HC Deb 26 July 1983 vol 46 cc1064-72 4.20 pm
The Secretary of State for Trade and Industry (Mr. Cecil Parkinson)

With permission, Mr. Speaker, I should like to make a statement about yesterday's meeting of the European Community Steel Council.

My hon. Friend the Minister of State and I attended the Council.

The central issue was whether to prolong the arrangements made under article 58 of the European Coal and Steel Community for mandatory production quotas. Ministers agreed that to provide the Community with market stability it was desirable to prolong the quota arrangements to the end of 1985.

The Italian Ministers, however, representing a caretaker Government, felt unable to impose such a long-term, legally binding obligation on future Governments. Because of that, the Council's formal decision was to prolong the arrangements to 31 January 1984, with a unanimous declaration of political intent to agree a further renewal to the end of 1985.

The Ministers accepted the need for member states to use this period of market stability to restructure their steel industries, in accordance with the Commission's decisions of 29 June. Those decisions recognised the British argument that we had made the major contribution to reducing European steel capacity and that it was now the turn of others to match those achievements.

The new production quotas also recognise what the British steel industry has already achieved. Our quota is to be increased by 380,000 tonnes of steel per year, which will benefit both the British Steel Corporation and the private steel companies.

Ministers also agreed to greater flexibility for private producers who face difficulties as a result of severe quotas. That should help our wire rod sector particularly. We also agreed to more effective monitoring and policing of the quota system.

The Commission will apply its price rules more firmly so as to tackle unfairly low-priced imports from other member states.

Another benefit to Britain is that we have been able to safeguard British Steel's exports of heavy steel sections, which might otherwise have been cut down by quotas.

While in Brussels, I raised the Port Talbot investment project with Vice-President Davignon and I am pleased to tell the House that he gave me a categorical assurance that approval for it would be given at the end of this week.

There is little doubt that failure to reach agreement on the quota regime yesterday would have led to damaging uncertainty in the steel market. I believe that the outcome of the Council is a very satisfactory one, which will help both British Steel's progress towards financial viability and our private sector steel industry.

Mr. Stanley Orme (Salford, East)

We welcome the small increase in output quotas announced by the Secretary of State, as we welcome the Port Talbort decision. Nevertheless, it is a pitiful return for the burden that the United Kingdom has borne in cuts, with the loss of 100,000 jobs, or 65 per cent. of the work force, since 1979. The 380,000 tonnes represents only about 4 per cent. of the output lost by British Steel since May 1979.

What can the Secretary of State report about quota changes for the other EC countries? Will he confirm that the gap between output and capacity in Britain is narrower than in any other EC country? Will he also confirm that no British firm has ever been fined under the quota system? Will he assure the House that the quotas will be policed effectively? He said that they would be monitored and policed. How will that be done?

Given the new quotas, will the Secretary of State now guarantee that there will be no more closures or further rundowns in British steel? What is the production forecast for 1983–84, bearing in mind that last year's production figure was the lowest since 1947?

Mr. Parkinson

I thank the right lion. Gentleman for his opening remarks. I agree that the quota of 380,000 tonnes is not so big as that obtained by some other countries, but it is substantial. I should not be breaking a confidence if I said that it is bigger than the industry expected.

I accept that there has been a substantial capacity loss in this country, but other countries will now have to go through the same painful process. A commitment was obtained from all member states for substantial capacity reductions, which will be enforced and without which there will he penalties on the quotas. Our share of those losses was 500,000 tonnes. The highest was 6.8 million tonnes, so some very substantial cuts will now be made by our Community partners. Our partners have committed themselves to those cuts, which will be monitored and must take place.

Our quota changes were at the top of the range. One of the reasons why our quotas were increased was that it was recognised that the British steel industry had made substantial capacity cuts and substantial improvements in productivity.

As to the gap between output and capacity being narrower, that was precisely why the cuts were necessary. British Steel simply could not afford to maintain huge spare capacity indefinitely. The fact that our output and capacity are nearer to each other than those of other countries, which the right hon. Gentleman regards as a criticism, is a sign of progress and of our industry moving closer to viability.

I confirm what the right hon. Gentleman said about no British firm ever having been fined under the quota system.

As to effective policing, the Commission releases the quotas quarterly, so individual states' performances will be measured and the Community will have that information available when it decides the next quota allocation. Member states which do not co-operate can thus be disciplined.

