§ 4.51 p.m.
§ The PARLIAMENTARY UNDER-SECRETARY of STATE, DEPARTMENT of INDUSTRY (Lord Melchett)
984 My Lords, I beg to move that this Bill be now read a second time. This short Bill deals with the affairs, and particularly the finances, of the British Steel Corporation. The British Steel Corporation is one of the largest industrial enterprises in Europe and, before embarking on the detail of the Bill before us, it may be helpful if I remind your Lordships of some of the more important figures which describe this enterprise. It has a turnover of about £2,500 million, is currently investing between £500 million and £600 million a year and employs over 200,000 people. The main purpose of this Bill is to raise the statutory limit on the amount of external finance which the British Steel Corporation and its wholly-owned subsidiaries can raise by borrowing, and by the receipt of public dividend capital.
An increased limit is necessary mainly to finance fixed investment and working capital for increased production and sales; and also temporary operating losses. The present borrowing limit, taken together with the Corporation's internal cash flow, will be insufficient to provide the cash needed because of the scale of modernisation and expansion, low profitability resulting from inadequate past investment and working practices which have fallen behind international standards.
The Corporation's financial position has to be looked at over a number of years. The Corporation achieved a pretax profit of £56 million in the year of high steel demand in 1973–74 and a further profit of £89 million in 1974–75. The Corporation entered the recession of 1975–76 with sales diminished and customer confidence impaired because of operating problems, largely due to the aftermath of the three-day week and industrial relations difficulties. The depth of the recession was such that last autumn it looked as if the deficit on the financial year to 3rd April 1976 might be substantially in excess of £300 million. However, the Corporation has pursued a vigorous policy of cost savings covering the whole of its activities with the result that the actual deficit was approximately £255 million. Annual accounts for 1975–76 are due to be published by BSC on 29th July.
Demand for most products has been improving this year, with steel plate being the notable exception. The Corporation 985 is planning to break even in 1976–77 which will reduce its financing requirement, but the additional contribution from internally generated funds will be more than offset by increased working capital needs as business picks up. Substantial finance is being provided to increase the physical level of the Corporation's ordinary stocks and work in progress needed to provide reliability of supply. Consideration is being given to a further tranche of counter-cyclical stockbuilding.
We have reviewed with BSC its financial requirement for 1976–77 and examined likely requirements up to five years ahead. There is a considerable measure of uncertainty in attempting to forecast far ahead; over the four-year period from April 1976 to March 1980 BSC expect to invest some £4,000 million and to require approaching £1,000 million for increased working capital. It considers that nearly £2,000 million of these needs should come from self-generated funds in the form of retained profits, depreciation and development grants, leaving about £3,000 million to be raised by way of external borrowings and advances of public dividend capital.
In line with other nationalised industries, BSC is now subject to a cash limit which has been fixed for the current financial year at £950 million. This allows for a small element of self-financing by the Corporation in meeting the year's total financing requirement of approximately £1,000 million. Of this, some £650 million is accounted for by new fixed investment, nearly all in the United Kingdom, and the remainder by working capital.
The Corporation's borrowings and receipts of public dividend capital counted against the borrowing limit are approximately £1,700 million. A margin must be allowed to cover short-term borrowings and day-to-day fluctuations in the Corporation's cash balances. When these are taken into account, it appears likely that the Corporation will reach the present borrowing limit by the autumn so an increase will be needed by then. Running up against the limit would mean risking disruption to BSC's operations, investment and job opportunities.
The Bill seeks to amend certain provisions of the Iron and Steel Act 1975 986 Clause 2 provides for an immediate increase in the borrowing limit of £1,000 million and also allows for further increases of up to £1,000 million to be effected by order. Thus the maximum limit which would be established under the Bill is £4,000 million. Clauses 4 and 5 provide for technical changes to the borrowing powers of BSC and the publicly-owned companies (in effect the wholly-owned subsidiaries registered in the United Kingdom) to achieve two purposes. In the first place, borrowing between BSC and a publicly-owned company, and between publicly-owned companies, is freed from any restriction or need for Government consent. Such borrowing between members of the BSC group imposes no additional calls on public resources, and the Government have accepted representations from BSC that flexibility of group financing arrangements could with advantage be improved by removing unnecessary restrictions. The borrowing concerned will not count against the borrowing limit although borrowing by the publicly-owned companies from outside the group will count.
