HL Deb 22 November 1982 vol 436 cc730-6

3.47 p.m.

Lord Trefgarne

My Lords, with your Lordships' permission, I shall now intervene to repeat a Statement being made by my right honourable friend the Secretary of State for Industry in another place about the European Community discussions on steel. The Statement is as follows:

"Since my Statement on 22nd October, I have had talks on steel individually with my German and French colleagues, and further talks with the Commission Vice-Presidents Davignon and Ortoli; and on Thursday I attended the informal meeting of Community Industry Ministers in Denmark. These meetings have taken place at a time of deepening crisis in the steel industries in this country, in the rest of the European Community and indeed in the whole of the industrialised world.

"At the informal meeting in Denmark, the Commission stressed the seriousness of the forecast in their document, General Objectives for Steel, 1985, that the surplus steel-making capacity in the Community, already evident in 1980, will be even greater in 1985, with capacity for finished steel products exceeding forecast demand by nearly 50 million tonnes per year.

"I stressed to my community colleagues that the United Kingdom had done and was doing its part to reduce excess capacity and become competitive. I said that I could not and would not defend a situation where our capacity cuts were not matched by other member states. If the Community's steel industries were to be restored to health, all Governments must pull together, and be seen to be doing so. This position was fully shared by eight of our nine partners; however, the Italian Minister expressed misgivings. I made it clear to the Commission that there must be no certificates of exemption in their administration of the state aids decision of August 1981.

"I also drew attention once again to the increasing instability of steel prices in the Community and to the widespread allegations of abuse or evasion of the rules. I called for more effective policing of the price and quota rules; member states should be ready to assist the Commission in this task.

"I am pleased to say that Vice-President Davignon outlined a battery of measures which the Commission are considering urgently in order to try to restore price stability and to improve the enforcement of the rules throughout the Community. It is the intention that formal Commission proposals on these matters will be made in the next few days. These are important moves which will, I hope, tackle the problem of unfairly low priced imports from other member states.

"As far as imports from third countries are concerned, I repeated the Government's calls for a toughening of the voluntary restraint arrangements to be renegotiated for 1983, as regards both overall quantities and provisions to avoid disruptive surges in imports. The negotiating mandate has today been agreed at the Foreign Affairs Council in Brussels in a way that meets our principal concerns.

"I also stressed the Government's concern about the level of United Kingdom imports from other member states of high speed and tool steels, which has particularly affected the Sheffield-based industry.

"I have drawn the attention of all my Community colleagues to the need for action to deal with these problems. Vice-President Davignon's response was helpful in that he asked all member states to examine the technical issues urgently. An essential first step is to extend the list of products covered by the Treaty of Paris.

"Finally, I expressed concern about the recently announced decision of the President of the United States to open proceedings under Section 201 of the Trade Act against imports of certain special steels from the European Community. I stressed the importance of seeking to resolve this issue speedily. Vice-President Davignon agreed that a Community position was urgently required.

"The meeting in Denmark made useful progress in tackling the problems faced by the steel industry and should help to improve the outlook for British steel producers, both in the public and the private sector. In particular, the effectiveness of the Community steel policy will be an essential element in the discussions I am having with the chairman of the British Steel Corporation about the future strategy of BSC.

"This is not the occasion, Mr. Speaker, to discuss BSC's future in detail, if only because I have little to add to what I said on this subject on 9th November. My purpose, and that of the BSC, is to reach sensible decisions aimed at putting the corporation back on to the path to profitability while at the same time ensuring that it retains the capacity to respond readily to the likely level of demand from customers over the next few years. I still hope that I will be able to report to the House before Christmas."

My Lords, that is the Statement.

3.51 p.m.

Lord Bruce of Donington

My Lords, the House will be grateful to the noble Lord for repeating the Statement made in another place, which Statement indeed is one of the utmost gravity. We are very pleased indeed to note that a further report will be made to the House, and presumably to another place, before Christmas. I put it to the noble Lord that, although these matters are resolved through the usual channels, we on this side of the House regard it as of the utmost importance that a full, public and informed debate takes place on the questions that have been raised by this Statement.

Since 22nd October, and indeed during the last week, in the United Kingdom there have been closures near Motherwell and also near Dudley which total some 1,700 job losses. During the year 1981–82 there were losses in the United Kingdom amounting to 14.1 per cent., in West Germany to 5.1 per cent., in France to 2.1 per cent., and in Italy to 2.6 per cent. Over the last three years, if the noble Lord will reinforce himself by reports appearing in The Times last week, of 110,000 job losses in the steel industry over the last two-and-a-half to three years 100,000 have been lost in the United Kingdom and 10,000 in the remainder of the Community. In other words, we have borne 10 times the amount of redundancy that has been borne in the remainder of Europe.

