HL Deb 16 March 1977 vol 381 cc27-34

3.43 p.m.


My Lords, with the permission of the House, I shall repeat a Statement now being made in another place.

"With permission, Mr. Speaker, I shall make a further Statement about capital investment in the steel industry in Wales. As I informed the House on 19th July last, I asked the British Steel Corporation to carry out a further review of the options for their works at Port Talbot and Shotton in the light of the latest available information. This review has now been completed. I am grateful to the Corporation for the thorough and objective way in which they have carried out this task.

"The Corporation have concluded that development of their Port Talbot works remains the most economical course of action in steel making terms and in supplying United Kingdom users with quality strip mill products on a fully competitive basis. They recommend proceeding with the development at a deliberate pace so that Port Talbot would reach a capacity of 4 million tonnes of liquid steel by 1981–82 and 6 million tonnes by 1985–86. The full cost of this at March 1977 prices is estimated at £835 million. This programme reflects the slower growth which now looks likely in world steel markets up to the mid 1980s. It also reflects what the Corporation can realistically aim at in terms of increased market share and in bringing new plant into full operation.

"The first phase would include a 10,000 tonnes per day blast-furnace similar to that now under construction at Redcar and a new steelmaking vessel, in addition to the developments authorised in July. The second stage would include further investment to support iron-making, uprating the present steelmaking plant and additional continuous casting facilities.

"The Corporation believe that to close Shotton's iron and steel capacity when prospects are uncertain and while Port Talbot is being built up over an extended period might risk a shortage. The Corporation are therefore withdrawing their closure proposals for Shotton's heavy end, and they anticipate that iron and steelmaking will continue there for many years to come. They will undertake the necessary expenditure at Shotton to keep the open-hearth steel plant in prime condition. This will lead to the maintenance of employment there at close to present levels. This decision will not be reviewed during the period of BSC's current five-year plan; that is, not before 1982–83 at the earliest. The long-term future of steelmaking at Shotton can then be reviewed in the 1980s in the light of technical developments and results of our industrial strategy.

"The Government welcome the Corporation's proposals as a realistic plan for the development of their strip mills' activities. The proposals also take account of regional and social needs, and I have agreed to them. I look to both workforce and management in the Corporation and also to those engaged on steel plant construction to make a success of the new strategy."


My Lords, we are grateful to the noble Lord, Lord Winterbottom, for repeating the Statement made by the Secretary of State for Industry in another place. However much one may argue inside or outside Parliament about the merits of the proposals, may I say that we welcome the fact that, at long last and very late in the day, we appear to have some firm decisions and that some very damaging uncertainty may at last have been removed. I assure the noble Lord that we welcome that.

I should like to ask the noble Lord three questions about the substance of the Statement. The first relates to Port Talbot. The Statement says that the full cost of the development proposed for Port Talbot will be £835 million. Speaking from memory, I believe that the previous figure was of the order of £600 million. Can the noble Lord tell us how much of that one-third increase is due to inflation and how much, if any, is due to any real increase in the investment to be undertaken there compared with the previous plan?

Secondly, may I ask a question about Shotton? The Statement uses the interesting phrase that the Corporation: will undertake the necessary expenditure at Shotton to keep the open-hearth steel plant in prime condition". Does that just mean maintaining what is there in good order or does it imply some new investment of a fundamentally new kind and not just what I call good care and maintenance? I believe that that is an important point.

Thirdly, may I ask the noble Lord the meaning of the last words of the Statement in which the Government refer to "success of the new strategy"? I noticed particularly that they used the word "strategy" not "tactics". Does this mean that the Government have abandoned the previous strategy and that this is more than a tactical decision as to how to carry it out? Are they really going to embark upon a wholly new strategy compared with the one previously put forward and approved for the Steel Board?

