European Community (Steel)

HC Deb 21 November 1983 vol 49 cc124-42 10.40 pm

The Minister of State, Department of Trade and Industry (Mr. Norman Lamont)

I beg to move, That this House takes note of European Community Documents Nos. 6374/83, Fourth Report on the application of the rules for aids to the steel industry, 6450/83, General Objectives for Steel 1985 and 6375/83, Proposal for a Council Decision relating to a contribution to the European Coal and Steel Community out of the General Budget of the Communities; and welcomes the Government's support given in the Council of Ministers for the ECSC Steel Anti-Crisis Measures. The purpose of the debate is to take note of three EC documents relating to the steel industry as recommended by the Select Committee on European Legislation. The first document, 6450/83 takes a forward look from the present to 1985. Under the ECSC treaty, the Commission is required to lay objectives for the European steel industry. Much of the document is background comment on the state of the industry. The outlook as seen by the Commission is gloomy. The Commission is updating the data and views expressed in the document. The document is gloomy and hard-hitting but realistic.

The document forecasts that consumption and demand for steel within the Community up to 1985 will fall. That is perhaps a reminder to us, because the House is often told that only the United Kingdom industry faces a fall in consumption. The document also forecasts that competition internationally will become much fiercer. It makes the point that the EC steel industry has reacted less effectively than some of its competitors in other parts of the world. It says that the Japanese steel industry has adapted by cost cutting, and even the American steel industry, which in many ways is technically more backward, has reacted quickly by bringing capacity more into line with demand and the market.

That is important because we are accustomed to compare our industry with that in other EC countries, but the comparison must also be with the industry in countries outside Europe. If we are not competitive with industries outside Europe, we shall penalise our steel-using industries. That is important because many more people are employed in the steel-using industries than in the steel industry.

The document says that the structural crisis facing the industry is being made worse by escalating Government aid to the steel industry. It says also that there are dangers in Europe of the industry becoming overprotective and developing hidebound attitudes. In other words, the Commission's view is that the European industry has not been changing sufficiently or quickly enough.

When there is so much argument about where the burden of the cuts has fallen and where they will fall next, the Commission makes the important point that production sharing must be related to efficiency. It cannot be done on the basis of Buggins' turn—"We had the cuts last."

To underline that point, the document says that, if a company is having recourse to Government aid, that shows that it is not an efficient undertaking and that it still has to adapt to new market trends. Our Government policy of returning BSC to viability is the best insurance against the British steel industry being required to make further cuts.

The main conclusion of the document—this is the gloomy point—is that there is likely to be an excess of supply over demand, which will deepen, and that surplus capacity is likely to be about 50 million tonnes. That is equal to one third of the in-store steel capacity in Europe. The Commission concludes that the objective must be to reduce capacity throughout Europe. For that reason, Government aids to the steel industry must be linked to restructuring. The document confirms that aids to the industry should end by 1985, and that in the meantime aids that do not correspond with the criteria laid down by the Commission will not be approved. That is an important point. Those criteria include that aid should be part of a plan for an undertaking to achieve viability.

I should like to give the House some information about recent developments in EC steel measures. As the House knows, there have been a series of measures to bring supply and demand into balance and to maintain prices. We have had mandatory quotas for production and sales in the Community. They have been in force for three years. In July, the Council of Ministers was able to agree to renew quotas only until 31 January 1984, so there will have to be another Council to consider quotas in the near future.

However, those arrangements have been only partially successful in maintaining price stability. Prices for certain products, especially on the continent, have deteriorated during the second half of this year. Prices currently being charged in the market place for hot rolled coil are in some cases 280 ecu per tonne, or lower, compared with a published guidance price of 380 ecu. The Commission, on which the ECSC treaty confers major responsibilities, has decided that further action is required to arrest the decline in prices. It has accordingly announced its intention to introduce mandatory minimum prices for certain flat products with effect from 1 December, and is currently engaged in prior consultations with producers, traders, consumers and member states. The Government understand the reasons for that action. Our aim will be to ensure that any such measures are effective, workable and enforced throughout the Community. We shall also make it clear to our partners that this short-term action cannot and must not distract from the need to tackle the root cause of the problems, which is the persistence of excess capacity.

Mr. Stan Crowther (Rotherham)

Would it not be equally fair to say that the root cause was not so much excess capacity as lack of demand? If there were throughout the Community, especially in this country, a substantial increase in demand from the motor car, shipbuilding, railway and construction industries, would not the gap between capacity and demand be greatly reduced.

Mr. Lamont

I do not agree with the hon. Gentleman. As he will be aware, this year we had record sales in our motor industry. That produced a great opportunity for the steel industry. It is not as if imports have been increasing. Indeed, they have been decreasing. There is no doubt that there is a massive overcapacity not just in Europe but in the United States and Japan. It is a worldwide phenomenon. As the first document makes clear, part of the reason for the fall in demand for steel is not a lack of demand in an aggregate sense, but a structural change Much material is being used as a substitute for steel. Therefore, I cannot accept what the hon. Gentleman says

There are also arrangements on imports. Imports from third countries accounted for about 7 per cent. of the United Kingdom market this year. That figure is below traditional levels. Total import penetration of the United Kingdom steel market this year, from Community and non-Community sources, is just over 23 per cent., compared with 26 per cent. last year. Imports from the EC of 16 per cent. are the lowest level recorded for some years. In current discussions in Brussels on the prolongation of third country import arrangements in 1984, emphasis is placed on ensuring that partner countries respect the traditional trade flows.

