HC Deb 22 March 1983 vol 39 cc837-44

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Thompson.]

11.42 pm
Mr. Tom Clarke (Coatbridge and Airdrie)

I welcome the opportunity to discuss the serious problems of the decline of the steel industry in my county of Lanarkshire, particularly the problems in my constituency where redundancies have recently been announced at the Imperial plant in Airdrie and at the Calder works at Coatbridge. Redundancies are being discussed in R. B. Tennant as a result of the amalgamation with Sheffield Forgemasters. On top of all that in Lanarkshire—this applies to many of my constituents—there is speculation over the future of Ravenscraig and Gartcosh. I thought it right that the House should have the opportunity of a debate on those matters and that the Government should have the opportunity to reply.

In my constituency at the moment just under 11,000 people—this is after the new method of calculation—are officially registered as unemployed in the two jobcentres in Airdrie and Coatbridge. The redundancies that are being projected in Clydesdale in the constituency of my hon. Friend the Member for Bothwell (Mr. Hamilton) and in Imperial and Calder would add unreasonably and unacceptably to those numbers. British Steel has said that if the order books do not improve by 6 May, there will be 426 redundancies in Clydesdale, 185 in Imperial and 110 in Calder, giving a total of 721.

The three plants are interdependent—the future, efficiency and effectiveness of one of them will affect the other two. We cannot, therefore, talk about one in isolation. In terms of financial success and productivity, the three plants can talk of profits which would bring great credit to a private enterprise—they bring enormous credit to that sector of the British steel industry. Last year, the three plants made a joint profit of £21 million and they are on course for a profit of £15 million In the Imperial at Airdrie, the investment, thanks to my right hon. Friend the Member for Chesterfield (Mr. Varley) when he was a member of the Labour Government, has been justified by the increase in productivity. If the redundancies occur, 185 men out of a work force of 460 will find that they no longer have jobs.

During the 1979 general election campaign—not long ago—450 men worked in the Calder works in Coatbridge. That work force has been reduced to 217 and, if these redundancies occur, it will be only 110. That means that, since the general election, the manpower there has been reduced by 75 per cent.

I have not yet heard a convincing argument or a reasonable case for the redundancies. In Calder last year, there was a projected loss of £1.25 million, but the works broke even. The men who achieved that are entitled to the thanks of our community—they know such gratitude exists—and to the congratulation of the House, not the question mark that hangs over the steel industry.

Coatbridge was known for many years as the "iron burgh". I regret to say that evidence of that role in industry is much and sadly in decline. The management of BSC whom I, my hon. Friend the Member for Bothwell and representatives of the unions met at the Clydesdale works on Friday, has not adequately explained the reasons for the crisis that we now face and the announcement of possible redundancies. It was much less forthcoming than it ought to have been.

I was greatly disappointed when, on Monday, I presented myself as the Member of Parliament for Coatbridge and Airdrie for discussions with the management at the Calder works and it decided to postpone or abandon the entire exercise. I know that the Minister probably does not endorse that action, but we are getting dangerously far from any form of open government.

It would be right for the House to remind the BSC that Members of Parliament are elected and that their principal role is their guardianship of their constituents' interests. I hope that Mr. Ian MacGregor will not condone the decision of his management to treat the local Member of Parliament in that way.

Nor can I see the reasons for the doubts about the future of the jobs concerned. My colleagues in the trade union movement gave me information about the order books. The management were given a chance to do so but they did not take it. I am told that if we examined the order books for Calder, there are orders for 8,089 tonnes between now and September 1983. At Imperial the figure is 24,470, at Clydesdale 1 it is 5,171 and at Clydesdale 2 it is 10,091 tonnes.

All of this takes place a few days after the Budget, when the Chancellor said that some of his measures would aid oil exploration. That was noted in my constituency at the weekend, because The Scotsman reported a speech of the Secretary of State for Energy, who spoke about this factor with great optimism. The article stated: In spite of the latest uncertainties on oil prices, Mr. Nigel Lawson, the Energy Secretary, was confident last night that the Government's Budget changes in oil taxation would give a boost to North Sea activity. He told the annual dinner of Knutsford Conservative Association that the moves could double the number of new oil and gas projects submitted for approval during the next two years. The Secretary of State was reported as saying: Indeed, despite the difficult conditions of today's oil market, I am hoping to see new oil and gas developments starting in that period at a rate of at least one every six weeks. If that is the case, given the splendid record of Imperial, Calder and Clydesdale and the speculation about an upturn in this sector of industry, the onus is on the British Steel Corporation to give reasons for those redundancies. So far it has not taken the opportunity to do so. I cannot exaggerate the contribution that the work force of those plants has made to their survival and to increased productivity. Those men have not had a wage increase for three years, apart from the agreement on productivity, so there can be no argument that they are pricing themselves out of a job. They co-operated fully with the corporation's chairman's policy of "something for something"—a scheme that has led to greater productivity and to lower manning—and they have been given little thanks, if any, for their effort and contribution.

