HC Deb 22 November 1982 vol 32 cc587-95 3.44 pm
The Secretary of State for Industry (Mr. Patrick Jenkin)

With permission, Mr. Speaker, I should like to make a statement on last Thursday's European Community discussions on steel.

Since my statement on 22 October, I have had talks on steel individually with my German and French colleagues, and further talks with the Commission—Vice-Presidents Davignon and Ortoli—and on Thursday I attended the informal meeting of Community Industry Ministers in Denmark. These meetings have taken place at a time of deepening crisis in the steel industries in this country, in the rest of the European Community and indeed in the whole of the industrialised world.

At the informal meeting in Denmark, the Commission stressed the seriousness of the forecast in its document "General Objectives for Steel", 1985, that the surplus steel-making capacity in the Community, already evident in 1980, will be even greater in 1985 with capacity for finished steel products exceeding forecast demand by nearly 50 million tonnes per year.

I stressed to my Community colleagues that the United Kingdom had done and was doing its part to reduce excess capacity and become competitive. I said that I could not and would not defend a situation in which our capacity cuts were not matched by other member States. If the Community's steel industries were to be restored to health, all Governments must pull together, and be seen to be doing so. This position was fully shared by eight of our nine partners. However, the Italian Minister expressed misgivings. I made it clear to the Commission that there must be no certificates of exemption in its administration of the State aids decision of August 1981.

I also drew attention once again to the increasing instability of steel prices in the Community and to the widespread allegations of abuse or evasion of the rules. I called for more effective policing of the price and quota rules; member State should be ready to assist the Commission in this task.

I am pleased to say that Vice-President Davignon outlined a battery of measures which the Commission is considering urgently in order to try to restore price stability and to improve the enforcement of the rules throughout the Community. It is the intention that formal commission proposals on these matters will be made in the next few days. These are important moves which will, I hope, tackle the problem of unfairly low-priced imports from other member States.

On imports from third countries, I repeated the Government's calls for a toughening of the voluntary restraint arrangements to be renegotiated for 1983, as regards both overall quantities and provisions to avoid disruptive surges in imports. The negotiating mandate has today been agreed at the Foreign Affairs Council in Brussels, in a way that meets our principal concerns.

I also stressed the Government's concern about the level of United Kingdom imports from other member States of high-speed and tool steels, which has particularly affected the Sheffield-based industry. I have drawn the attention of all my Community colleagues to the need for action to deal with these problems. Vice-President Davignon's response was helpful in that he asked all member States to examine the technical issues urgently. an essential first step is to extend the list of products covered by the Treaty of Paris.

Finally, I expressed concern about the recently announced decision of the President of the United States to open proceedings under section 201 of the Trade Act against imports of certain special steels from the European Community. I stressed the importance of seeking to resolve this issue speedily. Vice-President Davignon agreed that a Community position was urgently required. The meeting in Denmark made useful progress in tackling the problems faced by the steel industry and should help to improve the outlook for British steel producers, in both the public and the private sector. In particular, the effectiveness of the Community steel policy will be an essential element in the discussions that I am having with the chairman of the British Steel Corporation about the corporation's future strategy.

This is not the occasion to discuss BSC's future in detail, if only because I have little to add to what I said on this subject on 9 November. My purpose, and that of the BSC, is to reach sensible decisions aimed at putting the corporation back on to the path to profitability while at the same time ensuring that it retains the capacity to respond readily to the likely level of demand from customers over the next few years.

I still hope to be able to report to the House before Christmas.

Mr. Stanley Orme (Salford, West)

The Secretary of State's statement says nothing new about safeguards for the British steel industry, the future of which now hangs in the balance. In the past week, while the Secretary of State was discussing the matter in Europe, closures were announced at Craigneuk in Motherwell, with the loss of 427 jobs, and at the Round Oak plant at Dudley, with the loss of 1,286 jobs. Therefore, in the past week alone, over 1,700 steel workers have been made redundant and there has been no statement to the House on this issue.

Against this, would the Secretary of State agree that the Government have allowed manpower reductions to be overwhelmingly borne by this country? In 1981–82 the rate of change in the United Kingdom was minus 14.1 per cent., while in West Germany it was minus 5.1 per cent., in France minus 2.8 per cent., and in Italy minus 2.6 per cent. Is the Secretary of State prepared to allow this trend to continue? Will he tell the House whether our main competitors in the EC will restrict their exports into the United Kingdom? These exports are now over two thirds of our total steel imports, and our industry cannot bear them.