Document 6374/83 is the fourth report by the Commission on the application of the aid rules, and it covers the period 1 June 1982 to 31 January 1983. It includes detailed tables on the amount of aid notified by member states, and lists the cases dealt with in the relevant period. Most important, the document notes that the capacity cuts offered by individual member states fell well short of the target of 30 million to 35 million tonnes that the Commission consider is the amount that needs to be removed from the market by the end of 1985 to restore equilibrium.

The important point about the document is that it is now out of date. It has been overtaken by further negotiations which led to a series of Commission decisions on 29 June under the aids regime. The decisions required further capacity cuts throughout the Community, by the end of 1985, of 8.3 million tonnes, in addition to cuts of 18.4 million tonnes already undertaken since 1980 or promised by member states in return for the approval of aid.

The Government regarded the outcome as positive for two reasons. First, they confirmed the Commission's resolve to administer the rules on aid and restructuring fairly throughout the Community. Secondly, although the decision calls for a further cut of 500,000 tonnes by the United Kingdom, it requires by far the bulk of future capacity cuts to be made in other member states. Therefore, it recognises that the United Kingdom has shouldered its burden of contributions towards restructuring.

As regards the 500,000 tonnes proposed for the United Kingdom, I assure the House that we shall make it clear to the Commission that any such commitment is conditional upon other states fulfilling their obligations. Cuts will take place only if they are necessary to improve BSC's competitiveness. They will not take place simply at the behest of the Community.

The signs are that the Commission now recognises that it is the turn of other countries to match the United Kingdom. There are also signs that other Governments within the Community also recognise that. The Commission's decision on 29 June acknowledged Britain's restructuring achievement, and called on other member states to shoulder their part of the painful burden of restructuring.

The effect of the decision on 29 June is that, of the total restructuring in Europe in the period 1980 to 1985, the Germans will contribute 22 per cent., the Italians 22 per cent., the French 20 per cent. and the Belgians 12 per cent. The United Kingdom would contribute 17 per cent., with the exception of the 500,000 tonnes that it has already contributed. That shows that other countries will be required to shoulder their share of the responsibility.

Mr. Allan Rogers (Rhondda)

Will the Minister confirm that member countries that did not comply with the previous quotas laid down by Commissioner Davignon will now satisfy the regulations? Will Italy retroactively cut its production, which it did not cut under the previous quota system, and will Germany, which was fined for not complying with the previous quotas, now pay the fines that it owes before Britain cuts even more capacity?

Mr. Lamont

The signs are that the other countries will take action. The French have already publicly committed themselves to restructuring, up to 1985, by almost the same amount as Britain has restructured. Belgium and Luxembourg are also squaring up to the need for major capacity reductions. The position is uncertain in Germany because of the Thyssen Krupp merger, but when Count Lambsdorff met my right hon. Friend the Secretary of State at the Anglo-German summit, he made it clear that Germany would carry out capacity reductions before 1985. Even in Italy, the Commission's decision has at least forced both the Italian Government and the industry to face the fact that they, too, must reduce capacity. The hon. Gentleman should remember that the Commission has the power to withdraw the approval of aid if countries do not abide by its decision. However, those assurances have been given——

Mr. Rogers

Does the Minister accept that Commissioner Davignon said that the restructuring aid that is forthcoming will be available only if capacity is reduced? Will the Minister not talk about restructuring aid for the industry? The aid is related to reduced capacity.

Mr. Lamond

That is correct, and I thought that the House understood that. I apologise for using the euphemism "restructuring" when I should have said "reduced capacity". However, no one is in any doubt that that is what we are talking about.

The Government believe that the Commission's decisions in June were satisfactory to Britain. Although those developments were moderately satisfactory, it does not mean that we can relax our efforts to make the British Steel Corporation viable. It is more important than ever that we continue those efforts.

The House is conscious that Britain has done more restructuring than other European countries, but some of our EC partners say that we have also given more aid to our steel industry than have other countries. If we continue to give aid, we must expect to be pressed to make more cuts. If an undertaking continues to receive aid, in the eyes of the Commission it is inefficient and should contribute to capacity reductions. The logic of the Commission's view, which accords with Government policy, is that we have every reason to redouble our efforts to make BSC a viable undertaking.

Fortunately, the outlook is moderately encouraging. We still hope that the corporation can break even, before interest, in 1984–85. There are some encouraging signs for the corporation. There has been a small increase in the demand for steel in Britain, whereas demand is reducing in Europe. Imports have decreased, output is recovering from the depressed level of the last quarter of last year, and in the first nine months of 1983 productivity was extremely good. The corporation achieved an output of 210 tonnes per man-year, which compares with an average of 206 tonnes in West Germany. One does not say that all will be plain sailing from now on, but we have a very different position from that which pertained in 1979. It is a remarkable improvement.

The final document, 6375/83, covers social support measures that are designed to cushion the social costs of restructuring. During the past three years the Council has authorised the Commission to make payments totalling 212 million ecu to member states as a contribution to the costs of early retirement, severance pay assistance, temporary short-time working, and making up the salaries of people who move to other occupations. The House debated the proposals to establish that first programme of measures on 15 January 1981, and the United Kingdom stands to be a net beneficiary from this first part of the programme.

The proposals in document 6375183 envisage continuing with those measures, including new types of assistance, to be financed by the transfer of 330 million ecu from the general budget of the Communities. The details are still under negotiation in Brussels. I should make it clear that the United Kingdom is much less likely to benefit from the second set of measures than from the first, for the simple reason—perhaps this will be good news—that we expect redundancies to happen elsewhere in Europe, not in this country. None the less, the social costs of that restructuring across Europe will be great. The commission esitmates that there will be 150,000 job losses in the Community steel industry between 1983 and 1986.

