason, I rejoiced in my right hon. 77 Friend's triumph two years ago, and was proud to be asked to play a part, albeit a minor part on the fringe of her Government, as a PPS, a pride that I am grateful to think that some of my constituents share.
I was particularly happy to serve my right hon. Friend the Member for Cambridgeshire (Mr. Pym) first in his role as Secretary of State for Defence and currently as Leader of the House. He has been a source of great strength and comfort to me, both politically and personally.
This Third Reading marks the end of a sorry chapter in our industrial history. In these past two years of worldwide recession and overcapacity in the iron and steel industry, we have seen taxpayers' money spent by the billion, as my right hon. Friend the Member for Taunton (Mr. du Cann) said. That money has been used to shore up the public sector, to enable the British Steel Corporation to meet foreign competition, and to reorganise and modernise production. However, our taxes and the borrowings have also subsidised competition with our own private firms and helped to make private industry unprofitable, closed plants and cost jobs in the private sector, which has had no help with the expense of modernisation, reduction or redundancy. That uneven and, I believe, essentially unfair approach is even more clearly shown by the more generous redundancy terms that are available to corporation employees and the topping up of their short-time working compensation payments—all out of taxes paid by private firms and individuals who are unable to afford or provide the same terms.
I do not wish to rake over the ashes of Duport or Hadfields or the manner in which negotiations were conducted before the arrival in the Department of my hon. Friend the Member for Chingford (Mr. Tebbit). However, there is a widespread feeling of resentment at treatment considered to be less than just or fair, and certainly far removed from what were thought to be Conservative principles. The steel industry should be viewed as a whole by the Government, and not left solely to the purview of Mr. MacGregor. It was largely that feeling that prompted me earlier in the year to put down a motion on the need for an industrial strategy.
Apart from the resentment that I described, there is loss of confidence in the future among private steel makers. We should remember that there has been investment from abroad in private steel making and in activities downstream. How far will corporation competition be allowed to extend from steel making into rolling, drawing, forging, foundries and stockholding?
Splitting the corporation into Companies Act companies is a welcome step, but how will they be financed, and on what basis will they compete with private firms? The possibility of selling those companies later is welcome, but what comfort will that be to private firms that have been overwhelmed by the corporation previously?
The increases in the corporation's productivity are welcome, but how does it justify better treatment for its employees than for private steel workers with comparable service and performance? Is it not a case once more of unions being able to wield more influence and power in nationalised industries than in the private sector? Is there not a possibility that old scores are being paid off from the steel strike in the corporation a year ago, the strike that did such damage not only to the corporation but to all producers, as merchants and customers turned to imports?
§ Mr. Miller
I am sorry, but I shall not give way. I am making a personal statement, as I made plain to the House.
I have mentioned Duport. Its facility at Llanelli was the most modern of its kind in the country. It was diverted to South Wales by act of regional policy. It should have been established in the West Midlands, adjacent to the rolling, drawing, and stockholding facilities for engineering steel. The plant was thus isolated from its market and made less economic because of the transport and reheating costs involved. The West Midlands was deprived of badly needed new investment. Now the Government are even asking for repayment of the grant, although the company was paid nothing for the plant, nor helped with closure costs. The remaining steel interests of Duport in the West Midlands may form part of the projected Phoenix II, to which my hon. Friend the Minister referred, but there is a fear that they will be linked with other BSC facilities rather than combined with the Round Oak output.
The decline of steel, engineering and motor vehicles in the West Midlands again calls into question the Government's policy on development areas. With the fastest rising unemployment in Britain, we believe that incentives should be withdrawn from other regions or extended to the West Midlands.
I have said that subsidies for British Steel are in part to enable the corporation to meet foreign competition. This raises the whole question of trading policy. I yield to nobody in the House in my support for the Common Market and for free trade. I believe that Britain's vital interests are best served by our membership of the European Community and our adherence to the freest trading system possible. But we weaken the case for the Community and public acceptance of it by permitting our partners to dump their products here. There may be a benefit in so reducing the rise in inflation, but the lasting damage to our industry, employment and the cause of a united Europe can more than offset that temporary benefit.
My hon. Friend the Minister has talked of agreements to limit production of steel in the Community and to end subsidies. Well and good, but in the meantime only the public sector is being cushioned against the damage. It is far from clear that the creation of a European cartel is in our long-term best interests.
Why should we not insist on fair as well as free trade? Why should we not pursue, and be seen to pursue, the national interests in these matters, like the French or the Americans? The same considerations apply to other products and to other sources outside the Common Market. Here, surely, we should insist on fair prices and reciprocal opportunities. Yet steel comes in unhindered from a number of areas. Castings flow freely from the Eastern bloc, East Asia and Spain, with obstacles, prices and tariffs that we cannot surmount. On a number of occasions I have urged these arguments in respect of motor vehicles, some of the largest end-users of our iron and steel products. But now it is happening on an ever-increasing scale with those basic products themselves.
Of course we must be competitive, of course we must be prepared to change, but let us see that the competition is fair and that there is reciprocal opportunity. We must be prepared to manage the rate of change to allow the necessary adjustments in our economy to take place at a pace that does not involve socially unacceptable dislocation and disruption.
79 Those principles of competition should also apply in energy. After months of pressure, the Government set up the National Economic Development Office energy task force, which reported at the beginning of March. Energy costs are particularly relevant to the iron and steel industries, accounting for up to 20 per cent. of operating costs. Competition from imports with different energy cost structures is severe. Some palliatives against further rises were announced in the budget, but nothing has so far been announced with regard to foundry coke, which is of particular significance in those industries.
