Iron and Steel

HC Deb 23 July 1984 vol 64 cc736-69 4.48 pm

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

I beg to move, That the draft British Steel Corporation (Borrowing Powers) Order 1984, which was laid before this House on 13th July, be approved. The subject of this draft order is the statutory borrowing limit of the British Steel Corporation. This limit applies to all the corporation's borrowing, whether from the Government or from outside sources, as well as to payments of public dividend capital into the corporation.

The principal statute governing the BSC—the Iron and Steel Act 1982—provides that the limit shall be in the range of £2,500 million to £4,500 million and may be varied by order subject to an affirmative resolution of this House. The present limit stands at £3,000 million. It was set at that level in December 1982 by the British Steel Corporation (Reduction of Capital) Order that completed the capital restructuring of BSC which was begun in 1981. The order raises that limit by £500 million to £3,500 million. The House will recognise that, as with all these orders, it is permissive and does not commit the Government to providing that amount of money. Future funding will be governed by the external financing limits and the money will be subject to the Vote of the House through the Estimates in the normal way.

Hon. Members will recall that, when the present limit was set in December 1982, BSC's recovery from the steel strike of 1980 had also been hit by the introduction of protectionist measures in the United States. There had also been a sharp downturn in world markets for steel and, consequently, there had been a collapse of steel prices in Europe. Shortly after the House discussed the previous borrowing powers order at the end of 1982, my right hon. Friend the Secretary of State for Education and Science, who was then Secretary of State for Industry, made a statement to the House on BSC's strategy in the light of those events. He reported that progress to break even would be slower than had been expected and that the EFLs that were set for 1982–83 and for 1983–84 were no longer achievable. In the same statement, my right hon. Friend announced the Government's decision that BSC should draw up its next corporate plan on the basis of steelmaking continuing at all five integrated sites, with the objective of breaking even in 1984–85.

Although the corporation would be able to take management action to cut costs to maintain efficient operations and to move steadily towards the objective of viability, any closure of one of the five main integrated steelworks would have to be considered jointly with the Government. That remains the case. Following my right hon. Friend's statement, the EFL for 1982–83 was increased to £575 million and a new limit of £325 million was set for 1983–84. In the event, BSC's results for 1982–83 reflected the severe difficulties that I have described and the loss before exceptional items was £386 million—up £47 million on the previous year. I have described what happened in 1982–83 in some detail simply to remind the House where we have come from.

I am pleased to say that BSC made substantial progress in 1983–84 in recovering from the setbacks that I have outlined. I should like to refer to some of the events that are described in detail in the BSC's report and accounts, which were laid before Parliament earlier this month. One of the BSC's major objectives is to improve the cost structure of its businesses to bring them up to the best European standards. Since the end of 1982, productivity has risen steadily. The number of man hours needed to make one tonne of liquid steel fell to 7.1 in 1983–84, as compared with 9.3 in the previous year. In the quarter ended March 1984, BSC's production of crude steel rose to an annual rate of 271 tonnes per man year — 12 tonnes per man year better than in Germany and 46 tonnes per man year better than in France.

During 1983, performance records were broken at many BSC works. For example, weekly production records for continuous casting were achieved during September and October at Scunthorpe and Stocksbridge, and in August the Port Talbot slab caster recorded the highest United Kingdom weekly output for a single concast machine. There have been some considerable improvements and achievements. Overall production of liquid steel totalled 13.4 million tonnes—an increase of 1.7 million tonnes on the previous year. Energy usage per tonne of steel fell and the proportion of steel produced by the continuous casting process increased from 38 per cent. to 46 per cent.

Of course, improvements in manufacturing performance cannot be and are not the whole story. It is also necessary to increase the market share. During 1983–84, BSC maintained its share of a growing home market and increased its exports by 16 per cent. against an increase in the world market of only 3 per cent. I know that BSC has made considerable progress on customer satisfaction in terms of delivery and quality. Some hon. Members will recall the director of the National Association of Steel Stockholders paying tribute to the improved quality of BSC's products when he appeared before the Select Committee.

In financial terms, BSC's loss, excluding exceptional items, fell in 1983–84 to £174 million as compared with £383 million in the previous year. The external financing requirement fell from £569 million to £318 million. The number of employees fell during the year by 10,000. That is a lot but I must stress that it was the smallest reduction for several years and that, of those 10,000, about 2,000 were transferred to new companies that were set up or disposed of as part of the privatisation policy. Hon. Members on both sides of the House will agree that, taken as a whole, 1983–84 was a year of achievement for the BSC. I pay tribute to the chairman, the board, the management and, of course, the work force on their efforts to achieve these satisfactory results.

It would be wrong, however, to suggest that the results were achieved without problems, or without problems having to be overcome. The performance for the year conceals a contrast between the two halves of the year in terms of operating conditions. In the first half, there was a strong trading position and the BSC was ahead of forecasts in most respects. However, in the summer and autumn of 1983, prices became much weaker throughout Europe and trading conditions in the second half of the year were much more difficult. For that reason, action was taken by the European Community at the end of last year to restore market stability through a reinforcement of the anti-crisis measures. That helped to stabilise matters in the early part of 1984. I think that most people agree that that has resulted in price improvements in the current financial year. The anti-crisis measures, which include stricter output quotas, minimum prices for certain products and monitoring of intra-Community trade flows, are designed to provide a breathing space to facilitate the restructuring of the industry and to enable state aids for steel to be phased out by the end of 1985 — a Community requirement.

The Government have always been a firm supporter of those measures and our industry has been in the forefront in implementing the painful but necessary restructuring. It is pleasing that there is now evidence that other countries are matching our efforts. Commissioner Andriessen announced in May that he expects capacity reductions in the Community to reach about 30 million tonnes between 1980 and 1985.

In those circumstances, it is all the more important that the BSC should be able to compete effectively in Europe and the world and that the position reached through the commitment of funds in the past and the tremendous restructuring which has taken place should not be thrown away.

In view of the achievements of the BSC work force, it seems to me all the sadder and all the more perverse that the competitive position which has been reached should be threatened by the miners' strike. The attempts which have been made to prevent the steel industry from carrying on its business risk, as everyone must know, the permanent loss of markets which would endanger the future of the whole industry. It cannot be right to say that the BSC can survive the interruption of steel production. Everyone must know that foreign companies will snap up the market at the first opportunity. There is no need to dwell any longer on that aspect. The steel workers who have experienced a painful but necessary contraction of their industry have by their actions recognised the realities.

Mr. Peter Hardy (Wentworth)

I do not wish to anticipate difficulties in the steel industry, but does the Minister accept that, early in the miners' dispute, an agreement was made between those who work in the steel and the coal industries to ensure that Scunthorpe received the amount of coal that it needed and that men from pits in my constituency loaded and sent that coal? Does not hindsight suggest that it would have been better for the same approach to be adopted with coke? Is it not the case that, had adequate warning of the need for coke been given, the scenes at Orgreave would not have occurred?

Mr. Lamont

That is not a fair representation. It would not be right for this debate to turn into a great debate on the miners' dispute. I shall not pursue the hon. Gentleman down that road.

It is normal in debates on nationalised industries' borrowing powers to outline the planning over the period covered by the new powers. At present, however, planning is impeded by the uncertainty of the strike. The existing borrowing limit of £3 billion has been in place for about 18 months, which is very much as was expected when the previous order was debated at the end of 1982. At the end of March 1984, BSC's actual and potential borrowings against the limit stood at £2,866 million. The order seeks an increase to £3,500 million. We have set a target for the corporation of breaking even before interest in 1984–85 and an EFL for this year of £273 million. In the period after that, the BSC will seek to achieve enduring profitability and freedom from state aids from 1986 onwards, as required by the EEC. The corporation's assessment is that the business will require external financing during 1985–86 of a similiar magnitude to 1984–85. Other things being equal, therefore, we might expect the new powers to last for about two years from now.

The planning process has, however, been interrupted by the strike. The BSC chairman stated in his recent report that the corporation had come close to breaking even, before interest, at the beginning of the current financial year. We must hope that the impact of the miners' strike will not be too adverse on the corporation. Undoubtedly, that strike has had an effect, although these are early days and it is too early to say precisely what that effect is likely to be.

Mr. James Hamilton (Motherwell, North)

Does the Minister recollect that yesterday, on "The World at One", the Secretary of State for Energy stated that, despite the miners' strike, there had been an increase in steel production?

Mr. Lamont

It is true that overall steel production has stayed at remarkably high levels, and getting coal, coke and ore supplies through is a tremendous achievement. Production is down at some plants, but it has risen at others. The remarkable achievement has not been made without considerable effort. I am grateful to the hon. Gentleman for drawing attention to that point, but it is no thanks to his hon. Friends that that production level has been achieved. I was thinking that it was perhaps not a good thing to turn this debate into a discussion on the miners' strike—that is still my inclination—but I am willing to do so, if the hon. Gentleman wishes it.

Mr. Deputy Speaker (Mr. Harold Walker)

Order. Despite what the Minister is willing to do, the Chair will ensure that hon. Members keep to the subject of the debate.

Mr. Lamont

I agree with you, Mr. Deputy Speaker, that relevance is a far better route to pursue. I am bound, however, to make the point that we cannot debate the finances of BSC without observing that the miners' strike could have a serious effect on the corporation's finances, its markets and the future of individual plants.

Decisions on the BSC's planning will need to wait until the position becomes clearer. It is already obvious that, under any foreseeable circumstances, the cash needs during the current year and the next financial year will require the commitment of the great bulk of sums provided for in this order. The House will, of course, be kept informed as external financing limits are set for each year.

We have made it clear that we wish the corporation's activities to be returned to the private sector. I should like to comment on the rather synthetic expressions of surprise made by some hon. Members when my hon. Friend the Under-Secretary of State for Trade and Industry made it clear in answer to a recent parliamentary question that our aim is that BSC should earn profits and pay dividends on its capital and should eventually be returned to the private sector. It cannot be any surprise to the House to note that that is the Government's objective. We have consistently made it clear that we see no reason why the Government should be involved in steel production through ownership of the major part of the industry, and we see no reason for this industry to continue to depend on funding from the taxpayer.

Priority must necessarily be given to the reduction of losses, not just to reduce the burden on the taxpayer but because viability and profitability are essential if private sector finance is to be attracted and industry is thus to have a long-term future. However, the Government and the corporation have both taken the view that, while striving to turn around the corporation's overall performance, immediate attention should be given, first, to privatisation in the area where BSC's activities are in direct competition with the private sector and, secondly, to those activities that are not part of the corporation's mainstream business. We are, however, still some way from the point at which bulk steelmaking can be privatised. The timing of the elimination of subsidies depends on developments in the market, the successful continuation of the anti-crisis measures in Europe and continued improvements in BSC's performance. In the so-called "overlap- area, we have been concerned that the conditions of competition between the public and private sectors should be, and be seen to be, completely fair. For that reason, we have sought where possible to achieve the outright sale of the BSC's activities or, where that is not immediately possible — for example, because of a need for large-scale rationalisation — to set up Phoenix-type joint ventures as a halfway stage. In 1983–84 a number of joint ventures of that kind were set up, including two mergers between BSC and Tube Investments for seamless tubes. Those disposals have already helped to reduce the proportion of the corporation's activities in the overlap area.