The second aim of the changes contained in these two clauses is to relax restrictions on the financing of BSC's wholly-owned subsidiaries. I should explain that BSC undertakes certain investments in the United Kingdom and overseas through two holding companies—BSC (United Kingdom) and BSC (International). These two companies, which are to become publicly-owned companies as defined by the 1975 Act, need to continue to be able to borrow long-term from sources other than BSC when this is advantageous both to the Corporation and the Government. Thus the proposed legislation provides for the publicly-owned companies to undertake such borrowing subject to the consent of the Secretary of State and the approval of the Treasury.
Finally, Clause 6 of the Bill proposes to update the requirements relating to accounts. The consolidated accounts of BSC and its subsidiaries, which are used by the Government and provide the main focus of public attention, are henceforth to become mandatory every year. The preparation of consolidated accounts of BSC and the publicly-owned companies, which are more restricted and appear to 987 be of very little interest, will cease to be mandatory. These latter accounts will be required only if the Secretary of State so directs; they will not be required for the year ended 3rd April 1976. The accounts of the individual publicly-owned companies must continue to be laid before Parliament.
In bringing forward this Bill we have very much in mind the need for supporting the very large programme of capital investment which the Corporation is now undertaking. As I have indicated, BSC foresee spending some £4,000 million in the period 1976–77 to 1979–80. Sir Monty Finniston has recently stated that the total cost of the 10 year development strategy could be as much as £9,000 million. These are of course the Corporation's own estimates based on its assumptions about inflation, which the Government believe will turn out to be too high.
Of course, such investment needs to be looked at very carefully in terms of overall national priorities. There are major considerations of resource use and public finance to be taken into account. Nevertheless, we consider it important that the BSC should press ahead with the modernisation and development of steel production capacity. There are vital implications for the balance of payments, for the Corporation's own commercial prospects, for the many industrial customers for steel, for employment, regional and social considerations, and for the United Kingdom plant and equipment manufacturers who are heavily dependent on orders from BSC.
The development strategy must not be regarded as a rigid schedule of events and priorities; a flexible approach is needed taking account of market developments, changes in capital costs and operating practices. As my right honourable friend the Secretary of State for Industry explained when introducing this Bill in another place, the basic aims of the development strategy are to reduce costs by producing on the right scale from modern equipment (and this also requires improvements in manpower productivity); to improve the quality of the products sold to customers where there have been signs of slipping behind world standards in recent years; to increase capacity, both to meet new home and export opportunities and to eliminate bottlenecks; and to reduce 988 the pollution which was for too long inseparable from the steel industry's image. En all these four areas—cost saving, quality improvement, capacity expansion and pollution control—many opportunities were missed in the 1950s and the early 1960s, when our main competitors were re-equipping themselves with modern plant. We are still suffering from the legacy of that chronic under-investment but are planning ahead on the proper scale, with bulk steelmaking in public ownership.
Government, management and unions alike share the responsibility for seeing that the best possible use is made of the enormous sums of public money invested in the Corporation. The economies which have been achieved during the last year show what can be achieved by all those concerned when they are faced with an immediate critical situation. The problem which now have to be tackled are of a longer-term nature, the maintenance and expansion of output and the operation of capital intensive plants in the most efficient and economic manner. At this stage it is easy to lose the sense of urgency, but this must be avoided if the industry is to have a secure future and our industrial economy as a whole is to prosper. Steel is a critical element in our economy because so much of our industrial effort depends on it. Because of this, an Iron and Steel Sector Working Party was set up under the NEDC auspices as part of the Government's industrial strategy programme. The Working Party's first task has been to look at the prospects for steel supplies and likely constraints on output during the current upturn in demand. A valuable report has been produced and published; it is now for all those concerned to consider the recommendations and take the necessary actions.