There is no agreement at present among member states on the principles of the current proposals, on the details, or on the method or the level of financing. The Government will take note of any views that are expressed in this debate. Our objectives in the Council will be to ensure, first, that any further set of social measures is so framed as to provide the maximum benefit for the United Kingdom, and, secondly, to ensure that it is tied to tangible progress towards restructuring throughout the Community.

I am sure that the House will welcome the support given by the Government for the European Coal and Steel Community's anti-crisis measures. We believe that the measures that the Community has taken have been necessary in the face of the unprecedented and great difficulties that face our industry. We believe that they provide a basis for the restoration of a viable and competitive steel industry both in this country and in the rest of Europe. I commend the documents to the House.

11.2 pm

Mr. Harry Ewing (Falkirk, East)

The Minister of State has made what I would describe as one of the most depressing speeches about the steel industry that I have heard for many years in the House. It was only towards the end of his speech that I realised that he was speaking for the United Kingdom Government and not for the European Community. He seemed to be apologising for, not supporting, all the measures that are envisaged in these three documents. He painted an alarming picture of the future of the steel industry in this country. I shall come back to that later in my remarks.

As Eric Morley said in announcing the result of the Miss World competition on Thursday night last week, I shall deal with the documents in reverse order. The Minister of State dealt last with the document covering the social support measures. I shall deal with it first. The Opposition welcome it, though we hope that it never has to be used in this country, because it envisages a further 150,000 job losses in the European steel industry. Although the Minister was careful to say that he did not expect that many of those 150,000 job losses would occur in the United Kingdom steel industry, it was noticeable that he avoided saying how many of those job losses might take place in the United Kingdom. I am certain that the Department of Trade and Industry has done its calculations on the matter, and I am certain, too, that, had the Minister wished, he could given us tonight the expected further job losses in the United Kingdom steel industry.

The Minister said nothing, for instance, about future prospects at Ravenscraig. I am led to understand that we shall have a statement this week about a tie-up between the Ravenscraig plant and the American steel industry. If the Minister has information to that effect in his possession—information that is vital to Ravenscraig and the British steel industry—he is under an obligation to give it to the House tonight. I warn him that any tie-up between the two would cost Ravenscraig about 2,000 jobs.

Therefore, while the social support measures in the document are welcome, we hope that they will never be used in Britain, because we have made our fair share of cuts in output, production, targets and manpower. It is something of an irony that the Minister should be bringing the document at all to the House, when he knows as well as we do that next year the British Steel Corporation will bring to an end British Steel Industries, the company that was set up to create new industry in Sheffield, South Wales, Scotland and the various steel areas where the steel capacity—to use the Minister's language—was taken out.

BSI was established with the object of creating new jobs, yet in this document we have an important extension of the social support system, which I was surprised the Minister did not mention. That extension will apply in steel areas where steel workers take up other employment that has been created for them or they have been able to obtain. Under this provision the Commission will make up the difference between their earnings had they remained in the steel industry, and their earnings in their new jobs. Our view of the document, therefore, is that it is to be welcomed in the hope that it will not be used; or, as Burns would have said: I forward cast my ee on prospects dreer, Forward though I cannot see I guess and fear. The Minister did not exactly display confidence that there will be no further substantial job losses in the British steel industry as a result of the documents before the House.

The second document, No. 6450/83, is a factual account of the applications for aid that have been made during the period under review and the way in which they have been disposed of by the Community. Some important statements appear in that document. For example, we are told that there must be a further reduction in capacity in the European steel industry of about 35 million tonnes.

There is a discrepancy between that document and the third, No. 6375/83, in projecting the future of the industry to 1985. The third document says that by 1985 there will be over-capacity of 48 million tonnes, whereas the second document refers to a reduction of 35 million tonnes. In either event, a worrying picture is presented. In other words, against a background of continual reductions in capacity and quotas, there must be a further reduction of at least 35 million tonnes. The Minister rightly said that at the June meeting it was agreed that the United Kingdom's share of that reduction would be about 500,000 tonnes, but, as my hon. Friend the Member for Rhondda (Mr. Rogers) said earlier, some countries, particularly Germany and Italy, have not complied with their quota allocations. As my hon. Friend rightly said, Germany was fined for not complying with the quotas, but has even failed to pay the fine.

It was noticeable that when my hon. Friend asked questions about Germany and Italy the answers he received were about Belgium, France and Luxembourg. The reason is that the Minister of State knows that even the new quotas that have been allocated to Germany and Italy will be ignored. When we discuss the recommendations arising from the documents, the Minister of State will have to admit to the House that the new quotas allocated to Germany and Italy have been ignored. There is even a possibility that the hon. Gentleman will ask the House to accept a further reduction in British steel capacity.

When I first came to the House in 1971, the quota output of the British Steel Corporation was 42 million tonnes. I remember the Conservative Government of 1970 to 1974 reducing that figure to 38 million tonnes. I do not believe that any right hon. or hon. Member in the House at that time foresaw the day when we would be discussing a reduction in capacity to 11 million tonnes. How any industrial nation can sustain an industrial economy based on a steel industry that has an output target of only 11 million tonnes is well beyond me. I do not believe that any trading nation can base its economy on a steel industry that has an output target of only 11 million tonnes.

Document No. 6374/83 says: The additional capacity reductions should in the Commission's view be made principally by undertakings which require aid … registering the heaviest losses and receiving the most State aid. That is alarming. Despite what the Minister of State said about the British Steel Corporation, when Mr. MacGregor left the chairmanship of the board of BSC it was incurring heavier losses than when he became chairman.

Mr. John Prescott (Kingston upon Hull, East)

It was his wages.

