§ 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 1985, which was laid before this House on 20th June, be approved.The subject of the draft order is the British Steel Corporation's statutory borrowing limit. All the corporation's borrowing, whether from the Government or from other sources, together with payments of public dividend capital from the Government, count towards the limit. The Iron and Steel Act 1982, the principal statute governing the BSC, provides that the limit shall be within the range £2,500 million to £4,500 million and provides that the limit may be varied by order, subject to an affirmative resolution of the House. The limit presently stands at £3,500 million, having been set at that level in July last year by the British Steel Corporation (Borrowing Powers) Order 1984.
The draft order proposes that the present limit be raised by £700 million to £4,200 million. It is important to emphasise that, as with all such orders, it is permissive only. It does not, of course, commit the Government to providing that sum to the corporation, and the future funding of the corporation will be subject, as always, to external financing limits and to the procedures of the House.
In the debate on the previous order in 1984, I said that as a result of the dispute in the coal industry there was a possibility that a further order might be necessary earlier than the two-year period normally elapsing between orders. That in this case has proved to be true. The direct financing impact of the miners' strike upon the BSC was about £180 million. This enormous unnecessary additional cost, together with the BSC's final external financing limit of £343 million, more than absorbed the £500 million increase in the corporation's borrowing limit approved by the House last July. The EFL for the present financial year of £360 million will push the BSC through its current borrowing ceiling.
At the end of March, the BSC's actual and potential borrowings stood at £3,390 million against the present limit of £3,500 million. Now that the strike is behind it, the BSC's cash needs so far in 1985–86 have been relatively modest, but an increase in the borrowings limit will certainly become necessary some time after the end of July. The BSC's forward cash needs are at present subject to uncertainty for a number of reasons. However, it is clear that, whatever decisions are taken, the BSC will continue to need outside funding for a few more years.
With the miners' strike behind it, the BSC is now trading profitably. To cater for these needs, we have set an EFL of £360 million for 1985–86, which is well below the £523 million of external finance provided for last year. The best estimate that we can make at present for external funding in the period after 1985–86 is that it will continue to diminish from year to year, but that slightly more than a further £300 million will be needed over the following two years taken together, and public expenditure projections are currently on that basis. The figure of £700 million should, therefore, be able to cover the requirements for up to three years and to give us a degree 243 of flexibility to deal with current uncertainties. But it remains our firm policy to end the BSC's dependence on the taxpayer as quickly as possible, and decisions over the period covered by the order will be taken very much with a view to reducing the BSC's external funding needs as quickly as possible.
I should like to comment briefly upon the corporation's performance during the last financial year, and then to consider the future. The year 1984–85 was, of course, very much dominated by the miners' strike. The BSC was set a demanding target of breaking even before interest. It must therefore have been particularly galling for the management and the work force to see the attainment of that target frustrated by the employees of an industry which was the second largest customer of the BSC. Opposition Members, many of whom represent steel constituencies, might reflect upon the much stronger position in which the BSC would find itself today but for that disruption.
I pay the warmest tribute to the management of the BSC for its ingenuity in keeping plants operating and, of course, to the workers for their courage and common sense in perceiving their long-term interest and that it could in no way be served by adding to the disruption.
The BSC's annual accounts are expected to show that, but for the intervention of the miners' strike, the corporation would have made a small profit after interest. This represents the best operating result for 10 years, and exceeded the Government's target for the year of break-even before interest.
The corporation has entered the current year at a trading profit and, if expectations are borne out, this year will see the first accounting profit since 1974–75. This very encouraging performance, which is masked by the cost of the strike, has been achieved in conditions of intense competition in Europe and elsewhere. It is a measure of the great improvements in productivity and quality which BSC has made in recent years. I should perhaps underline to the House that in the past five years the BSC's selling prices have risen by half the rate of its input costs. Against this background, I think that the improvement in its operating results is all the more remarkable.
During the past year the BSC has continued to pursue another target set by the Government, that of privatising those areas which overlap with the private sector and those activities which are outside the main stream of the BSC's steel business. Two major disposals took place. First, 75 per cent. of the shares of Stanton and Staveley were sold to Pont à Mousson and RGC Offshore plc was sold to the Trafalgar House Group. A number of smaller disposals also occurred, most notably Pipework Engineering to Babcock Power Ltd. and Coated Electrodes Ltd. where a management buy-out was completed.
During the year, two important joint ventures were established with the private sector. I draw the attention of the House to United Merchant Bar Ltd., which was created with Caparo Industries plc which holds a 75 per cent. interest in the new company which was formed to roll flats and light sections.
§ Mr. Don Dixon (Jarrow)
The hon. Gentleman talks about small issues. Does he realise that 500 men at Jarrow and Warrington will lose their jobs? That is not a "small" issue to them.
§ Mr. Lamont
If the hon. Gentleman wants to make a speech about the steel industry in his constituency, I am 244 sure that he will do so. He knows that measures and decisions about particular plants are matters for the BSC'. There has been an enormous contraction in the industry's labour force.
§ Mr. Lamont
It is not a small issue. I did not say that the closure of plants or the shedding of labour were small issues. But that has happened throughout the Western world and Europe.
§ Mr. Michael Grylls (Surrey, North-West)
I am sure that the House has followed with great interest what my hon. Friend said about disposals during the past year. What further disposals does he expect during the year ahead? How much money is that likely to bring in to the BSC to relieve the burden on the taxpayer?
§ Mr. Lamont
It is extremely difficult to answer those points, because we are a long way from the time when the BSC's basic steelmaking business will reach a state of enduring viability that would make it capable of being privatised. As Opposition Members who take an interest in these matters know, Phoenix 2 — the engineering steels—was an area where we very much hoped that privatisation could occur. That is one of the most important areas of overlap between the public and the private sectors. It is closely linked with a number of other decisions that must be taken within the corporation
I wish to emphasise how much privatisation has already occurred. Since 1980, the total book value of assets disposed of has been £349 million, which is 16 per cent. of the total book value of the BSC's assets in 1980. Land and property sales have realised £78 million. Since 1980, 14,000 BSC employees have been transferred to companies that were set up or disposed of as part of privatisation policy. I hope that my hon. Friend the Member for Surrey, North-West (Mr. Grylls) agrees that much has already happened in this direction.
§ Mr. James Hamilton (Motherwell, North)
Does the hon. Gentleman realise that there is tube manufacturing in my constituency? Many rumours have been circulating for a long time on this matter. I and my hon. Friend the Member for Motherwell, South (Dr. Bray) have met the management at the BSC's premises at the Clydesdale works. The management did riot deny that, if a suitable offer were made, privatisation would occur. Do the Government intend moving in that direction?
§ Mr. Lamont
It is the Government's intention that as much of the corporation as possible should be privatised and that, to a large extent, it should be done through joint ventures with the private sector. That is the way that is likely to be most practicable in the areas of overlap with the private sector.
Does the right hon. and learned Member for Monklands, East (Mr. Smith) wish to intervene?
§ Mr. John Smith (Monklands, East)
Ministers do not often invite me to intervene, but the hon. Gentleman has kindly asked me to do so. He has just said that joint ventures will be a method of privatisation. Does that mean that Phoenix 2 is not a joint venture but a method of privatising?
§ Mr. Lamont
Phoenix 2 is a project on which decisions have not yet been made. I must emphasise that decisions on Phoenix 2 must be related to other decisions about the 245 corporation. Phoenix 2 would be likely to be a joint venture. In my terminology, a "joint venture" could also be called a measure of privatisation. I hope that that makes the position clear to the right hon. and learned Member for Monklands, East. I invited him to intervene because, as some of my colleagues were talking, I was not sure that I had answered the question addressed to me by the hon. Member for Motherwell, North (Mr. Hamilton).
§ Mr. Richard Hickmet (Glanford and Scunthorpe)
I refer to transferring part of the BSC to the private sector and also to Phoenix 1 and Allied Steel and Wire. Is it not a fact that ASW is now highly competitive and highly profitable? If we are concerned about the steel industry's stability and future, should we not look at ASW which has proved that, if the steel industry operates in the private sector, it will operate more effectively and efficiently and its long-term future will be secured?
§ Mr. Lamont
I entirely agree with my hon. Friend. ASW has demonstrated that a privatised company can operate successfully and can offer greater job security. Above all, because it is a privatised company decisions about the steel industry are made on a commercial basis and are not wrapped up in political considerations which, despite all the current controversies, do not serve the long term interests of the industry or of those who work in it.
Another important feature of the past year was the decision taken by the BSC with its overseas partners to terminate an arrangement for the supply of iron ore which had become uneconomic. This decision resulted in the closure of the Firelake mine in Canada and the subsequent repayment of loans used to finance the mine at a total cost of £130 million. The BSC's external financing limit was increased by £70 million on this account. The remaining £60 million was provided from the BSC's own resources. This transaction will result in a saving to the BSC of £40 million each year.
It is clearly not possible to view the BSC's performance in the United Kingdom context alone. The European and world steel markets need to be taken into account. I think that every hon. Member would agree that the corporation's anti-crisis measures have continued to stabilise the steel market. This has resulted in improvements in prices in the second half of 1984 and in 1985, although in real terms steel prices are still well below 1979 levels. These anti-crisis measures are designed to support the Community market while excess capacity is removed and to pave the way for the ending of steel aids by the end of 1985. This is a policy that the United Kingdom Government have supported, and our industry has been in the forefront of those implementing it.
It must be emphasised, as the Government have emphasised before in these debates, that the restructuring of the industry was necessary irrespective of the European regime. Although we started the process earlier than some other Community countries, the current steel aids code requires other member states to play their full part in the restructuring process as well.
§ Mr. Alec Woodall (Hemsworth)
Does the Minister have recent information about whether there will be pressure from other EC countries to keep state aid in existence beyond the present closing date? There are rumours to that effect.
§ Mr. Lamont
I am afraid that I cannot anticipate that. At the last Steel Council, the decision to end steel aids at the end of 1985 was accepted by all members. There will be a further meeting of the Steel Council on 26 July to consider the quota regime and what will happen after 1985. The ending of state aids does not mean that it will be impossible for Governments to make investment or loan capital available to their steel industries in certain circumstances. Further discussions will have to take place on 26 July about the whole apparatus—not just of the steel aids but of the quota regime that goes with it.
§ Dr. Jeremy Bray (Motherwell, South)
Does the Minister intend to press on 26 July for a continuation of some aspects of the quota and price regime?
§ Mr. Lamont
Our view tends to be that a sudden removal of the quota regime might have extremely drastic consequences. Representations to that effect have been made to us by the BSC and the British Independent Steel Producers Association. Our final position has still to be determined. I believe that we should look at the possibility of a phased withdrawal or gradual reduction. Our position will depend a little on what other Governments do and their position on state aids.
§ Mr. Lamont
That must be considered on July 26. No decision has been reached about how long the system will remain in existence. That is a decision not simply for us to take, but for all other member states.
§ Mr. Lamont
I do not wish to prolong this short debate, so I shall not give way again.
All member states will achieve at least the reductions in steel capacity that they have promised for the end of 1985. Between 1980 and 1985 at least 28.4 million tonnes of capacity will have been shut in the Community as a whole. The final figure could well reach 30 million tonnes. The United Kingdom's promised share is 4.5 million tonnes, but our final figure will be rather higher.
Despite the additional difficulties in cost imposed on the BSC by the coal strike, the corporation's continuing efforts to improve efficiency and reduce costs will be seen to have paid off not only in the past year but in future years. The BSC now ranks among Europe's most competitive steel suppliers. Since 1979 the United Kingdom's productivity in tonnes of steel per worker has doubled and is now on a par with the best comparable levels prevailing in Europe. The BSC started from a very much worse position and we cannot assume that its competitors will stand still, but clearly the BSC is now in a much stronger position to face the future than would have been thought possible by those who doubted the resolve of the BSC and the Government in recent years.
Sir Robert Haslam has said that the corporate plan will be published at the end of July. Will the Minister confirm that?
§ Mr. Lamont
The corporate plan will be received by the Government at the end of July. We have no intention to publish that plan. It has not been published in the past.
The BSC's progress results from a determined effort by management to respond to market demands and competitive pressures and from the Government's 247 acceptance of the need to back the corporation's effort. It results also from the skill and determination of the work force. The world does not stand still and the Government must look to the BSC to make further progress in the future.
I acknowledge the point made by the hon. Member for Motherwell, South (Dr. Bray). The Government have accepted the EC system of quota and price controls, although it has imposed limitations on market initiatives by producers, because it is necessary to allow time to eliminate the need for subsidies. The other major European producers have recognised the need to make this regime work to bring some stability to the market. If a further extension of the quota system is proposed, our willingness to accept it will depend, as on previous occasions, on our judgment as to whether it is in the best interests of the United Kingdom steel industry. Any proposals will need to recognise the substantial improvements in our performance over the past few years both in absolute terms and relative to the rest of the industry in Europe.
Unfortunately, the improved performance in both the United Kingdom and the EC steel industries does not mean that the problem of overcapacity has been solved for all time. The Commission has recently produced a report on Community steel industry output up to 1990, which says that output in 1990 is unlikely to be significantly higher than in 1984, and may well be lower. Despite the substantial progress that has been made in removing excess capacity in the past few years, the Commission estimates that further substantial capacity closures will be needed in Europe. Only then will the industry return to levels of capacity utilisation consistent with profitability.
