HC Deb 03 December 1987 vol 123 cc1107-22 3.40 pm
The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Kenneth Clarke)

With permission, Mr. Speaker, I should like to make a statement on the British Steel Corporation. The corporation today announced its half-year results for 1987–88. These show a bottom line profit of £190 million. This compares to £178 million profit for the whole of 1986–87. This is an impressive improvement in the corporation's performance and I am sure that the House will join me in congratulating the corporation and all its employees on such an impressive achievement.

As the House is aware, the Government are committed to returning successful state industries such as steel to the private sector as soon as practicable. It is quite apparent that the British Steel Corporation has now reached the stage where it would benefit from a return to a fully commercial environment. I am therefore pleased to announce that I am setting in hand the work necessary to privatise the corporation as soon as possible, subject to market conditions. Legislation will be required to turn the corporation into a private company. This will be introduced later in the current Session.

In accordance with the previous commitments given by the Government, the corporation will continue with five integrated plants until August 1988.I have been reviewing this with the corporation in the light of the current market position, which will require steel making at all five plants for a number of years. Scottish Members will be pleased to hear that the corporation will be putting out a statement today making clear that, subject to market conditions, there will continue to be a commercial requirement for steel making at Ravenscraig for at least the next seven years.

The corporation also expects that, again subject to commercial considerations, there will be a similar requirement for plate rolling at Dalzell. This therefore gives assurance to Ravenscraig's iron and steel-making facilities for a period much longer than the three-year commitments that the Government have been able to give in each of the two previous reviews in 1982 and 1985. The corporation has also indicated that, even if it should wish at some stage, because of market conditions, to close its steel-making facilities in Ravenscraig it would consider, on a commercial basis, any wholly private sector offer for those facilities as an alternative to closure.

There is clear surplus capacity in the British Steel Corporation, as throughout Europe, in hot strip. BSC's strip mills are currently running at below 70 per cent, of their potential capacity, which is among the lowest level of utilisation of strip mills anywhere in Europe. However, having reviewed the situation thoroughly, the Corporation has decided on commercial grounds that all their present mills, including the Ravenscraig mill, will continue to operate at least until 1989.

The Government's consistent aim has been to achieve a strong competitive British steel industry capable of performing well against international competition. This is in the best interests of the work force of British steel, of all its customers and in particular of steel users in the rest of British industry. The British Steel Corporation has already achieved a quite remarkable recovery and is now one of the most successful steel makers in western Europe.

I believe that early privatisation and full commercial freedom will enable the company and its work force to be best placed to go on to further achievements and to secure a firmly based competitive industry with a long-term future.

Mr. Bryan Gould (Dagenham)

On a day when the British Steel Corporation and its work force deserve genuine congratulation, has the Minister not rewarded them instead with a statement which quite unnecessarily places their future in jeopardy? Does he not recognise that British Steel's success has been achieved under public ownership? Indeed, it is much more successful than privately owned manufacturing industry. Is it not the case that the success could not have been achieved without essential investment funded by the public purse and without debts being written off at the public expense? Is this to be yet another example of the taxpayer making the investment, but being denied the return; another case of the taxpayer picking up the bill but the City picking up the profit?

Does not this statement come at exactly the wrong moment—at a time when the EEC context in which the industry operates is in a state of maximum confusion? What will the Government say in the prospectus about quotas? What responsibility will the Government undertake to prospective buyers on that issue? Will not that uncertainty jeopardise the share issue altogether? Is not this another case of a privatisation which is dogma-driven and is to be carried through without regard to market conditions and the needs of the industry?

Does not the Minister's statement add to that uncertainty, particularly in regard to Ravenscraig? Is not the apparent guarantee of a seven-year future for Ravenscraig a hollow promise, depending as it does largely on so-called commercial considerations for which the Government will no doubt disclaim any responsibility, and depending also largely on the continuation of the hot strip mill, which, let it be noted, is given a guarantee for only the next 13 months? Can he not offer a better guarantee to Ravenscraig and its 3,000 workers than the weasel words contained in his statement?

Is it the Minister's intention to privatise British Steel as one entity, or is some other implication to be drawn from his statement? How is the privatisation to be organised? Is it to be by flotation or by merger, and if by merger, with whom? Finally, has the Minister taken the precaution of consulting the right hon. Member for Chingford (Mr. Tebbit) on this important issue?

Mr. Clarke

It is obviously true that British Steel has gone through a difficult time under public ownership. In the bad old days, when British Steel was not doing very well, public ownership cost the British taxpayer billions of pounds as the corporation struggled to come to terms with the difficulties in the steel market. It is not as a result of public ownership that it has improved; it is as a result of the considerable efforts of the management and work force as they have adjusted to sometimes painful changes and have brought the corporation to its present level of performance.

Now that the corporation has reached that position we are offering the flexibility and the opportunities that privatisation will give. It will be free of the restraints of Whitehall and the controls on its expenditure that public ownership brings. It can now go to flotation and operate competitively and flexibly in the market place because it is a strong and efficient producer with a good future.