On a wider front, energy supplies should be one of our main advantages, particularly over our Community competitors. People find it difficult to understand why we seem to have to pay more for our energy than our competitors do. Help has been announced for conversion to coal firing, but more help is needed, paricularly in measures of conservation. The forging industry particularly, needs that for the cladding of furnaces.
I began with a sketch of my constituency and my region. I have rehearsed the principles of Conservative policy that I uphold. From what I have said the House will understand that I do not find the treatment of the private iron and steel industry by the Department to be either equitable or in accordance with Conservative principles, or in the best interests of my region and my constituency. Similarly, I am unable to accept the sense of current policy on energy costs for industry, and I wish to see a more determined trade policy. These policies have caused widespread misunderstanding and resentment amongst our supporters.
I am not a person given to making gestures. Both privately, and, increasingly, publicly, I have sought for more than a year to have these policies changed. I do not believe that they reflect the programme on which I was elected.
Therefore, I have reluctantly come to the conclusion that I must give up my post in order to be able to speak out more freely and to be able to give wider expression to the concerns of the West Midlands. The West Midlands is not only the manufacturing and trading heart of this country. It is also its political heart, where general elections are won and lost. It is therefore vital to promote the prosperity of the region's industry and trade, and to oppose policies that would weaken the West Midlands.
It is clear that the Labour Party has nothing to offer the region. The only prospect that it has held out is of more nationalisation, of higher spending by swollen local authorities, as is clear from its recent election programme. That can only mean more spending, more taxes, more borrowing, more inflation and yet more jobs lost. As one looks at the Labour Benches, it is obvious that there is no alternative to our Prime Minister, but her success will depend on her policies succeeding in the West Midlands. It is on behalf of the West Midlands that I have spoken tonight.
§ Mr. Bill Homewood (Kettering)
I did not intend to speak in the debate but I have been spurred to do so by two speeches from the Conservatie Benches. The first was the speech from the right hon. Member for Taunton (Mr. du Cann). Although we come from different extremes of society and our experience in this House is different—I 80 have been here for a short time and he has been here for a very long time—I have always found a kinship whir his economic beliefs. Although on every occasion he speaks he attempts to deny his Keynesian affinity, that is where we have a common cause. Living in the Kettering constituency which contains Corby, I have seen the effects of mass unemployment over the past few months. I recognise that the right hon. Gentleman thinks of economics in terms of people being able to do a job of work and finding a new job when they are put out of work. That is where our affinity lies.
There is no doubt that the iron and steel industry, whether privately or publicly owned, is being torn to pieces, not primarily because of the aggressiveness of the public sector or because its previous inefficiency exalted the private sector, but because there is no longer a demand for either. Both sectors are being pushed into competitiveness which is not desirable for either.
Perhaps facetiously, I have gained some pleasure from the fact that under Mr. MacGregor's influence the BSC has achieved an advantage but the private sector is feeling the pain more than the workers in the public sector. Few public sector workers in the immediate future will be made redundant easily, but private sector workers are feeling the pinch. Initially I felt that that was a recommendation from the Conservatives, but that is not a good point of view and I do not care to carry it too far. I do not want to see any more communities, whether they are served by a public or a private steel sector, put into a situation similar to that of Corby.
The salvation of all of us, as there is still much publicly-owned steel industry left in Corby, lies, as the right hon. Member for Taunton said, in a macroeconomic arrangement. It is nonsense that our steel industry is being run down. What is left is efficient, competitive with everything that the Western World, although probably not the Japanese, can produce. It needs enormous capital investment. Capital investment is required in those areas that are suffering from the closure of steel works.
I have pressed upon Ministers the urgent need for a new road—the A1–M1 link—to give Corby a chance of a rapid rejuvenation. The Ministers say that nothing can be done about that yet. No start can be made until 1983. We have been arguing about that road for years. The steel industry is suffering, and when the steel industry goes out of existence the communities affected suffer because the Government delay the injection of capital into new industry. Without such investment the populace deteriorates quickly in those communities.
However, I take issue with the hon. Member for Bromsgrove and Redditch (Mr. Miller). He wants it both ways all along the line. He argues that the trade union movement has made matters difficult because it demands large severance payments in the public sector. The only reason that those large severance payments were made was that they bought out industries which the Government claim were losing large sums of money—way beyond the severance requirements in a short time. Whole communities were destroyed in six to 12 months because of those large sums of money.
I know Bilston, Bromsgrove and all the area of the hon. Member for Bromsgrove and Redditch because I worked for 12 years as a full-time trade union officer and organised throughout his area. No part of that area has been destroyed as quickly as Corby, Shotton or Consett. The unemployment that the hon. Gentleman is complaining 81 about now—as he rightly said, he supported those policies when he was elected—nowhere in his area is as high as it is in Corby. He complains about the large payments that the steel workers have received that have propped up the small communities. They will not prop them up indefinitely. The payments will merely tide them over. The immediate problem is persuading new industries to come to the area. The hon. Gentleman is being hypocritical.
