HL Deb 28 October 1985 vol 467 cc1418-33

5.15 p.m.

Baroness Turner of Camden rose to ask Her Majesty's Government whether they will comment on the social, economic and employment consequences of the proposed closure of the Gartcosh cold rolling mill and the effect that this might have on the steel industry in the context of the Scottish economy.

The noble Baroness said: My Lords, I understand that the British Steel Corporation is seeking to justify the closure of Gartcosh cold mill, with the resultant job losses, by saying that it would enable there to be an increase in cold mill capacity utilisation at Port Talbot; that it would reduce surplus capacity; that it would cut fixed costs; and that it would alleviate the need for substantial capital investment at Gartcosh to improve competitiveness and capacity. It is stated that the Gartcosh plant has a low capacity, that there is no product at Gartcosh that cannot be manufactured elsewhere in BSC and that substantial savings can be made in transport and other costs.

The employees and their unions, together with local communities, believe that all those suppositions can be refuted. They are concerned not just with the social and economic implications of the closure of Gartcosh but with the wider implications for the Scottish and the national economy.

The past practices of BSC have led many people to believe that the closure of Gartcosh and the refusal to invest in new coking ovens at Ravenscraig are backdoor attempts to force the closure of Ravenscraig steelworks. BSC has tried twice before to close Ravenscraig but has had to step back because of overwhelming opposition. The unions in particular have run successful campaigns to keep Ravenscraig open. It is claimed that the closure of Gartcosh will not put Ravenscraig at additional risk, but the evidence suggests otherwise.

Over the past few years the Government have agreed to a massive cut-back in capacity and jobs in the steel industry, claiming that that was necessary to meet EC quota targets; yet the Government have never challenged those targets and have allowed a massive reduction in steel industry employment which is much greater than for other EC members. From 1974 to 1984 the United Kingdom steel industry workforce has declined by 68.2 per cent. Over the same period the West German workforce declined by 34.3 per cent., the Netherlands workforce by 25.5 per cent. and the Italian workforce by 21 per cent. In France, the workforce declined by 46.1 per cent.

Although perhaps in the 1970s job losses were inevitable because of the general crisis in the industry, continuing heavy job losses in the United Kingdom would appear to be because of this Government's obsession with privatisation: the more slimmed down and undermanned the steel industry is, the more paper profit it can show. The objective of making BSC profitable in that narrow sense has been carried through irrespective of the economic and social consequences in the areas where closures have occurred.

Closure of Gartcosh would involve 550 BSC employees there and 160 directly at Ravenscraig, with about 200 more who are involved in sub-contracting. Thus over 900 redundancies would directly result, with an inevitable multiplier in the local community taking it to well over 1,000.

In June 1985 the figures for unemployment in the area concerned were as follows: in Coatbridge, among males 20.4 per cent. and among females 17 per cent.; in Motherwell, among males 20.9 per cent. and among females 17.9 per cent.; in the Easterhouse area, among males 36.1 per cent. and among females 28 per cent.; and in Moodiesburn, among males 16.8 per cent. and among females 15 per cent. It need hardly be added that an additional 1,000-plus on the dole, in an area with some of the worst unemployment and social conditions in Europe, would be quite catastrophic.

A major worry about the closure of Gartcosh is that it is a prelude to the closure of the Ravenscraig complex. This, if it were to happen, would result in 3,000 direct redundancies and an unknown number of indirect redundancies in an area with little or no alternative employment. As well as the loss of income in the area through the loss of wage earning capacity, the closure of the steel works would drastically reduce the rate of income to local authorities just at the time when they need to improve their services because of the social effects of high unemployment.

The Government are continually claiming that the economy is reviving. Steel is an essential element in industrial regeneration. Gartcosh would be the most obvious supplier of components to the new Nissan plant in County Durham. BSC claims that Gartcosh's orders will go to Shotton, Llanwern or Port Talbot, although it is admitted that it expects to lose about a quarter of present orders. Shotton is not yet a full-furnished mill and will never, I am advised, be able to handle Gartcosh's specialised output for the automative industry, and Llanwern and Port Talbot do not yet have this capacity. I am advised that it will take about three years to upgrade Llanwern. Therefore, it seems very likely that BSC will lose its orders for special steel to overseas competitors. This is particularly harmful to the United Kingdom economy as a whole. At the monent Gartcosh exports sell to the USSR and to West Germany. If BSC loses the ability to produce special steels, particularly for car making, Britain will lose its exports and will have to increase its imports. Yet it is in the area of special steels that the United Kingdom is likely to remain most competitive.

