That, at this day's sitting, the Motion in the name of the Prime Minister for the Adjournment of the House may be proceeded with, though opposed, until Twelve o'clock.—[Mr. Lang.]
§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Lang.]
§ Mr. Tinn
There has been a reaction in response to the disruption caused by the massive and sudden surge in imports, a surge that must be, should be and can be short 347 term in its nature. I was relieved to find recently that the Secretary of State seemed well seized of this point. It is vital not only to the well-being but to the future existence of the industry and requires repetition.
The Secretary of State agreed last week that the future size and shape of the British steel industry should not be determined by short-term order book considerations. I wholeheartedly agree, and profoundly trust that he will not allow himself to be pushed by the Treasury or anyone else from this manifestly sensible position. It is so clearly right that it should not require emphasis. Yet in this mad hatter world of monetarist economics, it certainly and sadly requires all the emphasis that we can give to it to drive the simple and obvious point home.
So far I have spoken without referring to my constituency of Redcar, where one of the five large steel plants still left to us is situated. This is no oversight or negligence on my part but simply because I wanted to stress that the crisis now facing the industry is greater than any that has gone before. It is national, even international, in its scope and consequences.
As I said to the Minister last week following his statement to the House, the days of what might be argued as healthy slimming in the steel industry are long past, and the time for surgery has long gone. What was once the surgeon's saw is now more the butcher's cleaver because the industry has been so trimmed and so slashed to the bone that any further substantial closure would call into question whether we can continue to have a steel industry at all.
If the worst should come to pass, Sir Richard Marsh and his steel consumers will bitterly rue their desertion of British steel for imports that are subsidised and consequently cheap in times of depression. They will prove to be unreliable in price, availability and quality when economic activity and manufacturing activity eventually get going again.
I owe it to my constituents to put before the House the full extent of their predicament. Up to now, I have been talking about what might come to pass in the steel industry if effective and well-judged action is not taken soon. However, the problems are not all in the future. Much of the misery—I am choosing my words with care and avoiding exaggeration—is with us now.
Although it could be rather rash, if the Prime Minister were to visit Teesside she could meet any of the 12,000 youngsters who have no regular occupation and hear their tales of hopeless searching. The youth employment officer for Cleveland says that on an average day there will be no more than six vacancies in the area—12,000 youngsters after six jobs. They do not need good luck; they need a miracle if they are to find one.
It is not just the young people who suffer. Teesside has the highest unemployment rate on the mainland of Great Britain after three years of Conservative Government. Many of us will have read the harrowing but accurate accounts in the Daily Mirror series earlier this month and the Financial Times on Monday. There has been a transformation and disaster in an area which a few years ago was the only growth area in the Northern region. I do not want to compete on Teesside's behalf for top place on some dismal league table of disaster. Other hon. Members are conscious of the massive problems in their areas. The stark facts have been spelt out not just in the newspaper 348 reports to which I have referred and in television and radio reports but most objectively and incontestably in reports published by Government Departments.
I have touched upon the disaster that has already affected Teesside. A major closure in Redcar would be the equivalent, in social and economic terms, of a nuclear disaster. It does not bear thinking about. The result would be indescribable. Teesside has suffered job losses, but we are not alone. The devastation about which we have heard this afternoon ranges far and wide, but today we are interested in the steel-producing areas.
I want to ram home to the Government the plain and simple truth that the people in those areas have had all that they can stand. A heavy price in human misery and worry has been paid to make the industry efficient. It will not be paid again. No steel industry in the world makes a profit without subsidies or some other form of Government aid. No one can expect the British steel industry to do the impossible under those conditions. Its collapse must be unthinkable. Its survival is essential. The Government must find the way and must consider the Opposition's proposals.
§ 10.9 pm
§ Sir Anthony Meyer (Flint, West)
I fully agree with the hon. Member for Redcar (Mr. Tinn) that it would be a mistake to base decisions affecting the steel industry on short-term considerations. In case anything that I might say suggests otherwise, I assure the hon. Gentleman that I fully share his vividly expressed anxiety about the hundreds of thousands of school leavers seeking a job in vain, which is particularly apparent in steel areas.
It has been a remarkable debate. No speech has been more remarkable than that of my right hon. Friend the Member for Taunton (Mr. du Cann). He set an example of parliamentary good manners to us all in being present throughout a debate in which he spoke at an early stage. There is another right hon. Gentleman who does not appear to be here.
However, I was surprised at some of the things that my right hon. Friend said. Let me summarise what I took to be his argument. He argued, first, that there must be no more steel closures and that the British steel industry had been clobbered enough.
§ Sir Anthony Meyer
I understood my right hon. Friend to say that we should not accept a plan that involved massive closures of our existing capacity.
I fully accept my right hon. Friend's assurance that he is not a protectionist, but he then said that we should make arrangements to shut out subsidised imports. In a breathtaking transition, he then demanded that all subsidies to BSC should cease forthwith. I agree about that, but his first and last points are inconsistent.
It is unwise for a major trading nation to embark on what must necessarily be the wholesale exclusion of imports. But if my right hon. Friend can explain how an unsubsidised BSC can maintain the vast bulk of its existing capacity, with or without protection against imports, I shall give him the "Stan Orme" prize for political lucidity.
Each of us will defend jobs in our constituency. When speaking of the threat of imports we shall do so in unison; when speaking of the disproportionate cuts that our region has had to bear, we shall do so with harsh dissonance, 349 which was most noticeable in the speech of my hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller). I am no exception.
Steel making and processing in North Wales has been clobbered more savagely than in any other region. The shut-down of steel making at Shotton was the single biggest closure in Europe. When it was in the air, the steel plants of South Wales got off more lightly; their comeuppance came a good deal later. Although they did their best to fight for us in North Wales, understandably they were more anxious to save their jobs. I would not want to see Motherwell devastated, as North Wales was. I am more anxious to ensure that the all too few steel jobs left in North Wales in steel coating are safeguarded.
My motivation is not only local patriotism; it is rational. The finishing operations at Shotton are competitive, but the steel making at Ravenscraig, for reasons that have everything to do with geography and nothing to do with any shortcomings of the labour force, will have the greatest difficulty in remaining competitive. But Shotton's production will cease to be competitive and on occasion, in the past, has ceased to be competitive when the hot rolled coil provided by other parts of BSC is too high in price, too low in quality or too late in delivery. There have been occasions when Shotton has had to use coil from other EEC suppliers. I cannot say that the comparisons have always been to the advantage of British coil.
Mr. John Pennington of BSC says that BSC could be competitive without subsidy if raw materials and energy were supplied at prices as cheap as those paid by their competitors. I have no doubt that if BSC could import cheap coal from Australia it would be able to make much cheaper steel. A number of my hon. Friends have pointed out that BSC would be greatly helped if it could obtain electricity more cheaply. If, however, electricity suppliers were to provide BSC with cheap electricity they would presumably have to supply more expensive electricity to someone else. Otherwise they would run into a massive deficit to be funded by the taxpayer.
§ Mr. Michael Brown
If the electricity industry does not take steps to ensure that its electricity is competitive, with the result that steel works shut, the electricity industry will have lost a customer.
§ Sir Anthony Meyer
I take my hon. Friend's point. If it can be demonstrated that a lowering of tariffs to British steel will enable the electricity industry to achieve greater efficiency and reduce its costs I shall listen to what my hon. Friend says. I find his argument a little too glib to be true. It is, however, a valid argument.
The argument that steel can be competitive if its input costs are lowered may be valid. But it cannot be confined to steel. The British car industry, most of the engineering industry, and also shipbuilding, as my hon. Friend the Under-Secretary of State for Scotland says, could improve competitiveness if they were able to obtain steel as cheaply as some of their competitors and if the tax bill for all those industries was not increased by the need to finance the deficit of the steel industry.
