European Communities (Definition of Treaties) (ECSC Decision of 7th December 1981 on Supplementary Revenue) Order 1982

HL Deb 01 March 1982 vol 427 cc1121-31

3.20 p.m.

Lord Cullen of Ashbourne

My Lords, I beg to move that the draft European Communities (Definition of Treaties) (ECSC Decision of 7th December 1981 on Supplementary Revenue) Order 1982, laid before your Lordships on 11th February 1982, be approved.

The order specifies as a Community treaty the decision taken by the Council of Ministers on 7th December 1981 to allocate supplementary revenue to the 1981 budget of the European Coal and Steel Community. If the House approves this order, it will formally define the decision as a Community treaty under Section 1 of the European Communities Act 1972, thereby permitting the necessary sum to be paid to the ECSC as provided for in Section 2(3) of the Act. I am sure that noble Lords will be acquainted with this procedure for allocating supplementary revenue to the ECSC, since it has been used three times in recent years in respect of the 1978, 1979 and 1980 ECSC budgets. In 1980 and 1981 the steel industries of the ECSC had two very bad years and they are still faced with weak demand, large surpluses of capacity and heavy expenditure associated with restructuring and capacity closures. There have been massive redundancies which in this country have been on an unprecedented scale. The difficulties can be particularly acute where an affected steelworks is the major or only employer in its locality.

Under Article 56 of the Treaty of Paris, the Community can already work in two directions to mitigate these social problems. First, it provides readaptation grants. These cover about half the cost of approved schemes of member Governments for providing income support for redundant ECSC steelworkers. Noble Lords will wish to know that under the Iron and Steel Employees Readaptation Benefits Scheme, known as ISERBS, which is the British scheme, we have become a major beneficiary of such Community grants, to a total of £103 million to date. ISERBS provides enhanced unemployment benefits; for substantial periods it makes up the earnings of those in new employment to 90 per cent. of previous steel earnings where necessary; it gives training allowances approximating to previous take-home pay; or it provides additional pension benefits.

Secondly, the Community provides reconversion loans towards the cost of projects providing alternative employment in steel closure areas, in many cases with the benefit of interest rebates financed from the ECSC budget. Again, the United Kingdom is a major beneficiary; projects in the United Kingdom accounted for 48 per cent. of the reconversion loans and 36 per cent. of the interest rebates approved between 1975 and 1980. These have helped provide jobs for 17,000 workers in that period, while loans for the United Kingdom agreed in 1981 were worth £92 million for projects expected to create 7,000 jobs.

Because of the difficulties of the steel industry throughout the Community in the last two years the Council of Ministers decided that special steps were needed to help alleviate the heavy social consequences. At their meeting on 24th June 1981 they adopted the special social measure which is intended to cover the period up to the end of 1984. It comprises Community aid towards expenditure by member Governments for two specific purposes. The first is early retirement (including severance pay) linked to specific schemes for restructuring—that is, permanent capacity closure—in their steel industries. The second is short-time working, again with the specific linkage to restructuring.

The 50 million ECUs of which our contribution will be part represents the first part of the programme for the 1981 budget. The balance for 1981 is likely to be found by the transfer of 62 million ECUs from the general budget of the EEC to the ECSC budget. This has been discussed in the Council of Ministers and a final decison is expected shortly. A further 100 million ECUs is to be made available for the period 1982 to 1984. The distribution of this sum over the three years and the method of financing remain to be considered on the basis of proposals to be formulated by the Commission.

In our case the measure will take the form of a partial reimbursement by the Community to the United Kingdom for the large sums spent in financing early retirement and severance pay in the BSC made necessary by the very large number of redundancies in the corporation. Our revised applications under the measure now relate to expenditure totalling £258 million in respect of 37,000 redundant BSC steelworkers, previously employed on making ECSC steel products, in the two financial years April 1979 to March 1981, and to a further 17,500 in the present financial year.

We are confident that the United Kingdom will gain a net financial advantage from the measure. The Commission has already notified us that we are to receive back 19.3 million ECUs of the first tranche of 50 million ECUs against our contribution of less than 9 million ECUs. At present we expect to be a major net beneficiary from subsequent tranches.