All member states are committed to ending state aids by the end of 1985. This was reaffirmed at the Industry Council on 26 March. The BSC will continue to need state finance, borrowings and capital after 1985, but I believe that no subsidy element will be needed after that date.
That is the background against which the BSC and the Government have to consider the corporate plan. It has proved a difficult task for the BSC to develop its view of the situation in the wake of the coal strike. The BSC chairman said in evidence to the Select Committee that a dialogue on planning matters had resumed between the BSC and the Government and that it was hoped that matters would be clear enough for a submission to be made by the end of July.
It would not be right for me to speculate on what the BSC may propose either in respect of any particular works or more generally, nor on what view the Government may take of the plan. The plan will need to show that the BSC is on the path to full commercial viability. That is necessary to show not just that further investment of capital in the BSC is an investment on commercial terms and not a state subsidy, but to satisfy the Government that the BSC's main operations will in due course be capable of being returned to the private sector.
The BSC has made progress in the privatisation of many of its activities. To make it possible to return the core activities to private ownership is a further challenge that the Government and the BSC do not underestimate. World prospects and existing levels of overcapacity suggest that it cannot be achieved overnight, but it is the Government's objective, which is fully consistent with the EC agreement to create a viable and secure steel industry.
248 This draft order will enable further funds to be provided to support the encouraging process of recovery of the BSC and will ultimately facilitate privatisation. I commend the order to the House.
§ Mr. John Smith (Monkland, East)
The Opposition do not oppose the order and we do not expect a Division, but it provides a timely opportunity to discuss the British steel industry and the Government's handling of their policy towards that crucial industry.
It is remarkable that the Minister of State can come to the House in the light of recent controversy over the future of the steel industry and not mention Ravenscraig or Llanwern. The Minister knows the deep concern throughout the industry about recent speculation by the chairman and chief executive of the British Steel Corporation in evidence to the Select Committee. It is not satisfactory for the Minister to say that he cannot speculate on the future of any plan within the corporation before he receives the corporate plan. We always seem to be awaiting a plan from the British Steel Corporation.
If the Minister cannot speculate on the future of Llanwern and Ravenscraig, how is it possible for the Secretary of State for Wales to speculate about Llanwern and for the Secretary of State for Scotland to speculate about Ravenscraig? In recent weeks, the Secretary of State for Wales has assured us that he will fight like hell to save Llanwern, but against whom? Is he fighting the Secretary of State for Trade and Industry or the Minister of State? Most people should fight as hard as possible against what they have in mind. I do not know what the Secretary of State for Wales has in mind, but the Secretary of State for Scotland has not been behindhand in telling us that he is committed to Ravenscraig. Indeed, he and other Conservative Members turn up at meetings in Scotland to tell us that they are solidly behind the future of Ravenscraig.
How can the Secretaries of State for Scotland and Wales tell us that everything is all right when the Minister of State says that he is unable to speculate? I believe that he is able but unwilling to speculate—I give him credit for competence. It is the duty of the Secretary of State for Trade and Industry to come to the Dispatch Box and to repeat what his colleagues have said—that the future of Llanwern and Ravenscraig is assured. Nothing less will do.
§ Mr. Roy Hughes (Newport, East)
I am interested in my right hon. and learned Friend's remarks. Does he, like me, fail to understand how the chairman of BSC, Sir Robert Haslam, could tell the Select Committee on Trade and Industry that the BSC and the Government were actively discussing the possible closure of either Ravenscraig or Llanwern? That was widely quoted in the media.
§ Mr. Smith
My hon. Friend keeps a close watch on what is said about Llanwern. His deep concern is shared throughout Wales, where the matter is of great importance to a much wider community than that which he so ably and tenaciously represents. He makes the valid point that, in evidence to a Select Committee, BSC officials speculated about cutting losses, and the one extra plant. That has been a feature of the evidence given every time that the matter has come before the Select Committee. Yet, when we 249 confront the Ministers responsible, they blandly evade the matter by saying that they are not willing to speculate. As the Minister knows, there is deep anxiety in the industry and the communities that are most directly affected by the future of both Llanwern and Ravenscraig, because the chairman of BSC keeps telling them—he does not even hint—that if BSC is to meet the Government's targets, especially privatisation, both plants cannot remain open. That is not good enough.
§ Mr. Hickmet
I shall give the right hon. and learned Gentleman that assurance when I speak from the Dispatch Box, which I do not expect to do soon. Does he accept the Government's injunction to BSC to achieve viability, and the injunction of the European Commission to end state aid by 1985? If so, what are his comments on Llanwern and Ravenscraig?
§ Mr. Smith
I hope that the hon. Gentleman will allow me to develop my argument. He wants answers from me, although the Minister does not answer questions. The Minister certainly does not give the Opposition answers. The Opposition oppose the regime which the Government wish to put on BSC because it is based not so much on viability as on moving towards privatisation. When in an important part of his speech the Minister said that the plan must move towards full commercial viability, he meant towards a level of profitability which would ease the sale of coal, iron and steel making to the private sector. While that remains part of the Government's policy for BSC, we shall resolutely oppose it.
According to the Minister, at present BSC is trading profitably. In that case, the only reason to close either Ravenscraig or Llanwern is to assist the move towards privatisation. Therefore, the threat to those steel plants comes from one quarter alone—the Government who wish to privatise our steel industry. There is no pressure from any other quarter, and there cannot be pressure to move towards viability, if the corporation is already trading profitably, as the Minister said.
The Government talk about privatisation as if every privatisation exercise in which they indulge were intrinsically creditable. It is as if every Minister must produce a report card at the end of term to tell the Prime Minister what he has privatised. I am sure that the Minister of State will not be behindhand in saying how much he privatised last year. It is as if the Government's only purpose in their stewardship of the steel industry is to move the industry as fast as possible and on any terms into the private sector. It is not difficult to sell public assets. Indeed, it is easy to make a success of doing so, especially if they are sold below their value, as was the case with British Telecom. If assets are sold cheaply, the sale will obviously be a success.
250 We are fearful for the future of the steel industry, because the parts which become capable of making substantial profits will be sold, while the other parts, which are necessary for the breadth of support that we must give our manufacturing industry, and which are loss making, will be kept in the public sector. All the loss-making parts will remain in the public sector and the profit-making parts will be sold to the private sector. The Government's relentless pursuit of that policy in the steel industry and in other areas does not benefit taxpayers because they are selling the profitable element, which would benefit taxpayers, and continually saddling taxpayers with loss-making elements.
My hon. Friend the Member for Motherwell, North (Mr. Hamilton) was right to mention the anxiety of workers in areas such as the tube works at Clydesdale in his constituency, which is an extremely efficient operation. They are worried that if they co-operate in making the enterprise successful, they will assist the process of privatisation, to which they are deeply and firmly opposed, as I hope both the Government and the corporation know.
The truth is that the worrying rumours about Llanwern and Ravenscraig, which includes the Gartcosh complex, will continue. They are not healthy for the industry or the communities dependent on it, and the Government could put them to rest immediately. There is nothing to stop the Minister coming to the Dispatch Box and telling us that those two plants are secure, and that the Government do not intend to assist in any proposal from BSC to close them.
I challenge the Minister to give us a specific answer to that question before tonight's debate finishes. He did not do so in his introduction. The people of Wales and Scotland deserve a clear answer, especially as the respective territorial Secretaries of State have not been behindhand in issuing those assurances. Those assurances need to be corroborated by the Minister responsible, who is present tonight. I am happy to sit down at any stage if the Minister is willing to answer our direct and specific questions about the future of Ravenscraig and Llanwern. His failure to answer them directly is sad. I assure him that the fight to maintain those works will continue as relentlessly and effectively as it has since the threat to their future was first raised.
§ Mr. Norman Lamont
I should like to ask the right hon. and learned Gentleman a question. Would he make a decision about BSC, regardless of the views of its management?
§ Mr. Smith
I would find it awkward to avoid expressing an opinion when senior colleagues in the Government—two Cabinet Ministers—felt free and able to do so. I would believe that the Government's integrity was so much in question that, before I saw the details of the corporate plan, I would make it crystal clear that, whatever it contained, there would be no question about the closure of either plant. I am willing to say that clearly and specifically.
The Minister's desire to ask me that question shows that there is some doubt in his mind. Will he rise to his feet now and tell us whether those plants will remain open? Why cannot he do that? I am willing to give way. I have answered his question. Will he now answer mine? I answered the Minister by saying that I would anticipate the 251 corporate plan by giving assurances that Llanwern and Ravenscraig would not close. That is a decision for the Government, and they should make it clear that the parameters within which BSC should operate are those that keep the major steel plants open. I hope that the Government's silence, reluctance and evasion will not pass unmarked in the areas which depend on those plants.
§ Mr. Lamont
My question was not whether the Government would be involved in the decision, but whether the right hon. and learned Gentleman would make the decision regardless of the advice of BSC management.
§ Mr. Smith
The Minister must come to terms with reality. We know that the British Steel management, as the chairman has made clear, would like to close one of the plants. That is the only construction that we can put on the evidence given to the Select Committee.
It is no secret in the steel industry that there is a desire, on the part of at least some of the management, to eliminate — I use the word carefully — one of the strip mill plants. The Minister is not so naive that he does not know of the struggle that took place a while ago, which resulted in the decision that neither plant would close. He knows also that the issue has re-emerged because of evidence given to a Committee of the House by senior management of the British Steel Corporation.
The question returns, as it always must, to the lap of the Government. The Government must make up their minds whether Ravenscraig and Llanwern will remain as permanent features of the British steel scene for the foreseeable future. That assurance has been given by the Secretaries of State for Scotland and Wales. Why can the assurance not be given by the Minister of State whose direct responsibility it is? Perhaps the Minister can tell us why he cannot give the same assurance as his colleagues.
§ Mr. Smith
As the ultimate owner of the corporation, the Government should of course listen to what the management has to say. But the Minister knows perfectly well what the management said to the Select Committee. We have listened to the evidence also and we know where it leads and recognise its import. The Government must not listen to any recommendation from the management to close Ravenscraig and Llanwern. The Minister must not quibble about words. It is clear that the Government have responsibility. If the Minister will not say that Llanwern and Ravenscraig will remain open, we are entitled to cast doubt upon the integrity of the Secretaries of State for Scotland and Wales, who gave emphatic commitments which the Minister is unwilling to endorse.
§ Mr. Smith
The Minister will have to fight his own corner without help from the hon. Gentleman. The Minister with responsibility for these matters is unwilling to agree with senior colleagues who airily gave assurances — it seems as though they were airily given — to the communities and counties which they represent that the works would remain open. My hon. Friends and I live in these areas and know what goes on in the communities. The Minister must know that some of his hon. Friends, who significantly are not here tonight, have attended conferences organised by the Scottish Trades Union Congress. We have been told that Scottish Conservative 252 Members will fight. The hon. Member for Banff and Buchan (Mr. McQuarrie) said at a meeting on a different matter that he would fight vigorously to maintain Ravenscraig. The hon. Member for Strathkelvin and Bearsden (Mr. Hirst) told us how vigorously he would fight for the future of Ravenscraig. Where are they tonight?
Where are the Secretaries of State for Scotland and Wales? They are conveniently absent in case their remarks would be brought home to roost. We have the undignified picture of a junior Minister from the Department of Trade and Industry wriggling because he cannot answer simple questions put to him by the Opposition. He cannot confirm that the Secretaries of State for Scotland and Wales are to be believed. We shall draw our own conclusions. There is doubt, uncertainty and confusion in the areas affected by Llanwern and Ravenscraig. It is time that they were put to rest.
The Minister knows that it is not enough to say that there will not be a closure. Ravenscraig needs investment in the coke ovens if it is to be kept up to date as a first-class plant. Llanwern needs investment in concast production methods. I hope that the Minister, when he replies, will make a definite commitment instead of the evasions to which we have been subjected.
The underlying problem, which the Minister fails to recognise, that has faced the British steel industry over past years is the collapse of manufacturing industry. Because of that collapse, there has been a collapse in the demand for steel. When the Government took office, production was 20 million tonnes. Production has not exceeded 15.5 million tonnes since that time.
The reason for this drop in demand is the catastrophic decline in manufacturing industry. There are gloomy predictions about the future of the industry because of the catastrophic predictions for the future of manufacturing industry. British Steel documents show a continuing level line for manufacture and production. The corporation is contracting its capacity to meet the bottom curve of a dip in demand. If we expand our manufacturing industry — that will be the intention of the next Labour Government — we shall find ourselves, perhaps, without the steel capacity that will be necessary to provide the raw materials for manufacturing industry. The present Government will then be exposed to the serious charge of neglect. They continue to cut and they show no concern for the future of manufacturing industry.
§ Mr. Lamont
Are the comments of the right hon. and learned Gentleman about steel production borne out by the fact that, in 1984 and 1983, United Kingdom steel production was higher than in 1981 as a proportion of demand in the EEC?
