HC Deb 21 October 1998 vol 317 cc1191-214 9.34 am
Mr. Denis MacShane (Rotherham)

Thank you, Madam Speaker, for granting me this debate. It is the first debate on steel since I was elected Member of Parliament for Rotherham four years ago to represent that great steel-producing centre in Europe. May I quickly declare an interest? I have 25 shares in British Steel, the dividends from which hardly pay for a "happy meal" for one of my children. I also have a close continuing relationship with the lion and Steel Trades Confederation, both locally and nationally, which I value.

Before I begin, I wish to make a point that is relevant to the debate. An extraordinary report appears in today's Yorkshire Post, which says: The Governor of the Bank of England, Eddie George, said that northern job cuts may be necessary. 'I suppose', he said, `that unemployment in the north was an acceptable price to pay for curbing inflation in the south.' That statement exposes the fallacy of having our economy controlled and determined by the values of the City. Mr. George may have been misquoted. If so, he must clarify what he said, but if he sticks by that statement, he should apologise. If he continues to say that the people of the north of England are ready to be sacrificed to guard his interests, he should join them and resign.

Let me return to the subject of this debate. I am pleased to see so many hon. Members in their seats. I am delighted that, when the Secretary of State for Trade and Industry, my right hon. Friend the Member for Hartlepool (Mr. Mandelson), was named to head that great Department, he said that he wanted to be known as the Secretary of State for Industry. Today he will get the chance to prove that he is a friend of industry, because I am sure that my very good friend the Minister for Science, Energy and Industry, will respond positively to the propositions that I and others will put to him in this debate.

Steel is now asking for the same interdepartmental attention that coal has received in the past 18 months. Despite its problems, the UK steel industry is a success. It earns £4 billion a year in exports, which have risen fivefold in the past 15 years. It earns far more than the film or music industries. Much as I welcome the new jobs in culture and leisure, we ignore the mega-money made by steel at our peril. The industry's record of industrial relations is second to none—except at the unhappy Co Steel plant in Sheerness, where the treatment of workers is a disgrace by international, let alone British, standards. The giant mastodon of British Steel, which controls more than four fifths of UK output, operates alongside relative newcomers like Ispat and Caparo, which work fruitfully with the unions.

Times are hard now, but since 1996 British Steel has made nearly £2 billion in profit. Thus, if, as the Secretary of State said in America last week, he wants to invest in clusters of economic success, and wants to back British-based and British-managed companies, and the entrepreneurship that we see in newcomers on the scene, which together earn far more for the UK than the "Full Monty" or the Spice Girls, I appeal to him to give the UK steel industry his full backing. It needs it, because it faces problems that are not, for the most part, of its OWN making. The problems at Longbridge announced today will exacerbate those difficulties. A rod mill has just closed in my constituency, and the highly successful, flexible and profitable Avesta stainless steel mill faces closure next door in Sheffield.

In the first eight months of this year, crude steel production rose by 5 per cent. in Germany and France, 4 per cent. in Italy, and 15 per cent. in Spain, but went down by 2 per cent. in Britain. Blast furnaces are being shut down; rotas are being changed; and men are being asked to work family-destroying hours and shifts to avoid employing new people. Not a steel worker in Britain, from chief executive to newly appointed apprentice, can feel 100 per cent. secure for his future.

Nearly all those problems are directly inherited from the previous Government. The Conservative party left time bombs ticking in the manufacturing economy, and it is Labour's job to seek to defuse them before long-lasting damage is done. The first time bomb is the anti-manufacturing culture, which permeated Britain throughout the 1980s and this decade. The second is the yo-yoing pound sterling—high under Lords Lawson and Lamont; low for a while under the former Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke). It went up again in 1996 and 1997, steadily rising higher and higher to cause the damage that is now being wrought on the steel industry, as he refused to take action to control his pointless pre-election boom. Now the pound is coming down again, but who knows what the value of yo-yo sterling will be in three, six, 12 or 24 months?

The third time bomb is Conservative isolationist hostility to Europe at the cost of any influence that the United Kingdom needs to have over decisions taken jointly with our European partners which impact on our steel industry. The fourth is an anti-manufacturing system of electricity pricing so perverse that Conservative Ministers could not have done a better job had they deliberately designed it to damage the steel industry. The fifth time bomb is the blind worship of unmanaged trade flows, whether in capital or goods, which has led to the present crisis of the world economy.

The sixth time bomb is the view that privatisation plus deregulation plus globalisation was a new magic formula that would solve all economic problems. If someone called a firm a plc and had it quote on Wall street or the stock exchange in London, that alone was thought to be sufficient to ensure success.

Let us take these Tory follies one by one, and consider what needs to be done. The most important change is to put into reverse the anti-manufacturing culture of the Conservative era. Steel has been, is and always will be cyclical. It requires long lead times for investment and production and for securing markets and sales. The chronic instability of the pound sterling is one root cause of the industry's problems.

The United States, Germany, the Netherlands and other European countries with successful steel industries all operate with interest rates set by independent central banks. The pound yo-yoed even more violently before May 1997 than it does today. Steel will continue to suffer until we form a linkage with the euro.

Mr. Alan Clark (Kensington and Chelsea)

I am listening with great interest and considerable sympathy to the case that the hon. Gentleman is making, but much of his argument in fraudulent. He refers to the fluctuating rate of sterling and compares the industry's performance with that of the United States and of Germany. Over that period, the deutschmark and the US dollar had even higher levels of fluctuation than the pound sterling.

Mr. MacShane

If the right hon. Gentleman examines the flows of the dollar, up and down, since the 1986 Plaza accord, he will find that it has been relatively stable. The deutschmark, certainly in the past 10 years, has been a well-managed currency. I do not want to enter into pro and anti-economic and monetary union arguments, but simply want to place on record my view that, until we have currency stability, and until we are a full economic player in Europe, we should not expect steel to do well.

I appeal to the industry to use its resources to give a kick up the pants of British business, so that it drops its vestal virgin blushes and campaigns publicly, loudly, forcefully and cheerfully for the view that our isolation from EMU cannot last much longer if manufacturing is to survive and thrive. On that point, I must give way to my hon. Friend the Member for Blaenau Gwent (Mr. Smith).

Mr. Llew Smith (Blaenau Gwent)

Although I obviously support my hon. Friend's demand for the sacking of Eddie George, what is far more important is the fact that, on almost our first day in power, we handed power over interest rates to a group of unelected and unaccountable bankers. All this morning's rhetoric and all the words of the Chancellor cannot alter the level of interest rates. If we learn something from this, surely it must be that interest rates must go back under political control. Democratically elected Governments could then take decisions affecting the industry and the community, which depend on them.

Mr. MacShane

My hon. Friend makes his point forcibly. There is no suggestion that deciding interest rates politically in the Treasury, before May 1997, was of any help to the United Kingdom economy. Interest rates do not become a political football in the countries where steel operates successfully.

I welcome the new Labour Government extending the hand of friendship to our European partners, which is paying off in terms of the directive on end-of-life vehicles. That is not a reference to former Conservative Members of Parliament. Concerted efforts by the Minister, to whom I pay tribute, his officials, Members of the European Parliament such as David Bowe and Linda McAvan, and the industry's experts are producing a good result for Britain's engineering steel makers. What a contrast that is to the anti-European antics of the main opposition party, which ensured that the United Kingdom steel industry had no voice or friends in Europe.