So far as concerns BSC's claim that the closure will not affect Ravenscraig, one quarter of Ravenscraig's total output presently goes to Gartcosh. If, as is suggested, BSC is unable to transfer Gartcosh's present orders to other BSC plants, Ravenscraig will have to reduce its production. The employees believe that it is because BSC anticipates this situation that it is refusing to invest in a new coke oven and is instead relying on the as yet unproven method of direct coal injection which is likely to reduce Ravenscraig to one blast furnace within two years. This will increase the unit cost of production, particularly in relation to the modernised Llanwern plant, and will provide BSC with the excuse that it is looking for effectively to end steel production in Scotland.

The small amount of investment immediately necessary to upgrade Gartcosh and the £90 million or so necessary to provide a new coke oven at Ravenscraig would enable both plants to carry on their effective production of steel and steel products for the United Kingdom and overseas markets. The costs, particularly in social terms, of the possible closure of, first, Gartcosh, and then Ravenscraig are so enormous that the Government should be exerting the maximum effort to ensure that this does not happen.

Finally, if people say that Gartcosh is a long way from Camden, let me say that the United Kingdom's manufacturing base is of crucial concern to all of us.

We cannot sit back and allow vast areas of the United Kingdom to become virtual deserts of deprivation and hopelessness. And if the Government respond by saying that the matter is one for discussion between the BSC and the unions, let me say that I am a working union official and I am in touch with the unions concerned. There is a general feeling among the unions and their workpeople that this is a political decision forced upon BSC by the Government requirement to achieve a quite artificial profit level.

May I put it to you, my Lords, that this is not the way to attack areas of social concern and deprivation in this country. There are other considerations rather than narrow balance sheet considerations when looking at the steel industry and its position in the economy, particularly its position in the Scottish economy. I thank your Lordships for your attention.

5.24 p.m.

Lord Wilson of Langside

My Lords, I am sure that your Lordships will await with interest the response of the Government to this important Question. We are grateful to the noble Baroness, Lady Turner, for putting it down. I wonder whether the Government realise the extent to which Scotland is up in arms on this matter. It is not just a case of all the Members of Parliament of all parties with the exception of one "idiosyncrat"; it is not just the Confederation of British Industry, although it is divided in its views; and it is not only bodies like the Ancient Trades House of Glasgow, or the chambers of commerce, which have expressed such widespread concern about this matter. My impression is that the man in the street in Scotland shares that concern to a degree which, within my recent recollection, I do not recall being expressed in regard to any other issue in the political or economic field. I look forward therefore with great interest to see how the Government will respond to this frightening situation. They have said, it seems to me, some funny things so far.

Before coming to these issues, may I point out that, apart from all the matters to which the noble Baroness referred, the implications from the point of view of the unity of the nation are very considerable. It would be another most divisive element in the present scheme of things if this decision were adhered to and if, as so many fear, Ravenscraig were not given a lease of life beyond 1988 or 1990. The political implications that would be a consequence of that happening are, without wishing to exaggerate, more than somewhat disturbing.

The Government have said that Gartcosh and Ravenscraig are not the same problem. In one sense, that is true. They say that the future of Ravenscraig is a strategic issue for the Government; Gartcosh is for the British Steel Corporation. Can that be true or sensible if Gartcosh, as widely argued, has always been regarded as Ravenscraig's cold mill and an integral part of the complex, although situated some distance away? That it is an integral part of the complex seems borne out by the circumstance of the 160 job losses in Ravenscraig consequent on the closing down of Gartcosh.

I look forward with interest to what the Minister will say in reply. It is, after all, people who are going to be affected. Already, Gartcosh has caused a loss of 700 or so jobs. If Ravenscraig goes, the consequences will be quite disastrous. I can only say that almost everyone with knowledge in the field to whom I have spoken has said that the question facing Ravenscraig steelworks is that of survival beyond 1988. Can we have some reassurance on that? Others have said that the probability that Ravenscraig will still be operating in 1990 is small. an we have some impressive reassurance from the Government about that?

The importance of this question from every aspect—not just the social and economic but the political—cannot be exaggerated. I hope that the Government are seized of the feeling of the people in Scotland, and will respond to show their awareness of the importance of this matter.

5.31 p.m.

Lord Mackie of Benshie

My Lords, I must apologise because I did not have my name on the list of speakers earlier, but I feel that we ought to back up my noble friend and the noble Baroness who so ably introduced the Question, because it is of immense importance to Scotland.

Frankly, the whole thing gives off a curious smell. I know nothing about steelmaking but I know something about business. I have also been in politics for some little time. It is sticking out a mile that if Gartcosh goes then obviously Ravenscraig must eventually go. I do not think that any assurances which the Government can give can detract from the fact that anyone looking at a business of this sort must see that if Gartcosh goes then in three years' time Ravenscraig will be found to be unviable and the obvious one to close. The decision on not reinstating the coking ovens gives credence to the view that this is the first part in closing it down.