Noble Lords will have noted that the Government's applications under the measure have related to costs incurred with regard to the BSC. At the time of these applications no comparable expenditure had been incurred by the Government in respect of the private sector of the steel industry. However, as noble Lords know, there now exists the scheme of assistance to the private sector which my right honourable friend the Secretary of State for Industry announced in his Statement on 14th December last. If it were found to be appropriate that we should apply to the Commission for a contribution towards the aid given by the Government in respect of that scheme also, then we should do so. However, this does not mean that steelworkers in the private sector companies who are made redundant as a result of closures cannot benefit under the ISERBS scheme. Provided they have been engaged in the production of ECSC steel products, they are eligible for ISERBS.

The United Kingdom is required to contribute towards the first 50 million ECUs of the cost, a sum which, as I have explained, we shall more than recover in benefits. I am confident that the proposed contribution is fully justified, and accordingly I seek approval for the draft Order in Council. I beg to move.

Moved, That the draft European Communities (Definition of Treaties) (ECSC Decision of 7th December 1981 on Supplementary Revenue) Order 1982 be approved.—(Lord Cullen of Ashbourne.)

3.29 p.m.

Lord Bruce of Donington

My Lords, the House will be grateful to the noble Lord for having explained the purport of the draft Order in Council and some of the reasons that lie behind it.

Before I come to deal directly with the order and some of the surrounding circumstances, I should like to consider the way in which it is proposed to deal with this item in this House. The consideration of this Order in Council first appeared on your Lordships' Order Paper on Friday. It is quite true that, through the usual channels, those of us who have the responsibility or the pleasure of sitting on the Front Bench, received it slightly earlier on Thursday, but, so far as ordinary Members of the House are concerned, your Lordships would not have seen it on the Order Paper until Friday, which means that the great majority of your Lordships may not have seen it until first post today.

I have had occasion before to complain about the lack of notice that is given before important questions of this kind are discussed and I raise the point once again. It is simply not good enough that an order of this kind, however innocuous it may appear on the face of it, should be taken at such short notice. As your Lordships will perceive, there are issues of considerable importance raised by it and your Lordships do not very often have the opportunity of having a debate in any event upon the activities, purposes and policies of the European Coal and Steel Community. I therefore venture to express the hope once again that the Chief Whip will ensure in future that we do get adequate notice so that we can study the implications of orders of this kind which raise quite important matters upon which the House and the public are entitled to be informed.

Having said that, I immediately acquit the noble Lord, Lord Cullen of Ashbourne, of any personal responsibility in this matter. As is well known in the House, the noble Lord always treats this House with the greatest possible courtesy. It is just that I would hope—and I express the hope moderately for me—that the usual channels will take this on board and see that we do get at any rate a week before matters of this kind are brought before the House. That is, more particularly so in circumstances when the order has not yet been considered by another place, which, of course, suits my book very well indeed, because were I minded to ask the House to reject this order they could not say then, "Well, of course, it has been approved by another place and therefore who are you in the House of Lords to object to it?" In fact, I am almost tempted to do so because of the example I could give to another place—if they saw fit to follow the example of your Lordships, were they so minded—to reject the order.

Lord Denham

My Lords, I wonder whether the noble Lord would be kind enough to give way since he has mentioned me by name? Perhaps I could explain that no discourtesy was intended to the House or to any of your Lordships who may be interested in this particular order. In fact, what happens with this sort of business is that it does go out on the advance notice which goes to all the parties. Had there been any complaint about the short notice we would, of course, have done something to meet the noble Lord then. But I quite take the noble Lord's point and I will consider what can be done about it in the future, without, of course, making any commitments because this is the sort of thing that happens at times in all Administrations.