Of course the steel industry is important. We need at all costs to maintain a steel industry that is big enough to meet our national needs in times of war or emergency. Above this minimum level, steel is merely one among many manufacturing industries. If the price of keeping 350 steel production at anything like its present level involves a crippling burden on the rest of British industry, we are getting our priorities wrong. The hundreds of millions of pounds needed to prevent any loss of jobs in the steel industry could possibly be used to create more and better jobs in newer industries.
It is in this context that we should study allegations that our EEC partners are cheating on the Davignon arrangements. If they are cheating, they are spending their taxpayers' money, directly or indirectly, on propping up steel jobs that could be used in promoting newer industries.
For us now to indulge, as hon. Members on both sides have done, in an orgy of recrimination is to divert our energies from both long-term and short-term measures to meet the crisis. In the long-term, we have to face the fact that the steel industry in western Europe will decline further as more and more developing countries turn to this labour-intensive, wealth-creating activity, for which many of them have the raw materials on their doorsteps. The long-term answer is to speed the process of industrial reconversion to the sunrise industries.
In the short-term, we have to devise ways of making the transition as orderly and as painless as possible. That surely means using subsidies and protection to defend only those operations which are genuinely competitive and which are threatened by unfair competition strictly defined. Even that limited protection will require resources which will impose burdens on the rest of industry. It would be mad to squander those resources on seeking to fend off competition from within the EC, where the steel industries face exactly the same long-term problems as we do. To try to apply protectionist measures on a purely national basis, as was urged by hon. Members on both sides, would invite retaliation which we could not possibly meet on our own. The outcome of the negotiations with the United States over its attempted ban on steel exports from Europe surely proves that time and again.
Greatly to my surprise, I find myself to some extent in agreement with my hon. Friend the Member for Southend, East (Mr. Taylor) who, in an article in The Times of 26 November concluded—it did him great honour, because it must have hurt him to reach this conclusion—that m the short-term the only effective way to protect the European steel industry was to have an effective European cartel—an effective one with a procurement agency centrally. In the short-term, it is the only answer. I emphasis "short-term", because in the long-term we must accept the fact that the steel industry is a poor bet in terms of saving jobs.
We should be thinking about how we can bring about an efficient steel industry of the size that the economy of this country can afford. Quite separately, we should he thinking about how we can provide jobs for those who hitherto had drawn their living from the steel industry but for whom there is no long-term future. If anyone cares to come to north-east Wales, he will see the process already under way. It is a long, slow and painful process. The old jobs went out with a hideous rush, and the new jobs are coming in painfully slowly, but there is no mistaking the growing atmosphere of hope in the future which is beginning to spring up on the ruins of the old steelmills at Shotton.
§ Mr. Robert Litherland (Manchester, Central)
To me, as a newcomer, this has been a remarkable debate. I wonder how many right hon. and hon. Members can remember such a one-sided debate. Because there is not to be a vote, we have heard Government Back Benchers in particular speaking their minds. Speaker after speaker condemned the Government's policies, and the right hon. Member for Taunton (Mr. du Cann) and the hon. Members for Brigg and Scunthorpe (Mr. Brown) and for Dudley, West (Mr. Blackburn) adopted solemn moral attitudes because of the effect on their constituencies. Government Back Benchers have tonight begged their Front Bench to take action to save the steel industry.
I trust that the Government have seen the light. Conservative Back Benchers have seen the devastation that their Government are causing. The speeches that we have heard tonight are not just symptoms of election neurosis. The hon. Member for Brigg and Scunthorpe sees his position waning, and the hon. Member for Dudley, West, who told us that he went to the dole queue, is getting in some practice for the general election.
§ Mr. Michael Brown
The hon. Gentleman is new to our debates, but his contributions are always welcome. However, if he thinks that there is any electioneering by those hon. Members who represent a steel constituency, as I have done for some eight years, let me assure him that we judge the issues purely on the merits of the industries in our constituency. We are not worried about our popularity. I have never given a damn for my popularity in Scunthorpe or elsewhere. I am concerned about the steel industry.
§ Mr. Litherland
I thank the hon. Gentleman for that assurance. It is a pity that we shall not go through the Lobbies tonight, because had we done so we should have seen which side he was on.
I come from a part of the world—Manchester—that has had famous metal-based industries. There used to be heavy engineering in Manchester, which was world renowned. I am afraid that the Trafford Parks of this world have been decimated and are part of history.
The debate is epitomised by the position of two firms in my constituency—Manchester Steel Limited and Richard Johnson and Nephew Limited. The future of both those companies is in doubt. Manchester Steel Limited teetered on the brink of closure only a few short weeks ago, having suffered from the world recession in steel, which was compounded by the Government's monetarist policies and the problems of import dumping, high energy costs and high exchange rates. Urgent action had to be taken.
The board of directors was presented with two options. It could accept an offer of £16 million by a private unnamed consortium, assisted by Government money, to close down. That would have meant a loss of 810 jobs. Alternatively, it could accept a survival package which was put forward by the management, the workers and the trade unions. Even that entailed about 170 redundancies—one-third of the work force. It would also have required a wage freeze, an increase in efficency, and a saving of between £2½ million and £3 million in the coming year.
Manchester Steel Limited, like other firms that have been mentioned tonight, was viable. As a result of a recent 352 outlay of millions of pounds of capital expenditure, it was an efficient steel-making firm with a high productivity rate. However, that efficiency and capital investment could not compensate for the high subsidies that were being enjoyed by steel industries in the EC and elsewhere. The managing director told me that the selling price for bar and rod was £170 per tonne in October. That dropped dramatically by £30 per tonne in November.
Manchester Steel Limited is owned by Elkem—a Norwegian-based firm. The local management went to Oslo and invited the full board to visit Manchester to look at the firm for itself. It came to Manchester to evaluate the two proposals that had been put forward. It had to decide whether to accept the survival package or the £16 million, which must have been a tempting offer. It was thought that it would grab the money and run.
However, the board met the trade union representatives, the local management, the workers, Members of Parliament and also members of Manchester city council, which had thrown its weight behind the company. Manchester city council knew that if Manchester Steel closed down there would be a rate loss, more people would be on the dole, more people would want social services and there would be more in need. It also knew that when such services are provided by the rates the Government engage in a clawback operation. The council, therefore, had a vested interest in what happened.
After a top-level discussion, the survival plan was accepted. The workers had met the criteria set down by the Government. They had rather reluctantly accepted wage restraint, redundancies and rationalisation. They had made every effort to save the firm. They had made the sacrifices about which the Secretary of State for Industry keeps talking. What could they expect in return? My right hon. Friend the Member for Manchester, Openshaw (Mr. Morris), along with Councillor Flanagan, who is a member of the city council and employed as a personnel and training officer at a steel works, and myself met the Minister. He merely said that the action by Elkem had put the cat among the pigeons and that the company would have to slug it out in the market place. In spite of all the efforts that had been made, the company's prospects still appeared gloomy.
Only a few yards away from the company there is Richard Johnson and Nephew, a firm that is over 200 years old. It is a renowned family firm, producing some of the finest wire. It has a unique technique of making galvanised steel, and if it closes, it will not be possible to reproduce that technique.
It is cheaper for Richard Johnson and Nephew to import steel from South Africa, Poland, Japan, Spain and the rest of Europe than to go to a steel-producing firm only a few hundred yards away. We have listened to Conservative Members talking about competition, but they are not comparing like with like. We cannot compete. The arguments of Conservative Members are merely excuses.
As part of the rationalisation programme, a commission was set up to assess the conditions of the market and the future of the wire manufacturing industry. The object was more rationalisation. The consultants, Touche Ross, have produced a document which is being reviewed. Richard Johnson and Nephew fears, and the workers fear, that there could be a closure. That will mean that the rationalisation programme will have hit Richard Johnson and Nephew. 353 Richard Johnson and Nephew are owned by a South African company—Cape Gates. It is feared that the South African company will be in the same situation as Manchester Steel's Elkem board was a few weeks ago. Will it accept a money offer and close down Richard Johnson and Nephew? No survival package has been assembled by the South African parent company. Mendle Cape has has been in possession of Richard Johnson and Nephew for about 18 months of its 200 years of existence. It will have paid back only a fraction of the loan debt in purchasing the three mills of Richard Johnson and Nephew, Ambergate and Steelrods.