The hon. Member for Dagenham (Mr. Gould) asked about quotas. I shall be attending the European Steel Council next Tuesday which will be continuing discussions about what follows the present quota regime, which is due to come to an end on 31 December this year. At this moment, I have no idea what agreement will be arrived at, but we shall be pressing for an early return to free-market conditions and an end to quotas, which is the agreed objective of every other European Government.

British Steel is now in such a strong position vis-a-vis its European competitors that it is excellently placed to take advantage of that steady return to free-market conditions. That is another reason for privatising as soon as possible. In the state in which we shall be returning it to the market it will be a dangerous and powerful competitor to the other Europeans.

The hon. Gentleman describes what I have said about Ravenscraig as unsatisfactory, an inadequate assurance, and all the rest of it. I suspect that, politically, the hon. Gentleman is somewhat disappointed that the news about Ravenscraig is so good. When the Government have had to undertake the obligation, we have twice given three-year commitments, and the Opposition made the same remarks about weasel words on both occasions. That obligation has now passed to this profitable corporation and it can say that in its commercial judgment, and subject to the market, there will be steel making at Ravenscraig for at least the next seven years.

"Subject to the market" are not weasel words. As we have discovered over the past few years, in this business and every other, nationalised industries operate in the market. Private industries operate in the market. The world makes its living in the market place. This privatised corporation will make its living in the market place. But it is now so well placed that it can give that assurance, which should come as a considerable reassurance to all those who work in Ravenscraig.

Finally, the hon. Gentleman asked about the form of flotation. We intend to float BSC as a single entity. We have taken careful advice, and that is obviously in the interests of the corporation and its owners, the taxpayers. We intend to proceed with that as soon as possible.

Mr. Kenneth Warren (Hastings and Rye)

I welcome my right hon. Friend's announcement. However, is it not a remarkable feat that, over the past several years, when the taxpayer's money has been put into Port Talbot, Llanwern and Ravenscraig, the workers there have responded heroically and are now turning out steel of a quality and at prices that are the best in the world? Is it not sad that the hon. Member for Dagenham (Mr. Gould) does not know that, and has not talked to the workers there?

Finally, will my right hon. Friend be aggressive in his approach to Europe, and try to roll back the quotas so that British Steel can take advantage of its success?

Mr. Clarke

I entirely agree with my hon. Friend's opening remarks. I believe that the work force at Llanwern, Port Talbot, Ravenscraig and Cleveland all realise that the changes of the past few years were necessary—necessary for their future, for the health of British Steel and for British industry as a whole, because it uses steel. That should be acknowledged, and I am glad that my hon. Friend has acknowledged it.

We intend to take a strong stance in the negotiations with Europe. The present quota systems are now inhibiting British Steel's ability to take advantage of its new competitive position. That cannot continue, and for that reason we are pressing for an early end to quotas. We seem to have substantial support from the other European countries.

Mr. Malcolm Bruce (Gordon)

Will the Chancellor of the Duchy of Lancaster accept that we are, of course, pleased with the success of British Steel, and the achievements made so far? In the light of today's statement, however, will the right hon. and learned Gentleman acknowledge that, in regard to the private sector, which is extremely competitive internationally, we must have certain assurances? We must be assured that the strategic role of steel in the British economy will be secured; that there will be safeguards relating to the percentage of foreign ownership; that the assets will be privatised at a fair and reasonable value, and will not be vulnerable to potential asset strippers; that the work force will have an opportunity both to be consulted about the proposals, and to acquire a stake in the company; and that our relationship with the EEC will acknowledge that we in this country have taken more than our fair share of capacity reductions?

On the particular issue of Ravenscraig, will the right hon. and learned Gentleman acknowledge that, while the assurances, such as they are, are welcome, they are definitely qualified? Does he accept that the commitment of British Steel and the Government to ensure that the mill continues for that seven-year period is dependent on its receiving investment that it has so far been denied? Will he give us an assurance that the mill will receive that investment, and that its seven-year future will be assured.

Mr. Clarke

If by his question about "the strategic role of British Steel" the hon. Gentleman means, "Can we be assured that British Steel will play a vital role in 'UK Limited', and in strengthening the British economy?," I can reassure him. We can be confident of that, because of the results that we are achieving and the likelihood of their being sustained. Making British Steel competitive and returning it to the market place is the best guarantee of the long-term future and success of the corporation.

Of course, we shall be aiming at flotation to receive a fair and reasonable value. We must maximise the return to the taxpayer by returning the corporation to the market in the right way, and we believe that floating it as a single entity is the best way to achieve that. As I have announced today, we are putting in hand the preparations—

Mr. Dennis Skinner (Bolsover)

The Minister is driving Ted to sleep.

Mr. Clarke

This is not a contentious statement.