The Minister has been helpful on Europe, but I want him to be helpful on the cost of energy, which is so loaded against steel makers in Britain.

Helen Jackson (Sheffield, Hillsborough)

Before my hon. Friend moves on to energy prices, and while he is praising the special engineering steel sector, does he recognise what is not often said in the Chamber and elsewhere—that that sector is one of the most environmentally pure of all manufacturing sectors? Recycling is total: without the special engineering steel sector, this country would have to dispose of all its scrap elsewhere. That must be balanced when we talk about the energy and environmental costs of the steel industry.

Mr. MacShane

I very much agree with my hon. Friend, who is a great expert on these matters. I sometimes wish that Britain's steel factories were painted bright green to send out a message that, despite the smokestack image, they constitute one of the most eco-friendly industries in our economy.

I ask the Minister to be helpful on energy. It is often said that electricity prices in Britain are a bit like the 19th century Schleswig-Holstein question, of which, hon. Members will recall, Lord Palmerston said only three people in the world understood it: one was dead, one was mad, and he himself had forgotten. I do not think that my hon. Friend the Minister is dead, he has not yet been driven mad by the burden of office, and I hope that he has not forgotten the importance of the problem, but understands that the corrupt, fixed, rigged electricity market that we inherited from the Tories does such damage to steel, and why it needs reform.

The facts are hardly known to the general public. Although it now takes 40 per cent. less energy to produce a tonne of steel than in 1970, which backs up the point made by my hon. Friend the Member for Sheffield, Hillsborough (Helen Jackson), British steel firms pay far more for electricity—often 25 to 30 per cent. More—than their competitors in mainland Europe.

Remember: although the United Kingdom has more natural energy resources than any other European Union country, our prices are the highest. In 1997–98, the price of electricity charged to the industry rose by 20 per cent., despite fuel costs falling on the world and local markets. That meant that the revenues of the dominant generators—National Power, PowerGen and Eastern—rose by about £590 million, which is more than the £576 million that they paid in windfall tax.

I cannot believe that the Chancellor intended that, in effect, steel and other industrial customers would pay for his windfall tax because of the excessively high prices that the regulator lets the generators charge. I stress that this is not a free-market operation; nor do the rules of competition come into play. This is another anti-manufacturing racket inherited from the previous Government.

The Minister has announced a review, but its outcome is unlikely to be known much before the millennium, by which time steel will have suffered further cuts and job losses. If the regulator continues to allow the electricity generators their profiteering on the backs of steel, there will be a much smaller customer base when the review is finished.

I urge the Minister to take steps to institute a temporary cap on the electricity oligopoly's price racket.

Mr. Tim Boswell (Daventry)

I do not want to disturb the flow of the hon. Gentleman's argument, but does he think that the current moratorium on gas-fired power station consent is contributing to a rise in, or the sustaining of, the electricity price level, or helping to reduce it in the way that he wants?

Mr. MacShane

I firmly believe that the Government can take action to institute a temporary cap. Rather than waiting for the millennium dome to open its doors and the electricity price review to be published, I urge the Minister to respond to that. To refer and defer to the regulator is not enough. The Deputy Prime Minister has shown leadership on the matter of the rail regulator, and on rail travel prices. The Secretary of State for Trade and Industry should this week do no less to ensure fair play for the steel industry.

The Department could also take steps to prevent the unfair dumping of steel products in the United Kingdom and other European Union countries. At the moment, we have the absurd sight of a significant surge in steel imports—which are up by 81 per cent. this year—into the UK and the EU from Serbia. In the morning, Slobodan Milosevic's steel factories produce steel for his tanks and guns to oppress the people of Kosovo; in the afternoon, they produce steel to put British steel workers out of their jobs, and earn hard currency in this country.

That is an EU-wide problem. Steel imports from third countries into the European Union have gone up from 40,000 tonnes a month in the first half of 1997 to almost 300,000 tonnes a month so far this year. We cannot have a 700 per cent. increase in steel imports in under 12 months and call that fair or free trade.

Hon. Members with whom I have debated will know that I am, by conviction, a free trader. I have stood my ground on that policy against many in my party whose first instincts are more protectionist. Such a surge is not due to the temporary flow of a newly fashionable toy—yo-yos from China, garments or electronic games—but will permanently damage the United Kingdom. We must join our partners in Europe and insist that dumping and unfair trade practices are swiftly investigated, and that quick action is taken.

The United States has already shown a lead. We should not increase our dole queues for the sake of an ideology that only the UK believes in, while the rest of the world moves on, or the dumpers move in and take over our markets.

Mr. Barry Jones (Alyn and Deeside)

There are problems in the steel industry in Wales. My constituents at Shotton steel works face redundancies. They have asked me to emphasise that they want help on energy prices and on the dumping of steel in Britain.

Mr. MacShane

I am grateful to my hon. Friend, whose work on behalf of steel workers not just in Wales but throughout the United Kingdom is well known. His points are well made, and I hope that the Minister will take them on board.

We need action on dumping. If we are tough enough to say "no entry" to a score or so of Slovakian gipsies fleeing hard and cruel times in their own country, we should be manly enough to say "whoa" or "slow down" to the scores of thousands of tonnes of steel that are causing hard and cruel times for steel workers in South Yorkshire.

That leads me to what is, in some ways, the worst of the Conservative inheritance: the slavish view that the only model is that based on shareholder value, in which consumers, employees and communities take second, third or no place at all. The tyranny of quarterly outturns and half-yearly dividend payments is a straitjacket from which British Steel should liberate itself. When the company can spend—as it did last year—£140 million buying its own shares in a fruitless stock market manoeuvre, something is wrong with its priorities. That is almost half as much as the entire UK steel industry invests in a good year.

Investment in Indonesia has melted away, as anyone who knew about the lack of democracy and the corruption in that country could have told British Steel. All that money would have been better spent on investment in the United Kingdom, or on securing a footprint in Euroland, because the proposed investment in Katowice in Poland cannot replace a serious engagement with the main markets in Europe.

Perhaps some in the steel industry believe that privatisation plus share options has meant the end of a relationship with Government. However, every day, every hour and every minute, we receive briefings from British Steel and other companies and the UK Steel Association—for which we are grateful, because we work as a team with the industry—requesting us to knock on the door of Government to ask for help on trade, energy prices, sterling, dumping and the other factors that no steel company can control but which control steel's fate. The steel industry is asking for a new partnership with Government, and I hope that they, through the Minister, will respond positively.

That requires a new approach to partnership right throughout the industry. Partnership means the full and timely sharing of information, which was not the case in Avesta in Sheffield, where the employees and their unions of the British Steel subsidiary company in Sweden were treated more equally, in the Orwellian sense, than those in South Yorkshire.

I hear too many stories in the industry of agreements not being fully honoured and of threats rather than co-operation. I do not believe that they are merely grumpy anecdotes of the dissatisfied. I urge all in the UK steel industry, and British Steel in particular, to ask themselves whether the time has not come to place trust and full information sharing from top to bottom as a priority in the industry in the hard times ahead.