My Lords, in considering the Bill and the issues lying behind its principal provisions I am sure that noble Lords will be very well aware of the major problems facing the BSC. Increased output and improved efficiency and productivity are the most important objectives. The BSC must remain profitable and internationally competitive. Customers' needs must be met with supplies of steel in the right quantities and qualities at the right time and at the right place. Massive investment in modernisation is essential for longer-term success. The Corporation has to pursue 989 policies which are responsive to the wider national interest and to the needs and aspirations of its employees. None of this will be easy but, given the necessary support, of which the Bill is an essential part, I believe the outcome will be successful. I beg to move.
§ Moved, That the Bill be now read 2a.—(Lord Melchett.)
§ 5.4 p.m.
§ Lord CARR of HADLEY
My Lords, when one listens to the noble Lord's persuasive presentation of the Bill, its proposals all sound superficially reasonable, sensible and most worthy of their objectives. Indeed, many of them are. In particular, I think we all accept the need for a modern, well-equipped steel industry to be competitive in both cost and quality of its products with the industries of other countries. I think we also all recognise the necessity that if this is to be achieved, there must be a large injection of new finance, particularly for capital investment but also for some of the other purposes mentioned by the noble Lord.
So far, so good, and we are on common ground. It is when we start to look a little below the surface, to test the validity of the sums of money requested in the Bill in relation to the information available about how they are to be spent, particularly on fixed capital investment, and with what return on the money, that doubts arise. Indeed, the information and the arguments produced by the Government in support of the Bill are, in my opinion, deplorable in their sparseness and sloppiness. As an example of public and Parliamentary accountability, the Bill—at least the case presented in support of it, not just, or not mainly, by the noble Lord today but by Ministers in another place—really is a disgrace.
No private company wishing to raise money would have a chance of getting away with it. If it wished to raise equity finance it would have to produce a prospectus containing information and projections to a rigorous standard which each and every director would have to accept and back with a clear and solemn responsibility, both individual and collective. If a private company wished to raise its medium and long-term borrowing, it 990 would have to support its case with firm evidence of the nature of its need and undertake specific commitments and responsibilities. Why should a nationalised industry not have to meet comparable requirements? The sums of money which Parliament is being asked to authorise, however necessary, are huge, yet the evidence given to us on which to exercise our judgment is virtually useless in financial and industrial terms. So often we are told by the Party opposite that public accountability through Parliament is supposed to be one of the virtues of nationalisation.
As a general proposition, I am sure that nobody contests that the steel industry requires a large injection of new finance. The real question is how much and for what purpose. That is the question we should be discussing and answering before we grant these vast extra new financial powers. It is a question, I submit, which we are really powerless to answer in any meaningful way on the information with which we have been provided. Finance for capital investment is a scarce and precious commodity. There are many competing claims and certainly the total demand for capital expenditure in the public sector is far greater than can be satisfied. Indeed, we heard earlier today how at the same time as we are being asked to increase the borrowing requirement of the Steel Corporation by £2,000 million—by £2 billion—part of the Chancellor's cuts will be in public sector capital expenditure, emphasising the scarcity and preciousness of this resource. Thus, each claim should be fully and rigorously evaluated and the case for it presented to Parliament, and this is simply not being done.
I cannot believe that the highly able, responsible men who direct and manage the British Steel Corporation are unaware of the need for a proper prospectus or are incapable of producing it. Have they in fact produced it to the Government and are the Government hiding it from Parliament? Or—and this is what I fear is the situation—are the directors of the Corporation prevented from doing the sort of sums that should be done and presented to us because the Government will not make the strategic decisions without which a properly documented prospectus cannot be produced for the consideration of Parliament? That, I believe, is the real truth of the matter.
991 The suspicion that the fault lies with the Government because of the interminable delay in taking strategic decisions was confirmed and turned into near certainty by the Statement we had last Monday about the future of steelmaking in Wales. It was another non-event, another non-decision. I heard some noble Lords—for example, my noble friend Lord Selwyn-Lloyd and the noble Baroness, Lady White, both of whom have a long, deep knowledge of and interest in the Shotton area—welcome what they saw as a reprieve for the area. I had hoped that they would be here today, because I should like them to consider with us and with the Government whether they are right to be certain that this is a reprieve or whether it may not be just another cruel extension of the uncertainty that has already done damage to the long-term interests of the area, just as it has done damage to the economy of the whole country.
