§ 4.44 p.m.
§ The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead)
My Lords, with leave of the House, I shall now repeat a Statement being made in another place by my right honourable friend the Secretary of State for Trade and Industry. The Statement is as follows:
"With permission, Mr. Speaker, I should like to make a Statement about yesterday's meeting of the European Community Steel Council.
1452 "My honourable friend the Minister of State for Industry and I attended the Council.
"The central issue was whether to prolong the arrangements made under Article 58 of the European Steel and Coal Community for mandatory production quotas. Ministers were agreed that in order to provide the Community with market stability, it was desirable to prolong the quota arrangements to the end of 1985.
"The Italian Ministers, however, representing a caretaker Government, felt unable to impose such a long term legally binding obligation on future Governments. Because of that the Council's formal decision was to prolong the arrangements to 31st January 1984, with a unanimous declaration of political intent to agree a further renewal to the end of 1985.
"The Ministers accepted the need for member states to use this period of market stability to restructure their steel industries, in accordance with the Commission's decisions of 29th June. Those decisions recognised the British argument that we had made the major contribution to reducing European steel capacity and that it is now the turn of others to match those achievements.
"The new production quotas also recognise what the British steel industry has already achieved. Our quota is to be increased by 380,000 tonnes of steel per year, and that will benefit both the British Steel Corporation and the private steel companies.
"Ministers also agreed to greater flexibility for private producers who face difficulties as a result of severe quotas. That should help our wire rod sector particularly. We also agreed to more effective monitoring and policing of the quota system.
"The commission will apply its price rules more firmly so as to tackle unfairly low priced imports from other member states.
"Another benefit to Britain is that we have been able to safeguard British steel's exports of heavy steel sections, which might otherwise have been cut down by quotas.
"While in Brussels I raised the Port Talbot investment project with Vice-president Davignon, and I am pleased to tell the House that he gave me a categorical assurance that approval for it would be given at the end of this week.
"Mr. Speaker, the Government have little love for market cartels, but there is little doubt that a failure to reach agreement yesterday on the quota regime would have led to damaging uncertainty in the steel market. I believe that the outcome of the Council is a very satisfactory one, which will help both British Steel's progress towards financial viability and our private sector steel industry".
My Lords, that concludes my right honourable friend's Statement.
Lord Bruce of Donington
My Lords, we on this side of the House would like to thank the noble Lord for having repeated the Statement being made in another place. Although it was due to be made at some convenient time after 3.30, I should perhaps inform the Government that the Statement did not come into 1453 our hands until 22 minutes past three. Seven or eight minutes does not really give adequate time for us to refer to the data in our possession relating to the various matters which are raised in the Statement.
We should like to express our appreciation to the Government that on this occasion, at any rate, they have dug in their heels. And, if I may say so, high time, too. There have been many occasions over the last three years when from this side of the House, both here and in another place, the question has been raised as to why, although we ourselves have complied with the requirements laid down in the original plan, our fellow member states on the continent have not behaved with the same alacrity. We should have greatly preferred to slow down the process in this country—thus avoiding much unemployment—in order to match the progress that has been made in other member states. During the past 10 years, 100,000 jobs have been lost in the British steel industry as a result of conforming to a plan which has reduced our capacity by some 65 per cent. as against a loss of capacity in France of approximately 47 per cent. In Italy, which was also committed under the original plan to make reductions, steel production has increased by 20 per cent. over the past 10 years—this is despite Italy's commitment to reduce. Apparently, Italy has now reduced capacity by a mere 2 per cent.
So while we are appreciative of the stand that has at last been taken on this matter, we must recall how correct we were during the past three years in drawing the attention of the Government to the necessity of being far firmer than we have evidently been in the Council of Ministers in the past. We welcome the fact that some extra 380,000 tonnes have been added to the quota—but doubtless the noble Lord will know that that figure represents approximately 4 per cent. of the output we have lost since 1979. It is welcome, nevertheless.
We note that the Commission will apply its price rules more firmly in the future. We are very grateful that the Commission are at last going to behave more firmly. Let us hope that the firmness is universally applied and is not accepted by only one or, at the most, two states. Great Britain is very often accused of being non-cummunautaire, as I believe the term is. It is high time that some of those who accuse Britain of not co-operating with the European Community started to pick the beam out of their own eyes. We are very grateful indeed that the noble Lord's right honourable friend has taken a stand.
The Statement refers also to the fact that we have been able to safeguard British Steel exports of heavy steel sections. We are very pleased about that—but can the noble Lord, while he is about it, inform us what has happened about the duty of 49.3 per cent. which the United States were imposing on certain exports of specialised steel to the United States? This does not appear to be one of the first canons of "Reaganomics" so favoured in Conservative circles, which I believe are addicted to the principle of free competition.
