§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Garel-Jones.]11.42 pm
§ Mr. John G. Blackburn (Dudley, West)
I rise for the fourth time in two weeks to bring to the attention of the House the critical position in my constituency relating to the proposed closure of the Round Oak steelworks. With all the power and dedication at my command, I represent my people in order, yet again, to present a case for the retention of the steelworks.
These steelworks have been a vital and profitable part of the private sector of the steel industry for the last 124 years. Responsible representations have been made to the chairman of the British Steel Corporation, the Secretary of State, and the Minister of State by trade unions—it would be improper for me to mention that they are represented tonight— the Dudley metropolitan council, led by the mayor, the West Midlands county council and myself.
Documented evidence of a high order has been supplied in support of the case which, yet again, I outline to the House. The plant is one of the most modern in Europe. The British Steel Corporation would be proud to achieve 26 per cent. of its production by continuous casting in order to keep plants based on the ingot route open. If Mr. MacGregor had suggested such a closure to the Governments of either Germany or Japan he would have been laughed all the way back across the Pacific.
Industrial relations are a model for the industry. The trade unions have co-operated fully in the reduction of the work force from about 3,000 to 1,286 in three years. Even against that background, they are prepared to reduce the work force by a further figure to 900, with completely flexible working systems. These systems earned the highest praise from the chairman of the British Steel Corporation when he recently visited the works.
The plant is probably the only steel producing plant that is capable of being profitable on 55 per cent. capacity. In essence, it is all that is good about a steelworks. It is all that the Government have sought. I state, with humility, that I am proud to be associated with the works, the largest employer in my constituency. I object in the strongest possible terms to the closure notice, both the manner in which it was handled without consultation and the time element of five weeks. With other closures, such as Corby, there has been up to a year's notice. The matter merits the most thorough investigation. It is nothing short of a disgrace.
There are three basic reasons for the retention of the steelworks. The facts that I present cannot be challenged. In financial terms, the works are viable. I am able to report that a completely independent assessment of the financial structure has been completed this very day with the aid of the best computer. Recent trials have pointed to such a high quality of product that an annual order for 50,000 tonnes is waiting to be secured as second supplier to BSC Cumbria at Workington. With all the power at my command, I seek the assurance from BSC that the order will be placed with Round Oak steelworks.
I have documentary evidence that local steel consumers are waiting to place orders of up to 1,000 tonnes a week. These are not being accepted. I have irrefutable evidence that failure to accept the orders will result in just what we 1085 do not want—imports. The exchange rate has fallen by 4 per cent., making the exports of the company even more competitive. It has to be borne in mind that the company holds the Queen's Award for export achievement. I am delighted that the firm is situated in my constituency.
I applaud without question the reduction of 12½ per cent. secured by the Secretary of State in steel imports from third countries. There is extra capacity that can be produced by United Kingdom manufacturers. Round Oak is at the heart of the engineering industry. It produces high quality engineering steel. It is on the record that, for the last three years, hon. Members on both sides have given active and financial support to British Leyland for the production of the LC10 car. I pay a warm and generous tribute to my hon. Friend the Under-Secretary of State, who will be replying to the debate, for the prominent role that he played as a Back Bencher in seeing that work on the LC10 went ahead. It is now a reality. The components for the car should be manufactured in the West Midlands, in the heart of the Black Country. And here is the steelworks, specialising in the steel required to supply this venture.
The social impact of the closure of the black country—not simply the constituency that I have the honour to serve—would be devastating. Unemployment is growing more rapidly here than in Scotland, the North-East or Merseyside. That aspect has been well documented and presented to the Secretary of State by the Dudley local authority. I pay warm tributes to the mayor of the borough, who has been active in all these matters, and to the chief executive, Mr. John Mulvehill, to whom I owe a personal debt. They receive from me the highest possible commendation.
