HC Deb 19 February 1992 vol 204 cc437-44

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

10.27 pm
Mr. Elliot Morley (Glanford and Scunthorpe)

I am grateful for the opportunity to express my concern about the future of the British steel industry, both nationally and, in particular, in my constituency.

Since the privatisation of the industry in 1988, the Scunthorpe general steel works has experienced almost constant job losses. More than 1,000 craft and production jobs have gone over the past year. Since the early 1980s, the number employed in the industry in Glanford and Scunthorpe has declined from more than 20,000 to around 6,000.

The Scunthorpe works has responded to those changes in a way that has brought about record iron and steel production and record productivity. A great deal of sacrifice has been made by the workers at every level in the works to ensure that it remains competitive and performs well, in a national and an international context.

The question now is this. For all that sacrifice in terms of jobs, and for all those gains in terms of productivity, what has been the reward for the work force—and, indeed, for the town that surrounds the works? It has now been announced that British Steel intends to invest in a new plate mill. I believe—and recent rumours confirm it—that a study of the site of the plate mill established that the Scunthorpe works had a great deal of merit, and was a strong contender.

My hon. Friend the Member for Redcar (Ms. Mowlam) is in the Chamber. I do not want to deprive her of the pleasure that people on Teesside must feel about the fact that it has been named in connection with the plate mill investment. As individuals, we have worked together to defend not only the interests of our constituencies, but those of steel in general.

However, since privatisation there has been a move away from identifying investment in the Scunthorpe works to retrenchment. There has been a great deal of contracting out at those works as there has been at all steel plants. At Scunthorpe, even the security and emergency services have been put out to contract and that has, of course, caused concern given the very high quality of service provided in the past. I am pleased that the manager of the Scunthorpe works has given me personal assurances that that quality of service will not deteriorate.

Nevertheless, in view of the extent of the contracting out, it is inevitable that people who work at the plant feel that there is a lack of job security. That is not helped when they see investment by British Steel—now privatised—going to companies abroad to obtain the best return on capital. I understand that British Steel management have to operate under certain rules, but the management have shown a ruthlessness and lack of concern for the work force's commitment in the various plants over the years.

In all fairness, I am grateful to Sir Robert Scholey, the chairman of British Steel, and to Brian Moffat, the chief executive, for their frankness in my discussions with them and for their willingness to meet to discuss these issues. I also pay tribute to Gerry Gorman, who was the former manager of the Scunthorpe plant and the present manager, Stuart Pettifor. They have also been helpful in responding to requests and have generally managed the works very responsibly.

The Government must share responsibility because when they privatised the steel industry they cut it adrift and washed their hands of it, leaving it to sink or swim. Steel is the powerhouse of manufacturing in this country. Its role is strategic as well as commercial. To lose our steel-making capacity means losing our place as a manufacturing nation. Do we want our industrial heritage destroyed and to end up as an assembly-line nation putting together goods designed and manufactured abroad? That is already happening.

The matter was brought to a head and my constituents' fears were underlined by a comment made by the chief executive, Mr. Moffat. In an interview, he said that the Scunthorpe works could end up finishing imported Brazilian billet. I do not want to take Mr. Moffat's comments out of context—he made it clear that he was talking about the long term and that he did not expect that to happen in his lifetime—but one can understand how they have not helped morale at the Scunthorpe works. People feel that, despite the gains that it has made in productivity, the works' future lies in finishing imported Brazilian steel.

Ms. Marjorie Mowlam (Redcar)

Does my hon. Friend agree that an additional problem for British Steel is the depth and seriousness of the present recession, which has led to the difficulties of playing one area—his own in Scunthorpe—off against another—mine in Teesside? That is the last thing that the Labour party want. We want to support British Steel in a diversified policy which develops different regions, rather than producing the appalling situation in which one region is played off against another.