Has the Secretary of State agreed on the need for the most stringent round of steel plant closures undertaken by the EC, as reported in the financial press? What agreement has been reached on pricing policy, and what effect will this have on the United Kingdom?

In today's statement the Secretary of State kept saying that he hoped that something or other would happen, and that he hoped that the EC would do this or that. When will he take action instead of hoping? Will he explain further what will happen about imports from third countries into Europe? No positive action is proposed in the statement.

This statement makes it more imperative than ever that the Government protect our domestic industry. Therefore, will the Secretary of State give an assurance that he will not allow EC pressure to force another major closure of any of the five large units, and that the Government will extend further finance to maintain our industry, irrespective of the EC?

Is not this new round of discussions on the steel crisis an admission that existing EC agreements on capacity reductions, production quotas and prices have broken down? What guarantee has the British steel industry that any new agreement will work more effectively?

This statement is full of hope, but we want action from the Government.

Mr. Jenkin

I am sure that the right hon. Member for Salford, West (Mr. Orme) recognises that last Thursday's meeting was an informal one to enable an exchange of views. It was not a full Council of the Community and therefore had no power to take decisions. This is a useful statement because the views of the nine of us who agreed with the general thrust of the Commission's proposals has strengthened its hand in ensuring that which is the central burden of the right hon. Gentleman's question, and which I have made clear—that this country will not make all the sacrifices alone. We have said before and I said it again in the statement, that I could no longer defend a position where we were the only country cutting capacity.

The right hon. Gentleman asked about major closures. However, I cannot at this stage give any further statement to the House on the progress of my discussions with the British Steel Corporation. I said that I hoped to be able to make a statement before Christmas.

Mr. Dennis Skinner (Bolsover)

Before the Queen's Park by-election.

Mr. Jenkin

I continue to hope that that will be the case.

It is not simply a question of doing these things out of deference to the Community. The British steel industry needs to be competitive and to be able to pay its way in the world. The British Steel Corporation needs to be returned to viability. That is the background to the discussions that we are having.

In relation to that, I remind the right hon. Gentleman what I said in my previous statement to the House on this subject. That is that it is the function of the board of the BSC under its chairman Mr. MacGregor to continue to take the steps that are necessary to restore the corporation to viability. I made it clear that I would not stand in the way of changes that the corporation wished to make, whether the changes involved reduction in capacity, as long as it is not a question of a major closure of one of the five main integrated plants.

The right hon. Gentleman asked me about imports. The meeting on Thursday produced valuable proposals and suggestions from the Commission as to how the Community's regime to control imports can be strengthened. [Interruption.] If the hon. Gentleman will allow me, I am coming to this point.

One has to draw a distinction between imports from the Community and those from outside. With regard to imports from third countries, at the Foreign Affairs Council today a new regime was agreed that would reduce the proportion of trade supplied from outside still further. The figure agreed is now 12½ per cent. below the base line and, in addition, measures were agreed to provide for much more and tighter enforcement of voluntary restraint agreements, in particular to prevent disruptive surges in imports.

Control of imports from Community countries is essentially a question of enforcing and policing the quota regime and the price regime by better policing and more inspectors. For instance, from 1 January 1983 individual countries will have the responsibility for policing prices at which products from steel stockholders will be sold, and we intend to do that.

There will be measures to prevent producers from disobeying the price rules and benefiting from operating aid. There will be procedures to extract from countries that are allegedly exceeding their quotas the fines that they are charged, and there is a battery of other measures. These matters are being discussed urgently in Brussels, and it is hoped that they will firm up the market for steel. Without that there is no hope for a profitable steel industry in Europe.

Several Hon. Members


Mr. Speaker

Order. I remind the House that there are two Supply debates today, both of which are important to the Opposition. Therefore I hope that questions and answers will be brief, so that I can call more hon. Members.

Mr. John G. Blackburn (Dudley, West)

Does my right hon. Friend agree that it is because of the abuse of these arrangements that the Round Oak steelworks is under threat of closure, particularly when we have 40 per cent. imports of steel tubes? Does my right hon. Friend further agree that if the Round Oak steelworks closes, the political philosophy of Phoenix II is finished? Will the three-point survival programme now before his Department, which has the full agreement of the union, receive his urgent attention? Will he assure me that he will receive a deputation from Dudley in the immediate future?