Lord Bruce of Donington

My Lords, I am most grateful to the noble Lord and accept his assurance in the spirit in which it was given. I now come to the order itself and more particularly to the Eleventh Report from the Joint Committee on Statutory Instruments which reported on this matter. I quote from HL 85 for the Session 1981–82 where at paragraph 3 the Joint Select Committee says: That the Committee draw the special attention of both Houses to the above instrument on the ground that it requires elucidation. The Order would declare the Decision of the Representatives of the Members of the European Coal and Steel Community (ECSC) of 7th December 1981 to be a Community Treaty as defined in the European Communities Act 1972". One wonders why the Eleventh Report referred to it in those terms bearing in mind, as the noble Lord, Lord Cullen of Ashbourne, indicated in the course of his speech, that the three preceding Orders in Council have followed the identical procedure. I am reluctant to think for one moment that the Joint Select Committee overlooked the three previous occasions. It may well be that they look askance at them and that on this occasion they asked the reason why.

On the face of it—I shall refer to the Act of 1972 in due course—it would appear that it is not necessary in any way to have a treaty for this purpose. Section 2 of the European Communities Act 1972 gives general power for any Government to issue instruments in whatever form in order to enforce the provisions that are from time to time made by the European Community, whether they are made by decision or whether they are made by regulation. In fact the House very often considers such statutory instruments which are not graced with the title of a treaty.

At any rate the Department of Trade gave an explanation of this which is reproduced at page 7 of the Eleventh Report. I quote: This Committee have asked for a supplementary memorandum in amplification of paragraph 9 of that previously submitted. They ask why an Order in Council, instead of a simple resolution of Parliament, is necessary to authorise payment of the supplementary contribution to the ECSC 1980 budget required by the Decision mentioned in the title of the Order". They go on to say: Under article 4 of the Decision, Member States are required to take all necessary measures to ensure that the obligations created by the Decision are implemented". They go on to point out in the explanation, by quoting from Section 2(3) that a treaty is necessary. But of course all it does really is to prove the opposite because Section 2(3) provides: There shall be charged on and issued out of the Consolidated Fund or, if so determined by the Treasury, the National Loans Fund the amounts required to meet any Community obligation to make payments to any of the Communities or member States". It does not need a treaty. Indeed, the explanation submitted by the Department of Trade merely says at the end: It is thought preferable"— Note the words, "thought preferable"— to seek authority under the European Communities Act 1972 for any payments which arise out of a Community obligation rather than to rely on any other machinery which might be available". They then go on to say: The same procedure has been followed in relation to supplementary contributions to the ECSC budget for 1978 and 1979". So it is merely preferable: it is not really necessary.

I wonder why? I wonder what the real reason is for this to be made a treaty obligation. Might the answer be that if it is made a treaty obligation it comes out of the Foreign Office vote, which is notoriously more amenable to matters of this kind than the Department of Industry? Can that be a reason? The House is entitled to know the real reason rather than to be told, as is put down, that it is preferable. I deal with technicalities which, of course, it is the function of this House to deal with, to make quite sure that everything is done in due and proper fashion.

I now turn to the order itself and its purport, which, of course, refers back to the decision, which is in Command 8490. If one turns to Command 8490, one finds that the contribution made from the United Kingdom for 1981 amounted to 8,667,513 ECUs, which at the current rate of conversion into the pound at 0.5367, totals about £4,680,000. So it is ultimately £4,680,000 about which we are talking.

When matters of money are being discussed in your Lordships' House, there is sometimes a danger of discussing them from two different attitudes. If the expenditure is something of which in particular the party opposite approves—such as the net contribution to the European Communities, or the cost of the Community institutions—we are immediately informed on this side of the House, somewhat dismissively, that after all the expenditure amounts to only 0.23 per cent. of the GDP and, therefore, does not matter very much. If I may say so, that is one way in which the party opposite tends to look at expenditure of that kind. It minimises it by percentage in relation to the gross domestic product.

What a different attitude exists when there arises the question of the provision of kidney machines, which at a cost of £30,000 save people's lives; or when it comes to putting 6p on the amount required for the National Health Service, when doctors have to choose among children as to which ones shall live and which ones shall be left to die. There is a totally different attitude then.