I cannot guarantee that there will be no more closures, but there will be no more closures arising from this agreement. We believe that the additional 500,000 tonnes for which the Community has asked is already provided for. First, we can establish that we have made more closures and have more closed capacity than the Community credits us with. Secondly, the Port Talbot investment envisages a reduction of 160,000 tonnes. Thirdly, there is mothballed capacity which may be taken out. Therefore, no closures should be necessary as a result of the agreement.

Mr. Hal Miller (Bromsgrove)

I congratulate my right hon. Friend the Secretary of State on his robust defence of British interests—; [HON. MEMBERS Robust?"] Yes, robust—;and better than the industry's expectations, if not better than the Opposition's delusions.

I was hoping that my right hon. Friend would say something about the possible end of this cartel system rather than leading us to expect that fixed markets and fixed prices for steel would continue apparently without any end in sight. I do not think that many of us thought that that was what the EC was about.

As for administration, what will happen when further quota measures are taken? Should not the combined quota total be available to the merged company?

Mr. Parkinson

I thank my hon. Friend for his remarks about my robust defence. Opposition Members are keen to compare import penetration in the British market with that in other countries. Import penetration in the steel market of France and Germany is approximately double that in the United Kingdom. We have fought the corner of the British steel industry and will continue to do so.

We expect the regime to run for 2½ years and it will be the last such regime. The industry will be fundamentally restructured during that period. The coin has two sides—;quota increases and capacity reduction. At the end of that period, Europe will have shed approximately 30 million tonnes of surplus steel capacity.

On administration of quotas, I think that my hon. Friend is referring to the small producers such as Glynwed. In that case, two small producers that qualify for exemption because of their size are, when they merge, just above the limit and are therefore penalised. We raised that point with the Commission, which realises its importance. We shall pursue the matter further.

Mr. John Morris (Aberavon)

I welcome the Minister's categorical assurance about the hot strip mill at Port Talbot—;a disaster area of unemployment. The lack of interest by the Welsh Office is shown by the total absence of Welsh Office Ministers from the Treasury Bench.

Will the right hon. Gentleman clarify his remarks about the 160,000 tonnes reduction in capacity? Is there any need to wait for the end of the week, when Parliament will be in recess? How much additional money will it cost since the Government first announced their intention as long ago as last November? Does he understand that those who have campaigned long and hard for the mill will be happy only when there is full, formal approval and the work has begun?

Mr. Parkinson

We must wait until the end of the week because of a Community formality. The proposal has been circulated among the Commissioners, and the closing date for objections is 29 July. There will be no objections, but the formalities must be observed. The actual piece of paper cannot be issued until 29 July. The commitment is clear and specific. The go-ahead can be given and contracts can be signed. I am as pleased as the right hon. and learned Gentleman is about that.

The 160,000 tonnes capacity arises from the change in the process. It is part of the scheme to improve the viability of the mill. Taking out that 160,000 tonnes and modernising the plant will ensure a viable throughput. We expect Port Talbot to become a profitable and modern works.

Sir Anthony Meyer (Clwyd, North-West)

I congratulate my right hon. Friend on the highly successful outcome of the discussions. Can he think of any subject about which the Opposition talk more nonsense than they do on this? Is it not true that the job losses, which we all deplore, were necessary if British Steel was to become competitive? It has little to do with the cartel arrangements that are designed gradually to enable us to reduce capacity without too much pain.

Mr. Parkinson

There is some hypocrisy in the remarks made by Opposition Members. They know full well that, had they been elected in 1979, they would have had to restructure the British steel industry. They know that there was no way in which that huge over-capacity could have been kept down, except at a gigantic and unbearable cost to the taxpayer. The difference between us and the Opposition is that we have the guts to take some difficult decisions, as a result of which British Steel is now one of the most productive steel industries in Europe and has a bright future.

Mr. Donald Coleman (Neath)

I confirm the welcome that south Wales will give the development of Port Talbot, but does the right hon. Gentleman recognise that the rejoicing will not begin until the work has begun? When will it begin? What steps will he take to ensure that the butchering of the British steel industry has come to an end and that the sacrifices that British Steel has made in the interests of European steel requirements are at an end?

Mr. Parkinson

The contracts for Port Talbot can be signed without further delay. That is one reason why we have been pressing the Community. It wants to start the work during the summer shutdown. There is an incentive for the company to get on as quickly as possible.

I did not answer the question about additional costs posed by the right hon. and learned Member for Aberavon (Mr. Morris). To date, they amount to nothing, but had the delay continued, by the end of the year we would have begun to run into a penalty period and the cost would have been £16 million. We are glad that permission is being granted and that the work can start without delay.

