HC Deb 01 December 1982 vol 33 cc337-71

Postponed Proceedings on Question, That this House do now adjourn, resumed.

9.7 pm

Mr. Flannery

I am intrigued by the sublime irony of the Government with their plan to join the private and public sectors of industry. It is, of course, a backdoor method of denationalising steel. That is happening in Sheffield, involving the River Don works of the BSC and Firth Brown. I do not know whether it is a trial. It has certainly had many people wondering what is going on. The code name intrigued me. It is called Phoenix I, II, and III.

I took part in the discussions on a Bill that dealt with this issue. The phoenix, I gather, is a mythical bird that rose from the ashes. I can only assume that the Government are intent on creating the ashes for the mythical bird to rise from. The devastation and official vandalism of the industry should be seen by everyone. The damage brought by the Government is massively greater than anything achieved by Hitler in this country.

If anything is more dreadful than vandalism, it is the official, coolly and and coldly planned vandalism that is destroying our industry and putting millions of people out of work. We are in the presence of the most merciless Government that this country has ever had. The workers have been strained to breaking point. It is our duty to inform the Government just how strained to breaking point the working class now is, because, unlike Conservative Members, it does not have dividends coming in from foreign shares. Many of the workers have to live on social security, with all the abuse and insults that they get about that from the Conservative Party.

Workers now have to contend with what is known as the Tebbit Bill. That is law. I have talked to various groups of working people in various unions about that legislation, and they are only just realising what a horrifying thing it is and the blow that it is striking at the trade union movement. It is part of the reason for the collapse of the steel industry, and the fight against it will now begin.

We shall have many winters of discontent if the Conservative Party remains in power. Conservative Members may look smug and pretend that they have done no damage, but they know the terrible devastation that they have caused. They have lost their way. They should try to get back on the rails, because it will be a difficult job for the country, never mind their party, to get back on the rails.

What then should we do? I believe that selective import controls should be imposed immediately. They should deal, in particular, with the Common Market, which is a deadly enemy of this country, and which is in the process of being dealt with in a democratic way by the votes of the people. In particular, there should be import controls on steel from the Common Market. In my view, many in the Tory Party now see the necessity to do that, and only a minority believe in the Common Market.

Secondly, we should immediately halt closures and redundancies. That can be done. An example should be set to industry generally by proving that it can be done. If it is not done, the devastation will be even more terrible.

Thirdly, we should commence reflation of the economy as the only way out. There is no other way. If we do not do that, we will get deeper and deeper into the trough.

Fourthly, we should consign monetarism to the dustbin of history, where it belongs. As I have said, we are in the presence of the most merciless and doctrinaire Government that we have ever had. They make any ultra Left-wing group of Marxists look mild in their dogmatism and doctrinaire approach.

Lastly—but, in fact, first—we should get the Tories out, because that is the only way in which we shall achieve the other four proposals.

9.12 pm
Mr. Patrick McNair-Wilson (New Forest)

Inevitably, a debate on the steel industry—like, perhaps, a debate on the coal industry—is about jobs, and I am not convinced that a debate about jobs will necessarily throw up the correct solutions to the problems of the British steel industry today. I have listened with interest and admiration to those hon. Members who have spoken about their constituency problems. Nevertheless, this debate is about the steel industry, and we must therefore address our minds to the future of that industry.

First, I declare my known interest in the steel industry. I left the privately owned pre-nationalisation industry almost 20 years ago, and I think it can be said with some satisfaction about the days before nationalisation that the production of liquid steel has never been higher since the State started to take an interest in an industry of such vital importance to this country.

There is no optimum size for the British steel industry. Those hon. Members who have talked about the collapse of the British steel industry should one part either be reduced or closed are not facing reality. Targets for industries are always likely to be proved false and can have no effect other than to destroy the morale of those who work in them.

I well remember that when I came to the House in 1964, one of the first actions that the Labour Government took was to reduce the size of the coal industry. The chairman of the National Coal Board at that time, now Lord Robens, made it clear that in his judgment any coal industry below 200 million tonnes would not be viable and would spell the end of the British coal industry. We are far below 200 million tonnes now and we have the most efficient coal industry in Europe.