Mr. Ewing

I am not sure about that. Whatever the contributory factor, the losses of BSC under the chairmanship of Mr. MacGregor were greater when he left that position than when he came to it. I make that point, not for pleasure, but to bring home to the House the reality of the statement that those countries that are having to support the steel industry to the greatest extent through aid will have to bear the heaviest cost in output. They will have to stand the heaviest job reductions. The Minister of State did not address himself to that issue.

I accept that these are discussion documents, and that is why the Opposition will not seek to divide the House, but I must warn the Minister of State that if the Government seek to implement these indications—they are not decisions—in relation to the British steel industry he will have a terrible fight on his hands. The Opposition will not concede the picture that is painted for the British steel industry in the EC documents.

The Minister of State started with the document that projects the future of the steel industry in Europe to 1985. This is an alarming picture. We have seen the United Kingdom bear the brunt of the output reductions that have been brought about in EC countries. The United Kingdom's steel industry has borne the heaviest manpower losses. We have borne the almost intolerable losses imposed by the EC.

Output in the United Kingdom has decreased more than in any other EC country because of the impositions of the EC and, to a greater extent, the Government's economic policy. It is time that the United Kingdom Government stood up for their steel industry. We should no longer give in to the EC.

The EC talks about the need to introduce new criteria. We are not talking about continuing with restructuring, as the Minister says. Those are fine words. Basically, they mean that more men are losing their jobs and more families are being savaged because of Government decisions. In working men's language, a loss of capacity means closing factories and throwing men on the dole. We do not want fancy and flowery phrases to be used, because the steel workers know what all this means.

Mr. Michael Fallon (Darlington)

Nonsense.

Mr. Ewing

It is not nonsense. Any one who does not understand the feelings of steel workers when they are made redundant or thrown on the dole should see some of them. The hon. Gentleman seems to be saying that it is nonsense to suggest that steel workers have been and will continue to be made redundant. I do not know where the hon. Gentleman has been since the early 1970s if that is his contention.

Mr. Fallon

I was only seeking to suggest that the redundancies are occurring not just among steel workers but in companies in my constituency which continues to be affected by the imposition of the current quota on prices in the Community. The hon. Gentleman is wrong to imply that we should consider only redundancies, as these are the primary result of the steel regime. There are many other secondary effects. Many companies in my constituency would welcome a relaxation of the regime and an end to the quotas.

The hon. Gentleman may be surprised to hear me say that I agree wih 75 per cent. of what he said. However, we are discussing the steel industry. I should be the first to admit the knock-on effects of redundancies in the steel industry, because I have seen them in my and other constituencies. I had the impression that when the hon. Gentleman was interrupting me from a sedentary position he was saying that it was nonsense to talk about redundancies. There is no shadow of a doubt that there have been serious effects.

Mr. Rogers

The hon. Member for Darlington (Mr. Fallon) intervened during last Thursday's coal debate. Although I cannot quote him verbatim from Hansard, he said to my right hon. Friend the Member for Salford, East (Mr. Orme), the shadow spokesman for energy, that the problem with the coal industry was that it did not produce metalliferous coking coal and anthracite. That was the most ridiculous statement that I have ever heard, especially as it comes from someone from the south-west coal region which normally produces a high proportion of these elements. We cannot meet the demand for these minerals in this country. I suggest that the hon. Gentleman knows less about steel than about coal—and that is pretty abysmal.

Mr. Ewing

My hon. Friend must accept that one of his functions in the House is to educate Conservative Members about the effects of Britain's decline as an industrial nation, especially in relation to coal and steel. My hon. Friend does the House a service when he intervenes to fulfil that role.

On the new policy to be introduced between now and 1985 to restructure the steel industry in Europe, the Minister said nothing about the points made on page 3 of document 6450/83, which states: A new policy must be established around these economic references: firstly by the companies which must have the strength of purpose to bring about the convergence of strategies, towards an adjustment to real demand"—— and this is important—— —by governments, whose intervention must be in support of the restructuring effort, as they cannot afford to pour cash into supporting a fundamental structural inefficiency. The Minister said nothing about that new condition.

Is the Minister satisfied that the fundamental restructuring of the British steel industry is now complete, in both the public and private sectors? Labour Members have just as much interest in sustaining the private sector, because the people whom we represent work in that sector as well as in the public sector. We are not in the business of playing off one sector against the other, but of trying to preserve a viable steel industry in this country. Is the Minister satisfied that the restructuring that has been going on in both sectors of the industry for the past nine or 10 years is now complete? If he says that it is not complete and that there is a long way to go, the criterion that I have mentioned immediately applies.

The document then refers to focussing all the instruments of Community cohesion (crisis measures, aid code, financing, commercial policy, regional and social measures) more closely on objectives better adapted to the needs of the present situation. The present situation is depressing. The Labour party's policies, however, are designed to achieve not that depressing present but a far brighter and expanding future in which the United Kingdom steel industry will play a very important role. That is why I have said that no industrial nation can hope to survive with a steel industry for which the output target is a mere 11 million tonnes.

There has also been no mention so far of the final new policy by the governments and the Community to implement reconversion plans which are indispensible for employment and regional development. How does the Minister envisage that being implemented in this country? The covering note from the Department makes it clear that the Department and therefore the Government are committed fully to support the document. How does the Minister envisage the implementation of that new policy in terms not only of the new criteria but of the effects that will flow from implementation of the rather stricter and far more closely drawn criteria contained in these documents?