If the Government's money is accepted, Richard Johnson and Nephew will be closed and the money will be used to buy outright the other two firms which came into the company's ownership, which are Ambergate and Steelrods at Derby. In other words, public money will be given to a South African firm to close down a firm of 200 years' existence and to purchase two wire manufacturing firms in Britain. Can it be in the public interest to use public money in that way? How can our companies exist following the signing of the Treaty of Rome and the abolition of import controls? We know that imports are flooding into Britain.
The Joint Industrial Council has given its views. It says:British steel makers whose products were defined under the Treaty of Paris enjoyed assistance from the EEC whereas British wire manufacturers whose products were defined under the Treaty of Rome were not eligible for such assistance.
The importing of steel and the price increases have had serious effects on the wire industry. The Joint Industrial Council says:There was a real chance that wire prices would deteriorate still further in 1982 having regard to the extremely keen competition from overseas wire manufacturers, weak European currencies against sterling and substantial overcapacity in the United Kingdom. The United States market was very depressed and overseas wire manufacterers were looking for other markets. The United Kingdom market was very attractive to them.
The Joint Industrial Council is gloomy about the future. It says that wire imports of hard and mild steel for 1971 were 8.7 per cent. and in 1982, 53.2 per cent. and rising. The Government talk about competition. What chance has Richard Johnson and Nephew to compete in that atmosphere, and what does that mean to Manchester Steel? If Richard Johnson and Nephew closes, Manchester Steel's efforts for survival will have been in vain. It will mean a reduction of 20 to 30 per cent.—400 to 500 tonnes each week—in the amount that Richard Johnson still takes from Manchester Steel. If the firm closes, it will be disasterous for the community.
In my constituency, more than 34 per cent. of the people are unemployed. Manchester, like Sheffield, is becoming an industrial wasteland. It is estimated that the closure of just one firm will mean another 2,000 lost jobs in allied industries. If that figure is multiplied by the number of people in the families involved, one gets an idea of the effects of the closure.
As my hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy) said in his excellent speech, we are seeing not only the closure of factories but the deaths of whole industries. This is not like the slumps of the past, when the machinery and skills were still there. When the trade cycle had been completed, skilled men were taken on again. Those days have gone. Not only firms and industries but whole communities are closing down.
The Minister, especially in a statement of a week or so ago, spoke of sacrifice. Manchester Steel has made the 354 sacrifice, but if such firms are not allowed the same facilities in competition they will surely go to the wall. That is criminal.
A great deal has been said today about survival. Under this Government Britain is committing suicide. Our children and inheritors will never forgive us. We want, not good intentions, but action from the Government. The workers in the steel industry live in fear not only for their own future but for the future of their families.
I hope that the speeches that we have heard today are sincere and not simply platitudes, and that the bouquets handed out are not just flowers on the grave of the steel industry.
§ Mr. Richard Page (Hertfordshire, South-West)
In the late 1970s, it was my privilege to represent a steel constituency and I gained a great interest and concern for the industry. That genuine concern has been expressed by both sides of the House.
In my brief contribution tonight, I shall refer to the past. In the past decade, and particularly before 1979, the steel industry has become a political shuttlecock that is lobbed backwards and forwards by both major parties to the detriment of the steelworkers and the management. The industry is paying for those political decisions now.
Vast sums were invested and billions of pounds of taxpayers' money were spent, although there was little interest in efficiency or in whether the man-hours were right. The penalty is now being paid.
I could produce many examples. One need only consider the Beswick closure programme and the rime that that took. It was far too long. On the question of price controls—this point tells against us on this side of the House—controls were imposed on our steel products, so stockholders sent the goods abroad and the same steel was then reimported. Our steel users were thereby paying more for the products that we were producing. Hon. Members should consider the slowness of investment decisions. It cost us more when we eventually got round to introducing the much-needed improvements.
I shall take the year 1977–78, although I could give many other examples. We lost a mere £443 million and BSC said that 40 per cent. of that loss was due to overmanning, that 20 per cent. was due to the slow implementation of the Beswick review, and that 40 per cent. was due to the recession. Efficiency was bad and the man-hours per tonne produced were appallingly high. That was a byproduct of politics, and I do not blame the steel workers or the industry. During that period, the private sector was operating and sheltering under that umbrella of prices provided by the BSC.
However, in 1979 Mr. MacGregor arrived to do a most difficult job at probably the worst time that could have been chosen. Losses were running at about £10 million a week. I pay tribute to the wonderful work that Mr. MacGregor has done and to the difficult decisions that he has made. [Interruption.] If the hon. Member for Sheffield, Hillsborough (Mr. Flannery) will allow me to make my point, I may move a little way towards the aims that he has in mind. However, I do not think that there will be a meeting of our minds, because I do not think that they will ever come together.
At that time, it was taking 14 man-hours to produce 1 tonne of liquid steel. Since 1979 there have been dramatic improvements, and the man hours are now in single 355 figures. Such an improvement in three years is, indeed, dramatic. The latest figures that I have for the amount of crude steel produced per process worker are for 1981. We produce 250 tonnes per process worker. We have a long way to go before we catch up the opposition. West Germany produces 297 tonnes per process worker, and Italy produces 313 tonnes. However, a few years ago we would have been nowhere near that 250 tonnes. Therefore, there has been a remarkable improvement.
Unfortunately, those improvements occurred during a world recession. There are now about 76 countries producing steel. In the 1950s, only 32 countries produced steel. Another factor to consider is the lack of production capacity curtailment within the EEC. Let us compare our production levels with those in Germany. We have roughly the same size populations. We produce about 14 million tonnes per annum, while the Germans produce 37 million tonnes. Some curtailment will have to take place across the water in the EEC, rather than in Britain.
If we look at the closures that have taken place over the past three years, we see that we started from a basis of more inefficiency and more manpower, but our manpower has now dropped by about 41 per cent., Germany's has dropped by 11 per cent. and manpower in France, which is the nearest to us, has dropped by 16 per cent. We started from a higher inefficiency, but others in the EEC should start to take the brunt of some of the closures of capacity.
My worry is that, if what we are doing is allowed to continue, it could become a self-defeating spiral when lower demand means lower efficiency of the plants, lower efficiency of the plants means lower production, lower production means losses and losses mean closure. We could find that we spiral downwards to zero.
My hon. Friend the Member for Flint, West (Sir A. Meyer) mentioned the sunrise industries. I am all for seeing our industries develop and grow in new areas of technology. I know that new technology means jobs. However, in new technology, other countries are already there. The new areas that we will have to fight in will be just as tough as steel. When we start to take on Japan at its products, there will be a tough fight. Therefore, we must stay in the production of steel for motor cars and white goods. As my hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller) said, our steel must be used. That is the only way in which we shall use that steel.
That means that we shall have to retain a bedrock level of production. I have great sympathy for my hon. Friends on the Front Bench. They have been deluged with advice, cajoled and in some cases almost bullied about what they should do. I am unhappy about import controls. They would not work. They are usually a short-term solution. They are not often used so that there can be reconstruction, but they become a reason why improvements should not be carried out. That provides only a temporary respite before the problem returns in a greater and more virulent form.
We have made more sacrifices than anyone else in the EC. Of course, we must continue to improve our efficiency. That is only natural. However, our production per head is the lowest in the EC. The obligation is now on the EC to provide a market with more favourable competition for our British steel industry to survive. It must show the people of this country that it means 356 something. Our steel production can stay in existence if the EC, with Ministers pushing it, can give our steel industry a chance on the capacity levels. We have made the sacrifices so I urge my hon. Friends the Ministers to make the EEC confound the sceptics who have been critical of it this evening.