Therefore today we are dealing with a sum of £5 million. The noble Lord, Lord Cullen, pointed out—I think somewhat disingenuously—that we received more than this back in respect of the payments that were made. That is not strictly true because, when determining the total refunds to this country, there have to be taken into account the amounts already paid into the ECSC budget by individual member states. The amount with which we are concerned here is a payment to supplement the proceeds of levies that are made on each member state.

So when determining how much net benefit remains due to this country, we would have to take into account not merely the £5 million odd that is contributed by this supplementary payment, but also the contributions that have been made by way of levy on the coal and steel industries, which in 1978 amounted to —and I am now translating ECUs into pounds—£84 million; in 1979, £97 million; in 1980, £114 million; in 1981, £87.5 million; and in 1982 it is projected at some £140 million, plus a further supplementary payment that will, as the noble Lord indicated, be made during 1982. Therefore, before one assesses benefit, one has to take into account not only this £5 million, but the other contributions that are made by levy by all the European states.

It may well be that this country benefits from them. There is a very good reason why this country should benefit from them; because, of course, it has agreed to reduce its capacity by a far greater amount than any of the other countries in Europe, except perhaps for Denmark, which has only a very small industry and a capacity of only about 1.1 million tonnes production.

The question that I have to ask the noble Lord is this: Why is it that in 1980 to 1984 Britain, already having a capacity ultilisation lower than that of any other country in Europe to the extent of 40 per cent. of its capacity—the lowest capacity utilisation in the whole of Europe—has agreed to cut its steel capacity in 1984 by a further 8.5 per cent., as against Germany decreasing hers by something under 0.5 per cent., with a natural increase in capacity in the case of Italy and Holland, and as against an average decrease over the whole EEC of something like 3.5 per cent. over the same period? The question I want to ask the noble Lord is: Why should it be agreed that the United Kingdom, which already has the lowest capacity utilisation of the lot, should decrease its capacity still further?

We are grateful in one way for this having brought out the fact that, far from the troubles in the steel industry being uniquely the result of the workings of the nationalised industry in the United Kingdom, the problem has, of course, been shared all over Europe and that all Europe's steel plants have been suffering on roughly the same scale and for the same reasons as those in the United Kingdom. In fact, as the noble Lord is aware, the British Government have already agreed with Viscount Davignon, the commissioner in charge of the rundown or reorganisation—you can choose whichever words you like—that all subsidies should be phased out by the end of 1985. The noble Lord is also aware that in the case of Belgium and France the Commission is already winking its eye and is already tolerating the fact that subsidies are continuing to be paid. Why then is there this acquiescence by the British Government in the wishes of the Commission? Why is it that we are so astonishingly pliable regarding the reduction of our capacity to a far greater extent than any other country in Europe?

Could it be that this is part of the deliberate rundown, part of the policy aiming at privatisation assuming, by sheer reduction of capacity, that British Steel ultimately gets into a profitable condition when it can then be "flogged" off, presumably on the same lines as Amersham International was "flogged" off. Can it be that the plan is deliberately to run down the British Steel industry to a point where it is conveniently profitable to "flog" it off to their friends—the friends of the opposite party opposite—at a fraction of its capital cost? These are matters that require some answers.

One might ask as to why is it that there should be all this distress in the steel industry in Europe anyway, and in this country in particular. The official excuse by Viscount Davignon, which is echoed by his "Little Sir Echos" in the other place and here, is, of course, that there is no demand or that there is a lack of demand for steel, although, incidentially, exports seems to have held up remarkably well if one consults the latest statistics produced by the British Steel Corporation. Is there no demand for hospitals in this country? Is there no demand for schools in this country? Is there no demand for the products that use steel? The answer is that of course there is demand. It is only the deflationary policies that have been followed by this Government that have deliberately depressed the demand in any event. So much so that production has not only dropped in the steel industry, which is by no means unique in this respect, but in manufacturing industry generally.