My hon. Friend the Member for Bothwell has written to the Department of Employment about the continuation of temporary employment subsidy payment. Will the Under-Secretary of State use his good offices to draw that to the attention of the Department, because there may be a case, given the uncertainty within the industry, for extending short-time working rather than declaring such brutal redundancies? That is surely better than reaching the stage that I understand was reached some years ago when, during a similar crisis and hiatus in the industry, we imported tubes from Italy. We wish to avoid that.

On the cost of electricity, will the Under-Secretary of State confirm that there is an energy policy, that the corporation has not been disadvantaged and is not being asked to pay more than is reasonable, and that there is some co-operation between energy policies and the approach of the the Department of Industry? The Calder works has already provided tubes to Nigeria, and the customers were happy with the standards of production and delivery dates. However, because the International Monetary Fund is slow in reaching an agreement with Nigeria, there is a delay. I know that the Minister is interested in the Brandt report, as I am. This is one occasion when the recommendations of the Brandt report could lead to jobs in my constituency and in the entire country, and lead to improvements in that part of the Third world.

As to Ravenscraig and Gartcosh, inevitably, if the House is discussing the steel industry, and particularly this week, the subject of Ravenscraig must be raised. There was speculation in the Glasgow Herald yesterday that the Secretary of State for Scotland would meet Mr. MacGregor to discuss the £2 billion deal with an American steel company, we are told at the cost of 2,000 jobs at Ravenscraig and Gartcosh. We were also told by the paper that the executives are within a week of completing the details.

The Under-Secretary is, in my experience, a courteous man, and I ask him to pass on the view of the House, and particularly of Scottish Members, that it is time that the Secretary of State for Scotland clarified this issue. I invite him to remove as speedily as he can the speculation over the future of Ravenscraig. The things that are being said about the American deal and other matters do not equate with what the Secretary of State for Industry and the Secretary of State for Scotland said towards the end of last year and the beginning of this. It is time, and in the interests of the people and families in Lanarkshire who have given so much to the steel industry, for the future of Ravenscraig and Gartcosh to be clarified. It is time that the Secretary of State for Scotland made his position clear.

My concern about the steel industry and Ravenscraig and Gartcosh was expressed during my maiden speech on 14 July, and subsequently I wrote to the Prime Minister and said that my concern continued and that I still felt that the Government's opinions about these plants were rather vague. The Prime Minister said: You express particular concern over the future of the major BSC works at Ravenscraig and Gartcosh. As you know, in recent months new productivity records have been set by the workforce at Ravenscraig. This is a very encouraging sign, which I was pleased to be able to refer to during my visit to Scotland at the beginning of September … We must nevertheless keep up the pressure to reduce costs and improve competitiveness in the British steel industry. That is the way in which steel jobs can be secured, not by seeking assurance about the future of individual plants. I endeavoured to do that, but I was joined after that debate by the Secretary of State for Scotland, the hon. Member for Edinburgh, South (Mr. Ancram) and almost every Tory Member of Parliament, who suddenly discovered that my predictions were becoming much more accurate than they had acknowledged during the debate.

The Prime Minister continued: But no Minister can give categorical assurances about the long term future of any plant, whether in the steel industry or elsewhere. The absence of such a categorical assurance in the case of Ravenscraig and Gartcosh is therefore the normal state of affairs". That may be the normal state of affairs for this Government, but it is an unacceptable state of affairs to the people of Lanarkshire and to the people of Scotland.

It is time that the Government came clean on the future of the Scottish steel industry and that the Secretary of State for Scotland was seen to defend the future of the Scottish steel industry, not least in my constituency of Coatbridge and Airdrie. I am delighted to have had the opportunity to put these points to the House and to the Under-Secretary.

11.58 pm
The Under-Secretary of State for Industry (Mr. John Butcher)

I congratulate the hon. Member for Coatbridge and Airdie (Mr. Clarke) on his tenacity in the interests of his constituents. It was not too long ago that he was leading a deputation of trade unionists from his constituency to discuss some of the problems at the Imperial plant. He has followed that up with the investigatory speech that he has made tonight. I congratulate him on having secured this Adjournment debate.