The real way to ensure that the British steel industry has a viable future is for it to continue to perform as well as it is now beginning to perform. I hope that everyone in the House is proud that it is now the most productive steel industry in Europe. We can all take pride in that.

Mr. Michael Fallon (Darlington)

Can my right hon. Friend tell the House more about the position of the Italian delegation? Is it still contesting the Commission's cutback figures? What sanctions will the Government support if it continues to do so?

Mr. Parkinson

The Italian delegation did not contest the Commission's figures for capacity reduction. It is a Commission decision and is binding on the Italians. They realise that they will have to reduce capacity. They qualify for aid only if they get on with that job. They accepted that part of the package and did not dispute it. They accepted it on behalf of all the political parties in Italy, and had political cover for doing so. The Italian steel industry will be restructuring itself. It will come forward with specific plans. It needs cash from the Community to do it; that is the incentive to get on with the job.

Mr. Richard Caborn (Sheffield, Central)

During the right hon. Gentleman's discussions with the Community, did he mention the special steel sector in Britain—;something that the British Independent Steel Producers and the trade unions have been arguing about for some time? Is he aware that import penetration in that area, part of which does not fall under the Paris agreement, has risen in the United Kingdom from less than 12 per cent. in 1972 to more than 55 per cent. in 1982? Is he further aware that many redundancies in the Sheffield area have arisen because of that import penetration?

Mr. Parkinson

The Government are aware of the problems of the special steels sector. We raised the matter at the Council of Ministers yesterday and urged that the quota regime be extended to special steels. I am sorry to tell the hon. Gentleman that we were in a minority of one, and that our case was not accepted. However, we are taking action to press the Americans to think again about the quotas which they have imposed on special steels and which are biting on about £11 million-worth of special steel exports. The Community as a whole is seeking compensation from the Americans for that action. We hope that that will lead the Americans to the same conclusion that we reached when we acted in a similar way on synthetic fibres— that the game is not worth the candle. We hope that they will end the special tariff. We are keeping on the pressure because it is one way to help special steels.

Mr. Eldon Griffiths (Bury St. Edmunds)

As my right hon. Friend has brought back good news from Brussels, will he take advantage of the higher quota and the welcome improvement in productivity by British Steel to dispose of a restrictive practice in Britain? Is he aware that British Steel is charging the private sector higher prices for steel coil than the private producer would need to pay if he imported it from Europe?

Mr. Parkinson

I know that my hon. Friend has been in touch with the Department about that. We are investigating with British Steel and we shall take up the matter with my hon. Friend when we have the answer.

Mr. Ian Wrigglesworth (Stockton, South)

I welcome the Secretary of State's statement, but will he spell out in more detail the implications for the British Steel Corporation? Will the increased capacity safeguard the five steelmaking areas? Is the future of the Redcar works on Teesside assured?

Mr. Parkinson

The Government's policy is that set out in the letter by my right hon. Friend the former Secretary of State to the chairman of British Steel. My right hon. Friend told the chairman that he must make his corporate plan on the basis that steel production would continue at the five major sites, including Redcar. Nothing that happened yesterday and nothing discussed in the Council changes that in any way.

Mr. A. E. P. Duffy (Sheffield, Attercliffe)

Is the Secretary of State aware that this statement will be received with anger by redundant workers in south Yorkshire special steels, whose capacity and jobs have been needlessly destroyed in recent years by cuts that are now being restored? Will the Secretary of State now look at the projected closure of Hadfields in my constituency by the Phoenix tool works consortium? Otherwise, there will be no private steel to take advantage of the increased quota.

Mr. Parkinson

The regime does not apply to special steels. I read with interest the hon. Gentleman's speech in yesterday's debate. The regrouping of special steel companies offers the best hope for all of them of a viable future. Strong companies capable of competing with the best should emerge from the regrouping. The Government support that objective.

Mr. Stuart Bell (Middlesbrough)

I agree with one Government Member that the Secretary of State has adopted a more vigorous approach over steel than his predecessor, who spread uncertainty and anxiety throughout Redcar and Teesside, where many of my constituents work in the steel industry. Can the Secretary of State deny a story in today's newspapers that, notwithstanding the agreements reached yesterday, about 6,000 further jobs in British Steel will be lost? Does the Secretary of State agree that as a nation we have made a far greater effort to reduce manpower than any other European nation?

Mrs. Elaine Kellett-Bowman (Lancaster)

My right hon. Friend has already said that.

Mr. Bell

He may have said it, but I should like it confirmed.