What we were given in Monday's announcement was a reconsideration of a reconsideration of a reconsideration. I hear the last Conservative Government criticised by Ministers in this House and in another place for prevarication and delay in coming to a decision about the strategic plan submitted by the Steel Corporation in 1969. I was a member of that Government, and I will say, yes, we did take a long time about coming to our decision. But why? Simply because the problems were very difficult. There is no denial about that. It was also because, in particular, on top of the complex industrial and economic issues, there were severe human and community problems involved in remodelling for the future such an old and basic industry as steel.
Shotton is a prime example of such a problem, though it is not the only one. I was a member of the Cabinet closely involved in much of that consideration and I remember how we wrestled long with the advantages and disadvantages and alternative plans of action, and in particular how we wrestled with their respective social implications, realising that if we moved the decision one way to relieve the social implications in one area we were increasing the social implications in another. I can remember in particular meeting at least once and, I believe, more, the late father of the noble Lord, Lord 992 Melchett, who was the chairman of the Corporation, and his senior colleagues. We discussed backwards and forwards face to face, this counter-balance between economic and industrial advantage on the one hand and the social implications for particular areas on the other.
While, therefore, I am sorry we took so long, I cannot really apologise for it for the reasons I have just given. But, if the Conservative Government are to be criticised for not announcing strategic decisions until the beginning of 1973, what is to be said of the present Government who put that decision in suspense and now, three and a half years later, have still failed either to confirm or to change it? I submit that that is a disastrous way of going on. It is disastrous for our economy and for our hopes of full employment and high prosperity. Of course, social considerations are important. They are crucial, because the economy is made for man, not man for the economy. But I beg the Government and the House to remember that our ability to restore and maintain full employment in Britain as a whole and, therefore, our ability to do our best for special problem areas depends on raising the efficiency and competitive power of British industry and, within that, the competitive power of the steel industry as a vital element. If we fail in that, we shall fail in our social duty as well in anything but the shortest of terms.
That is why it is so vital in an industry as basic to the whole economy as the steel industry that we should get the long-term investment strategy right in industrial terms. Having got it right in industrial terms, then let us be prepared to spend money and other resources generously, imaginatively and vigorously, to tackle effectively the community and individual problems which will inevitably be created in some areas, whatever we do. We have a very heavy duty to the men who are at present working in the steel industry in various parts of the country, to their families and to the communities which have grown up round the great centres of the industry. But we also have a duty to future generations, and that involves achieving a good and firm strategy for the industry as a whole. This continued delay makes that more and more difficult and puts future employment and prosperity further at risk because it is this firm, clear strategy— 993 which we were told was to be one of the great advantages of nationalisation—which we have not got and which we so urgently need, and which, I submit, the House ought to have before being asked to approve such a huge increase in the Corporation's borrowing powers.
To sum up, my case against the Government is that they ought not to be asking Parliament to approve the Bill before announcing their strategic decisions and before the presentation of a proper financial prospectus based on those decisions. I take what the noble Lord says about the need for a strategy to be flexible, not rigid; but flexibility is very different from the ad hoc, piecemeal approach which we are getting. This summary case against the Bill was, I submit, made strongly by last Monday's non-announcement.
So what can the House do about this? In theory, no doubt, we ought to reject the Bill and tell the Government to come back with it when they have made their decisions and done their sums or given the steel industry a chance to do its sums. Realistically, however, I do not believe that we can now seek to place further conditions on the granting of the first tranche of the extra finance requested in the Bill—that is, the increase from 2 billion to 3 billion in the Corporation's borrowing powers. I believe that, if we were to do that, we should cause more delay than could be sustained in the interests of the industry. Therefore, I do not recommend that we do that, but I believe that we should demand that the Government provide a much fuller prospectus before they come to Parliament under the Bill and ask for the consent of another place by Affirmative Resolution to the second tranche, which will put the Corporation's borrowing powers up from 3 billion to 4 billion.