Mr. Jenkin

I have much sympathy with those who work at the Round Oak steelworks. It had been hoped that the Phoenix II arrangement, to which my hon. Friend referred, would lead to a rationalisation of the engineering steels market and production, and that this plant might have been saved. In the event, such an agreement proved to be not possible and the managers of the Round Oak company therefore decided last week that it was not possible for it to continue trading.

I and a number of my colleagues are meeting representatives of the steel unions tomorrow, and we shall listen carefully to what they say. If my hon. Friend asks to bring a delegation from Dudley, either I or one of my Ministers will be very pleased to see it.

Dr. Jeremy Bray (Motherwell and Wishaw)

Is the Minister aware that in the case of Craigneuk works in my constituency where, in his absence, the BSC management announced its proposal to close the bar mill, the BSC management has agreed to reconsider its proposal in the light of representations to be made by both staff and manual employees in the works? Is he aware that the Secretary of State for Scotland has supported their claim for an independent referee? Will the Minister undertake to examine those cases and reserve that decision at least to himself, and not allow it to be taken by BSC in ignorance of the economic assumptions that will be made in the case of the big five?

Mr. Jenkin

Whatever the decisions about the big five are likely to be, it remains a fact that United Kingdom capacity in the production of steel bars far exceeds actual and forseeable demand. It is a fact that the Craigneuk bar mill does not have modern facilities and has been incurring constant losses. As the hon. Gentleman will know, other operations on the site remain in being, saving 350 jobs. I must make it clear that it is the job of the management of the corporation to decide the management's affairs, including the rationalisation of production. The only matter about which the Government have been asked for guidance and on which we shall take joint decisions is if any of the decisions involve the closure of one of the five major integrated works.

Mr. John Grant (Islington, Central)

Will the Secretary of State be more specific and say whether the 1982 EC import quotas have been exceeded by certain East European and Latin American States, and what immediate action—not future proposals—is being taken to deal with that situation? Does he accept that the real cause of the plight of the United Kingdom steel industry is the lack of domestic demand, for which this Government have direct responsibility?

Mr. Jenkin

I do not disagree with the hon. Gentleman when he says that the appalling mistakes of the last decade in our industrial policy have left the customer base for steel in this country much weaker than it need be. That is the heart of the problem of the steel industry in Britain. It is the Government's intention progressively to put that right.

In answer to what the hon. Gentleman said about enforcing the voluntary restraint arrangements, the details that were agreed this morning in the Foreign Affairs Council—of which, no doubt, details will shortly be placed in the Library—will mean a much tighter administration of those arrangements—I stress that they are voluntary arrangements with third countries—and in particular will avoid what has caused so many problems in the past—the surge of imports in the first half of the year, which has caused great difficulties.

Mr. Hal Miller (Bromsgrove and Redditch)

Will my right hon. Friend accept that there is a widespread welcome for his robust defence of British interests and calls for urgent action on this important subject but that there is still concern, in the West Midlands in particular, that there is no commercial basis of competition for independent companies against the State monopoly, BSC, and that the closure of the Round Oak works is bound to lead to an increase in imports because no customers will be tied to a State monopoly supplier?

Mr. Jenkin

As my hon. Friend knows, efforts were made over many months to reach a rationalisation agreement—my hon. Friend the Member for Dudley, West (Mr. Blackburn) referred earlier to the Phoenix II arrangement—which would involve both the British Steel Corporation and the private sector companies in the rationalisation of this sphere of steel production. Unhappily, that did not prove possible.. The negotiations were suspended, with the sad results which were apparent last week, with the closure of Round Oak. I ask my hon. Friend to bear in mind the fact that this Government have made available substantial sums of money to help the private sector to rationalise its production. The original figure was £22 million; that has now been increased to £34 million. We have received a large number of applications for help under the private sector steel scheme, and I am very keen to have a substantial private sector steel industry in this country.