§ Mr. Smith
I am not interested in the selective presentation of statistics. I am interested in a simple fact, which is that much less steel is produced now than in the years when the Labour Government were in office. The reason for that is the great decline in manufacturing industry since the days of the Labour Government. The Minister can wriggle this way or that but that is a fact from which he cannot escape.
§ Mr. James Hamilton
My right hon. and learned Friend is right in saying that there has been a serious drop in steel production, and that is the result of the Government's policies. Steel consumption industries — I worked in one before I became a Member of this place — are in a worse state than they have ever been since the 1920s. We need new bridges, schools, hospitals and other items of infrastructure, and if such projects were implemented the demand for steel would be considerably greater.
§ Mr. Smith
My hon. Friend advances the argument compellingly. The steel industry is dependent on manufacturing industry, and some sectors of the steel industry are especially dependent upon the construction industry. If the market is removed, which the Government have been so careless in allowing by their neglect of the manufacturing sector, it is no surprise that the steel industry finds difficulty in securing markets for its products. The best tonic that we can give the British steel industry is to revive manufacturing industry. That is at the heart of the economic policies that are advocated by the Opposition, which will be implemented by the next Labour Government.
It would be wrong not to mention Tinsley Park, another matter which the Minister failed signally to mention. He knows that the proposal to close Tinsley Park was made by the BSC. The workers have fought a vigorous campaign to seek to persuade the corporation to abandon its proposals, but it seems that they have been forced, reluctantly, to accept the closure proposals. It is sad that another important plant is to be closed.
The latest information that I have suggests that the work force is likely to accept the plant's closure. It is a sorry day when these plants go out of existence. I compliment those who have worked so hard to try to persuade the corporation to change its mind. As the Minister knows, there is a great deal of suspicion because it was elicited in December 1983 in the Select Committee on Trade and Industry that the closure of Tinsley Park was included in the Phoenix 2 proposal. That hardly squares with the constant assurances which the corporation gave that it was a self-standing decision that had nothing to do with the Phoenix 2 proposal.
When I asked the Minister whether a joint venture was the road to privatisation, he more or less admitted that it was. That was a revealing part of his speech. It appears that joint ventures are an exercise in the privatisation option. We have always suspected that. They are a particularly bad exercise of the privatisation option because they usually involve a large amount of public sector resources and capital and a small amount of private sector capital and resources, but both private and public sectors share the profits equally. Once again, there is a 254 large contribution by the taxpayer and a disproportionate benefit going to the private sector. That is the pattern of the Government's approach to the British steel industry.
I am sorry to say at this stage in the debate that, without the assurances that we have sought from the Minister, we must remain deeply dissatisfied about the Government's conduct and their policy towards this crucial and important industry. That is, first, because our manufacturing industry continues to languish, and, secondly, because important plants are left in the doubt, uncertainty and confusion that it would be easy for the Government to resolve but which, for their own reasons, they curiously refuse to do.
§ 8 pm
§ Sir John Osborn (Sheffield, Hallam)
I listened to the speeches of my hon. Friend the Minister and of the right hon. and learned Member for Monkslands, East (Mr. Smith) with interest. The debate gives hon. Members a chance to obtain the Government's view on what is happening in the steel industry. I shall make a few observations about steel in general, a few more about special steels and engineering steels in particular and specifically I shall touch on the scene in Sheffield, involving Sheffield Forgemasters and Phoenix 1 and 2, and including Aldwarke and Stocksbridge, as well as the Tinsley works.
As hon. Members will know, I have been involved in the steel industry all my life. There is no need for me to declare an interest now other than that of my constituents. I welcome the observations made by my hon. Friend about hiving off, and the growth of the private sector. Those in the private sector of the steel industry who have survived in Sheffield are looking forward to the future in the private sector with optimism. It is a pleasure to see the vigour coming back to the few who have survived.
I read with mixed feelings that the order extends the borrowing powers to £4.2 billion. After this debate, I shall have even more mixed feelings because the nation is faced with a £700 million increase in the extent to which taxpayers must divert their funds from other priorities to sustain disastrous decisions taken 18 to 20 years ago.
Earlier today, my right hon. and learned Friend the Minister for Health had to defend the Government's decision to expand the Health Service but not to provide as much taxpayers' funds as they would wish. If there is a need to provide taxpayers' funds for the steel industry, as has been done consistently for 20 years, that must mean that other priorities have to fit in with the priority of sustaining an industry that has made a series of disastrous decisions which have been mainly under Government pressure and from which it is now pulling out. I thank my hon. Friend the Minister for his optimistic forecast for the steel industry.
It had been my intention to use the annual accounts of the British steel industry for the current year. However, I have only the accounts for the last year. Therefore, I will have to deduce how well the steel industry is doing. I have attended the Select Committee that heard from Sir Robert Haslam, Mr. Scholey, Mr. Stambrook, Mr. Evans and others. They say clearly that, but for the coal strike, the BSC had hoped to break even this year. I welcome the fact that it is running profitably now and I welcome the optimistic forecast of requiring less and less money, as put forward my hon. Friend the Minister.
255 The BSC's leaders speak to all-party committees as well as to the Select Committee. Last year's accounts show that the BSC has written down a huge amount of taxpayers' money in the past 20 years. Assets of £2.6 billion in the steel corporation are thin compared to the required borrowing power of £4.2 billion. I welcome the sales to the private sector that my hon. Friend the Minister has been able to suggest, and the fact that they are worth about £349 million. I welcome the joint ventures. I shall not say too much about Sheffield Forgemasters but, as the Conservative Member in Sheffield, I wish that project well. Sheffield Forgemasters has grown in spite of trade union opposition and opposition from the city council, and therefore the task of the management has been that much more difficult.
I hope that Phoenix 2 will materialise. I understand that it could involve Brymbo, Aldwarke and Stocksbridge. From what I heard in the evidence given to the Select Committee, the closure of Tinsley Park could be part of the package that will go with Phoenix 2. I hope that when the project is launched, it will be adequately funded. The coal strike has been a great tragedy. It has cost the British steel industry £180 million.
The science and technology committee of the Council of Europe inspired the sixth scientific and parliamentary conference in Tokyo early in June. Scientists and politicians from all over the world, particularly from the OECD countries, were there. Because of my interest in new technology, the Japanese car and steel industries and robotics, we went to the Nippon Ohgishima steelworks, or the Keihin works. That factory is on an artificial island 5 by 3 kilometres, which has been built and decided upon in the past 10 years. Ships can bring in iron ore at one dock on the island and coal at another. The capacity of 6 million tonnes a year, with bar, plate and strip, includes a pipe-making plant. I sensed an optimism at this new site that I wish I could sense in Britain and many sites elsewhere in Europe. It has been possible in other parts of the world to construct something which gives courage.
The Sheffield steel industry grew up on the fact that 30 or 40 years ago it could rely on electricity from coal-fired power stations at highly competitive prices. Now, that electricity is far too costly compared to the prices charged for electricity to Sheffield's competitors throughout the world. Those with a nuclear or hydroelectric capacity are able to provide electricity more cheaply to these vital works. Therefore, I shall be pressing my hon. Friend the Minister in due course for an examination of the electricity costs in Sheffield.
Turning to the Tinsley Park works, I am reported in a Conservative newsletter, with a history of involvement in the steel industry behind me, as pledged "to oppose closure". That is not accurate. I deplore the fact that so much has happened but I am asking why it is necessary, and so is the Select Committee. I note that the Iron and Steel Trades Confederation has threatened to take court action and that it has been looking at a blueprint for a four-day week in Sheffield. I cannot ask my hon. Friend the Minister to answer all these questions now, but I am having meetings, as far as the BSC management will allow me, as a Back-Bench Member of Parliament, to have them, to find out the options, and the reasons for any decision.
A Member of Parliament cannot run a private sector steelworks or claim to have inside knowledge of that or a public sector works. Management must have authority to 256 manage but, as consultation is announced in the case of what is happening at Tinsley, Stocksbridge and Aldwarke, I very much hope that it will be extended to Conservative Members of Parliament. As I understand that my hon. Friend the Minister will be making an announcement to the Select Committee on Tinsley this week, I will not pursue the matter further.
I can only conclude, after listening to this debate, that, if Opposition Members had their way, they would keep uneconomic steelworks in operation, taxpayers would have to dig even deeper in their pockets and other priorities—the Health Service and education—would suffer. The figure which the Minister has gauged is about right.
I listened from these Benches to the decision to set up Llanwern and Ravenscraig. It is tragic that they are loss makers. In view of the current market for home and overseas contracts, it is hopeless to run a plant on too few shifts. It is much better to have fewer plants running full shifts so that costs can come down and steel can be competitive. Surely it is up to the BSC to decide to do that. If my hon. Friend the Minister is drawn into making a decision, I wotrld suggest that he does not have the information at his fingertips to take the right decision. I hope that he will not be tempted by the right hon. and learned Member for Monklands, East (Mr. Smith).
§ Mr. Stan Crowther (Rotherham)
No doubt the hon. Member for Sheffield, Hallam (Sir J. Osborn) will forgive me if I do not comment directly on his speech but, in truth, I do not think there was much meat in his speech.
I am pleased to hear the Minister refer to the fact that the productivity of the British Steel Corporation is now comparable to the best prevailing in Europe. That is not the average but the best. It is against that background that I want to urge certain courses of action upon him. I wish to make a brief reference, as my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) did at greater length, to the wide strip mills. I appreciate that my hon. Friend the Member for Motherwell, South (Dr. Bray) will no doubt have a lot more to say on the question of Ravenscraig, should he catch your eye, Mr. Deputy Speaker. The British Steel Corporation still wishes to close one of the three and I do not think there is any doubt that Ravenscraig is its favourite candidate for closure. The Minister was repeatedly putting to my right hon. Friend a hypothetical question because he asked whether my right hon. and learned Friend would make a decision regardless of the views of the BSC. I think I can help him on this matter, because a former Secretary of State, the right hon. Member for Wanstead and Woodford (Mr. Jenkin), did precisely that.
In 1982 the right hon. Gentleman did not wait for the corporate plan to come into his office. He merely told BSC, in advance, that he would not accept a corporate plan which did not keep open all the five integrated plants which, of course, includes the three wide strip mills. Therefore, if the Minister is looking for a precedent he has got one. The Minister has told us that he cannot speculate or comment until he has seen the corporate plan. Yet there was a Secretary of State who made a sound political decision, understanding the social consequences of closure and he told BSC what it had to do. He showed who was the boss.
My first appeal tonight is that the present Secretary of State will show the same courage. After all, the 257 Government, as representatives of the taxpayer, are the owners of BSC. It does not belong to Sir Robert Haslam and Mr. Bob Scholey. It belongs to the public, and the Government, as representatives of the public, must take into account the public interest. The previous Secretary of State's decision has been amply justified by events. He told the House that he had instructed BSC in that way because:it would be wrong to take a decision to close one of the plants on the basis of forecasts made in the trough of a recession and before the European Communities state aids regime had had a chance to have a significant impact on excess capacity elsewhere in Europe".In our recommendations to the Government, the Select Committee on Trade and Industry said in March 1984:now is not the time to close a strip mill. We also recommend that BSC should retain as many options as possible in its approach to the freer market of 1986.I cannot anticipate what will be in our report which comes out later this week, but that was our view then and nobody can argue that, in the middle of 1985, things have changed so much that we ought now to start closing options before 1986. I thought that I would remind the Minister of those points in case he is looking for an element of consistency in Government policy. I do not know whether he is, but it is sometimes helpful.
Mr. Scholey told the Select Committee that he would rather have two wide strip mills operating at full capacity than three operating at two thirds capacity. It does not take a mathematical genius to calculate that a plant operating at full capacity is incapable of taking any more orders. He wants to close capacity to the point at which any significant increase in demand cannot be met in the United Kingdom. That would necessarily increase imports.
§ Mr. Hickmet
I do not wish to comment on Ravenscraig, but does the hon. Gentleman believe that capacity at the two strip mills that would remain if Ravenscraig were to close would not be sufficient to absorb present demand or any reasonable anticipated increase in demand? Is not the problem the fact that there is massive overcapacity in the home market?
§ Mr. Crowther
I have quoted what Mr. Bob Scholey told the Select Committee. It is a mathematical fact, is it not, that two plants operating at full capacity are equivalent to three operating at two thirds capacity? He said that he would prefer to have two operating fully. That must mean that they could not take a substantial increase in demand. I cannot quite see the hon. Gentleman's point.
§ Mr. Crowther
The hon. Gentleman might have a chance to make his own speech.
The case that was previously accepted in regard to wide strip mills should be accepted now in that sector of the industry and also apply to the engineering steels sector. In that sector, British Steel's special steels group represents 82 per cent. of present capacity—the rest is represented by the only remaining private sector company, GKN Brymbo. BSC has announced that it wants to close the Tinsley Park works, which is in the constituency of my hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy), although I understand that at least half of the work force are my constituents.