I want to say to the noble Lord that this is a matter we shall seek to deal with at the Committee stage next week, and that we shall press the matter very hard indeed. We shall also seek to deal on Committee stage with another subsidiary though still very important matter—namely, some further control or definition of the Corporation's powers to indulge in overseas borrowing. I am not saying that that is wrong in all circumstances, but 994 we are saying that the Corporation's activities in that field need greater definition and control than they seem to be under at the moment. I believe that tackling those two matters will be the responsible way in which we can make the best of what is fundamentally a bad job.
So for the reasons I have given I believe that we must, though under protest, allow the Bill a Second Reading. But we must also seek next week to make important Amendments to increase the degree of accountability over the second tranche of money referred to in the Bill and to deal with the foreign borrowing element I have spoken of. On that basis, and having given notice to the Government of the main lines of the Amendments we shall seek to move next week, I say to the House that I believe it would be right to allow the Bill a Second Reading.
§ 5.20 p.m.
§ Lord LLOYD of KILGERRAN
My Lords, on 8th July the noble Lord, Lord Melchett, repeated a very important Statement which was made in another place about the progress of plans for industrial strategy for the United Kingdom. The Statement appeared very shortly after an important meeting of the National Economic Development Council, presided over by the Prime Minister. The Statement pointed out how essential it was for the United Kingdom to develop an effective industrial strategy which would reverse the contraction of the industrial base of the United Kingdom and enable it—I use the words of the Minister—to create wealth through industrial production. Only in this way can we achieve the social improvements to which we must aspire."—[Official Report, 8/7/76; col. 1330.]We have heard this afternoon an important Statement by the Leader of the House repeating what was said in the other place by the Chancellor, and throughout that Statement the theme relating to the necessity for an industrial strategy was perfectly clear. Therefore the discussion on this Bill this afternoon must be conducted in the context of industrial strategy, and the main purpose of the Bill must be considered in that context.
The main purpose of the Bill, as the noble Lord, Lord Melchett, so lucidly explained, is to increase enormously the 995 borrowing limits of the British Steel Corporation. There is no need for me to stress the importance of the steel industry to the rest of British industry as well as the desirability of infusing more capital into the steel industry. But there is a sense of frustration among businessmen, particularly in small and medium sized businesses of a. variety of kinds, not only because of the present performance of the British Steel Corporation itself but also because such enormous sums of money, comprising such a vast share of national resources, can be made available to this one industry, while so little so far is made available to many other viable exporting manufacturing industries.
This kind of action is something over which businessmen and indeed Parliament seem to have no adequate control. To businessmen in private industry the British Steel Corporation seems to be moving along, if not in an inefficient way then in a desultory way, with confrontations arising between management and politicians, whatever Government are in power. At present there seems to be no political framework to control or monitor these matters in relation to the British Steel Corporation. It seems to private industry and to the public that there is however some system that allows industries associated with public ownership to get a financial cushion every few years when the political climate is right, with small regard at the same time to operating efficiency and marketing success or the needs of other industries.
It also seems to many in industry that the British Steel Corporation at present is not producing that service which industry as a whole could reasonably expect, while on the other hand, if the Bill is passed, it is likely to continue to consume vast sums of public money. It has been said, for example, that the strategy of the British Steel Corporation has been leaning too heavily towards production concentrated in very large works in coastal areas. In this connection I should like to ask the Minister whether he is in a position to make a Statement about the progress being made to achieve the right balance between small or mini mills and medium sized plants, and whether money will be allocated for this purpose.
I realise that at this stage the Minister cannot perhaps make other than general 996 observations as to the industrial strategy associated with this increase in borrowing powers. He has been good enough today to hand to me some helpful documents which relate to the cash flow of the British Steel Corporation, but so far I have not had time to analyse these. But I am sure that he realises that it is essential to give as much information as possible about the British Steel Corporation's plans. For example, I should be interested to know whether it is proposed if at all specifically to control the power of the British Steel Corporation to borrow money from abroad. In regard to both questions which I have asked I fully realise that I gave only very short notice that I was proposing to ask them.
