§ 4.13 p.m.
§ The MINISTER of STATE, DEPARTMENT of INDUSTRY (Viscount Trenchard)
My Lords, with the leave of the House, I shall now repeat the Statement made a short while ago in the other place by my right honourable friend the Secretary of State for Industry. The Statement runs as follows:
"With permission, Mr. Speaker, I wish to make a Statement on the British Steel Corporation.
"For the last financial year, as the House was told on 10th June, BSC estimate a loss before adjustments of £450 million from ordinary activities. There are also extraordinary items, consisting of redundancy and other closure costs and a write-down of over £1,100 million of fixed assets. Final figures will be available in a few weeks' time.
1744 "For this financial year, as the House knows, the Government have made £450 million of taxpayers' money available as the external financing limit. The chairman has warned me for months that, without corrective action, BSC's needs would greatly exceed the external financing limit but he also told me that he was seeking remedies and was not asking for more cash. On 6th June, however, he wrote to me that, even after allowing for the remedies being pursued, his board foresaw an additional cash requirement of around £400 million in the financial year 1980–81 over and above the EFL. He wrote that unless the Government agreed to the factoring of home debts and the sale and leaseback of major assets outside the EFL to provide this £400 million, BSC could not carry on trading and the board would have to recommend the liquidation of the business.
"Measures such as BSC have proposed would, of course, only postpone the day of reckoning. As for liquidation, the Iron and Steel Act 1975 makes no provision for this. The £400 million figure is based on provisional trading forecasts: a firmer figure, which may well be larger, will have to await an up-to-date assessment of BSC's trading position.
"Over the past year, the market has fallen away both at home and abroad with a depressive effect on prices. Meanwhile, BSC's costs have been rising sharply. The long strike has, as I warned the House, made BSC's sales and job prospects and the cash problems worse.
1745 "We are not satisfied that the corporation have yet taken with sufficient speed and determination all the action open to them to reduce their cash requirement in 1980–81. Mr. MacGregor, who takes office as chairman next week, will need time to produce new proposals.
"Until Mr. MacGregor has made his proposals and we are satisfied that the corporation is taking the necessary measures we are not prepared to reconsider the level of the external financing limit. Should the Government decide to advance additional funds, any money required would involve a winter supplementary estimate and if needed before then would be provided by a repayable advance from the Contingencies Fund. I shall report to the House again later in the year.
"Meanwhile, having considered the corporation's concern about taking on fresh financial commitments, I have asked BSC to continue trading as an on-going business. I have told them that in the last resort Her Majesty's Government would have to ensure that creditors of the corporation had their claims met in full.
"BSC have for years suffered from political interference and insulation from market realities. The taxpayer has already contributed over £4,000 million to BSC over the past five years; a further £450 million is being made available in the current year and now we are being asked to consider yet further calls on the taxpayer. BSC are still faced by excess capacity and lack of competitiveness in what is an intensely competitive market. It is for the new chairman to use every practicable means, including a further review of capacity and disposals, to bring the corporation's cash requirements as close as practicable to the EFL and to see if it is possible to restore the corporation's financial and trading position".
§ My Lords, that is the end of the Statement.
§ 4.18 p.m.
§ Lord LEE of NEWTON
My Lords, in a long parliamentary career I do not think that I have ever heard a more 1746 serious Statement on any industry in this nation. Is the noble Viscount aware that it is difficult for us to believe that this state of affairs has suddenly come up on the Government, without their intimating anything of the kind to either House of Parliament? Indeed, following this Statement there will be consternation and anxiety throughout the whole of the areas in which the steel industry is situated. It would seem that there is now a threat to the whole bulk producing sector of the BSC. That threat will be seen to involve not only Wales, Scotland and the North of England, but indeed those vast number of industries which depend entirely on steel as their raw material.
The Statement is the culmination of 12 months of dithering during which the cash limits have been shown to be inadequate. On these issues even now we really get no answer to the problems which the Statement poses to us.
The extraordinary items referred to in paragraph 2 include, as has been said, the costs of redundancy and closures; but surely it has been possible, while that was happening, for the Ministry to be able to make an estimation of what the total costs would be? We are further informed that the chairman of the BSC informed the Secretary of State many months ago that without further financial aid BSC cash limits would be quite inadequate, but that the chairman was not asking for more money. What, in Heaven's name! did the Secretary of State think the chairman was going to use for money after a statement of that kind? It would seem that on the 6th June the board put the figure of £400 million in the year 1980–81 as the additional requirement for that period. Then we read again in paragraph 4 that that would merely postpone the day of reckoning.
Again, in paragraph 2 we are told about a total write-down of assets of over £1,100 million. I have had some experience of writing down assets, but in this Statement there is no indication whatever that the Government are even agreeing to write off that figure. May I ask the noble Viscount, do they propose to do so? If not, how do they propose to deal with an issue which, as given in the Statement, would justify the liquidation of the whole industry, were it not possible under the Act for them to do so?