I have said that the Opposition do not intend to divide the House. I emphasise that that must not be taken to mean that we agree with the documents. The Minister made a surprising and alarming speech. It appears that he was setting the scene for more reductions in capacity and, therefore, more job losses in the British steel industry. I shall be glad to get the Minister on the record saying that there will be no such reductions. However, that was not the import of his speech. I look forward to hearing what he has to say.

11.25 pm

Mr. Richard Hickmet (Glanford and Scunthorpe)

Listening to 25 minutes of the hon. Member for Falkirk, East (Mr. Ewing) giving a virtuoso performance of repetitive arguments which have no doubt been made in the House many times, I wondered where he has been in the past few years. What has happened to the steel industry here is not unique to Britain. The same has happened throughout Europe, America and the rest of the industrialised world. When the hon. Gentleman talks of the British steel industry without having regard to that, there can never be a fair presentation of the problem.

Steel making has drifted to countries with low labour costs. Europe has been slow to adapt to new production techniques and there has been a world recession. The result has been overcapacity. Production of steel in Europe is now at 1966 levels. It would be idle to suppose that steel production in Britain in 1979 was efficient, productive and successful. Steel making has been inefficient throughout Europe. One of the largest problems facing Europe recently has been the restructuring of the steel industry. It has involved substantial cuts in capacity, plant modernisation and job losses.

Britain's contribution to cuts has amounted to about 19.7 per cent., or 4.2 million tonnes. That has been part of the European restructuring plan. In my constituency, 11,000 men have been made redundant since 1979, the majority since 1981.

Mr. Rogers

And the hon. Gentleman does not care.

Mr. Hickmet

It is utterly ridiculous and disgraceful for the hon. Gentleman to say that, especially when such redundancies have had a knock-on effect on so many other industries. The Opposition seem to think that they have a monopoly on compassion as well as on ideology. They are wrong.

Despite what the hon. Member for Rhondda (Mr. Rogers) may think about my feelings, the substantial number of redundancies in my constituency have caused grave concern not only to my constituents but to politicians in Westminster. We have seen the closure of Normanby Park steelworks, one of the most important works within the British Steel Corporation, and, under the chairmanship of Mr. MacGregor, the BSC work force was reduced by between 80,000 and 90,000.

The EC's strategy to achieve viability in steel industries by 1985 will mean, according to the documents before us, a further 150,000 job losses by that date and a cut in capacity of 30 million to 35 million tonnes in addition to the 26.7 million tonnes agreed by the Commission on 29 June.

I ask my hon. Friend the Minister of State to note that it cannot be argued that our continental partners have experienced anything like the level of cutbacks that have taken place in Britain. Luxembourg, Belgium and France have made substantial efforts, but Italy has refused to do anything but increase its steel output. At the June meeting, the Commission recognised this country's contribution and, in pursuance of the Elsinore agreement of November 1982, a cut in capacity of 5.9 million tonnes was imposed on Italy, with further large cuts being imposed on West Germany. A minimal cut, of 600,000 tonnes, was imposed on this country.

It is essential that the Government and the Commission hold the Italians and the Germans to the Commission's June decision on capacity and its decision in July on quotas. The BSC has completed 85 per cent. of the restructuring required by the Commission, but the Germans and the Italians have failed to match anything like that programme. I assure my hon. Friend that I shall find it very difficult to support proposals that involve significant cutbacks in any of this country's five major integrated steel plants. I was glad that the Secretary of State made it clear at the June meeting that the Government's commitment to those plants would remain firm and that he would not be prepared to see any of them closed.

Mr. Ewing

The hon. Gentleman should understand that the Secretary of State's commitment to retain the five integrated steel plants was made against the background of a debate in the House during the previous Parliament, when hon. Members on both sides of the House made it abundantly clear to the Government—who were a long way down the road towards shedding Ravenscraig, one of the five integrated plants—that they would not accept the closure of any of those plants.

That is the importance of these debates.

I am delighted with the hon. Gentleman's point of view. We can impress upon the Minister the fact that he will not get away with going to Europe and agreeing with everything that they impose upon the steel industry in this country.

Mr. Hickmet

I hear what the hon. Member for Falkirk, East says. By all accounts, the then Secretary of State's performance in Europe in defence of the five major integrated steel plants, was remarkable for its success and robustness. I understand from my meetings with the management of BSC—I speak with all respect to the present Secretary of State—that it was pleased with the performance of the then Secretary of State and had a great deal of faith in his commitment.

Mr. Rogers

Will the hon. Gentleman accept the fact that the proposed quotas are based on existing production levels and that West Germany and Italy have not even complied with the previous quotas? That is why they are in difficulties. The platform for the future is based on an illegal position obtaining in West Germany and Italy. The Minister should not be protecting the present position but acquiring recompense for the past.

Mr. Hickmet

I have made my views clear about the performance of West Germany and Italy.

Although we were successful in achieving small quota increases for the United Kingdom in July, such quotas are nonsensical if they are ignored by other countries or if manufacturers arrange for finished steel products to be kicked or knocked about with hammers so that they can say that such steel products do not count against the quota arrangements.

The refusal by West Germany to restructure—I note the sanguine confidence expressed by the Minister about West Germany's intentions, although press reports lead me to believe that such confidence may be optimistic—the refusal by the Italians to cut capacity, the over-estimate on consumption in Europe, the dumping of steel by Spain, the closure of the United States market to many of our specialised steel products and the 12.5 per cent. import penetration into the EC by countries outside that trading arrangement are factors that depress steel prices. The depression of steel prices across the whole range of products, which has occurred since June, should be causing not only the Minister but the Secretary of State great concern. The Government must press for a reduction of about 5 per cent. to 7 per cent. of steel imports into Europe. They should insist that the Italians and the West Germans abide by agreements on capacity and quotas reached by the Commission. The United States market should be opened further to our specialised finished products, or else adequate compensation should be paid by the United States under the GATT agreement.