Mr. Phil Hope (Corby)

Unfortunately, Corby no longer makes steel, thanks to the efforts of the Conservative party. We still manufacture high-quality tubes in Corby, for home and export. Does my hon. Friend agree with me that British Steel owes much of its success to the skills and motivation of the work force, despite the travails of the Conservative Government? Given the partnership between the Iron and Steel Trades Confederation, employers and the Government, we should look forward to investment in the industry, in people and in training as the key to the success of the steel industry in the future.

Mr. MacShane

My hon. Friend makes an important point, and I hope that it is taken on board.

The steel industry faces a rocky period. Orders are down, and prices are 20 per cent. lower than a year ago and falling. Jobs will go. I appeal to the Minister to release funds under his control, or under his guidance through the RESIDER programme, to Steel Partnership, one of the training bodies in Rotherham, which seeks to ensure that, when people lose their jobs, they do not lose their skills, their aptitude for work and their self-confidence.

I do not want to be over-gloomy. Since the days of Vulcan, steel making has involved the more awesome alchemy of transforming raw materials through the crafts and skills of the men to which my hon. Friend the Member for Corby (Mr. Hope) referred.

Mr. Owen Paterson (North Shropshire)

Will the hon. Gentleman give way?

Mr. MacShane

The hon. Gentleman will have a chance to make his own points. I am taking up quite a lot of time.

In any steel plant today, the heat, light and raw power are the same as they were 2,000 years ago. Steel is a continuing part of the manufacturing base of any civilised country. We allow our steel industry to decline further at our peril. The managers, technologists and workers of Britain's steel industry can and will survive. I have outlined how Government can help, but both sides of industry and the steel communities have a part to play.

I suggest that the time is right for a national round table on steel, to allow all those with a stake in the industry to meet and to put their cards on the table. I am not talking about negotiations, corporatist encounters, tripartism or any of the ancient formulas. Instead, I propose a new way—my hon. Friends may call it a third way, and Opposition Members may call it the British way if they have read the Chancellor's recent speeches. It is a new way that allows us all to see what needs to be done, what needs to be changed, what needs to be offered and what needs to be conceded to secure a bright future for an industry that I firmly believe is part of tomorrow's Britain.

9.57 am
Mr. Richard Allan (Sheffield, Hallam)

I am grateful to the hon. Member for Rotherham (Mr. MacShane) for raising this subject. I firmly agree with his initial comments. Jobs in the north are vital, and if we tilt the economy any further towards the south-east, we shall be heading for disaster. That will affect people not only in the north, but in the south-east as the pressures there become unbearable.

Sheffield now produces more steel than it has ever produced. We have had great success in projecting a new image through entertainment and the service industry. "The Full Monty" and other forms of entertainment have been tremendously successful—so much so that, when I make an after-dinner speech, rather than expecting me to talk about industry, people want me to take my clothes off, as they think that that is what men from Sheffield do these days. This august Chamber is safe from any such Sheffield-like behaviour.

With our friends in Rotherham, we remain a world-class centre of excellence in the manufacturing and processing of steel, despite our shiny new image as a city of fun. It is essential that we get the European context right, particularly the impact of European monetary union. From next year, the euro will propagate through the supply chain. Businesses such as steel, which trade heavily in other European countries, will, whether they like it or not, find that the euro is an essential fact of their business life. The Government's attitude to the euro, and to economic and monetary union, will be vital in securing the interests of all businesses that trade heavily with Europe. Whatever the politics involved, there is a strong business case for close engagement with Europe in this context.

That is particularly relevant in areas such as mine, where many companies are Anglo-Swedish. We are likely to have one component of a company in the Euro-zone, and another outside it. That will mean some complex economics, and, again, the Government's attitude will give the management of those Swedish companies a strong signal as to how Britain intends to proceed. It will make a significant difference to their investment decisions, determining whether they buy new plant in Sweden or—as I hope—in Sheffield and other British cities.

The second issue that I want to raise is that of electricity prices, which the hon. Member for Rotherham rightly mentioned. As he pointed out, the pool system is an oligopoly for three large generators. The signs are not good for reform. The gas market has moved on—gas prices at the wholesale level have fallen—but legislative time is not being given for the establishment of a new electricity structure that would allow the abolition of the pool system.

The Minister for Trade (Mr. John Battle)

Having dedicated about a third of my life to reforming the pool system, I must point out that we said in opposition that we would challenge it, when others said that it was too arcane even to be looked at. One of the first tasks that I undertook in government was that of asking the regulator to present proposals, which he did. Only two weeks ago, we announced that we would take the regulator's recommendations as the basis for a full and radical overhaul of the pool.

We are talking about the wholesale market for electricity. We cannot simply abolish the system, as some have suggested; if we did, no power stations would operate, and there would be no electricity at all. The project is well under way—there is no holding back—but there is no doubt that it is complex.

Mr. Allan

I am pleased to note the Minister's passion, which suggests that we may see changes in the near future. I hear voices saying that the pool system urgently needs reform, and I am glad to learn that reform is on its way.

A third issue is investment in research and technology. Sheffield contains two fine universities, the university of Sheffield and Sheffield Hallam university. Both are able to supply our industry, including the steel industry, with a competitive edge by providing the skills and research that are needed for the development of new products that will set us ahead of our competitors. I hope that the Minister will tell us that the Government are committed, on a cross-departmental level, to ensuring that our educational institutions can link with industry and provide it with the support it needs.

I believe that I heard on the radio this morning—it may have been a fantasy, as I was lying in bed at the time—confirmation that the university for industry would be in Sheffield. I know that it is not the Minister's departmental responsibility, but if that is so, it is very encouraging. The university for industry and similar initiatives are vital to the achievement of a competitive steel industry, without which—however much we invest—we are unlikely to succeed.

I hope that the Minister can assure us that the Government are committed to investing in excellence in manufacturing, because that is what we have in Sheffield and Rotherham. I hope that my constituents, and all the people of Sheffield, will be able to feel some confidence that progress is being made, and that the importance of the issues that we have discussed today has been recognised. I know that the Minister feels passionately about those issues, and I look forward to hearing him announce initiatives similar to the university for industry, such as the reform of pool prices that we so desperately need.

10.3 am

Mr. Derek Wyatt (Sittingbourne and Sheppey)

I congratulate my hon. Friend the Member for Rotherham (Mr. MacShane) on his excellent speech, and thank him for the opportunity to speak—especially as I, too, had made a bid for an Adjournment debate.

I want to talk about Co Steel, a Canadian-owned company in Sheerness, in my constituency, and to describe the way in which decent men are being bullied and harassed by its management. I want to know from the Minister, and from the Department of Trade and Industry, about the current thinking in relation to our fairness at work strategies, and whether any of those proposals will alter the scenario that I am about to relate.

First, let me make a confession. My mother, Peggy, is a proud Canadian, as is my sister, and as was my late brother. They would not be best pleased by the tale that I am about to tell. The Canadian high commissioner took it on himself to visit the plant last week, and gave all the wrong signals. He let his country down.

Co Steel in Sheerness is for sale. The Toronto-based company is having problems of its own, stretching back to a bond issue that was withdrawn a couple of years ago, and a joint venture in a new mill whose price has escalated. Some 550 jobs are at risk: the community will be devastated.