The hon. Member for Bromsgrove and Redditch complained that when he was elected he fully supported the Government's policies. Those policies have not changed much. It is no good crying when they do not work. I do not know about the right hon. Member for Taunton, but I know about the hon. Member for Bromsgrove and Redditch. I was in his area at the time and he made a complete commitment to what the Government are now doing. I am sorry, but he cannot now have it both ways. He cannot support tax reliefs, reduction of taxation, reduction of public expenditure, reliance on the monetary system, and a belief that one can withdraw Government intervention from the industrial structure, and then cry out and get squeamish when people are made redundant.
§ Mr. Homewood
The hon. Gentleman would not give way to me in the middle of his speech. However, so thin is the ice on which he has been skating that I shall give way to him.
§ Mr. Miller
I am grateful to the hon. Gentleman for his kindness. I wanted to point out to him that I was not trying to have matters both ways. I said that the actions of the Government in this respect had not been in accordance with what people understood at the time of the election, in that huge amounts of money had been poured into the public sector, creating a great strain on the money system and on the tax system. That was not envisaged at the time of the election, and it would not have had my support if it had been.
§ Mr. Homewood
The hon. Gentleman really tries to have it both ways. What his right hon. Friend the Member for Taunton has been saying, and continues to say, is that what is wrong is that we need some injection of public funds into the economy. I am sure that the right hon. Gentleman will also start to shake his head, but it is not possible to do it in any other way. It is impossible constantly to extract money on the lines that the right hon. Gentleman talks of unless private enterprise injects the same level of funds to keep the same level of employment.
What is coming through is that the priorities are different, in that there is an accent on profits one side and an accent on employment on the other. If there is a difference there about which we can argue, that is fine. However, the hon. Member for Bromsgrove and Redditch agreed with policies of that kind. I saw his election address. He agreed with all that his party was seeking to say at the time. The hon. Gentleman really has no right to say that he will resign.
I am a comparatively new Member of this House, and I become extremely annoyed when Government supporters make such comments. I lived in the hon. Gentleman's area, and I know what he and others said at the time. The policies of the Government are exactly what the Government said they would do. We Labour candidates 82 said what the consequences would be, and we are suffering those consequences in places such as Corby and Kettering, which had never had unemployment. Today, they have enormous levels of unemployment, way above the national average, because of the policies to which Conservative Members subscribed and which they now seek to deny with such comments as "I shall resign because I cannot agree." Statements of that kind are a load of codswallop. They are nonsense. Conservative Members who take this line should have made up their minds at the time. If they had done so, they would not be sitting on the Government Benches now.
I find a distinct affinity with what the right hon. Member for Taunton said, though after what I have said he probably finds none with me. I am sure we have a common interest. The object of economics in any civilised society must be to maintain the level of employment. That has now become the critical factor. If we do not seek to deal with it along the lines suggested by the right hon. Member—by means of powerful capital investment in the public sector—I do not know where we shall end up, not only economically but socially. I must admit that it is the social consequences that worry me far more than economic consequences.
§ Mr. John G. Blackburn (Dudley, West)
There comes a time in public life when one has to stand up and be counted. There comes a time in political life when one has to stand up and be counted. Tonight this House has seen an act of courage and of honour that we have not witnessed for a long time in the personal statement made by my hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller). I pay a warm and sincere tribute to him for his stand on this issue. I am sure that his standing in his constituency will be even greater than before as a result. The greatest compliment that I can pay him is that he is a good man, and I am proud to be one of his friends from the same region.
There also comes a time when hon. Members must stand up and be counted, especially in the context of the steel industry. Tonight the House of Commons will be counted when it expresses its reaction to the plight of the steel industry.
I have no intention of going down the pathway of inquests on what has happened in the past and considering whether the fault lies at the door of overmanning, bad management or competing in the wrong markets at the wrong prices. Even at this stage, that is academic. However, it is my prayer that never again will the House have before it on Third Reading a Bill containing a provision such as that in clause 3, with the write-off of £3,500 million.
I was quietly comforted by the excellence of the speech of the hon. Member for Whitehaven (Dr. Cunningham). He sought to build a bridge of common purpose for the benefit of the steel industry which, in the final analysis, is what we are here to discuss.
In the course of a number of speeches in this first class debate, the question of fairness has been brought to our attention. I do not hold the view that in the context of the steel industry and in that of the Third Reading of the Bill we have witnessed fair play to the private sector of the steel industry. I, too, go along the pathway that has been trodden by my hon. Friend the Member for Bromsgrove 83 and Redditch and point to the subsidies which have been made in abundance to the public sector and to lack of similar subsidies to the private sector.
We have had discussions about a corporate plan. I associate myself with the remarks of my right hon. Friend the Member for Taunton (Mr. du Cann). If I were an investor and the credentials for the corporate plan were placed before me, I would not find the enthusiasm to invest a postage stamp to decline the offer. However, that is historic. The steel industry has gone through a crisis, and we now have Mr. MacGregor at the helm.
There is a very important equation that the House may, to benefit, take a moment to consider. It is a very simple, well-tried and fundamental philosophy that in business and industry the circle of events starts with an order. Order equals production; that equals jobs; that equals profit; that equals further investment; and that equals more jobs. When one has quietly considered this equation over many days, I find it difficult to believe that we can get past the first step, which is the order, because in so many respects orders have been obtained in the public sector, which is subsidised, and the private sector cannot obtain export orders because they attract no subsidy.
One must review the Bill on its Third Reading and say, with sincerity, that the House is showing, in real terms, what it feels about the steel industry by writing-off of these vast amounts of money and debt. I suppose that it could be taken as a vote of confidence in the steel industry that the Government are prepared to say "We shall give you the opportunity to write off the past and look forward to the future".