I have announced today that we are putting in hand the preparations for privatisation, but the details must be steadily evolved while we take the legislation through the House, and then take the corporation to the market. We shall consider whether there is a case for restricting foreign ownership, but it does not instantly appeal to me. However, I am attracted by the idea of workers being given the opportunity of shareholdings, and we shall consider that carefully. I am delighted that the hon. Member for Gordon (Mr. Bruce) is also attracted by that idea. Even the hon. Member for Dagenham has been known to make approving noises about worker shares in the past. Perhaps the Opposition Front Bench is pressing me in the same direction.

As for Ravenscraig, the hon. Gentleman referred to things being welcome but qualified, which makes it sound as though he has been taking part in too many delicate negotiations about mergers and is losing his assertive edge. They are undoubtedly welcome. It is reassuring that the corporation, which is to be a private company, sees the need for steel making over seven years. There are many other factories about which that could not be said by the owners. The qualifications are commonsense qualifications that every private company, owning any factory anywhere, would make if one asked it about its plant. It would say that it must be subject to market conditions and to commercial considerations, because it is the wise commercial judgment of a company's management that guarantees the future of the company. Investment will be a matter for the private sector company. It will have to decide where to make that investment.

Several hon. Members

rose—

Mr. Speaker

Order. May I ask hon. Members for brief questions? There is to be a business statement, during which many of these questions may be relevant.

Sir John Stradling Thomas (Monmouth)

I welcome my right hon. and learned Friend's statement, which provides hope particularly for the future of both Llanwern and Port Talbot, which are so vital to the Welsh economy. Does my right hon. and learned Friend not agree that to give them the opportunity that they are ready to grasp he must pursue what he has suggested is his approach to the negotiations with the Common Market regarding the bedevilled quota system? Given the opportunity, Llanwern and Port Talbot can take on the world.

Mr. Clarke

I agree entirely with my hon. Friend's remarks, and I shall bear them in mind next Tuesday when I am in Europe. The quota system was one of those temporary and unpleasant necessities that we should now move to end. When we return to a free market, I am sure that both Port Talbot and Llanwern will be particularly well placed to take advantage of improved market opportunities.

Mr. Stanley Orme (Salford, East)

What is the total amount of taxpayers' money that has been invested since this Government came to office in 1979?

Mr. Clarke

We are trying to work out what the total bill has been for past losses and many other kinds of financial cover for BSC. It is a cost that has been largely incurred as a result of foolish decisions taken by past Labour Governments. If the right hon. Gentleman were to table a question, I should try to give him detailed guidance. It is difficult to reach the total, but I can assure him that several billion pounds have been invested in BSC during the last few years. That merely underlines what an achievement it is to be able to come to the House and say that BSC has made a profit of £190 million in half a year and that it can return to the market place.

Sir Hector Monro (Dumfries)

Will my right hon. and learned Friend accept that the seven-year guarantee for Ravenscraig, the two-year guarantee for the hot strip mill and the Scottish long-term option for a purchase in that country is wonderful news for Scotland, and that it is far better than the Opposition could ever have expected? Does my right hon. and learned Friend agree that British Steel and the Government deserve many congratulations for turning round an industry that was devastated by the last Labour Government?

Mr. Clarke

I agree entirely with my hon. Friend. The Opposition were sitting there waiting for bad news about Ravenscraig, but what they have is good news for Ravenscraig. It is good news because of the corporation's own achievements and the present strength of BSC.

Dr. Jeremy Bray (Motherwell, South)

Is the Minister aware that Ravenscraig and the other works in my constituency have performed at least as well as any works within the British Steel Corporation? Is he aware that privatisation will plunge the steel industry back into all the uncertainties and inefficiencies of the past, which will have a devastating effect on the steel communities? Is the Minister also aware that it will be grossly inefficient and extremely damaging to Scotland if the Government sell off the British Steel Corporation in such a way that the hot strip mill can be closed in 1989, with a rundown rump of steelmaking being offered for sale at the end of seven years?

If the Government insist on pushing through privatisation, will they allow full facilities for a private bid to be prepared for Ravenscraig, plus sufficient finishing mills and other plant to make it a viable unit that can compete with the rest of the steel industry?

Mr. Clarke

There are always uncertainties in the market place for any product, but it is possible to embark upon those uncertainties with more confidence if there is a profitable and competitive business—as British Steel is. I do not believe that the immediate prospects are as the hon. Gentleman describes them. The outlook for Ravenscraig is more cheerful now than it has been for a long time. Previously, Ravenscraig had to rely on political three-year guarantees. They will no longer be necessary.

There is a problem with hot strip mills, as I frankly disclosed in my statement. There is surplus capacity in the United Kingdom. However, the commercial judgment of the corporation is that it can continue to operate all four strip mills, at least until 1989. Then the private company will have to decide whether to continue with all four. That is what happens in every other industry, and it will inevitably happen in this one.

The question of separate bids does not arise. We have taken clear advice on a variety of options and it is in the best interests of British Steel and the taxpayer that there should be flotation as a single entity. That is by far the most sensible course.

Sir Anthony Meyer (Clwyd, North-West)

Is my right hon. and learned Friend aware that there will be great satisfaction about this announcement in Wales, where everybody, except the professional moaners, are aware of the immense opportunities that it will open up for the Welsh steel industry?