Production quotas within the EC should be observed. It goes without saying that any cuts that might occur in my constituency, which contains one of the five integrated steelworks, would be viewed with grave alarm and anxiety. Quite frankly, I would be unable to support such a proposal.

The social policies identified in the documents are of no use if there are no jobs or industries in the region.

The Welsh and the Scots have one day in 20 in this Chamber. Numerous Ministers are Welsh or Scottish, or claim to have Scottish or Welsh connections, but as far as I am aware there are none that proclaim their Humberside connections. I asked for statistics on the level of investment from the European steel fund, the European regional development fund and the British steel industry, but received one of those dusty answers that senior colleagues told me that I would have to get used to. It said that the cost of assembling such information was prohibitive, and was available if, in effect, I would only go to some library month after month, looking it all up.

I know that the level of investment from those funds in my constituency does not compare with that in Corby, or the places in Scotland and Wales that we hear about for hour after hour. If there are any workshy Ministers in the Department, perhaps the Minister will encourage them to delve into the figures, so that I can have them. There should be adequate investment in Humberside. If my hon. Friend sees any Japanese people in the near future, he might mention Humberside to them.

11.41 pm

Mr. Richard Caborn (Sheffield, Central)

I do not know why I have been given an opportunity to speak so early in the debate. It may be due to the letter that I sent to your office, Mr. Deputy Speaker, on Friday, or to the fact that Martin Kettle, in The Sunday Times, referred to new Members of Parliament who had not made their maiden speeches. The Sunday Times referred to me as a tight-lipped Member of Parliament. I must be one of the select few to be described in that way. I hope that that reporter will note the actions rather than the rhetoric. However, I should be pleased to show him round my constituency.

I thank the voters of Sheffield, Central for having given me the privilege to represent them in the House. Sheffield, Central is an area that I know well, as I was born and educated there, and also worked in the constituency. I obtained my first job at the age of 15 as an apprentice engineer in the steel works, where I continued to be employed until being elected to the European Parliament in 1979.

On behalf of the old Sheffield, Park constituency, I should like to thank Fred Mulley, who served the constituency for about 30 years. He served the House in many capacities and gave loyal service to the Labour party for many years. Indeed, he was chairman of the party for two years. I wish him well, and a long and happy retirement.

I thank the staff of the House and other Opposition Members for the valuable information that they have given to me. The pleasant manner of the staff, particularly in the Library—which is open for many hours—is highly commendable. There are some people from the Socialist group in the European Parliament in the Gallery tonight. If some of the staff of the House saw the conditions of service and remuneration offered at the European Parliament, they might become a little discontented.

As the name implies, Sheffield, Central is in the centre of Sheffield. Like many industrial centres, Sheffield is experiencing great hardship, with high levels of unemployment. In some areas the figure is as high as 30 per cent. That information is based on the 1981 census. Many of those people worked in Sheffield's steel industry. Of the 17 worst districts in Sheffield, where unemployment was recorded as being more than 30 per cent., 16 are in the Sheffield, Central constituency. However, those are the 1981 figures. Calculations now show unemployment to be well over 40 per cent. and, indeed, as high as 60 per cent. in some areas.

Of the 5,900 school leavers in Sheffield this year, only 800 have full-time jobs. Over 10,000 young people in the city of Sheffield have never had a real job.

I am speaking on behalf of a steel city. The principles and bases on which these documents have been presented, and which the Minister has explained, if adopted by the Government, will make the figures in Sheffield considerably worse in the coming years.

One area has not been mentioned. Do the figures for tonnages that the Minister mentioned include Phoenix 2? We believe that an announcement will be made within the next few days. We also believe that Phoenix 2 will mean the closure of Hadfields, one of the major steel companies in Sheffield, with 800 redundancies. The workers in those factories have not been consulted on how their industry should develop. The management has been asked to sign documents on secrecy so that the announcement is not leaked to the shop floor. These redundancies will be in addition to the 21,000 people in Sheffield who have been made redundant since 1979. Many thousands are on short time working.

The Government have gone out of their way to reduce the steel industry to ashes so that they can start resurrecting the Phoenix. The Government have gone like lambs to the slaughter to reorganise the steel industry at the dictates of the Common Market.

I shall put that into context. We have not just lost the biggest slice of production capacity; we have borne more than 45 per cent. of the job losses sustained by the Common Market steel industry. We are the only major producer country within the EC to have reduced capacity between 1973 and 1982. West Germany has increased its capacity by 15 per cent., Italy by 41 per cent., France by 5 per cent., Belgium by 10 per cent., but the United Kingdom is minus 16 per cent. It is a tragedy for our steel industry. From being second in the league in 1972, we became fourth in 1982.

Conservative Members seem to put a great deal of emphasis on state subsidy, and the Minister has referred to it. State involvement in steel production does not reveal the whole of the Government's interest. If account is taken of state contribution to fuel charges, freight charges, unemployment, short-time working payments, and assistance to research and development, public support for the British Steel Corporation amounts to £11 per tonne compared with the average figure for the EC of £15 per tonne, for West Germany £15, France £18 and Belgium £19.

It is against that historical background of about 10 years that we are asked to follow the principles embodied in the state aid document and also the evaluation of the steel industry by the EC. A collapse of EUROFER has clearly been spelt out in the press over the past two or three weeks. It is the main organ upon which the Commission was relying to obtain a consensus in the industry. It is absurd for the Minister to say that he will put pressure on the Germans and the Italians when the very instrument by which that pressure was to be brought is failing in front of our eyes.