Those who talk about the end of the British steel industry if another plant closes are not talking sense. They are merely putting fear into those who work in the industry. We must realise that no optimum sized industry exists.

I remember the debates on what is now the Iron and Steel Act 1972, when hon. Members talked about whether 35 million tonnes was enough. What rubbish that all turned out to be. That was based on computer models, extrapolating from experience to create graphs which automatically went up, and it has all been proved to be complete eyewash.

We must recognise that an industry must be run on the basis of the market size and what the industry can hope to perform. Therefore, when hon. Members complain about the possible mothballing of a plant—whether it be a furnace or a whole works—we should not be too jaundiced in our view. After all, the Hunterston direct reduction plant, which was opened and closed by the Labour Government, may, if oil prices world-wide continue to fall and gas prices follow them, once again be a fashionable way to make steel. We do not need to worry about whether Britain will lose its steel industry. It will have a steel industry of the right size to take advantage of existing markets. I am wholly committed—as I am sure my hon. Friends are—to ensuring that Britain continues to have a primary steelmaking capacity. It is a strategic necessity, and I have never heard any Conservative Minister suggest that it should be wound up.

However, having said all that, we must recognise that competition is extremely fierce. It is not fierce in the historical sense, because the problems that the industry is facing today are not new. Anybody who has any knowledge of the steel industry's history will recognise that. What is new is that there are now 76 world producers of steel. I remember going to a small country—Qatar—in the Arabian Gulf about 10 years ago. It has a national population of 150,000 people—not 150,000 people in the capital city. That country now boasts an integrated steel plant. Such countries are not only satisfying their own needs, but are selling into the world market.

When my hon. Friend the Minister of State tells us that we have a capacity for 21 million tonnes but a market of about 10 million tonnes, one can see that that imbalance must be corrected. How will that be done? There are real opportunities for the industry which are being ignored.

First, I acknowledge the work done by Viscount Davignon. He has attempted to bring the European steel industries to a point at which they can survive together. It is not exactly a cartel, but it has been an attempt to provide some sort of price plateau from which they can operate. It is obviously a high-risk policy to try to raise prices during a recession, as has been tried in Britain in recent months. It is reasonable for any business to try to get the best possible price for its products, but we require greater price flexibility from the British Steel Corporation.

My hon. Friend the Minister of State told us of the reply that he has given to a written question from my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) about stockholders. No doubt hon. Members will read the reply in Hansard tomorrow. The fact is—I speak with some experience on the subject—that stockholders who have outlets in both Britain and elsewhere would like to buy and stock British steel, but they require from British Steel prices that are comparable to those that they obtain in other supplying countries.

It is up to the BSC's sales force to match overseas figures where possible. Oportunities are being missed because of an attempt to maintain a price structure and to go for the highest price. There are two options—either to go for the highest price, or to maximise on the capacity available. In the present temporary situation, I should prefer to maximise the available capacity.

What else can be done? The cost of electricity is of special relevance to Sheffield, the home of electric melting. The announcement of a reduction of the work force at Sheffield, about which hon. Members have reminded us during the debate, is disturbing. Sheffield's electric melting shops used to be second to none—perhaps they still are—in their efficiency, but they use a lot of electricity.

My hon. Friend the Minister of State failed to take on board the point made by my hon. Friend the Member for Brigg and Scunthorpe (Mr. Brown). If my hon. Friend the Minister believes that the electricity prices that the British steel industry has to pay are on all fours with those of its competitors, he is not facing facts. I quote part of a letter from a large electricity user in Sheffield, who sets out the difference between the prices charged to him and those paid in other parts of Europe: As bulk electricity users ourselves with a peak demand of 34 megawatts … we are able to directly compare electricity prices with like … plants in France and Italy which for the second half of 1982 are"— these are per kilowatt hour— France 1.12; Italy 2.16; United Kingdom 2.52. It should be noted that in the United Kingdom figure we have full advantage of the new bulk tariff structure. This position is made worse when we learn that our Italian plant is now to take advantage of a state supported scheme for large electricity users which will reduce their price by 50 per cent.!