§ Dr. Jeremy Bray (Motherwell and Wishaw)
There was a meeting this afternoon between Iron and Steel Trades Confederation representatives and the British Steel Corporation in the preliminary round of the annual wage negotiations. At the meeting the representatives were told that BSC's aim—which was carefully phrased by the corporation's spokesman and carefully noted by the ISTC representatives, and of which I have seen the written record—is to reach a cost structure that breaks even at 200,000 tonnes per week, which is 10 million tonnes a year, at 70 per cent. capacity working, assuming retained capacity of 14.4 million tonnes, to be achieved with further small closures and a further reduction in manpower, with production pauses likely to continue. In other words, the representatives were told that BSC is not contemplating a major closure as the outcome of the review.
I have never believed that a major closure would be the consequence of the present review. I welcome the realism of BSC representatives effectively telling that to ISTC members while the Government go through the pirouette of pretending that they are going through a major review with cataclysmic possibilities. But that conclusion leaves many questions unanswered. The first is that of mothballing. That is effectively closure, as no mothballed steelworks is ever reopened. It has been dismissed as an unacceptable solution for any of the big five, certainly Ravenscraig. Then there is partial closure. It is suggested that the second blast furnace at Ravenscraig might be closed or that the strip mills at Ravenscraig and Gartcosh might be closed. That would leave Ravenscraig as a plate producer which would be quite unviable in cost terms. Nor would Ravenscraig be viable simply as a finishing plant without steel-making capacity.
The other possibility that might be aired is to cut off all of the ancillary processes which are unique to Ravenscraig to make it the most highly equipped steel plant in Europe. The de-sulphurisation, argon flushing, vacuum degassing, and secondary steel making are precisely the facilities that equip Ravenscraig to supply products that cannot be supplied from elsewhere within the BSC and, indeed, hardly within Europe.
Ravenscraig is the best located steel works in Britain to supply 64 per cent. of its market. If it were closed, 64 per cent. of its present deliveries would have to travel a greater distance than they do at present.
In the second quarter of this year, when Ravenscraig still had a decent order load, it achieved 4.45 man-hours per tonne in output on the EC standards compared with the best corporation average for any month in this year of 8.8. On present plans and on a 1.8 million tonne order load, Ravenscraig will be achieving four man-hours per tonne by the middle of 1983 which is easily the best in the United Kingdom and comparable with the best in the world.
With regard to other associated costs, the Scottish Office has achieved a small reduction in the cost of 357 electricity, and freight charges are in the process of being negotiated downwards. A considerable cost reduction is possible right across the board from suppliers.
The Minister of State challenged my right hon. Friend the Member for Salford, West (Mr. Orme) to say how much steel would be produced under a Labour Government. My right hon. Friend wisely refused to give him an off-the-cuff answer. Nevertheless, it was a good question that deserves a properly researched reply. My right hon. Friend the Member for Stepney and Poplar (Mr. Shore), the Shadow Chancellor, has produced a far more detailed and closely argued case for industrial recovery than any previous Shadow Chancellor.
The Minister of State asked us to go further. We should do that. He asked what the implications of that plan were on the demand for steel. I shall do my best to persuade my right hon. Friend the Member for Stepney and Poplar to answer that question. It is necessary—it is helpful to us—to demonstrate the complete credibility of the recovery strategy that my right hon. Friend has demonstrated and which privately some, perhaps not all, Ministers in the Department of Industry believe to be possible and necessary.
The answer is needed to show the voters where the jobs will come from. That should also be examined industry by industry. I am confident that the answer will fully justify the retention of 14.4 million tonnes of capacity. Looking at the matter off the cuff, which I am glad that my right hon. Friend the Member for Salford, West did not, there is scope for a 25 per cent. increase in output due to a recovery of market share and scope for a 25 per cent. increase in the market. That is the increase in manufacturing output over the five years under the strategy that my right hon. Friend the Member for Stepney and Poplar published recently. It compares with an increase in manufacturing output under the Tory policy—simply the EIU basic medium-term forecast on the assumption of continued present policies—of only 6.8 per cent. in the next five years. That gives a 50 per cent. increase to 15 million tonnes a year, which fully justifies the retention of the nominal 14.4 million tonnes at which BSC capacity has recently stood. We recognise that even if steel output was increased to 20 million tonnes a year—which is possible—from the retained plant inventory, there would be precious few more jobs in steel. Steel areas such as Motherwell and Wishaw entirely accept that recovery from the 25 per cent. levels of unemployment—50 per cent. in some parts of the town—from which they now suffer will come only from the growth of other industries. It would, however, be murder to destroy such steel jobs as are left.
Having attempted to respond to the Minister's challenge, I pose an equivalent challenge to him. I referred to the absymal economic case in the document on the closure of the bar mill at the Craigneuk works. I asked Mr. Derek Bray, who is, I am afraid no relation of mine, to confirm that this document came from the BSC headquarters. He said "Yes." If we wish to deviate from these figures, we must make the case for doing so. Furthermore, the figures have been seen by the Department of Industry as part of the annual review of cash limits for the nationalised industries.
That document contained appallingly stupid statements, such as that there would be no change in the exchange rate and that there would be a continuing increase in the import penetration of cars and so on. I have 358 never seen a more pathetic set of arguments. The extraordinary thing is that that document, on which the BSC is now working in making these closures that have been left to its discretion, is based on only one GDP forecast—the medium-term EIU forecast which my right hon. Friend the Member for Stepney and Poplar described as the Tory case.
There is no use in the document of any model that could have traced the impact of alternative exchange rates or rates of growth on the pattern of growth in different industries and on the level of steel demand. That has not been examined by the BSC as the background for any of the closures that it is now making. It is outrageous that the Government should be giving BSC a free hand when they know that this kind of thing is going on. It has occurred because of the defeatist atmosphere that the Government have generated in British industry, such as the appalling attitudes to the maintenance of the broad economic strategy.
The Government propped up the exchange rate in September last year and did so again last week. The Prime Minister said that it was simply a response to market forces. I am astonished that intelligent people such as the Minister of State should consent to remain in a Government who murder British industry in that way. People such as the Minister of State will look back on their membership of this Government just as others did on their membership of the Government responsible for Munich, only this is a far greater betrayal because it is done consciously and deliberately. They have destroyed British industry right across the board.
The Department of Industry should take up the challenge mounted by my right hon. Friend the Member for Stepney and Poplar. It can have the full computer printout of all 64 tables in the Treasury forecast. It can trace that through to the inter-industry effects in the Cambridge Econometrics model which the Department of Industry uses but which the BSC does not. It should produce the levels of steel demand that will result from that, and it should say whether, with a 50–50 chance of its Labour strategy that is implemented after the next election, there is not a cold economic case that steel closures should be stopped forthwith.
I do not believe that the Government are doing that kind of work. Nothing that any Minister has said gives me any confidence, and none of the inquiries that I have made in the economic trade suggests that the Department of Industry is asking that kind of question.
The case is overwhelmingly for leaving the basic capacity of the industry intact, but there is also the specific case of the small works that many of us have in our constituencies. In addition to Ravenscraig, my constituency includes Craigneuk works where 427 steel workers are to be made redundant with the closure of the bar mills. Those workers have until Friday to produce an alternative solution. I believe that such a solution is fully justifiable if the special market which they supply is understood. In the small-batch, under-one-tonne market for engineering steels, the big bar mills simply cannot compete. It might be different if the big mills had large warehouse stocks and quick deliveries, breaking down 100-tonne lots, but history has proved that Craigneuk has a loyal band of customers and there is certainly a market for its products.