The concluding moments of my speech are opportune for me to dwell on the future. I believe that the steel industry, which I salute, is looking to the Government Front Bench tonight for an absolute statement that there will be no further delay in the creation of Phoenix II, because the delay and uncertainty that have prevailed against the private sector have meant that no management can possibly plan for the future or develop the markets into which it would like to enter. The steel industry is entitled to ask this question: can the Government indicate this night the future ownership of the companies in the private sector?
In the excellent and memorable speech of my right hon. Friend the Member for Taunton, we heard the detailed argument, step by step, about the loss of market in the private sector. How did that come about? Did it come about because of the brilliance of British Steel, or the excellence of its new chairman, or the enthusiastic endeavours of middle management? They may be contributory causes, but I have the moral courage to suggest that the reason those orders increased was that the public sector was undercutting the private sector with subsidies from the Government.
For the future, I have not only a moral responsibility to the House and to the Conservative Party; I have a greater responsibility—to my constituents. In the final analysis, that must take pre-eminence, because it is through their warm and generous support that I find myself in this House tonight, the only Conservative Member ever to be elected for my constituency. It is a constituency that is dominated by an excellent steelworks with first class men working within it. I salute them. I refer to the Round Oak steelworks at Brierley Hill. From director to 84 management to worker in the foundry and in the mill they with one voice would say "We are not afraid of competition. We seek competition. We seek competition that is fair, and in fair competition we shall succeed. We shall prosper and we shall be wealth-creating in the difficult situation that the West Midlands is experiencing."
I am conscious of the excellence of the Under-Secretary of State for Industry, my hon. Friend the Member for Arundel (Mr. Marshall), who over many years worked professionally in the steel industry. However, on Third Reading we want some answers. I contend that the House has not been given the full background to the Bill. Matters have been discussed of which we know nothing irrespective of the corporate plan. As for Phoenix II, is it true that the corporation will take the 50 per cent. ownership that is currently in the hands of Tube Investments Ltd? I represent the Round Oak steelworks and I am entitled to ask that question.
What can the Minister tell us about GKN and Brymbo? We have heard a great deal about Duport at Llanelli. I should be trespassing if I went down that path again, because the issue has already been discussed at length. What about Lonrho and Hadfields? There is surely some information to be given on that score. Before passing the Bill and spending so much money from the public purse, these are pregnant questions that deserve answers.
If the House divides, I shall be prepared to support the Government. However, I give a warning. I do not want to be invited similarly to support them. The Government have saluted the steel industry by introducing the Bill and the House will do likewise if the Bill is enacted. I believe in the good faith that exists in abundance in the industry, and I am confident that the fine men in it will respond to the challenge. I hope that the Bill will be given a Third Reading. We must not reflect on the past, and we must look forward with hope and assurance to the future of one of our basic and prime industries.
§ Dr. Jeremy Bray (Motherwell and Wishaw)
I apologise for having missed the Front Bench speeches and that of the right hon. Member for Taunton (Mr. du Cann), as I was unable to be in the Chamber at the time. The hon. Member for Bromsgrove and Redditch (Mr. Miller), who has just left the Chamber, made what is always a difficult speech with dignity and obvious feeling. I agree with him that the private sector has been badly treated and also about the need for fair as well as free trade. I understand the pressures that lead to the resignation of any hon. Member from any kind of office, but I fear that the hon. Gentleman's travail is not yet over and that he, the hon. Member for Dudley, West (Mr. Blackburn) and many other Conservative Members may find that they have to press their disagreement with the Government to the Lobby before any notice is taken of them.
I make one brief point about the Bill. We tried in Committee to press for proper information on the crucial clauses 2 and 3, which carry out the financial reconstruction. By repeated questioning we were able to get some statement about the principles underlying the valuation of the assets of the corporation. Finally, we were able to discover what a closer reading of the Bill and of previous annual reports should perhaps have brought to light earlier, namely, that on the liability side the 85 corporation will be left with no fixed-interest debt at all. The British Steel Corporation will now have no interest charges to pay. That is an extraordinary arrangement.
I well understand the feeling of ignorance which no doubt exists in the Department about how the corporation's total debt will turn out when it gets back into profit. Nevertheless, the Secretary of State could at least have laid down some principles about the gearing that he proposed and ensured that at least some of the debt bore interest. I say this as a Member representing many thousands of steel workers and a major investment of the BSC at the Ravenscraig, Craigneuk Dalziel and other steelworks. It is not in the interests of the steel workers that the BSC should effectively have access to free capital. It means that borrowing by the corporation must come out of the same kitty as public authorities' expenditure—the money needed for the day-to-day wages of public sector workers, the running of the health and education services, and so on.
The BSC, like the other nationalised industries, is a commercial venture and it should be expected to operate commercially. It is in the interests of steel workers that it should. The inevitable result of this treatment of the corporation's borrowing will be that, like the public sector and the other nationalised industries, when in the future it has a good commercial case to make it will be told by the Secretary of State and the Chancellor of the Exchequer that it cannot have the money that it requires because it comes out of the same kitty and adds to the public sector borrowing requirement in exactly the same way as any other kind of public expenditure. That is simply not in the interests of the corporation and its workers.