The reason why no price change has been made, or can be made, without an interruptible content is that the statute prevents it. Therefore, I appeal to my hon. Friend to see whether it is possible, under the terms of the Energy Bill going through Parliament, or in some other way, to alter the statute to enable industries such as steel to be treated differently from everybody else. They should be treated, not on the basis of a furnace that has to be closed down at 10 minutes' notice, but on the basis of enjoying a continuous supply of electricity at a different price. The existing statute forces the CEGB to have an even-handed approach to all customers. Until that statute is revised, talks about making concessions to bulk electricity users will never reach the heart of the problem. I ask the Government seriously to consider the legal obstruction.

Secondly, there are businesses in Sheffield and elsewhere which are paying more in rates than they are making in profit. I am not suggesting that we should start rating agricultural land or buildings—there are some who argue that agriculture is the largest industry in Britain—but if the Government are likely to introduce relief for certain domestic ratepayers, I urge them to treat industrial ratepayers similarly. They are carrying the colossal extra burdens of rates and high electricity charges in addition to the competition problems to which I have referred, and we are doing ourselves an injury which we could well do without.

Thirdly, there are two ports of entry in Italy for steel products. We have heard much about import penetration. I am delighted to hear from my hon. Friend the Minister that the overall figure is 30 per cent. However, if we were able to remove that percentage altogether, the industry's problems would vanish at a stroke. If we try to sell British steel in Italy, for example, from points other than the two ports of entry, the steel will lie rusting on the quayside. If one tries to sell a video recorder in France and it does not go through Poitiers, which is in the middle of France, one cannot get it into the country at all.

Fourthly, if that is what European co-operation is all about, we, too, will have to play the game or face being destroyed by those who are playing it. The suggestions in the written answer to my hon. Friend the Member for Selly Oak about stockholders is merely evidence of the same problem all over again. It seems that we are creating a web of controls which will be applied and understood by the British steel maker or stockholder and ignored by the competition overseas, be it in Europe or anywhere else. The time has come to ascertain from Europe whether we can get even-handed treatment, and if not, to start playing the competition at the competition's game. If we do that, the four items that I have mentioned will lead to a positive sales pitch for the industry.

Morale in the British steel industry is extremely low. That is because those in the industry wrongly believe that no one in the Government is interested in the industry's problems. However, problems such as the one that I have mentioned about electricity charges, which have been hammered at Ministers ever since 1979, appear always to be brushed aside. I ask that my four proposals concerning rates, electricity, points of entry and a flexible sales approach by BSC are implemented immediately, to try to correct some of the grave problems that now face British Steel.

9.30 pm
Mr. Bill Homewood (Kettering)

I am glad to follow the hon. Member for New Forest (Mr. McNair-Wilson) because in some respects some of his arguments run parallel to what I wish to say.

I am puzzled by the fact that when the Government discuss unemployment they consistently talk of competitiveness. They believe that if competitiveness in industry—steel or any other industry—can be increased, there will be no problem in arresting the decline in employment opportunities—indeed, increasing them. I am suspicious of that theory because of the state of the steel industry.

Over the past three years there has been an enormous increase in steel production. We have lost 112,000 jobs, but no one now disputes that our productivity is equal to—indeed surpasses—most of the productivity levels in Western Europe and the Common Market.

Only two factors are involved in price competitiveness: first, the level of productivity and, secondly, wage costs. If those factors are favourable to an economy, it should have no difficulty in rebutting imports and its export industry should have an enormous advantage. Productivity in Britain is equal to the rest of Western Europe. Wage costs, as everyone knows, are lower than in most Western European countries, but we are still unable to cope with the import menace. Over the past seven months, imports into Britain from the EC have increased by about 48 per cent. I have come to the conclusion that something is wrong, although Ministers have denied it in every steel debate in which I have taken part. The hon. Member for New Forest touched on most of those points.

We have told Ministers time and again that our competitiveness must have been eroded by energy costs, transport costs or even by Government intervention in the steel industry. Only electricity costs were quoted in detail, but if gas, coal and transport costs were examined, it would be found that our subsidies are almost at the bottom of the league compared with Western Europe.

It is time that Ministers started to believe in the philosophy they preach. They should not imagine that there exists in Europe a perfect competitive market in which everything is equal. There would be if the rules of the game were adhered to. But the rules of the game are not being adhered to and the sufferers are our steel workers. It is no use hon. Members saying to me now, as they were able to say three years ago, that our industry is overmanned and underemployed and that steel workers do not work hard enough. That is no longer true. Yet we are still suffering from the burden of unfair competition—we should be leading the race—because of factors outside the control of the workers and management of the British Steel Corporation.