The third aspect to which I wish to draw attention is something which, in the final analysis, must be held very dear—certainly to me. It is the political philosophy of the proposed closure of the steelworks. I demand from the Government a renewal of the covenant which was made in 1981, and to which I was an enthusiastic subscriber, that Round Oak steelworks, having had its natural habitat for 124 years in the private sector, should be returned to the private sector. It was to be the king-pin of phoenix 2. I went into the Lobby, secure in the fact that there would be a phoenix 2, that there would be a private sector, and that it would compete equally and fairly with the giant British Steel Corporation. The private sector is part of my fundamental philosophy and that of my party. How can there be a private sector when the House was told last week that every tonne of steel that is produced by BSC carries a subsidy of £88?
I find it morally and politically offensive that a Government should condone the proposition that the British Steel Corporation should be allowed to use public money in its attempt to close the private steelworks at Manchester, using £16 million to put 900 men out of work. That is the confusion of the slaughterhouse, with the logic of the madhouse, supported by the assets of the poorhouse. The British Steel Corporation is financially bankrupt. It is the will of the House that we go through the Lobbies to write off millions of pounds again.
It is manifestly clear that a similar situation now applies at Round Oak steelworks, and I shall defend those steelworks tonight. The share capital of that company was purchased with public money. Although the time scale is 1086 a little longer, the situation is the same—the purchase of Round Oak with the intention of closing it and removing a competitor.
§ Mr. Blackburn
My hon. Friend knows the area well, and knows the Black Country. He is correct when he says that Round Oak is too efficient. It is the most efficient modern steel plant in the country. I am grateful to my hon. Friend for his intervention.
By the grace of God I shall display all the courage and dedication that is required to oppose the closure. I shall do it in a most reasonable and responsible way, which I pray will be the hallmark of my service in the House.
It is a matter of considerable concern that this company could be closed within five weeks of receiving the notice. I am able to tell the House that, because of the wealth of good will that has been extended to Round Oak steelworks, the highest and most knowledgeable authority in the country in connection with the administration of the steel industry is being commissioned to produce an independent report on Round Oak. I have already said that an independent financial report is being produced. Tomorrow at 2 o'clock I shall have it in my hands. It will be no surprise to the House to learn that the first person to whom it will go will be the Secretary of State for Industry, who is represented by his junior Minister tonight.
On behalf of the fine workers of Round Oak steelworks and the people of Dudley, and to protect the political integrity of the Government, I look to Ministers on the Treasury Bench. I ask that they take note of the fact that an independent assessment of the financial structure has been completed. I invite the Minister to take note of the fact that the highest authority in the land is being commissioned to do an independent inquiry into the viability of the steelworks. I know that the steelworks are viable. I could never stand by and see my workers taken out of employment when I know, and in the soberness of the House we all know, that they are fine men producing a fine product in demand. They do it very well and very competitively. I pay tribute to them.
It is in that spirit that I commend to the House the proposal that in no circumstances must Round. Oak steelworks close. It is financially viable. It has an order book. It has a superb work force and a reputation which has been built up solidly for 124 years. I give due notice—I do not say this in a sense of bravado, but out of a sense of affection for my people—that I cannot and will not stand by and watch this dark day dawn.
§ The Under-Secretary of State for Industry (Mr. John Butcher)
I commend my hon. Friend the Member for Dudley, West (Mr. Blackburn) on the most diligent and vigorous way in which he has presented his case both tonight and on previous occasions. He has pursued his constituents' interests most energetically and sincerely in seeking out my hon. Friend the Minister of State and my right hon. Friend the Secretary of State on several occasions. Last week he led a deputation from the Round Oak works, the Dudley district council and the West Midlands county council to see my right hon. Friend. I know that he has the wholehearted support for his efforts from all those involved with the Round Oak works, with which he himself has been so closely involved over several years. 1087 As the Member for Coventry, South-West, I share my hon. Friend's concern about what is happening in the west midlands. Traditionally it is an area of great prosperity with low levels of unemployment by comparison with other parts of the country. Because of this, the present hardships are even more difficult to understand and to come to terms with. The announcement of the ending of steelmaking is a sad blow to the West Midlands. I join my hon. Friend in his concern for the work-force, and their families, faced with this closure.