The first thing that I have to ask the noble Lord, particularly in the light of his statement that, The meeting in Denmark made useful progress in tackling the problems faced by the steel industry and should help to improve the outlook for British steel producers, both in the public and the private sector, is whether he will give the House the assurance that there will be no further redundancies in the steel industry, or that there will be no further closures. I would take it that "improve" in common parlance means much less closure and much less redundancy than has occurred in the past. "Improve" means what it says.

The House will note from the noble Lord's Statement that his right honourable friend's expressions of discontent with the current position were agreed to largely by eight of the nine partners, but that the Italian Minister expressed misgivings. Can the House be given an assurance that in the negotiations that take place, whether they be at COREPER level or at the Council of Ministers, the unanimity rule will still apply? The noble Lord will recall that it is only a few months since the unanimity rule resulting from the Luxembourg convention was breached. What happens in the current circumstance if Italy should dissent from any measures that the Commission proposes be taken? Is it the noble Lord's position that he will seek to obtain from his colleagues approval for the veto being overridden? Could we have some assurance on that point?

The Statement said that the noble Lord's right honourable friend would not defend a situation where our capacity cuts were not matched by other member states. Will the noble Lord agree that the term "would not defend" is a rather passive expression of Government resolve in these matters? Would it not have been far better for the Government to say that they themselves would attack if measures unjust to the United Kingdom were proposed and agreed upon by other member states? In the light of the record of which I have acquainted your Lordships, this is surely not a situation in which we can afford to be on the defensive much longer.

Will the noble Lord say whether, in the course of the discussions that are to take place, attention will be drawn to the fact that in so far as imports of steel products into the United Kingdom are concerned no less than two-thirds of the imports of the United Kingdom come from within the Community itself? Notwithstanding the sentiments of his noble friend Lord Cockfield in favour of the overriding nature of market forces, is the noble Lord prepared to give an undertaking that the Government will seek means of protection for the British steel industry from unduly large imports from the remainder of the European Community?

Will the noble Lord also give an undertaking that his right honourable friend will consult with the Prime Minister and the Chancellor of the Exchequer over some means of changing the Government's high exchange rate policies and its policies of artificially increasing the energy prices paid by the English steel industry, which have in all probability contributed greatly to the situation in which the steel industry finds itself? Finally, will the noble Lord give the House an indication as to whether the new package as seen by him and by his department is likely to prove any more effective than the old one which, in the event, has had such disastrous consequences?

Lord Gladwyn

My Lords, we, too, thank the Minister for repeating that Statement and, speaking personally, I have some sympathy with the proposal made by the noble Lord, Lord Bruce, to the effect that we should have a debate before Christmas on the very grave situation in which the steel industry finds itself, when we would have an opportunity of saying how far we agree with the efforts of the Government to put it right or how far we do not.

However optimistic one may be by nature, like myself, it is difficult not to be depressed by the statement that the Community's capacity for finished steel products is likely in 1985 to exceed demand by no less than 50 million tonnes. May I ask the noble Lord to say how much steel, on that assumption or estimate, is likely to be produced in that year in the United Kingdom? Indeed, if the slump goes on in 1985, it looks as if those people may be right who say that this was the first country to industrialise 200 years ago and will be the first country to de-industrialise—in other words, to have practically no heavy industry at all; and what the effect of that will be nobody can say, but it is unlikely to be extremely pleasant, to say the least.

The only other question I would ask is whether the Government would agree that the prospects for our steel industry, grim though they are, would be even grimmer if we were not able to negotiate with the United States as a member of the Community, and additionally that the efforts of the Commission, and notably those of Vice-President Davignon—the efforts of the Commission which have been so often criticised in this country—have been particularly worthy of praise on this particular occasion.

Lord Trefgarne

My Lords, I am grateful to the noble Lords for their reception to my Statement, although the noble Lord, Lord Bruce, had a good number of points to raise and I shall deal with as many of them as I can. He asked whether there could be a debate in your Lordships' House on these important matters. As he knows, that is not a matter on which I could give him an assurance. It will, of course, be discussed through the usual channels, and I should certainly be happy to take part in any such debate, should one be arranged.

He referred to a recent report about job losses in the European Community steel industry and in this country. I would ask him to treat that report with caution. I saw it myself and my preliminary advice—I have not yet had a chance to look at it in detail—is that they are not comparing like with like and that the position is nothing like as bad as the article suggests.

He asked if I could give him an assurance that there would be no further redundancies in British Steel. I cannot, I fear, give him that assurance. These matters are now being actively pursued by the British Steel Corporation in close consultation with my right honourable friend and, as the Statement says, my right honourable friend will wish to come forward, if he can, with a further announcement before Christmas.