I am sure that this matter will be pursued in the current inquiry by the Select Committee on the Treasury and Civil Service into the financing of the nationalised industries. I hope that we shall then require much fuller information on both the asset and liability sides than Ministers have been prepared to give to the House and the Standing Committee during the passage of the Bill.
I hope that the Bill will receive a Third Reading. The capital reconstruction is necessary, but the manner in which it has been carried out is appalling.
§ Mr. Roger Moate (Faversham)
I understand from earlier remarks that there will not be a vote on Third Reading. Nevertheless, I do not think that anyone who has listened to the speeches from the Conservative Benches could have failed to recognise that this is a traumatic occasion for many Conservative Members.
The speech of my right hon. Friend the Member for Taunton (Mr. du Cann), the very courageous speech of my hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller), and the speech of my hon. Friend the Member for Dudley, West (Mr. Blackburn) are an indication of the depth of feeling on the Conservative Benches. Many of us—and I am one of them—feel a sense of bitterness and failure at the fact that we have this legislation before us tonight. The Government were not elected to preside over the reduction of the private sector of the steel industry, yet that is what we have seen. We were elected to withdraw the frontiers of the public sector and to press forward the private sector, but we have seen the very reverse of that policy.
I am sure that in one respect at least there is no divide between the two sides of the House. We might argue about 86 the differences between private enterprise and the public sector, but everyone shares the sense of tragedy when there is a closure of steel industries or a reduction in the steel sector in a constituency, whatever the ownership
It is a greater sense of tragedy when we see a private sector company go under, because the private sector has built itself up in recent years against all the odds. It has striven against the enormous weight of the public sector. It has passed all the tests of high productivity, of efficiency and of efficient investment that we should like to see applied to enterprise of every kind. These are the criteria which have been applied to the private sector. It is these highly efficient units that have suffered in the last two years in particular from the immense competition of the public sector and, of course, faced with the enormous problem of the recession.
I speak with great feeling because in my constituency I have the steel mill of the Sheerness Steel Co. I do not think that any hon. Member, Labour or Conservative, could fail to be proud of that enterprise or to have immense admiration for the management and the work force who in the last few years have turned that steel mill from nothing into one of the most successful industries of this country.
I pray that the company will survive. It has faced redundancies and short time working and is losing money. I believe that it will survive. But there is no doubt whatever that it is going through critical times. The problems that it faces are typical of those that have been faced by Hadfields, by Duport and by other parts of the private sector. This is a real tragedy, and the Minister of State must also feel a sense of pain that it is under a Conservative Government that we have faced this disastrous decline of the private sector.
The growth of the private sector was a testimony to the strength and principles of free enterprise, so that it is a particular pain to us when we see it suffering as it has in the last two years. I do not blame the Government entirely for this predicament. The major factor is the recession and the dwindling or even disappearance of the markets. It was inevitable that the private sector and the public sector would suffer equally in these difficult times. Nevertheless, the Government, by bailing out the public sector, as they had to, thereby contributed very substantially to the problems of the private sector.
Having taken the first action, as the Government were honour bound to do, to help the public sector, they failed to understand the consequences of that action for the private sector and have left it to suffer those consequences. They should have done more and should have stepped in earlier to help.
My hon. Friend the Member for Bromsgrove and Redditch referred to energy costs. I do not believe that we would have the Bill today if the Government had acted more promptly on certain matters, including energy costs.
Eight or nine months ago many hon. Members were telling the Government that there were serious major discrepancies between the energy prices being paid by steel producers in this country and their main competitors on the Continent. At that time the problem was brushed aside. Months later, the Government produced the NEDO report, but it took many months to get it, the Government having denied for some time that the problem existed. The NEDO report said that there was a 30 to 35 per cent. discrepancy between those industrial energy costs. That means millions of pounds a year to many steel mills.
87 What has happened? The Budget was supposed to contribute about 8 per cent. as a reduction of energy costs, but even that has not materialised. Steel producers still face increasing energy costs. Unless something is done about factors such as that, the private sector will not stand much chance. I ask my right hon. and hon. Friends to take urgent action in an area where they can have some influence and direct effect.
We understand that Mr. MacGregor has undertaken to investigate any complaints by the private sector about alleged undercutting of prices by the British Steel Corporation. This is very much a cosmetic exercise. I have no doubt that any blatant examples will be investigated and that action will be taken. But how can the private sector hope to compete against a corporation which has £1,000 million of taxpayers' support in a single year? It is not specific examples of undercutting, but the general ability of the corporation to absorb losses on a massive scale which counts. In a recession such as we have experienced, if the BSC had been unable to absorb those losses, many private sector companies would have been able to increase their production and share of the market. But they have not been able to do that. They have lost markets at home and abroad in the face of the BSC's competition. As a result, many now face bankruptcy and liquidation.
We are told that investigations will be made and that we are not to worry about unfair competition of that kind. But I believe that unfair competition will continue as long as the taxpayer is ready to put his hand into his pocket and pay out the sums about which we are now talking.
We have been told that one object of the Bill—and I welcome it—is to ensure transparency of competition and fair competition so that we know where the taxpayers' money is going and the extent to which the BSC is being subsidised. I have to come back to the point that I have put to my hon. Friend on a number of occasions. That may in future be true about the BSC—although I am not too sure of that—but what about the new Phoenix companies? We are supposed to welcome these little Phoenixes which will spring up from the ashes. I fear that they are not Phoenixes, but the tentacles of a State octopus. We shall see these quasi-State companies still linked to their parent company and able to obtain transfusions of money from the centre.