The present circumstances of the British Steel Corporation appear to call for more regular accounting and up-dating of information to be disclosed to the public and to Parliament so that the industry and the public can be reassured that the vast increase in borrowing power will be reflected in increased productivity, efficiency and profitability.
§ 5.27 p.m.
Baroness WARD of NORTH TYNESIDE
My Lords, before the noble Lord replies, may I ask one question? Can he give this House any information about what is to happen to the Consett iron and steel industry. I followed with very great interest what my noble friend Lord Carr of Hadley said because I well remember in another place the complications about Shotton. We have also had complications, as I am sure the noble Lord knows, about the Consett iron and steel industry. At one time there were indications which were very worrying for those who worked in that very important company, isolated on the top of a hill in County Durham, as to whether Consett was to be retained.
I represented part of the area to which I now refer in another place for 38 years and I am often asked about the future of the Consett Iron and Steel Company. First, it looked as if it was in danger of being closed and this caused extreme anxiety. Then matters seemed to improve. I was there once when a new rolling mill or something similar was being introduced and it looked as if everything was well with Consett Iron and Steel Company for which all of us who live in my part of the world 997 were extremely grateful, and we felt reasonably happy about it. I am sorry that it did not occur to me earlier to deal with this matter, but I had hoped to hear something from the noble Lord, when he introduced the Bill, about what was to happen. I would find it very uncomfortable, coming from my part of the world, if I had not asked the question. I am hoping, and all of us are hoping, that the future of Consett is fair and reasonable, and that we shall have all the modern machinery that is necessary, because it is a very important iron and steel works, not only on the North-East coast but to the whole steel economy of the country.
As I say, I am sorry I was not able to let the noble Lord know that I was looking for an opportunity to ask about this, and, of course, if he cannot reply today I shall understand; but I would be very grateful if he will let me know exactly what the position is in a letter which I can have published, because I would find it very regrettable if the people who work in Consett and the iron and steel company thought (though I am sure most of them do not necessarily support me politically) that I did not even ask what was going to happen about that company. As I say, I know I ought to have let the noble Lord, Lord Melchett, know before I asked this question, and if he cannot reply I will accept that, but I should like to have the absolute detail before very long, even on Third Reading, so that we know what is the future of those men who have done such magnificent work. During the last war they could have been bombed at any time, because of course we could not damp the furnaces down and, as the planes came over, they could have been obliterated; but they went on working, and helped in our victory. So I felt it was up to me to speak on their behalf, in the same way as Shotton and other parts of the country West of the Pennines are being considered.
Perhaps the noble Lord will be kind enough to tell me what the position is, and if he cannot do so today perhaps he will be able to do so on Third Reading. I should be very grateful, and certainly those who work so adequately and magnificently in Consett will be glad to know that their future is secure. If any new machinery is necessary to bring Consett further up to date than it is—because I think it is a very modern iron and steel 998 works—I should like to know, and perhaps the noble Lord could tell me, at any rate on Third Reading. I am sorry to intervene at this stage, but I am not quite used to your Lordships' House yet and I always feel that I have got to get my word in if I want to get my word in.
§ 5.33 p.m.
§ Lord MELCHETT
My Lords, the noble Baroness certainly achieves the end which she desires so far as getting her word in is concerned. My Lords, we have had an interesting short debate on the Steel Corporation, and particularly, of course, its financial record and financial needs for the future, which the Bill particularly covers. The noble Lord, Lord Lloyd of Kilgerran, made a brief aside about the feelings of private industry. If I heard him aright, I think he said that private industry felt that they were getting very little money from the Government. In fact, of course, private industry get massive sums of money from the Government in the form of tax allowances and, recently, stock appreciation relief, which has amounted to a very considerable sum. In some recent years most companies have not been paying any mainstream corporation tax at all because of stock appreciation relief.