It is a quite extraordinary thing to do because Gartcosh has an order book and a reputation of its own. The cold mill at Gartcosh is supplying Austin Rover—they insist on their steel—Ford Halewood, Ford Germany, BMW in Germany in smaller quantities, all over North England and the Midlands, and exporting to Russia and Canada. The productivity in the whole complex has grown enormously and has constantly been breaking records previously set. Now the Government are intending to close it down. I do not think there is any other conclusion that one can reach if Gartcosh goes.

It appears to me that the allegation made—that this is being done to facilitate privatisation of the steel industry—holds water. It is the traditional thing to do. One takes over a company, looks at what is making losses, savagely cuts that off, trims it down; loses customers but puts the company back into profit. That is the way to put any company back into profit, but is that the way to deal with a steel industry of immense importance to the whole country and to the whole area of Scotland?

The noble Baroness revealed some horrifying figures. In one district there are 28 per cent. unemployed. One will not only take away what would amount to 1,000 jobs but also hit the already low morale of the people in the area. I do not think that it can be done and the Tory Party retain any credibility in Scotland. It would not annoy me terribly if that were so. But what we are thinking about is the state of the industry and the state of morale in Scotland with the blow that this would strike. That is why we plead with the Government to think again. We plead with the Ministers in Scotland to put their reputations on the table and to say—and mean it—that they will resign if Gartcosh goes. There is no shadow of doubt that it is an absolutely vital issue and that their reputation—already low—hangs on their intentions with regard to Gartcosh.

5.36 p.m.

Lord Campbell of Croy

My Lords, I am sure that we are all grateful to the noble Baroness, Lady Turner of Camden, for having raised this matter. I must apologise for the fact that my name is not on the list of speakers. I hope that your Lordships will bear with me. I have been in Scotland for the last few days. I understand that this Question was put down only on Thursday. A message reached me in northern Scotland yesterday afternoon, on the Sabbath, that this subject was to be debated. I have been in the chair of a board meeting in Edinburgh. I quickly add—I hope your Lordships will sympathise—that it is of an enterprise which is expanding and providing more jobs in Scotland, one of three in which I am involved, and it was an appointment which I had to keep. By aircraft and fast car from Heathrow I arrived here at five o'clock, and was therefore unable to be here for the previous debate.

I want to speak because, as some of your Lordships will know, I was Secretary of State responsible in 1972 for the Government decision to undertake the modernisation of Ravenscraig and therefore to make sure that that was one of the five steelmaking centres in the United Kingdom. I was also responsible for the decision that there should be an ore terminal at Hunterston to serve Ravenscraig before that. Small vessels were necessary which went up the Clyde almost to Glasgow to deliver ore. Of course, the era of large bulk carriers had arrived and it was necessary to have a deep water port and therefore the Hunterston Terminal came into existence particularly to serve Ravenscraig.

I naturally have a personal interest, as well as knowing how much it means to Scotland, that Ravenscraig's capacity and potential should be fully understood. The noble Lord, Lord Ross of Marnock—I think that I am breaching no confidence in saying this—when he handed over to me in 1970 indicated that the steel industry was one of the matters of great importance to Scotland. He was absolutely right. When I handed over to him in 1974—involuntarily, I will say, as a result of an election—I was able to say, "During the last four years we have been able to do what was required because of this great modernisation programme at Ravenscraig, and the steel industry is still there and in good heart and in Scotland". I am glad that the noble Lord will be speaking in this debate shortly.

Of course, in those days we did not visualise the world reduction in the demand for steel which has occurred. The whole world has suffered from this phenomenon of less steel being required. May I refer to Japan. In those days, in the early 1970s, we saw the Japanese just about doubling their capacity for steelmaking; and we wondered whether they were guessing aright. They guessed wrong, and have been in a lot of trouble since then because much of their capacity is simply unused. They over-estimated. But so did most of the rest of the world. Steel has not been needed in the quantities which were expected. Even so, special types of steel have been in demand; we must remember that. What we have to consider now is whether there will be an upsurge in demand for steel in the future or whether other substances—plastic or other metals—may be used instead.

I cannot over-emphasise that if Ravenscraig were to be closed this would be disastrous, not only to Motherwell and the area around there but also to the industrial heartland of Scotland. It would have an impact on those involved not only in the steel industry but in the many ancillary industries and services which are connected. My right honourable friend and successor, Mr. George Younger, has done everything humanly possible to point this out and also to point out how shortsighted it would be to take a decision which would close Ravenscraig when there could be an upsurge, with more steelmaking required than is required at present. It may be that demand will come again.