I come back to the point that I have put before about Allied Steel and Wire. It will have an almost monopoly position, although it was set up in such a way that there was no prospect of referring it to the Monopolies and Mergers Commission. It has been established with a direct link with the British Steel Corporation. Therefore, we are entitled to know how much money will be available to that new organisation to enable it to sustain losses in the first year of its life in order to capture the lion's share of that section of the market. We are entitled to have that information.
If there is to be fair competition, and if we are to know how much public money is going into such bodies, we should be given the facts and figures when the Phoenix companies are set up. I understand that it might not be appropriate to let us have the facts and figures when negotiations are taking place on the price of assets. However, as soon as the deal is made, my hon. Friend will be under a duty to tell the House how much taxpayers' money has been put into each of the new Phoenix 88 companies. If we are not given that information, we shall not have faith in the claim that there will be true and fair competition between public and private sector companies. The steel industry has had a disastrous two years. In addition, those two years have been disastrous in terms of the damage done to the faith of the Conservative Party and to the faith of Conservative Back Benchers. We have seen proud, successful and efficient companies go under, or standing in danger of doing so, because a Conservative Government have given subsidies to the State sector and because of the problems involved in a recession. The Bill could provide the basis for re-establishing faith if it creates genuinely viable and unsubsidised private sector companies. However, at this stage, we are dependent on an act of faith and on pure optimism.
We want more evidence to show that what the Minister says may happen will happen. We want more evidence to show that we might return to a genuinely independent and viable steel industry both in the public and private sectors. My hon. Friend's refusal to give the basic information that I have sought has shaken my faith. I have a jaundiced view of the Bill's Third Reading. I regret that there will not be a vote on it. If there had been, I might well have gone into the Lobby to vote against it.
§ 8.56 pm.
§ The Under-Secretary of State for Industry (Mr. Michael Marshall)
The debate has been interesting. The hon. Member for Whitehaven (Dr. Cunningham) was temperate and moderate. He probably saw the storm clouds gathering behind me and was content to let the fire come from whither it may. I differ from the hon. Gentleman on one basic point. He suggested that by imposing cash limits the Govenment were in some way culpable and had virtually encouraged the strike in the steel industry. It is interesting to note that when Labour Members are in Government they strongly advocate cash limits. Indeed, to a substantial extent they built up that system in the industry. However, when our party is in power those cash limits suddenly become unreasonable and are in some way guaranteed to lead to strike action. As the hon. Gentleman knows, at that time the management believed that it could not justify the wage increases urged upon it. That argument is often heard. However, the hon. Gentleman took the issue out of context.
It is clear that the main thrust of the debate has come from several of my hon. Friends. They reflect genuine and deeply felt concern about the future of the steel industry, particularly the private sector. There is a difficulty about debating such matters. During such debates we recognise the familiar faces of the "steel gang" and of a number of regulars. Over the years we have enjoyed a certain camaraderie. Across the Floor there is a feeling that we are all trying to do the best that we can for our steel industry. In a powerful speech, my right hon. Friend the Member for Taunton (Mr. du Cann) made that point. I share the admiration that he expressed for those who work in both the public and private sectors of the steel industry.
My right hon. Friend suggested that we needed to get the best deal possible for both sectors of the steel industry. I am at one with him on that but we face a difficulty when we discuss the means of achieving it. If I have to jib at the remarks of some of my hon. Friends it is because—with no disrespect to the powerful feelings that they have— 89 they are inclined to see the issue in black and white and to imply that if only the BSC had not done certain things the private sector might flourish.
We must remember the problems caused by the world recession. In the Community alone the estimated excess capacity is over 40 per cent. My hon. Friend the Member for Faversham (Mr. Moate) mentioned that towards the end of his speech, although there has been a tendency to leave that aside and to regard the BSC as the chief protagonist.
We must try to strike a fair balance. It is reasonable to ask all hon. Members what they would do that is different to try to put the balance right and keep the industry viable. My hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller) did himself less than justice when he said that import competition had been allowed to drift. My hon. Friend the Minister of State is deeply involved in negotiations in the Community to seek to achieve a balance, whether on prices or quotas, to put some stability into a market that is suffering substantial overcapacity.
The House listened carefully to my hon. Friend the Member for Bromsgrove and Redditch, as it always does when an hon. Member makes a personal statement. My hon. Friend knows of my respect for him, over several years. I listened to him with care. I understand much of what motivated his speech. He should reflect on some of the problems involved in trying to help a great industry during a world recession which is on an unparallelled scale and beyond our experience in the post-war years.
My hon. Friend said that access to capital was available to the British Steel Corporation. That goes to the heart of the matter. We have to accept that, by definition, a Labour Party nationalising an internationally competitive manufacturing industry gives it at one fell swoop an advantage that no private sector company can enjoy, namely, that in difficult circumstances it has a bank of last recourse that is not available to the private sector. That problem cannot easily be set aside.
I hope that my hon. Friends will see—as did some Opposition Members because they argued against it—that one of the merits of the Bill is that it increases the opportunities for privatisation and begins to move to the only real answer—the injection of private capital and commercial disciplines on a more direct and accountable basis than is possible in a nationalised industry.
