HL Deb 24 February 1981 vol 417 cc982-8

3.15 p.m.

The Minister of State, Department of Employment (The Earl of Gowrie)

My Lords, I beg to move, that the Bill now be read a second time. A Second Reading of an Iron and Steel (Borrowing Powers) Bill would normally afford to the Government spokesman an opportunity to review the wider issues affecting the corporation and the steel industry generally. I hope that your Lordships will forgive me if I do not take that opportunity. There are good reasons why I should not do so. The Government are now in a position to announce their decisions on the British Steel Corporation's corporate plan. I shall be repeating a Statement which is to be made by my right honourable friend the Secretary of State for Industry in another place later this afternoon. That Statement will deal with the situation facing the steel industry, the Government's attitude towards the corporate plan and the future financing of the corporation as well as the problems of competition between the private and public sectors of the industry. Shortly afterwards, my right honourable friend the Secretary of State will introduce in another place an Iron and Steel Bill which will facilitate the policies outlined in that Statement.

Therefore, this present Bill is an essentially interim measure which must be enacted quickly. Its sole purpose is to enable the British Steel Corporation to continue in operation while the House gives its due consideration to the proposals arising out of the review of the corporate plan. The need to proceed in this way arises because the corporation's essential requirements for further finance will shortly take it over its present borrowing limit. I might remind the House that, while this present Bill is a Money Bill, the Iron and Steel Bill is not a Money Bill and we shall have opportunities to debate it in full, to amend it or to do whatever is necessary.

The present Bill will raise from £5,500 million to £6,000 million the statutory limit of the amount of finance which the British Steel Corporation and its wholly-owned subsidiaries can raise by borrowing and by receipt of sums paid by the Secretary of State. Under the Bill, the corporation will be permitted, therefore, to take up an additional £500 million of finance. There is also a provision for the limit to be raised by a further £1,000 million. I hope, however, that it will not be necessary to make use of that provision. This is because the Bill which is to be introduced in another place this afternoon will seek to write off a substantial amount of BSC's capital which presently counts towards the limit which is being raised by the Bill presently before this House. If this capital is written off, the limit of £6,000 million provided for in this Bill will afford more than enough headroom to finance the British Steel Corporation for the foreseeable future. The further Bill will therefore contain a clause reducing the borrowing limit so that the BSC cannot accumulate an excessive amount of new borrowing without Parliament being given the opportunity to debate the issues. In these circumstances, and provided that Royal Assent to the further Bill is given in good time, it will not be necessary to take up the provision in this Bill further to increase the borrowing limit.

On a technical point, nothing in the Bill empowers the Government to give or lend the British Steel Corporation any more money. That will require the new external financing limits for the corporation which are being set and announced by my right honourable friend in another place. This Bill is an essential first step in the process of providing finance to the British Steel Corporation, but its immediate effect will be simply to permit the corporation to continue its short-term commercial borrowings from the banks and other financial institutions within the limits that are set for it.

The Statement later this afternoon on the Corporate Plan will rightly be regarded, in my view, as more important than this interim or holding piece of legislation and renders inappropriate any attempts by me to put this present holding Bill in the broader context of the difficulties faced by the British Steel Corporation or of events in the steel industry generally. The provisions of this Bill will be short-lived, overtaken inevitably by an enactment of the further Bill. It might even be described as an unwanted Bill since it would have been preferable to deal in the further Bill with the problems of BSC running up against its borrowing limits. However in one respect, even if unwanted in this way, it is a most important and essential measure. It will avoid a position where the British Steel Corporation simply runs out of money. In so doing, it will also allow the House to examine the broader proposals contained in the further Bill without being under threat of the imminent deadline that that would otherwise have imposed. It is in that light therefore that I ask the House to give a Second Reading to the Bill.

Moved, That the Bill be now read 2a.—(The Earl of Gowrie.)

3.21 p.m.

Lord Wallace of Coslany

My Lords, first, I should like to thank the noble Earl, Lord Gowrie, for his clear—if somewhat brief—explanation of the Bill's provisions. I must say that, speaking from these Benches, it makes our job extremely difficult to deal with this Bill when in point of fact we are getting a Statement shortly afterwards and probably as I sit down. In addition, we are also told now that another Bill is likely to be on the way in the not too distant future. So it makes life difficult for those of us who are not (shall we say?) in possession of the same facilities as the Government Front Bench.

Compared to some Bills that we have had before us, the paper content of this Bill is minute. But the purpose of it is of vital importance to the British Steel Corporation and, above all, to the steel industry's workforce, interim or not as it may be. I note the Bill does not deal with the private sector of the steel industry. Both public and private sectors of the industry have been damaged by the Government's economic policies. Last year we had a 16 per cent. slump in manufacturing industry, a massive rundown in building and construction, harsh cash limits on fuel industries, railways and others, and a collapse of manufacturing investment in Britain.