The steel industry currently faces appalling problems. We heard of many of them in the course of the steel debate in the House only last week and many suggestions were put forward to improve matters. I remind the House of some of the key issues which are at the roots of the problem. Essentially there remains too much capacity to meet fewer and fewer orders.
The British Steel Corporation has more than twice the capacity of its current production of 10 million tonnes of liquid steel. On even the most optimistic of medium-term forecasts, steel demand is not expected to approach anything like those levels. This is a world-wide problem, but one that is particularly acute in Europe and in the United Kingdom. The solution to our problems is closely bound up with the measures being taken in Europe. We have fully supported the regime to cut capacity and phase out subsidies by 1985. This means further cuts in capacity and some of them will, I am afraid, affect modem steel plants.
The rules on pricing, production and imports from third countries are all being tightened and we welcome that. Those latter measures are essentially short-term palliatives designed to give industry a breathing space in which to adapt to the necessary structural changes.
For a time those measures brought some relief, but from the spring of this year the position has again deteriorated seriously. BSC's recently announced half-year losses of £154 million bear witness to the extent of this deterioration. Losses on this scale cannot continue and the corporation has therefore acted urgently to reduce them. It has been explained on previous occasions to the House that the Government, with the corporation, is undertaking a review of BSC's five major integrated works. However, other measures to cut costs, involving further redundancies and closures of smaller plants, are a matter for BSC's judgment and do not require authorisation by the Government. The decision to close Round Oak has fallen into this latter category.
Round Oak, as my hon. Friend said, has been a private sector firm for over 100 years. Since nationalisation in 1967, it has been jointly owned by Tube Investments Ltd. and BSC. Its principal function was to supply tube rounds to TI. By late 1980, along with most of the companies making engineering steel, it was sustaining heavy losses. Here again the problem was one of serious over-capacity, and so discussions about rationalisation within the sector began. These discussions were codenamed Phoenix II. The objective was a viable joint venture, private sector company. At the outset there were five or six possible participants operating at several locations in the United Kingdom and with a combined capacity of around 4.5 million tonnes. There was general agreement at the time that only some 2.3 million to 2.8 million tonnes was required.
1088 By early 1981, Round Oak was in serious difficulties and the Government therefore authorised BSC to buy out TI's shareholding, in order to prevent the company from going into receivership. The clear intention was that the Round Oak plant would form part of the Phoenix II company. As we know, the discussions between the principal parties, BSC and GKN, have not produced any firm proposals. Sadly, no Phoenix II company has materialised.
Meanwhile, demand for steel products has dropped below even last year's levels—in engineering steels, demand this year is 20 per cent. below BSC's expectations. Further reductions in capacity are inevitable. BSC has therefore acted to close Round Oak, involving 1,286 job losses and at the same time has announced 1,700 further job losses at it plants in Sheffield and Rotherham, together with the closure of an electric arc furnace. Those are serious measures, but BSC's situation is serious and the corporation needs urgently to cut its costs to restore its financial and commercial position.
These measures will still leave BSC with almost 2 million tonnes of engineering steels capacity. Nor must we forget the rest of the private sector, which has currently over 600,000 tonnes in addition. United Kingdom demand for engineering steels totals 1.7 million tonnes and this is not forecast to show any significant improvement in the next two years. An increase in demand of 50 per cent. can thus be met without the Round Oak capacity of 360,000 tonnes and without increasing imports.
I turn more closely to the capability of the Round Oak works and the decision by BSC to close it. It has been made clear that that decision is a BSC management decision, and not one in which the Government would seek to influence or question the corporation's commercial judgment. I understand, however, that although it is agreed that the works is modern and flexible with concast facilities, there are now cheaper means in BSC and the private sector in the United Kingdom for producing the tube rounds which gave the works its traditional order book. That is a development that has also taken place abroad. In addition, orders for tube rounds have now dropped to a very low level.