Since 1980, the total book value of assets disposed of is £274 million, which is 13 per cent. of the total book value of BSC's assets in 1980. Land and property sales have realised about £61 million. Twelve companies have been set up, some of which have subsequently been privatised. They include the so-called Phoenix II joint venture in engineering steels which would halve the remaining overlap area. I know that certain hon. Members are interested in this point—proposals have been put to the Government on this venture and negotiations are taking place.

Mr. Stan Crowther (Rotherham)

I hope that the Minister will tell us whether the proposals in the order take account of the Phoenix II proposals. Is the proposed new limit of £3,500 million based on an assumption that British Steel's special steels group will have been privatised during the period covered by the order? Clearly that factor must affect the borrowing requirement.

Mr. Lamont

The corporation is not the only source of finance for Phoenix II, but it might be a contributor to a joint venture. Part of that is provided for in the extension of the borrowing limit, but it depends upon precisely when the investment takes place because, as I have said, we expect the limit to last for some two years. It includes some contribution towards a Phoenix II venture.

Mr. Crowther

The Minister is not answering the question. If the Phoenix II proposals have not gone through during the period intended to be covered by the order, any investment in the special steels group must be covered by BSC's own borrowing powers. If, however, special steels have been privatised by then, future investment will be covered from outside BSC's borrowing powers. I am anxious to know which assumption has been made in arriving at this figure.

Mr. Lamont

The borrowing power is consistent with both assumptions. There could be a contribution from BSC towards a proposed joint venture, and there could be investment by BSC in its own engineering steels business. Either way, that would be consistent with the powers being taken under the order.

The hon. Gentleman will realise that it is open to us to decide when we must come back to the House for more money. Under the terms of the order, we expect that there will be a contribution towards Phoenix II. It is not open to me now to say precisely what we expect that will be or when it will be made. In addition to Phoenix II, there are several orders——

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

Before the Minister leaves Phoenix II, can he say a further word about the proposals to which he referred? He will be aware that the annual report which he has mentioned contains a statement that a detailed joint plan covering Phoenix II has been submitted to the Government. The Minister will be aware that some of my hon. Friends and I discussed Phoenix II across the Floor of the House with him as long ago as 1982. The talks that gave rise to the proposals which are now in the Government's hands have been going on for four years. Can he say what has gone badly wrong?

Mr. Lamont

A detailed proposition has been put to the Government only recently. There have been many discussions about possible propositions and different combinations of plants, but we now have a specific proposal and a specific request. We are now looking at them. I am sorry that it is not a satisfactory position for the House. We want to reach a decision on that as quickly as possible. I well understand the anxiety that the matter causes in the hon. Gentleman's constituency. We shall attempt to deal with it as quickly as possible.

Several other disposals or joint ventures are in prospect. There are two sides to privatisation. It also requires a commitment from the private sector—steel or non-steel —to strengthen its involvement in the industry. BSC's assets will be sold only at a realistic assessment of their value to a viable business.

Where immediate disposal is not in view, we are encouraging the corporation to set up further limited liability companies. We have stressed that these must be genuinely at arm's length from the corporation. That will improve the transparency of its separate businesses and be a first stage towards privatisation. That is a point that the private sector has put to me, again and again, as one to which it attaches importance, because it demonstrates transparency and fairness of competition.

Government assistance to the corporation has been massive over a number of years. We look forward to the time when such support will no longer be necessary. The management and the work force have contributed wholeheartedly to the return of the business to viability. The order will enable further funds to be provided to enable the process to continue over the next two years. The immediate future is, as I have said, regrettably unclear because of factors to which I have referred. However, the House will be kept informed as decisions are taken and the provision of finance to BSC will be subject to the normal controls. I commend the order to the House.

5.14 pm

Mr. Roy Hughes (Newport, East)

The order is essentially about the corporation's borrowing powers under the Iron and Steel Act 1982. The Opposition welcome and support the proposal to increase those borrowing powers from £3,000 million to £3,500 million.

I was glad to hear from the Minister of the progress that has been made by the corporation in recent years. He gave splendid figures of its overall output and efficiency with regard to the tonnage produced compared with the number of people now employed. The corporation is now, of course, slimmed down.

There was one worrying aspect of the Minister's speech. I am talking, of course, about the Minister's reference to the Government's privatisation proposals. They will create a new scare and further uneasiness throughout the corporation. We must remember that it was originally taken into public ownership to provide the essential investment in the steel industry that had been denied it for many years by its former private owners. His remarks will cause bitter resentment throughout the industry. They might herald a new period of instability and uncertainty, which could do untold harm to its future.

Those of us who have been interested in the industry for a long time believe that an efficient steel industry is vital for an industrial nation such as Great Britain. We cannot afford to rely upon imported supplies of steel. We believe that a sizeable and efficient steel industry is vital for this country's defence. It could be justified on that ground alone. Without an independent steel industry we would be at the mercy of overseas suppliers with all that that can mean for pricing policies and delivery dates.

Our steel industry's production capacity has been cut to the bone. I have put forward that view in the House many times. I have spoken in most of the steel debates over the years. I have a constituency interest in that the integrated plant of Llanwern and other smaller works are in my constituency. When we debate the corporation's borrowing powers and this proposal to increase them, I can ask the Minister, with a twinkle in my eye, whether he would please bear in mind Llanwern and its proposal for a new concast plant. I believe that its record of output and overall efficiency in recent years justifies such an investment.

The Minister has said that we are in the midst of a serious mining dispute. I am aware that that has posed many problems for the steel Industry. In some ways, it is disrupting the industry. The longer the dispute goes on, the more serious the situation becomes. For many reasons, the sooner the mining dispute is concluded the better. The politics of confrontation should cease. What we require now is statesmanship, because there would seem to be little between the two sides.

In recent weeks and months there have been proposals concerning the European Coal and Steel Community. Can the Minister say, in relation to recent agreements, what will be the future position of the United Kingdom steel industry? What is happening about new investment? I am sure that many of my hon. Friends representing steel constituencies throughout the country are anxious about the future of their plants, believing that we need new investment in them to keep up with new technology, and to retain our competitive position in the markets of the world.

Recently, there has been comment in the media about the quota system. Can the Minister tell us how the BSC will fare under the new system? Some of us recall what happened when there was a mass attack on our own domestic steel industry. We recall that while our industry was being cut to ribbons, with all the social problems involved, Italy was increasing its overall productive capacity.

As I said earlier, I speak with a certain local —indeed, a Welsh — interest. Unfortunately, Wales has always had a record as an area of high unemployment. Since 1977 it has lost no fewer than 40,000 steel jobs. I vividly recall what happened at Shotton, at Ebbw Vale, at Llanwern, at East Moors and at Port Talbot. Thousands of jobs were lost, causing problems for many families and many communities. Many of my colleagues could tell a similar story from their own areas, particularly in Scotland and in the north of England.

I repeat that our steel industry has been cut to the bone. We need our five integrated steel plants. From time to time, the media refer to the alleged rivalry between Ravenscraig and Llanwern. I say clearly and unequivocally that it is non-existent; there is no such rivalry. We need all five plants. I believe that one day, perhaps even under this Government, we shall have a measure of economic expansion — a so-called upturn in the economy. In that sense, I support the order.

5.24 pm

Mr. Richard Hickmet (Glanford and Scunthorpe)

The present position in my constituency reflects to a certain extent what has happened to the steel industry in recent years. In the good days we were making a great deal of steel in Scunthorpe, with three major steelworks employing about 26,000 men. Today, we have one major integrated plant there, employing 6,800 men. Nevertheless, prior to the coal miners' strike, the Scunthorpe steelworks was achieving new production records. The weekly production was 61,000 tonnes at its height. That is in a context of overcapacity in steel production, not only in the United Kingdom or in Europe but in the United States and on a world wide basis. Europe is awash with steel. The BSC exports about £700 million worth of steel—roughly 30 per cent. of its product.

The position in which the BSC finds itself as a result of the coal mining dispute is, to say the least, serious. Prior to the dispute, the BSC had managed to sustain three price rises. The market had borne those three price rises since about January. Our market share at home was increasing by about 4 per cent. per annum, although I am bound to point out to my hon. Friend the Minister that that is not on the capital side. When production increases on the capital side BSC's position will become that much stronger. Nevertheless, production in the home market was increasing by about 4 per cent., and the BSC had become one of the most competitive, if not the most competitive, steel producers in Europe.

My hon. Friend the Minister referred to the figures. In the United Kingdom, tonnes per man-year in the year ending March 1984 were 271, compared with 176 in 1982. That was higher than the figures for West Germany and France— a remarkable turn-round. The quality of the product that the BSC is producing is infinitely superior to what has been produced in recent years. In addition, the BSC has become more reliable in its production targeting and in meeting its orders.

The present position is, of course, serious, because the BSC has, in effect, stopped exporting the amount of steel that it was exporting prior to the coal strike. I do not know what the present figures are. The Minister has not given them and I do not think there has been any public announcement about them, although there is some speculation.

The coal miners' strike must be causing losses to the BSC. I do not know what they are running at. In some journals, the losses are said to be virtally nil; in others they are said to be about £5 million per week. I do not wish to turn the debate on the order into a debate on the coal mining dispute, but I do not think that we can look at the financing of the BSC without taking that dispute into account. If the NUM's policy was successful, and production ceased at Ravenscraig and Scunthorpe, our market share would be lost substantially in Europe and in the United Kingdom.

The lesson of the 1980 strike was that, however hard we try to prevent imports, it cannot be done. BSC has been driving out imported steel and has recaptured more of the market. We have more of the home market than do any of the major European steel producers. The loss of the European markets and the home markets would be a double tragedy for BSC.

The attempt by the leadership of the NUM to put the steel industry out of business has been pursued with unacceptable vigour. I hope that the dispute will be ended speedily. Nevertheless, it is essential that supplies of coal, coke and iron ore continue to enter the steelworks in sufficient quantities to maintain their production. I hope that the Minister will assure us that that will be so.

I should like to ask the Minister one or two questions. Future state aid to BSC depends upon the Commission's approval of the BSC's new corporate plan, which will produce viability by the end of 1985. Can the Minister tell us what the corporate plan provides—I believe that he has had the plan on his desk for some time — and whether the need to bring capacity and demand into balance will ensure that our five major integrated plants can be retained?