I shall repeat figures which were given this afternoon because Ministers constantly ignore them in their negotiations within the EC. In the past three years we have shed 33 per cent. of our productive capacity. The only EC country that has shed anywhere near that amount is France, which has shed 15 per cent. West Germany has shed 5 per cent. Italy, as has been stressed virtually all afternoon, has increased its productive capacity and is laying down a new integrated plant which will further increase its productive capacity. We do not mind being competitive, provided that the rules are fair, and it is up to the Government to ensure that they are fair. The British steel worker is sick and tired of being told that he must lose his job, because he knows that there is no equity in the system.

The hon. Member for Dudley, West (Mr. Blackburn) spoke about the Round Oak steelworks. I know more about the Round Oak steelworks than that hon. Gentleman—I am not boasting—because I dealt with it for about 10 years. Indeed, I negotiated all the job reductions when the new plant and capacity were installed. It is one of the most modern steelworks in Europe. Capital equipment for that plant cost £25 million. It replaced its open arc furnaces with electric arcs and put in a new 850mm reduction mill. It is probably the most efficient plant in the United Kingdom in terms of its particular type of output. Nevertheless, that plant is going to the wall. The reason is that the name of the game is not fair trade. It is being subjected to unfair competition from the EC, and that is unjust.

About four weeks ago I had a meeting with top management in Corby. I was told that another 600 jobs were to go at the tube works. Yet that is one of the most modern mills in Europe. It was built about three years ago at a cost of £50 million. The only mill like it in Europe is in Italy.

That brings me to the second thing that is wrong with the Government's thinking. Supply side economics cannot solve the steel industry's problems, no matter how gently they are infused into British business. If demand is reduced in practically every sector of British business, the steel industry will suffer. The management in Corby made no bones about the problem. We were told that the contraction in the construction and engineering industries and the contraction facing almost all its customers had led to the loss of 600 jobs.

The funny thing is that three years ago the Corby iron and steel works was closed, because it was losing £10 million a year. Now there is only the tube works left. Another 600 jobs are to go because the plant is still losing £10 million a year. The figure is exactly the same. I suppose that we should consider ourselves lucky, because next time £10 million is reached, only two or three jobs will be lost if there is a proportionate reduction in jobs.

It is nonsense to continue to pretend that we shall have a steel industry for ever—no matter what the hon. Member for New Forest may say—if there is no demand for its goods. That is why Opposition Members say that there should be some form of import control. We are entitled to an answer from the Government on that point. If competition were fair, we would not urge import controls. If trade within the EC were equitable, we would not ask for such controls. All the good is on our side. We should slam EC countries to death and expand our steel industry, while theirs declines. However, that is the Ministers' responsibility. We are asking for import controls because it seems to us that that is the only way that we can hold our own with the Common Market's steel industry and producers.

The hon. Member for New Forest said that the number of steel-producing countries had increased enormously. In the past seven or eight years the increase has been from about 33 to 76, but 75 per cent. of our imports come from the Common Market. Third world countries are not helping us. However, they are not damaging our steel industry as much as the Common Market. It is up to Ministers to give us selective import controls against those products to enable us to stabilise our industry until, as the hon. Member for New Forest said, we can adopt the practices that EC countries have used for so long and which have destroyed much of our steel industry.

It does not matter what we do about selective import controls. Unless the Government change their policy with regard to expanding the economy, there will be no future for the British steel industry. It will go down and down. I suggest to the right hon. Member for Taunton (Mr. du Cann) that it does not matter whether the industry is publicly or privately owned. The industry will go down if there is no change in the Government's economic policy.

9.41 pm
Mr. Hal Miller (Bromsgrove and Redditch)

The House is indebted to the hon. Member for Kettering (Mr. Homewood) for his knowledge and experience of the industry and the moderate and constructive way in which he spoke. I share many of his views about fair competition. However, I am not so happy about some of his remarks about production, but I shall endevour to deal with that in my speech. I remind the House that I have an interest to declare in the steel industry. It is sufficiently well known, but it is fair that I should draw it to the attention of the House again.