Mr. Clarke

I quite agree with my hon. Friend. There will also be rejoicing in Wales that the Government have decided not to intervene, on political grounds, as to where there should be investment and where there should be changes. This should be a commercial judgment by BSC, in the best interests of BSC as a whole in England, Wales and Scotland.

Mr. Donald Coleman (Neath)

Does the right hon. and learned Gentleman recall that during the steel strike his right hon. Friend Sir Keith Joseph, the then Member for Leeds, North-East, defended his refusal to intervene in the affairs of the British Steel Corporation because there was a taxpayers' stake in it? Where does the right hon. and learned Gentleman get his mandate from today to prevent that taxpayers' stake from becoming profitable for the nation? Furthermore, if the chairman of the British Steel Corporation had had his way in earlier days, Port Talbot and Llanwern would have been destroyed and would have been unable to make a contribution to the steel industry today.

Mr. Clarke

As for our mandate, we seemed to do reasonably well in the last general election, when the Government's policy was to return successful public industries to private ownership. That is what we are proposing to do. As for the hon. Gentleman's last point, I do not believe that there has ever been a serious risk to Port Talbot. Port Talbot is one of the flagship plants of the British Steel Corporation. A great deal of investment has been put into it, and in my opinion it has a secure future. I am also quite sure that in the opinion of the chairman of the British Steel Corporation it has an extremely secure future.

Mr. Nicholas Fairbairn (Perth and Kinross)

Will my right hon. and learned Friend, in a moment of humility, commiserate with the Opposition over the fact that they have not been given the opportunity to pretend that they are sorry because something has been lost instead of rejoicing in the fact that something is profitable? Will he remind them, please, that Ravenscraig is profitable because the work force has made it profitable—that it is not some sort of mascot Socialist toy that has to be kept because it is Scottish, that it is being kept because it is good and successful?

Mr. Clarke

I agree with my hon. and learned Friend that the work force at Ravenscraig has made its contribution to the success of BSC. I am sure that the work force at Ravenscraig will be disappointed that the Opposition would prefer bad news about the future of that particular plant, for their political purposes, to the good news that they have just heard.

Mrs. Margaret Ewing (Moray)

On behalf of the Scottish National Party and Plaid Cymru, may I make it clear to the House that we shall be opposing the privatisation of the steel industry, thereby accurately reflecting the decisions that were taken politically in Scotland and Wales at the last general election. As for Ravenscraig, may I ask for an assurance beyond 1989 for the hot strip mill, since 40 per cent, of the work force at Ravenscraig depends on the hot strip mill? If the Government are genuinely concerned about the future of Ravenscraig, may I ask them to return to the British Steel Corporation and say that the coke ovens at Ravenscraig are in great need of investment, as that would guarantee the continuation of the steel plant?

Mr. Clarke

First, I should tell the hon. Lady that 400 people work at Ravenscraig on the strip mill, although about 200 or 300 other jobs associated with the mill are dependent on it. Over 2,000 other people work in the rest of the plant, so the hon. Lady's figure of 40 per cent, is inflated.

As to the future of the strip mill, it is not possible to look beyond 1989 at the moment. Nobody is saying that it will close; we are saying that at the moment British Steel faces a serious problem with excess capacity. As a result, it is under-utilising all its strip mills, which is damaging efficiency and cannot go on indefinitely unless the market improves. Against that background, it is good news that the corporation has decided that the right commercial course is to keep them all going until at least 1989. It will then have to decide whether the position has improved and what it intends to do.

Mr. Richard Holt (Langbaurgh)

Would my right hon. and learned Friend care to reflect that not many years ago the steel industry was costing British taxpayers £4 million a day? That money has today been spent on the National Health Service, and is probably much better spent on it than it was on British Steel's works. Will my right hon. and learned Friend accept that the steel workers who live and work in my constituency elected me on a privatisation programme? I look forward to that programme happening, as they do, particularly if they are given a proper share in the stock option later this year.

Mr. Clarke

I am grateful to my hon. Friend. In 1979–80—its peak year of losses—BSC lost £1.75 billion. My mathematics is inferior to my hon. Friend's, but I calculate that it was costing about £5 million a day in 1979–80, which was part of the great public sector investment that Labour Members say we should be recouping. That money is no longer going from the taxpayer to a loss-making industry, and we are looking forward to privatising a successful industry. BSC is successful in the north-east, which is an area with many problems. The Cleveland plant is a successful and modern one, and its future is enhanced by what it has to offer. I hear what my hon. Friend, says about workers being allowed to participate in the flotation and take an ownership stake in the company that they are serving so well.

Mr. Barry Jones (Alyn and Deeside)

The Minister will know that Shotton steelworks in my constituency lost 8,000 jobs in 1980, which was the largest recorded redundancy in western Europe. Does he recollect that last month his ministerial colleague told me that as recently as last year Britain imported £1 billion-worth of hot rolled steel? Some 22 million tons of it have been imported since 1980, at a cost of about £5 billion. Why have we had so many redundancies in the 1980s and such a high level of imports? Surely the right hon. and learned Gentleman cannot believe that privatisation will assist Britain's problem with heavy imports? He should know that my constituents will not back his proposals.