What a devastating indictment it is of the system as a whole, not only in this country but throughout Europe, that it should be said—and I am quoting from Commission Decision No. 1836/8l/ECSC at page 13 of the Official Journal of 4th July 1981, where it has a preamble to the latest series of steps that it has to take towards what is euphemistically termed the rationalisation of the industry— Whereas the steel market continues to be seriously affected by the deterioration of the economic situation; whereas, in order to create economic conditions favourable to the indispensable restructuring of the iron and steel industry, immediate action with regard to the sales prices of steel is absolutely necessary; whereas urgent implementation of such action is becoming increasingly essential in this period of crisis;". Period of crisis? This was not one of the things we were promised at the time we entered into the European Coal and Steel Community, into the EEC. There was no vista of this at all.

Now what we have in Europe, followed to a greater extent, and to an inexplicably greater extent in this country, is a policy first of all of shoving up prices by, as Viscount Davignon hopes, and I am sure the British Government agree because they always agree, between 40 per cent. and 50 per cent. in the foreseeable future to 1984, and to a further slimming down of the steel industry.

There is no case for the rejection of this order as it stands, because of course it produces a comparatively small but nevertheless significant financial benefit to this country. Many of us could find very good use for this if we had control even of the small benefit that is received. But that does not mitigate the indictment which we on this side of the House make, that the whole manner in which the ECSC works ought to be probed to a far greater degree than is apparently at present possible, either in another place or in this House, and that we should view with dismay the efforts that are being made to slim down an industry here for the ultimate profit of people who want to make a quick buck, in the same way that those who subscribed for Amersham made their quick buck.

3.54 p.m.

Lord Molloy

My Lords, I want to add just a few points to the remarkable explanatory speech, laced with knowledge of the subject and indeed of the industry, made by my noble friend Lord Bruce of Donington. I think that this order, just a few words on the Order Paper of your Lordships' House, can spell a dramatic effect on the commerce and industry of all our nation.

It was quite right when the noble Lord, Lord Cullen, said that part of this order we must welcome, particularly the point that he mentioned—and it is probably the most vital of all—that it might help those who are trained and are skilled craftsmen, and who for a number of years of their lives have made steel for the commerce and industry of this country. They were not found wanting in 1940 when steel was urgently needed for the defence of this nation, but they were callously dismissed by the Prime Minister of this country and her Government when they thought that there were a couple of million pounds to be saved because of a downturn in the steel industry.

Born and bred in this particular area, may I say to your Lordships, that there is a feeling among the steelmen, as there was among the colliers before the war, that you can give your best for this nation but that, when it suits the purposes of a Tory Government, they just spit in your face. That is the feeling. Noble Lords ought not to depend on the two or three minute newsreels of the BBC showing strikes and demonstrations, but should perhaps visit, look, and talk to people who had to gain their knowledge and their experience of all that is involved in making steel, and the other additions that flow from the making of steel, when you could only work in front of a furnace since 1911 for 6 hours. That did not have to be negotiated; it was volunteered by the owners and the employers because of the rate that they were burning and slaying men who worked in front of the furnaces. It is all these things that get passed down from family to family in these particular areas.

I thought that I should like to compliment the noble Lord, Lord Cullen, for selecting one aspect of the order which might make some contribution to alleviating the social effects. That is something that I find very fine to say in your Lordships' House when one is discussing and debating a complicated issue like this. I am grateful to the noble Lord, Lord Cullen, for the few moments he spoke on that aspect. But, as I have said, there are other aspects, and I am tempted to go on for a long time, which I shall not do. But I beg your Lordships to try to realise just how much our nation depends on two industries. The seats we are sitting on, the clothes we are wearing, the tables we are leaning on, our civil and military aircraft, every hospital, every school, every university, every piece of equipment provided for the skilled hands of our doctors and our surgeons, all start with miners digging coal and steelmen providing steel.