BSC has described that plant as Europe's premier producer of quality special steels, and yet it wants to close 258 it. There seems a certain illogicality in that, to say the least. As with the strip mills, now is not the time to close a special steels plant. We are told that there is still excess capacity in the special steel sector. Looking at existing demand, I do not doubt that that is true, but will the present low level of demand exist for ever? Are we to accept the notion that British manufacturing will for ever be in the doldrums and that we shall never have a revival of manufacturing? Are we to accept that we shall never again produce enough wealth to maintain a reasonable standard of living for all of our people? That is what the Minister would be saying if he accepted BSC's view. Of course, he has carefully avoided telling us whether he accepts that view. That would be a doctrine of despair. If it is true — and I hope that it is not — this country will never again be able to produce wealth at the level we need to pay for the services that should be provided for the sick, the elderly and the handicapped, to provide better education, to house the homeless and to provide money for the arts and so on—all the things that a country needs to do if it is to be called civilised, but which we cannot do if we are for ever committed to the present low level of manufacturing output. That is something that I cannot accept. If there is to be an improvement — and as my right hon. and learned Friend said, the next Labour Government will ensure that there is — we are now in serious danger of reducing steelmaking capacity to the point where it cannot accept any substantial increase in orders.
Some hon. Members are aware that I am a student and, indeed, from time to time a performer of folk songs and similar works. The tragedy of Tinsley Park irresistibly reminds me of a song that I have known for many years about a nice young man called William Brown:Who worked for a wage in a northern town.He worked from six till eight at night,Turning a wheel from the left to the right.I appreciate that it would be out of order for me to sing that song, but it may be appropriate to remind the House of the gist of it. The song tells us:One day the boss to William came,He said, 'Look here, young whatsyername,We are not content with what you do,So work a little harder or out you go.'So William turned and he made her runThree times round in the place of one.He turned so hard that he soon was madeLord high turner of the trade.The nation heard the wondrous tale,The news appeared in the Sketch and the Mail.The railways ran excursions down and all to see young William Brown.But sad the sequel is to tell,He turned out more than the boss could sell.The market slumped, the price went down,Seven more days and they sacked young Brown.That is precisely the story of Tinsley Park.
We have been told time and time again by the Minister that, as long as British industry gets rid of its surplus manpower and becomes more efficient and competitive, everything will be fine. The BSC got rid of two thirds of its work force. Tinsley Park has achieved the almost incredible productivity increase of 73 per cent. since the beginning of 1982. Now the BSC has decided to close it with a net loss of 800 jobs. Like the unfortunate William Brown, the workers turned out more than the boss could sell. Where is the incentive for people to become more productive if all that happens is that they are sacked? I do 259 not know what more people could do to carry out the Government's recommendations for productivity than what has been done by the people at Tinsley Park.
The BSC says that it will save £12 million a year by closing Tinsley Park, and that is its only concern. But surely the Government's concern must go further—they must consider the social costs that will go very deep, quite apart from the obvious cost of redundancies. Those 800 people will be permanently out of work, and, as there are 21,000 on the dole in Rotherham and Mexborough travel-to-work area, there is not much hope of those 800 people finding employment. That will be a continuing cost of £5 million a year. Sheffield city council will lose £3 million a year in contributions to the rates, and the other ratepayers will have to meet that because the closure of Tinsley Park does not reduce the need for the services that the council has to provide.
Many small contracting firms in Rotherham and Sheffield will face severe problems because they work for the BSC at Tinsley Park. They are the very small firms that the Prime Minister continually says she wants to help. She will put them out of business by closing Tinsley Park. There will be many other ripples throughout society in that area.
The Prime Minister tells us twice a week that recovery has come, that everything is working out better and that in no time at all we will be round the corner and everything will be fine. Despite what my right hon. and learned Friend said — and he was right — about manufacturing industry still operating at a much lower level than in 1979, it is nevertheless improving. Steel output is rising — in the first five months of this year, it was 4.7 per cent. higher than in the first five months of last year. Lest anyone suggest that the coal strike was a factor in this, I remind the House that the coal strike similarly affected both the periods under comparison.
In a recent report, the Select Committee drew attention to the decline of manufacturing and, in effect, asked what we should live on when the oil ran out if we had no manufacturing industry. It urged the Government to take the necessary steps to sustain and revive manufacturing industry. Recently I heard further sad news of the decline in manufacturing industry. I understand that Philips, the multinational, is to close its factory making washing machines in Halifax in the Yorkshire and Humberside region, with the loss of 660 jobs. It is transferring that production to Naples — not because of any problems with industrial relations or quality, but apparently because it has reached an agreement with the Italian Government. Our Government should be looking seriously at that because we cannot afford to keep losing such jobs.
If there is a reverse in the fortunes of manufacturing industry as a result of policy changes by either this Government or the next, we must have a steel industry that is adequate to meet any substantial increase in orders. I calculate that if the automotive industry were able to recapture just half of the market share that it has lost since 1970, that would increase the demand for engineering steels equivalent to the total capacity at the Tinsley Park works. Are we to abandon hope of ever getting our manufacturing industry back on its feet in that way? I hope not. Do Ministers really mean it when they talk about the need for our industries to become more competitive, to defeat imports and to get out and export their goods 260 throughout the world? If they do, they must not throw away the tools to achieve that, and the most essential tool is the steel industry.
§ Mr. Richard Hickmet (Glanford and Scunthorpe)
In considering the order to increase the borrowing powers of the BSC, it is legitimate to examine its performance during the past 12 months and before. When the right hon. and learned Member for Monklands, East (Mr. Smith) responds to the debate, it behoves him to stress the fact that the BSC now poses a major threat not only to the steed producers of Europe but to the steel producers of the United States of America. We should remember that there has been a remarkable turnround in the performance of the BSC; its progress on productivity has been dramatic. We have equalled and surpassed levels of productivity in most of our competitor countries of Europe—and that is after successive Governments have injected into the BSC more than £12,000 million during the past 15 years.
Not only has the BSC achieved remarkable levels of productivity; it is on the verge of breaking even —despite the miners' strike, which cost the corporation £180 million. If any one questions the need for such increases in the borrowing powers, it is legitimate to remind him of the ruinous cost of that strike.
In their efforts, the militant Left and Mr. Scargill were not helping to keep open Ravenscraig steelworks, about which there has been much debate this evening. They were trying to bring about their closure, as well as the closure of Llanwern and Scunthorpe steelworks, in my constituency. It lies ill in the mouths of Opposition Members to criticise the Government's policy when the Leader of the Opposition failed to respond to a letter that I wrote to him on 9 May last year. In the letter I asked whether he supported Mr. Scargill's efforts to put 10,000 men out of work in my constituency. I received no reply. That is the regard that he had for the jobs of steel workers in my constituency.
In Scunthorpe, we were obliged to endure millions of lorry movements of ore and coal from the port at Immingham and ore from the wharves on the Trent. At Orgreave we had the most amazing scenes of violence directed simply to putting men in my constituency out of work. The rail unions made an effort to combine with the miners' union in that endeavour. With great respect, we did not hear much from the Opposition when those jobs were at stake. It is legitimate to bear it in mind that, despite all those factors, the profit performance of the British Steel Corporation has increased by £400 million over the past two years.
We are constantly told, both through the media and in the House, that Mr. MacGregor butchered the steel industry. It is a sort of litany that butcher MacGregor butchered steel workers' jobs and has now moved on to the mining industry to butcher miners' jobs. The only people who butchered the steel industry were those who insisted on maintaining manning levels and production techniques that were completely unrealistic. In 1979 we operated the most unproductive steel industry in the world. Britain produced less steel per man than the United States, Korea, Japan, France, West Germany, Italy, Belgium and so on. Steel production was not just marginally less; it was dramatically less. Is any credit given by Opposition Members for turning the British Steel Corporation into a major threat to its European competitors? No, none at all.
261 What is the best thing that will secure the jobs of steel workers and the future of the British Steel Corporation, if it is not the fact that it is a highly competitive and productive organisation with productivity improving from approximately 14 man hours per tonne of liquid steel in 1980–81 to 6.9 man hours per tonne in the third quarter of 1984? No industry can hope to survive when it is so hopelessly unproductive, uncompetitive and uneconomic. It is to the credit of this Government, British Steel Corporation management, those who are employed in BSC and, I believe, the trade unions after the strike in 1981, which lost us so many markets and jobs, that we have faced those difficulties and taken steps that have enabled BSC to survive. Britain is now producing more steel than in June 1980, when BSC was recovering from that steel strike.
Those enormous improvements in the corporation's position are in stark contrast to five years ago when BSC was terminally ill and about to go down the tube, with our European competitors licking their lips at the prospect of picking up BSC's United Kingdom and world markets. In my view, it is absurd to suggest that we have cut out so much steelmaking capacity. Let me pick up the point about Ravenscraig, that if it were to close, we would cut out so much steelmaking capacity that we would be unable to respond to any reasonable increase in demand. Last year BSC produced 15 million tonnes of liquid steel. The hon. Member for Rotherham (Mr. Crowther) will know that when it comes to debating with the Commission on manned capacity and quotas, there is absolutely no point in talking up one's manned capacity — one does the reverse. If one bears that in mind, the fact is that BSC can produce about 21 million tones — that is to say, more steel than it has produced in the past 10 or 12 years. Those are the facts. BSC is currently operating at about 70 per cent. of capacity. That figure is not consistent with its target of financial viability.
The hon. Member for Rotherham referred to the closure of Tinsley Park. In my constituency, we lost 11,000 jobs when Normanby Park closed in 1981. Between 1981 and 1983, the industry was slimmed down and made more productive. As a Member of Parliament with a constituency that has about 20 per cent. unemployment as a direct consequence of the rationalisation in the steel industry, I am well aware of the problems associated with that, and the heartache and tragedy that such levels of unemployment cause.
BSC must pursue policies which, in the long term, protect the jobs of all those who work in the corporation. The special steels division of BSC has suffered from the remarkable decline in the British car industry. What was that decline promoted by? It was promoted by restrictive practices, manning levels and the trade unions' attitude towards employment, which brought British Leyland to its knees. Does the House remember Red Robbo, the shop steward who could bring out BL and the rest of the work force at the drop of a hat? Frequently he did so.
§ Mr. Hickmet
Why not? He is not there because of the policies towards trade unions pursued by the Government. Those policies have been condemned time and again by Opposition Members, but they are welcomed by the trade unionists who work in the industries concerned.
262 The consequences of the decline in the car industry have meant that United Kingdom car and commercial vehicle manufacturers have contracted by over 50 per cent., with imported cars now taking 60 per cent. and imported commercial vehicles 40 per cent. of the United Kingdom market. Throughout, the Labour party has condemned our efforts to promote trade union reform. In fact, it has fought it tooth and nail all the way.
§ Mr. Roy Hughes
The hon. Gentleman does not strike me as being terribly well-informed on the motor industry, because it is generally recognised throughout that industry that the reason for its decline was, first, very poor management and, secondly, a lack of investment.
§ Mr. Hickmet
Nobody can condemn this Government for failing to invest in the car industry when only two weeks ago the Secretary of State announced support for a £1.8 billion corporate plan. Throughout the lifetime of this Government they have stood by British Leyland and have attempted to inject proper management techniques into that corporation. It is idle to suppose or to promote the argument that restrictive practices and trade union practices within the car industry in this country had no effect on the position. The policies of the Government have, in fact, arrested the decline of British Leyland and the British car industry with the corporate plan announced by my right hon. Friend two weeks ago, enabling the development of a new British Leyland engine which will be of direct significance to the special steel divisions of the British Steel Corporation. When only 70 per cent. of capacity is utilised in special steels, when we have tried to hang on to our markets both at home and abroad and when special steels exports represent 24 per cent. of BSC's product, it has had to remain competitive in this highly competitive sector of the market. We have to match the competitiveness of our European rivals, who will shortly be producing steel at 9.5 man hours per ton compared to our 10.5 man hours.
Over the last 12 months the records of the British Steel Corporation have been remarkable. The British Steel Corporation has not only survived but is now breaking even. The Minister is to be commended for the Government's policies in this regard. I very much regret that Opposition Members give no credit whatsoever for what has been a remarkable success for British industry.
§ Mr. Roy Hughes (Newport, East)
At the outset of my contribution, may I first register my disgust at the fact that the Secretary of State for Wales is not on the Front Bench today. Nor has any Welsh Minister appeared throughout the debate. The people of Wales will make their own judgment about that, particularly because of the importance of steel to the Welsh economy.
In discussing the steel corporation's borrowing powers those of us who have taken an interest in the steel industry over many years will realise that an independent British steel industry is vital to us as an industrial nation. Without such an independent industry we would be at the mercy of overseas suppliers, with all that this can mean in terms of pricing policies and delivery dates. It has been said many times before that an independent steel industry is vital for Britain's defence needs. That is the basic premise from which I start.
263 Having listened to the Minister of State, I believe that it is becoming more apparent every day that the Government's policies are bringing neither stability nor confidence to the industry. Last year he said:We have made it clear that we wish the corporation's activities to be returned to the private sector." — [Official Report, 23 July 1984; Vol. 64, c. 739].He was clear, and explicit. Understandably, though, such a declaration sent shock waves throughout the industry. Today he reiterated his position, but he was just a little bit more reticent, political considerations perhaps now having an effect on the Government. The Opposition believe in a publicly owned steel industry. It is too important an industry to be left to the machinations of private operators, because we recall quite vividly how the steel industry was starved of investment when under private ownership. I repeat, the Government's policies are not bringing stability or confidence to the industry.