Two years ago, Joe Davey, who had worked at Co Steel for 25 years, was sacked a few days before Christmas. Joe had been an active trade unionist for all his time at the company. In 1992, Co Steel became a union-free shop. Although substantial union work is being undertaken at Co Steel through the Amalgamated Engineering and Electrical Union and the Iron and Steel Trades Confederation, unions are banned.

Joe Davey—with the admirable support of his union, the ISTC—took Co Steel to the industrial tribunal at Ashford. Here are some of its findings. On senior management at Co Steel, it stated: We find some witnesses we regarded as essentially unreliable. On the personnel manager, Dr. Hugh Billot, it stated: Having heard the lengthy evidence in this case, it seems to us that Dr. Billot is being disingenuous. The company may not have been collectively hostile to trade unions, but there is no doubt that Dr. Billot himself was hostile, and that his view of the unions informed the company's approach. To make the sale of Co Steel more attractive, over the last month there have been 45 so-called voluntary redundancies and—surprise, surprise—19 wholesale redundancies. Let me read some of the letters that are being sent to me over the past few weeks. One correspondent wrote: I had an industrial accident at Co Steel. I used holidays so as not to penalise on the existing points scheme that is enforced at Co Steel. I eventually had an operation on my back. I was made redundant. I have had other letters, from decent citizens in my constituency. One reads: I am one of those made redundant. Co Steel has given the excuse of work behaviour and performance for my redundancy. What I should like to know is, after 20 or so years of loyal service, why they have decided that my behaviour and performance is not up to standard. It is possible that it is because I am a union member. If it is so that Co Steel needed to lose 60 members of staff, why were only 21 accepted for early retirement, and of those why were so many union members? Another letter reads: As you know, the company derecognised the unions in April 1992, so why is it that we have been made redundant? Why have we been refused union recognition? Another reads: You may already be aware of the despicable treatment of a number of men made redundant by the personnel director at Co Steel. As an active trade unionist, it is no surprise to find myself on the list. And so on, and so on.

My concerns are these. Some of the Co Steel management is a disgrace. Two of its senior staff were economical with the truth at a tribunal, but they were neither fined nor fired. Good working practices are important for all staff, not just the men and women on the shop floor. How will "fairness at work" ensure that, when management misbehaves, it is fined? I await the Minister's comments with interest.

Co Steel may find a new owner. I am reliably informed by one of the potential buyers that the sale document has more holes than the average colander. We need a buyer, but they are thin on the ground. I hope that, when the white knight arrives, he will make a charge against Co Steel's senior management.

10.8 am

Mr. David Prior (North Norfolk)

The hon. Member for Rotherham (Mr. MacShane) will know that I worked for British Steel during much of the 1980s. I must say that I found many of his comments utterly misleading.

Mr. MacShane

Will the hon. Gentleman tell the House in what capacity he worked at British Steel? I do not recall meeting him on the shop floor.

Mr. Prior

My last job at British Steel was that of commercial director.

In 1979, British Steel was completely uncompetitive. It had rotten industrial relations, and its products were of poor quality. By the end of the 1980s and the beginning of the 1990s, it had been transformed into the most competitive steel company in the world. The hon. Gentleman ought to pay tribute to those who worked at British Steel, and to remember that that success was achieved under three successive Conservative Governments.

I am going to be brief, because I know that other hon. Members want to speak. There are three areas where the Government could do something tangible to help British Steel. The first is interest rates. I heard the hon. Member for Rotherham talking about the damage that exchange rate volatility can do to a company such as British Steel. I share some of those concerns, but, by pursuing high interest rates and giving independence to the Bank of England, his Government have increased the value of our currency above it should be. I agree with the hon. Gentleman that it is not good enough for his Government to disclaim responsibility for interest rates.

The second area where the Government can help is in a review of the pool. The pool works quite well for individual consumers, but clearly does not give the benefits it should to high energy users. British Steel is paying 15 or 20 per cent. more for its energy than its competitors in Europe. I hope that the Minister will introduce more competition into the pool. His policy of having a moratorium on gas-fired stations is wrong. We need more competition in energy generation.

The third way in which the Government can do something tangible is anti-dumping. As the hon. Member for Rotherham pointed out, imports into Europe as a whole are some seven times what they were last year. That is having a damaging impact not just on British Steel, but on other European users. I hope that the Minister will take urgent, quick action to bring in anti-dumping measures.

There was a period during the 1980s when it became fashionable to say that manufacturing did not matter. That was a very short period, but it did become fashionable. It is particularly sad that, under this Government, that attitude seems to be getting out again—that services matter, that somehow manufacturing does not matter, and to hell with British manufacturing.

Mr. Battle

The hon. Gentleman might check how many times we have campaigned for, mentioned and highlighted the importance and vitality of manufacturing, compared with Lord Young, who said that manufacturing did not matter: let people in the manufacturing city of Leeds, my city, eat out, he suggested. We have changed that culture already.

Mr. Prior

It is wrong for a Minister to say that, when manufacturing industry faces a severe recession. This is a recession that we cannot blame just on world markets and overseas events. This is largely a recession that has been manufactured by economic incompetence in your Government.

Mr. Deputy Speaker (Mr. Michael Lord)

Order. It is not my Government. I hope that the hon. Gentleman will use correct parliamentary language.

Mr. Prior


Mr. Frank Roy (Motherwell and Wishaw)

Like the hon. Gentleman, I worked for British Steel in the 1970s and 1980s. In fact, I was still there in 1991, and I have to say that I never met him on the shop floor when I was in the melting shop working on the ladles. However, I am glad to hear him say that the Government were saying, "To hell with manufacturing." What would he have told my constituents when they were told in the 1970s, 1980s and 1990s by his Government, "To hell with manufacturing and the steel industry in the Motherwell area"?

Mr. Prior

I should like to conclude by saying that British Steel is a fine business. It is very competitive. It can hold its head up high throughout the world. It depends totally on a successful manufacturing base in this country, with a strong customer base. Manufacturing needs some help, and the Government are not giving it.

10.12 am
Ms Joan Walley (Stoke-on-Trent, North)

We have had a colourful, powerful, upbeat and far-ranging speech from my hon. Friend the Member for Rotherham (Mr. MacShane). I congratulate him on securing the debate, but it is important that all of us who have steel capacity in our localities be part of the new deal that he is now asking the Government to enter with British Steel. I speak just to put the case that, in north Staffordshire, we want to be part of that new deal for steel.

I think it was four years ago—time flies so quickly in this place—that we had a real problem about increased capacity in Ireland, which had an extra subsidy. That issue was fought over in the House. It was crucial at that stage that we did everything we could to safeguard the capacity of British Steel to carry on manufacturing.

Members of Parliament in north Staffordshire played a leading role in that. We got the overall capacity from elsewhere reduced. In that process, we maintained a part of British capacity. That was crucial. My reason for speaking now is to say that there have been huge improvements in British Steel manufacturing since then, but we do not want to lose it.

In relation to the global economy, we are in a particularly vulnerable position. That is why it is so important that all of us here who care about steel in our constituencies give that message to the Minister with responsibility for industry, my hon. Friend the Member for Leeds, West (Mr. Battle), so that he knows that he has the support of all of us in the new deal that I hope he will be able to secure for steel.