Mr. Clarke

I have every sympathy with the hon. Gentleman's opening remarks. I could not help reflecting, when I listened to the hon. Member for Moray (Mrs. Ewing) worrying about the uncertainty of the position of 700 people beyond 1989, that in Shotton 8,000 jobs were lost in one set of redundancies at the depths of BSC's problems. As those times are behind us, the present employees of British Steel have a much more secure future to look forward to because of its success.

The hon. Gentleman asked about imports; we also export substantial amounts of steel. There is a competitive market in Europe that we wish to return to. There will be some imports into Britain to give our users choice, but there will also be exports into western Europe. One of the principal reasons for getting rid of quotas, as my hon. Friends have been urging, is that at the moment they are holding us back from penetrating German, French and other markets. We intend to try to get rid of them.

Mr. Tim Devlin (Stockton, South)

On behalf of many people on Teesside, particularly those in my constituency, I welcome today's announcement that British Steel is to be privatised. When my right hon. and learned Friend visited Teesside during the summer, did he notice the energetic and competitive spirit that is permeating the work force? Did he not see that not only have we a successful plant on Teesside, which is the largest blast furnace in Europe, but that many of my constituents are eager to compete with international producers, and are sending steel as far as San Francisco and Hong Kong? They look forward to doing that in the private market in the future.

Mr. Clarke

I agree with my hon. Friend. I was impressed when I went to Cleveland and saw the fantastically modern facilities and the spectacular giant blast furnace at Redcar. When talking to the work force one felt that they realised they were in a competitive business, and they were eager to compete. One wondered at the transformation that had been wrought in a nationalised industry of this kind. That feeling leads one to consider that the natural conclusion is to make it a private sector company, and I am sure that the people of Cleveland will make a great success of it.

Miss Marjorie Mowlam (Redcar)

May I help the Minister and the hon. Member for Langbaurgh (Mr. Holt) with their mathematics? We have lost 45,000 jobs on Teesside since the Government came to office. That figure does not relate only to the steelworks but to the chemical plants and docks. We know what bad news is about, but Labour Members do not celebrate it — we have experienced it. The hon. Members for Stockton South, (Mr. Devlin) and for Langbaurgh said that the right hon. and learned Gentleman came to the steelworks, which he did, and I am sure that he talked to the work force. However, I hope that the right hon. and learned Gentleman listened to the work force, because with regard to the plans that the Government are proposing it is worried about what will happen with pensions. I should like to know what guarantees the right hon. and learned Gentleman will offer.

Mr. Clarke

The aspect of pensions will be addressed in the legislation, which will be introduced after Christmas in the current Session of Parliament. The matter of pensions has been raised in every piece of privatisation legislation that has gone through the House. We have enough privatisations behind us to know that the problem of pensions can be satisfactorily addressed. People can be reassured that they will not lose their pension rights as a result of the changes.

Mr. William Powell (Corby)

Is my right hon. and learned Friend aware that many Conservative Members representing steel constituencies have experienced bad news in the past decade? However, we have also had plenty of good news. This will be treated as good news by my constituents who work in the steel industry. Is this not an outstanding example of how, when the work force and management in a nationalised industry are determined to adjust to the realities of the market place, real results can be achieved? Will my right hon. and learned Friend do all that he can to ensure that the work force is rewarded by having preferential treatment in share applications?

Mr. Clarke

Corby has experienced great job losses in the steel industry, but it has achieved amazing success in attracting alternative employment and getting new development going. As a town, Corby is definitely on the up. The remaining employees of British Steel in Corby will, as my hon. Friend does, take reassurance from today's news. I hope to be able to meet my hon. Friend's request for them to be given an opportunity to participate in the eventual flotation.

Mr. Elliot Morley (Glanford and Scunthorpe)

Will the Minister explain why, during the election campaign, Ministers came to my constituency and told people that it would be many years before the steelworks was privatised? Does this mean that they were deliberately misleading my constituents, or, more to the point, that, with the failure of the BP flotation, BSC is to be sacrificed to regain some of the Government's lost credibility? What guarantees will the Minister give that the people who work in the industry — whose productivity and sacrifices in jobs and conditions have turned it around—will, at the very last, not be worse off as a result of privatisation?

Mr. Clarke

On several occasions, the previous team of Ministers made it clear that it was the aim of the Government to return British Steel to the private sector as soon as practicable. I do not know whether one of my colleagues expressed pessimism during a visit to the hon. Gentleman's constituency, but perhaps he did not anticipate the remarkable recovery that British Steel has made so quickly. Today's results are a staggering achievement, and it is obvious they are likely to be sustained.

The terms and conditions of the work force will mainly depend on the success of the business. For as long as British Steel continues to go from strength to strength, the work force can look forward to sharing in that.