For clarification and emphasis of this point I turn again to the evidence of Sir Robert Haslam, chairman of the British Steel Corporation, to the Select Committee on Trade and Industry a fortnight ago. His words were widely reported in the media. He said that the Government are actively discussing closure of either Llanwern or Ravenscraig with the British Steel Corporation. The manner in which that statement was reported is pretty clear and explicit, because, they argued, existing plants like Ravenscraig and Llanwern were operating to only 70 per cent. capacity. This under-utilisation is understandable, bearing in mind the considerable amounts of steel we are still importing. Secondly, we have to consider the very low level of economic activity in the country as a whole, particularly when about 4 million people are out of work.
Surely, as my hon. Friend the Member for Rotherham (Mr. Crowther) has argued so lucidly, this under-utilisation of capacity will eventually be needed when there is an economic upturn. Some of us believe that the Government expect no such economic upturn; nevertheless, they wish to return the steel industry to private hands. To make the Steel Corporation attractive to possible buyers the British Steel Corporation's assets have to be shown to be operating at capacity and, perhaps even more significantly, profitable. Sir Robert Haslam told the Select Committee that this over-capacity, to use his words, was an albatross around the neck of the British Steel Corporation.
Here I want to declare my constituency interest because the Llanwern steelworks is in my constituency. My first reaction to that statement was to say "What an albatross", because Llanwern is now universally recognised as one of the most competitive plants in Europe. Since the slimline operation some five years ago, in terms of output and overall efficiency it has won admiration far and wide. With such a spendid record, why should the management and, more particularly, the work force, be again thoroughly demoralised with the threat of closure?
This is the issue about which the people of Wales are so rightly concerned. It is with good cause, then, that I turn to the ignominious role that has been played in this whole affair by the Secretary of State for Wales. He has repeatedly praised the workers of Llanwern who have brought about such a remarkable transformation. On other occasions, notably in a speech to international business men in London on 12 January 1983, he denied any threat of closure and strongly hinted that new investment at Llanwern would be forthcoming. This has been his theme 264 throughout, yet a fortnight ago the chairman of the British Steel Corporation told the Select Committee on Trade and Industry that the Government were discussing with the Steel Corporation the closure of either Llanwern or Ravenscraig. In other words, the ground has been taken from under the feet of the Secretary of State for Wales. He has deceived the workers of Llanwern. He is becoming recognised increasingly as a man who cannot be trusted.
The revelation of Sir Robert Haslam has caused dismay and outrage throughout the whole county of Gwent. I have here a letter from Mr. John Murphy, the secretary of Llanmartin and district labour party. I propose to read the letter, which is not politically biased. The housing estates in that district were built to house Llanwern steel workers. People flocked there from all over the country. Mr. Murphy himself, for instance, is a Glaswegian and a redundant steel worker into the bargain—a victim of the so-called slimline operation. He writes that members of his partyare greatly concerned about what is happening in the steel industry and what effects it will have to our area if Llanwern had to close when this new corporate plan is published. We would be grateful if you could come to a special meeting of your calling before this plan is published. All I would need is (at the most) 24 hours notice".That shows the urgency and concern felt in that area. That concern is understandable, bearing in mind that at the end of the March quarter, according to the figures released by Gwent county council, unemployment in the county stood at 17 per cent. Closure would spell disaster. What a poor reward that would be, in view of the remarkable efforts of the work force in recent years.
Llanwern requires two specific things — first, an assurance from the Government and the British Steel Corporation that the works will have a long-term future, and, secondly, a go-ahead from those two bodies for a concast scheme in the works at a cost of approximately £100 million. The works has been crying out for such a scheme for years. Concast is recognised as a more efficient way of producing sheet steel. As a country we lag behind our European competitors in concast capacity. Germany has four times the amount that we have and France and Italy have double or more our capacity. Investment in concast at Llanwern can be more than justified by the performance of the works.
Britain cannot afford any further cutbacks in its steel making capacity. Ultimately it is this country's long term interest that should prevail. The Government have for too long been slaves to political dogma.
§ Sir Anthony Meyer (Clwyd, North-West)
The hon. Member for Newport, East (Mr. Hughes) will have noted that his eloquence has drawn into the Chamber my hon. Friend the Minister of State, Welsh Office to listen to his strictures. I shall be agreeing with the hon. Member for Newport, East about the efficiency of the Llanwern steelworks but about precious little else. Certainly I shall not be agreeing with what he said about my right hon. Friend the Secretary of State for Wales, who has fought magnificently within the Cabinet for the interests of Wales and who would require a great deal of convincing if eventually the decision was to be against Llanwern, although I do not think for a moment that it will be.
It was no doubt shortness of time that obliged the hon. Member for Newport, East not to sing his familiar song about the ills of the British steel industry being entirely the 265 fault of the Common Market. The fanatics against the Common Market, such as the hon. Gentleman, like to pretend that it is the Community that has obliged Britain, and particularly Wales, to shut down so much of its steelmaking capacity and to lose so many jobs in the steel industry. This is, of course, to stand truth on its head.
The Community has done what any intelligent, modern Government have to do. It has cushioned the process of inevitable change. If there is one thing on which all those who have studied the question are agreed it is that there is enormous overcapacity of steel production in the world as the developing countries come on stream in steel production. Existing steel producers in Europe have the choice either of protecting their high cost production, which means not only massive subsidies to be borne by the taxpayers but imposing a crippling burden on the rest of the steel-using industry, or they can try to become as efficient as the developing countries. What the Davignon plan did was to ease the process of transition towards efficiency which inexorably means the loss of a very large number of jobs.
I am glad that the steel industry in Wales at Llanwern and at Port Talbot is efficient, judged by any standards. The Shotton steelworks, at one time one of the great producers of steel but sadly alas no longer, is now the most efficient coking plant in western Europe.
It has been recognised that Welsh steel producers, and Llanwern in particular, have achieved total competitiveness. They have eliminated overmanning, which was notorious. They then dealt with all kinds of demarcation disputes. If a fuse blows in the works, anyone can mend it. The production record is equal to any but — and I cannot stress this enough — the pursuit of competitiveness is unending. One never gets to the point where one is competitive enough to leave things as they are.
Two factors govern the future of Llanwern. The first is the question already raised on both sides of the House as to whether Llanwern is to get the continuous casting plant that it needs. Without that facility the most heroic effort of its workers will not enable it to stay in the competitive race for much longer. The second question — not yet mentioned — is whether Llanwern is to continue to be handicapped by having to buy more expensive coal than its competitors overseas.
For so long as the Coal Board is unable to push ahead with its strategy of making the coal industry as competitive as the steel industry has become, by closing down uneconomic pits and concentrating on the good ones, Llanwern, having committed itself to buying Welsh coal, is imposing a £2.5 million a year burden on its production costs. But the whole future of the coal industry in South Wales is bound up, in turn, with the survival of Llanwern and Port Talbot, though one would hardly have thought so from the conduct of the miners and, I am sorry to say, the railwaymen—who equally depend on the steel industry in South Wales—during the coal strike and their efforts to bring production at Llanwern to a halt. If the price of Welsh coal could be brought down, as it will be if the uneconomic pits are taken out of production, Llanwern will be able to remain competitive and to go on using Welsh coal. This obviously beneficent chain of events was too much for Mr. Scargill to swallow, and, sadly, the miners' union in South Wales went along with his wrecking policies.
266 One would have thought that the Labour party in South Wales, and especially the hon. Member for Newport, East, would have found the courage to stand up for their constituents and their supporters in the steelworks at Llanwern. Not a bit of it. The hon. Member for Newport, East went along uncomplainingly, proudly indeed, with the mineworkers and the railway workers trying to stop production at Llanwern. It was a moment of crisis, because it was touch and go whether Llanwern would have to shut down altogether and the furnaces go cold, their linings cracked, and the chance of revival gone for ever.
If they pulled through it was no thanks to the hon. Member for Newport, East. It was his colleague, my hon. Friend the Member for Newport, West (Mr. Robinson), who emerged as their champion. My hon. Friend is not here tonight; he has gone to help confound the pollsters in Brecon and Radnor. I want to pay my tribute to his heroic efforts on behalf of his constituents. Behind his quiet and diffident manner my hon. Friend has the ferocity of a tiger defending its young. I am sure that at the next election the voters of Newport will remember what my hon. Friend did for Llanwern and will remember what the hon. Member for Newport, East did not do.
After all this, the steelworkers of Llanwern must feel they deserve well of the Government. They have made themselves super-efficient. They have kept going through a strike designed to cripple them and now they look to the Government to make a gesture of confidence and gratitude, in particular, to give them the concast plant they so desperately need. I do not envy the Government their choice. Despite what the Select Committee on Trade and Industry said in its report the other day, there is no doubt that there is still overcapacity in steel production in this country. Three strip mills is probably one too many.
The Government have to weigh all the facts, but they have also to weigh, and weigh very heavily, the encouragement that a massive investment in Llanwern, or for that matter in Ravenscraig, would give to workers in coal, or steel or on the railways or throughout British industry who have had the courage to understand they must modernise or perish, and that strikes designed to halt modernisation do not delay death; they merely make it much more painful. The steelworkers at Llanwern, Port Talbot and Ravenscraig have given a lead to other workers in British industry and the Government need to weigh that fact very heavily.
It would not be reasonable to expect Ministers to give a firm commitment tonight about the future of Llanwern or Ravenscraig, but the workers at those two plants and all who are concerned with their future would do well to reflect on what the future of those plants would be if it lay in the hands of the Labour party who, in government as in opposition, have always lacked the guts to stand up to unions fighting against modernisation. Without a continuous process of modernisation, Llanwern, Ravenscraig and indeed Port Talbot are doomed.
§ 9.3 pm
§ Mr. Paddy Ashdown (Yeovil)
The hon. Member for Clwyd, North-West (Sir A. Meyer) touched on the question of managing change. I think he used the words "cushioning the necessary change". That is a matter to which I should like to return later.
We must welcome the order, because, within the structure by which we fund our nationalised industries—agreed between the Government and the Opposition — 267 we have no choice. It is the way in which we can provide the funding that the British Steel Corporation needs in order to be able to make the changes that are necessary. But it is reasonable and pertinent to discuss why we have such an order before us and why we have to constrict, ossify if we like, the mechanisms by which we fund our nationalised industries in a way which brings this order before us tonight.
We all know that our nationalised industries are, by statute and by agreement between the two major parties, not permitted to borrow in any sense upon the open market. They must get their money from the Government. That seems to be a product of the kind of tunnel vision that afflicts the two major parties in the way that they view our nationalised industries. Both suffer from tunnel vision about the chasm that both seem to insist shall exist between the private and national sectors. Both pay tribute to the mixed economy, but they cannot mix within the economy. There is a massive chasm between them, and the way in which we fund our nationalised industries is a perfect example of that. The BSC and our other nationalised industries must go exclusively to the Government to receive their funding. Hence the reason for the order.
One of the reasons evinced by the Government for this curious policy, on which they agree with the Labour party, is that to allow more liberal structures by which the nationalised industries could raise funds would somehow starve the funds available to private industry. We are led into the ludicrous situation where, in order to get more flexible funding, the Government believe that they must go the whole hog and sell off assets such as British Telecom. That produces the very starvation of funds that they seek by this system to avoid.
It is equally ludicrous that, as a consequence of this kind of structure for financing our nationalised industries, the BSC borrows from the Government and ends up as a net lender of money to non-Government sources. That is revealed in table 5.4 of the BSC's expenditure plan for 1985–86. Although it borrows from the Government, it lends £86 million to non-Government sources, an admittedly very small sum compared with the sums that we are now discussing.
The Government have told us that they believe in wider share ownership. We have always supported them, because we have always believed in the need to move towards wider share ownership. But why cannot the British people also share in that by helping to provide the funds in their own nationalised industries? We wish to see much more autonomy for our nationalised industries within a broader, longer term plan, part of which would be a more flexible system of funding than at present.
If that serves to break down the barriers between nationalised industry and private industry, well and good. Those barriers should be broken down in a mixed economy. It is much more sensible to have such barriers broken down naturally by a more liberal programme of funding the nationalised industries than to stick to a system that merely preserves the chasm between the nationalised industries and the privatised industries.
When we wish to share with the people the industries that they already own, under the present system we must go through the ridiculous exercise of, for example, flogging off British Telecom, which merely converts a public monopoly into a private monopoly.
The background to funding is in our opinion narrow and afflicted with tunnel vision. But we are also discussing 268 funds that in another way are crucial to the BSC. As the Minister and the right hon. and learned Member for Monklands, East (Mr. Smith) have said, the BSC has now moved significantly and commendably into a much more profitable and productive phase. Had it not been for the miners' strike, the BSC would probably have broken even in the near future, not just because of rationalisation but also because productivity has increased. That was eloquently touched on by the hon. Member for Elmet (Mr. Batiste).
The House has rightly paid tribute to that fact, because as a result unions, work force and management have good reason to be content with the current operating direction. However, it is one thing to make a small profit for a year or so but quite another to set a new long-term trend towards profitability.