Can the Minister tell us whether the quota arrangements and agreements for capacity restrictions are being observed by the Italians, the Germans and the French? There was clear reluctance by the Governments of Italy, Germany and France to come up with the requisite capacity reductions. Have they realised that they cannot continue to fund the massive losses in their steel industries? Is the Minister satisfied that sufficient is being done to ensure that those countries are observing the Commission's directives on capacity reductions?

The Select Committee on Trade and Industry, of which the hon. Member for Rotherham (Mr. Crowther) was a member, made several recommendations in its report that have implications for BSC's funding. Recommendation 3 is that now is not the time to close a strip mill". Can the Minister enlarge upon that?

The strategy of rationalisation, or cutbacks, in European steel-producing capacity has gone hand in hand with social policy. Member states do all that they can to ensure new investment in steel closure areas. I should remind the Minister that the Government are considering the regional aid map. I ask him to bear in mind the special position of steel closure areas in this country.

It is apparent that BSC — its work force and management and the trade union—have turned round BSC from an appalling loss-maker to a position in which it approaches its target of viability. However, viability is not enough. If adequate capital investment is to take place there must be profitability. BSC has turned into one of the most productive steel makers in Europe. All those concerned should be congratulated on their effort.

It is vital that the attempt by the NUM leadership to bring the steel industry to a halt should be defeated. If it were successful, the consequences for the 71,000 men working for BSC would be more hazardous in many ways than for those who are presently engaged in the coal mining industry. Steel would be affected by rationalisation in the mining industry. I should like, therefore, to support the order.

5.37 pm

Mr. Stan Crowther (Rotherham)

I was most surprised that Conservative Members brought the coal industry dispute into the debate. If the Government had pursued expansionist economic policies in the past five years, not only would the steel industry be far more productive, but we should be using every tonne of coal that we could get. Arguments about pit closures would be largely academic. Because of the Government's contraction of the economy, we have a dispute in the coal industry. Therefore, I was surprised that the hon. Gentlemen brought the dispute into our debate.

The hon. Member for Glanford and Scunthorpe (Mr. Hickmet) referred to the sad story of the reduction in the work force at Scunthorpe. That merely reflects what has happened throughout the steel industry. It is, I agree, a very sad story. Nothing is more tragic than the way in which our steel industry has been run down in recent years. It is heart-breaking to pass through the area between Rotherham and Sheffield, and to see works that have closed and are derelict. Once, it was the most intensive centre of operations in steel making and heavy engineering in the whole of Europe, but the industry has been moving in that direction for some years, under the Government's leadership.

I thought that the Minister was getting a little mixed up after he kindly allowed me to interrupt his speech to ask him whether the Phoenix II proposals were taken into account in fixing the £3.5 billion in the order. The fact is that that is affected by whether privatisation has taken place. A long time ago, when the then Secretary of State for Industry, the right hon. Member for Leeds, North-East (Sir K. Joseph), invited several hon. Members to discuss what became known as the Phoenix II scheme—I think that my hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy) was there — the right hon. Gentleman explained that that scheme had to be put outside the public sector so that its borrowing would not be reflected in the public sector borrowing requirement. If the Phoenix II proposal goes ahead and the special steels group of British Steel Corporation is passed into the private sector, any borrowing by that company from then on will not be within the £3.5 billion limit proposed in the order. Therefore, that matter is relevant and any further borrowings will be in the private sector, not the public sector. I wanted to make that point clear.

When the chairman, Mr. Haslam, gave evidence to the Select Committee on 18 January, he said: At present we have a number of these projects in hand". By "these projects", he meant the Phoenix schemes. He stated further: Our EFL for the coming year, which is £275 million, will not cover all the larger ventures in hand. In our discussions with government on our EFL we naturally recognised for example that if we go ahead with Phoenix II, which is a joint company with GKN, then an additional contribution from government would be necessary. I think that the chairman got it wrong too, if what the former Secretary of State said was right. It is true that more Government money will be necessary. It may be Industry Act money, but it will not be under the BSC borrowing powers.

I am extremely worried—as worried as everyone in the industry is — about what is happening about the Phoenix II proposals. I should remind the House what Phoenix II now entails compared with more than four years ago, when it was first considered. At that time it was intended to merge the BSC special steels group with several private sector plants, including Duport's works in south Wales and the west midlands, the Round Oak works in the west midlands, Hadfield's in Sheffield and the GKN Brymbo works in north Wales. However, because of the terrible events in the steel industry—so much has closed down—only GKN Brymbo is left in the private sector to be merged with the BSC special steels group.

According to written answers that I have received, about 82 per cent. of the productive capacity of the proposed new private sector company will come from the public sector. Less than 20 per cent. will be provided by GKN, yet BSC will not be permitted to own more than 50 per cent. of the shares in the new company. Therefore, the taxpayers' assets will be handed over to a private sector company and our representatives, in the form of BSC, the only public corporation involved, will have no more—probably less—than half the shares in the company. That is a serious matter for the taxpayer. It cannot be in taxpayers' interests to pass over to the private sector what is potentially the most profitable part of the whole of BSC' s operation.

It is remarkable that, when the Minister of State gave evidence to the Select Committee on 8 February, he omitted to mention that proposals jointly agreed by BSC and GKN on Phoenix II had arrived in his Department on 19 December. He was extensively questioned on the matter, but at no stage did he tell the Committee, "We have received proposals from the two organisations involved." In fact, far from saying that he had received the proposals, he went out of his way to imply that the Department had not received them. I asked him whether there was an estimate of the new company's productive capacity and whether any capacity closures would be involved. The Minister said that his Department did not have an estimate. I asked him how much Government money would be put into the new private sector company, and he said: no proposition for the money has been put forward. It was only as a result of written answers and correspondence from the Under-Secretary that I discovered that all that information and all those proposals had been in the Minister of State's Department since 19 December, including proposals for further reductions in capacity which, according to the Under-Secretary, are commercially confidential and including proposals for more Government money, although no precise figure was yet put on it. I do not intend to pursue that point further in the Chamber because it might be pursued elsewhere. I am rather disturbed that the Minister of State felt it proper to try to keep that information from the Select Committee when we were carrying out an inquiry into the future of BSC. No doubt he had good reasons, but I cannot understand what they are.

If the company is established under the Phoenix II project, it will have a monopoly within the United Kingdom in the production of a wide range of engineering steels. The Select Committee has expressed grave concern on that matter. We said that many customers will not be happy about having only one source for their steel. People might be driven to going overseas and importing steel because they do not want to be tied to a single supplier in the United Kingdom. To their credit, the Government are looking into that issue. I look forward to seeing the results of their inquiry. The result of my inquiries is that many existing customers of the special steels industry, both in the public sector and private sector, are unhappy about the idea of having only a single source in the United Kingdom.

Another effect on customers should be taken seriously into account. Several people have expressed concern to me about it. GKN is the other partner with BSC in the venture. That is what creates the problem. GKN is not only a steel maker but a steel user. It has massive engineering interests. Some of its competitors in engineering suspect that GKN, having established itself as a major partner in a new company holding a monopoly in the production of these steels, will be able to use its influence to provide for itself an advantage in prices that will not be available to its competitors in the engineering world that have to go to the same company to buy their steel. The Minister of State should be concerned about that matter. After all, we have been assured time after time that competition is one of the important features of the Government's policy. They believe in competition to provide efficiency in industry, and so on. In this case, they are about to destroy competition, apparently greatly to the disadvantage of many private sector engineering companies.

The Select Committee refers to the effect of Phoenix II on the taxpayer in paragraph 35 of its report, which expresses concern about the hiving off of a potentially valuable and profitable part of BSC: We are concerned that such an approach will lead to privatisation of the more profitable parts of BSC only to leave a loss-making rump in the public sector. The Minister of State must deal with that point when he winds up the debate. If it is Government policy to privatise those parts of any public corporation that can make a profit —for instance, the Jaguar cars part of BL, perhaps the warship-building operations of British Shipbuilders and certainly the special steels section of BSC—how can it be for the benefit of the taxpayer to be left with the non-profitable parts of the industries concerned? The Government must give a full explanation of how it can possibly be in the national or public interest to take away the parts of publicly owned industry most likely to bring a return on the money that taxpayers have invested. As taxpayers, we are entitled to expect a return on our capital. If the operation involved is hived off to the private sector as soon as such a return becomes available, how can the taxpayer get something back for what he has put into those industries?

Mr. Christopher Hawkins (High Peak)

In return for the profit-making asset, the taxpayer receives a capital sum which reflects the potential future profitability of that asset. The loss-making parts of the undertaking remain in the public sector in any case. The capital sum received by the taxpayer can then be invested in other areas such as the National Health Service, Government bonds, the Post Office or building societies to yield a rate of return.

Mr. Crowther

With respect, if the hon. Gentleman believes that, he will believe anything. The history of privatisation by the Government shows that, on the contrary, valuable public assets have been sold off at bargain basement prices.

Mr. Hawkins

That is a different point.

Mr. Crowther

It strikes me as being very much the same point. Moreover, with Phoenix II it is not even a question of selling but of giving away. It has been made clear both in the chairman's evidence to the Select Committee and somewhat grudgingly in parliamentary answers to me that the taxpayer will be giving the so-called purchaser extra money to take away potentially the most profitable section of the industry. That is utterly unacceptable. It is not as though the Government are asking the City, as they sometimes do, how much they can get for the asset. On the contrary, they go along to GKN — the only company left since Duport, Tube Investments and Hadfield's have been knocked out—and ask what it is prepared to pay.

At least, that seems to be the intention if we are to believe the words of the then Secretary of State—there have been quite a number of them—at the last general election. In a letter to the British Independent Steel Producers Association, the then Secretary of State said that the intention was to see what the private sector could afford. Apparently, it is no longer a matter of what things are worth but merely of what the private sector can afford. When there is only one potential buyer, that is scarcely a reasonable way to determine the true market value.

In my view, there is no doubt at all that the taxpayer is to be sold down the river completely. There is also a great danger to the private sector engineering companies which will have to buy their steel from a United Kingdom monopoly in which one of their competitors holds a substantial part of the equity. These questions are causing great concern. I hope that the Minister can produce some good answers today.

5.55 pm

Mr. Michael Brown (Brigg and Cleethorpes)

I have had the privilege of attending every steel debate in the House since 1979, but this is the first in which there has been a note of such considerable optimism. I no longer represent a steelworks as my constituency now ends about a mile from the great Appleby Frodingham steelworks, which I had the privilege to represent from 1979 to 1983, but times have certainly changed since the dark days of 1979 and 1980 when the Opposition, week after week, led by the Leader of the Opposition and the Shadow spokesman, called from crowded Benches for debates about the steel industry. Where is the Leader of the Opposition now? Where is the Shadow spokesman? Where are all the Opposition Members? They are not here because they no longer need to worry about the steel industry.

Mr. Harry Ewing (Falkirk, East)

Will the hon. Gentleman give way?