The matter before us this evening is the "Gartcosh connection". Will the proposed closure of Gartcosh prejudice the future of Ravenscraig? I am not technically qualified to comment on that question. However, I ask my noble friend and the Government to give an absolute assurance that the proposed closure of Gartcosh will not prejudice the future of Ravenscraig. In passing, I mention that I remember the reduction and virtual closure of the steelworks at Glengarnock in Ayrshire. It caused some distress at the time. However, since then I have been told that the industries which have taken the place of the steelworks have by now produced more jobs than there were in the steel industry. Of course that situation was on a much smaller scale. We all rejoice in the fact that there has been a successful replacement of jobs in that community of Ayrshire, which was very much dependent upon the steel industry.

The scale of the situation was very small compared with that which we are dealing with now; namely, the connection of Gartcosh with the future of Ravenscraig. I believe that a decision on Ravenscraig should not be taken yet, should not be prejudiced by what may happen at Gartcosh; and when it is taken it certainly should have in mind the long-term prospects of steel and Britain.

5.42 p.m.

Lord Ross of Marnock

My Lords, the House should be grateful to my noble friend Lady Turner of Camden for raising this very timely Unstarred Question regarding Gartcosh and steel. I welcome the fact that the matter was raised by someone with London roots and not by a Scotsman, because if a Scotsman had raised it everyone would say, "Ah, the Scots are greeting again". My noble friend dealt with the matter correctly, because she was thinking in terms of the nation and not in terms even of Scotland or Lanarkshire or the west of Scotland.

The noble Lord, Lord Campbell of Croy, who has just spoken, says this matter has been part of his life, and the same applies to me. Indeed, it has been part of the lives of many noble Lords who are present. I see that the noble Lord, Lord Thorneycroft, is here. The noble Lord as well was involved in this matter at one time. It was a united effort which gave us Ravenscraig in the first instance. I remember the ad hoc committee which was led by a distinguished Scotsman and which I think included Walter Elliot. I think that it was Mr. Macmillan who eventually decided that we should have Ravenscraig. We had to fight for it, and here we are fighting again to save it.

The noble Lord, Lord Campbell of Croy, said that the need for steel may come again. What seems to be at stake here is a decision by the Government which will mean that when we need that steel, wherever we make it, it will not be in Scotland. That fact has been seized by the people of Scotland as the essential matter. The people of Scotland are convinced that there is a link between Gartcosh and Ravenscraig, and the figures produced by my noble friend prove it. The production from Ravenscraig which goes to Gartcosh will not even be taken up elsewhere. I think that the British Steel Corporation now admits that there will be a 25 per cent. loss. At the beginning of the argument it said that there would be no loss at all. It now says that there will be a loss of 25 per cent.

Bearing in mind the other decisions which it has taken in relation to modernisation, it will eventually present Ravenscraig with the tremendous task of overcoming rising unit costs as a result of the decision which it takes on Gartcosh. The Government suggest, "Oh yes, what happens to Ravenscraig is an important Government decision, but we shall leave Gartcosh to the British Steel Corporation". The British Steel Corporation can make a decision which will inevitably prejudice Ravenscraig, in which case the Government will have no argument other than to claim that Ravenscraig must close because all the figures say so. That is what is at stake.

I do not know how many of your Lordships go into the Library and read the Glasgow Herald. However, the headline today reads: Tories in open revolt over steel". The same type of headline appears in the Scotsman. Who are these revolting Tories? There was a packed private meeting of the Scottish Conservative and Unionist Association's western area council. That area covers half the Tory MPs in Scotland—but, mind you, there are not many of them—and the whole industrial west. They made a demand and they voted by more than four to one in favour of a motion moved by Mr. Brian Cooklin, chairman of the Conservative Candidates' Association, urging the Government to: use all its influence and power to ensure that both Gartcosh and Ravenscraig are reprieved for the next three years". Three years is mentioned because in 1982 Mr. MacGregor tried to close Gartcosh. There was an outcry in Scotland and so it did not go ahead. He changed his mind. He then had the bright idea of sending the semi-finished products from Ravenscraig to the United States—a MacGregor brainwave. We saw that as death by attrition. Again it was turned down by the Government and a pledge was given that nothing would happen as regards Ravenscraig until three years had passed.

Our concern now is that a decision on Gartcosh will inevitably prejudice Ravenscraig. Every Tory in Scotland, except one, has seen that to be the situation. Sir James Goold has tried very hard to keep the lid of the pot from just being blown off. Sir Hector Monro has been told to be quiet. Other Tory MPs in Scotland have been told the same thing, but they refuse to be quiet. We now have the candidates making a plea to the Government.