But even apart from those fiscal incentives to industry very considerable sums of public money have been spent on private industry, both on regional incentives and on incentives to particular industries, either particular sectors of industry, like the ferrous foundry scheme and the paper and board scheme, and so on, or the extremely successful scheme to encourage manufacturing industry to invest in advance of the upturn, the accelerated project scheme. So to say that private industry is not getting any financial support from the Government I simply would not accept for a moment. Indeed, the criticism has been the reverse, that far too much money is being paid out to private industry without enough care being taken about what happens to it.
The noble Lord also raised two points of which he was kind enough to give me notice. The first concerned overseas borrowing. The British Steel Corporation's long-term borrowings include borrowings from overseas, which are subject to the statutory limit which Clause 2 of this Bill seeks to increase. 999 Under the provisions of Section 16(4) of the Iron and Steel Act 1975, overseas borrowings by the Corporation are subject to the consent of the Secretary of State and the approval of the Treasury, as I said when introducing the Bill. The Corporation's foreign borrowings at April 1976 totalled £483 million, of which roughly half was covered by the Government against foreign exchange losses.
Foreign currency borrowing by public sector bodies has made a major contribution to the financing of the United Kingdom's external deficit over the last three years. We still have a deficit on the current account of the balance of payments, albeit on a much reduced scale, and the Government see a continuing case for foreign currency borrowing in this situation. The money generally carries a lower rate of interest than domestically-raised finance, and exchange rate cover is available when requested. The borrower pays a charge for this cover. The BSC have estimated on a provisional basis that they may wish to seek some £700 million worth of foreign borrowings in the four-year period up to March 1980. I do not know if that answers the worries that the noble Lord, Lord Carr, has on this point, but as he gave notice that he would be returning to it at Committee stage no doubt we will be able to deal with any other points then.
The noble Lord, Lord Lloyd of Kilgerran, also asked me about small plants versus large plants. As he may know, I have special responsibility at the Department of Industry for small firms, and he has only to mention the word "small" to have my immediate sympathy. But, of course, the steel industry is not necessarily representative of the rest of industry in this matter, and however enthusiastic one may be about small firms—and I am—one has to accept that there are some industries in which smallness is not necessarily an advantage. Perhaps I could give the noble Lord a brief indication of how the Government see the advantages of large steel plants in relation to small ones. Let me say straight away that this is not a matter, of course, in which the Government expect to lay down general policy rules which the Steel Corporation is then expected to follow. There are a very large number of factors which have to be weighed in choosing the scale and location of steel 1000 works. In reaching decisions on projects of major significance submitted to the Government by the BSC, we would take full account of the Corporation's own very great knowledge and expertise. The Government's task is to weigh the wider, national considerations, such as the overall use of the United Kingdom's resources, the balance of employment and social factors, and so on.
There are undoubtedly economies of scale which it is possible to achieve in very large integrated plants. These relate not only to the cost of production but also other factors, such as the maintenance of consistently high quality standards over long production runs. Against these there are questions of operating flexibility, technical problems associated with very large units, logistical and other problems. Of particular importance, of course, are the human problems and human needs, which are not necessarily always best met by very large plants. The 1973 White Paper envisaged the concentration of bulk steelmaking at a few main sites, and the Corporation are continuing to plan on this basis. As I have emphasised, the strategy must be flexible, but the Government are in no way going back on it. This was made clear by the Secretary of State in another place when responding to questions on the 19th July about the Statement on the steel industry in Wales which I repeated in this House.
I wanted to go on to make a further reference to the development strategy, but first of all perhaps I could say something in response to the remarks of the noble Lord, Lord Carr, about the lack of information that was being made available to this House and to another place on the passage of this Bill. The Bill itself spent a considerable time being considered in another place—about nine hours in Committee—so that very detailed discussion has gone on on all aspects not only of the Bill itself but of the steel Corporation's record and future intentions. If that amount of time was spent on discussing the problem, I do not think that it could be said that the Government were not providing information.
The noble Lord made the point that private companies would have had to provide more information. If you look at the record of the steel industry before nationalisation, when it was in private 1001 hands, no information was being provided because no investment was being done. Whether or not one accepts what the noble Lord has said, at least we are in a better position than in the pre-nationalisation period when no modernisation and no investment was going on in the steel industry. That is one of the major reasons why the steel industry is not as competitive internationally as it should be and as we all believe it will be in the future.