Here we come up against the longer-term problems of BSC. Its large expenditure during the 1970s allowed for the modernisation that has resulted in increased productivity as well as some rationalisation. We are investing too little in plant and machinery, particularly in research and development.
§ Mr. Ashdown
I see the hon. Member for Elmet shaking his head. There are significant individual exceptions to that rule, but the corporation as a whole is investing too little. It is hiving off its modernisation investment in the 1970s. I have heard it said with a good deal of justification that the South Korean industry is technologically as advanced as our own. Present funding policies are failing significantly.
As for Llanwern, Ravenscraig and Port Talbot, we are of course referring to Llanwern and Ravenscraig. I share the concern of the right hon. and learned Member for Monklands, East not so much that the Minister of State cannot give an answer tonight as that he has boxed himself into a position——
§ Mr. Ashdown
The right hon. and learned Gentleman asks, "Why not?" The reason is that he has called for a report from BSC. He referred to the central problem when he said that it would have been much more honest and reasonable for the Government to draw up the parameters within which the report should have been submitted. They should say that they want a report from BSC which states whether or not it wants those three plants to remain in operation. But that is not what the Minister of State said. Since he has got himself into that position, we recognise why he cannot tonight give the answer that is being sought.
Last year the Select Committee reported — I see little reason why its report should be different this year, although we must wait until later this week to discover whether it is — that there is room for all three plants. It was said earlier in the debate that the three plants are operating at two thirds capacity. That means full capacity at two plants. What room is there for expansion? That must be what the Government want. I have heard it said that if production were to increase by as little as 10 per cent., the capacity of the two remaining plants would be significantly increased. I am told that last year productivity went up by 9 per cent. Will not the Government be looking for a similar increase in the years to come?
Sir Robert Haslam said that he is preparing for privatisation. No doubt there will be another exercise in 269 which we shall flog off the good bits and kill off the bad. We shall be left with a rump that will serve British industry ill in the primary supply of one of its key raw materials. The proposed privatisation programme of the Government is nonsense, but the real point is that this is a classic and symbolic case of the steel industry being treated as a political football by the two major parties. They have damaged one of our great industries. BSC is the key example of political ideology: privatisation versus nationalisation. The question is answered on purely dogmatic, not reasonable, grounds and it has greatly damaged this great British industry.
The record is well known to those who have studied it. BSC was nationalised by the Labour party in 1951, denationalised by the Conservative party in the late 1950s, and renationalised by the Labour party in 1967. There was also talk of denationalisation by the Heath Government in the 1970s. Now it is back again. What a climate in which to foster one of our great industries. It is a typical example of the dogma that inflicts the two major parties and that so damages British industry. It is a symbol of how a great industry can be destroyed by political ideology and dogma on the central question of nationalisation or denationalisation.
BSC needs a climate of political stability in Britain. It does not seem likely to get it, at least not under the present two-party system. BSC needs an economy that has been restored to full fitness. I agree with the Labour party's strictures and criticisms on that. BSC needs a Government who are prepared to invest in Britain in rebuilding some of the major parts of our infrastructure.
§ Mr. Ashdown
The Channel tunnel may be part of that. We are talking not just about the restitution of our existing infrastructure but about the building of an infrastructure which will be suitable for a modern industrial nation moving into the 21st century.
BSC needs a climate of political stability and an economy restored to more permanent fitness. Unhappily, until we see a change of Government, or until we can persuade the Government to change direction, none of that seems likely. BSC will have to stumble on making the best of an unhappy and unfortunate situation with great dedication, skill — the Minister is right — and commitment from its work force but, nevertheless, in a climate that will always stultify rather than encourage growth.
§ Mr. A. E. P. Duffy (Sheffield, Attercliffe)
Employment possibilities in Sheffield have been severely hit by the decline of the British steel industry. In 1971, there were 45,000 workers employed locally in the steel industry, of whom 54 per cent. were employed by the British Steel Corporation. By 1983, there were only 18,000 employees — a decline of nearly 60 per cent. Since then, redundancies have brought the number of steel workers to well below 17,000. At the end of the present financial year, BSC special steels division will employ only a few more than 8,000 people.
Against that background, on 28 March, the management of BSC special steels division announced its intention to start consultations on the possible closure of 270 the Tinsley Park billet producing works in my constituency. The closure would affect 1,114 workers, with an estimated net job loss of 805, on the assumption that 300 jobs would be created at the Stocksbridge and Aldwarke sites in south Yorkshire.
On 4 June, it was confirmed that the closure of Tinsley Park would take place. The Iron and Steel Trades Confederation, the Tinsley Park multi-union committee, which is acting as a campaign closure unit, and the Sheffield city council were not satisfied that sufficient consideration had been given to the issues raised by the closure announcement, and they asked me to draw their anxiety to the attention of the House.
First, if implemented, the proposal would result in the largest closure of a plant in Sheffield in the past five years, and it would be the first local closure of a BSC plant. Secondly, there is considerable doubt locally that the 300 jobs can be created at Aldwarke and Stocksbridge as projected by BSC. The implication is that at least 805 jobs will be lost within BSC but that the final figure will be much greater.
Thirdly, also immediately affected but not included in BSC's estimates are the employees who work for contractors on the Tinsley Park site on bricklaying, cleaning and other services. In answer to questions from the city council, BSC said that it had not yet discussed the impact of the closure with those contractors.
Fourthly, the long-term effect will snowball through the rest of the local economy. Estimates produced by the city council's employment department show that every 1,000 jobs lost will mean that more than £2.5 million will be lost in local consumer spending.
Fifthly, the likelihood of those made redundant at Tinsley Park finding alternative work is limited. In May this year, nearly 44,000 people were registered as unemployed in the Sheffield travel-to-work area, a rate of nearly 16 per cent. At that time, there were 817 notified vacancies in Sheffield so that there was only one vacancy for every 56 people.
BSC special steels justified the projected closure by reference to its estimates of market prospects. As the House will know, its forecasting record has come under severe criticism in the past.
§ Mr. Martin Flannery (Sheffield, Hillsborough)
Does my hon. Friend remember that we went for a meal with the leadership of BSC, Sir Robert Haslam and Bob Scholey, whom we now know very well? I asked, as I think my hon. Friend also did, whether the Sheffield area had anything pending of any size, and I asked about the Stocksbridge works to which I understand about 300 people from Tinsley Park are going. They replied that nothing was going to happen in Sheffield. A week after that, the closure of Tinsley Park was announced.
§ Mr. Duffy
I remember that meeting very well, and I am grateful to my hon. Friend for bringing it to the attention of the House.
My hon. Friend will know that this is not the only aspect of Tinsley Park which causes us grave concern. It is rumoured that there has been involvement over several years in Phoenix 2 which, despite repeated questioning of the Minister of State, has never been clarified to the House. Even at this late stage we do not know. The Minister, in his opening speech, refused to be drawn by one of his hon. Friends. I say no more about that, although 271 I am very concerned. Because of the time, I wish to reserve my main remarks for the impending closure of Tinsley Park.
Sheffield city council is not convinced that the forecasts made by BSC have taken adequate account of the expected rate of growth in British manufacturing industry in 1985–86. Nor is the multi-union committee at Tinsley Park convinced. Its secretary, Mr. Geoff Stronach, is reported as saying:We are working in the dark because no one outside BSC senior management knows what the financial situation has been at Tinsley Park. No profit and loss account is ever published; indeed, some of us suspect that our works has often been well into the black.The multi-union committee is convinced that the closure decision is purely political and part of a long-term plan to cut back and privatise the UK special steels industry, and that its plant faces the axe solely because the Government desperately need to cut the asset value of BSC's special steel operations if they are to justify handing over control to the private sector under the Phoenix 2 plan.
Mr. Roy Bishop, who is divisional officer in Sheffield for the ISTC, notified the Select Committee on Trade and Industry last month of rumours abounding in south Yorkshire that the announcement concerning the formation of the new company, code-named Phoenix 2, is to be made in Parliament before the summer recess. This means that before the Select Committee has the opportunity to investigate and report to the House in depth on the crisis in engineering steels on the basis of evidence presented to it only the week before last by BSC as well as by ISTC, including Mr. Bishop, the production capacity in engineering steels will have been reduced from nearly 2.5 million tonnes a year to just over 1.5 million tonnes, a 33 per cent. decrease. The Select Committee will have been faced with a fait accompli, and the total capacity of engineering steels will have been reduced to a level lower than the present 1984–85 total sales of 1.7 million tonnes.
As Mr. Bishop argued not only in his written submission last month to the Select Committee Chairman but in his oral evidence a week before to the Select Committee, this means that, faced with a monopoly in engineering steels, customers would seek second sourcing from imports. Such increases of imports would reduce demand on the home industry to a level incapable of supporting such an industry, leading to the demise of the engineering steels industry and the dependence of the engineering industry on imports to maintain its production.
BSC special steels has given insufficient consideration to the wider social and economic implications of the closure of Tinsley Park. Its projections on the future need for engineering steels are too pessimistic. I therefore urge the Minister to delay the closure of the Tinsley Park works and the announcement in Parliament of the Phoenix 2 project until at least the Select Committee has had the opportunity to investigate and report in depth on the crisis now facing in particular the engineering steels industry and in general the supporting manufacturing industry.
§ Mr. Tom Clarke (Monklands, West)
I think that my hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy) will agree that today's events in the House which started with the Prime Minister's report on the Milan conference, and moved to the statement by the Minister of State in opening this debate, reveal the end of the 272 resolute approach. There was nothing resolute about the weak and feeble responses from the Government Dispatch Box—especially those made to the reasonable questions of my right hon. and learned Friend the Member for Monklands, East (Mr. Smith)—or about the speeches by Conservative Members. They did not show that the Government were prepared to accept that our steel industry has little future if we accept the inhibitions pressed on it by a Government who are not prepared to stand up for themselves, for Britain's interests in Europe and for an industry which could thrive and has much to contribute to our manufacturing base. My colleagues have offered not only great hope for the future but the only hope for the future in recognising the role of steel manufacturing in the future of our industry and our economy. In spite of the Government's record, the steel industry has a great deal to offer.
When do the Government intend publishing the corporate plan? Sir Robert Haslam has said that it will be available in July but, in replying to my question, the Minister did not say when the Government intend taking their decisions. Because of the urgent need for action to be taken and the representations on the steel industry's behalf by hon. Members from all parts of Britain, I hope that major decisions will not be taken during the recess.
I sometimes believe that the House should pay more attention to Conservative contributions. In this debate we have seen yet again the type of divisions that Britain could well do without. Conservative Members have attacked the trade union movement and attempt to create geographical divisions. One of the greatest tributes paid to the trade union movement during all our recent steel debates has been that paid to its steadfast refusal to allow trade unions to be divided — Wales against Scotland and England against Scotland and the rest. Trade unions are rightly putting up a robust fight in the interests of the steel industry. I certainly want to lend them my support.
The Minister has every reason to be proud of the steel industry. He told the House on 1 May:The progress on productivity has been dramatic. We have equalled and surpassed the levels in France and Germany and done our restructuring."—[Official Report, 1 May 1985; Vol. 78, c. 254.]That is certainly true, so why does he not offer the men in the industry the fruits of their achievement and their labour? In his speech today, instead of praising the employees' productivity and achievements he talked about privatisation, knocking the heart out of the men in the industry. They did not achieve productivity records to see their industry sold off to private speculators. They have achieved those records because they believe in their industry, they want to see a future for it and they are proud of their contribution to it.
Like my hon. Friends, I regret that the Minister did riot find it possible to say anything about Ravenscraig or Llanwern. I was delighted to hear my hon. Friends draw attention to the fact that the former Secretary of State felt free to make an announcement about Ravenscraig in 1982. Significantly enough, that was in the middle of the Coatbridge and Airdrie by-election campaign. Yet two days before the Brecon and Radnor by-election the Government are so lacking in courage that they will not tell the Welsh, the Scots or the English their proposals for the industry.
I was delighted, too, that my right hon. and learned Friend the Member for Monklands, East referred to the 273 Gartcosh works in my constituency, which he represented until the last general election. The workers there are grateful to him for his efforts both before and since then. Like so many sectors of the industry, Gartcosh needs investment. No industry can thrive without investment in modern plant and without looking to the future. I met Sir Robert Haslam at the beginning of the year and argued for an investment of £2 million or £3 million to make Gartcosh competitive in recognition of the efforts of the work force, which has achieved such high productivity. Sir Robert could give no assurance even about the future of Ravenscraig. Moreover, he said that even if Ravenscraig survived that did not mean that Gartcosh will survive: If that works does not survive it will be a tragedy in terms of unemployment in my constituency and in Lanarkshire generally. We should be giving that plant the utmost encouragement.
What is the difficulty about making that small investment? The other day I put down a question asking the Chancellor of the Exchequerif he will estimate the effect on the level of the public sector borrowing requirement of the current level of unemployment in Scotland.The Chief Secretary replied — I suspect that the Chancellor did not wish to give the answer himself — as follows:The current cost of benefits to the unemployed in Scotland is about £700 million. Since it is not possible to estimate the revenue forgone, the full effect on the public sector borrowing requirement cannot be estimated."—[Official Report, 27 June 1985; Vol. 81, c. 491.]I am asking for just £2 million for Gartcosh to keep 800 people in work. Yet no assurance has been given. The coke ovens for Ravenscraig, to which my hon. Friend the Member for Motherwell, South (Dr. Bray) will doubtless refer in due course, require a mere £90 million. Given the outstanding record of the men of Ravenscraig, Gartcosh and the rest of the industry, it is outrageous that they should be denied the tools for the job in terms of new equipment and a level of investment that the Government have not so far accepted.