Mr. Brown

Perhaps I may first develop the point.

I make no criticism of Opposition Members for not being present today because there is no need for them to be here. The steel industry no longer faces the crisis that it faced in 1979 and 1980. In those days, the Opposition were right constantly to demand debates, to participate in those debates and to argue about the kind of steel industry that we should have in the future. It was a testing time for me, too, because I had to decide on my own stance, bearing in mind not only my constituency interest but my loyalty to my party.

Mr. Ewing

I am anxious that the hon. Gentleman should not continue much longer without apologising for drawing attention, in his usual unfair way, to the absence of my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) as soon as my right hon. Friend had left the Chamber. As my right hon. Friend had been present throughout the earlier part of the debate, the hon. Gentleman should have the courtesy to withdraw his remark. Moreover, before the hon. Gentleman gets carried away by his own enthusiasm, he should remember that we have plenty of crises to deal with—the economic crisis and the crisis in the coal industry, to mention but two. We are never short of a crisis or two with the present Government in power. Whether it be in the steel industry, the coal industry or elsewhere, there will always be a crisis so long as they remain in power.

Mr. Brown

I shall ignore the hon. Gentleman's last comment, but I certainly withdraw any unfairness that my remarks may have implied. They were certainly not intended in that vein. I went on to make it clear that there was no need to worry about the steel industry. As the hon. Gentleman rightly says, there are probably more important matters now requiring attention. I certainly intended no criticism, but if any was implied I certainly withdraw it. We have come a long way since 1979 and 1980.

The hon. Member for Rotherham (Mr. Crowther) made a significant statement in his comprehensive speech when he said that the taxpayer had a right to a return on his investment. For one moment I thought that it was my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), the former Secretary of State, speaking. Any of my hon. Friends could have said that. How right the hon. Member for Rotherham was. That is what this Government have tried to ensure for five years. From 1979 the Government's intention has been to say as loudly and as clearly as the hon. Member for Rotherham that the taxpayer has a right to a return on his investment. At one time nearly £1 billion a year was being lost in the steel industry.

Mr. Crowther

If that is so, why does the hon. Gentleman support giving away public assets just when they are about to give the taxpayer a return on investment?

Mr. Brown

The taxpayer can be saved the sums that he used to have to spend to keep going an industry which was inefficient and producing steel for the wrong customers, or for customers who were not there. He can be saved the £869 million that he had to spend in 1982–83 and throughout the mid and late-1970s. Is it not right that the taxpayer should now receive a return on his investment because people are able to invest voluntarily in the steel industry?

I want to contrast what happens today with what happened in 1979–80. It is important and puts in context the achievement by the Minister of State and his colleagues in the order. I recall the massive sums that had to be voted through to sustain the steel industry in the late 1970s and early 1980s. However, that is not all that this Government are about. They have ensured that the industry can survive and thrive. It is not enough to come to the House every year, or every two years, with a borrowing powers order. It is not enough to announce each year the external financing limits, although tremendous achievements are involved in that.

According to this year's report, the external financing limit is £3 million below the limit of £321 million set last year. That represents the smallest subsidy for nine years for the steel industry. My hon. Friend the Minister acknowledged that 10,000 people went out of the industry in the last year, but that was the lowest number for many years.

We now have a steel industry capable of surviving and competing against the most difficult competition from Japan and Germany. According to this year's annual report, output is up to 271 tonnes per man-year, compared with 259 tonnes per man-year in Germany and 225 tonnes per man-year in France.

Criticism was heaped upon me, Mr. MacGregor and my right hon. Friend when in 1980–81 a decision was made that had a tremendous impact on the constituency now represented by my hon. Friend the Member for Glanford and Scunthorpe (Mr. Hickmet). I was challenged by the Opposition to go into the Opposition Lobby to save the Normandy park steelworks and oppose the redundancies involved. I decided that my duty was to support the policies upon which I had been elected to a steel constituency. Today I can say that I never regretted going into the Lobby wholeheartedly in support of the policies that the Government set for the steel industry. Today, tomorrow and in the future my hon. Friend the Member for Glanford and Scunthorpe will represent a steel constituency. If we had not taken those decisions in 1980–81, my hon. Friend would represent not a steel constituency, but an industrial desert.

I pay tribute to my hon. Friend the Member for Glanford and Scunthorpe for the way that he has represented that constituency. Like me, my hon. Friend recognises that it is important to tell steel workers the truth and to vote in support of one's own Government when one knows that that will benefit the steel industry in the long term. Steel workers will then vote Conservative. My hon. Friend's presence here today is testimony to that.

Mr. Crowther

Does the hon. Member for Brigg and Cleethorpes (Mr. Brown) recall that when Mr. MacGregor, as part of his corporate plan, proposed to close down Normandy park he appeared on television with me and strenuously defended the decision to close the works on the ground that it would guarantee the future safety of the rest of the steel industry in Scunthorpe? How many jobs were lost in Scunthorpe after the hon. Gentleman approved the closure of Normandy park?

Mr. Brown

I shall answer the question with pleasure. I recall the interview. It was in line with the speech that I made to the House in November 1980 when the decision to close Normandy park was announced. The capacity of Scunthorpe today as a result of the decision to close Normandy park is higher than expected. Of course. some jobs have been lost subsequent to that decision. I do not know the exact figure, but relatively few were lost. It was always made clear by the Government, by Mr. MacGregor and by myself that the closure of Normandy park of itself did not mean that we would give up the battle to become efficient. It did not mean that we would give up the battle to achieve 271 tonnes per man-year output. Nowadays we have to look further than job losses. The 271 tonnes per man-year is the important statistic which will guarantee future jobs in the steel industry.

Mr. Hickmet

What happened in Scunthorpe and elsewhere was simply the precursor to what is happening now in the rest of Europe. Since 1979 the Government have succeeded in putting the British Steel Corporation in the most competitive position that it has been in for many years. The Italians are reducing capacity by 6 million tonnes, Belgium by 5 million tonnes, France is planning to make a quarter of its steel workers redundant and Germany is examining the prospect of taking out 10 million tonnes of capacity.

Mr. Brown

I agree with those statistics. They clearly show that our steel industry has already taken decisions which are now being taken by the rest of Europe.

Perhaps I have been provocative, but I shall now try to find a common cause with the hon. Member for Rotherham, a distinguished member of the Select Committee which produced an excellent report on the future of the steel industry. The Select Committee took the view that there was no room for further capacity cuts, and I agree with that. Because of the policies instituted by this Government four or five years ago, which were carried out with such effectiveness by Mr. MacGregor and supported by the work force in the steel communities, there is now the possibility that the market for the United Kingdom output of steel can be sustained by five integrated steelworks. I commend that section of the Select Committee's report to my hon. Friends. However, we must constantly underline the need for competitiveness and that supply and demand should, as far as possible, be in line. On the basis of the industry's output, its costs and its profits, I think that we can justify the retention of five integrated steelworks.

The figures in last year's annual report, recently produced by the British Steel Corporation, show that the Select Committee's optimism is justified. In 1983–84, the industry's exports had risen by 15 per cent. to the highest figure for five years. The role that British Steel has found for itself in the export market shows that there is room for the optimism in the report. I pay tribute to the hon. Member for Rotherham and his colleagues for producing such a fine report.

I pay tribute also to my hon. Friends at the Department of Trade and Industry, the British Steel Corporation, the work force and, above all, to Mr. Bill Sirs, the general secretary of the Iron and Steel Trades Confederation. Mr. Sirs is a distinguished trade union leader and his words during the past few weeks have been little different from the words of my right hon. Friend the Member for Leeds, North-East when he was Secretary of State, the words of his successors, and the words of Mr. MacGregor two or three years ago.

I recall the laughter in the Chamber when, time after time, the only message that my right hon. Friend the then Secretary of State and Mr. MacGregor could offer to the work force was that we must retain our markets and supply our customers with the products they wanted at prices they could afford. During the past few months, Mr. Sirs has said nothing more nor less than that. He has shown great courage. Of course, we all want a unified trade union movement. I do not think that any Conservative Member derives any pleasure from seeing trade union leader fight trade union leader. That is not healthy for industrial democracy or good will—[Laughter.] The hon. Member for Kingston upon Hull, East (Mr. Prescott) laughs. I am making a serious point. I hope that he derives no pleasure from the fact that Bill Sirs has had to write the sort of article that was printed in the national newspapers last week. I do not derive pleasure from that, and nor do my hon. Friends. We do not derive any pleasure from seeing the triple alliance—

Mr. Crowther

The hon. Gentleman should speak for himself.

Mr. Brown

Of course I speak for myself, but I cannot believe that I am not speaking for the whole House in saying that we derive no pleasure from seeing Bill Sirs fighting the leader of the National Union of Mineworkers. Surely the Opposition would agree with me on that—[Interruption.] I hope that the hon. Member for Kingston upon Hull, East, who has dropped into the Chamber for a few moments, will take—

Mr. John Prescott (Kingston upon Hull, East)

Rubbish.

Mr. Brown

The hon. Gentleman may call what I have said rubbish, but I hope that he is not calling what Mr. Bill Sirs has said rubbish. Now that the Humber bridge is built, some of the hon. Gentleman's constituents may work in Scunthorpe. He should remember that the words of Mr Sirs are those of a wise trade unionist who, when time and occasion demanded, was willing to take industrial action on behalf of his members. I hope that the hon. Gentleman recognises what he is saying. He should read the articles in the national press written by Mr Sirs who, not only on behalf of the steel workers but on behalf of manufacturing industry as a whole, has stood up against one man.

The hon. Member for Newport, East (Mr. Hughes) referred to the coal mining dispute and said that there was little standing in the way of a negotiated settlement. He may be right. Only one person stands in the way of a negotiated settlement, and that is Mr. Arthur Scargill. I agree with the hon. Gentleman—

Mr. Deputy Speaker

Order. While it is in order to discuss the coal mining dispute in relation to the steel industry, I hope that hon. Members will not be led into a discussion about the dispute itself.

Mr. Brown

I apologise, Mr. Deputy Speaker, but I was incited to go down a road that I recognise was out of order.

It is important to recognise that, with the justified optimism in the Select Committee report and the excellent policies that have led to the creation of one of the best steel industries in the world, only Mr. Scargill's coal dispute stands in the way of ultimate success for steel workers in general and for the steel industry in particular.

Six coal mines in south Yorkshire —11 throughout Britain — supply the Scunthorpe steelworks in the constituency of my hon. Friend the Member for Glanford and Scunthorpe. I hope that all will recognise the importance of the steel industry to the coal mining industry. I hope that all will recognise the words of Mr. Bill Sirs. I hope that the Leader of the Opposition will give Mr. Sirs the same support as he has given to the leader of the NUM. Bill Sirs is a distinguished trade unionist and we can all learn many lessons from what he has had to say on behalf of the steel industry.