This is not just about the economy or industry, but about the environment, the negotiations that are about to start post-Kyoto, the changes that are taking place to utility regulation and the price of energy for intensive users of energy; therefore, through this debate, I want us to put all those issues on the table, so that we can continue to make the case for manufacturing in our constituencies.

We have heard from my hon. Friend the Member for Rotherham about job losses at the Templeborough rolling mills. Every time we hear about job losses in British Steel, or are told that there are going to be more job losses because of the particular stage of the cycle that we are in, I get worried about potential job losses in north Staffordshire.

I want the Government and British Steel to know that, between us, we will do everything to safeguard one of the best producing sites we have. I am talking, of course, about the British Steel Shelton site. It is producing 400,000 tonnes of steel per year. It has been doing that for the past five years, and is on target to produce the same amount this year.

British Steel contributes 39,000 jobs throughout the United Kingdom. Obviously, the Shelton site is crucial to that. We have had investment from British Steel in Shelton. We have a new operating pulpit investment of £600,000. We are commissioning new marking and labelling machines to give the edge on customer service and control systems. There is also in progress an overall refurbishment of £1 million.

Five years ago, we had a work force of around 400. Two years ago, we had a work force of 350, and currently we have a work force of 330. We want to keep that work force on that site.

I pay tribute to the huge effort by the work force at Shelton in terms of team working, multi-skilling and work flexibility, all done with trade union agreement. The output in Shelton is second to none. As I hear hon. Members warning about the chill winds of the global recession and everything else, I want to safeguard those jobs in north Staffordshire, so that we can reward the enormous efforts by the team of dedicated workers there, bearing it in mind that we are an island site and, as a result, are particularly vulnerable to any additional pressures; such as the extra costs of transport are so great.

I use this debate to remind British Steel and the government of all that. People in north Staffordshire are important. I use it to remind them of the part that we placed in the last battle, if you like, to maintain British Ste capacity.

I [...]ch on what my hon. Friend the Member for Rothe[...]am said about the Governor of the Bank of England. The Minister will know, because he came to north Staffordshire only last month, how much the pottery industry in north Staffordshire relies on exports, and how important it is that we are innovative and make an upbeat contribution, but the same applies to steel production.

If we bear it in mind that about 50 per cent. of British Steel production is exported and, of the remaining 50 per cent., a further 50 per cent. is exported, and we see what has happened to the Asian market and the collapse there, it is clear that there are difficulties and bumpy rides ahead. For that reason, I say to Eddie George, Governor of the Bank of England, "You cannot sacrifice manufacturing industry just for the service economy." Manufacturing is important. We make things in north Staffordshire, and we are proud of those things. The crucial point is that we do not want to be sacrificed for the wider economy.

We are now at a critical stage, and I wanted to emphasise the importance of our manufactured goods, and of developing the partnership necessary to deal not only with environmental issues but with the international economy, so that we can ensure that British Steel workers in north Staffordshire, at the Shelton site, have a real future.

10.19 am
Mr. Alan Clark (Kensington and Chelsea)

This debate has provided a very good demonstration of the importance of our Wednesday morning Adjournment debates—which allow hon. Members, such as the hon. Member for Sittingbourne and Sheppey (Mr. Wyatt), to cite and bring to the House's attention monstrous cases of victimisation. It is an excellent thing that such issues should be raised in the Chamber.

Today's debate has also allowed the hon. Member for Rotherham (Mr. MacShane) to deal with an absolutely fundamental dilemma of economic policy that we find ourselves at liberty to digress upon all too seldom. In much of what he said, powerful argument was heavily interspersed with obligatory party political points and a good deal of confusion and hot air.

Mr. MacShane

The right hon. Gentleman speaks with some expertise on that.

Mr. Clark

Although many of us pride ourselves on that gift, hon. Members—Labour Members, too—have to try to cut through it.

The hon. Member for Rotherham rightly drew attention to the scandal of the Governor of the Bank of England saying that we must tolerate unemployment in the manufacturing sector in order to control or moderate overheating in the service sector. I have foreshortened the Governor's argument, which is a familiar one—he was not the first person to articulate it. Greatly to the shame of the Conservative party, Conservative Members have in the past made the same case. The hon. Gentleman mentioned Lord Young, under whom I worked as a junior Minister. I drove that Department's officials mad by arguing the unfashionable case of protectionism, against the views of my own Secretary of State.

The hon. Member for Rotherham also drew the House's attention to the fact that, although the Government have been in power for more than 18 months, they are, if anything, more in thrall now to the multinationals, the supranationals and the supermarkets, and to their friends in industry who are buying titles and subscribing to funds, than they were at the outset. They are certainly far more in thrall to them now than they were when they published the Labour party manifesto before the general election.

It is no good saying that many of the seeds of damage were sown by the previous Government. The Labour party has been in power for more than 18 months, and it has intensified the close allegiance between the rip-off corporations and the Government, whose paymasters they are slowly becoming.

The hon. Member for Rotherham dodged the main point. Although he made his case, which sounded fine, he would not arrive at his conclusion. He would not admit that no economy, least of all ours, is strong enough to pay both unemployment benefit to its own workers and the wages of manufacturing work forces in other countries that are dumping their products in the United Kingdom. Although he said that we have to be strong enough to resist dumping, he dodged the matters of the general agreement on tariffs and trade and our associations within the Community. Although he argues—his argument was veiled, but not very closely veiled—that some of our steel industry's problems would be cured if we were in the euro and worked closer with Europe, he knows perfectly well that that argument is utterly fraudulent. If anything, such actions would intensify the problems.

The hon. Gentleman cited the example of Serbian steel being dumped in the United Kingdom. Such dumping provides the House with a classic example of the fact that, because of the damage that they have suffered, many sectors of our manufacturing industry need to be protected. I am one of the few hon. Members on either side of the House who is still not ashamed to argue the archaic but traditional Tory case that we should protect our manufacturing industry by using the various devices of Government—such as subsidy, taxation and import control—that we have used traditionally, and that many of our competitors still use. For some reason, we have had to discard such devices.

I tell Labour Members that we must now realise what is at stake in the argument. Hon. Members, especially Labour Members—with their roots in constituencies that contain what is left of our manufacturing industry—must realise that a major choice will have to be made if, as all judges believe will happen, there is a major contraction in the world economy. The choice will be between the welfare of our constituents as producers and their welfare as consumers.

For too long—for reasons of loyalty, doctrine or laziness—the House has swallowed arguments from Front Benchers on both sides of the House that we must now subscribe to the consumerist ethic, and that the service industries and the ephemeral earnings of show business, with all its shallowness and triviality, will support a major economy of 55 million people. How can such industries support our economy? Although we know that it is impossible for them to support our economy, we allow ourselves time and again to be sold the doctrine that they can.

The choice will have to be made, and the impulse to make it will have to come from within the party in government. I tell Labour Members that I came into the Chamber to hear the speech of the hon. Member for Rotherham, whom I respect, and that my speech is entirely unprepared and extempore. Nevertheless, I hope very much that, in the course of time, within the next two years, there will be a real debate on the subject, and that hon. Members on both sides of the House will be able to give it their attention with proper and fully prepared speeches.