The pessimism that the Government bring to this review of the steel industry, their irresponsibility in having landed 359 the industry in this condition and the suggestion that the decisions that they will undoubtedly make to preserve the big five are merely political decisions when they are absolutely necessary if there is any shred of confidence in the economic future of Britain have gravely damaged the morale, the performance and the prospects of one of our basic industries.
The Conservatives, for all their cackle about new technology, seem not to understand anything about the challenges that will face the world as oil supplies run out at the end of the century. If the introduction of the hydrogen cycle, the replacement of oil, and so on, are faced by a poor, badly organised and industrially disrupted world, the necessary world-wide adjustment will be a very difficult process. The Government do not begin to understand the meaning of that challenge, which our children will have to face, with the policies that we have to follow today.
§ 11.1 pm
§ Miss Joan Maynard (Sheffield, Brightside)
I am pleased that the Minister of State who opened the debate is present, as he said a great deal about overcapacity when he should have been talking about under-consumption caused by the Government's actions in destroying our industry and making it impossible for it to buy the steel that is produced.
The right hon. Member for Taunton (Mr. du Cann) made a very interesting speech. It seemed odd that he should complain of the hostile environment in which our steel industry has to operate, as that seems to be the natural environment for the kind of society that he supports.
The gravity of the situation in the steel industry cannot be overstated, as speeches from both sides have made clear. If capacity falls much further, we shall no longer have a viable steel industry. As my right hon. Friend the Member for Salford, West (Mr. Orme) said, if production falls below 10 million tonnes the industry will no longer be viable. I believe that that is generally accepted throughout the industry.
Much has been said today about saving the five major plants, but surely we need to save the whole of our industry and not just those five plants. Indeed, many of us believe that we might have done better to develop our industry differently and, rather than building those huge plants, to have had smaller, more flexible units. However, it is always easy to be wise with hindsight.
Whenever we meet Mr. MacGregor, we are told that with one more closure or so many more redundancies we shall be able to balance the books. It seems to me that we shall be able to balance the books only when we have closed the steel industry. That would be a tragedy, because the steel industry is a basic industry of our industrial society. Therefore, our wealth as a nation is based on it.
We know that there is a recession in the capitalist world, but the position in Britain is made much worse by two things—our membership of the Common Market and the Tory Government's monetarist policy. The lack of demand for steel from our home market flows from lack of investment in our railways and the lack of demand from mines, cars and the aero-space industry. What has been done to our industry by the Government has had a dramatic effect on demand for steel in the home market.
360 The crisis is not due to striking workers. One of the most serious issues for Britain is the import of steel from EC countries. Imports of steel on a massive scale are destroying the British steel industry. From January to July 1981, as compared with January to July 1982, there has been an increase of 40 per cent. in steel imports. Of the total imports of steel to Britain, for example, of an average of 349,000 tonnes a month, 233,000 tonnes—or 67 per cent.—were from the EC.
There has also been a problem of imports from the United States. However, the real problem comes from the EC countries. Since we joined the EC, industrial output in the United Kingdom has fallen by 16 per cent. Under the rules of the so-called free competition of the Treaty of Rome we have suffered an unrestrained onslaught of industrial competition from the strongest economies in the EC, notably, West Germany and the powerful multinational companies, which have been facilitated by the EC.
In the past few days, many more jobs have been lost in our steel industry. Whether the jobs are in Scotland, Sheffield or wherever, we must stick together and not allow them to split us up, remembering always the truth of the statement that an injury to one is an injury to all.
The steel workers should seriously consider sit-ins at plants that are threatened with closure, for once they are outside the factory, how do they get back inside? I appreciate that this means stopping taking redundancy money, but this is very important. I know that it is easier to say this than to do it. However, taking redundancy money is not only selling out their jobs but selling out the jobs of the next generation.
If the steel industry and the jobs are to be saved, the battle has to be conducted. The triple alliance must be made a reality. The workers and the labour movement, including all Labour Members, must be as single minded for our people, the working people, as the Government are for their class, and the Government have given us an object lesson in how to work for one's own class.
A Scottish steel union leader describe this accurately when he said that what is going on isindustrial gangsterism at its worst.That puts accurately what is happening to our industry as a whole, and particularly to the steel industry.
Davignon is now making it plain that his thinking on the future of European steel has evolved into a strategy that goes well beyond the safety net. What is behind this thinking? Does it mean that much more money can be made by producing steel in south-east Asia and South America where wages are low and safety regulations much less tight than they are in the Western world and this country?
The United Kingdom has taken more than its fair share of cuts in capacity and jobs in order to restructure the industry. Great Britain's closure drive has put it far ahead of its EC partners and accounted for one in every two redundant steel workers. When will Ministers stand up for Great Britain, not just over the Falklands, but to protect our jobs and industry? We have closed down at least 33 per cent. of our capacity, France 15 per cent. only and the remaining EC countries have made hardly any closures. That is scandalous and a sell-out by those people who are always telling us what good patriots they are.
If the import-export ratio continues at the present rate we are heading for a large deficit in our trade in steel products which is astounding. There has been increasing 361 penetration by special steels. Sheffield excelled in special steels, but the city has become a desert and the work force is being destroyed.
When Great Britain joined the Community, United Kingdom producers had to increase their prices to bring them into line with the EC ruling. Great Britain's EC membership exposes the British steel industry to powerful competition from European producers who are generally larger than all the United Kingdom producers except the British Steel Corporation. That company had not then brought its major new investment projects on stream. That meant that from the start the British steel industry was in a weak position compared with its European competitors. As the crisis began to deepen, the producers' response was to strengthen their cartel. There is an inherent tendency for the strongest members of any cartel to exceed their quotas and cause problems for the weaker members.
Lack of Government support for the British Steel Corporation economically and politically has further weakened the position of the British Steel industry within the EC.
We do not need Gaston Thorn and his well-funded circus to come here to tell us of the so-called benefits of our membership of the EC. We know from hard and bitter experience what it has meant to our workers and industry. We have lost our sovereign control over investment. It is shocking that we are being told that we must make further cuts in our steel industry or we shall not be given the investment that we urgently need.
Unless the Government are prepared to fight to retain our steel industry—capacity cannot fall much lower or it will not be viable—we shall be in a sorry state. The best thing that the Government could do to help our steel industry would be to take Great Britain out of the Common Market. As that is not likely, we ask for import controls. I do not like to ask for them. I should prefer the Government to give the same help to our industry as is given to that of our competitors. We have modern works and excellent workers. They can and will compete if they can compete fairly, and if there is anyone to whom they can sell their products. The solution rests with the Government. If they will not act, they will be removed; and that cannot be too soon.
§ Mr. Allen McKay (Penistone)
I wish to reinforce the arguments of my colleagues, particularly those from Sheffield. Like all last speakers, I shall leave the best bits of my speech for another occasion. I shall bring them out of mothballs while the steel industry is in danger of going into mothballs.
For a long time the Government have been warned of the growing crisis in BSC, not only by the unions but by chairmen of BSC and representatives of the private sector in the British Independent Steel Producers Association. The Government had information about the imports which have now turned into a raging flood from Brazil, South Korea, Austria, South Africa and other EC countries. Imports from Brazil have risen sevenfold, from Korea two and a half times, from France and Italy by over 50 per cent., from Spain by 89 per cent. and from Poland by 95 per cent. The import of tooled and special steels upon which Sheffield depends now covers 82 per cent. of the British market. The import of steel of all categories is about 30 per cent. Our car imports bring the total up to 60 per cent. Those imports have sounded the death knell of 362 our steel industry as we have known it, both in the public and private sectors. Sheffield's industry has been based on 50–50 co-operation between the public and private sectors, which have worked well together.
The factors behind the problem are a lack of control over the steel stockholding which allowed imported steel to be offered at discount prices; foreign suppliers using extended credit facilities; the fact that foreign supplies could be taken now and paid for when the product was sold; the issue of credit notes against alleged poor quality claims; and transmission from port of entry to site at no extra cost. Those factors have combined to offer even cheaper steel to the United Kingdom market. Other countries also have considerable energy and transport subsidies, and training and research costs are borne by their Governments, whereas for us they are a cost on the industry.