I understand that the Commission will conduct a closer investigation of pricing policy, but is the Secretary of State saying that the Commission, or Council, is now prepared to adopt a more vigorous approach to the dumping of steel products in Europe? Is the right hon. Gentleman aware that such matters are of great interest to my constituents who work in the steel industry and that they would welcome any assurance that the Secretary of State can give?

Mr. Parkinson

I hope that what I said in my statement will help to prevent dumping. The Commission proposes that the minimum price which can be allowed—;it is the lowest price—;should, in the case of continental steel, recognise the cost of transporting and freight to the United Kingdom before it is ex-works, because the previous system helped to produce the type of dumping about which the hon. Gentleman complains.

I cannot comment on today's newspaper stories because I have not seen them. Nothing that was decided yesterday was based on the assumption that further cuts would have to take place and further jobs lost to implement the agreement. Other closures or job losses may take place, but not because of the agreement.

Dr. Jeremy Bray (Motherwell, South)

Can the Secretary of State confirm that the proposed BSC-United States deal for the partial closure of the Ravenscraig and Fairless works is now dead? Will the practical effect of yesterday's decision be to reduce the fines paid by BSC for exceeding realistic production quotas because of the recovery in demand, or will the effect be to allow increased production?

Mr. Parkinson

The Ravenscraig slab deal is still alive and negotiations are continuing. It is wrong to assume that the deal is dead. Telegrams have been passing to and fro in recent days. Negotiations are firmly in train. I have not been party to them, but I am aware of what is happening. As for fines, British Steel believes that the agreement will lead to increased production.

Mr. James Hamilton (Motherwell, North)

Bearing in mind that for a long time we have heard nothing but dismal reports from the EC, particularly in relation to the steel industry, did the discussions include tube producing? Is the Secretary of State aware that the Clydesdale works in my constituency is in need of a concast plant which is a vital part of the investment to give the necessary impetus for competitiveness? Will the Minister take it from me that people in Lanarkshire are deeply concerned because nothing is forthcoming in relation to the deal between MacGregor and the American company? Are we right to assume that something is still going on? Is not the House entitled to know the position?

Mr. Parkinson

Mr. MacGregor is negotiating a commercial deal. Confidentiality is essential. The two parties are negotiating carefully. I am aware of that, because I have seen telegrams which refer to it through our embassy, which is giving support and help. I cannot tell the hon. Gentleman more than that and I do not think that I should. The deal is still alive and still being negotiated. The only time that tube came up yesterday was when we discussed the need for supplements for coil for tube. The Commission took that need on board and said that it would give an answer soon.

Mr. Paddy Ashdown (Yeovil)

I welcome the statement, modest though it is. I particularly welcome the Secretary of State's comments about countervailing measures to protect special steel, but does he agree that the increasing protectionist and isolationist measures taken by the United States steel industry is the major threat to the future of such careful quotas as we have now negotiated? Is the right hon. Gentleman prepared to take any specific measures to resist such pressures and moves by the United States?

Mr. Parkinson

We have made it clear to the United States in various ways, through my right hon. Friend the Foreign Secretary and myself talking to the United States trade representatives, that we believe that it made bad decisions on special steels and that we hope that that bad precedent will not be followed in other areas.

The Community has the capacity to take action and it has gone to GATT to seek compensation under world trade rules for what we believe to be a wrong action by the Americans. We believe that the best way forward is to reinforce world trade rules and not to follow the Americans in trying to breach them. That is what we propose to do.

Mr. Dennis Skinner (Bolsover)

Is not the real tragedy of the steel industry and the unemployment in that industry the fact that for four years the Government have lectured the House of Commons and the steel workers about the so-called free winds of competition and market forces which would enable the steel industry at some point to survive? The Secretary of State has had to come here today and admit that the only way to salvage what is left, or some of what is left, is Government intervention and quotas. Why all the misery of Corby and Consett and all the other steel towns and cities up and down the country? It has all been for nothing.

Mr. Parkinson

The tragedy of the British steel industry is that the Labour Government, of whom the hon. Member for Bolsover (Mr. Skinner) was a supporter of sorts, could not bring themselves to take the action that was vitally necessary. It was because that vital action was not taken that hundreds of millions of pounds were lost and a debilitated British Steel Corporation was in existence when we came to power. Actions taken by this Government have retrieved a solid core.

Mr. Skinner

This is market forces.

Mr. Parkinson

I entirely agree with the hon. Gentleman—;for the first time, I think, in many years. Our policy is to have a short-term regime, during which restructuring can take place, but that restructuring is a reduction in spare capacity. The policy of the hon. Gentleman's Government was exactly the opposite. They spent hundreds of millions of pounds on maintaining capacity that would never be needed.