Mr. Morley

I am grateful to my hon. Friend for making that point. My predecessor, who was a Conservative Member of Parliament viciously attacked the Ravenscraig steel industry before 1987, and succeeded only in setting one steel plant against another. I pay tribute to my hon. Friend for supporting me tonight and for the way in which she has worked with me and our two communities—two Labour Members of Parliament working together—to try to represent the best interests of those communities and the future of steel in manufacturing.

Steel is a capital-intensive industry which is prone to cycles of production. The privatisation of steel does not have a good record. Previous privatisations led to asset stripping and under-investment. The jury is still out on this privatisation in terms of investment by British Steel in its plants, but I am worried that, although there has been a great deal of investment in the primary end of British Steel, there has not been a great deal so far in the downstream part of its production. Financially, steel has not performed noticeably better under private ownership than under public ownership.

Within the Scunthorpe works are two private steel works—United Merchant Bar and Allied Steel and Wire. They have both recently received the Queen's award for industry, and they are both successful and important to our community. Those two companies are dependent on the Scunthorpe works for the supply of their billet and part of their energy. They are an integrated part of the works —indeed, they were formerly part of those works until they were sold to the separate companies.

When the Government privatised British Steel, they gave it monopoly power. At the time, I accepted that it was probably better to sell the organisation as an integrated company than to break it up into individual plants—and I imagine that that is still true today. However, if viable individual steel plants are threatened with closure and with being sold off, there is a case for examining British Steel's current monopoly in those areas.

British Steel's current profits are about the same as they were before privatisation—about £200 million, which they were in 1987. They are certainly lower than the £400 million that it produced in 1988, under public ownership. Although time has moved on, demand and sales were similar in both periods, and exports are slightly higher.

As I have said, there has been much investment in the primary end of the business, and that makes Mr. Moffat's comments all the more strange. To talk about importing steel into what is, in terms of liquid steel and iron production, one of the most efficient steel works in the world, puzzles local workers and other constituents. I share their concern.

British Steel would be the first to point out that it has to operate in the current economic climate. The Government must take its share of the blame for that climate, and therefore for the decline in steel. The company has to depend on the energy prices laid down by the Government, and energy and water costs in Britain are artificially high; they have been inflated by the Government's dogmatic adherence to privatisation.

It is no use blaming the world recession—we have heard a great deal of that in recent weeks. British Steel says that, although there has been a slackening in the demand for steel in world markets, that slackening has been about 5 per cent. in America, Japan and the rest of Europe, while in the United Kingdom there has been a drop of between 16 and 17 per cent.—nearly three times the drop in world demand.

The Government must also take responsibility for their general level of economic incompetence. They have imposed high interest rates, which have crippled industry, and they have given manufacturing industry a low priority. Thirty-four jobs in the manufacturing sector have disappeared for every hour of the day and night since 1979, when the Labour Government were in power. Since 1979, 2,387,000 jobs in manufacturing have gone, 9,400 apprenticeships have gone, and unemployment has increased in 22 consecutive months—that is well above the EC average.

Britain is the only country in the EC where manufacturing activity is lower than it was in 1979. We have the lowest rate of research and development in the EC. This country never had a trade deficit under the Labour Government; since 1983 it has never had a surplus. That is an appalling record.

In my constituency all the local councils have done their best to react to the changes. Until last year they had great success. Scunthorpe council was held up as a model council for attracting company after company to the area. It has done a good job, for which it deserves credit. That activity has cut unemployment from its peak, and I acknowledge the Government grants received because of our assisted area status, which, with contributions from the EC, have been vital to the process.

Even so, according to the Government's calculations, there was a 44 per cent. reduction in unemployment between January 1984 and January 1992. You will be aware, Mr. Speaker, that the Government have changed the method of calculating unemployment at least 22 times, to my knowledge, and I have now lost count. The fairest way to compare the drop in unemployment is to use the former methods of calculation which have been prepared for me by the Unemployment Unit.