Mr. Nicholas Bennett (Pembroke)

Will my right hon. and learned Friend accept that this is very good news for the Welsh economy? It means that, because the Government grasped the nettle and ensured that we had large improvements in productivity at Llanwern and Port Talbot, those plants can look forward to a successful future under private ownership?

Mr. Clarke

I entirely agree with my hon. Friend. The two plants are extremely strong and successful and are likely to attract future investment. They have everything to hope for from the privatisation that we have announced.

Mr. Rhodri Morgan (Cardiff, West)

When Sir Robert Scholey announced that he wanted to aim for profits of £300 million-plus per year before the industry was set on the road to privatisation, he gave as the main reason for wishing to make such a profit that that is what is required to invest for the future. As a result of the higher levels of profits that are now being achieved, will the Minister tell the House what proposals there are for fixed capital improvements in the industry, or will the higher profits be put in the reserves ready for privatisation and not invested?

Mr. Clarke

Sir Robert probably did set a figure of £300 million a year as the threshold for privatisation. Today's results of £190 million for a half-year and with the second half-year looking as good as the first show that we are well above that threshold. That is why today's announcement was made. With regard to investments, I am sure that Sir Robert shares the opinion of us all that it is essential that investment is maintained in the steel industry because the markets remain competitive and the quality demanded by customers is ever higher. Until the industry is privatised, investment proposals will have to come to me for approval. There are no formal proposals at the moment, but it is likely that some will be made. I can assure the hon. Gentleman that, unless there is some compelling financial or commercial reason against the proposals, worthwhile investment proposals will receive our approval and will not be delayed by the Government. After privatisation, investment decisions will be entirely a matter for the new privatised company.

Mr. Kenneth Hind (Lancashire, West)

Is my right hon. and learned Friend aware that many British consumers of steel will welcome his announcement today? Is he aware of the contrast between the losses of £35 million a week under the Labour Government and the £7 million a week profit under a Conservative Government? Perhaps that shows the different approach to enterprise which has resulted in my right hon. and learned Friend's announcement today.

Mr. Clarke

The contrast is symbolic of a great deal that has happened in the British economy over the past eight or nine years. From being one of the disaster areas of the British economy seven or eight years ago, British Steel is now one of our great successes. It is one of the most powerful competitors in steel in western Europe.

Mr. Kevin Barron (Rother Valley)

Does the Minister accept that, if the ending of steel quotas to which he has referred happened today, under too current circumstances that would benefit BSC enormously with regard to steel making, as BSC would make a massive profit? Is not today's statement more likely to enhance private cartels than competition?

Mr. Clarke

No, I do not think that the statement today has anything to do with private cartels, because the private company will be subject to the same rules on monopolies and trade as any other private company. Only time will tell whether the European steel producers will try to arrange cartels. The present European cartel with the quota system is now operating in a way that inhibits British Steel's growth. I am glad to say that not only I, but all other European Council Ministers agree that we must move within a reasonable time to remove the quotas.

Mr. Ian Gow (Eastbourne)

Does the Chancellor recall the pledge given in this House on behalf of the Conservative party during proceedings on the Steel Bill in 1966, when we undertook to return the industry to private ownership? Despite the failure during the premiership of the Chancellor's right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) to redeem that pledge, does my right hon. and learned Friend the Chancellor share my satisfaction that it has fallen to our right hon. Friend the Member for Finchley (Mrs. Thatcher) to redeem the honour of the Conservative party?

Mr. Clarke

I agree with my hon. Friend that it has taken a long time, and rather longer than most of us would have wished, to get British Steel back to where it ought to be. I share my hon. Friend's pride in the fact that we have been able to do that because of the achievements in British Steel and because of the changes made in the British economic climate over the past few years.

Several hon. Members

rose—

Mr. Speaker

Order. I appeal for very brief questions. I should like to try to call hon. Members who have been rising, but it would be helpful if they did not repeat what has been said before and particularly only if they have interests in these matters.

Mr. George Robertson (Hamilton)

Does the Minister really expect the public to believe that this privatisation is anything other than an example of a Government of political spivs selling off the last items of the family silver? What comfort can my constituents who work at and depend on Ravenscraig get from paper assurances by a Government who are just about to dump the whole of this vital and strategic industry into the hands of the private sector which has so dramatically failed the industry in the past?

Mr. Clarke

I thought that the Opposition were having a re-think about nationalisation and renationalisation. When the two years are up, I will be interested to see whether there is a commitment to renationalise this or any other industry because the legislation will have been passed and privatisation completed by then. The assurances that I have given are assurances from the British Steel Corporation, the assurances of the new company. According to its commercial judgment, it expects steel making to continue at Ravenscraig for seven years as long as the market demand is sustained as it is at the moment.

Mr. Bowen Wells (Hertford and Stortford)

In view of my right hon. and learned Friend's statement that both hot strip mills are being under-utilised, would not British Steel's correct commercial decision — not its political decision—be to concentrate in one plant, not two? That plant should clearly be in south Wales. Will my right hon. and learned Friend agree that his statement today represents yet another example of Welsh and English workers subsidising those in Scotland?