My right hon. Friend the Member for Taunton said that he welcomed the Companies Act structure for Redpath, Dorman, Long. I am glad that he sees that as a step in the right direction. We welcome anything that will take that further down the private route. It is still early days. If it goes ahead we should look for something which, once more, will achieve a majority in the private sector, as in the case of Allied Steel and Wire. My right hon. Friend might have added that British Steel Stockholding is following the same route. We believe that to be a step in the right direction, not only as a first stage towards privatisation, but as a more accountable way for that company to act and to make its activities known to the public.
My right hon. Friend asked for a progress report on the state of the corporation. That was a helpful and fair suggestion.
§ Dr. Bray
The Minister referred to the difference between the public and private sectors in terms of access to finance. Does he appreciate that it would have been 90 possible to seek some alignment by which the private sector was given parity of treatment with the public sector in the dramatic cycle that it has experienced? Government Members argue that the private sector should have been helped. My hon. Friends recognise that there is an obligation on the BSC which should be represented in the interest charges that it is called upon to pay. It is because of the inconsistency in the treatment of the public and private sectors that Ministers are making such a cock-up of the industry.
§ Mr. Marshall
I shall come to the hon. Gentleman's contribution. I fear that he is inaccurate about these matters. On the basic question of additional assistance to the private sector, I would point out that there is assistance for capital projects under sections 7 and 8 of the Industry Act 1972. As my hon. Friend the Member for Bromsgrove and Redditch knows, offers have been made to the private sector following the principle that is also applied in certain parts of the motor industry. To suggest that there is some way of matching for the private sector the assistance that is built into a nationalised manufacturing industry in trouble is to take us down a substantial road. It: is misleading to imagine that help can be confined to the private steel sector without having implications for the whole of British industry.
My right hon. Friend the Member for Taunton asked for a review of the BSC's position. It was helpful that Mr. MacGregor gave some indication of the results achieved by the corporation in the first three months of the year when he appeared before the Select Committee on Industry and Trade on 13 May. His report is borne out by our own monitoring of the BSC's progress. During the first quarter that immediately preceded the starting point of the 1981–82 corporate plan, BSC's operations showed a modest improvement. Production and delivery of steel increased broadly in line with the BSC's expectations, although the improvement in output and deliveries owed more to exports than to the home market. Prices still remain weak.
Considerable progress was made in closing excess capacity and reducing manpower as required by the corporate plan. There are no signs so far that BSC will exceed its external financing limit for 1981–82. It remains essential that the BSC should continue with the cost reduction programme envisaged in its plan, that this should be carried out successfully and that there should also be some improvement in steel prices in this country and in export markets if the corporation is to get, as is hoped, to anticipated break-even next year.
In July the Government will receive from Mr. MacGregor a report on the first three months of the 1981–82 financial year. This has been said to be a check-point, beyond which he will want to reappraise the BSC's plan. This report will be used to assess progress against the corporate plan and should enable the BSC and the Government to discuss whether any significant change:3 to the plan will be necessary.
My right hon. Friend also asked what could be done in matters such as redundancy payments, the temporary short-time working compensation scheme and similar matters. As he will be aware, there is a real problem. These matters are part of the negotiations taking place between the BSC and its trade unions. They will have to 91 be concluded in order to facilitate the closure and redundancy programme that is, sadly, a major part of the steel industry scene.
This is part of the great problem that has faced both the public and private sector. If, after the last general election, the Government has been discussing the idea that there should be 50,000 redundancies within the BSC in 1980, and a further 20,000 in 1981, my hon. Friend the member for Bromsgrove and Redditch might have agreed that this was an enormous scale of rundown, especially when one recalls the difficulty experienced by the BSC from those who, aided and abetted by some Opposition Members, were opposed to a progressive rundown when conditions were more favourable for carrying through such a programme.
Therefore, the burden of part of my argument in response to my hon. Friend the Member for Dudley, West (Mr. Blackburn) and others is that it is not fair to suggest that the burden has been heaped entirely on the private sector. The burden of redundancies has been unpleasant and tough and has hit both sectors of the industry, which have faced massive excess capacity, certainly within the European Coal and Steel Community.
The House recognises that my right hon. Friend the Member for Taunton has properly sought to debate the question of engineering steels. We know of his anxiety for the future of that sector, but he knows that the closures at Bilston, Hillside and Templeborough have resulted in the loss of 1.4 million tonnes of capacity and 7,000 jobs. I do not seek to make a direct comparison, but closures at Llanelli and Hadfields would involve about 700,000 tonnes and 3,000 jobs. I mention the figures to show that the numbers involved are substantial on both sides of the equation. I know that no one takes any pleasure from that.
The hon. Member for Motherwell and Wishaw (Dr. Bray) has not got the picture right. The BSC still has a foreign loan debt of £700 million which has to be repaid at a current rate of interest of about 10 per cent. and there is still about £350 million of short-term debt. The national loans fund figures have been written off. The hon. Member for Motherwell and Wishaw is rowing a lonely canoe. I admire him for that, if for nothing else. His hon. Friends in Committee, including the Opposition Front Bench spokesman, asked why we had not accelerated the process of writing off the NLF debt. Previous Governments hoped that the viability of the BSC would be nearer to realisation before capital reconstruction could be carried out. We have had to make a judgment on what debt the corporation could carry and maintain any hope of viability. Those are the facts.
§ Dr. Bray
I appreciate the Under-Secretary's difficulty in trying to set out a complete balance sheet from the Dispatch Box, but that balance sheet should have been given to the House before the Bill was introduced.