10.26 am
Mr. Andrew Miller (Ellesmere Port and Neston)

Before I speak to the subject of this debate, I should like briefly to mention one example of the steel industry's success in my constituency. Vauxhall Motors has not only just taken on 1,000 new employees but is producing the best selling car in Britain—the new Astra. Vauxhall's success is a credit to the partnership between industry and Government. The situation is therefore not entirely one of doom and gloom, as has been suggested by some hon. Members in this debate.

Like my hon. Friend the Member for Sittingbourne and Sheppey (Mr. Wyatt), I should like to deal with one specific point. I also realise that I shall receive support from various Departments in dealing with some specific problems facing H. H. Robertsons, which closed just before the general election. I am grateful to the hon. Member for Solihull (Mr. Taylor), who was then the Department of Trade and Industry Minister with responsibility for competition, under whom an investigation was started by the Department's insolvency service, which subsequently involved the serious fraud squad and police.

The background to the investigation was a £5 million deficit in the work force pension fund and a series of business actions resulting in moneys dripping out of the company, to the detriment of all creditors, especially the pension fund. Regrettably, because of the complexities of the matter and the way in which the Companies Acts are structured, the Serious Fraud Office has been unable to produce a case that it believes would stand up in a fraud trial. I believe that a case has not been made, not because the SFO is happy with events, but because of the very clever way in which the money was used.

The matter is currently being dealt with by the pensions ombudsman. Earlier this week, I had an exchange with the Secretary of State for Social Security on that point.

I should put in context the closure of H. H. Robertsons, which was a very important steel works. Ellesmere Port was a steel manufacturing town, and subsequently has become a petrochemical town. It began producing steel at the turn the century, when the work force of the then Wolverhampton Iron Works walked up the canals to gain jobs at the new plant. The plant survived for the best part of 100 years, but then, after some very interesting financial manoeuvres, it disappeared. That was a tragedy, not only for the town and the people who worked at the plant, but for the credibility of an important part of British industry.

I want to put three points to the Government in the context of the inquiries that must continue. I appreciate that the first is not within the remit of my hon. Friend the Minister for Science, Energy and Industry, but I make a general plea to the Government to work with me and with all the parties involved to find a rescue package for the pension fund of the plant. The state is paying a significant sum in benefits, so it would be helpful if we could find a way to rescue the fund.

Secondly, I should like the Government to examine carefully the way in which the Companies Acts have been used in this particular case, and the effects of their structure on the ability of the work force to get a clear picture of what has happened. Even the Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Pontypridd (Dr. Howells), cannot get hold of the full report from the Serious Fraud Office, which is a bizarre state of affairs.

Finally, when the company was taken over—something on which the pension fund members were not consulted—the pension fund was in deficit. Because of the refinancing of the company, pension fund members automatically became lower-ranking creditors than the people who allegedly invested in the company. The exposure of the pension fund increased as a result of the vehicle that was used to refinance the company. That is a ludicrous state of affairs, which can no longer be allowed to occur under British law.

There needs to be a great deal of close co-operation between the Department of Trade and Industry, the Department of Social Security and the Treasury. I should be extremely grateful if the Minister would reaffirm the Government's commitment to work with me and the ex-employees of the company in an attempt to get justice for them.

10.31 am
Mr. John Healey (Wentworth)

I congratulate my hon. Friend the Member for Rotherham (Mr. MacShane) on securing the debate, and on arguing his case so powerfully. He brings a worldwide view to the subject. I cannot compete with that, so I shall not try. Instead, I want to examine the local scene and make a plea to the Minister for practical help in dealing with some of the fallout of the problems that my hon. Friend outlined.

The British Steel Engineering Steels plant in Alwarke is in my constituency, as is the Thrybergh rolling mill. Many constituents also work at Kvaerner and Avesta and in other small steel plants throughout Rotherham and Sheffield. They feel a growing sense of dismay and desperation. They are doing all they can, often led by their union, to help their companies succeed and to become internationally competitive, but the firms are then hit by forces well beyond their control.

Steve Shaw is typical. He lives in Rawmarsh in my constituency, and works at Avesta in Sheffield. He, the Iron and Steel Trades Confederation branch secretary and other colleagues have been heavily involved in work force and management partnerships in the past five years to introduce new shift patterns, new working teams and new levels of productivity and profitability. However, in the summer, as my hon. Friend the Member for Rotherham said, the firm announced plans to close the mill and move the Sheffield order book to Sweden with the loss of 100 jobs and 100 family incomes.

I regret to say that Avesta is only one of a string of steel companies instituting closures and cuts. Even BSES, a world-class and internationally competitive company, is reducing capacity. However, it is still holding on to its work force, still investing and still looking to the upturn, but the danger lies with downstream companies in South Yorkshire. It lies with the damage that is already in the system but which is still to work through. Supply chains are long, especially in engineering steels.

The local challenge is to do what we can to help people living with the threat of redundancy. In Rotherham, we have pragmatism and resilience, and a proud track record of partnership involving organisations responding to such problems. That has been the root of our recent regeneration efforts, and it is the reason that we want pathfinder area status for Rotherham and the pilot scheme for the new deal for the over-25s.

Although I welcome the efforts of the Minister and his colleagues to set up a rapid response team in the Department of Trade and Industry, and while I applaud the efforts of similar rapid response teams in the borders and in the north-east to deal with large-scale company closures, Rotherham already has such an operation in place. It has an effective partnership to tackle the immediate problems of retraining and resettlement for steel workers who are losing their jobs. It is called Steel Partnership Training, and is based on co-operation nationally between the ISTC, SteelAction and Most Training. With support from the Rotherham ChamberTec and Rotherham council and, crucially, the Employment Service, it has secured RESIDER funding to pay for training for 100 redundant steel workers and those threatened with redundancy.

We are now looking for a further £45,000 to double the number of people with whom we can deal. That money lies in the RESIDER programme funds, and I urge the Minister to help to fast track our bid to secure that cash because we can then match it from other sources. If we can fast release these funds, action can be taken while workers are still on notice rather than on the dole. If we can secure the funds, in the midst of the maelstrom that is today's global economy, the Government can help individuals whose lives have been overturned by events that are well beyond their control and that of their company.

10.36 am
Mr. Owen Paterson (North Shropshire)

I heartily congratulate the hon. Member for Rotherham (Mr. MacShane) on bringing this subject to the House on a Wednesday morning, but, having spent my whole life in manufacturing, I must deplore some of his comments about the previous Government.

After I left university and before I entered the House, I spent my time in industry, making things and selling them abroad. There was a revolution in Britain during that time, led by British Steel in particular. It was sad that, when my hon. Friend the Member for North Norfolk (Mr. Prior) said that he had worked for British Steel, he was laughed at. It was a team effort; surely the old class warfare has gone. We need people with skills on the shop floor, and we need people with my hon. Friend's skills in management—that was why the privatised British Steel was such a success.

The revolution liberated the country from the burdens of a rigged labour market that had the law behind it. Corporate taxation was dramatically reduced, which is a lesson that this Government should not forget, to levels that made it worth while staying in this country and investing here, and which brought the extraordinary tide of inward investment that has led to an extra 1 million firms being created. However, I have only three minutes left, so I shall be brief.

It was extraordinary that the hon. Member for Rotherham (Mr. MacShane) led an attack on Eddie George, who is in charge of the Bank of England, when he wants to join the euro. If the Chancellor wants to get rid of Eddie George, it is at least in his power to do so. If we joined the euro, we could never get rid of Mr. Duisenberg. We should be just one little voice, one of a dozen.