Finally, as to fines, can the noble Lord the Minister give some indication of the efforts being made for the Community—which is proverbially short of funds—to obtain the £50 million fine recently imposed on the German Government because of their breach of the regulations relating to steel? Is that fine being 1454 enforced? Will the Community be able to collect it—or will Germany, in common with the Italian Government, flout Community rules when it suits them? These are matters about which the British public, who are becoming increasingly disenchanted with certain aspects of EEC matters, would like to be informed.
We note also that the noble Lord's right honourable friend has been given a categorical assurance by Vice-President Davignon, no less, that the Port Talbot investment project will be approved by him. My immediate riposte to that is, that is mighty good of him! How much longer are we to subject valid projects in the United Kingdom, designed to assist the British economy and to gradually regain the goal of full employment, to Vice-President Davignon's entitlement to veto them? Had such an assurance been forthcoming from the whole Commission, as distinct from a mere member of it, it would have been more satisfactory. I sincerely hope that the noble Lord will be able to give a suitably robust response when attitudes of that kind are taken by individual commissioners.
§ Lord Rochester
My Lords, I am grateful to the noble Lord, Lord Belstead, for repeating the Statement, although I support the noble Lord, Lord Bruce of Donington, in what he had to say as to its timing. We have always acknowledged the need for rationalisation of this country's basic industries, including steel, so long as due regard is paid to the effect on the people involved. Moreover, although we have no greater love than the Govenment for cartels, as good Europeans we recognise that problems of the kind which have now arisen are best dealt with on a Community basis.
We naturally welcome—as did the noble Lord, Lord Bruce of Donington—the decision to increase current United Kingdom output by 380,000 tonnes per year. As the Statement says, this represents well-justified recognition of the major contribution we have made to reducing European steel capacity. Indeed, in terms of numbers employed, our contribution has been, relatively, even greater. It remains the position, however, as the noble Lord, Lord Bruce of Donington, has already said, that the effect of the decision which is now being taken will be to increase our capacity by only 4 per cent. compared with earlier reductions of nearly 20 per cent.
I have just a few questions to ask the noble Lord the Minister. Allowing for the relatively greater overmanning that earlier existed in the United Kingdom, are the Government now satisfied with the position following the latest agreement, or do they feel that if quota arrangements are extended before 1985, still more needs to be done to achieve an equitable outcome as between ourselves and our European partners?
The Statement refers also to more effective monitoring and policing of the quota system. Can the noble Lord the Minister tell us in a little more detail how this is to be achieved, to ensure that countries such as Italy do not in practice produce more than their newly allotted quota for steel? Reference is also made to the firmer application of price rules so as to tackle unfairly low priced imports from other member 1455 states. Here, I should like simply to echo the question already asked by the noble Lord, Lord Bruce of Donington, as to what further action is contemplated by the Government to ensure that the United States do not, contrary to GATT agreement, continue to impede British Steel exports to that country.
Finally, is the noble Lord the Minister able to give any preliminary indication of the new options that will now be open to the British Steel Corporation and to the private sector of the industry in terms of increases in capacity at specific plants—other than those in the rod sector, to which the Statement refers?
§ 4.59 p.m.
§ Lord Belstead
My Lord, I am grateful to the noble Lords, Lord Bruce of Donington and Lord Rochester, for their replies to my right honourable friend's Statement. I must apologise to both noble Lords about the Statement being somewhat late. I believe it was drafted while my right honourable friend was travelling back from the Steel Council in the very early hours of this morning. Although it did come very late, fortunately we are taking it about one and a half hours after it came into the hands of both noble Lords. Nonetheless, the noble Lords' remarks are valid as a general matter of principle and I will, of course, draw what has been said by the noble Lord, Lord Bruce of Donington, to the attention of my right honourable friend.
Both noble Lords agreed that in this country we have made very considerable progress on restructuring —far in excess of the progress which has been made in other member states. I think it is worth my making the point in reply that the decisions of the commission, recognising our argument that we have made this major contribution and that it is now the turn of other member states to match ours, will now require the Germans to contribute 22 per cent. of total capacity cuts at the end of the structural cuts, which of course should be in 1985; the Italians to make 21.7 per cent. of the total cuts; the French to make 19.9 per cent.; and at the end of the day the United Kingdom's share, even with an additional capacity cut of 500,000 tonnes, which was agreed yesterday, will only be, in comparison, 16.9 per cent. I think that really is a recognition of what this country has done.
The noble Lord, Lord Bruce, and the noble Lord, Lord Rochester, asked me about the policy of the United States. I am afraid I have nothing to add to what was said by my right honourable friend the Foreign and Commonwealth Secretary in another place on 20th July. This was not a matter which was discussed at the Steel Council yesterday. It is a matter in which, on behalf of the Community, the European Commission has already taken up with the United States Administration the difficulty presented by American policy. The commission propose to seek consultation in GATT and to raise the issue in the OECD, and the Foreign Affairs Council strongly support the commission's proposals in this particular matter. I am afraid I cannot take that any further today.