All this has seriously damaged both public and private sectors of the steel industry. Both need and deserve help. Harsh penalties are imposed upon the steel industry because of the costs of some of its facilities of production; notably, fuel and the pricing policies imposed on the nationalised industries. Perhaps the most outstanding problem facing the industry is that of energy costs. So far as energy is concerned, electricity and gas are being used at the moment as instruments for raising taxes. Gas is a particular case where consumers are facing a further steep increase when the industry already shows a handsome profit (I believe of some £440 million) and it is expected to show a further considerably increased profit this year. This policy of the Government places an intolerable burden on industries such as steel.

I should like to quote from the First Report from the Industry and Trade Committee of another place. In paragraph 71 the report says: In respect of Europe the British Steel Corporation (BSC) acknowledged that the comparison of energy costs was a complex matter, but submitted to us a copy of a study they had produced jointly with the British Independent Steel Producers' Association (BISPA). The conclusion of that study was that in the United Kingdom the monopoly position of the energy supply utilities has effectively made it possible for Government to impose on them pricing policies unrelated to the requirements of the market place with detrimental and near disastrous consequences to manufacturing industry. The British steel industry is being increasingly handicapped vis-à-vis its competitors as a result of UK energy policies". Then the committee itself in the final section of paragraph 71 says this: Nevertheless when bodies as important as BSC and BISPA reach the conclusions we have quoted we believe they should not be lightly dismissed. Their argument has recently been reinforced by those of the Chemical Industries Association and the CBI. Whatever fluctuations there may be in energy prices, it is in our view essential that United Kingdom industry must not continue to be placed at a disadvantage compared with other countries over energy prices, especially when those prices are within the control of HMG.". The steel industry is in an entirely different position compared with the generality of British industry where energy costs are only about 5 to 6 per cent. of costs as a whole. There is definitely a case for the Government, ii they meet the request of industry to look at energy costs, to treat British Steel and private steel separately from the rest of industry when they look at the problem of energy costs. This is a Money Bill; no more, no less. It is about borrowing but not about commercial borrowing. To a great extent it is about a borrowing situation forced upon the industry. Nevertheless, we on this side welcome the Bill as essential. We trust that the private sector will also receive consideration and assistance. Powers already exist for this to be done. I would add that yesterday's news about the Duport closures—a firm with a fine record—can only but serve as a warning to the Government.

In conclusion, I must mention the human factor that lies behind legislation of this kind. It poses the question of employment or unemployment. Thousands of steel workers are now unemployed or facing the loss of their jobs. Some of them are aged between 35 to 40 years. They face the fact that most probably they never will work again because there are no jobs to go to. These are highly skilled men who face the dole for the rest of their lives. Some areas are becoming ghost towns with the life drained from them. Surely, no Government can tolerate that situation. This may be a Money Bill conferring borrowing powers, but we must never forget the human factors that lie behind it. It is in that spirit that we on this side approach the Bill and indeed give it our blessing.

3.28 p.m.

Baroness Seear

My Lords, we on these Benches also thank the Minister for introducing the Bill. But it seems somewhat unreal to be discussing this in the light of the Statement that is to be made in a few minutes' time and the Bill that that Statement heralds. I shall be very brief indeed. Reluctantly we accept that this Bill must go through because it appears to be the case that, if it does not, the British Steel Corpora- tion will run out of money and not be able to pay its labour force and keep going. It is obvious that, since Mr. MacGregor has been put in charge and he has developed a plan for steel, it would be ridiculous to let the steel industry get into this condition at this time. Surely this underlines the importance of getting on with the MacGregor plan. We understand that the Macgregor plan was formulated some time ago and we should be interested to know what holds up its implementation. Maybe we are going to be told in the Statement.

We also say that, while we accept that this is necessary to be done because we must have a steel industry, we do not want to have a steel industry run in an extremely uncompetitive and inefficient fashion. It seems lamentable that the more efficient and profitable section of the industry, the independent section, is also going out of business and is maintaining that it is getting unfair competition from the British Steel Corporation. We should like to know from the Minister what answer he has to the accusation from the free steel manufacturers that the competition from BSC is undercutting them in a way which is quite unwarranted and which we certainly could not accept if it is done on the basis of support from taxpayers' money for the British Steel Corporation, which has a consequence of undermining the private sector.