The House has devoted considerable attention to the difficulties of the steel industry in recent years. It is right that this should be so. The problems of steel raise important industrial, international and, not least, human issues which merit being kept under regular review. The hon. Member has rightly chosen this subject for debate tonight.

The House is only too well aware of the background to the domestic and international crisis in the steel industry. Steel forms the bedrock of modern industrialised economies. In the decades of industrial expansion after the last war, steel demand and production expanded as never before in response to continued and regular growth in manufacturing industry and trade throughout the western world. But, as we know all too well, the oil shock of the early 1970s, repeated towards the end of the decade, brought steady expansion to a halt. By then, however, steelmakers and Governments everywhere had laid the basis for major increases in production capacity for which markets failed to develop. It is this legacy with which the United Kingdom and virtually every other industrialised country now has to contend. The rationalisation and restructuring that it entails has painful and unwelcome consequences, but the problems have to be faced and will be made worse only if remedial action is constantly deferred.

I take the hon. Gentleman's point about the profitability of the plants in his constituency to which he has referred. When one talks of remedial action, obviously one hopes that management decisions made by the British Steel Corporation will take account of some of the factors that he has listed.

Before I turn to the position of the steel industry in north Lanarkshire, almost all of which is accounted for by the British Steel Corporation, I should like to say a few words about BSC's position more generally. At the end of the 1970s the corporation was burdened with excess capacity, a significant proportion of it obsolete, and a degree of over-manning, which together put BSC near the bottom of the European league table in terms of efficiency and productivity. The struggle since then has been directed towards bringing capacity more closely into line with demand and slimming manpower so as to restore the corporation's competitiveness, reduce costs and thus enhance the prospects of job security for the work force that remains.

As I said earlier, the process has been painful; that is undeniable. Some of its manifestations have been referred to by the hon. Gentleman. But BSC's results in the financial year 1981–82 showed that real benefits could accrue. Output increased, and plant loading was maintained at a high level. This, coupled with reduced manning, improved productivity markedly and allowed BSC to record a small monthly profit in March 1982 for the first time in five years. When we first saw those figures, some of us looked at them with something approaching joy. We thought that BSC had made it, but unfortunately the market got its own back. Since then, as the House knows, recession has hit BSC just as hard as all other steelmakers in the industrialised world.

In 1982 we saw the United States industry working at just 40 per cent. of capacity, Japan's output cut to the lowest level for a decade, and steel production in the European Community in the last three months of the year falling to the lowest level for 30 years. This has been an extremely difficult period. BSC could not have been expected to buck the general trend and remain unaffected. But this check in the corporation's progress towards competitiveness and profitability does not, as some would argue, show that the policies have been wrong. On the contrary, if BSC had not been put into more efficient shape, there is no doubt that the difficulty in weathering the trough of recession would have been even greater.

It is against this general background that the position of the steel industry in north Lanarkshire has to be viewed. I shall refer first to the recent history of BSC tubes division and of its three Scottish works at Clydesdale, Imperial and Calder. Despite the difficulties of the past few years, the corporation's tubes division has been generally profitable. This is in no small part due to the success of the seamless tubes business which is centred on the three Scottish works. The high-quality steel tubes which they produce have a variety of applications, many in offshore oil exploration. They go to make up submarine pipeline and, from the Imperial works at Airdrie, oil well casing. The quality of these products is such that they have been able to compete not only in the North sea but in the United States market, as oil exploration boomed there over the past few years. In addition, the rather less buoyant market for the welded tubes also benefited from the oil exploration boom, with welded tube being transferred for the first time from BSC's English plants to Scotland for certain finishing operations.

As a result, demand on the Scottish tube works increased, and I recall the picture that we discussed when the hon. Gentleman came to the Department of Industry a few months ago. At the Imperial plant, for example, a second shift was introduced in autumn 1981 to cope with the increase in orders, and by early 1982 pressure had built up to such an extent that a third shift was required. However, there has since been a decline in demand. Although activity has been maintained at a generally high level in the North sea, the oil exploration boom in the United States ended in the spring of last year. For a while deliveries from BSC's Scottish plants were maintained and prices held, but orders then declined. Tubemakers everywhere cut prices in a bid to secure dwindling business, and the market more or less dried up. By the autumn it was clear that some job losses would have to be implemented at the Scottish plants. At Imperial, the second and third shifts introduced to cope with the boom had to be ended. One production line was mothballed, and 130 jobs were lost. Across the three Scottish tube plants taken together, BSC announced 265 further job losses at the end of last year, which are currently being implemented. In addition, the corporation has recently indicated that an extra 450 redundancies will have to be implemented if the market for tube has not improved by May.