The plan put forward by the work force involves a breathing space of 12 months in which to allow Round Oak to re-establish its market base. But as I have just explained, BSC believes that tube rounds can be produced more cheaply elsewhere and these alternative facilities are not expected to be fully loaded next year. In engineering steels, Round Oak would be competing against other BSC works and the private sector where both BSC and GKN have recently announced redundancies reflecting reduced demand and over-capacity for those products.
The more favourable exchange rate has only restored the position in Europe, where the overall market is more competitive than last year. Demand in the United States of America is low and the quota arrangements inhibit any significant improvement. Elsewhere in the world, business is to be had only at a very low price, requiring the lowest cost process routes to be used.
Unfortunately, reducing the work force to 900 does not remove the underlying problem of excess steel making capacity, nor can it compensate for the very low level of the Round Oak order book. The works is not viable at the 4,000 tonnes per week level suggested. I understand that the order of 1,000 tonnes referred to is a single order for 1,000 tonnes of steel made very recently after the closure 1089 announcement, and is not a regular order for 1,000 tonnes per week. However, I listened carefully to what my hon. Friend had to say and I am sure that that will enter into the Secretary of State's consideration of the paper that he recently put forward at the Department of Industry.
This closure has been presented as a departure from our political philosophy of promoting the cause of the private sector of industry. It is true that in the Phoenix II case things have not gone well and that the lengthy discussions between BSC and GKN have not produced a new joint venture company, but this was always a particularly difficult sector in which to seek success. With Phoenix I and Phoenix III we have been more successful. Last year, Allied Steel and Wire was set up, merging certain of the rod and bar interests of BSC and GKN. Rationalisation has also taken place in the heavy forgings area with the recent birth of Sheffield Forgemasters, a joint venture between BSC and Johnson and Firth Brown.
The paramount problem in the private sector is also one of over-capacity and the only way forward is for the industry to rationalise its resources. In order to assist this process, the Government originally offered £22 million under the private sector steel scheme and that has recently been increased to £34 million. One part of the scheme offers assistance to self-help levy schemes. Hon. Members will no doubt have seen references in last Sunday's press to major proposals for such schemes for the steel castings industry, and a similiar scheme was announced last week for wire drawers. They have the double attraction of ensuring a sector-wide approach to rationalisation, largely funded by the industry, and of ensuring that it is the industry as a whole—and not Government—that decides which companies are to close and which are to remain in business.
My hon. Friend referred to the proposal for a scheme for the wire rod and rebar sector. The compensation that was to have been given to Manchester Steel was, I stress, 1090 to be funded not only by BSC but by other private sector producers. Indeed, it was a prime condition of the Government's support that that was so. As my hon. Friend knows, that particular proposal has now been dropped.
My hon. Friend and I share a common interest in the well-being of the West Midlands. He and I have fought this corner together in the past. I listened carefully to my hon. Friend and I am aware that he has put in a very strong and tightly reasoned report to my right hon. Friend the Secretary of State, who is considering it. I assure my hon. Friend that his report, and the representations that he has often made, will be treated very seriously. I know that he has a promise from the Secretary of State that we shall respond to those representations as soon as we can.
My hon. Friend has been pugnacious in defence of his constituents' interests and in the interests of the Round Oak steelworks. I am sure that he can detect almost envy on my part because I am standing here and he is standing there on this occasion. That envy may not be reciprocated, given my hon. Friend's obvious affection for and faith in his constituents. He has shown that faith and I hope that, when we come to respond, we shall show that we have taken his position seriously.
My hon. Friend talked, rightly, about integrity. He has shown integrity in the way that he pursues his aims to preserve the Round Oak steelworks. We shall try to respond with equal integrity, because my hon. Friend's case justifies that.
I know well the people of the Black Country—those who live in Netherton, near Conuygre road and in Tipton. They are tough, warm and hardworking people and for their sake we should treat seriously my hon Friend's requests.
§ Question put and agreed to.
§ Adjourned accordingly at twelve minutes past Twelve o'clock.