Mr. Clarke

There are four hot strip mills, at Port Talbot, Llanwern, Lackenby in the north-east and Ravenscraig. Certainly at the moment they are all being run below capacity because of the very large surplus of capacity, which sooner or later will have to be addressed by the private sector company unless conditions improve.

I agree with my hon. Friend that if the Government in their wisdom were to take a political decision for some reason that one of those hot strip mills should be favoured at the expense of the others, we would wind up favouring the workers of one nationality against the workers of another. That would be grotesquely unfair. The right thing to do would be to leave it up to the corporation to make its own decision in the light of conditions in 1989.

Mr. Tam Dalyell (Linlithgow)

Supposing they were to get an offer for Ravenscraig, Dalzell and associated works, what would be the Government's likely attitude?

Mr. Clarke

We looked at various options when we considered how to privatise, and we have taken financial advice on a range of options. Our judgment is that we must go for a flotation of the company as a single entity. The idea of any separate bid or flotation of the Scottish part of the company or any other part of the corporation is not practicable nor is it a desirable financial objective. That would be likely to damage the steel industry as a whole and greatly minimise the returns.

Mr. Charles Wardle (Bexhill and Battle)

Can my right hon. and learned Friend confirm that, if next week's negotiations hasten the abolition of quotas, British Steel will have every prospect of enabling Britain to become a net exporter of steel to the whole of Europe once again? Will that not be the crowning achievement of its recovery?

Mr. Clarke

That is right. The hon. Member for Alyn and Deeside (Mr. Jones) who has Shotton in his constituency, understandably referred back a few years to traumatic events in his constituency and asked questions which implied that we are afraid of imports from stronger steel makers overseas. That is no longer the position. There are still imports, because users like different sources of supply. British Steel is increasingly an exporter, and the more it goes from strength to strength, the more likely it is to build up its exports. Quotas are now getting in the way.

Mr. Dennis Turner (Wolverhampton, South-East)

Will the Minister reflect on the question of capacity as distinct from market share? Will he reflect on the fact that we have lost more than 70,000 jobs in the steel industry? When he tries to reconcile the turnround of the steel industry, will he look at the other side of the balance sheet—at the social costs and the costs in payments of unemployment benefit to those thousands of people?

Can we advise the British Steel Corporation, instead of concentrating on capacity, to talk about a bigger market share? We have lost a massive market share in British Steel in the past eight years. What are we producing in this country today? We do not have the kind of industry that we had before. When we talk about market share, we should remove the cartel from Europe, as that will allow us to get back some of the orders that people have taken—

Mr. Speaker

Order. It is very unfair for the hon. Gentleman to go on as long as this.

Mr. Clarke

The hon. Gentleman talked about the market share. One gets into difficulties if one has the capacity to produce vastly more steel than one can sell. That is true of any product. British Steel faced that problem some years ago. The result was that the closure process began while the industry was nationalised—and it started under Labour. As I recall, it was under Labour that the steelworks at Bilston and Ebbw Vale went. That process was inevitable as long as the steel industry did not occupy a secure place in the market. There is still a great deal of excess capacity in western Europe. The figures vary, but the Commission and its experts say that, and there will undoubtedly be closures in other western European countries. We have got our steel corporation into a much better state than other European countries' industries and we can now look to the future optimistically, with the worst of the change behind us.

Mr. Peter Snape (West Bromwich, East)

Will the Minister accept that it has taken eight years, about £6 billion of public money and the loss of 70,000 jobs for us to arrive at the present state of affairs? What sort of a policy is it that insists that, although the taxpayer has funded all those losses for eight years, the benefits must be reaped by the private sector, which has contributed very little during that period? Should not the taxpayer be rewarded for his investment?

Mr. Clarke

In the first place, the taxpayer will get the returns on the flotation, which will be some recompense for the considerable losses and costs incurred while the British Steel Corporation was being nursed back to health. Our main consideration has to be the future of British steel —the health of the industry and its ability to produce good quality, low cost steel for British steel users. That will be best achieved if the British Steel Corporation is a private sector company, subject to commercial disciplines in the market place.

Mr. John McAllion (Dundee, East)

Will the Minister explain to Scottish Members and Scottish steel workers, why, in his announcement of his plans to privatise five integrated plants across the United Kingdom, he found it necessary to single out Ravenscraig as the one plant that is likely to have a limited future and the one plant that the Government would consider hiving off to a separate private sector buyer? Does he not realise that singling out Ravenscraig puts an enormous question mark over its long-term future?

Mr. Clarke

I have a lot of sympathy with that. Every time I go to Scotland, people will talk about nothing but Ravenscraig. They talk about it in terms that suggest that it is a commercial disaster and that it is kept going only by the Government's political guarantees. We have given political guarantees to keep Ravenscraig going. The fact is that the corporation—the owner—has said that in its commercial judgment steel making will be required at Ravenscraig, subject to market conditions, for the next seven years. Because Ravenscraig has always felt itself particularly protected by the Government's guarantees, I felt it necessary to go carefully on the hope that the proposals offer it for the future.