1747 Another question to which the noble Viscount will perhaps address himself is this: Is this the preliminary to a proposition to write off the whole production of the bulk steel industry in this country? I have had a chance to look at this for only a short time, but to my reading of it, that is inevitably the threat that is now posed by this Statement.
How much knowledge of this had the trade unions in the industry? Long before we got to this pass surely the Secretary of State should have called together not only the interested members of the Government but the whole of the BSC and the whole of the trade unions involved in the steel industry, to find a way to face these problems. Is there any intention by the Government now to convene that kind of machinery in order to try to make a go of what appears now to be a very distressing spectre indeed?
We are left now to wonder just what attitude the Government intend to take to it, having said nothing as to how they are going to deal with the problems they have posed, except to say: "In a while we will consider whether to write off this or that" That will not do. As the weeks pass the problem is intensified. Unless action of a wide-ranging nature is taken almost immediately, the despair created throughout the steel industry and the steel users of this country will spread like wildfire. I ask the noble Viscount: What are the necessary steps in the immediate future that the Government intend to take?
§ 4.24 p.m.
§ Lord ROCHESTER
My Lords, from these Benches I should like to thank the Minister for having repeated this Statement. I do not think I can thank him for much else. It is a harsh Statement and, in my view, inadequate to meet the present situation. As I said in response to the Statement made last week on remedial measures for areas affected by the steel rundown, we on these Benches accept the need for the restructuring of the steel industry, and therefore I think I can fairly claim that we have already shown our willingness to approach this problem in a positive way. But, as I have also made plain before, the Government have a very heavy responsibility to see 1748 that the necessary adjustments are made at a pace that does not produce intolerable social strains, particularly among young people in areas where unemployment is already very high.
In The Times this morning there are reports that the Manpower Services Commissior is dissatisfied with the Government's requirement for it to make still further staff cuts despite the enormous growth in unemployment generally, of which we were hearing earlier this week, and the greatly increased calls on the training and special programmes that are sponsored by the commission for people out of work. I suggest that the Government really cannot have it both ways. If they insist on confining the BSC to the present financial limits, surely it becomes even more necessary to provide the means by which the Manpower Services Commission can handle the additional problems that result.
I should like to ask the noble Viscount a number of specific questions. First, is it not the case that in some towns like Shotton, Corby and Consett, which have been so heavily dependent on the steel industry for employment, conservative estimates are that there are already more than 10 per cent. of the employable population out of work and this figure will rise to as much as 25 per cent. for the next few years, including a very large increase in the number of unemployed school-leavers?
Secondly, are the Government satisfied that the facilities are adequate for retraining steel workers who have the capability to take up skilled occupations in lighter industries, whether in terms of the use now being made of existing training premises, or the availability of further facilities for this purpose? I think the noble Viscount will be aware already of the concern that is felt by your Lordships' Select Committee on unemployment on this point. It is a very real present problem and it is not going to go away while we are waiting for Mr. Ian MacGregor to size up the situation.
Finally, would the noble Viscount not agree that new firms are less likely to cornmit themselves to come to steel towns such as those I have mentioned if there is insufficient skilled labour available in those places? Putting all this in another 1749 way, if the Government are not going to give the Manpower Services Commission adequate funds to cope with the rapidly worsening employment situation, they should in the case of the steel industry, in our view, make more money available to the corporation, thus enabling the pace of rundown to be slowed.
§ 4.29 p.m.
§ Viscount TRENCHARD
, My Lords, nobody in the Government wishes in any way to belittle the extreme seriousness of the situation in steel, and so I find that I can echo the opening words of the noble Lord, Lord Lee. It is indeed a very serious situation and it arises to a high degree out of the failure of previous Governments to ensure that the British Steel Corporation management faced up to the realities of the market and the realities of the competitive situation between British Steel and the steel industries of other countries; so we have a really major problem to sort out.
The noble Lord, Lord Lee, is quite right, of course, in saying that this did not happen suddenly, and the chairman of the British Steel Corporation has been warning of the threatening position, partly arising out of failing to meet their own targets of movement towards competitiveness, partly, of course, arising out of the steel strike and the damage that that has done, as my right honourable friend warned that it would do. However, it is true that until 6th June the chairman of British Steel and his board informed my right honourable friend, and believed, that they could take remedial actions to stay within, or very nearly within, the financing limit.