If it is important for Government influence to be used in respect of Ravenscraig, then it is important for it to be used in respect of Gartcosh. Neither George Younger nor the Government can duck this issue. They can fold up their tents and creep away. As a matter of fact, I think that the chairman of Cunning-hame South Conservative and Unionist Association has given the Government until March and has said that if they take a decision against Gartcosh he will resign from the party. He is not alone in that view.

I want a decision on this matter long before March, because so much depends upon it. There are throughout Scotland suspicions about the British Steel Corporation which have sprung from its past and from what it has tried to do. I sincerely hope that the Government will listen to what is being said today by their own organisation in Scotland and by the local authorities in Scotland. A short time ago there was an all-party meeting held in Glasgow which involved the regions and the district councils. It was an all-party meeting attended by Conservative, Labour and Liberal members. Everyone was there and all were unanimous that there is a direct link between Gartcosh and Ravenscraig, and that Gartcosh must be saved. The position about Gartcosh is of course that it takes so much from Ravenscraig. Indeed, it produces special steels that would inhibit our own steel-using industries which are working for the automotive and the North Sea industries. That steel can be produced elsewhere; it would not need to be imported. At the same time, here we are in Scotland; we have the SDA working under both governments to get new industry into Scotland. If there is no steel in Scotland, there will be no steelmaking industries there. All this build-up of structure to bring in new industry is wrong. You do not need to send down to Wales for it, a journey of 400 miles there and 400 miles back, and we can all see what that does to unit costs in respect of steel users in Scotland. This will not do. Gartcosh takes one-third of the Ravenscraig strip output and one-quarter of Ravenscraig output of strip and plate. This is the important thing, and now the Steel Corporation says that orders will be lost to the tune of 25 per cent. and those steel users in Scotland will be faced with the additional cost in respect of it.

Then there is the effect on the ports, Grangemouth particularly. The figures per annum from the customers are as follows: Austin Rover, 52,000 tonnes; the Soviet Union, 28,000 tonnes (from Grangemouth); and GKN 19,000 tonnes. Tube Investments, Ford United Kingdom and Ford Germany also use Grangemouth. Then there is Stelrod and Dalbeathie which have to be considered. I can understand why Sir Hector Monro is concerned about the effect on industry as far away from Gartcosh as Dalbeathie.

An interesting study has been done by the Glasgow Chamber of Commerce. They do not mince words, and they demand action by the Government. All Scotland demands action by the Government because so much importance is attached to this. Here was the great industrial heartland of Scotland. In Lanarkshire they have already suffered blows, and remember the integrated unit is Gartcosh, Dalzell and Ravenscraig, and if part of it is ripped out inevitably the rest will be killed. I will not say the Government are doing it because eventually they want to maximise profits in the steel industry to make the industry more attractive to privatise—I am not saying that, although it is being said. I am just voicing the thoughts of the people of Scotland. The Government will never be forgiven in Scotland if they let Gartcosh go.

It is all very well to say how many people are already employed in Glengarnock. I can give the figures for unemployment in that area just now; and they are far, far higher than they were when there was a thriving steel industry. It is easy to say, "Oh yes, there are more employed there than when they were eventually making steel"—when the whole steel industry had been run down there, and they were employing a fraction of what they used to. Do not let us hear that argument from BSC.

My Lords, I passed Glengarnock this morning and saw what was going on and what is involved in expenditure for the SDA, clearing the whole area. I do not under-estimate that they can do something; but they cannot tackle a problem which was the heart of the steel industry, of Motherwell—a whole town. It is right in the heart of the city; it is the heart of the town. If that is ripped out, that whole community goes.

Lord Campbell of Croy

My Lords, if the noble Lord, Lord Ross of Marnock, will allow me to interrupt him, I hope he realises that he is making the same argument that I was trying to make. I gave Glengarnock as an example of what could be done on a very much smaller scale. But it could not apply to Motherwell.

Lord Ross of Marnock

My Lords, the noble Lord has used something that I have already seen in some of the pro-Government propaganda in respect of the number of people employed at the present time. The noble Lord is comparing it with when the industry was dying, not when it was flourishing. That was the weakness of his argument. The noble Lord seemed to say, "I must say something for the Government" when all he had to do was to attack the Government and let them know their job, which is to save Gartcosh and to save Ravenscraig. If you want to save Ravenscraig, you must first of all save Gartcosh.

5.55 p.m.

The Parliamentary Under-Secretary of State, Department of Transport (The Earl of Caithness)

My Lords, may I begin by congratulating the noble Baroness, Lady Turner of Camden, on putting down this Unstarred Question. I totally agree with her and with the noble Lord, Lord Ross of Marnock, that this is a subject of great importance, not only to Scotland but to the whole country. I welcome the opportunity provided tonight for the Government to offer their comments on the subject.