Dr. John Gilbert (Dudley, East)

Is the Minister aware of the wave of deep anger that is spreading across Dudley and the rest of the Black Country at this final end of steelmaking in the part of the country where the industrial revolution began? Does he realise that, with that decision, Dudley has lost, at a stroke, 10 times as many jobs as it gained through his enterprise zone? Does he know that only a couple of months ago the men who have given the company many years of loyal service and harmonious industrial relations were told that their jobs were safe? Does he realise that there have been no discussions with those men about alternative working practices, alternative schemes with fewer redundancies, or possibly a pay freeze? There have been absolutely no discussions. Will he insist that the BSC management has discussions at once?

Mr. Jenkin

I understand that the decision to close the Round Oak plant was on the recommendation of the management of that plant, and it was a recommendation that the British Steel Corporation could not see its way to reject. There is a substantial over-capacity for steel not only in this country but in the whole of Europe. Anyone who does not face that reality deludes himself and deceives those to whom he speaks. I am concerned primarily to see that our partners in the Community play their part in bringing the capacity in the Community into line with the foreseeable demand. That was the main purpose of the talks in Elsinore last week, on which I believe that we shall now see positive action by the Commission.

Sir Anthony Meyer (Flint, West)

If there is to be effective sharing and sacrifice throughout the European Community, is it not essential that closures should be closely monitored and the share-out strictly enforced? Is it therefore appropriate for those who demand that our partners bear their share of sacrifices to complain that strong authority is needed to enforce this, necessarily involving allegations of interference with sovereignty?

Mr. Jenkin

My hon. Friend will remember that the arrangment that was negotiated and agreed in the Community was that all aids should be notified by the end of September this year, that they should be phased out by the end of 1984, that there should be no further State aids after that, and that those seeking to give State aids to their industries should notify the Commission of the reductions in capacity that they proposed to make. It has been made clear to member States that the reductions in capacity so far notified do not measure up to what is necessary to bring capacity into line with demand. It was acknowledged firmly at the same time that some countries have done a great deal more in this respect than others. Certainly we are one of those "some countries". It is my intention to see that the Commission enforces the rules as firmly as possible on those countries which have not done so.

Mr. Peter Hardy (Rother Valley)

Does the Minister accept that the experience of the past four years does not justify us placing any faith whatever in the Community, and that the Government therefore have the responsibility to ensure that the public and private sectors of the steel industry survive and that, if they do survive and action is taken, the surplus of which he speaks may be much smaller than is now thought? Does he accept that during the first half of this year, and since, the Government received a flow of detailed evidence from the industry, which should receive urgent attention, of cheating by Community countries and others, and that we cannot rely on the Commission to do that for which the Government should take responsibility?

Mr. Jenkin

That was precisely why I made it clear at Elsinore that the Commission should authorise member countries themselves to undertake the policing of the Commission rules, both on adherence to list prices and on the operation of quotas. That proposal is firmly on the table. I have made it clear to the House that Britain must have a viable steel industry both in the public and the private sectors. I hope that the hon. Gentleman accepts my assurance on that.

Mr. Roger Moate (Faversham)

My right hon. Friend said again that he does not intend that Britain should make all the sacrifices, but he did not tell the House of the powers that he has to ensure that we make no further sacrifices if, in the rapidly worsening position, the Commission does not take effective action on overproduction on the Continent, under-pricing and increased Continental imports to the United Kingdom. What contingency plans does my right hon. Friend have in those circumstances?

Mr. Jenkin

If the Community does not adhere to the rules that it has laid down, the arrangement will break down and individual countries will be driven to take in national measures—

Mr. Frank Dobson (Holborn and St. Pancras, South)

They are doing it now.

Mr. Jenkin

—to achieve stability. I cannot stress too strongly how damaging that would be to the European steel industry, of which the British steel industry is part. It would be a most disastrous descent into protectionism and I hope that we can avoid it. That was the intention of Thursday's meeting.

Mr. Roy Hughes (Newport)

In his statement this afternoon, is not the Secretary of State attempting to close the stable door after the horse has bolted, because our steel industry has been decimated whereas in other Western European countries, such as Italy, the industry has expanded in recent years? Can the Secretary of State confirm the statement of my hon. Friend the Member for Ealing, Southall (Mr. Bidwell) that more than two-thirds of imports into Britain come from the Common Market? That does not include motor cars and washing machines, which have such a high steel content. When shall we tell our Common Market partners that enough is enough?