Imports have risen by 25 per cent. since 1981, while the home market has dropped from a target of 52 per cent. to 43 per cent. The United Kingdom industry is being destroyed while our European competitors ensure that their capacity remains.
That fact is illustrated by the figures for the period between 1975 and 1982. The United Kingdom production in 1,000 tonne units has decreased by 24 per cent.; Germany's has risen by 5 per cent., Italy's by 24 per cent. and France's has decreased by only 1 per cent. The British industry has borne the brunt of the cuts while our competitors have produced a glut. It is like a man saying that incomes can be redistributed by sharing the money equally, but when he has spent his it should be shared out again. Unemployment in our industry has increased while Europe has maintained its capacity, ready for the upturn which we shall not be ready to participate in.
Barworth Flockton at Ecclesfield produces fine, high quality steel. It has to shop in the same market as its competitors and pay the same price for its ingredients. Even taking out rolling and wages costs, it cannot compete. That shows the extent of the subsidies given by other countries.
The new Concast at BSC Stocksbridge can make steel at £20 a tonne cheaper than anyone else. It depends on a home market that no longer exists. Unless that market is recreated, one of the most highly efficient and productive steel units in Europe is likely to go under. I am confident about the survival of BSC at Stocksbridge and Tinsley Park. Both are modern plants with an excellent work force.
Ireland Alloys extracts special alloys from scrap steel. A plant that it established in my home town some time ago is having to close because of the rundown in BSC. It is moving from a low rated area to highly rated Sheffield. The decision belies some of the arguments employed about rates.
The Government have failed miserably to protect British steel and industry generally. I could have argued that it was time for them to resign. They would not have listened. I suggest instead that it is time they took protective measures to save one of our basic industries.
§ Mr. Harry Ewing (Stirling, Falkirk and Grangemouth)
I recall only one debate that resembles our proceedings today. In the early days of the Government, the then Secretary of State for Industry, who is now Secretary of State for Education and Science, presented to the House a proposal that Ferranti should be sold to GEC. 363 Like today, Ministers wished to hear the views of hon. Members expressed in debate. Again like today, not one hon. Member supported the Secretary of State's proposal. Fortunately, the then Secretary of State showed more sensitivity than he has shown over many other problems and did not proceed with the proposal.
The right hon. Member for Taunton (Mr. du Cann), to whom I pay tribute, as the hon. Member for Flint, West (Sir A. Meyer) did, for remaining throughout the debate after he had been called as the first Back Bencher to speak, told the Government in no uncertain terms that the British Steel Corporation's proposals were not acceptable. The advice of the right hon. Gentleman, the chairman of the 1922 Committee, is that the Government should not bring the proposals before the House in the form presented to them by the BSC.
The hon. Member for Edinburgh, South (Mr. Ancram), who is chairman of the Conservative Party in Scotland, also told the Government in no uncertain terms that any proposal to close the BSC plant at Ravenscraig would not be acceptable to any part of Scottish opinion— political, religious or cultural. The chairman of the Scottish Conservative Party has advised the Government not to bring any such proposal before the House.
I submit to the Under-Secretary of State for Scotland that the chairman of the 1922 Committee and the chairman of the Scottish Conservative Party represent a powerful Back-Bench combination. I should have thought that any junior Minister with an eye on his career prospects would take account of the remarks of the right hon. Member for Taunton and of the hon. Member for Edinburgh, South.
It is the nature of Government Departments that, when a Secretary of State knows that his Department is in for a hiding, he does not come near this place. He sends his junior to take the beating and to carry back the message "You really cannot do that, Sir." That is the message that will go back to both Secretaries of State tomorrow—although I have seen the Secretary of State for Scotland popping in from time to time today.
I draw the attention of both Ministers to the fact that even during the two-hour break, over the dinner table, no doubt with the encouragement of a bottle of good quality wine—
§ Mr. Ewing
The right hon. Member again declares an interest—the Government were unable to persuade any of their Back Benchers to support their proposals.
It is important to set the debate in context. The Minister of State said that the purpose of the debate was to hear the opinions of right hon. and hon. Members from both sides before the Government came to a conclusion on the proposals put to them by the British Steel Corporation, particularly in relation to the big five plants as they have been called.
The House has expressed its opinion. It would be a negation of democracy if the Government came forward with proposals that were contrary to the unanimous opinion of the House of Commons. There is no point in the Minister of State shaking his head. He is struggling hard to find support.
§ Mr. Ewing
I shall not give way. I have an agreement with the Under-Secretary of State for Scotland and, if anyone needs time to explain himself, he does. I shall not deny him that opportunity.
I emphasise what my right hon. Friend the Member for Salford, West (Mr. Orme) said. We expect—in fact, we demand—that the statement is made—we hold the Secretary of State for Industry to his promise—before the House rises for the Christmas Recess. Following the statement, we demand a debate on the Floor of the House and an opportunity to express our opinions in the Division Lobbies that evening. We shall then see the depths of sincerity that go with the words that have been spoken today. A warning was also sounded by the hon. Member for Brigg and Scunthorpe (Mr. Brown).
I was encouraged to hear my hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) say that he had spoken to the representatives of the ISTC following their first discussion with the BSC on the new round of wage negotiations. The House will have listened with interest to my hon. Friend's report of the meeting. Apparently the BSC assured the union that it intends to maintain all the big five plants and that it wants to maintain output at 16 million tonnes per annum, with only some small closures. I regret even those small closures.
I was very interested to hear the report that my hon. Friend gave to the House. He will not object to my saying that the report conflicts strongly with what the chairman of the BSC, Ian MacGregor, said when he was in Scotland on Friday and Saturday last week.
Senior management from the west of Scotland have sent me a document which I suspect many hon. Members received today. It arises from the meeting that they had with Ian MacGregor on Saturday. To their credit, they decided not to make any comment until they had met him. They begin by expressing their fear that the Ravenscraig-Gartcosh plant has been singled out for closure. They say that before they made any comment they wanted from the chairmanthe facts regarding the well-publicised options for the future strategy of the BSC and when the basis of such options might be made known.That meeting was held on Friday 26 November.
I shall quote from the letter, because I am anxious to put in context what my hon. Friend the Member for Motherwell and Wishaw has reported from the meeting between the BSC and the unions today. Senior management said thatit was confirmed by Mr. MacGregor that the complete closure of the Ravenscraig-Gartcosh plant was an option now before the Government for consideration".
My hon. Friend the Member for Motherwell and Wishaw rightly dismissed the option of mothballing. The hon. Member for New Forest (Mr. McNair-Wilson) also said something about the possibility of that. It is ludicrous to suggest, first, that one can reduce a three-furnace operation to one. That is not on, because it must be fairly obvious that if the one furnace happened to go the whole plant would go. The flexibility is not there. In any case, two furnaces cannot be mothballed without mothballing many of the other facilities which my hon. Friend the Member for Motherwell and Wishaw mentioned.
Most important of all, how can people be mothballed? We are talking about people, their jobs and their families. I emphasise that throughout the debate no Labour Member has talked about creating more jobs in the steel industry. We have discussed the preservation of existing jobs and 365 steel capacity in order to create more jobs in other industries which will spring from the preservation of the steel industry. If we allow the steel industry to go, the possibility of creating more jobs from that springboard disappears altogether.
I met Tom Brennan and the shop stewards from Ravenscraig on Monday before I came to London. There is a feeling—my hon. Friend the Member for Motherwell and Wishaw will not object to my saying so—that Ravenscraig is being singled out in a campaign to undermine it by the BSC. Yesterday I heard a report on BBC Radio Scotland which obviously came from a BSC press handout. It went out of its way again to single out Ravenscraig.