Mr. Martin Flannery (Sheffield, Hillsborough)

Given the Minister's optimism and the smugness of his Back Benchers, it is obvious to those of us who come from places such as Sheffield, and to all Opposition Members, that another great steel robbery is about to take place. The Minister will know that we have just lost 600 jobs at Stocksbridge Engineering Steels in my constituency. The phrase "subject to market conditions" will loom over the steel industry during this period. Furthermore, I gather that a great tranche of unemployment — about 22,000 job losses—is to come from the EEC. Will any of those job losses occur during the period of the takeover and the robbery? Are the Sheffield works—indeed, all the works in the constituencies of Opposition Members who have stayed to listen to the Minister's statement — to suffer some more?

Mr. Clarke

the business of being subject to the market place and the fact that some job losses still occur in private steel engineering works and in parts of the steel industry is an inevitable consequence of economic life, whether a company is nationalised or privatised. If one does well in the market place, jobs are secure and additional jobs are created, but jobs are inevitably at risk if one does badly in the market place. I shall not restate that proposition again. Presumably, the hon. Gentleman's fear that the EEC is about to inflict another 22,000 job losses is related to the belief that is held by some that the European Community determines whether steelworks should be closed. That is most emphatically not the case. There is no question of the Commission or the Community next week determining the future of any British plant. While the industry is nationalised, that is entirely a matter for the British Government, but as there will be no change in configuration until the industry is privatised, such closures will be a matter for the private sector British company in the years beyond privatisation.

Mr. D. N. Campbell-Savours (Workington)

Does the Minister believe that the new privatised British Steel Corporation will be any more vigorous in its pursuit of economies and higher productivity than the nationalised industry? If so, does that not spell danger for plants on the periphery of the United Kingdom, such as those in Workington, which, although highly profitable, might not feature prominently in any configuration demanded by shareholders at an annual general meeting?

Mr. Clarke

The corporation has been pursuing higher productivity and greater efficiency for the past eight years with considerable success, so that the amount of liquid steel produced by the British Steel Corporation is not much less than it was in 1979 although the corporation has roughly one third of the work force that it had then.

That was an inevitable process if the industry was to survive in an ever more competitive market for ever more high quality steel. Success in achieving greater efficiency and the profitability of producers give the best assurance to all those who work for the British Steel Corporation. That process must be sustained. It cannot stop, whether the corporation is publicly or privately owned. The world gets ever more competitive, productivity levels increase everywhere and technology changes — technology has changed very rapidly in the steel industry—but if BSC does as well in the years ahead as it has in the past few years, everyone can feel much more confident about its future.

Mr. Paul Flynn (Newport, West)

A tribute has been paid to the great sacrifices made by the work force and the families of those in the steel-working communities. Will the Minister urge, as an act of natural justice, that before privatisation goes ahead, the profits to which the communities have contributed enormously will be used specifically to ensure that there is a continuous annealing plant at Llanwern and a second continuous casting plant at Port Talbot? Those are essential if the competitiveness of the industry and the security of British steelworkers' jobs are to be guaranteed for the future.

Mr. Clarke

First, I join in the hon. Gentleman's tribute. On investment at Port Talbot and Llanwern and more continuous casting in that part of the country, British Steel will have in the first place to put some formal proposals to me if it has such plans while it remains in public ownership. I assure the hon. Gentleman that I shall examine carefully any such proposals and that I realise that it would be quite wrong to delay good and justifiable investment proposals. Port Talbot and Llanwern are very good plants, but they need continuous investment if they are to sustain themselves in the future.

Mr. Donald Dewar (Glasgow, Garscadden)

Why should those of us interested in Ravenscraig feel reassured when the guarantee for that plant is being downgraded to a qualified commercial requirement, and when even that is subject to market conditions? What are the Ravenscraig workers to make of a pledge from a Government who are determined to shed responsibility for the industry and who accept that the privatised steel corporation may sell off or close the plant at any time? Why should the workers trust the Minister when he will give no promises for the vital strip mill capacity beyond 1989?

Is the right hon. and learned Gentleman's statement not a fraudulent front, given that the reality will be further uncertainty for Ravenscraig — a plant that deserves better and which is now to be left to the profit motive and the commercial judgment of business men, who, as the Minister has heavily underlined, are already under pressure to shed further capacity?

Mr. Clarke

I find the hon. Gentleman's reaction very difficult to understand. In talking about the future of any manufacturing business, he really cannot be so dismissive of market conditions and the commercial judgment of business men. I cannot believe that if, heaven help us, the hon. Gentleman was ever responsible for these matters, he would start giving assurances about a steel business that disregarded market conditions or guarantees that he would ignore commercial judgments. That would be an act of irresponsible folly. Facing up to market conditions and to the reality of commercial judgments, the corporation can give such an assurance for the next seven years. That is very good news indeed for Ravenscraig and I do not believe that the hon. Gentleman really expected any such assurance.