Mr. Jenkin

The hon. Gentleman should realise that the best protection against imports is for our industry to become competitive. If the British steel industry were competitive up to world standards there would be no problem with competition from imports. We could hold our own in Britain and in export markets. Great progress has been made in restoring the British steel industry to competitiveness, but much more must be done.

Several Hon. Members


Mr. Speaker

Order. I propose to call two further hon. Members from each side and then to move to the next statement.

Mr. Kenneth Lewis (Rutland and Stamford)

Is my right hon. Friend aware that Conservative Members appreciate the fact that he told our European partners that we cannot make all the sacrifices because we have already made many? If there is no deal with Europe on this matter, does my right hon. Friend appreciate that the British Steel Corporation must reduce its prices and that there will be a steel price war? The Government must then extend the losses of the corporation, which will threaten to put out of business some private steel manufacturers.

Mr. Jenkin

I agree with every word uttered by my hon. Friend.

Mr. James Tinn (Redcar)

Does the Secretary of State take the view that the long-term size and shape of the steel industry should not be determined only by short-term order book considerations? I am sure that he does. If we wait for effective action from Europe, will the Secretary of State accept the responsibility to ensure that the British steel industry is not subject to further cuts—which, far from being remedial surgery, would prove to be sheer butchery?

Mr. Jenkin

I have already made it clear in the House and elsewhere that it would be wrong to take major decisions about the configuration of steel plants in Britain on the basis of short-term market trends. A matter that we have examined at some length with the British Steel Corporation is the market prospects in the medium term in order to decide what is likely to be the capacity to meet not only the present but future demand. It is vital that we resolve the matter as correctly as we can. No one can wholly foretell the future, but we can do our best.

Mr. Teddy Taylor (Southend, East)

Although I congratulate the Secretary of State on fighting so hard, may I ask whether he does not agree that under the European regime we would need an army of European steel inspectors, with a separate inspector chasing every sale room and tapping every telephone line, if the price regime were to hold up, bearing in mind the fact that there is no interest either to the producer or to the person who buys the steel in revealing the phoney discounting that is going on, and that the Secretary of State knows about? Does ny right hon. Friend realise that in Britain we have cut employment more than the rest of the European Community put together since the Government came to power? Is it not clear that Britain is being taken for a ride?

Mr. Jenkin

No, we are not being taken for a ride and I am sure that my hon. Friend will recognise that the substantial overmanning that became apparent in the British Steel Corporation would have required many job losses, irrespective of market levels.

As to price policing, I remind my hon. Friend that it is in the interests of the producers to maintain a reasonably stable price regime. They have every possible incentive to ensure that it is stable. If we are to quarrel about imports from overseas and to argue that they are dumped, it must be apparent that an anti-dumping action will not stand up if customers can prove that they can buy steel within the Community at those import prices. The matters hang together. If we wish to preserve the restraints on imports from third countries, we must maintain a floor under prices product by product for steel produced and sold within the Community.

Mr. Charles R. Morris (Manchester, Openshaw)

Is the Secretary of State aware that his statement will provoke anger and dismay among steel workers in my constituency? Does he accept that there is a problem with low-cost steel imports from Eastern bloc countries? What justification is there for sacrificing steel jobs in Manchester in order to preserve jobs in Eastern Europe?

Mr. Jenkin

One matter agreed at the Foreign Affairs Council this morning was that the Commission has confirmed its readiness to introduce quotas when problems arise through indirect imports from Eastern Europe. The matter has been deal with firmly.

Dr. John Cunningham (Whitehaven)

Given the serious momentum of the steel crisis, will the Secretary of State assure the House that he will keep it apprised of the discussions that are continuing in Europe? As the Commission proposes during the next three years to close 50 millions tonnes of steel capacity—almost one-third of all steel-making capacity in Europe—will the right hon. Gentleman assure the House now that none of the five major plants in Britain will play any part in that reduction?

Mr. Jenkin

The estimated excess capacity to 1985 was 48 million tonnes. The Commission's proposed reduction is not as large as that but is between 30 million and 35 million tonnes. If we are forced to reach a conclusion that involves the closure of one of the five major integrated plants, that will not be because of Commission rules but because it will be the only way to restore the British Steel Corporation and to give it any hope of viability in the medium term. [An HON. MEMBER: "You are giving an assurance".] I am not. I am making it absolutely clear that those matters are still under study. I shall return to the House when there is anything further to report.

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