May I just add that a number of my noble friends have telephoned me to say how sorry they were not to be here tonight. They had hoped to take part in our deliberations—and I am sure that that applies to a number of other noble Lords as well. But I am delighted to see my noble friend Lord Campbell of Croy, who, with the help of modern technology, has managed to make it tonight. I should like to thank him for such wise words from his great experience of the subject, and for paying tribute to the work of our right honourable friend the Secretary of State for Scotland.

Important issues have been raised on this Question and in the remarks made this evening. It is always a subject of very great concern when it is intended to close a works employing a large number of people. The Government share the concern and greatly regret that redundancies and reduction in employment opportunities will result from closure. But before I deal with the issues at the heart of the Question, your Lordships may find it useful if I set out the background to the particular decision by the British Steel Corporation to close the Gartcosh cold rolling mill.

Earlier this year, in consultation with the Government, the corporation undertook a review of its strategy for the next three years. The outcome of that review was announced on 7th August. This included the decision by the British Steel Corporation that Gartcosh should close, with the loss of 711 jobs, 551 at Gartcosh itself and a further 160 employed in supporting services at the Ravenscraig works. The noble Baroness was right when she said that further job losses will occur, but it is difficult to quantify them as it takes time for the effects of any closure to work through. Furthermore, the Government are encouraging, and people are taking, mitigating action—and I shall come on to that in a moment.

The statement made by my right honourable friend the Secretary of State for Trade and Industry on 7th August said that the closure of Gartcosh was not subject to specific Government approval although the Government were aware of the intentions of the Btritish Steel Corporation arising from the strategy review. While the Government are involved in decisions affecting the five integrated steel works—Ravenscraig, Teesside, Scunthorpe, Llanwern and Port Talbot—the British Steel Corporation can, as part of its managerial responsibility, take subsidiary closure decisions in order to reduce or eliminate financial losses and bring capacity more closely into line with demand.

Gartcosh is one of four cold rolling mills operated by the British Steel Corporation. These four mills as a group were operating at only some 65 per cent. of available capacity. That was an untenable situation, and there was a clear case for bringing capacity into line with demand. Therefore, the corporation decided to do this by closing the mill which had the smallest capacity and was least well equipped to cope with the demands of the future, taking into account many other factors such as location in relation to markets and operating costs. That mill is Gartcosh. The closure will raise overall capacity utilisation from the 65 per cent. level I mentioned to 78 per cent., and is expected to improve the strip products group's financial performance by £11.5 million a year.

The decision was taken, therefore, in the context of the process of bringing capacity and demand more into balance. As such, it was in accordance with the strategy of the corporation agreed in consultation with the Government.

Lord Mackie of Benshie

My Lords, I am sorry to interrupt the noble Earl, but in the way he is putting it it sounds extraordinary. Is he saying that the Government held a joint review of steel-making with the British Steel Corporation and that they put forward no view on Gartcosh, leaving that entirely to the British Steel Corporation? Does the noble Earl mean that they did not say to the British Steel Corporation, "This has enormous implications for employment and everything else"? Is the noble Earl trying to tell me that they protested, or did not protest, or they had nothing to do with it? If that is the case, then it is a sore dereliction of their duty.

The Earl of Caithness

No, my Lords, what I said was that the Government and the corporation had worked together, and we knew what the corporation's strategy was and we made the appropriate comments. The noble Lord is a little premature in getting up to intervene, because I am going on to deal with some of the specific points he has just raised.

The objective of this strategy has been, and is, that the corporation should be restored to commercial viability. The prospect for achieving such an objective would be greatly diminished if BSC were to retain capacity which it is unable to use. Consequently, at the same time as announcing the intended closure of Gartcosh, the corporation also announced. its intention to acquire and close a privately owned hot strip mill in South Wales in order to remove surplus capacity in that sector of the United Kingdom industry. I shall mention that acquisition again later, because it is also relevant in another way to the issues we are considering today.

At this point I think we would all be well advised to pause and think just what might have happened if the corporation's strategy had not been followed. Given the oversupply of steel worldwide and the substantial surplus of production capacity—difficult odds indeed—the corporation is now trading profitably again and building to secure a future for its remaining 63,000 employees. I wonder whether, without that strategy, steel production would have been possible without massive and increasing injections of taxpayers' money on an annual basis.