In common with my right hon. and learned Friend the Member for Monklands, East, I represent the town of Coatbridge, which was once described as the iron burgh, and which exported equipment for building railways to Russia, America and other parts of the world. If Gartcosh is closed — there will be a tremendous fight before any such thing happens — there will not be a single iron or steel job in my constituency. Given that all the mines have now been closed since the closure of Cardowan, Monklands, West is being reduced to an industrial desert, which I fear will exist in the rest of Scotland, if we are not prepared to fight.
In my constituency 32 per cent. of the male population is unemployed. Most of the young people who are leaving school find either no jobs available or are offered opportunities on the youth training scheme, and that is that. That is an absolute tragedy, but it will be short-lived, because, like my right hon. and hon. Friends, I believe that the construction industry, which is in temporary decline, and other industries which are dependent on steel, will find that manufacturing can resume its former place in our industrial society. It is despair at its worst when the Government base their views on the assumption that our manufacturing base will remain at its present level. I do 274 not believe that. The men and women who have given so much to our steel industry are entitled to far more than the Government have promised tonight. Because of the determination and commitment of those people, they will succeed, as will our steel industry.
§ Dr. Jeremy Bray (Motherwell, South)
My hon. Friend the Member for Monklands, West (Mr. Clarke) argued powerfully that tonight we should have been told how BSC will spend the £700 million on the necessary investment to ensure the future of the steelworks in our constituencies. My right hon. and learned Friend the Member for Monklands, East (Mr. Smith), and my hon. Friends the Members for Motherwell, North (Mr. Hamilton) and for Cunninghame, South (Mr. Lambie), who always speaks in debates on the steel industry, have all contributed to the debate. There have also been speeches from my hon. Friends the Members for Rotherham (Mr. Crowther) and for Newport, East (Mr. Hughes), and my right hon. Friend the Member for Swansea, West (Mr. Williams) will reply.
Although two Scottish Tory Members are present — they have just come in, no doubt to hear my speech — no Scottish Tory Minister is here to repeat the assurances about the Secretary of State's suit of armour, which, in his rather kinky style, he tends to keep in his wardrobe at home, but which he will dust off and bring out if the Cabinet is rash enough to consider any suggestion about the closure of Ravenscraig.
Ravenscraig will continue as an integrated steel works into the 21st century, not because it has become the symbol of the industrial survival of Scotland — although it has — nor because of the outstanding productivity records that are achieved by its workforce, which will continue, but because it is an essential element in our industrial recovery.
This afternoon I attended a conference at Chatham house on the future of information technology in Europe. The Commission's staff came hot foot from the Milan summit, where they had been contributing to the background briefing on EUREKA — the proposed European initiative on advanced technology. It is hoped that it will work in the integration of computer-aided design and computer-aided manufacturing methods. The British Aerospace representative explained the steps that British Aerospace had taken so that the airframe designers, their subcontractors and systems suppliers could work together on the aircraft design on one integrated computer system.
The other evening I was hearing about the proposed extension of that to the design of offshore production platforms. At present we have the engineering department of British Petroleum with its own computer-aided design and manufacturing system. It is designing the complete detail of production platforms on computer screens. That is then recapitulated entirely by contractors such as Brown and Root which undertake detailed design. That leads on to the production of engineering drawings for the fabricators, firms such as Motherwell Bridge that are hanging on by their teeth because of the current lack of investment. The entire complex of prime process operators, offshore operators, contractors, fabricators and steel producers is being integrated in one technology in which every square millimetre of steel has to be designed to standards which were never dreamt of in the past.
275 Ravenscraig is the only steelworks in the United Kingdom which can produce steel of the specifications required for Trident submarines. The same specifications will be required for the undersea completion systems that will operate in 2,000 ft of water off Rockall. These steels will be required for production platforms, undersea pipelines and for the technology that will be needed to gather minerals from the seabed in far parts of the world.
Industries that are currently in the cradle will be the basis of Britain's industrial recovery, which the Government are vandalising. The Government have no vision, no sense of responsibility and no plans for the future.
The House is being asked to approve an increase of £700 million in the borrowing powers of the British Steel Corporation. I am sufficiently old-fashioned to believe that when such a sum is asked for from the House the Secretary of State should ask for it personally and should be able to give a proper account of the plans and prospects of the industry. But what have we had? We have received a bland statement from the Minister of State. Apparently, he does not expect to receive the BSC's corporate plan before the end of July. We have had a further statement that there will be a steel council on 26 July when the future steel regime in Europe will be considered. Are not these mattes relevant to the corporation's borrowing requirements? Can the House be treated with such contempt that the Government can collect the money from us before considering policy requirements? That is no way to treat the House.
The Minister of State is saying, in effect, that he is prepared to allow the corporation to put up proposals that show no faith in Britain's industrial future. These are proposals that have already shed a destructive, morale-destroying miasma on those who have been, alas, influenced by the mutterings of the chairman and chief executive of the corporation before the Select Committee in June.
It is not sensible for a Government to give carte blanche to a major nationalised industry such as the steel industry by allowing it to make its own judgments on Britain's industrial future, for the Government to give no indication of what their views are on future steel demand, for example, and then to allow the corporation to say that if it maintains three strip mills one of them will be continuing as an act of charity. That is not the way in which to run a modern and efficient industry. That is no way in which to conduct the government of Britain.
There are two strategies before us. One is now openly preferred by Mr. Bob Scholey and his sidekick the chairman. It is to see an end to the Europricing regime, production quotas and Government subsidy. This will lead to a price war that will set the steel companies free to close whatever capacity they like to so that they can reduce the industry to a rump, which they think could then operate profitably and create a situation in which they can go off into the wild blue yonder of privatisation. That strategy would not work.
The chief executive of the BSC has so run down its research and development capability that, unless something is done urgently, it is condemned to be a low-grade bulk steel producer, unable to compete in the premium market. With closures, the BSC would be forced up to such a level of capacity working that the first stockbuilding surge would bring in a flood of imports, lose the loyalty of the customers and reduce the market share 276 so that the BSC would find that it was falling back to the 70 per cent. level of a reduced capacity. That has been the story of the steel industry in cycle after cycle in the past 50 years. It has learnt nothing.
There is another strategy, which has been put forward most eloquently and with the greatest authority, not in this Chamber and certainly not by the Government, but in a study by the Technical Change Centre carried out for it by Dr. Darnell, a former engineering director of BSC and a widely respected veteran of the steel industry. He was the works director in the Steel, Peach and Tozer works in which the whole of the Sheffield mafia first cut its teeth in steel management, including the present chief executive of BSC.
The chief executive of BSC tried to suppress Dr. Darnell's report. Mr. Scholey wrote two letters to Sir Bruce Williams, the director of the Technical Change Centre, saying that it was against the public interest to publish this report on the future of the steel industry in Britain. The report points out that there is scope for a growth in the share of the British market and of the share that Britain has in the European steel market, but that it will come from trading up in grades of steel, in specifications, in the types of customers served and in the quality of service given to them.
The Government have set their face against this strategy by the way in which they have treated the BSC's finances. I hope that the Minister, when he is preparing for the corporate plan, which he will be receiving shortly, will read the report by Dr. Darnell. I am not even sure that the Minister knows about the report, which he should have had two years ago when it was published. It is a prime report on what should be the policy of BSC today.
The steel corporation has come through this difficult period of the miners' strike quite well. In the words of Mr. Scholey to the Select Committee:I think it is fair to say we emerged from the strike without commercial damage.The mean and crafty cavil of the Minister about the damage done by the miners' strike is so much nonsense. Having emerged from that difficult period, already in the first two months of this financial year the BSC has been operating at a profit on only 70 per cent. capacity. What more can the Government expect when, in the earliest stages of industrial recovery, the BSC is already able to make a profit and is finding that, at present levels of manning, its strip product works are working flat out? What possible reason is there for saying that the corporation does not require the capacity to maintain three strip mills?
If we look into the detail of how BSC does its production planning, we find a most extraordinary story. The Government might have been utterly unsuccessful in privatising BSC but, by God, they have successfully privatised the information on which BSC tries to plan. I invite the Minister to read May's issue of Economic Trends in which there is a contribution from Mr. Astin and Mr. Brady of BSC supporting a description of the commodity flow accounts which will be produced with the aid of finance from a group of users outside the Government. These are the United Kingdom commodity flow accounts giving production, consumption, exports and imports of commodities such as steel, and in future they will be produced and financed by a private consortium— and will not be available even to the House — yet they' will 277 use the powers of the Statistics of Trade Act 1947. They will collect prime information but not make it available for public use.
The information is so crude, however, that it does not even contain information about the steel consumption of the motor industry. It does not say how much a change in construction output would affect the demand for sections in Scunthorpe. It does not give any information about how a shift in the level of imports of Japanese cars would damage the level of demand from the strip mill division.
With that mutilated information base, BSC produces its extrapolations which would make the planners of the past such as Sir Robert Shone from British Iron and Steel Federation days turn in their graves. BSC is merely extrapolating present trends and the present defeatism of the Government. It is writing off all possibilities of industrial recovery and saying that, within that prospect, it sees a nice comfortable future for itself with just two strip mills. That is decadent, irresponsible and deplorable in any public corporation.
Of course, Llanwern and Ravenscraig will survive. Of course, there will be necessary investment in continuous casting at Llanwern and in the new coke ovens at Ravenscraig. There will be a re-establishment of serious research and development in BSC. There will be higher levels of customer service. Higher grades of steel will be introduced. All that will secure a future for the steel industry. The Government's motivation for allowing the first steps during the next few years until we can get on seriously with the job after the general election is simply that they are too scared to face the deplorable consequences of the miserable failures of their economic and industrial policies.
§ Mr. Alan Williams (Swansea, West)
Listening to my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) and my hon. Friends the Members for Sheffield, Hillsborough (Mr. Flannery) and for Sheffield, Attercliffe (Mr. Duffy), I became increasingly disturbed at the deviousness and evasion that seem to have surrounded the tragic destruction of the Tinsley Park unit. The closure means the loss of 800 jobs in an area where there are 56 jobless people for each vacancy. Closure was determined in December 1983 when the Phoenix proposition was first put forward. Ever since then, the steel industry has consistently denied a relationship between that closure and Phoenix. It is only now that we are discovering the truth.
My hon. Friend the Member for Hillsborough said that during a meal that he and another of my hon. Friends had with the chairman and senior members of the British Steel Corporation just a week before the closure was announced, they were told that no such closure was envisaged. That leaves us with an impression of complete and thorough dishonesty by the BSC.
The closure has, in effect, taken place. It is virtually accepted that the plant cannot be saved. In the face of that deception, how can we believe assurances from Ministers, especially when they are given with such ambivalence? The Minister has been singularly coy. He has been offered opportunity after opportunity to repeat the assurances that have been given in the country by the Cabinet Ministers 278 representing Wales and Scotland. We are left with the impression of an inexorable and tragic logic unravelling before us.
Perhaps inadvertently, the Minister has helped to clarify the position, although I am sure that that was not his intention. He said that his objective was to return the core operation of the BSC to the private sector. A few months ago the chairman of the BSC came to speak to a meeting in the House. He made it clear that there was only one way in which the core operation could be made profitable enough to be privatised. He actually put a figure on the level of profit that he required. Last week he mentioned £200 million, but said that that might not be sufficient. When he spoke to us a few months ago he said that he was aiming for a profit of £300 million. I chaired that meeting and I asked how he could make that profit with the three strip mills. He said that he could not—he could do so only with two strip mills. He said that the three strip mills were operating at 60 per cent. capacity, so that if one was closed there would still be 20 per cent. surplus capacity for any expansion. He has put that view to Ministers also.
As Margam is already highly profitable, the two units at risk must be Ravenscraig and Llanwern. The Minister said that he would not speculate on the future of any of the works. That is fair enough — after all, he is the responsible Minister. But if he will not speculate, on whose authority was the Secretary of State for Wales speaking when he gave the impression that there was no risk? With what authority was the Secretary of State for Scotland speaking when he tried to give the impression that there was no risk?
Only last week, the Secretary of State for Wales said:I know of no such closure threat.If one knows the Secretary of State for Wales, that is not much comfort, because what the right hon. Gentleman does not know far outweighs what he does know. My hon. Friend the Member for Newport, East (Mr. Hughes) will recollect that for a couple of years there was a scandal of a crumbling hospital near the right hon. Gentleman's head office in Cardiff — directly his responsibility. It was only when we started asking questions in the House that he discovered what was going on. Therefore, I am not surprised that the right hon. Gentleman does not know. Indeed, I sometimes wonder what he does know. However, we had better not speculate too far in that respect. After that statement by the right hon. Gentleman, there was the ominous point:But he admitted that there were problems of overcapacity in the industry.Is it not a fact that, regardless of the corporate plan that the Minister hopes to get in July, in July last year the chairman of BSC presented his Department with a document outlining the options if the Government were to achieve their objectives of maximum privatisation, including privatisation of the core sector, as stated by the Minister? Is it not a fact that in that option document, which has been with Ministers for 12 months, the closing of one of the plants that I mentioned was envisaged? Is it not a fact that the Secretary of State for Wales and the Secretary of State for Scotland would or should have been aware of the contents of that document? Is the Minister saying that he has kept that information from the other Departments, or were the other Departments pretending that they had not had the information?