We would also ask the Minister: what is the position with regard to imported steel? A great deal is being said about the difficulty of the British Steel Corporation maintaining its position in relation to imported steel; but after reading the account of a debate in another place in connection with this Bill, one was left wondering whether there were inefficiencies in the British Steel Corporation which justified the fact that imported steel has been used. For instance, there was an astonishing remark—and perhaps there is an explanation for it—that Shotton has been using imports of essential raw materials from Holland because Ravenscraig had delay in getting going after Christmas in order to produce the requirements of Shotton. Is the reason why we are having to import from other countries because our own producers in fact cannot get going again after a public holiday in order to produce the goods that are needed? We should like some comments from the Minister as to why the imports have been necessary; why we have failed to produce the requirements for our own industry and whether this is a matter of gross inefficiency on the part of steel producers in this country.

Finally, I would simply say that it seems plain that if the steel industry is to warrant support of this kind the whole problem of its future has to be looked at again, and looked at in the context of the EEC. I will stop on that point now, because this is surely something we shall have to take up in the light of the new Bill.

3.32 p.m.

The Earl of Gowrie

My Lords, I agree with the noble Baroness and with the noble Lord, Lord Wallace of Coslany, and I am grateful in the main for their response to this short Bill. It is a curious situation in that a Government spokesman is winding up a debate on the Second Reading of this Bill, having just received advice from his Chief Whip that the substantive issue, which is the Corporate Plan, has just been cleared in another place for announcement. That means that if your Lordships give the Bill a Second Reading I shall then be able to get down to the "nitty gritty". But I think it is understood that it is in the nature of nationalised industries as such that the Government are their bankers; and since Governments have to behave constitutionally they have to come before Parliament in order to be able to make these financial decisions which have to be made and which cannot pre-empt the other discussions which must take place in Parliament with much more appropriate deliberation. I am simply in the nature of an executive in a bank who is having to O.K. a particular piece of financing for a limited period of time.

That said, I would refer to the remarks of the noble Lord, Lord Wallace of Coslany. He said in his normally good-humoured way, but with quite a sting in the tail, that it was only because of the Government's imposition on the British Steel Corporation of harsh cash limits and the rest that it had got into this position in the first place. My Lords, that simply is not borne out by the table of losses which I have before me in relation to British Steel dating from 1975. It has been a continuous process under successive Governments, and one of the reasons why the borrowing requirement and the financing requirement have gone up under the present Government is simply that this is the first Government that has had the "guts", if I may put it that way, to face the overmanning and the necessary de-manning in this industry, which has caused it so much damage for so long. If we, as a nation, had taken sensible and phased decisions on manning in this industry we would not be having to go down this road with rather an ugly rush at a peculiarly difficult time for the industry, not only domestically but also internationally.

The noble Lord, Lord Wallace of Coslany, talked about the burdens which the Government's pricing economic policies in the energy field imposed upon the industry, and he then talked about consumers facing an increase in gas prices. One of the reasons why there are burdens on industry is that consumers are not—and I sympathise with them, as a consumer myself—yet paying anything like the market clearing prices for gas. You do not get a free ride, and that means that somebody else will be paying nearer the market clearing prices for gas, gas being a very expensive and very finite resource. That is indeed one of the burdens imposed on the steel industry, but it is in a sense the consumer who is posing the burden rather than the Government. I welcome the views on the private sector side of the steel industry which came from the noble Lord, Lord Wallace, and I think that the Statement I am about to repeat will perhaps make clear some of our views in that area.

The noble Baroness, Lady Seear, put her finger on the facts of the matter when she implied that the Government had the choice of either backing Mr. MacGregor or not backing him. That is effectively what is being done. On the issue of imports, I think the big rise in imports was probably mainly due to the very damaging and debilitating steel strike. The consumers and the customers of steel had to survive and function; therefore they necessarily had to go outside for their require- ments. I hope that now all is much better in the steel industry, in industrial relations terms, that situation will no longer continue.

The noble Baroness, as an uncompromising European, will be well aware that it would be quite illegal for us to impose import bans on European steel, which is where the bulk of our overseas steel comes from. That being said, I find myself in considerable agreement with her that one of the problems facing the European Community is that it has not over time, as it should have done, worked out a sensible common steel policy which is very necessary in view of the enormous capital costs which are involved. We could all enjoy the most lively competition with each other without necessarily having to compete in this damaging and expensive area of basic material supply; so, speaking for myself, I would certainly take the noble Baroness's view about that.

As I said, I welcome the very responsible way in which the House has received an essentially holding, interim measure, and if the House will give this Bill a Second Reading, I can then let the House know about the substantive measures the Government are taking in respect of the industry generally. I beg to move.

On Question, Bill read 2a; Committee negatived.