The corporation's recent decisions have provoked strong reactions of opposition from many interests in Scotland. In view of the loss of jobs, and what I believe was seen wrongly as an implied threat to the main works at Ravenscraig, it is understandable that there should have been such reactions. Many arguments have been deployed against the decision. What has aroused the greatest concern, however—as again tonight—has been anxiety over the possible repercussions of the closure of Gartcosh on the Ravenscraig steelworks. It is claimed that the closure of Gartcosh is a preliminary to the inevitable closure of Ravenscraig.

As a result, my right honourable friends the Secretary of State for Trade and Industry and the Secretary of State for Scotland have had meetings with many groups to hear their views. Those groups have asked that the Government should intervene to reverse the corporation's decision. That was asked again tonight.

The Government's view on the closure of Gartcosh is that the decision is a matter for the commercial judgment of the board of the British Steel Corporation. It is rightly a management decision, and is in accordance with the agreed strategy. We do know, however, that an essential feature of that strategy is that, barring unforeseen changes in underlying market conditions, steelmaking will continue at all five of BSC's main integrated sites, including Ravenscraig, for at least the next three years—that is to say, for the full extent of the period covered by the recent review. This is clearly agreed between the Government and BSC.

In consequence of this, it is our view that the present concern about Ravenscraig is misplaced and, I believe, very damaging. The noble and learned Lord, Lord Wilson of Langside, asked me for a specific assurance as to the future. I can say, in view of what I have already said, that it has as good a future as any commercial operation could reasonably expect. The chairman of BSC, Sir Robert Haslam, has said this firmly and publicly. Moreover, the corporation has taken other measures which will underpin Ravenscraig's future and compensate for the loss of Gartcosh as an outlet for Ravenscraig steel.

The acquisition and closure in due course of the Alphasteel hot strip mill in Wales, to which I have already referred, removes some of the surplus capacity in the United Kingdom, and thus enables the company's quota to be redistributed within the corporation's own strip mills. This is to the benefit of the corporation as a whole, and therefore to Ravenscraig as part of that corporation.

Lord Mackie of Benshie

My Lords, I am sorry to interrupt the noble Earl again, but how is closing the Alphasteel mill and then transferring their equipment to somewhere else in Wales, and closing down Gartcosh, going to help with the surplus capacity?

The Earl of Caithness

My Lords, that is not what I said. I fear that the noble Lord misheard me. I said that you are talking of two different types of mill, and the closure of the Alphasteel mill will enable BSC to redistribute that capacity within the hot rolling mills, which includes Ravenscraig.

It is important to note that Ravenscraig will become the major supplier by supplying 75 per cent. of the needs of the corporation's modern cold mill at Shotton, which produces coated steels. This is a major market section which is expected to expand over the next five years. Furthermore, the corporation is to spend up to £15 million on new investment at Ravenscraig to improve the continuous casting process and to install new direct coal injection equipment to reduce the steelwork's requirement for coking coal. Similar schemes have worked well. I would mention the one at the Scunthorpe works, and experience worldwide shows them to have been highly promising.

The noble Baroness, Lady Turner of Camden, and the noble Lord, Lord Mackie of Benshie, said that the BSC was not undertaking coke oven investment at Ravenscraig. No, it is not, but nor is it at any of its other plants. I can tell the noble Baroness, adding to what I have said, that Ravenscraig will operate economically on two blast furnaces and not one as she suggested, and this is confirmed by the BSC demand forecast.

Lord Ross of Marnock

My Lords, how long will that last without any reinvestment and modernisation?

The Earl of Caithness

My Lords, so far as I am aware it is for the three-year programme, which is the same for all the hot rolling mills. Thus, to link Ravenscraig's future to that of Gartcosh is, I hope I have proved, misleading.

It is reported that the British Steel chairman, Sir Robert Haslam, when he gave evidence to the Scottish Affairs Select Committee on 23rd October, said: The closure of Gartcosh will in no way determine or prejudice the future of Ravenscraig. We think this linking of Ravenscraig with Gartcosh does an injustice to both Ravenscraig and the employees there, and is doing them a disservice. Consumers, and possible consumers, who hear this being rammed home time and time again could become disaffected by Ravenscraig and it is in danger of becoming a source of self-fulfilling prophesy". I agree with that statement, and I believe that any noble Lord who has spoken tonight would also have agreed with such an important statement made by a chairman of a nationalised industry appointed by his Prime Minister. The future, excluding worldwide influences, lies with those who work at Ravenscraig, those who serve it, those who transport its products and the management. The closer they can all work together the better the prospects for the future.

While it is true that my right honourable friend the Secretary of State for Scotland has recently met the Ravenscraig trade union committee and is urgently considering their evidence (but I cannot comment further at the moment), what none of us can condone is that the local unions have not talked, and moreover are reluctant to talk, to the BSC. My Lords, that is no way forward.