We are now told that we are to bear a further reduction of 500,000 tonnes. Is the reduction in capacity under Phoenix 2 included in those figures, or will another 90,000 tonnes of capacity be taken out of United Kingdom engineering steels at the request of the EC?

The Government's attitude in the negotiations across the English Channel has been one of sheer capitulation for five years. It has left our industry in a sorry state. The ex-chairman of Hadfields, in a book on the public sector published two or three weeks ago, said that the United Kingdom should get out of bulk steel making. If one continues to reduce capacity much below 11 million ingot tonnes, the question mark over the industry rears its head.

Some 90 per cent. of special steels are produced in Rotherham and Sheffield. That is an important sector of the steel industry. It supplies steel for high technology industries such as aerospace and energy. Import penetration was less than 12 per cent. in 1972, but from 1972 to the early 1980s it ranged from 50 per cent. to 55 per cent. Those figures are confirmed by the Commission. That has been the level of penetration in special steels, such as high speed steel, tool steel and stainless steel.

When people talk about the development of new technology and its application, they should look seriously at the continuation of a fully developed special steels sector. The special steels sector of Sheffield made sure that the RB211 got into the air. It produced the quality of steel that would withstand the heat exchanges and stresses that the engine placed on it. Such development is now being lost not only in Sheffield but in the United Kingdom. For people to say that we can run down the bulk steel and low alloy side of the industry and keep the special steels sector going is nonsense. Many people in the steel industry believe that, too.

The United States has now placed import controls on the special steels sector. The private sector alone is exporting 10 per cent. of its production to the United States. The cost to BSC, through the imposition of a 20 per cent. duty, will be over £100 million. What restraints has the EC brought under GAIT? Very few. There is a danger that in the negotiations global imports and exports will be considered and that special steels may be put into that equation not as special steels, but as an amount of money. That will be extremely damaging.

I ask the Government to consider seriously the basis of the Commission's documents. The Minister has already had discussions. The documents do not give the answer. Looking at the long-term trends of the British steel industry, one sees no answer. In 1981, the Minister of State said: The phasing out of aids and the elimination of excess and uncompetitive capacity can be done only on the basis of multilateral agreement if the burden of the necessary restructuring is to be fairly shared."—[Official Report, 28 July 1981; Vol. 9, c. 1103.] Is the basis for the figures for the past 10 years a fair one on which to take a further cut of 500,000 tonnes? It will inevitably mean further redundacies for steel workers in the private and public sectors.

11.55 pm

Sir John Osborn (Sheffield, Hallam)

I congratulate the hon. Member for Sheffield, Central (Mr. Caborn) on his maiden speech. I look forward to hearing him speak again on steel and other subjects. I know that he has particular knowledge of the steel industry.

During a number of elections the hon. Gentleman chaired factory gate meetings when I accompanied Conservative candidates for the Sheffield, Brightside constituency. The hon. Gentleman's predecessor caused me, during my first election campaign, to reveal that I was a budding steel baron.

The devastation that has hit Sheffield has hit management and shop floor alike. Hon. Members who have heard me speak before will know the extent to which Sheffield has suffered from the events of recent years.

The hon. Gentleman's knowledge of the European scene has long been respected by the industry—and so it should, as he stepped into my shoes as the Sheffield Member of the European Parliament. When I was a MEP I had to deal with Labour Ministers.

In the few minutes left to me, I shall refer not only to Sheffield but to the changes in the demand for steel in Europe and the work of the Council of Europe in connection with the OECD steel committee, which had to look wider than the EC. One aspect of that is that in the last OECD debate, to which I referred earlier this evening in another debate, it was noted that steel expansion took place in Mexico, Brazil, Venezuela and other Third world countries. In the context of this debate, that is bad news for Britain, but in the context of our earlier debate it is welcome news.

I welcome the Government's support in the Council of Ministers for the ECSC steel anti-crisis measures. But I am worried about discussing documents dated as far back as April 1983 when the scene since then has changed quickly. Once again, the House has been in danger of closing the stable door after the horse has bolted. Earlier this month there was a statement by Commissioner Davignon outlining a number of measures that will come into operation on 1 December. A tragic reality, which justifies his statement, is that the special high speed steel and alloy steel industries in Sheffield have been decimated. Even the BSC activities have been hit. Because 90 per cent. of special steel comes from Sheffield, it has been especially hard hit.

My right hon. Friend the Secretary of State for Trade and Industry knows Sheffield. I hope that he will pay a return visit there for many reasons—not least the troubles there and the cost of energy. The increases in the cost of gas and electricity have caused considerable consternation to those surviving in Sheffield. However, it is reassuring that Ian MacGregor—one-time head of BSC—is now poacher turned gamekeeper. He knows that the high cost of coal, often caused by keeping open uneconomic pits, has an impact on the cost of electricity. The fact that 84 per cent. of electricity comes from coal-fired stations is one of several reasons for the damage caused to Sheffield and its electric arc steelmaking.

Two activities took place in October. There was a meeting in Japan of the International Iron and Steel Institute——

Mr. Bill Michie (Sheffield, Heeley)

Does the hon. Gentleman recall two or three meetings with the economic development committee in Sheffield town hall, where we finally convinced him—or at least he conceded—that the corporation's problems with energy prices were not so much the fault of the British mining industry, but of the hidden subsidies paid in the rest of the Community?

Sir John Osborn

That matter has been discussed in the House many times, and I thank the hon. Gentleman for drawing it to my attention. Sheffield's Members of Parliament have had frequent committee meetings with the city council about that city's plight.