Mr. Crowther

I am listening with great interest and approval to the words in praise of Mr. Sirs. But did the hon. Gentleman support Mr. Sirs in 1980? Did he support him while he was opposing closures in the iron and steel industry? Why, suddenly, has Mr. Sirs become a great man? The hon. Gentleman should have supported him before.

Mr. Brown

I think that Mr. Sirs would be the first to admit that he and his union learnt the hard way. They learnt that the strike in December, January, February and March of 1979–80 led to the loss of jobs.

I think I hear the hon. Member for Kingston upon Hull, East saying, "We won". I presume he means that, in his view, the steel workers won. In fact, they lost as a result of that strike. Bill Sirs has made it clear that an industrial dispute of the kind which was prosecuted by his union in 1979–80 and the dispute now being prosecuted by the coal miners will in the long run result in fewer jobs in the steel industry, and, ultimately, less opportunity in the coal industry.

I congratulate all concerned on what they have achieved in the steel industry, including the Government, the British Steel Corporation, the workforce and its union leader. Only one man stands between solving the miners' dispute and between success and failure in the steel industry.

6.21 pm

Mr. Tom Clarke (Monklands, West)

The vitriol which, no doubt, Conservative Members have been, advised to use in this debate was personified in the speech of the hon. Member for Brigg and Cleethorpes (Mr. Brown). I, too, recall the steel strike of 1980. I remember seeing Mr. Bill Sirs on television with tears in his eyes, but I do not recollect him being supported by Conservative Members.

It is a matter of pride for me, as we address ourselves to the problems of the steel industry, that some of the foremost supporters of the miners in their present dispute in Lanarkshire are people employed in the steel industry —an industry which, despite the tone of the Minister's speech and the remarks of Conservative Members, still feels insecure.

The hon. Member for Brigg and Cleethorpes said that he had attended every steel debate in the House for the last five years. I do not want to split hairs, but I suggest that he was wrong. I have been in the House for two years and in that time have initiated two Adjournment debates—[Interruption.]—on the future of the steel industry in Scotland. That may be a laughing matter for Conservative Members; their sense of humour is as repugnant as their economic policies.

In those debates, I presented what I thought was a reasonable case for the future of Ravenscraig and Gartcosh. When replying to those debates, the Minister did not give the assurances to which we were entitled. For example, he did not give the sort of assurances which the figures in the order now before the House suggest that he should have given.

Is it not time that the Government stopped taunting Ravenscraig? In view of the success of the steel industry which Conservative Members have drawn to our attention, is it not time that we stopped speculating about the future of any one of the five major plants, and in particular told Ravenscraig that it has made such great strides forward that it has a sure future?

I say that because, as my hon. Friend the Member for Falkirk, East (Mr. Ewing) knows, in my constituency is the Gartcosh plant. The future of that plant is not only important to the future of the steel industry generally but is of great importance to the future of Ravenscraig. In other words, if there are worries about Ravenscraig, there are bound to be fears about Gartcosh. My area once boasted proudly of its coal and steel industries. Today, we do not have one pit, following the closure of Cardowan last year. Should anything happen to Gartcosh, we will not have one steel job in my constituency.

Time and again we are told by Conservative Members —the hon. Member for Brigg and Cleethorpes made a big point of it — that this is an argument solely concerned with markets. In the constituency which I formerly represented, which is now represented by my right hon. Friend the Member for Monklands, East (Mr. Smith), we had the Imperial tube works. I regret to see that the Minister is leaving the Chamber because he had a major part to play at that time. Perhaps he is not leaving but is simply seeking assistance from his civil servants. I am surprised that he must seek assistance so soon. I have only begun to make the major points that I wish to put to him.

We were told at that time by Mr. Ian MacGregor that 300 jobs at the Imperial works could not be saved, and he was supported in that statement by various Ministers. We were told that there was no need for those jobs because the markets did not exist to support them. Previously, however, we had been told by the Chancellor of the Exchequer that, because of activity in the Northorth sea, there would be prosperity in the tube industry. Mr. MacGregor, supported by Ministers, did not share that view, and those jobs went.

Shortly after those 300 men at Imperial were made redundant—at high cost to the taxpayer and, no doubt, to the EEC—150 new people were recruited within the following two or three months. Since Mr. MacGregor, supported by Ministers, assured us then that those jobs had to go because there were no markets, yet markets suddenly materialised shortly afterwards, have we any reason to believe that Mr. MacGregor is right today in what he says about the mining industry?

An event in recent times which I welcome has been the departure of Mr. MacGregor from the steel industry. He created almost as much havoc there as the hon. Member for Brigg and Cleethorpes—I was recently in Asia—created in Hong Kong. Now, Mr. MacGregor has taken his havoc with him to the coal industry.

Having referred to recent successes in the steel industry, the Minister might at least have expressed public appreciation of the efforts of the workers in that industry, for the main achievement belongs to them. Despite the lack of confidence that they felt — and although Ministers would not give assurances about the future of steel plants that are still with us—the workers went on to produce the outstanding results that we see today.

To be fair to the hon. Member for Brigg and Cleethorpes, he reminded us that, in the last quarter of 1983–84, BSC's steel output rose to 271 tonnes per man —year compared with 259 tonnes in Germany and 225 in France. That is a great tribute to BSC workers. I am proud of the workers in my constituency, but the Minister is knocking the heart out of them by producing again the hoary old story of privatisation. The men did not achieve those productivity levels so as to see their industry privatised. They have competed successfully with other countries, the steel industries of which are subsidised to the hilt. For example, France has not given any assurance that by the end of 1985 it will accept the same EEC view of subsidies as has been imposed on, and accepted by, Ministers for the British industry. The employees and their families in the British steel industry are entitled to a greater assurance about the future.

There is a relationship between the future of the coal industry and that of the steel industry. The Labour party has been arguing the point about this infrastructure for many years. We have argued that if, for example, Ravenscraig were closed, that would reflect not only on the coal industry but on the small service industries, and the large public corporations such as electricity and gas, which would suffer. The job losses on paper would be far exceeded by the job losses in reality. The closure of Ravenscraig would be a grave blow for Lanarkshire.

In the light of the achievements of the steel workers and the modest successes that we are seeing, if the Government were prepared to get out of the hair of British Steel, allow it to compete in markets and capture them, and protect it from competition with other countries that are subsidising their steel industries to the hilt, the British steel industry would have a future. In spite of the borrowing figures that the House is considering, unless the Minister's reply is an improvement on his opening speech, I, for one, will not have much confidence. Bill Sirs has rightly led the opposition to the Government's policies, and still does, and he can expect and accept the same reaction from Labour Members.

6.32 pm

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

At the beginning of the debate I raised with the Minister the joint venture project known at Phoenix II, through the medium of which the Government propose to merge BSC special steels and Guest, Keen and Nettlefold, although originally a greater range of companies was rumoured to be involved. I did so because, as the Minister knows, I have a profound constituency interest in this matter. The Minister can confirm that, over the past three or four years, I have repeatedly pressed him for information about either the state of discussions or, more recently, what proposals were available. Most recently, I pressed him on when the Government could be expected to come to a decision. He will know that my concern arises from the widespread fear in my constituency that the Tinsley park works in the east end of Sheffield, which may be a party to any Phoenix that takes off, may be at risk.

I can understand why the Minister has not been able to be more forthcoming. Notably, he has been worried about commercial confidentiality. However, he must know that recently the feeling is that it is not just commercial confidentiality that is holding up the Government's statement, but that something—as I hinted earlier—has gone wrong. As he must know, because his office will be reading the reports in the press, it is believed that the Government are having second thoughts, or are even backing out.

The Minister must know that even the BSC executive Bob Scholey has recently voiced warnings about the difficulties that will attend future joint ventures. He has said: Unless the market circumstances, demand and prices are such that you can launch the thing so that it can really and truly stand on its own feet, you are not being responsible. No doubt Bob Scholey, when he was putting that warning on record, had in mind the experience of another joint venture, known as Phoenix III, in which my constituency was also involved. It gave rise to Sheffield Forgemasters.

The Minister will be aware to the lessons of that joint venture, born of the merger of Firth Brown and BSC River Don. It must be in the mind not only of the Minister but of all those planning future denationalisation projects. Sheffield Forgemasters lost £18 million in the first year and more in the second. Mr. Scholey continued: The problems worrying the private and public sector steel managers planning denationalisation projects have been exhibited in Forgemasters. You set off with all good intentions, market prospects and the prospects of prices rising, and that never happens. The Minister will be familiar with these views of Mr. Scholey. I wonder whether they are not now weighing in his judgment and that of his advisers.

It is not merely the finding of the Select Committee on Trade and Industry that will be weighing with the Minister, but the experience of his office in other joint venture projects. The statement following the publication of the Select Committee report by its Chairman, the hon. Member for Hastings and Rye (Mr. Warren), a friend of the Minister, that it would create a private sector monopoly in engineering steels has also to be borne in mind. The Committee Chairman said in a newspaper article: a loss-making rump, which would result from Government privatisation policy, would not be in the interests of the steel industry, customers or the taxpayer. There is another warning for the Minister. Such warnings have come from men who are basing them either on experience of the industry or on the findings of a Select Committee that has the respect of the House.

Another consideration that will weigh with hon. Members as well as with the Minister is the recent change in merger policy and the increased emphasis on competition policy. Might that have an effect on the merger between BSC special steels and GKN, if it were to come about? A year ago, I raised with the Director General of Fair Trading the possibility of such a merger, if Phoenix II were to get off the ground, and suggested that this would not be in the public interest. He did not then take that view but I wonder whether he might now take such a view. What is the point of the recent change of merger policy if it was intended only to give an increased emphasis to competition policy?

We heard from my hon. Friend the Member for Rotherham (Mr. Crowther) about the concern that he and his colleagues on both sides of the House who served on the Select Committee feel about sourcing policies. The Minister will know that that is a real danger, given the possible emergence of Phoenix II. It must have an effect on imports. It is a consideration in the minds not only of Members of Parliament and of the Minister but of people in the industry. They do not like to be confined to a single source, but nor do they want to be driven to going overseas. However, there are some of them who will take what for them is that very unpalatable step.

There is the further consideration of cost. What will be the cost to the public purse? Although the Minister cannot be drawn on this, he must know that it is a very real factor. What is to be the reaction of the Treasury? The Treasury will not feel happy, never mind right hon. and hon. Members on both sides of the House, about such a lopsided and inequitable arrangement as will be any merger between BSC special steels and GKN, where 50 per cent. and no more of the stake will be held by BSC special steels although it is well known that it will be providing far in excess of 50 per cent. of the asset value..