The noble Lord also asked me about Italy and the prospects of unanimity in the Council on this matter. The British position on the Luxembourg compromise is well known to the noble Lord. The Italian position with regard to their steel industry is, they claim, different from everyone else's because they consume so much more steel within their own economy. Be that as it may, there is clearly a need for a united European decision on this matter, which should apply to all members of the Community, and the Government certainly hope that that can be achieved.

The noble Lord went on to ask about the wording of the Statement when we refer to defending the need for justice—if I can put it that way; or equality of misery—throughout the Community, and he referred to the words in the Statement when my right honourable friend said: I said that I could not and would not defend a situation where our capacity cuts were not matched by other member states". The reputation of the Government in defending—if I may use that word again—British interests in the Community is one of which we can be proud. We have achieved a great deal in the time we have been responsible for these matters, not by dictating to our partners in the Community—which is not possible in an organisation such as that—but in active discussion and debate, and pointing to the justice of our case. We shall continue to do that, but we shall not be able to do it by hectoring the other members of the Community, which I am certain would be counter-productive.

The noble Lord went on to ask about United Kingdom imports from the Community. That is a matter which has been giving rise to considerable concern lately and we were very anxious indeed to achieve better policing of the existing quota arrangements and the existing price control mechanism in the Community. Vice-President Davignon agreed with us on that, and we understand that proposals are to come forward very shortly for that purpose.

He then asked me some other matters about exchange rates and energy prices, which I hope he will forgive me for not pursuing with him now, matters which perhaps do not precisely arise from the Statement I have repeated, and I do not think I should be able to tell the noble Lord anything particularly new on that, anyway.

Turning to the remarks of the noble Lord, Lord Gladwyn, he asked me about production in 1985. I can tell him that the installed capacity of the British Steel Corporation at this moment is 21 million tonnes, that they are manned to produce about 14 million tonnes—these figures are on an annual basis—and that they are actually producing now about 10 million tonnes. What the figure will be when we reach 1985 it is difficult for me to forecast, but we certainly hope that the capacity and demand of the European Community steel industry generally will be much nearer in balance at that time; and we note, of course, the figures which the European Community propose if proper steps are not taken between now and then.

Lord Roberthall

My Lords, the Minister has done as well as could be expected in the unfortunate situation in which we are, but the problem is that of the world recession, which is making this sort of trouble happen in most industries and in most parts of the world. What is needed is some concerted attempt to get the world out of this recession. It has been said that we should have a debate in this House about the future of the steel industry. It would, however, be a very unhelpful debate, as we have no idea at present what the outlook will be. The Minister said at the end of the Statement that, the corporation . . . is hoping to respond . . . to the likely level of demand from customers over the next few years". However, it will not have the faintest idea what that will be without some notion of whether the Government or other Governments have any ideas in their heads at all about getting the world out of the present recession.

Lord Trefgarne

My Lords, the noble Lord is quite right to say that the world is in great recession at the present time, and I suppose that that lies at the very heart of the problems not only of the British Steel Corporation but of all the steel manufacturing companies of the European Community. The first step so far as we are concerned in restoring the world economy to health is to get our own economy into a healthy position, and that is what our policies are aimed to achieve.

Lord Boardman

My Lords, is my noble friend aware how much we welcome the tough stance being taken by his right honourable friend in resisting the disproportionate cuts in steel production capacity that have been suffered by the United Kingdom against our European partners? Will he urge his right honourable friend to take account of the impact these steel cuts are having on industry both upstream and downstream of the main steel producers—and here I should perhaps declare an interest—and ask his right honourable friend to take account of the points made from both sides of this House on the impact of energy costs on these essential basic industries?

Lord Trefgarne

My Lords, certainly I shall convey the thoughts of my noble friend to my right honourable friend. As for the impact of energy costs upon the problems of the Steel Corporation, this is a point that was raised also by the noble Lord, Lord Bruce of Donington, and I skated over it somewhat. As I said the other day in answer to a different question from a noble Lord opposite, of course the raising of energy prices to a competitive level—which is what has been happening in recent years—is not imposing a special burden on the British steel industry, or on any other industry, but is lifting from them the prospect of any form of assistance with energy costs, and that is a very different matter. We have chosen a policy of restoring the energy costs to a level competitive with other sources of energy, and I am certain that that was the right way to proceed.

Lord Skelmersdale

My Lords, the next Statement is not yet cleared from another place. and so perhaps the noble Baroness, Lady Robson of Kiddington, would be good enough to speak on the Second Reading.