HL Deb 19 July 1976 vol 373 cc529-34

3.40 p.m.


My Lords, with permission, I will now repeat a Statement which is being made in another place by my right honourable friend the Secretary of State for Industry. The Statement is as follows:

"With permission, Mr. Speaker, I should like to make a statement about capital investment on steel in Wales.

"The Government have been faced with a very difficult and complex decision over the British Steel Corportation's proposals for major developments at Port Talbot and for the closure of steelmaking at Shotton. The Corporation's plans and several alternative schemes have been most carefully examined in the light of the many representations made to us from the areas concerned. It is the Government's view that the assumptions about capital costs and market prospects which lay behind the Corporation's proposals require a thorough re-examination in the light of inflation and of market prospects as the steel industry recovers from the severe recession of last year.

"I have therefore asked the Corportation to carry out a further review both of their own proposals and of alternative schemes involving continued steelmaking at Shotton, in the light of the latest available information. They have agreed to do so.

"This review will inevitably take some time to conduct in the necessary depth and detail. We have therefore proposed to the Corporation that they should undertake without awaiting the review those elements of their proposed investment at Port Talbot which would not prejudge in any way the decision on the future of steelmaking at Shotton.

"The Corporation have informed me that they are willing to proceed on this basis with the second phase of the coke oven replacement scheme, of which a first phase was authorised in February 1975. This will reduce pollution in the vicinity of the works and will contribute to operating efficiency. They are also prepared to consider the economic and operational feasibility of introducing some continuous casting to feed the existing mill at Port Talbot, giving some improvement in product quality. The new coke ovens and the continuous casting machine together with necessary modifications to the steelmaking, scrap and slab handling facilities, would represent an investment of some £100 million in total.

"The Government informed the Corporation of our readiness immediately to authorise expenditure of a further £250 million for the proposed new hot strip mill at Port Talbot. The Corporation have agreed to consider this proposal within the re-examination that they have undertaken to carry out."

My Lords, that concludes the Statement.


My Lords, I am sure that the House is grateful for the repetition of that Statement on such an important matter. May I ask the noble Lord whether he realises that it can be with nothing but dismay that the House hears that, after all this time—now a number of years—there is still no decision about this vital matter. All we can have is the promise of a further review, and goodness knows how many reviews there have been already. The noble Lord admits that this review will take some time.

Coming to more specific matters, does the noble Lord agree that the urgent need of the British Steel Corporation is for a definitive decision about the new investment in basic iron and steel production, and that within this overall need the BSC need to know in particular whether the capacity of Port Talbot in the future is to stay at the present level, which I believe is about 3 million tons a year, or whether it is to be greatly increased to 6 million tons a year. Thirdly, may I ask the noble Lord whether he accepts that this investment of £250 million which was announced on the new hot strip at Port Talbot will not increase the total output of steel in this country? It fails to do so at a time when the big tin plate users and the big users of other forms of steel sheet are probably being driven more and more to import in order to meet their requirements. Is this not in itself a condemnation of the Government's lack of decision over the really urgent matters?

3.44 p.m.

Baroness SEEAR

My Lords, we from these Benches should also like to thank the Government and the noble Lord, Lord Melchett, for repeating the Statement which has been made in another place. I fear that I can only echo the comment made by the noble Lord, Lord Carr of Hadley, in deploring still further the delay in deciding what is going to be done about Shotton. I am sure that your Lordships' House will agree that in a matter such as this there comes a point when almost nothing can be worse than further uncertainty as to what is to be done; nothing can be worse either to the health of the industry or indeed the people employed in that industry, or contemplating going into that industry in this area, who cannot know, and have not known now for years, where they stand or where they can expect to stand in the near, let alone middle, future.

I should like to ask the Government from where this £250 million is coming. Is it a loan to be repaid by the BSC at some time? Is there any reason why it should not be raised on the market with a Government guarantee? If the future of the steel industry is good, why should this not be done? If indeed it is simply a further grant to the steel industry, we must point out that £250 million is a quarter of a billion, the billion which has nearly split the Government in deciding how they are going to save monies of this order.

3.26 p.m.


My Lords, taking the noble Baroness's point first, we will shortly have a Bill before your Lordships' House dealing with the capital investment programme of the British Steel Corporation. It may be best to leave the detailed discussion of that until that time. I take it that the noble Baroness is not suggesting that this much-needed investment should not be proceeded with, and my understanding is that the sums mentioned in the Statement come within the existing provisions of the British Steel Corporation's investment programme. The British Steel Corporation are empowered to raise money on the market if they wish. A Government guarantee amounts in public expenditure terms to exactly the same thing as the Government providing the money. I do not think that of itself is necessarily very helpful.