Under the former methods of calcuation, the drop in unemployment between January 1984 and January 1992 is 29.2 per cent.—considerably less than under the present calculations. That trend is now reversing. Under the official Department of Employment count, between January 1991 and January 1992, unemployment has increased in Glanford and Scunthorpe by 29.2 per cent. —exactly the decline in unemployment from 1984. We are back almost to where we were in 1984. The calculations are a matter of concern to my constituency and to the local economy. Glanford and Scunthorpe has used the available Government grants wisely, and the grants have been vital in trying to combat the change.

More than 1,000 jobs in the steel industry have gone in the past year. Of those, about two thirds went through early retirement. I am concerned—I hope that the Minister will take note of this—that those who have left employment in the steel industry through early retirement do not show up in the official statistics. There is a great deal of hidden unemployment in the area. Unemployment is worse than it appears to be in the figures. Although people have left the industry because of early retirement or retirement due to ill health, those jobs have gone for good and future generations will be denied them.

I appeal to the Minister to recognise that and to ensure that the support in Government grants through assisted area status is maintained because it is vital to the area. Even more vital, given people's insecurity about the future of steel, is that we ensure that we have job opportunities and that we widen the employment base in the constituency so that the area is not as reliant as it once was on the steel industry.

We have a Budget in a few weeks' time. We need a Budget for jobs and manufacturing. What we do not want is a 1p in the pound tax cut gimmick in a vain attempt to try to keep this Government in power. I believe that such a move will rebound on the Government because people will see through it and they will recognise that such money can be spent in far better ways for the future prosperity of our country.

We need investment in our infrastructure. We need, for example, proper high-speed rail links and freight terminals to take advantage of the channel tunnel. Our rail network is a laughing stock compared with those of France and Germany with their high-speed links. I hear tonight that British Rail has had to cancel a £150 million order for new rolling stock. That new rolling stock would have taken constructional steel from the Scunthorpe works. Not only will the commuters of the south-east have to put up with substandard rolling stock for a further year, but jobs will be lost in York in the construction of those trains and jobs will be threatened in the steel industry which would have produced the steel required.

We need more homes, and there is a desperate need for decent homes to rent. The construction industry needs a boost—kick-start—in the Budget. Councils need to be set free from the straitjacket of regulations. There is no reason why the councils that are sitting on capital receipts from council house sales should not be allowed to use that money to buy much-needed homes to rent. Industry needs tax help for investment in capital machinery.

Steel is not prospering under this Government. While they are committed to a hands-off and blinkered approach, we face unfair competition from Europe, where Governments are far more inclined to intervene in their economies to ensure that they are strong and competitive. There is an element of unfair competition in Europe in terms of subsidised energy and transport, and because other Governments have not made the same strides to reduce steel capacity. While that goes on, our steel industry is put at an even bigger disadvantage.

We need a Government committed to manufacturing strength, prosperity and investment in the future. If that cannot be done by this Government, the sooner they make way for a Labour Government who will do it, the better it will be for all concerned.

10.44 pm
The Parliamentary Under-Secretary of State for Trade and Consumer Affairs (Mr. Edward Leigh)

The future of the steel industry, like that of any other industry, depends on its competitiveness. Over the past decade, the United Kingdom steel industry has proved itself. British Steel has emerged as a company of the future, not the relic of the past which was the Labour Government's legacy.

It is understandable that British Steel's recent decision to end steel making at Ravenscraig should have led to concern about the future of the company's other plants. The hon. Member for Glanford and Scunthorpe (Mr. Morley) has a special interest in the Scunthorpe plant. Those who work there are among his constituents—and mine down the road at Gainsborough. He has a sincere and legitimate concern for their future. He is entitled to put his views, as he has done in the Adjournment debate today, but it is for me to put matters into context.