Mr. Peter Hardy (Wentworth)

Does the Secretary of State recall that it is just two weeks since he proclaimed boldly and clearly, in response to a question from me, that our European partners must effect their own restructuring before there could be any further contraction of the British steel industry? Is he aware that, while his words were echoing around this Chamber, the finishing touches were being put to the arrangements and to the statement that has destroyed another thousand jobs in south Yorkshire, wiping out capacity at Hadfields and perhaps at other steel works in and near my constituency? Does he not feel that that capacity being wiped out will give our overseas competitors an even greater opportunity?

Does the right hon. Gentleman believe that either the buoyancy that the EEC arrangements now confer on him or the freedom from the EC arrangements to which he referred should give him an opportunity to review the arrangements now being made in south Yorkshire, because the steel works in that area were more buoyant and were breaking more world records than those in any other part of the European steel industry, yet they are plunged into further despair and irritation as a result of European policies and the policies of this Government?

Mr. Parkinson

There was at least 30 million tonnes of excess capacity throughout Europe. We have made our own reductions, for our own reasons, because we could not afford to maintain a totally unviable steel industry. Other have followed the example of the right hon. Member for Salford, East (Mr. Orme), when he was in government, and maintained a capacity that they do not need. They will now go through the painful process which, fortunately, is now more or less complete in this country.

Mr. Allan Rogers (Rhondda)

Will the Secretary of State at least acknowledge that he has made a most pathetic exhibition in Europe, and that the Italians have taken him by the nose yet again? Does he accept that for the past two and a half years they have broken all the rules, and that, although they should have put a deposit into central funds and been fined for increasing their steel production, they have not paid a penny in fines? Now, although it does not seem to have sunk in, in the euphoria of his return to this country, instead of an agreement for two and a half years, the right hon. Gentleman has one for only six months. Does the right hon. Gentleman accept that that is what the Italians have forced on him?

Will not the Secretary of State acknowledge that, once again—;looking not into the past but into the future—;we are being conned by our European partners, and that the Italians have no intention of staying within the quotas? They never have and they never will.

Mr. Parkinson

I had not realised that the House had acquired such an authority on the Italian steel industry.

Mr. Rogers

It is true.

Mr. Parkinson

The result of the agreement yesterday is that the Italian steel industry will shed 5.8 million tonnes and that the Italian steel industry has smaller quotas than ever before. So the hon. Gentleman's assertions are quite wrong. The Italians are now going through the painful process that we have already been through.

Also, the nine other members of the Community were totally agreed, and the Italians agreed in principle, that as a caretaker Government, they could not impose a regime of two and a half years. However, the regime will be renewed within the next seven months.

Mr. Tom Clarke (Monklands, West)

Will the Minister give us an assurance about his astonishing reply to my hon. Friend the Member for Motherwell, South (Dr. Bray), when he said that the slab deal is still under active consideration? Will he give us an assurance that no decision will be taken on this matter during the parliamentary recess? Will he reaffirm what almost every Minister has said on this subject, that the matter will not be concluded until Parliament itself decides?

Mr. Parkinson

The hon. Member for Motherwell, South (Dr. Bray) said that the negotiations had stopped. I said that they had not stopped. They are still alive, and negotiations are going on. I do not know when they will come to fruition. No proposals of any kind have been put to the Government. The only point that I made this afternoon was that negotiations are not over. I said no more and no less than that.

Mr. Orme

May I press the Minister on the subject of Ravenscraig? In the discussions that are clearly taking place about that plant and the special steel produced there, will he assure us that no decision will be made, certainly during the recess, and that the Government will make no statement about change of policy until the House returns, because we believe that it is crucially important for the House to be given a report?

I should like to raise a further point with the Minister. Time and again my hon. Friends have asked about quotas. The Secretary of State said that the quota system is on a short-term basis. We have had that system for a considerable time. Bearing in mind what our competitors and members of the EC do—;not just the Italians—;what does the Minister say about the West Germans, who owe about £50 million in fines? The West German Government are standing by their steel firms, and those fines are not being paid. Where does the policing come in there?

Mr. Parkinson

One company, Kloeckner, has been overproducing and has fines outstanding. Those fines will be enforced against it by the Commission. I repeat what I said earlier, because the right hon. Gentleman may not have heard what I said. The Germans and the French, who are constantly held up to us as people who know how to manage the market, have an important penetration into their market of more than double our own. Import penetration into our market is about 20 per cent. and falling. Theirs is approximately double that figure. Whatever else the figures prove, they do not prove that we have been taken for a ride.