I appreciate what the noble Baroness and the noble Lord have said about the uncertainties which a further delay will cause and the length of time it is taking to reach a decision on this matter. But both the noble Lord and the noble Baroness will accept that this is an extremely difficult decision that has to be made. It is a question of weighing up the very grave social consequences of any reduction in the steel making capacity at Shotton in an area of high unemployment where up to 6,000 or more jobs would be at jeopardy. The noble Lord said that this had been under consideration for a matter of years. Of course, until the Government had the British Steel Corporation's formal plans for Port Talbot we could not begin to reach any final decision on the case for closing Shotton. The plans were received in January 1975 at a time when the recession was beginning and capital costs were rising. That changing situation has affected both British Steel Corporation's own proposals and the alternative scheme that was put forward by the workforce at Shotton.

It is for those reasons that we think it is better to ask the British Steel Corporation to look at the matter again than for the Government to reach a decision on figures which almost certainly do not any longer reflect the true position. The noble Lord, Lord Carr of Hadley, mentioned the new hot strip rolling mill at Port Talbot. It is true it will not lead to any overall increase in the amount of steel produced at Port Talbot; but it will dramatically improve the quality and my understanding is that is something which is urgently wished for both by the British Steel Corporation and their customers. The Statement says we would have been ready to authorise the new mill at this stage because it has always been part of the British Steel Corporation's plans for Port Talbot and it had no implications for Shotton's future. The British Steel Corporation felt that such a large investment should be considered together with the location and size of related steel-making investment, and they will be re-examining the economics of the Port Talbot hot strip mill along with the related matters and alternatives for Shotton.

However, I do not think that the British Steel Corporation, or anyone else, would say that this investment, or the lack of it, would have affected any shortages in the immediate upturn because, on the best estimate, investment at Port Talbot would not have been in production before 1980. I know that as a result of the industrial strategy exercise the British Steel Corporation are in very close touch with their customers and will be keeping a close eye on the position in the immediate upturn of the supplies of steel.


My Lords, is the noble Lord aware that, as one who has had considerable concern over Shotton for a very long time, I am very pleased indeed that its future is at least to be further considered? A reprieve is better than the execution of a death sentence for 6,000 jobs. I hope that when the British Steel Corporation or the Government make a future decision it will be a wiser one than the last one.

Baroness WHITE

My Lords, is my noble friend aware that I am extremely grateful to the noble Lord who has just spoken, who was a neighbour at Shotton across the Dee and the Wirral, whereas I was the actual representative of Shotton for 20 years in another place? While we can very fully appreciate the feelings of noble Lords who consider that any further delay is undesirable, nevertheless until one can find a solution for the intense social problems of North-East Wales it really is not reasonable to demur at further investigation in the current situation. As the noble Lord has explained, the consideration so far has been based on information which is now somewhat out of date. I, for one, am delighted that in spite of the difficulties of delay there is to be further investigation.


My Lords, I am very grateful for what the noble Lord and my noble friend have said. Of course, any Government faced with this decision would like to be able to find an option which preserved the jobs at Shotton, and allowed the investment, modernisation and expansion at Port Talbot to go ahead. It seems it simply is not possible to find an easy way out and, as my noble friend and the noble Lord pointed out, the social considerations at Shotton are such that we feel the ultimate decision should be taken on the right information.


My Lords, may I associate myself with the relief that has been expressed about the proposal for Shotton being re-examined. I should also like to point out to my noble friend that those who criticise the changes in the capital programme have not a very clean record themselves. Indeed, this Government have a long way to go to equal the procrastination and deferments from which the steel industry suffered during the time of the 1970–73 Government. Might I ask my noble friend whether the question of Shotton is not bound up with the total capacity required by the British Steel Corporation? He may remember that the 1970–73 Government cut down the global amount which the BSC were going to produce by a very large amount indeed. May we take it that that figure is now to be increased to something like the 35,000/40,000 million tons which those of us who were responsible for nationalising steel had in mind at the time when we did it?


My Lords, having had in a sense some indirect experience of the British Steel Corporation's problems during the 1970–73 Government, I do not think I would disagree with what my noble friend has said. As to the point of total capacity, that is extremely important and it will be one of the things which I am sure the British Steel Corporation will be considering in this study.