Scunthorpe is a highly productive and efficient plant. Its integrated operation has been continuously strengthened. Coke ovens were recently rebuilt further to reduce costs and improve quality. The Queens blast furnaces, which are a characteristic feature of the Scunthorpe works, have been successfully reconstructed. Two have been completed in recent years and a third is due for completion towards the end of this year. This will ensure effective iron-making at Scunthorpe for the foreseeable future.

British Steel has made it clear that the recent decision to end steel making at Ravenscraig will have no effect on either of the existing plate mills at Dalzell or Scunthorpe. The hon. Gentleman referred to British Steel's plans to build a new plate mill at Teesside to replace the existing mills at Scunthorpe and Dalzell. I understand that those plans have been put on ice for the present until future market demands are clearer.

The hon. Gentleman is aware of comments by British Steel's chief executive recently reported in the press to the effect that future investment is likely to be concentrated at a smaller number of integrated plants—notably at Teesside and Port Talbot. These comments made it clear that the Scunthorpe plant is likely to have a long life. We should stress that point.

It is most unlikely that, in an industry where demand patterns are changing rapidly, with greater emphasis now placed on quality and finishing, supply patterns will remain completely unaltered. The important thing is that British Steel sees a long-term future for the Scunthorpe plant. I underline that point. So I believe that these comments are good news for those among the hon. Gentleman's constituents who work there. In order to survive, the plant will have to meet the needs of the market. That applies to a manufacturing operation in the steel industry, just as in any other industry.

Of course, Scunthorpe today does not just mean the steel industry. The attractions of the area have been recognised by a growing number of businesses. As the hon. Member well knows, I was in his constituency only a few months ago to open a new factory. In the past decade, Scunthorpe has seen the creation of many new jobs. Since May 1979, over 21,000 jobs have been created by just those investments which have attracted Department of Trade and Industry regional assistance.

Of course, I noted the hon. Gentleman's point about the need to continue the assistance programme. As he knows, we will have a review early in the next Parliament. The needs of Scunthorpe will be examined in an entirely objective way, just as the needs of Teesside and other areas will be examined. We will base our decisions on, for example, the unemployment figures, the peripherality of the area and other such indices to ensure that the assistance goes to those areas which need it most.

But, of course, the hon. Gentleman is right. Scunthorpe has been an enormous success story in the past 12 years. The area faced severe problems with the rundown of the steel industry but it has been a great success story. I am sure that the hon. Gentleman will pay tribute to that. The area has seen substantial growth in inward investment and new business formation in recent years. That trend continues to contribute to the increasing diversification of the local economy. One part of the hon. Gentleman's speech with which I, and indeed the whole Government Front Bench, agreed was when he stressed the importance of the need to diversify the Scunthorpe economy.

Relocations, expansions and new investment in sectors such as furniture, electronics, food and chemicals have all helped Scunthorpe to move towards a more balanced economy. I am sure that the hon. Member welcomes that.

I believe that the hon. Member recognises that the Scunthorpe plant must be viewed in the context of British Steel's overall operations and of the industry. I hope that the hon. Member will forgive me but, as the motion for the Adjournment refers not merely to the Scunthorpe plant but to the industry, in the few remaining moments I should like to say a few words about British Steel's wider operations.

Since 1979, the steel industry's productivity has tripled. In 1979, British Steel took more than 13 man hours to produce one tonne of liquid steel. Today, it takes less than five man hours. Over the same period, market needs have altered substantially. British Steel has adapted aggressively. Investment in modern plant and techniques has made British Steel one of the few European steel-makers able to offer a full range of steels which meet the requirements of motor industry customers in the 1990s.

It is no coincidence that those improvements have gone hand in hand with increased exports. Exports of finished steel have increased from 4 million tonnes in 1979 to 6.5 million tonnes in 1990—an increase of more than 50 per cent. During the same period, the proportion of production exported went up from 24 per cent. to 40 per cent. That is a record second to none. Those of us attending this debate should pay tribute to British Steel for its amazing record of improving productivity and exports.