The hon. Member for Brigg and Cleethorpes (Mr. Brown) thought that this "was a return to taxpayers on their investment from which they would feel some satisfaction." If I have quoted the hon. Gentleman wrongly, I shall take the first opportunity to withdraw, but I think that I understood what he was getting at. I hope that he will see that a merger such as is now intended and which I have very fairly described cannot really be in the interest of taxpayers, certainly not to begin with. Given the example of Sheffield Forgemasters, it may not be in the interests of British taxpayers for a very long time to come. It might not be in the interests of taxpayers at all given the change in the market position in recent months..

BSC special steels is in a different position now from the position that it was in a few months ago. I shall not stray into any reference to the present industrial crisis, but BSC special steels has kept clear of recent industrial disruption. It is blessed with electric arc furnaces, but it is producing and it is selling.

I shall be paying my customary annual visit during the recess to BSC locally in the east end of Sheffield and in south Yorkshire, and I am sure that I shall hear the same kind of optimistic results there as we have heard from other hon. Members on both sides of the House. If there are grounds for this optimism in special steels, again why are we going ahead?

I come finally to the feeling in my own constituency, and I hope that I shall be forgiven if I dwell a little on that. The Minister will not be surprised to hear that jobs are uppermost in the minds of my constituents. In recent years my constituency has been devastated. There is scarcely any industry left in what was once the most industrial constituency probably in the world. If there was a more industrially concentrated constituency, I was not aware of it. Today anyone driving up the M1 and leaving it at Tinsley viaduct and then driving along Attercliffe common the two miles into the centre of Sheffield will look almost in vain to right and to left for any industry. All that he will see is acres of clearance.

However, I still have Tinsley park. I do not have Hadfields any longer, which was party to this development about a year ago. That has already gone. But Tinsley park remains, though it is only fair to say that those who work there are as anxious that Tinsley park should survive as I am, not only because of the jobs involved, which must be a prime factor in the minds of everyone, but also because of their pride in it. The plant has a proven track record of efficiency.

I am wondering just how much that plant has suffered during the past four years because of these discussions about its future and then because of the delay in coming up with proposals and the further delay in the Department in arriving at a decision about those proposals.

I wonder how much Tinsley park has suffered in investment terms. It has been denied investment. It does not have continuous casting. That is what puts it at risk. Might it not have had it at any time over the past four years? This is a new plant. It is modern. It is a plant in which we all take pride. Hon. Members may be wondering why I am speculating in this way. I am only echoing the fears of my constituents, and they are genuine.

In terms of investment, modernisation and its claims to survive, Tinsley park might not have suffered because of the protracted length of discussions about the possible shape of a Phoenix II, whereas inevitably during the past four years it has cast a shadow over that work force, and men are angry about it.

Other BSC workers in south Yorkshire whose jobs are not under immediate threat fear that pension rights and other long-established conditions of employment may be changed for the worse should they find themselves working in the new Phoenix company outside BSC. In south Yorkshire workers dread that Phoenix II will mean the end of their works and their jobs. Other workers only a few miles away in plants which feel secure are also in dread of the fundamental change in working conditions resulting from a Phoenix joint venture..

Mr. Hardy

Recently there has been a degree of anxiety which is relevant to the point that my hon. Friend is making. Those people who have left the steel industry and engaged in courses supposedly funded by the EEC have been able to receive their wages from BSC during the courses while they wait for the EEC decision about the renewal of the grant of those funds. Other workers who entered the same courses and who were employed by the private sector of steel have not enjoyed the same facility. That has not created a particularly helpful climate in the industry in south Yorkshire.

Mr. Duffy

My hon. Friend is right, and I am grateful to him. Both he and I are concerned to make the best possible case for our own local industry, and I hope that the House will not think that I have failed in that.

I understand the Minister's position. However, I hope that he will understand my position and that of my hon. Friend in trying fairly to represent our constituents and to convey to him their anxieties in asking on their behalf when the Government will come to a decision. If it is delayed further, will the cut-off date of the end of 1985 because of EEC requirements affect such a joint development? Will the Minister ensure that the public interest is also safeguarded? I hope that he will not allow his anxiety to further the cause of privatisation to lead to what might be seen in south Yorkshire as an unforgivable betrayal of an industry into which so much dedicated effort and public money has been invested. I hope, too, that he will avoid any charge of selling it off at give-away prices to private buyers..

6.49 pm

Mr. Richard Holt (Langbaurgh)

I apologise to both Front Bench speakers for not being present at the beginning of the debate. In fact, I had not intended to intervene in it, being comparatively new to the steel industry, but, unlike my hon. Friend the Member for Brigg and Cleethorpes (Mr. Brown), I am possibly less charitable in pointing out that the hon. Member for Redcar (Mr. Tinn) has not seen fit to be present today. Although the Redcar steelworks is in the hon. Gentleman's constituency, the satellite element of Skinningrove and Carlin How falls within my constituency.

The debate so far has made no mention of Redcar, and it is perhaps the example sought by my hon. Friend the Member for Brigg and Cleethorpes to explain why many Opposition Members have chosen not to be present. I refer, of course, to the immense success of the Redcar steelworks. I recently spent a day going round the works. The men there were very proud of their achievements of the past few years. I am not as familiar with the statistics as my hon. Friend the Member for Brigg and Cleethorpes, but the men were justly proud to tell me that in the past four years the number of man hours required to produce a ton of steel had been reduced by two thirds, from 13 to 4.4 hours. At the same time, the earnings of workers there are now higher than ever.

The men are happy in the knowledge that their industry in Redcar and in the satellite that I represent is secure far into the future. That was not so five years ago. The uncertainty has been removed. The plant will now fail to succeed only if the market contracts. However, new markets have recently been obtained, and some expansion is in prospect. There has been investment in the plant. The new coke oven is on stream. There are 7,100 workers at the plant as opposed to 15,000 previously, but they are producing more than 100 per cent. of the capacity produced by the 15,000 workers.

It was distressing to learn from the accountants that if it were not for the burden of the rates imposed by Langbaurgh council the plant would be even more competitive and would be able to employ more people. We are all concerned to ensure that people have work. It is worrying that so many jobs are lost because local council, are irresponsible in spending other people's money. The steelworks is the only major industry in Redcar. If steelmaking declined further because of the impost of the rates, the effect not only on steel workers in the area but on other workers too would be highly detrimental.

Redcar is a shining example of the success of the past few years. I was struck to learn from the management that no new managers had been brought in from outside the industry by Mr. MacGregor. Mr. MacGregor came to the industry and gave it leadership. He found out what was wrong and put it right, and the works is now in the hands of people who have been there all the time. They have a pride in what they are doing, and in their industry.

However, it would be unwise for the Government not to continue to invest in this part of the public sector. We must bear in mind the difference between the north of England and the south where jobs are concerned. I urge Ministers to visit the Redcar area. I urge as many people as possible to go there to see how important it is for the steel industry to be maintained and for the investment which the Government are directing into the industry—albeit into the public sector—to be continued until such time as the whole steel industry can be made private for the benefit of us all.

What the industry needs now is an opportunity to settle down after the repercussions of the events of the past five years. After that short, sharp, clinical exercise, the industry requires a period of recuperation. The industry is not helped by the antics of the coal mining dispute. The steel workers of Redcar have no sympathy for the miners, who are seeking to destroy all that they have achieved in the past five years.

6.55 pm

Mr. Harry Ewing (Falkirk, East)

I must apologise to the Minister for having missed the first two lines of his speech. However, as I have heard every other speech that the Minister has made on this industry, I expect that I know the first two lines by heart.

I was saddened by the terms and tone of the speech of the hon. Member for Langbaurgh (Mr. Holt). It is a pity when an hon. Member enters the Chamber halfway through a debate and then complains about the absence of another hon. Member. I speak personally, not as an Opposition spokesman, but I have always thought it childish, petty and dangerous for hon. Members to complain about the absence of others without first checking on the reasons for their absence. I have never become involved in such tactics. There is no more assiduous attender in the Chamber than my hon. Friend the Member for Redcar (Mr. Tinn), and it was a pity that the hon. Member for Langbaurgh spoilt a reasonably good speech by that silly point. The hon. Member for Brigg and Cleethorpes (Mr. Brown) properly withdrew his own comment in that regard. I hope that the comment will not rebound to the discredit of the hon. Member for Langbaurgh during some future debate when he may have good cause not to be here.

My hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy) has requested to know the position in relation to Phoenix II, involving BSC and GKN in his constituency. My hon. Friend the Member for Attercliffe has attended one steel debate after another and raised that single point with great consistency. He wants to know the position of the Phoenix II project.

My hon. Friend the Member for Rotherham (Mr. Crowther) made the point that, to his knowledge, the proposals had been with the Minister since 19 December last year. The House is now about to rise for the summer recess, but the Government have still not reached a decision on this important project which will have an important effect on the Tinsley works in my hon. Friend's constituency. I hope that the Minister of State, in his usual helpful manner, will be able to tell my hon. Friend and his constituents something about this matter. The project should have been cleared by this time. Delays in reaching a decision lead to suspicion. The Minister of State may say that there is no cause for concern, but when a project has been in the Minister's hands for over seven months the Minister will understand the concern, if not the suspicion, so constantly expressed by my hon. Friend.

The debate has been wide-ranging, yet within the bounds of order. The hon. Member for Brigg and Cleethorpes made an enthusiastic speech.

Mr. Michael Brown

Hear, hear.

Mr. Ewing

I hear the hon. Gentleman expressing his confidence. The hon. Gentleman says that he was confident in 1979. He says that he was confident about the steel workers in 1980 and in 1981. However, he was not confident in 1983. He did not stay to fight his constituency. He ran away.

Mr. Brown

Will the hon. Gentleman give way?

Mr. Ewing

The hon. Gentleman ran away to the seaside and left the steel workers to his hon. Friend the Member for Glanford and Scunthorpe (Mr. Hickmet).

Mr. Brown

Can the hon. Gentleman tell me the name of my constituency?

Mr. Ewing

It is Brigg and Cleethorpes.

Mr. Brown

What was the name of my old constituency?

Mr. Ewing

It was Brigg and Scunthorpe.

Mr. Brown

How is it possible for one Member to represent a constituency that has been cut into two halves?

Mr. Ewing

I have obviously touched a raw nerve. The hon. Member for Brigg and Cleethorpes does not relish this appearing in his local newspaper, though his hon. Friend the Member for Glanford and Scunthorpe relishes that prospect. I think that the hon. Member for Brigg and Cleethorpes chose wisely, especially when I look at the size of the parliamentary majorities. I do not think that his confidence that his hon. Friend the Member for Glanford and Scunthorpe will represent steel workers for a long time will prove justified at the next election.

I do not intend to dwell on what the hon. Member for Brigg and Cleethorpes said, because, even by his standards, it was fairly low-grade—barely sixth-form—stuff. However, he justified his support for the Government's proposals between 1979 and 1982, but it was significant that he did not mention that, as a result of that support, whole areas of the country were decimated. Perhaps his area was not as badly affected as others, but there were some effects there. The works at Consett were closed and 7,000 jobs were lost.Steel treatment continues at Ebbw Vale and Shotton, but steel production was stopped. I am sure that the hon. Gentleman realises that the proposals that he supported devasted whole areas of steel production.