The noble Lord, Lord Bruce, asked me about arrangements to enforce a fine so far as German 1456 production was concerned. My information is that that was a penalty imposed on a German company, and the commission is still seeking to collect the money in that particular case.
Then the noble Lord, Lord Bruce, finally asked: how long are we to be subject to what in effect is a veto decision by the commission so far as important developments at Port Talbot and other steel plants in this country are concerned? My answer to that is, of course, that, as my right honourable friend's original Statement said, the Ministers in the Steel Council agreed that in order to provide the Community with market stability it is desirable to prolong the quota arrangements, and there is a need for member states to use this period of market stability to restructure their steel industries. Therefore, under the state aids decision of 1981, under which the restructuring powers of the commission are used, and under Article 58 of the Treaty, under which the quota powers of the commission are used, we in this country shall continue to abide by what is decided in the Steel Council and by the decisions of the commission, believing that, as our record has shown, if we do what we believe is necessary so far as restructuring quotas are concerned then at the end of the day we will receive our reward. Indeed, we have done so on this particular occasion, as is proved by the statistics which I read out earlier comparing the structural cut which has to be made in this country with the structural cuts that are going to be required from the Federal Republic of Germany, from Italy and from France.
The noble Lord, Lord Rochester, asked me about over-manning and the Government's view as a result of the latest agreement. The answer is that this agreement for an additional quota will, we hope, safeguard (but it will not increase) jobs in the steel industry. The noble Lord asked me about the monitoring of the agreement, the policing of the agreement, and how this will be done. This is a matter for the commission, and I am advised that the details of this are not yet settled.
The noble Lord also asked me about any preliminary indications, as he put it, of new options for the steel industry, and I think my final word must be on this. The only thing I can say is that we have this additional quota. It will be split, I am advised, 240,000 tonnes to BSC and 140.000 tonnes to the private sector. I believe this is going to help the British Steel Corporation, and I am very glad that it is also going to help some of the hard-pressed private companies.
§ Lord Ezra
My Lords, in putting a point to the noble Lord, Lord Belstead, on the Statement, I would declare an interest as I am chairman of the British Iron and Steel Consumers Council. I should like to join with other noble Lords who have spoken in welcoming the increase in the quota, which I think will be of benefit not only to producers but also to users. I was particularly pleased, however, to hear that there is a likelihood that the Port Talbot investment will now go ahead.
I was down in Port Talbot a few days ago and I saw the very great success they have achieved at the strip mill there with the continuous casting process. If any of your Lordships should be in the vicinity of Port Talbot in the near future I should like to recommend, 1457 as they do in the Guide Michelin, that you make a little detour and have a look at the quite remarkable achievement of this continuous slab of steel coming out of this continuous casting process. The investment which is now projected, as your Lordships are no doubt aware, is to replace the fairly aged hot rolling mill which is alongside the continuous slabbing mill. This will undoubtedly add considerably to the efficiency of the whole operation.
The point I should like to put to the noble Lord the Minister is this. Now that British Steel have been through this very substantial rationalisation process, and now that they have shown that they can introduce investment which is really worthwhile, could he tell us whether the Government will he encouraging them to look around and see what further investments of this sort can be made elsewhere within the corporation, and indeed in the private sector, in order not only to provide additional and much needed employment but also to increase still further the undoubted levels of efficiency already achieved by the British steel industry?
§ Lord Belstead
My Lords, I am grateful to the noble Lord, Lord Ezra, for his intervention. I think my answer to the final point the noble Lord put to me is that the future of individual plants of the British Steel Corporation must depend on the market and on the performance of the plant. It is in the light of those two criteria that investment decisions will be planned.
§ Lord Cledwyn of Penrhos
My Lords, may I briefly follow on the words of the noble Lord, Lord Ezra, and say how much we welcome the statement about the Port Talbot investment, for which we have been waiting for quite a considerable time. There will be satisfaction and relief, especially in South Wales, at this news, because it gives a guarantee of production into the indefinite future in an area which is dependent on steel.
I wonder whether the noble Lord would be good enough to enlarge on what he has said about employment. My noble friend referred, quite rightly, to the de-manning which has taken place, and over the last few years the steel industry has suffered more than any other from redundancies. Could the noble Lord be quite categoric in saying that as a result of the present decision, there will be no further redundancies, and could he say whether it is possible that there might be increased employment in Port Talbot as a result of the investment he has just announced?
§ Lord Belstead
My Lords, it is very much my hope that there will be no question of any further de-manning as a result of the present decisions made by the Steel Council. But as I said to the noble Lord, Lord Rochester, my understanding is that as a result of the increased quota there should be preservation of jobs, but not an increase in jobs.
I absolutely understand the concern which prompts the noble Lord, Lord Cledwyn of Penrhos, to ask his question and I am sorry I cannot be more helpful. In the very final analysis, of course, it must be for the British Steel Corporation itself to decide upon specific manning policies.