I find it extraordinary that, after the disaster of the exchange rate mechanism, for which our party has apologised but for which the Labour and Liberal parties have not, the Labour party wishes to put itself in a concrete box when it comes to exchange rates, so that a small, unelected group of people whom we can never remove will decide interest rates and exchange rates that will hit the work force of Rotherham.

The hon. Member for Rotherham cast some aspersions on the framework of shareholder capitalism which has proved successful in the western world, but he did not come up with an alternative.

The hon. Gentleman referred to a Government partnership, but, as far as I could tell, that boiled down to an exchange of information and a plea for funds to help with redundancies. Was he hinting that the Government should take back shareholdings in companies such as British Steel, or that a Government bank should be set up to provide soft loans? What is the Government partnership that the hon. Gentleman was talking about? There was also some knockabout stuff criticising shareholder capitalism, which brought so much prosperity to the western world and whose absence caused so much catastrophe in eastern Europe.

The hon. Member for Rotherham also mentioned unmanaged trade flows, and made some dangerous comments about dumping. Having spent much of my career exporting and importing, I am extremely alarmed by some of the noises being made here today. I include in that the remarks by my right hon. Friend the Member for Kensington and Chelsea (Mr. Clark), who I know believes in trade blocs.

In the 1920s and 1930s, there was a catastrophic shrinking of world trade by the raising of import barriers. I have spent much of my life battling to open up foreign markets to goods in my industry, with the help of European partners. Will the Minister give an assurance that he will be looking to open up another GATT round? The previous Government played a heroic role in getting important duties reduced around the world, and the Uruguay round was crowned by the establishment of the World Trade Organisation.

The hon. Member for Rotherham was absolutely right to mention Serbian steel, which I expect receives huge Government subsidies. Will the Minister tell us today that Britain will be leading the way in demanding another GATT round?

Finally, on energy, in the relaxed atmosphere of today's Adjournment debate, will the Minister answer the question that I have asked him twice before at Question Time? What leads Government energy policy? Is it the cheapest possible energy which will give the workers of Rotherham a chance to compete in the world, is it his own old commitment to the producer interests and protecting jobs, or is it Kyoto and keeping the world clean? Will the Minister think carefully, and give me a straight answer?

10.41 am
Mr. Tim Boswell (Daventry)

I, too, congratulate the hon. Member for Rotherham (Mr. MacShane) on securing today's Adjournment debate. We have had a serious and sombre discussion of an important topic, in which hon. Members have brought their particular concerns about the current position of the steel industry to the attention of the House. Behind it, however, stalks the wider agenda of what the Victorians would have called political economy, and those points were interestingly rehearsed by my right hon. Friend the Member for Kensington and Chelsea (Mr. Clark), who takes a very clear view, which I do not share, but which we should consider.

The steel industry is an excellent industry, which has reformed itself out of all recognition, but it is in real difficulties. Despite those difficulties, there is a positive undertow, and a wish on all sides that it should succeed. Although nobody talks now about the commanding heights of the economy, steel remains extremely important. British Steel alone employs nearly 40,000 people, and, as the hon. Member for Wentworth (Mr. Healey) said, there is a huge downstream, which reaches even into constituencies such as mine, in fabrication, processing and stockholding. So there is a very large multiplier, and the industry remains central to our economy, just as—as I have always believed—manufacturing is a vital part of our economy.

The investment programme is exemplary, representing some £350 million a year for the industry as a whole. It has enabled us to move from commodity steel to specialist steel, while supplying across the range. It has resulted in a much better productivity record than the British average on manufacturing industry. It shows, for example, that the cost of making steel in 1998 is the same as it was in 1990, which is pretty good considering the lapse of time. It shows that exports have increased from 20 per cent. to 50 per cent. of output and that we are a world player. British Steel is arguably second, third or fourth in the world, depending on the particular year.

Yet, despite what I readily acknowledge has been achieved by the industry, its employees and its unions, there is a problem. As my hon. Friend the Member for North Norfolk (Mr. Prior), with his direct experience of the industry, said, had we not privatised the industry, its circumstances would not have enabled it to put its house in order. It continues to do that, as it cannot be a one-off but requires a continuing programme, yet the breakthrough to continuing success eludes it for some other reason embedded in what we have been saying about political economy.

I would quarrel with one or two remarks by the hon. Member for Rotherham. In particular, for new Labour he took an uncharacteristically churlish view of the role of profits and the importance of the share price. Despite the market operation to which he referred, the share price of British Steel has reduced by something like 80 per cent. reducing market capitalisation. If the share price is not buoyant, it will be more difficult to raise capital in future.

So there is an underlying problem, to which a number of hon. Members have referred. I have a fellow feeling with one or two hon. Members on both sides in relation to exchange rate policies, particularly monetary policy. As the hon. Member for Rotherham was speaking—and I did not have the facility to check—I wondered whether he had voted against the Bank of England Act 1998, as I did. I know that the right hon. Member for Llanelli (Mr. Davies) and the hon. Member for Blaenau Gwent (Mr. Smith), who are in their places, also voted against it.

Frankly, Labour Members have wished the problem on themselves. They opted for a strict monetary policy, possibly to restrain themselves from the temptations of inflation. That has had direct effects on the exchange rate, which in turn have had direct effects on manufacturing industry, particularly the steel sector. British Steel's briefing, prepared some months ago, said rather eloquently: No-one disputes that the control of UK inflation by the blunt instrument of six interest rate increases since May 1997"— one of those has since been rescinded— has continued to impact with disproportionate severity on Britain's manufacturing sector (where inflationary pressures are, in contrast to much of the services sector, negligible). There we have it. It has made a huge difference, and has been accompanied by the Chancellor's increases in taxation, his attacks on savings and the impact on company pension plans that has yet to be fully realised. British Steel spends about £60 million a year on its pension fund. It will not have its new actuarial valuation until next year, but that will impact directly on what has to be provided.

Although the industry is doing well, the exchange rate is fighting and frustrating improvement, making it difficult for the steel industry to trade. When Labour Members say, sometimes from the Front Bench, that some of the exchange rate appreciation took place under the previous Conservative Government, one has to make the point that the bid at the margin has run back in the past couple of months, yet the prospect for manufacturing industry continues to deteriorate. For example, three mills shut recently.

It may not all be the fault of the Government. They cannot be held to blame for the problems in the Korean economy and the flood of steel from Asia. Whether or not it is dumped is a matter for the European authorities to examine. However, we can blame the Government not only for their failures in macroeconomic policy, but for their determination to ratchet up the cost of British industry at a difficult time, making it even less competitive, despite the problems that hon. Members have identified.

Let me single out two issues within my remit and responsibility. The first relates to employment costs, where there is a whole package of measures, including the working time directive, the minimum wage and the fairness at work proposals. One could fairly say that the Government used the engineering industry almost as a template for the introduction of the minimum wage. As they said, not many people pay that little in engineering, but, as we now know, with outsourcing, many other industries feed into the steel sector, both as customers and as suppliers and sources of services to the industry.

The costs that will come through such packages will have an impact not just on the service industries—once memorably called, in another forgotten phrase, the "candy-floss economy"—but on the real world of manufacturing industry.