279 When that document was put to the Government a full year ago, the chairman of BSC was taken aside and told, "Don't expect an answer. Don't expect a discussion. There will be no talk about this until the coal dispute is over". The chariman told us that in Committee. Therefore, the document has been lying on the table. The coal dispute is now over. The chairman told the Select Committee only a week ago that the document is now under discussion.
So whom do we believe? Do we believe the chairman, in what he has twice repeated in different forms, that one of those plants is at risk? Or do we believe the befuddled ramblings of the Secretary of State for Wales and the dodging and evasion of the Secretary of State for Scotland?
After all, we are not talking about something that will be imposed by the EEC. That matter was also clarified tonight. In the past, Ministers have always said, "You have to understand: it is not us; it is the nasty Commission. It's those bureaucrats over in Brussels. They're telling us that we have to cut back. We have too much steel." But what do we discover from the Minister of State? Far from having too much, he has cut back more than Brussels asked him to cut back. He admitted that earlier. I invite him to read in the Official Report tomorrow what he said.
Therefore, if one of those plants is to go, the Minister cannot blame Brussels or say that the reason is the elimination of loss-making, because he boasted to us that BSC is already in trading surplus. But the fact is that the Government intend to take the profitable parts, sell them off as quickly as possible and leave the less profitable parts there so that they continually contract. In pursuit of their ultimate objective — the privatisation of the core sector of the industry — to to which the Minister admitted this evening, all the jobs and capacity will be lost at one of those two plants.
This is the reality of what the Minister had to say. It is confirmed by silence on one key factor. If there were one degree of truth in what the Secretary of State for Scotland and the Secretary of State for Wales are jointly saying, that neither of those plants is at risk, one would expect to hear tonight something about the level of investment that is needed at Ravenscraig and at Llanwern. That would be the assurance the House and the country might have expected. The Secretary of State for Wales has said that he can be sure that this Government would not allow these plants, on which the industry's future success and profitability depend, to be deprived of the necessary investment. This is an opportunity for the Minister of State to give that assurance. It would be a disaster for the whole of Gwent, with 17 per cent. unemployed already, if Llanwern were to close with 4,000 jobs going at the same time as 2,000 jobs are being phased out nearby at Girling.
One would have thought that, on the eve of a by-election nearby, a Government who could find the money to save army camps could find the money to revive prospects that seem to be lost in the locality. Every attempt from hon. Members to extract a promise from the right hon. Gentleman that reflects the protestation of the Secretary of State for Wales and the Secretary of State for Scotland has failed. One is left with a rather embarrassing question. Which of these three Ministers is telling the House and the country the truth? Are any of them telling the truth? It is clear from the nature of what we have heard tonight that the Government are ashamed and embarrassed 280 about what they eventually intend to reveal and that they have no intention of revealing it this side of the by-election.
§ 10.7 pm
§ The Minister of State, Department of Trade and Industry (Mr. Norman Lamont)
We have heard a blood-chilling speech from the right hon. Member for Swansea, West (Mr. Williams). The only stage at which he became convincing was at the mention of the magic word "by-election" and then we began to see the motive for part of his speech.
The hon. Member for Motherwell, South (Dr Bray) has made some very interesting speeches. I am not sure that tonight he seemed as anxious to inform the House as to make political points. He sought to imply that the miners' strike had had no effect upon the British Steel Corporation. He referred to the fact that I had the audacity to refer to the miners as mean and cavilling. If the hon. Minister thinks that the miners' strike has had no effect on the steel corporation, let him wait seven or eight days until the accounts come out and he will be able to read about it there. It may be that the chairman of the corporation said to him, "We are resisting this strike, and because of our efforts we are a healthy corporation and we have managed to come through this, but that it has had a financial effect on the corporation nobody can doubt, and it will be demonstrated very clearly in the accounts".
I had a bit more sympathy with the hon. Member when he referred with some irritation to the fact that we have this order before the accounts are available, before indeed the corporate plan is available to the House. I understand that. But the point at which we raise the level of the ceiling on the borrowings of the corporation is determined, alas, not by the cycle of the corporate plan but by the borrowing situation of the corporation. As the hon. Gentleman, who has often come to these debates, will recall, it is not unusual for Governments of either party to have to make increases in the borrowing powers at a time when a corporate plan has not been submitted to the Government or an outline of it made available to the House.
The hon. Gentleman will also recognise that we are not, as he put it in his speech, collecting the money or spending the money. The order is permissive only. The expenditure of money will be subject to approval by the Government and subject to the procedures of the House in the normal way.
The hon. Member for Sheffield, Attercliffe (Mr. Duffy) referred to the closure at Tinsley Park, as did other hon. Members. Of course one regrets very much the loss of jobs that that closure has entailed, particularly in view of the efforts made by the work force and the management at that plant. It was certainly not a decision taken lightly by the steel corporation. But I repeat what was said before which — for reasons that were not clear, the right hon. Member for Swansea, West seemed to dispute — that that decision was not connected with the Phoenix 2 project. It was a decision which BSC had to make and wanted to make on its own account because it was losing money in that sector. It cannot be a decision made on the basis of Phoenix 2 because no decision has yet been made on Phoenix 2. The decision was made on the commercial judgment of the corporation because it thought the decision was necessary.
§ Mr. Crowther
The point needs to be clarified. If the closure at Tinsley Park has nothing to do with the Phoenix 281 2 proposal, will the Minister tell us when BSC first decided that it intended to close Phoenix 2 and when BSC first told the Minister? We now know, because Sir Robert Haslam told me when I questioned him about it, that that proposal was included in the Phoenix 2 proposals submitted to the Department in December 1983. If the decision had been made independently of Phoenix, it must have been made some time before that. Yet the unions were not told about the decision until March 1985.
§ Mr. Lamont
I do not recall the timing of the decision, but I repeat emphatically that that decision could be made and was made independently of the Phoenix 2 decision. It is one that the corporation wanted to make, regardless of whether Phoenix 2 does or does not go ahead.
§ Sir John Osborn
One of the most important things for a person in my position to know is what options have been before BSC locally in connection with Stocksbridge, Aldwarke and Tinsley Park, the options of future sales and why this decision has been reached. Obviously I have to support my hon. Friend the Minister, but so far I have had no information as to what the options are for the basis of that decision. This is what the Select Committee would like to know, too.
§ Mr. Lamont
The decision on Tinsley Park had to do with the costs of the plant and demand for the product. Those are the essential features. I cannot comment on the pan that other plants in the Sheffield area might play in the Phoenix 2 project. My hon. Friend will understand that that project is still very much under consideration. I will see that my hon. Friend is given a full account by the corporation of the reasons for the Tinsley Park closure, but the decision was a commercial one and not in any sense political; it was independent of any decision that might be made on Phoenix 2. It is a decision the corporation wanted to make even if Phoenix 2 did not go ahead. My hon. Friend the Member for Sheffield, Hallam (Sir J. Osborn) also referred to the new mood of confidence that he said was appearing in parts of the private sector. Listening to some hon. Members, I did not recognise the picture either of the steel industry in general or of the British Steel Corporation in particular that was being painted in the debate.
I very much agree with what my hon. Friend said, that the great thing we must not do in the steel industry, and particularly in the British Steel Corporation, is to have Governments making political decisions about the industry and all the time about particular plants. The hon. Member for Rotherham (Mr. Crowther) just dismissed Sir Robert Haslam's views and those of Mr. Scholey—they are not the owners of the business, he said—as though we did not think it was in the interest of the taxpayer to have the professional manager's views. But that must be in the interests of the taxpayer and in the interests of those who work in the industry.
Several hon. Members referred to the state of demand in the steel market. The hon. Member for Rotherham and the hon. Member for Motherwell, South thought that the Government and the steel corporation were being far too pessimistic about steel demand and very much regarded what they saw as the low level of steel production in this country as being a result of the Government's industrial policies and an utter condemnation of the Government's 282 policies. What they seem to leave totally out of account is the fact that steel production throughout Europe in 1985 is lower than it was in 1979. They leave totally out of account the fact that there has been a structural change, and that other materials are being substituted for steel. They leave totally out of account the fact that the European Commission is forecasting that in 1990 steel consumption in Europe will be no higher than it is today.
We may not like it and we may think it is very difficult, but those are things that we have to take into account. They are things upon which it is useful to have the opinion of the British Steel managers which the Opposition simply wish to wave away.
The hon. Member for Yeovil (Mr. Ashdown) wondered whether the corporation could raise money on the private capital market. As he rightly said, that is difficult to do within the present legislative framework, although nationalised industries have borrowed on the Euro currency markets. I very much agree with his general point that we ought to blur the distinction between the public and private sectors. That is one reason why we have been keen to have the joint ventures, Phoenix 1, 2 and 3. I agree with the hon. Gentleman on that point, but I did not agree with the picture that he painted of the steel corporation being depressed and restricted and fed up with the Government's policies.
If Opposition Members think that, let them ask the management of the steel corporation. I talk with them and I know that all my hon. Friends who take an interest in the steel industry talk to the managers of the corporation. If hon. Members opposite talk to them, they will find that morale is high because people are encouraged by the fact that they have been given greater commercial freedom, that they have been able to make decisions and have brought about spectacular improvements in the productivity and profitability of the industry, and that we shall see the first accounting profit for a decade. Such things encourage people and mean that morale in the industry is high.
Inevitably, much of the debate has been about Llanwern and Ravenscraig. The hon. Member for Newport, East (Mr. Hughes) called for investment in concast at Llanwern and the right hon. and learned Member for Monklands, East (Mr. Smith) called for investment in the coke ovens at Ravenscraig. He wants £90 million invested in the coke ovens at Ravenscraig before we have had the opinion of the steel corporation. Of course, we shall consider it, but we are of the opinion, particularly when we are thinking about spending £90 million, that we might as well have the opinion of the professional managers first before making a decision about it. I agree with the comments of my hon. Friend the Member for Clwyd, North-West (Sir A. Meyer) about Llanwern and the great improvements there. There have been remarkable improvements in productivity and the people there have very much responded to the fact that they have been given greater commercial freedom. I met a number of shop stewards from Llanwern the other day and they told me that one of the best things that had ever happened to the steel corporation was the appointment of Mr. MacGregor. The shop stewards from Llanwern told me what he had achieved for the corporation.
As to Ravenscraig and Llanwern, we have made it clear that these are decisions in which the Government must obviously be involved. We have also made it clear — I did so again in the debate—that we must have the views 283 of the BSC, and we have not yet had the corporate plan or the recommendations of the corporation. I do not believe that that is inconsistent with what my right hon. Friends the Secretaries of State for Scotland and for Wales have said. Of course they are proud of what has been achieved at the steel plants in their countries, but we must also have the views of the corporation.
§ Mr. John Smith
If that is the case, what attitude are we to take to statements by the Secretaries of State for Scotland and for Wales? Are they pronouncements on behalf of the Government to which we should lend credence?
§ Mr. Lamont
No one has ever said that there is a guaranteed future, for ever, for every plant in the corporation, and nothing I have said tonight has been inconsistent with what has been said by my right hon. Friends.
The right hon. and learned Member for Monklands, East is extremely agreeable and makes intelligent speeches, but tonight he made a slightly dishonest speech. He accused me of bland evasions because I did not answer specific questions about specific plants. I am sure that any Minister would do the same. But I was absolutely clear about viability and said that that was the Government's objective. The Government want the corporation to achieve enduring viability. Decisions on plants are largely for the management, although the Government wish to be involved in the Ravenscraig and Llanwern decisions.
The right hon. and learned Gentleman could not be clear about viability. He would not accept that viability 284 was a reasonable objective for the corporation. From the way that he answered the questions that I put to him, he seemed to suggest that every decision on every closure — not just the big strip mills—ought to be made by the Government, and that such decisions would be made by a Labour Government. In other words, we would go back to the way in which the BSC was so disastrously run by the last Labour Government—a sort of Beswick review, where every decision was subject to their preoccupations with by-elections, a subject that has not been so absent from the minds of Opposition Members tonight.
It was not at all clear whether the right hon. and learned Gentleman was in favour of viability. He seemed to agree with his hon. Friend the Member for Rotherham, who seemed to want a social policy for steel. The right hon. and learned Gentleman does not want the industry run in order to create a profit and to be a wealth creator rather than a wealth consumer. That is what we want for the corporation, and that is why we want privatisation. That is a spur to the creation of wealth rather than the consumption of wealth.
All the signs are that the BSC is making substantial progress and is well on the way to being a wealth creator. That is why the finance made available by the order ought to be accepted by the House.
§ Question put and agreed to.
That the draft British Steel Corporation (Borrowing Powers) Order 1985, which was laid before this House on 20th June, be approved.