The hon. Gentleman said that there may have been some confusion over comparisons between the employment position at the three plants before the American oil exploration boom and since. My Department has rechecked the question with BSC, and it may be helpful if I now confirm our understanding of the position. In March 1980, before the exploration boom got under way, the three plants employed 3,164 people. By March 1982, this had increased to 3,420. With the end of the boom, and with the partial implementation of some of the 265 job losses announced at the end of 1982, employment in February this year stood at 3,127—a figure which, incidentally, is only slightly below the level of three years ago. Once the remainder of the 265 redundancies has been implemented, and if the further 450 job losses prove necessary, total employment will fall to about 2,500. That would represent a reduction of about 20 per cent. since March 1980. Unwelcome as the reduction would undoubtedly be, it is proportionately much less than the 50 per cent. reduction in the work force that has taken place across BSC as a whole in the same period.

The hon. Gentleman also questioned the justification for this level of redundancy in the light of the prospects for oil exploration in the North sea, and he referred to measures outlined in the Budget. It is, of course, for BSC to make the commercial judgment about its market prospects, and I have no doubt that in doing so it will take full account of the outlook in the North sea. However, I must remind the hon. Gentleman that I recently looked into precisely this question on his behalf. The advice that I received made clear that, even if North sea exploration rates increased above expected levels, the problem is that the drop in demand for tubular steel which followed the ending of the United States exploration boom has not only reduced world demand below production capacity but has left a worldwide glut of tubular steel which is on offer at very low prices. In these circumstances, even a major upsurge in North sea activity would be unlikely to lead in the short term to any radical increase in output of tubular steel.

The hon. Gentleman referred to rumours about the future of Ravenscraig being affected by the conclusion of a slab supply arrangement between BSC and an American company. My right hon. Friend the Secretary of State made the position clear at Question Time on 14 March. The Government have received no formal proposal from the BSC about a deal with an American steel company. Negotiations of that type would initially be a matter for the corporation. The Government would expect the BSC to consult them about such an arrangement before any final decisions were taken. That remains the position, and there is nothing that I could usefully add tonight.

Before I leave the question of steel and describe the way in which jobs lost in the industry are being replaced or are proposed to be replaced by alternatives in north Lanarkshire, I should like to touch upon an issue that arouses considerable concern and comment—that is, the question of cutbacks in capacity in this country compared with elsewhere in the European Community. It is a fact that the British steel industry has made major sacrifices over the past few years, in terms of reductions in both capacity and numbers employed. But these actions have not been undertaken as a favour to the rest of Europe. Nor have they been done at the behest of the European Commission or our Community partners. They have been necessary, as I have explained, in order for the British steel industry to become more competitive. But those efforts have not yet been matched by our Community partners. The Government are not prepared to see the sacrifices of the British industry squandered by the failure of industries in other member states to restructure and cut capacity. We shall use our best endeavours to ensure that the others follow our example.

There will not be time to list in detail the differences within the EC on capacity cuts. Suffice it to say that although I have not had time to discover the name of the Italian steel Minister, I suspect that he may be called Signor Machiavelli. We shall examine the issues in great detail. I assure the hon. Gentleman that my right hon. Friend the Secretary of State will be pugnacious in his defence of the interests of Scottish and British steelworkers in our negotiations with our partners in Europe.

A number of matters should be placed on record in the few moments that remain for the debate. Most conspicuously, the hon. Gentleman asked me about the effect of recent announcements in taxation policy and the tax regime in the North sea. I am advised that the total value of tax relief initiatives announced by my right hon. Friend the Secretary of State for Energy amount to about £800 million over the next four years. My right hon. Friend said in a speech at Knutsford that there would be a magnificently lower tax regime for the new fields including the complete exemption from another entire tier of the tax system—the royalty of 12.5 per cent, that they would previously have paid on the value of all the oil that they produce. These changes will have a significant impact on prospects for these fields, perhaps doubling the number that would otherwise have come forward in the next two years.

Regardless of what has happened in oil price movements over the last few weeks and months, I put it to the House that the level of reduction in the tax take will be a considerable inducement to those involved in the business of oil exploration. I share with the hon. Gentleman the firm hope that it will have an impact upon the order levels of the plants whose defence he has maintained tonight.

Mr. William McKelvey (Kilmarnock)

Is there any guarantee that the oil people will buy British steel tube?

Mr. Butcher

There is never a total guarantee. However, with the sort of money put into the British Steel Corporation over the past three or four years, I assume that there would be a pretty strong inducement within the corporation's management to encourage the Government in the belief that their money has been spent well in this regard.

The Question having been proposed after Ten o'clock and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at twelve minutes past Twelve o'clock.