What I am terribly anxious about is whether through this order there could be a possibility of our British steel—as my noble friend Lord Bruce of Donington has said—passing into other, non-British, hands. We do not of course call them "foreign hands"; we call them multinational. I raised, for example, the issue of Hoover in this House, where British workmen in the late 1920s and early 1930s worked for five or six weeks for absolutely nothing, and accepted massive reductions in their pay to keep their skills going which could be handed on to their sons, and from their sons to their sons. But, when the capitalist side, the money-grubbing side, thought that there were a few million bucks to be lost, they were dismissed, and the history of their contribution to Hoover was entertained for about a week or two and then they were finished. That might not be terribly serious for the future of our nation, but, if, when the Government are talking about British coal or steel—and remember, it is a coal and steel order about which we are speaking— they carelessly place them in jeopardy, then that would be one of the most serious crimes any Government could commit. Therefore I say to noble Lords opposite, particularly those on the Front Bench, that they should check out what has been said by my noble friend Lord Bruce and myself. They should talk with steelmen of every calibre, from those who work before the furnaces to the great metallurgists. They will then realise that we must see to it that in no way—if that is the sly intention of the order—do hands other than British hands, responsible to the British Parliament, control the steel of our nation.

4.1 p.m.

Lord Cullen of Ashbourne

My Lords, I wish at the outset to thank the noble Lord, Lord Bruce, for the courteous things he said to me and, like my noble friend the Chief Whip, to apologise for any discourtesy he might have thought there was in the short notice given in relation to the order. ft was certainly not intended in that way at all.

The debate has ranged quite widely and, to return to the order we are discussing and the suggestion of Lord Bruce that I might have been rather disingenuous in referring to the 9 million ECUs which we contribute for this social aspect and the fact that we get back about 19 million, perhaps I may put that in perspective. The total United Kingdom contribution, including the £4.9 million which we are discussing today and the levy on United Kingdom production of coal and steel in 1981, comes to just over £19 million. The benefits which we receive are readaptation grants for redundant United Kingdom coal and steel works of £40 million, interest rate subsidies on reconversion levels of over £10 million (payments over five years) and ECSC research grants of £6 million, giving a total of £56 million, sums which add up in a very beneficial way to this country.

The noble Lord, Lord Bruce, asked why we had to have a treaty and not a statutory instrument or some other method. This is a technical matter which I cannot pretend to understand, but I gather the position is that it is a requirement of the European Communities Act 1972 that the transfer of money shall be made by means of a treaty with the Communities. That calls for an Order in Council, because only the Privy Council can approve treaties. If a transfer of funds from the Community is involved, a treaty is required by the terms of the European Communities Act. In any case, the money comes from the Consolidated Fund and is backed by the Department of Industry, not the Foreign Office. Payment is made by treaty, not by statutory instrument, because the legal advice we are given is that was the intention of Parliament in the European Communities Act 1972. I hope that that explanation satisfies the noble Lord.

Lord Bruce of Donington

My Lords, I am back to the explanation given by the Department of Industry in a reply to the observations of the Joint Select Committee. The reply was not that it was essential but that it was preferable, and it is that word I am querying. If it is only preferable, why has this somewhat cumbersome way of doing it been adopted?

Lord Cullen of Ashbourne

I am sure the noble Lord realises that I cannot answer him at this moment, my Lords; maybe some answer will strangely come to me while I am speaking.

The noble Lord rather suggested that the steel industry was being run down, but I do not think that is the case at all. The steel industry is beginning, at long last, after tremendous restructuring, to run up and it is very much hoped that the BSC will break even in 1982–83. That is not running down an industry but very much the reverse. We have, unhappily, made huge numbers of people redundant and capacity has been reduced, all of it in agreement with our EEC partners, but we are doing all that with a view not to running down the steel industry but the very reverse.

Lord Bruce of Donington

My Lords, when I was talking about running down the industry I meant decreasing production; I was not referring to profitability. Is the noble Lord saying that it is now the policy of the Government, through the British Steel Corporation, significantly to increase steel production over the coming years?

Lord Cullen of Ashbourne

I did not say that, my Lords. In fact, the closure of plants is not just something that is happening in this country; it is an EEC move. An interesting fact regarding the price of steel—the noble Lord mentioned the 40 per cent. increase—is that the price of steel today on average is back to about what it was in 1979; the 40 per cent. increase which has taken place only brings us back to just about the level in 1979. The price of our steel is still below that of America and Japan. I think I have answered all the points that were raised. If I have missed any, I will write to the noble Lords concerned.

On Question, Motion agreed to.