I think that the noble Lord, who has, as he rightly said, only just had time to look at a difficult Statement, is not separating the part of the Statement about 1979-80 from the part about the external financing limit for 1980–81. The £1,100 million is the figure that will be found when the accounts come out in relation to 1979–80—the Statement referred to unaudited figures—but is the figure of write-off of assets, both because of the reduction of demand and thus of capacity, and because of any realistic value of the assets in the industry as it is today. So they will come out in the accounts for 1979–80—
§ Lord LEE of NEWTON
My Lords, I am sorry to interrupt, but I should like to get this clear. Is the noble Viscount saying that credit will now be given to the BSC for that write-off, and that interest rates and so on which have been paid on that money will not now need to be paid any more in this year's assets?
§ Viscount TRENCHARD
My Lords, it will not, of course, affect the cash limit, because a write-off in the books does not do so. So it is a book transaction to bring the assets into line with the realistic value as they now stand. The main part of the Statement relates to the cash limit for 1980–81.
The next main point of the noble Lord, Lord Lee, was: Did this represent a major threat to the bulk producing areas of British Steel? He also expressed his alarm that the effect of this announcement, on both the areas and the people working in British Steel, would be very serious. Indeed, I understand his concern in both those two areas, and all I wish to say is that the Government have the greatest confidence in Mr. MacGregor in reviewing, as optimistically as he possibly can, all the alternatives that he sees before British Steel and in putting those before us. At this stage, we still fully believe that the management and personnel of British Steel are capable of maintaining a viable BSC. We must wait, however, for the new chairman to take stock in the incredibly difficult situation and to put before us the alternatives. It is for that reason that, at this stage, we do not wish to fix any extension to the external financing limit.
The noble Lord, Lord Lee, then asked me whether the Government would sit down with the trade unions in consultation as to what to do in this terrible situation. I believe that this reflects the views of the previous Administration and of noble Lords opposite, that Ministers are good at running industries. We do not think that. We believe that it is vital to ensure that we have the best possible management we can get in charge of British Steel. But it is for them to enter into consultation with the trade unions on the alternatives before them, and I am quite sure that at the appropriate times Mr. MacGregor will do that.
In relation to the points of the noble Lord, Lord Rochester, I, at least, thank 1751 him for his continued support of the necessity for major restructuring. Regrettably, the degree and form of that restructuring clearly have to be looked at again, in that the plan that we have had is demonstratably not up to the present situation. The noble Lord then asked me a number of detailed questions about the pace of adjustment and the remedial measures. I made a Statement, as did my right honourable friend, last week on remedial measures, and I think it would be wrong to take up extra time of the House in going through each one of those. But I would point out to the noble Lord that my right honourable friend the Secretary of State for Employment did—I believe on Monday, but I will check and let him know—at considerable length go through the fact that the MSC would be spending more in real terms under a number of alleviation heads than ever before, which is in line with the Statement that I made on remedial measures. I think I must refer the noble Lord to that, rather than go through the detail.
I do not believe at this stage that the unemployment figures which he quoted, of up to 25 per cent. in these areas, will come about. It is extremely hard, as he well knows, to forecast situations which depend upon the number of other industries coming in and how quickly they come in. I do not believe that skill shortages will hold up any new growth of new industries in those areas.
§ Baroness GAITSKELL
My Lords, may I ask the noble Viscount a very short question? Can the Government produce one other argument about industries in distress than to increase unemployment? So far as I can judge, the only thing they seem able to do is to produce an industrial desert.
§ Viscount TRENCHARD
My Lords, the plain answer is that the whole of our policies are directed to improve the competitiveness and, ultimately, the profitability of British industry so that we get industrial recovery. We have, unfortunately, taken on on a road which was leading straight downhill to the industrial desert that the noble Baroness mentioned.
§ Lord DRUMALBYN
My Lords, is not the message that my noble friend has 1752 given us today simply that the steel industry is very gravely sick, it is being put into hospital and it has a new doctor—
§ Lord DRUMALBYN
—whose main task is to keep the industry alive and bring it back to health? That is surely the message that my noble friend has given us today, and we ought not to anticipate events by demands for massive injections of funds at this time. Obviously, he has to be given whatever is needed to keep the industry alive. Of course we have friends and allies with us in Europe in the European Communities. The other steel industries are very nearly equally affected throughout Europe. Will my noble friend confirm that the maximum use is being made of the assistance that is available? Lastly, dealing with the point that the noble Lord, Lord Rochester, raised, there is the other aspect of the matter. I think that he was referring to those who are already confronted, or are about to be confronted, by unemployment. What he was asking was: what arrangements are being made to train these people in advance of industry coming to replace the jobs that they have lost in steel?
§ Viscount TRENCHARD
My Lords, I like my noble friend's medical analogy. The new doctor's first task has to be to stem the haemorrhage. I can assure my noble friend that we are taking all available help from the ECSC and will continue to make sure that we do. I believe that my right honourable friend the Secretary of State for Employment has said that we are increasing our efforts in training, now.