Mr. Paterson

Does my hon. Friend agree that none of the measures introduced by the Government has made the customers of British Steel in this country more competitive, and that there should be a ban on any further moves that would increase the costs of small businesses?

Mr. Boswell

I strongly agree with my hon. Friend.

The energy sector is important. It is no good saying, "We have got to do Kyoto," without considering the gas industry. The Government have shown that they are not prepared to encourage gas-fired power to help us to meet the Kyoto targets, so further strain will be put on the rest of manufacturing industry, which will be required to cut its emissions. There is a cost and an environmental impact.

As shown by this morning's news about Rover—a major steel user—the alarm bells in manufacturing industry are ringing. The Minister must reassure us that he is not heading straight for the iceberg.

10.50 am
The Minister for Trade (Mr. John Battle)

I thank my hon. Friend the Member for Rotherham (Mr. MacShane) for introducing the debate. For anyone who says that economic debate has left the Chamber, today's example of the use of parliamentary time has been superlative. We have started a debate here. I am delighted that manufacturing is again being debated in the Chamber. I say "again", because I led a debate on manufacturing. One of the commentators on "Question Time" the other night said that my town of Leeds was an old textile town. It is not. Leeds has been in engineering for the whole of the 20th century. That is the key to my constituency and my city.

The Government are committed to manufacturing, engineering and technology. I was asked whether we were committed to investing in excellence in manufacturing. For most of my life, I have been fed up with hearing manufacturing referred to as if it were a 19th-century practice. The technology, innovation, imagination and creativity in British manufacturing belong in the 21st century. We will champion those industries.

I should like to say a positive word about the importance of steel as an economic force in its own right. We have to confront economic pressures and issues related to skills, training, unfair dumping and the reform of the pool to deal with artificially high electricity prices. I want to respond as positively as I can to my hon. Friend the Member for Rotherham's proposal for a round table.

I do not have time to respond to all the points that have been raised. My hon. Friend the Member for Ellesmere Port and Neston (Mr. Miller) referred to H. H. Robertsons. I know that he has had meetings with Ministers. I shall take that forward in the light of his comments this morning. I shall also look into the comments of my hon. Friend the Member for Sittingbourne and Sheppey (Mr. Wyatt) about "Fairness at Work".

In the past year, I have attended meetings of the group of steel Members of Parliament, under the chairmanship of my hon. Friend the Member for Rotherham, and visited steel companies. Those meetings, in which the ISTC and Steel Action are often involved, have been positive and helpful in difficult circumstances, and serve as a model of how to proceed.

I should like to keep emphasising that we attach great importance to our manufacturing industry. Some 4 million people work in manufacturing. It is important also because of its innovation, its generation of new technologies and the fact that its output is still one fifth of gross domestic product. Manufacturing is how we will make our future.

I do not want the north to be set against the south—manufacturing against services. We should be looking for integration, accepting that both sectors are vital. I recognise the major role of the steel industry and its products in underpinning almost all manufacturing. Steel is not just a material—it is an economic force.

I should like to mention briefly the development of world-class, lightweight, stronger materials for the automotive industry, including new products such as the ultra-light steel auto body project. Later today, I shall be at the motor show in Birmingham, where I shall visit the British Steel stand to see its contribution to technology, industry and the economy.

My hon. Friend the Member for Rotherham talked about clusters of economic success. We should focus on them more readily. My hon. Friend the Member for Stoke-on-Trent, North (Ms Walley) and others praised those who work in the industry, who are the reason why it is one of the cleanest, most innovative and efficient steel industries in the world. In the past 20 years, productivity has risen more than fourfold, while the amount of energy needed to produce a tonne of steel has been reduced by about one third. Our productivity compares favourably with that of Japan and the United States. The steel industry's export performance is still remarkable by any standards.

However, as has rightly been stressed during the debate, we must face economic realities, and recognise that current economic conditions are difficult. The current difficulties in the world economy show the importance of pursuing policies that help us to steer a course of domestic economic stability. The Government are taking action to build a stable economy capable of sustained and steady growth, allowing businesses to move ahead with confidence, in contrast to the boom-and-bust, stop-go economics of the 1980s and early 1990s, when interest rates reached 15 per cent. and more than 1 million manufacturing jobs were lost. It is worth reminding ourselves of that occasionally. We are working hard to sort out the mess that we inherited.

I recognise that the strength of sterling and the financial difficulties in Asia and Russia are causing particular difficulties for manufacturers and exporters, particularly the steel industries. We have to take the long-term view, not let short-term pressures lead us back to the policies that produced the boom and bust of the past. The short-term fixes of the previous Administration did not work. We are laying the foundations for economic growth by putting economic management on to a more stable, long-term footing. We are encouraging investment and productivity growth and helping people from welfare to work, as my hon. Friend the Member for Wentworth (Mr. Healey) said.

Global forecasts are being revised down across the world. One quarter of the world, including Japan, is in recession, and no country is immune from the current instability in the world economy. We must ensure that we do not go back to protectionism, and that world markets are kept open. We need openness and transparency in financial transactions, with proper supervision and regulation.

More positively, we are also addressing the fundamental structural weaknesses that have held the economy back. It is appropriate that the university for industry, which focuses on re-skilling during a person's working life, is to be located in Sheffield. I think that that was announced this morning, and I can confirm it. I also praise the steel industry's excellent training record. One of the keys to competitiveness is skills training. Intensive investment in training has played a major part in the success of the steel industry. British Steel continues to invest heavily, providing significant amounts of training to ensure that all staff have the necessary skills. The industry was one of the first to have its national training organisation recognised by the Department for Education and Employment when NTOs were introduced in 1997.

British Steel has understood the need for training in a way that other industries have not. It is a model of how to proceed. British Steel has also understood that exporting is not simply a matter of selling products cheaply. Success requires investment in innovation, efficiency and training.

We have to get the framework right. We are working on building partnerships with the steel industry, as with other manufacturers. The agenda includes science, engineering and technology, the spread of innovation, new processes and new ways of doing things, the availability of finance for investment in research and development and the creation of a culture that builds on and uses the new knowledge-driven economies, integrating new technologies and telecommunications as a means of revitalising our manufacturing base.

Our commitment to that partnership includes taking an active part in defending the steel industry from illegal trade practices, unfair competition and illegal subsidies to its competitors. Where such practices are shown to exist, we shall campaign rigorously on behalf of the industry, and will represent it.

As I said in an intervention, we are tackling the wholesale market, which is a complex business. Electricity prices are determined by a pool. We have got on with tackling the matter; we asked the regulator to look at it. He has reported and we have accepted the broad shape of his response. We are pressing the regulator and a team of people on the issue. The regulator has appointed a person radically to overhaul the pool mechanism, to ensure that electricity prices for industry are brought down and it is not priced out by artificially high prices. The industry is, of course, regulated, so capping is a matter for the regulator, whom the Government do not tell directly what to do.

I assure my hon. Friend the Member for Rotherham that the regulator—the director general—is closely monitoring developments. If it appears that prices are rising without good reason, arrangements can be reconsidered. We shall keep an eye on that. On average—I know that it is not fair on the steel industry to say this—price pressure will be downwards.

Mr. Deputy Speaker

Order. We must turn to the next debate.

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