The Minister of State, in his honest moments, will admit that every time the EEC has laid down diktats that we must accept restrictions on our steel output, the Government have accepted the new quotas.

Mr. Brown

The hon. Gentleman has been hectoring about personal behaviours—and I do not disagree with him — but before he talks about running away from seats, he ought to realise that my previous constituency, which had an electorate of nearly 110,000, was cut in half. How can one hon. Member stand for two constituencies? Scunthorpe now has two Conservative voices, whereas previously it had only one. The second voice is that of my hon. Friend the Member for Glanford and Scunthorpe (Mr. Hickmet), who is here because of my decision.

I fully recognise that, in voting as I did in 1979–80, I was voting for redundancies. Between 7,000 and 8,000 people in my previous constituency were made redundant and there were a number of redundancies in my present constituency. However, I said at the time that I voted as I did because the Government's proposals held out the best prospect for a steel industry in the future — in Scunthorpe and elsewhere.

Mr. Ewing

I do not want to continue the debate about which half of the constituency the hon. Gentleman chose to fight. However, I am a good lip reader and it looked to me as if the hon. Member for Glanford and Scunthorpe was saying that his hon. Friend should have taken the other half.

Mr. Hickmet

May I inject a serious note into this amusing farce? The hon. Gentleman said that my sojourn in the House would be a short one. However, steel workers have been waiting for the Labour party to condemn the attempt of Mr. Arthur Scargill to make them redundant at Llanwern, Ravenscraig and Scunthorpe. The hon. Gentleman says that those workers will not vote Conservative at the next election, but I can tell him that there is no prospect of their voting Socialist, because that means supporting the right hon. Member for Islwyn (Mr. Kinnock), which means supporting Arthur Scargill, which means closing steel plants.

Mr. Ewing

I apologise to the House for giving way. If the hon. Gentleman had been present at a recent Trade and Industry Question Time, he would have heard me set out the Opposition's policy. The steel industry is as important to the miners as the mining industry is to the steel workers. That is the position on which the Labour party has stood since the dispute began.

I return to the point that I was making about EEC quotas. We want an absolute assurance that the Government will not accept any more reductions in the steel quotas for our industry. I think that the Minister of State will admit that one of the problems over the years, particularly in the past five or six years, is that the EEC crisis measures—when the BSC annual report refers to crisis measures, it is referring to the EEC steel quotas—have always affected our steel industry more than the industries of other member states.

We have always had to bear the heavy end of reductions in steel output and, therefore, reductions in the number of people working in the industry. It is a sobering thought that since 1974 the number of people working in our steel industry, private and public, has fallen from 200,000 to 71,000.

I do not say that the reduction is directly attributable to Government policies or to Mr. MacGregor's activities, with which I disagree. The main cause has been the crisis measures adopted by the EEC. They have fallen much more heavily on our industry than on Germany, Belgium and France. One reason why France and Germany are being asked to cut back is that they have had it easy over the past six or seven years, but there is no doubt that the proposed cutbacks on production in Germany and France will be nowhere near as severe as the cuts that were made here. We want an assurance from the Minister that he will not accept any more reductions in quotas.

The hon. Member for Glanford and Scunthorpe mentioned pricing. The history of pricing in the steel industry is interesting. In 1983, there was a collapse in the market. One contributory factor was the collapse in the value of the pound against the deutschmark. It was only at the beginning of 1984 that steel prices began to pick up. Only then did the market begin to recover its buoyancy.

Conservative Members will argue that one reason for the difficulties confronting the steel industry is the dispute in the coal industry. I have made the Opposition's view clear, but the Government must now make up their mind. The Secretary of State for Energy came into the Chamber a few minutes ago, but left quickly, because he did not want to embarrass the Minister of State, Department of Trade and Industry. Yesterday, the Secretary of State for Energy was on Brian Walden's programme. I shall not misquote or take him out of context, but he said that the coal dispute was having no effect. When the Minister was challenged on that, he admitted that production has been maintained at a remarkably high level.

Mr. Hickmet

rose——

Mr. Ewing

I shall not give way, because I know that the hon. Gentleman is determined to stir up trouble between steel workers and coal miners, and I do not want to give him that opportunity.

Mr. Hickmet

rose——

Mr. Ewing

I shall not give way. I am trying to introduce some sense into the debate. The Minister will have to make up his mind who is right. Either the Department of Trade and Industry, which claims that the dispute in the coal industry is having a dramatic effect——

Mr. Hickmet

On a point of order, Mr. Deputy Speaker.

Mr. Ewing

The hon. Gentleman should not pay attention to the PPS.

Mr. Hickmet

On a point of order, Mr. Deputy Speaker. The hon. Gentleman made an accusation against me and my motives for the stance that I have taken throughout this dispute for the past 20 weeks. He said that I was determined to stir up trouble between the coal miners and the steel workers. Am I right in thinking that he is obliged, by convention, to give way and to give me an opportunity to answer that accusation?

Mr. Deputy Speaker (Mr. Paul Dean)

It is for whoever has the Floor to decide whether to give way.

Mr. Ewing

The Minister must make up his mind whether the Department of Trade and Industry is correct in saying that the coal mining dispute is having a fairly serious effect on the steel industry, or whether the Department of Energy and the Secretary of State for Energy are correct in saying that it is not having any effect. That is what the Secretary of State for Energy said on Brian Walden's programme. It does not do one Minister any good to go on protesting that a dispute is having an effect on another industry and for another Minister to claim that it is having no effect. That just adds to the confusion. The Minister should say which of those views is right. Is it that of the Department of Trade and Industry or that of the Secretary of State for Energy? One thing is certain, and that is that they cannot both be right.

I turn to another aspect of the viability of the steel industry that has so far not been raised, although it is specifically mentioned in the BSC's annual report, to which the Minister referred—the price of scrap steel. There is a paragraph in the annual report—I think on page 8 — that mentions, in particular, the difficulties being created for the BSC. Although we are not debating the iron castings industry, that industry is also affected. However, the BSC makes it clear that over the period covered by the report the price of scrap steel has increased by 50 per cent. I think that that figure has been overtaken by events. My information is that the price of scrap steel has increased by about 120 per cent. in the past year, due to the substantial export of what is, to the steel casting industry, a basic raw material. Recently, I wrote to the Secretary of State for Trade and Industry asking him to impose the export quotas that are within the Government's power. I think that it was the Minister who replied, saying that he could not see any case for imposing the export quotas.

Yet, in the BSC's annual report, the chairman specifically mentions that the corporation is looking, with some encouragement, to the directive being discussed by the EEC, with a view to imposing quotas on the export of scrap steel. An increase of at least 100 per cent. in the price of a basic raw material will have a serious effect on any manufacturing industry operating on the margin, and that must worry the Government. Therefore, I hope that the Minister will say a little more about that aspect of the annual report, and where it fits into the £500 million increase in borrowing.

My hon. Friend the Member for Rotherham mentioned the role of GKN in the Phoenix II project. Worries have been expressed about GKN and its position as a major steel user and — as it will become — steel producer. The Government will have to consider the situation. I think that my hon. Friend the Member for Rotherham explained the point clearly enough for the Minister to give us some idea of the Government's thinking on this important issue. My hon. Friend the Member for Monklands, West (Mr. Clarke) mentioned Ravenscraig and Gartcosh. I hope that the British steel industry has now reached a stage at which the Minister can give us a guarantee about all five plants. As has been said, it is not a case of competition between Llanwern and Ravenscraig. We need all five integrated plants. If the new-found optimism that seems to have permeated our debate is justified, the Minister must be able to assure us that all five integrated plants will be required, so that we can forget, once and for all, any threat to the future of Ravenscraig. My view is that Ravenscraig will survive. I do not now believe that it is in any danger. Indeed, great tribute has been paid to the work force.

We hope that the British steel industry is now in a position to take off. We also hope that the Minister will not say that this will be its permanent shape and form. If the United Kingdom's economy is based on steel output of 11 million tonnes, it will not be very large. Therefore, I hope that one of the reasons for the order is that the steel industry is at the beginning of a growth period. I hope also that this new-found optimism will lead the Minister to tell us that Ravenscraig is secure and that there is a future for Gartcosh.

Mr. Crowther

My hon. Friend is making an extremely important point. Does he agree that the cuts that have taken place in both the public and private sectors of the steel industry have reduced it to a level at which it might well prove impossible for the British steel industry to take advantage of any significant increase in demand, should the economic situation change? It may well be that any future demand from the steel users will merely result in an increase in imports because of the terrible cuts in capacity that have already taken place.

Mr. Ewing

That is a very real danger. Indeed, we have mentioned it time and again in our debates. It is very dangerous for any industry, particularly the steel industry, to have its output reduced to a level at which it cannot possibly take off in the event of an economic recovery. I hope that the Minister will soon come to the House to announce plans for some form of expansion in the steel industry based on the Government's own economic optimism. As I said, if this country's economy is based on 11 million tonnes, it does not have a very bright future. That is the whole point.

I do not wish to be derogatory, but the Minister did not say how and on what the £500 million is to be spent. I should like some details about what the money is for. What will be the effect on BSC of the Government's decision to phase out regional development grant? I understand that BSC qualifies for such grant. If the grants are phased out during the next two years, what effect will that have on the finances of BSC and its ability to expand? Moreover, what effect will it have on the use of the £500 million, which the Opposition obviously support?

7.20 pm

Mr. Norman Lamont

All of those who have spoken have, to a greater or lesser extent, reflected greater optimism about the steel industry. Inevitably, however, some have been anxious about their constituency interests. We had some forthright constituency speeches. Some hon. Members, such as the hon. Member for Monklands, West (Mr. Clarke), said that there should be greater certainty. I appreciate his desire but BSC still has some way to go. I detailed its progress but it has some way to go before it reaches enduring viability.

The hon. Member for Newport, East (Mr. Hughes) asked about the relationship of investment to the Community and about Community approval for investment. He was right. It is part of the European steel regime that new investment projects be subject to Commission approval. It approved major projects proposed by BSC in the Port Talbot hot stripmill and in the galvanising line at Shotton. He also repeated, not for the first time, the need for concast at Llanwern. He will have heard me say that, if the BSC board proposes such an investment as part of its new corporate plan, the Government will consider it on its merits. However, no such proposal has yet been made.

My hon. Friend the Member for Langbaurgh (Mr. Holt) talked about his constituency and the impact of rates on BSC. He is right. We hear much from Opposition Members about the problems that face BSC. Indeed, they quoted some of the chairman's annual report. In that annual report the chairman, just like his predecessor Mr. MacGregor, drew attention to the difficulty BSC faces with its large rates bill.