§ Lord DAVIES of LEEK
My Lords, is the noble Lord aware that this grim Statement augurs a sad day for Britain? To me, it is as bad as autumn leaves on a coffin lid. Is the noble Lord aware that "MacGregorisation", and everything else does not matter? What I am really afraid of is that there is a hidden sequence, somewhere, to break down the industrial and military complex of Britain and move it over to central Europe. There is a feeling that investment is moving from the steel industry and the mining industry of Britain into Europe. I believe that we should have learned the lesson of the "Beechingisation" of our railways. Far 1753 from all this talk of a cold war and this rubbish about rearmament, we could not rearm a pigeon loft with the steel industry as it is today. Money should be spent upon it to protect Britain.
§ Lord DENHAM
My Lords, before my noble friend replies to that point, could I put it to the House that we are going a little bit wide? Questions are meant to be for elucidation.
§ Viscount TRENCHARD
My Lords, I have already said that this is a very serious announcement about a very serious situation. The reason that I find myself answering this question is because I want to do what little I can to reverse the decline of British industry and avoid it all going abroad—which it has been doing for a long while. It has been doing that because of the apparent inability of the party opposite to see that the way they—and, I have to say, previous Governments of my own party—have treated industry over the last decade has produced a situation in which our industry is very weak indeed, a situation in which reality has not been faced. It is therefore particularly difficult for my right honourable friend and the Government to bring in reality at this stage, and inevitably it causes very serious and distressing situations. I hope that the noble Lord does not for one moment doubt the sincerity of the Government and of all my colleagues in trying to ensure that British industry recovers and becomes really competitive.
§ Lord ROSS of MARNOCK
My Lords, surely we are not dealing with the question of the general and long-term restructuring of this industry. As I understand it, we are dealing with something which requires immediate action. The Government have said that they are not satisfied that the corporation have yet taken, with sufficient speed and determination, all the action open to them to reduce their cash requirement in 1980–81. So action has got to be taken in the next two to three months.
1754 The noble Viscount said that it is not for politicians to say how the industry should be run. But if they are satisfied that the corporation have not taken, with sufficient speed and determination, all the action open to them, they should clearly be able to tell the House what action they think should be taken. We are entitled to know exactly what are the implications. Is it a question of more unemployment? Is it just the laying off of men? If it is more unemployment on a long-term basis it means heightening that redundancy figure. So it is not that. It is more unemployment, probably on a short-term basis. It is probably holding back investment that is urgently needed. Why do not the Government come entirely clean with the industry? A Statement like this about cash not being available is going to create havoc in the minds of banks, suppliers and the people employed by suppliers. This is a very serious Statement. It is serious because the Government have not come clean and are leaving it all to MacGregor.
§ Viscount TRENCHARD
My Lords, once again may I say that the Government do not believe that they hold a magic wand? It is perfectly correct that we are not yet satisfied that in this very serious situation all steps possible have been taken. In particular, BSC's own targets for the improvement of their efficiency and competitiveness have just not been met. We certainly wish to hear from the new chairman, in whom we have great faith, as to the practicality of meeting those targets, and how soon.
There are parts of the business which may not be essential to the mainstream of British Steel but for which there may be a future outside the company. That affects the cash flow. There is the question of stocks and what should be done with a very high level of stocks of different kinds, upon which a man of Mr. MacGregor's enormous international experience must be allowed to have a proper view. Those, in short, are three main headings. There are, in a complicated industrial situation, all sorts of alternatives. We have appointed a new chairman who takes over next week. It would be gross political interference, from which the industry has suffered too much, for the Government then to tell him what we want him to do.
§ Lord WYNNE-JONES
My Lords, I wish to ask the noble Viscount a particular question about this problem of the steel industry. It is one which a vital to that part of the country in which I have been living. I am referring to the town of Consett. As I understand it, and I know the town fairly well, Consett is entirely dependent upon the steel industry. I understand also—perhaps the noble Viscount can tell us about this—that Consett has been told that the steel industry there is to be closed down entirely at the beginning of September. I understand further—and again perhaps the noble Viscount can confirm this—that Consett happens to be one of the areas of the British Steel Corporation which is productive and which has been producing a profit.
§ Lord WYNNE-JONES
I am asking a question. If the Chief Whip of the Government will forgive me, a noble Lord is entitled to ask a question in this House. The question I am asking is whether it is intended to continue with the closure of the whole of this steel complex in Consett, which lies in a part of the country where unemployment is running at the rate of over 11 per cent.
§ Viscount TRENCHARD
My Lords, my reason for rudely interrupting the noble Lord, Lord Wynne-Jones, was that only a few days ago I repeated a full Statement made in the other place on the future of Consett, Scunthorpe and the individual areas. I have nothing further to add to that Statement and to the remedial measures Statement that I made at that time in relation to Consett. I could repeat it all, but I do not think that it would be in the interests of the House if were to repeat Statements, and the answers that I made to questions on those Statements, over and over again.