I have made reference to the development strategy which was published in the White Paper in February 1973 and further details were given in January last year. I have already said today that the Government are in no way going back on the development strategy, so that the noble Lord, Lord Carr, does have available a clear statement of principle of the Steel Corporation's general policy and intentions for the future. We are not intending to go back on that in any way.
There are inevitably limitations on the publication of financial forecasts resulting from the need to preserve commercial confidentiality over sensitive aspects of the Corporation's plans. I think that noble Lords who are familiar with the accounts, reports and prospectuses of private sector companies will know that the extent to which these cover forecasts of the future is strictly limited. The Corporation, as a responsible public body, can be expected to be in the vanguard of disclosure; but there are limits to how far it can go in revealing information of a type not disclosed by its competitors without being put at a serious disadvantage. So far as public accounts are concerned, the Corporation's annual statements compare very favourably with the degree of disclosure by the private sector. A half-yearly statement is published which, I understand, conforms to the requirements imposed by the Stock Exchange on quoted public companies.
My honourable friend the Minister of State for Industry is now discussing with the Corporation the possibility of further adding to published information, including the scope for producing quarterly statements in addition to mid-year and yearend points. The Government firmly believe that there should be the maximum of disclosure consistent with the needs of commercial confidentiality and of 1002 avoiding placing an undue burden on BSC which would arise from requiring them to publish unnecessarily frequent and detailed statements. I would emphasise the need not to place industries that are absolutely and fundamentally vital to the economic wellbeing of this country at a commercial disadvantage with their competitors simply because they are nationalised.
My Lords, the noble Baroness asked about Consett. I can say that British Steel is investing in the enhancement of billet production at Consett. The Corporation proposes investing in a new plate mill at Redcar. This will involve the closure of the Consett plate mill. It may be those proposals at Consett which are of concern to the noble Baroness. This proposal is now being considered by the Government. I can assure the noble Baroness that an announcement will be made as soon as possible, but I am not in a position to say anything further at the moment. I should like to echo what the noble Baroness has said about the magnificent work that is being done by the people working in the steel industry—not just at Consett, although I take the point that that is her primary interest.
The noble Lord, Lord Lloyd of Kilgerran, raised the question of the efficiency and productivity of the Steel Corporation in particular with regard to the large sums of money that we are seeking to make available to them. From the beginning the Corporation had many very considerable problems to cope with and the increasing momentum of its investment programme before the "hiccup" of 1971–73 occurred was very encouraging. Over the last few years the rate of investment has been rising steadily in real terms, reaching a record of over £500 million in the last financial year, a record which will again be exceeded this year. Financial performance also began to improve with pre-tax profits of £56 million in 1973–74 and £89 million in 1974–75. The worst depression for 40 years has given rise to an enormous loss of some £250 million in 1975–76; but, as I have said, without the British Steel Corporation's energic programme of cutting costs and minimising losses the outcome would have been very much worse. As I mentioned in opening the debate, the Corporation are planning to break even this year and thereafter there are prospects 1003 for profits which should give BSC a strengthened base for future development.
Finally, my Lords in talking about the vigour with which the Corporation are tackling their problems, I should like to take this opportunity to pay tribute to the achievements of Sir Monty Finniston who, as your Lordships know, will be relinquishing the chairmanship of the Corporation in September. I know, particularly from my own personal knowledge, the enormous dedication and hard work which Sir Monty and his colleagues on the British Steel Corporation Board have put in to make the Corporation as successful as they could. I believe that in Sir Monty's time at BSC he has brought to the Corporation great qualities of leadership, technological vision and enormous energy. I believe that we owe him a considerable debt of gratitude.
I am grateful to the noble Lord, Lord Carr, for saying that he would not oppose a Second Reading. I hope that in spite of what he said about his intentions at Committee stage we shall be able to get the Bill through the House as quickly as possible so as to make this finance available for the British Steel Corporation.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.