We in Scotland are concerned not only with Ravenscraig but with preserving all of the five big plants. We are not in an either-or situation. We do not contemplate the saving of Ravenscraig at the expense of Llanwern. I understand that Port Talbot is not under threat, because of its low iron-making costs. We want to save and preserve the whole of the British steel industry, private and public.
If I disagreed with anything that the right hon. Member for Taunton said—I disagreed with precious little of it—I took some exception to his suggestion that the ending of subsidies to BSC would help the private steel sector. The Opposition are as interested in preserving jobs in the private sector as in the public sector. We represent workers in the private sector and they are our people as well as those in the public sector.
I refer again to the document which has been made available by the British Steel Corporation, and about which my hon. Friend the Member for Motherwell and Wishaw was rightly scathing. It is a disgraceful document. I understand that it has not been made available to the Scottish Office. I was able to keep the Scottish Office informed of what was going on in the aluminium industry, and I am willing to make myself available, to give it a copy of the document and to keep it advised of what is happening in the steel industry.
This is a serious document, on which the corporation has based its assessment of steel requirements for the foreseeable future. We are entitled to assume that it has based the proposition that it has put to the Government on the future of the big five and other steel plants in the United Kingdom on the assumptions that are contained in the document. If that is so, the corporation is saying that in the next five, seven, eight or nine years there will be no change in the exchange rate, no upturn in the economy and no increase in car output. It is stated in the document that an increase in car registrations will come from an increase in car imports. It is a depressing document.
That is the document on which the corporation has based its proposals to the Government. The Government have a direct responsibility to the House. There is no point in the Minister shaking his head. If he knows other criteria on which the BSC has based its proposals, he did not tell the House of them when he opened the debate. There were times when I had the clear impression that he was putting the corporation's case for it. I had the impression that he was speaking more for the BSC than for the Government. That is the main reason why I am sure that when a statement is made by the Department it will be delivered by the Secretary of State and not by the Minister. I say that with no disrespect.
366 The document is the basis for the corporation's submission to the Government, and, if the Government disagree with the conclusions that are set out in it, they had better say so. When the Government make a statement on the steel industry, they will have to explain the criteria that they have used in coming to their conclusions. The Minister of State nods in agreement and the Secretary of State for Scotland shakes his head in disagreement. If the two of them get together, we might get a more positive response. It is certain that their decisions will have to be substantiated by the criteria that they have set. The document cannot be allowed to go unanswered by the Government, because it contains the corporation's economic assessment.
The Government have been put on the line by the corporation. The economic assessment has probably come at a timely moment. It is one which the Government will have to confirm or dispute. It may enable us to learn more about the economic policy that will flow from the crisis. The BSC is, in effect, saying to the Government that its assessment of their future economic policy and of any possible upturn in the economy is based on 11 million tonnes of steel. If that is the extent of the upturn, I must say to Ministers that it is not much of an upturn. In fact, it is not an upturn at all. The Government will have to say before Christmas how they see economic prospects for this country. As a result of the crisis, it is possible that we shall learn more about the Government's economic thinking than would otherwise have been the case.
If all that we are promised in terms of economic upturn is an upturn based on 11 million tonnes of steel, not only is that not an upturn at all but it spells nothing but gloom and despair for the future economic hopes and employment prospects of millions of our people. The debate has been about the steel industry, but underlying it has been a debate about the future of this country.
I hope that when the Under-Secretary replies to the debate he will give us some reassurances and repeat the commitment by the Secretary of State for Industry that we will not have the nonsense of statements being made during a recess, and that the promised statement will be made before the House rises. We insist on having a debate and casting our votes in the Lobby. We do not ask for that tonight, but all the warning shots have been fired today and the verdict will be delivered when the Secretary of State makes his announcement.
§ The Under-Secretary of State for Scotland (Mr. Alexander Fletcher)
This has been an important and civilised debate. We should practise more often the idea of breaking for dinner so that we can proceed more comfortably afterwards. Perhaps we should have more controversial debates of this nature on the motion for the Adjournment of the House. The debate has been constructive and orderly and hon. Members on both sides of the House have tried to be responsible and constructive, bearing in mind the fact that many hon. Members were facing considerable constituency pressures in making their arguments to the House. I am only sorry that time will not permit me to do justice to all of the speeches and comments that have been made.
The hon. Member for Stirling, Falkirk and Grangemouth (Mr. Ewing) exercised a great deal of poetic licence in describing the speeches of some of my right hon. 367 and hon. Friends. Nevertheless, the views of my right hon. and hon. Friends are on the record and that will speak for itself.
My hon. Friend the Minister of State said in his opening speech that the Government's purpose in holding the debate was two-fold. First, we thought it right, at this time of great anxiety and uncertainty about the future of the steel industry, that the House should have a proper chance to express its views before the Government take decisions on BSC's future strategy. The issues touch the livelihoods and prospects of many families in many parts of the country.
Secondly, we were concerned to generate as wide an understanding as possible, inside and outside the House, of the reasons which lie behind the present plight of the British steel industry. It really will not do to pretend, as some Opposition Members persist in doing, that the problems of the steel industry are superficial, that they lie at the door of this Government alone, and that there is some magic wand which we could wave if only we chose to do so.
The problems of the steel industry are international and deep-rooted. No area of the world is coming through unscathed. It is not the Government's intention on this occasion or any other to gloat over the misfortune of other countries, but we have to be alive to what is happening elsewhere if we are to understand our own position properly and find effective solutions.
In opening the debate, my hon. Friend the Minister of State sketched the international scene most effectively. My hon. Friend the Member for Hertfordshire, South-West (Mr. Page) said that in a world in which 76 countries produced steel, compared with only 32 countries in 1950, no one should be surprised at the difficulties that the industry is facing in Europe, the United States of America and Japan. Much as all Governments would like to change the world for the benefit of their own countries, they have to be realistic. We cannot find a solution to the problems of the British steel industry by acting unilaterally. We have to act through international co-operation, and that means, first and foremost, working to restore market stability in the EC.
We cannot impose import controls, as some Opposition Members have suggested. One of the absurdities of that suggestion is that British Steel depends on imports for more than half of the basic raw materials that it uses to produce steel. The hon. Member for Bothwell (Mr. Hamilton) apologised to me for having to leave early. Along with other hon. Members, he pointed out that the British steel industry had made great efforts during the past three years to improve efficiency and productivity and to close down unwanted capacity—most of it obsolete.
However, the fact that we have already made progress does not mean that we can afford to sit back and do no more. What we must do, and are doing, is to make sure that others take the same medicine as we have taken in this country, particularly other countries in the EC. Again, my hon. Friend the Member for Hertfordshire, South-West and others referred to that. We also need to ensure that export markets for our steel remain open, for example, in the United States of America, and that imports do not come here at dumped prices. We have taken, and are taking, vigorous action through the Community to ensure greater stability in the market for steel.
368 My hon. Friend the Member for Sheffield, Hallam (Mr. Osborn) said that the Government should take off their gloves now when dealing with the international community. That is precisely what we are doing. I say that both to my hon. Friend and to my hon. Friend the Member for Brigg and Scunthorpe (Mr. Brown). As far as steel is concerned the Community is acting very firmly, prodded on—where necessary—by my right hon. Friends. The right hon. Member for Salford, West (Mr. Orme) spelt out the major redundancies of recent months and accused the Government of complacency. With respect, the complacency that has affected our steel industry arose between 1974 and 1979. Indeed, many of my hon. Friends have mentioned that. At that time other EC countries such as Germany and France realised the difficulties that the world faced because of the oil crisis and took firm steps to sort out the problems of the steel industry. We sat and did virtually nothing for five years and that is why there has been such a dreadful catastrophe—that is not too strong a phrase to use—in too many parts of the country during the past three years. We have had to take the action that was so long delayed by the Labour Party.