The debate is alive with the noise of chickens coming home to roost. One of the chickens is undoubtedly the rise in unit costs in our manufacturing industry under the Labour Government, when our unit costs rose by 100 per cent. as opposed to 13 per cent. in Germany, four per cent. in Japan and 35 per cent. in the United States of America. That devastated our manufacturing industry in competition with the products of other countries. It explains largely, but not wholly, the reason why our steel industry had so few customers left to supply.

Since 1979 there have been further reductions in the offtake from our industry by our steel users. As my right hon. Friend the Member for Taunton (Mr. du Cann) said, there was a 30 per cent. reduction in offtake from the motor vehicle industry, 18 per cent. in the construction industry and 15 per cent. in the engineering industry. There has been a total change in the pattern of trade and in the outlets for our industry. We must face up to that fact.

When we talk about user industries, we must realise that they employ a much larger number of people than the steel-producing industries. That is one of my main quarrels with the Government, as I mentioned in my resignation speech in May 1981—a fairly sizeable chicken is coming home to roost there. In that speech, I referred to energy costs, which have rightly been mentioned today by my hon. Friend the Member for New Forest (Mr. McNair-Wilson). I referred to the absence of any proper basis of competition between private industry and the State industry that my right hon. Friend the Member for Taunton (Mr. du Cann) mentioned today. I referred to the need for a national trade policy to ensure that we supported our own industries and that the conditions of trade were fair, equal and open. I also referred to doubts about the European Coal and Steel Community cartel.

I must tell my hon. Friend the Minister openly that my doubts about that cartel have been more than justified. There is no prospect of his maintaining, let alone raising, the price levels in that cartel when there is so much surplus of production and when user industries are unable to raise their prices to their customers.

No drop forger in Britain has been able to increase his price to our motor industry. Our motor industry has not been able to raise its price to the customer. There is literally no room for the steel price to be raised in those circumstances. The cartel is a vain occupation.

I do not know how a Conservative Government—in fairness my hon. Friend the Minister declared his embarrassment—came to be locked into that type of arrangement. It passes belief. Even more astonishing, if that is possible, is that the conditions of that cartel were not seen to be made to operate. We suffered the inequality of reduction in capacity and the inefficacy of the price fixing in our EC partner countries that has led to so much trouble with imports from the EC.

We shall have belatedly to tackle those problems. I make no apology for referring to them again. There must be a recognised and agreed basis of competition between the BSC and the private sector. It is no good the hon. Member for Workington (Mr. Campbell-Savours) arguing, as he did in an intervention earlier, that it was recognised that all the BSC subsidy was spent on restructuring costs. How would the hon. Gentleman explain, for example—the matter touches my right hon. Friend the Member for Taunton as a supplier—the BSC undercutting a private supplier in the West Midlands by £20 a tonne on a price that was previously agreed? That contract had been held for 15 years. The result was a loss of 5,000 tonnes of business by the private supplier. There is no reduction of BSC losses in such a case. Losses are only being added to and a private firm is being put out of business. There is no sense in that. That is part of the industry's structure problem.

I recognise that the Government are faced with an appalling problem when they consider the five major units. But it has already been argued most convincingly that customers will not be tied to the BSC as a monopoly supplier. They are bound to look for steel elsewhere. The more the private sector disappears, the more users of steel will look for it elsewhere. That is why I must question the philosophy behind trying to save the five major units at all costs. It will lead to great inflexibility in production and lack of service to the customer, whereas efficient units such as Round Oak, about which my hon. Friend the Minister is rightly worried, were able to supply effectively, flexibly, locally, rapidly and cheaply. But that company has deliberately been put out of business to save larger BSC plants elsewhere.

I foretold all that in my speech in May 1981. I said that attention should be directed to retaining a unit for the supply of engineering steels in the West Midlands and that the assets and facilities were there for that purpose. But as soon as an attempt was made to put that proposal into operation, the BSC immediately closed the ingot route at Round Oak. There is at present no basis for competition between the private sector and the BSC.

No wonder that there is such a lack of confidence and no possibility of investment. With respect to the Minister, whose efforts on behalf of Round Oak I admire, there is no prospect of private buyers taking over Round Oak unless the conditions for competition between the private sector and the BSC are defined.