From what I have said, I hope the House will see that in setting out the background to this issue I have already gone some way to answering the second half of the noble Baroness's Question; namely, what effect the closure of Gartcosh might have on the steel industry in Scotland. The Government believe that, regrettable though this closure may be, it does not have the wider implications sometimes claimed. The remaining operations of the British Steel Corporation at Ravenscraig, together with its principal establishments in Scotland, the Dalziel plate mill in Motherwell and the Clydebridge tube works in Glasgow, will continue to operate unaffected. The only exception will be those changes directly resulting from the switch between Gartcosh and Shotton as the principal destination of the output from Ravenscraig's hot strip mill.

I shall now comment on the other consequences of closure referred to by the noble Baroness. The Government regret deeply the impact which the closure will have on the immediate area. We recognise that it is an area which has suffered significantly from a decline in the older industries such as coal mining and steel. Gartcosh mill is situated almost exactly on the boundary between Strathkelvin District (in which the mill is located) and Monklands District. Its closure will unfortunately increase the unemployment by 0.1 per cent. in the Glasgow area and 0.3 per cent. in the Lanarkshire area. These areas are already areas which, as the noble Baroness pointed out, are above the Scottish unemployment rate of 15.8 per cent.

Local effects will of course be greater, in Coatbridge, Airdrie, Gartcosh village itself, other communities in the vicinity, and in Glasgow in such areas as Easterhouse. It always happens that the job losses extend more widely to the local economy than the direct losses alone because of the effect on services and suppliers. Given this situation it is only right to ask: what are the Government doing? I am pleased to tell the House that the Government are considering, and are encouraging others urgently to consider, how new job opportunities may be provided to replace those lost at Gartcosh.

Lord Ross of Marnock

My Lords, have I understood the noble Earl to say that the Government are considering asking other people to consider doing something?

The Earl of Caithness

My Lords, the noble Lord did not hear me aright. What I said was that the Government are considering and are encouraging others urgently to consider.

Lord Ross of Marnock

That is what I said.

Noble Lords

No!

The Earl of Caithness

My Lords, we are fortunate that redevelopment measures are already in place around Gartcosh specifically to cope with these problems, which are not new to the area. The Scottish Development Agency has two integrated projects run in conjunction with the local authorities, in Coatbridge and in Motherwell, which already have made significant achievements in simulating new business development. They are attracting companies to locate in these towns and improving the physical and commercial environment of the area. These projects will continue until 1987 in Coatbridge and (we hope) 1990 in Motherwell, and we have made clear our expectation that they will make a contribution to the work that needs to be done to create more jobs when Gartcosh closes. There are other economic initiatives at work in the area, also supported by the Government through the Scottish Development Agency, which will also be able to make a contribution to this work.

In addition, the Government have asked BSC (Industry), which is the organisation set up by the British Steel Corporation to support job-creating initiatives in areas affected by steel closures, to consider suitable action for Gartcosh. This might include the development of a workshop complex in the premises at Gartcosh, on the model of similar developments elsewhere which have been very successful in providing premises for small businesses. Two of these developments are in Scotland, at the site of the former Glengarnock steelworks and the former Clyde ironworks, and they are excellent examples of how such premises can be converted to a new and productive use.

The noble Lord, Lord Ross of Marnock, and my noble friend Lord Campbell of Croy have referred to the Glengarnock project. I can confirm that that project has created more jobs than were lost, and the size of the losses directly from steel were greater than at Gartcosh.

Most noble Lords have stated that because of a combination of factors the closure at Gartcosh will inevitably lead to a loss of sales by BSC. But none of BSC's major customers has said that because of the Gartcosh closure they will place their orders elsewhere. That includes the car industry, mentioned by the noble Lord, Lord Mackie of Benshie. It is true to say that similar considerations apply to exports. The noble Lord, Lord Ross of Marnock, said that a 25 per cent. loss of the market was admitted by BSC. That is not true. BSC stated that they expect no loss of market as a result of the Gartcosh closure, but in their financial forecasts of the effect of closure they have allowed for loss of sales of 2,500 tonnes.

The noble Lord, Lord Ross of Marnock, seemed to indicate that there was no future growth for steel and that the heyday of steel would not come again. I can assure him that all the present forecasts are that steel consumption and demand are likely to increase from present levels for the next five years. That includes the European Commission's forecasts for the Community as a whole. That is good news.

Getting across to the general public the Government's concern is often difficult. It is not, sadly, prime media news but I hope I have clearly explained that the Government are fully aware of the impact of the impending closure of the Gartcosh cold rolling mill and are taking additional action. We are conscious that it will have a direct effect on individuals, local businesses and other enterprises. But we believe the measures to which I have referred will create new job opportunities in the area.