Baroness SEEAR

My Lords, we on these Benches should also like to thank the Government for the Statement and the noble Lord, Lord Winterbottom, for repeating it. We are glad that some decision has been made. On the other hand, one cannot but wonder whether this is not yet again propping up an existing situation with an ineffective use of resources. We would remind the Government that, for example, in the field of shipbuilding much time and money were lost in propping up shipbuilding in the Clyde when that money could have been so much better spent diversifying industry in the area. Are we sure that this is not happening yet again in putting more resources into Shotton?

3.49 p.m.

Baroness WHITE

As a former Parliamentary representative of the area that includes Shotton, may I say how glad I am that this announcement has been made and that the Government have recognised that it would have been a social disaster of the greatest magnitude had not such a decision been taken, particularly in an area in which, through the run down of Courtauld's factories, the unemployment situation is already causing the gravest concern.

I should like to echo what the noble Baroness, Lady Seear, has said. I very much hope that this decision—welcome as it is—is not simply postponing a true strategic decision for Shotton and that the period into the 1980s, while it gives immediate relief, will be used for very serious consideration of the true future of steelmaking in that part of the world. With that caveat, I should like to say how greatly relieved those of us who have the interests of that part of the country very much at heart must feel on learning that the period of uncertainty has been brought to an end for the moment at least.


My Lords, as one who has been associated with the noble Baroness for many years in the battle for Shotton, I should like to say how delighted I am that this Statement has been made, that an end has been put to the period of indecision. We believe on Merseyside and on Deeside that there is a strategic future for the Shotton works, with its magnificent record of labour relations and with the work it has done for the steel industry in the past.

3.50 p.m.


My Lords, I hope that the House will forgive me if I deal with the questions in reverse order. I thank the noble Lord, Lord Selwyn-Lloyd, for his positive remarks, which are of great help to me. The noble Baroness, Lady White, has made an important point; the true future of Shotton is of concern to us all. The noble Baroness will recall that I said that it was the heavy end of the industry at Shotton that was likely to be, or that will be, in due course closed down. But a very heavy investment into coating steel is taking place there. The figure in my mind is £47 million. Whereas Shotton may cease to be a raw steel-producing unit, it will in fact be producing sophisticated products based on steel, which presumably it will buy from other sources in the middle of the 1980s.

I cannot agree with the noble Baroness, Lady Seear, who seemed to take a good old-fashioned Manchester economist's view of the economy. As the noble Lord and the noble Baroness who have just spoken have said, we cannot ignore the social impact of closing down a major industrial complex at Shotton just because at the moment its future seems unsure. We must have steel. The economy is becoming more lively and more alive, and it would be silly, while we are building up Port Talbot, to shut down productive resources at Shotton which, if they were not there, would mean that we should need to bring supplies from abroad; for instance, from Germany or Japan. So I think that here there has been a proper balance between the building up of Port Talbot and the closing down of Shotton.

I now wish to turn to the noble Lord, Lord Carr of Hadley. I apologise that I cannot give precise answers to his three questions, which I think are entirely valid, and it is right that he should ask them. All of them are rather complex. In his first question he asked me whether the £835 million which I have said (at 1977 prices) is to be put into Port Talbot is the equivalent of the £600 million stated at an earlier date. I am afraid that I cannot answer that. From the nature of my Statement I do not think that the two can be exactly inter-related, but obviously they are of the same order. Inflation must be taking place, and the £835 million must take into account the fact of inflation. If the noble Lord would like precise details perhaps he would put down a Question for Written Answer and I will give him an answer. The same is true of the question of keeping Shotton in prime condition, which presumably involves taking the technology of an open furnace which is really a rather old-fashioned piece of machinery. It implies a limit. Obviously, it has to be kept in good shape, and perhaps new technology could be applied to it. Again, if the noble Lord is interested in pursuing that matter further, I will write to him. We are talking now about what is to happen in Wales, and that is the strategy that I have stated today: the balance of steel production throughout various units in Wales.