The right hon. Member for Salford, West blamed steel imports for the problem, but that flies in the face of the statements made by the chairman of the BSC. He has made it clear that the loss of export markets is one of the most serious problems facing the industry. My right hon. Friend the Member for Taunton (Mr. du Cann) spoke for and of the private sector. He asked that the future capacity cuts should take place in Europe. We very much agree with that and have not hesitated to make that clear to the Commission. My right hon. Friend and some of my hon. Friends emphasised the dificulties that the private sector faces. It is extremely difficult for private-sector companies to compete with nationalised industries. If nationalised industries have not got a monopoly of the domestic market, they usually have a near monopoly. That is why we have pursued legislation to privatise more and more of our nationalised industries. My right hon. Friend also said that no more subsidies should be given to the nationalised industry. As he will know, the EC requires that State aid should end by 1985. That is the objective of the Community and the Government.
The right hon. Member for Stockton (Mr. Rodgers) mentioned the performance of Redcar and asked for a general moratorium on closures and redundancies for 18 months. He estimated the cost at £800 million. However, the threat to our steel industry has not arisen from a shortage of public funds. Some might argue to the contrary, that public funds have been made too freely available for too long. That has been the basic problem that our steel industry, particularly the private sector, has had to face. That problem has arisen because our industry has been too slow even to start catching up with the productivity of our competitors. Need I remind the right hon. Gentleman that he was a member of a Government who closed their eyes to the problems of the industry? He said that we have been slow off our mark in tackling the problems, but we have been like greased lightning compared to the Labour Party when faced with such difficulties.
My hon. Friend the Member for Dudley, West (Mr. Blackburn) spoke with great feeling and authority about his constituency. He spoke sincerely on behalf of his constituents. It is not surprising that, because of his conviction, they give him every support in his efforts to 369 look after their interests. My hon. Friend has had meetings with my right hon. Friend the Secretary of State for Industry. A great effort was made to retain a private steel industry. Every effort was made to ensure that the phoenix operation should succeed. Unfortunately, it did not. I would not wish to say anything to discourage my hon. Friend in his efforts to revive the possibility of a private sector steel operation in his constituency. I am sorry that I cannot say anything to encourage him, but I am sure that he has sufficient determination to ensure that every effort is made to succeed.
My hon. Friends the Members for Edinburgh, South (Mr. Ancram) and Flint, West (Sir A. Meyer) and the hon. Member for Stirling, Falkirk and Grangemouth referred to Ravenscraig. My right hon. Friend the Secretary of State for Scotland and I are exceedingly concerned about the future of that plant. We recognise that it has disadvantages, but, as Mr. MacGregor made clear during his visit to Glasgow last Friday, it also has important advantage.
Ravenscraig's main disadvantage is its location, particularly in relation to its ore terminal. We cannot move Hunterston to Motherwell, but I am glad to say that British Rail and the local BSC management are taking a fresh look at charges for the movement of iron ore. I hope that that will lead to an early reduction in Ravenscraig's costs.
Ravenscraig has, in recent years, lost a good deal of its market for strip products in Scotland, but it would be wrong to regard the plant as serving only the Scottish market. It also serves markets throughout the North of England. For example, a significant proportion of its output goes to the Ford plant at Halewood. Nearly 70 per cent. of its output goes to markets in Scotland and the North of England, which the plant is well placed to serve.
During the past year or two, Ravenscraig's productivity record has been compared unfavourably with that at the other strip mills at Llanwern and Port Talbot. However, it is important to recognise that the "slimline" process was introduced later at Ravenscraig and that earlier this year, when loading was still satisfactory, as the hon. Member for Motherwell and Wishaw (Dr. Bray) mentioned, the plant achieved productivity levels that matched those of the plants in South Wales.
§ Mr. Fletcher
I am afraid that I cannot. I am short of time.
Having commented on Ravenscraig's disadvantages, it is only right that I should refer briefly to its advantages. They include its ability to produce the types of high quality steel that are increasingly in demand. Over 80 per cent. of Ravenscraig's output is produced by continuous casting processes, and Concast steel is gaining an increasing share of the market and is increasingly being demanded by customers.
The plant also has a multi-product role producing slab for plate as well as strip. Most of the slab now goes to the Dalyell plate mill, which is one of the most modern in Europe, with an ability to process very wide plate for the North Sea oil industry and plate of great thickness for defence purposes such as Chieftain tanks and nuclear submarine hulls being built at Barrow-in-Furness.
My hon. Friend the Member for Edinburgh, South asked whether inward investment would be damaged if 370 Scotland lost the ability to produce steel. The answer must be "Yes". Scotland has a highly integrated economy in which the steel industry plays an important part.
All those factors which the Government are taking into account in considering the BSC's proposals for its major plants are not in any way being overlooked. As the chairman of the corporation made clear again in Glasgow last Friday, until each plant in the corporation achieves and sustains productivity levels equal to those of our international competitors, there can be no such thing as a safe plant or a safe job in the British steel industry.
As to the review of major plant configuration that the Government are carrying out with the BSC, I promise the House and my hon. Friend the Member for Edinburgh, South, who raised the matter, that we shall not take hasty decisions that are based only on short-term factors.
We want a sound steel industry in the United Kingdom. We are examining all the possibilities with Mr. MacGregor just as carefully as we can. We hope that the Government and the corporation will be able to announce our plans in the next few weeks, but we shall not sacrifice thoroughness for speed.
I remind the House that, with the best will in the world, the British steel industry cannot be saved by decree. The Government are fully prepared to play their part in the difficult circumstances that face the industry today, but the future of steel manufacturing in Britain lies firmly in the hands of those who manage, produce and sell the industry's products.
There is no reason why British steel should not be as competitive as that produced in any other country. If everyone who is employed in the industry accepts that challenge and if that is fully reflected in their actions, they need have no fears for the future.
My hon. Friend the Member for New Forest (Mr. McNair-Wilson) was right to remind the House that projections of demand or capacity that are based on theoretical political considerations rather than practical market projections are, by definition, almost bound to be wildly inaccurate. I do not wish to tread on anyone's toes at this late hour, but several former Ministers from more than one party, in their enthusiasm for their responsibilities, have tended to explode the assessments of the demand that would be present for British steel.
That applies to every other industry as well. That is why our privatisation programme is so important. The sooner industries compile their own projections and are left to their own devices to do so, the sooner we shall have a better and happier state of affairs in industry in the United Kingdom. Viscount Davignon has made and is making a great effort to bring demand and capacity into line in the EC.
My hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller) said that there must be a recognised basis for competition between the BSC and the private sector. That problem is bound to persist when we have a dominant nationalised industry in the domestic market, not merely in steel but in ship repair, oil platforms and other industries.
Complaints do not come only from management and shareholders. In my experience in the private sector, complaints come from workers and shop stewards who feel the consequences of what they describe as unfair competition from nationalised industries.
The hon. Member for Motherwell and Wishaw made quite an issue about capacity in the steel industry. It is time 371 to dispel myths about the inadequacy of the steel capacity in the United Kingdom to meet an upturn in demand. The facts speak for themselves. In 1981, the BSC produced 13.6 million tonnes of liquid steel using plant with an installed capacity of 21.3 million tonnes a year. In recent months, output has fallen to an annual rate of about 10 million tonnes. Similarly, the private sector produced 2.4 million tonnes in 1981 from an installed capacity of 4.7 million tonnes. Total installed capacity in the United Kingdom of 26 million tonnes thus compares with actual production in 1981 of 16 million tonnes. It clearly leaves a wide margin of flexibility in circumstances where even the most optimistic of recent forecasts prepared by the tripartite iron and steel sector working party shows that United Kingdom steel demand is unlikely to exceed 18 million tonnes—
§ It being Twelve o'clock, Mr. Speaker interrupted the proceedings, and the Motion for the Adjournment of the House lapsed, without Question put.