On the question of the outstanding debt—£700 million overseas debt and £350 million short-term borrowing—are those figures arrived at simply on the basis of the accident that they happen to be the overseas debt and the short-term borrowings, with no consideration of what should be the gearing in the BSC between fixed interest and equity?
Does the hon. Gentleman accept that, although the Opposition have often argued that nationalised industries have been subjected to inappropriate debt burdens and 92 capital structures, if, when it comes to the point of making a capital reconstruction, sound principles are not put forward by Ministers, that will result in further complaints in future?
§ Mr. Marshall
The hon. Member for Motherwell and Wishaw is active in these matters and once he gets the bit between his teeth he is enthusiastic. I try to go out of my way to appreciate the hon. Member's contributions, because we have talked about steel matters for a few years, but much of the information to which he has referred was available in the annual report. He made a song and dance about it in Committee and sought to carry it on tonight.
I have described the judgment that we had to make. The questions that the hon. Gentleman is raising would have been more properly looked at, in their correct perspective, if he had supported us when, in Opposition, we argued that the matters should be looked at when we began to move away from the basic principles of sound accounting. The gradual movement away from traditional forms of financing over several years has caused difficulties. Those of us who were involved in the proceedings on what is now the 1975 Act remember the many arguments that took place at that time. If the hon. Gentleman had been consistent he would have joined us in opposing those measures. He has only suddenly acquired sound financial principles.
I want to comment on one or two of the more misleading pieces of advice that were given by the Opposition.
§ Mr. Speaker
Order. The hon. Member for Motherwell and Wishaw (Dr. Bray) is appealing to me, but I am not addressing the House. I am sitting innocently listening and learning.
§ Mr. Marshall
I must get on. I want to try to put straight some of the misleading advice that was given by the Opposition. We enjoyed having the hon. Member for Neath (Mr. Coleman) in Committee, but there is always a slight danger when a talking Whip begins to cut loose. Tonight he gave one of his more powerful orations—a very dangerous potion. I respect him as an Iron and Steel Trades Confederation man, and he speaks a lot of common sense. It is a pity that he covers up the sense for most of the time when he comes back to the Floor of the House on Third Reading. He tried to put the blame for the ills of the corporation on the management of the British Steel Corporation. That was not particularly helpful. Indeed, his argument ran smack into the arguments of his hon. Friends, who said that various parts of the corporation had been consistently well managed. They should get their acts together.
In a more direct way the hon. Gentleman attacked the principle of privatisation, which is one of the most important aspects of this measure. In the Bill we have sought to accelerate the process of 50-50 public-private enterprise in the private sector. We as a Government have maintained that principle in a number of measures. We have already done so with British Aerospace, and there are the forthcoming measures affecting Cable and Wireless, the National Freight Corporation and the British Transport Docks Board. For people who take a serious interest in 93 industrial matters, the principle of that kind of joint venture is worthy of serious consideration. It is part of the answer that I give to my hon. Friends who are concerned about some of the problems of the private sector. The key issue is that these companies—Allied Steel and Wire has been the first example of the Phoenix range—are in the private sector.
Here I come to the question raised by my hon. Friend the Member for Faversham in his diligent, if not persistent, manner. I accept that he wants to understand the matter as clearly as possible, because I know of his close concern and interest in the Sheerness Steel Company in his constituency. I must point out to him that we are speaking here of a private sector company, and because it is a private sector company the Government take the view that they cannot discriminate against it as opposed to any other private sector company. Therefore, the company must be left free to come forward, as it must do, with proper accounting principles in its accounts within seven months of the end of its first year's trading to state its position. That is the only answer that I can give my hon. Friend. I accept that he is not happy about it, but I must be consistent.
The hon. Member for Kettering (Mr. Homewood) raised another matter in what I considered was a rather constructive speech. He fairly pointed to the limits in steel demand and to the shared problems of redundancies, and so on. He slipped into political rhetoric at the end, but, in general, the sight of the hon. Gentleman seeking and finding common ground with my right hon. Friend the Member for Taunton is something that I am sure the House enjoyed. I pay my respects to him for what I thought was a helpful contribution.
My hon. Friend the Member for Dudley, West also looked for common ground. He praised the Opposition 94 spokesman, the hon. Member for Whitehaven, who then looked slightly embarrassed. However, that is something to which we can become accustomed. We are naturally keen to see further progress in the development of public-private sector joint companies—the Phoenix range. I am sure that my hon. Friend will understand that I cannot help him or others who ask for a total progress report. Such reports involve a number of private sector companies as well as the British Steel Corporation. They involve confidential discussions, and it would not help if I were to intervene in that way.
My right hon. Friend the Member for Taunton said that he did not wish to intervene in the corporation's management, and in this he was reflecting a dilemma. I fully respect his and other hon. Members' right to try to obtain the best possible information, but the Government have the difficult task of trying to reach a balance between what is appropriate in examining a measure such as this and intervention in the corporation's management.
I know—I have argued this myself from the Opposition Benches—that we all want more information when we wish to carry our argument forward. That is what the House is all about. I have tried to help my right hon. Friend and other hon. Members, not only tonight, but throughout the Committee proceedings. Anyone who reads the Official Report of the Committee proceedings will find that the general tenor of the debate, while reflecting the anxiety on both sides, was constructive.
We do not wish to return to the House with write-offs on this scale. We believe that the Bill will help us move towards a better balance between the public and the private sector, and therefore I commend it to the House.
§ Question put and agreed to.
§ Bill accordingly read the Third time and passed.