My Lords, I should like to join other noble Lords in expressing relief about Shotton, but I wish to revert to what I believe is the question that the noble Lord, Lord Carr of Hadley, had in mind. If we are being told that the open-hearth furnaces at Shotton are to be preserved, that means that Shotton will not be kept open for very long, because long ago we passed the point at which they had any real future. Therefore what concerns many of us is that talk of keeping them in prime condition denotes in itself a very short-term future. Can my noble friend say whether, once we have passed this period, it is the intention of the British Steel Corporation to install at Shotton electric are furnaces and modern equipment of that type?


My Lords, in reply to my noble friend I should say that we are talking about what is, in political terms, quite a long-term period. I have said that this decision about Shotton will not be reviewed during the period of the British Steel Corporation's current five-year plan; that is, not before 1982/83 at the earliest. If anyone can see clearly what this country will look like in 1982, then he has a better crystal ball than many of us. The long-term future of steelmaking at Shotton can be reviewed in the 1980s in the light of technical developments and the results of our industrial strategy; presumably that is the national industrial strategy as opposed to the industrial strategy for steel in Wales.


My Lords, is my noble friend aware that, as most of us know, it is not possible for him to answer the technical questions because these are really matters for an expert? But as my noble friend, Lord Lee of Newton, has said, if the open-hearth furnaces are to be the producers of the future, they will soon finish producing because of the cost and the quality that will arise therefrom. However, in the Statement it was said that the position will be reviewed. In a smaller plant it is possible to have an electric furnace working on the new technicalities that are available, and this could make quite good steel—not necessarily good steel for the products being made at Shotton, but quite good steel nevertheless, and it may be adapted for that particular purpose.

I think that the purpose behind everybody's questioning here is: are there to be developments so far as steel production is concerned, say, along the lines of electric furnaces, which will give hope for the future of Shotton for the next decade; or are we having only a temporary phase to get over a political quandary and run the plant for a year or so on steel that is to be imported from other works, in which case the transportation costs would make it absolutely impossible for that works to continue? That is the kind of question which is being posed to my noble friend. I do not think that he can give the answer, because a good deal of technical experience is needed first, but perhaps he can get the answer so far as Shotton is concerned, and will let some of us know what it is.

Baroness SEEAR

My Lords, if Shotton has not a future I revert to the point that I made: what alternative employment is there? What strategic development is there for the area in terms of employment? That was the point it was asking about. Apparently the noble Lord did not understand.


My Lords: I understood it. The point is that we are now looking into what seems to be almost the impenetrable future; namely, 1983. Shotton will continue until then. I am most grateful to my noble friend, with his great knowledge of the industry which I do not possess, for pointing out that Shotton in its present form cannot continue. But on the other hand, a steel-based industry must obviously continue there, for the social reasons that I have given. So I hope that the noble Baroness will accept the fact that this area will continue to provide employment for the substantial number of people who work there at the moment—if my recollection is right, in the region of 10,000—until such time as new technology, and possibly a more buoyant economy, will enable us to re-create on that site a steel-based industry which certainly will not use the open-hearth furnace.


My Lords, understandably most of the interest has been directed at Shotton; but with regard to Port Talbot, which is to be a new extension, have the workforce or their representatives in that area been kept in the picture regarding what is now called the new strategy? I ask this because £835 million is to be spent, and I guess that the sum will be much greater than that by the time the actual extensions are installed. Is there any likelihood of a situation arising where these new plants have been put down but, for some local reason, they are not worked for some time, thus involving the type of waste that has been experienced in the very recent past?


My Lords, it is obvious that the ever closer collaboration between the Government and the trade unions will make certain that this common study of the future possibilities will take place. I have no doubt whatsoever that such consultation is taking place now.


My Lords, I do not want to press the noble Lord to answer the three questions. I wonder whether he would agree to write to me about these matters, and perhaps to others who have shown an interest, because it is difficult to pursue this in even long Question for Written Answers. May I ask one further question of him. He talked about the period he mentioned as being long in political terms. Yes, my Lords, I think we would all agree; but it is short in terms of industrial development. It is one of the problems of this country that industrial timing is much longer term than political timing, and we want to make a plea to time Government to take that into account.