The International Iron and Steel Institute provides a forum for steel competitors to meet, and to compare production costs, techniques and even marketing arrangements. Has the Minister had a report of this conference?

A year ago I instigated a debate in the Council of Europe which gave rise to a report by Mr. Pignion, a Member from the north of France, on the plight of the European steel industry. The subsequent debate on this report early in October this year was attended by Japanese Members of Parliament, representatives of the American Congress and Members of Parliament from Canada and Australia. What impressed me in that debate was the fact that, even in Australia, the recession had hit a company such as Broken Hill Pty., which had natural advantages over its European competitors.

The preparatary work for the debate was carried out by the steel committee of OECD. In a recession, an industry that is contracting must have price stability. That is essential in a buyers' market such as was the case in 1930, and I hope that it will cover steels made in Sheffield. The Sheffield steel industry has taken more than its fair share of closures, and I hope that the Minister will now stand up for Sheffield. However, reviewing the problem in its wider context, it must be recognised that the United Kingdom has suffered a 59 per cent. reduction in steel manpower during the past 10 years, which is rather more than France, with 36 per cent., and Belgium, with 30 per cent. Italy increased employment during that period by about 5 per cent., and I reiterate the comments that have already been made about that.

In countries outside the EC, capacity in Europe has been cut by only 0.8 million tonnes, and Spain has increased capacity. That must be balanced with the self-sufficiency of other countries, but the industry's plea is that high alloy steels should be brought within article 60 of the European Coal and Steel Act. Originally those steels were made by old methods and not to local, let alone international, standards. Now worldwide standards have been set, and alloy steels are produced alongside bulk steels in the same factory. The industry hopes that price stability can be extended to other grades of steel.

I hope that the Minister will elaborate on the emergency measures announced the week before last by Commissioner Davignon. What impact will they have on Sheffield, which has already been hard hit and which has taken its fair share?

12.4 am

Mr. Norman Lamont

My first duty is to congratulate the hon. Member for Sheffield, Central (Mr. Caborn) on his good, strong and fighting maiden speech. It was also an informed speech. Plainly, he knows the steel industry backwards. He will not be surprised if I do not agree with everything that he said. Nevertheless, it was an interesting speech, and we look forward to his contributions in future steel debates.

I shall answer one or two of the points that were raised in the debate. My hon. Friend the member for Glanford and Scunthorpe (Mr. Hickmet) has also established himself during his time in the House as a fighter for the steel industry and his constituency. It was a great pity that the hon. Member for Rhondda (Mr. Rogers), from a sedentary position, made insulting and totally untrue remarks about him. They made me feel uncomfortable, because I know that my hon. Friend can be an awkward customer, and he was egged on considerably by the hon. Gentleman. My hon. Friend asked about cutbacks in imports, and I can assure him that we are pressing for cutbacks in imports from third countries. That is the position that we are taking in the negotiations on the voluntary restraint agreements with third countries. My hon. Friend also asked about United States actions against special steels. He said that we should press for compensation and exemption for certain categories of special steels. That is exactly what we are doing.

The hon. Member for Falkirk, East (Mr. Ewing) asked about the contradiction between the 35 million tonnes capacity reduction that the Community is proposing and the 50 million tonnes that has been identified as the excess capacity within the Community. The answer is that the Community does not propose to take out all the excess capacity. It recognises the argument for leaving a certain amount of excess capacity, because one cannot expect to run a steel industry at 100 per cent. capacity all the time.

I was somewhat surprised by parts of the speech of the hon. Member for Falkirk, East. He said that we were to have a statement on Ravenscraig this week in the House. That is news to me. No proposition on a slab deal has yet been put to the Government. Mr. Haslam is still considering the matter, and if he has proposals to put to us, no doubt he will do so in due course. I do not know where the hon. Gentleman got his information from. At times I wondered whether he was taking part in a different debate about a different steel industry. He put forward the fantastic notion that my speech was intended to pave the way for further reductions in capacity and cuts in this country. I thought—and I am sure that my hon. Friends would agree with me—that the tenor of my speech was exactly the opposite. I thought that the period of cutbacks was past. It is not our intention to have further cutbacks. Of course, I cannot give guarantees. We always have to struggle to be competitive, and we are always chasing a moving target. I made it clear that we take the view that other countries should now take the burden of restructuring. I said that two or three times.

The hon. Gentleman also seemed to be under the misapprehension that Mr. Ian MacGregor had left the British Steel Corporation with larger losses than when he took over. May I point out that when he took over the losses were nearly £700 million, and that when he left in August 1983 they were £386 million. I do not know where the hon. Gentleman got his information.

The hon. Gentleman also said that my speech was a depressing speech. I know that he is a magician and a rainmaker, but does he think that it is all the fault of the Tories that steel production has slumped by 38 per cent. in the United States to the lowest level since 1938? That is all our fault, is it? Are the Tories responsible for everything, including the fact that production throughout the Community is down by about 12 per cent. Does the hon. Member think that it is just a question of will-power and determination, of producing more steel regardless of whom one is selling it to? The hon. Gentleman and his hon. Friends live in a fantasy world.

It being one and a half hours after the commencement of proceedings on the motion, MR. DEPUTY SPEAKER put the Question pursuant to Standing Order No. 3 (Exempted Business).

Question put and agreed to.

Resolved, That this House takes note of European Community Documents Nos. 6374/83, Fourth Report on the application of the rules for aids to the steel industry, 6450/83, General Objectives for Steel 1985 and 6375/83, Proposal for a Council Decision relating to a contribution to the European Coal and Steel Community out of the General Budget of the Communities; and welcomes the Government's support given in the Council of Ministers for the ECSC Steel Anti-Crisis Measures.

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