The hon. Member for Falkirk, East (Mr. Ewing) asked about a guaranteed future for the five major plants. I cannot add to what I said in my opening speech. The 1982 decision meant what it said. BSC was asked to prepare its 1983–86 corporate plan on the basis of steel making continuing at the five integrated sites. If BSC wanted to proceed on a different basis in its 1984–87 plan, or if it is forced to do so by the current disruption, it is open to it to make such a proposal to the Government. Such a decision would have to be examined jointly by BSC and the Government.

My hon. Friend the Member for Glanford and Scunthorpe (Mr. Hickmet) said that he understood that I had the corporate plan. I do not, for the good reason that much of what would be in it is difficult to calculate because of the effects of the miners' strike.

Mr. Ewing

Is the Minister saying that he does not have the corporate plan because of the dispute in the coal industry?

Mr. Lamont

I am saying that the projections for the future are deeply affected by the miners' dispute, as is the impact on BSC's markets. Until the smoke has cleared, it is the chairman's view that it is difficult to assess the factors that have to be in the plan.

The hon. Member for Falkirk, East tried to contrast what my hon. Friend the Secretary of State for Energy said on a television programme, which I did not see, with what my right hon. Friend the Secretary of State for Trade and Industry has said. I am sure that my right hon. Friend the Secretary of State for Energy was referring to the fact that production in BSC has been kept up. We owe BSC and its work force great praise for that. That is not to say that extra costs have not been imposed on BSC. It has incurred extra costs getting in the coal and the coke and as a result of the blend of coals. The dispute is having an impact on BSC but all right hon. and hon. Members welcome the fact that production has been kept at near pre-strike levels.

Mr. Ewing

Perhaps I can take the Minister back to the corporate plan. Can we have the matter on the record? Is he saying that the chairman of BSC has told the Government that, but for the dispute in the coal industry, the Government would now have the corporate plan? It is important to have that on the record.

Mr. Lamont

I have made the matter crystal clear. The chairman has said that much of what would have to be in the corporate plan and which is vital to framing it cannot be included in the present uncertainty. There is no point in the Government and BSC considering the corporate plan until after the strike, when those factors will be clearer.

Mr. Hickmet

I am grateful to my hon. Friend for giving way, especially in view of the accusations that the hon. Member for Falkirk, East made against me. Is it not the case that Scunthorpe has suffered almost the entire cut in BSC production? The record production figure of 61,000 tonnes before the strike has dropped to less than 25,000 tonnes. When it is said that I am attempting to stir up trouble between the mine workers and the steel workers, should it not be borne in mind that, at one time, there were 10,000 men standing on a picket line at Orgreave trying to close the Scunthorpe steelworks by stopping coke going from Orgreave to Scunthorpe? Is that not a disgrace?

Mr. Lamont

My hon. Friend is right. Although I have said that BSC has been able to keep production at near pre-strike levels, the situation at Scunthorpe has been extremely serious and, at times, it has come close to closing down. For Scunthorpe and BSC generally, it is a tragedy that miners should try to deny steel workers the fruits of their efforts and sacrifices of the past few years.

Mr. Hardy

Will the Minister give way?

Mr. Lamont

I do not think that we want a debate on the miners' strike. I should have thought that Opposition Members would have agreed about that and would have preferred to debate the steel industry. In my normal way, I have attempted to lower the tension, but I shall give way to the hon. Gentleman.

Mr. Hardy

Does the Minister also regret that BSC management did not give the people who made the agreement that Scunthorpe should have the coal that it required time to negotiate an agreement so that coke could have gone to Scunthorpe, thus maintaining the market for south Yorkshire coal and not adding to the already heavily fuelled bitterness and frustration in south Yorkshire? Does he agree that BSC management at Scunthorpe could have been wiser?

Mr. Lamont

I do not agree with the hon. Gentleman. He made that point when previously he intervened. The fact is that the NUM, aided and abetted by the rail unions, sought to starve Scunthorpe of its supplies by rail, so the corporation had no option but to look elsewhere. That is why BSC decided to use lorries to run coke from its Orgreave plant. That seems to be perfectly reasonable and lawful. The response was violent picketing on a mass scale, which cannot be justified.

The hon. Member for Falkirk, East said that he was sorry that he had missed the first two lines of my speech, but said that he thought he knew what they were—a repetition of previous speeches. I do not plead innocence to that charge, but I must say that some of his themes are pretty well worn.

Mr. Ewing

That is because I do not get any answers.

Mr. Lamont

I am not sure whether the hon. Gentleman always listens to the answers. He repeated the points about reductions in capacity and reductions in Europe. I am sure that he knows that, because of the decision of 29 June 1983, which was subsequently endorsed by all member states, and the meeting of the steel Council earlier this year, the cuts required in the major countries as a percentage of steel capacity are now as follows: Belgium 19.4 per cent.; Luxembourg 18.4 per cent.; France 19.8 per cent.; Italy 16.1 per cent.; the Netherlands 13 per cent.; the United Kingdom 19.7 per cent.; and Germany 11.3 per cent. Our cuts have already been made. It is clear from those figures that by 1985 those countries will have made reductions in capacity comparable to our own.

My hon. Friend the Member for Glanford and Scunthorpe was right when he drew attention not just to the commitment on paper but to what is happening on the continent. France has announced 5 million tonnes of cuts and has said that it will take out 20.5 per cent. of steel capacity, which is larger than the original decision required. Luxembourg has said that it will cut steel capacity by 24.9 per cent., which is larger than our reduction and larger than the requirement of 18.4 per cent. The Netherlands has said that it will cut steel capacity by 18.2 per cent., instead of 13 per cent.

If hon. Members doubt that those commitments are real, they should lift their eyes across the channel and look at the telling example in France. We know about the disruption here, but there has not exactly been an absence of disruption in France.

Mr. Roy Hughes

Does the Minister nevertheless agree that that fact does not invalidate the point I made in my original remarks, that at the time of the terrible carnage in BSC, Italy was expanding its steel production? That is a simple point.

Mr. Lamont

The Italian industry was, of course, in a very different position. I do not want to defend what happened in Italy. I am sure that the hon. Gentleman does not wish to weaken my negotiating stance. We have made it very clear that we think that the Italians should make larger cuts. The Italian Government have pointed out, first, that there has been growth in their economy and, secondly, that much of the growth in the steel industry happened in the electric arc mini-mills unaided by the public sector.

The House should be in no doubt—hon. Members have heard this before—that we made our cuts when we did because we had to, because we were running up large losses and were uncompetitive. As my hon. Friend the Member for Glanford and Scunthorpe said, we are benefiting from the strong competitive position that we established. Both sides of the House have acknowledged that point and the fact that the economic climate is better now than it has been for some time.

The hon. Member for Falkirk, East asked about the article 58 quotas. We have continued to take up that issue with the Commission. Because in 1983 the United Kingdom economy was growing faster than the economy in Europe generally and both steel consumption and steel production were growing faster than in Europe, we have had problems with quotas. I am pleased to report that Commissioner Davignon confirmed at the end of last month that arrangements had been made to deal with BSC's immediate difficulties and that the Commission was ready to devise a lasting solution if the problem persisted. If individual private sector companies face those difficulties, we shall certainly pursue those cases with the Commission.

The hon. Member for Falkirk, East asked also about scrap prices. The hon. Gentleman knows, of course, that scrap prices are notoriously volatile. I note that he is looking at the report. I assure him that I, too, have read what the chairman said in the report. Although recently there have been large price increases, they have taken the prices of scrap only up to the level prevailing in 1979. Moreover, United Kingdom prices are below those on the continent. In that case, the Government do not intend at present to restrict scrap exports.

The hon. Member for Rotherham (Mr. Crowther) came back on the question he had put to me in an intervention about whether the money available under the order covered Phoenix II. I am not sure why he was dissatisfied with my answer. The order is permissive. It would allow BSC to contribute to the new companies' cash needs, if that were the decision. The powers do not, however, require that to happen and could equally be used for investment in engineering steel outside Phoenix II. That point may be more succinctly expressed now, but that is what I said before to the hon. Gentleman.

The hon. Member for Rotherham put to the House various remarks about the mix of assets and the cash liability that might be shared between BSC and the private sector. He thought that the measure would be poor value for the taxpayer. I am sure that the hon. Gentleman understands that I cannot comment on that point at the moment, because the final decisions have not yet been made. The hon. Gentleman will have to examine that aspect, and he will be able to question my right hon. Friend the Secretary of State for Energy and myself either in the House or before the Select Committee on whether the measure represents good value for money.

The hon. Members for Sheffield, Attercliffe (Mr. Duffy) and for Rotherham raised points about a monopoly supplier and customers wanting a choice of supply, and we shall, of course, look at their points. Those aspects are extremely important when making a decision on Phoenix II. As with so many cases, we face a familiar dilemma: do we want a strong national grouping that is capable of competing against international supplies or do we want to place greater emphasis on domestic competition, which may not be able to cope so well against imports?

The hon. Member for Attercliffe asked whether the Government were backing off on Phoenix II. No, we are not backing off. The hon. Gentleman will understand that that is an immensely important venture, involving not only a BSC contribution and private sector contribution but perhaps the question whether the Government should give assistance under section 8 of the Industry Act. That could be an expensive solution, and must weigh with us heavily. We are not backing off, but the project could be an expensive demand on scarce funds.

The hon. Member for Rotherham attacked the idea of privatisation as applied to the steel corporation. He felt that it was wrong that we should privatise the most profitable bits of nationalised industries. He did not confine his argument to BSC. He said that it was wrong to privatise Jaguar and the warship-building part of British Shipbuilders. Our aim is privatisation; my view and experience is that if one does not privatise when one can, one never does. If one does not privatise when the bits are profitable, one will never privatise.

Furthermore, I do not subscribe to the hon. Gentleman's view that it is right to use the profitable bits to subsidise the unprofitable bits. That is the way in which many of the profitable parts of our nationalised industries have been bled of investment. That is why many of them have got into trouble. There are several reasons why it is right to privatise parts of the corporation. One is that the parts that we are privatising at the moment are those which overlap with the private sector. Another reason is to ensure fair competition among the unsubsidised undertakings.

As I said, we intend to go ahead with privatisation. The House must be realistic. We are a long way from privatising basic steel making. Although I listened with interest to what the hon. Member for Monklands, West (Mr. Clarke) said about his constituents who were apprehensive about that, we are a long way from it. Both sides of the House must agree that it is right to make basic steel making profitable and free from state aid as soon as possible. That is our objective. It is a policy that we intend to follow even when the sums of money allowed under the order are advanced to the corporation.

Mr. Crowther

Before the Minister——

Mr. Lamont

I commend the order to the House.

Resolved, That the draft British Steel Corporation (Borrowing Powers) Order 1984, which was laid before this House on 13th July, be approved.