My hon. Friend the Member for New Forest has dealt in detail with energy costs, but I should like to tie that subject in with what the hon. Member for Kettering (Mr. Homewood) said. I believe that he accepts that we must be competitive on the same ground rules, but there is no question of the ground rules being the same in respect of energy or trading policies. Industrialists in the West Midlands are becoming sick and tired of being lectured on the need to compete when the Government are responsible for so many of the conditions of competition.

That is why I have tried to be positive, helpful and supportive to the Government by outlining the essential need for a competition policy. There should be freedom of competition inside the country, which means no more discrimination against the West Midlands.—[Interruption.] I shall not be lectured by Labour Members about unemployment. Unemployment in the West Midlands is higher, both absolutely and relatively, than in Scotland. Therefore, I shall listen to no more special pleading from the Celtic fringe on the Labour Benches. We want freedom of competition both inside and outside the country so that we get a fair crack of the whip in trading practices. The Spanish tariff on motor vehicles is an obvious example. Only this morning, eight West Midlands Members went to the Department of Trade to urge such actions.

We are asking that the Government should be seen to be concerned. They should be seen to be standing up in defence of the British national interest. That is what people expect. I support the Government's policies. I wish them to succeed. I believe that their policies are capable of development to ensure that success. But we must be seen to be standing up for the British interest.

We want the same rules of competition to apply to energy, rates, water, telecommunications and so on. We must be able to compete on the same basis.

When the Government deal with this grave situation, they should stick to the principles that they have followed so far. If that decision is to be skewed on political grounds and there is to be a departure from the commercial basis of decision, truly we shall be swept away. The Government have in large measure—and I support them most strongly in this—made it clear to the people of this country that there is no escape from the need to compete internationally. By all means let the Government see that the rules of competition are fair and are observed, but at the end of the day there is no escape. Just as the consumer industries have to compete, so it is no use keeping employment and capacity going in the steel industry if the steel cannot be used. There must be users, so there must be competition and the decisions must be taken on that basis.

If it is perceived that the Government are giving way on their policy and that other, short-term considerations are to come into play, I am afraid that all the hard work and sacrifice of the past three years will be swept away. I understand only too well the regional and other pressures, but I urge the Government to stick to principle arid to uphold the national interest.

9.56 pm
Mr. James Tinn (Redcar)

At the beginning of the speech of the hon. Member for Bromsgrove and Redditch (Mr. Miller), I thought that the Minister could at last sit back and relax and listen to a few kind words from a Conservative Member. By the time the hon. Gentleman concluded his speech, however, he had disabused the Minister and the usual brickbats were flying.

It is significant that not one speech has given firm support to the Government's efforts on behalf of the steel industry. Some hon. Members have expressed appreciation of one or two attempts that the Government are making and expressed confidence that the Minister is doing his best, but no one expressed confidence in what the Government have achieved. The confidence of a few hon. Members in what the Government were likely to achieve thus rang a little hollow.

A few short months ago, no one would have thought that we should so soon be debating steel in such an atmosphere of crisis as we do today. The industry seemed to be set fair on course for recovery, although a very heavy price in jobs had been paid. Productivity was higher than ever and comparable with the best anywhere in the world. The chairman of BSC himself confirmed that. Energy costs—another major bugbear—were being reduced, although more needed to be done in that respect. Finally—and very important—in the larger plants, at least, the industry was running at 95 per cent. of its admittedly savagely cut capacity. Although no one at that time was rash enough to assume that the industry was finally clear of the rough waters through which it had been passing, the ship was answering the helm and making progress. That is not an argument. Those are the plain facts.

Now, however, just a few months later, the situation is transformed. The industry is limping along at only 63 per cent. of its much reduced capacity and productivity has crumpled, not through any failing on the part of the work force but as an inevitable consequence of the lower output. This has happened despite all the efforts of men and management which earlier in the year were showing good results.

I stress the sudden as well as the massive nature of this transformation. I urge the House to remember that we have a heavy responsibility to ensure that nothing is done that will have the effect of throwing away all that has been achieved to safeguard the future of the industry in some reaction caused by the disruption because of the recent massive surge—

It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.

  1. BUSINESS OF THE HOUSE 14,309 words