HL Deb 18 January 1994 vol 551 cc449-51

2.53 p.m.

Lord Ezra asked Her Majesty's Government:

Whether the agreement reached in Brussels on 17th December 1993 will resolve the steel problem in the European Union.

The Minister of State, Department of Trade and Industry (Lord Strathclyde)

My Lords, the decision is a useful step towards dealing with the industry's problems.

Lord Ezra

My Lords, I recognise that this was a useful step towards dealing with the industry's problems. Perhaps I may draw the attention of the noble Lord to the fact that British Steel, which is generally regarded as the most efficient steel producer in the whole of Europe, is extremely anxious that as a result of that agreement, out of the 30 million tonnes of surplus capacity which needs to be closed, only 5 million tonnes is to be closed in the state-aided capacity, and the remaining 25 million tonnes will fall on those producers which are not state aided. That situation has been exacerbated, as the noble Lord may have seen, by the situation in Bremen. Is he aware that the steel works in Bremen, which are producing some 3 million tonnes of hot rolled product which is totally uncompetitive, are likely to be rescued by the city of Bremen, therefore exacerbating the situation and operating much to the disadvantage of such competitive enterprises as British Steel?

Lord Strathclyde

My Lords, the noble Lord, Lord Ezra, is quite right to draw the attention of this House in his Question to this very grave problem facing the European steel industry. I am grateful for the way in which he has done so. So far as concerns the situation in Bremen, my right honourable friend the Minister for Industry has drawn this case to the attention of the relevant commissioner. Reports suggest that the commission itself is not satisfied with the German Government's response and that a formal investigation is imminent. That of course will be very helpful.

Viscount Mersey

My Lords, is my noble friend aware that the Italian steel industry is at the moment in debt to the tune of 5.5 billion ecus? Does he not fear that the Italian Government might attempt to shore up their industry using taxpayers' money, which would be contrary to the Treaty of Paris?

Lord Strathclyde

My Lords, indeed, it was precisely such a situation that the agreement reached in December was intended to avoid. There were three aspects of that agreement. First, the proposals themselves have been tightened up. Secondly, there was an agreement that there would be no further aid after that agreed in December. Thirdly, there would be more vigorous monitoring of what happens in individual member states to make sure that there is no unfair competition.

Lord Stoddart of Swindon

My Lords, is it not intolerable that British Steel, which has cut its workforce from 250,000 to 40,000 and is once again profitable, should be placed in a situation in which it is meeting unfair competition from subsidised steel firms abroad, especially in Germany? Why does this country always have to lose out in these negotiations? Is it not absurd that industries in the EC are being subsidised to produce steel which nobody wants? We seem to have a common steel policy which is becoming just as bad as the common agricultural policy.

Lord Strathclyde

My Lords, I share and understand the noble Lord's anxiety on this issue. However, if we had not reached an agreement in December the situation in the future could have been considerably worse than I believe it now will be. The monitoring network that will be put in place will ensure that the aid which has been agreed will be used solely to facilitate restructuring and not to allow unfair pricing. That allows British Steel to remain the most efficient and productive steel manufacturer in the whole of Europe.

Lord Geddes

My Lords, is my noble friend satisfied that the unfair competition emanating from Spain either has been or, as a result of the December agreement, will be eliminated?

Lord Strathclyde

My Lords, in Spain in the case of CSI, the relevant Spanish company, a firm date for closure of the Ansio plant has been agreed. I believe that that will go a substantial way to implementing the agreement to which Spain signed up in December.

Lord Peston

My Lords, does the noble Lord agree that the matter is really very simple: if there is excess capacity then the high cost producers are the ones which ought to go out of existence? What ought not to happen is that under the guise of restructuring—an expression one has heard many times in many contexts—the high cost producers are kept in existence and, as my noble friend points out, the low cost producers are then placed at a disadvantage.

Is the noble Lord not aware that the use of the word "monitoring" always frightens your Lordships because it is another way of saying that we will do nothing? More directly, is there anything that the British Government can do or propose to do that corresponds to action that would lead to British industry being able to compete fairly and foreign industry, which has high costs, going out of existence?

Lord Strathclyde

My Lords, on a point of principle, of course I agree with the noble Lord. But we have to deal with member states of the European Community in such a way as to allow British Steel the best opportunity to compete fairly. I believe that the agreement that was signed in December goes a long way to solving this particular problem.