Mr. Morley

I certainly concede that British Steel has an enviable performance record. However, I am sure that the Minister can understand that, when the people within British Steel who were responsible for that—through their commitment, productivity and the work that they have done within the industry—see British Steel negotiating with, for example, Bethlehem Steel in America for investment there, one can understand that what worries them is that the investment that they feel ought to go to our United Kingdom plants might be siphoned off into investments in other countries, to the detriment of their jobs and futures. The Minister must understand their concern about that situation.

Mr. Leigh

It is always right for a Member of Parliament to express concern on behalf of his constituents. We all understand that. However, we must consider British Steel's record and the way in which it has managed to increase productivity and output. It is a sad fact of life that the number of people employed in the British steel industry, as in manufacturing generally, has declined continuously since the 1950s. That is a fact of life that we cannot escape. I am sure that the hon. Member, who is a pragmatic member of the Labour party, realises that that is a fact of life.

Unfortunately, we can now produce more steel, more efficiently, employing fewer people. It would be dangerous for me as a Minister, or for the hon. Gentleman—who perhaps hopes to be standing in my position in a few weeks —to second-guess the commercial decisions of British Steel. Were we to do so, we could well spin British Steel into uncompetitiveness, and in the long run, that could lose more jobs.

We must recognise British Steel's enormous success since it was freed from the shackles of Government control. I hope that the hon. Gentleman is not one of those people who want to return to the bad old days when British Steel lost about £16 billion—in modern money. I am sure that the hon. Gentleman, who is a pragmatic, modern-minded, progressive-minded member of the Labour party, does not want to return to those days.

Ms. Mowlam

In view of the Minister's argument and his emphasis on the importance of pragmatism, and as he has just argued that manufacturing jobs have declined consistently since the 1950s, will he explain the reasons for that continual decline? What is his projection for jobs in manufacturing in the next decade?

Mr. Leigh

I cannot, of course, look into a crystal ball to foresee what will happen in the next two decades. However, something very interesting has already happened. Although, sadly, the number of people employed in manufacturing industry has declined under Labour and Conservative Governments—and under all European Governments—since the 1950s, since the late 1970s things have changed. As a result of our policies, output has increased by a quarter, investment has increased by a third, productivity has increased by a half, and export volumes have increased by more than two thirds. Those achievements result from our policies, which have freed British industry from the type of controls under which it was shackled by the Labour Government.

The debate is in danger of becoming party political, and that was not my aim. I digressed from my excellent text, but I shall return to it. Today, British Steel is more efficient than it has ever been. It is geared to adapt rapidly to changing market needs and it is exporting more than it has ever exported. It is in an immeasurably stronger position to face the future than it was when the Labour party left office.

British Steel's commercial and industrial strategy is a matter for the company, not for the Government. The Government believe that the national interest is best served by allowing companies to manage their own affairs. That applies to the steel industry just as it does to any other industry. It has been vindicated by British Steel's performance since privatisation, which by any standards has been impressive.

British Steel, like any other private-sector company, is responsible to its shareholders for its performance. The company has made clear its intention to continue its efforts to reduce costs in order to remain competitive. The deterioration in market conditions—with continuing over-capacity across Europe and general price weakness —has made cost-competitiveness even more important. Companies which do not compete and do not adapt to the needs of the market will not survive: it is as simple as that. There is no other way.

It is clear that 1992 will not be an easy year. Much will depend on those industries—construction, engineering, motor manufacture—which are major customers for steel. Producers will be operating in a highly competitive environment. To succeed, they will need to continue to reduce costs, to rationalise their operations, to modernise and to improve quality.

British Steel is doing all that. It is now one of the most efficient producers of steel in the world. There is every reason to be optimistic about the future of the company and, I believe, about the part that Scunthorpe can play in that future.

Question put and agreed to.

Adjourned accordingly at four minutes to Eleven o'clock.