HL Deb 01 December 1998 vol 595 cc357-60

2.50 p.m.

Lord Roberts of Conwy asked Her Majesty's Government:

What are the anticipated effects, especially in Wales, of the proposed changes in the steel industry.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville)

My Lords, the British steel industry is undergoing a period of extended restructuring to retain its competitiveness in the face of difficult international trading conditions. This will result in the closure of uneconomic plant, together with job losses: some 2,700 of those have been announced since April. The effect will be to ensure that British steel companies continue to be among the most productive in the world. Although 1,600 of those job losses are in Wales, there are also some encouraging developments in the Welsh economy. From May 1997 to the end of October of this year, the Welsh Development Authority recorded 184 projects, which forecast 14,227 new jobs and safeguarded 4,865 others. Over 6,000 of those new jobs relate to projects recorded in the past seven months alone.

Lord Roberts of Conwy

My Lords, I am grateful to the Minister for that frank and honest reply, depressing though it may be with regard to job losses envisaged. However, can he tell me what is the root problem of the industry? Is it the strong pound, a fall in demand for steel or over-production of steel worldwide? Can he assure us that everything that can properly be done is being done to safeguard the export trade in steel, to stop the dumping of steel in Europe in particular and to preserve jobs not only in the steel industry but in the many manufacturing industries that use steel?

Lord Sainsbury of Turville

My Lords, the industry's present difficulties have many causes. The economic crisis in Asia has contributed to rapidly falling world steel prices—up to 30 per cent. in specific cases. There is global overcapacity. The high exchange rate has also had an impact, although we believe that it is at the right level from the general economic position. The noble Lord can be entirely assured that we are doing everything we can to protect our industry, making certain that subsidies do not take place in other countries.

Lord Bruce of Donington

My Lords, will the Minister give an assurance that the practice of subsidising continental steel companies, at present permitted by the Commission, is rectified with a minimum of delay?

Lord Sainsbury of Turville

My Lords, we are determined that the UK steel industry should not be disadvantaged by illegally subsidised competition. We have consistently pressed for strict rules on subsidies to the steel sector, in particular the rigorous enforcement of the steel aid code by member states, and the stringent monitoring of enforcement by the Commission. I think that that has contributed to a climate in which legal state aids have significantly declined in importance for the UK steel industry.

We are pressing also for equally strict controls for state aid to the steel industry to be incorporated in a successor regime to the steel aid code which expires in the year 2002. We shall be vigilant in ensuring that the British industry is not disadvantaged. We shall investigate quickly any evidence put forward of illegal subsidies. We shall consider what action might be appropriate.

Lord Hooson

My Lords, does the Minister agree that while we are losing 1,700 real jobs in steel in Wales, we are and have been spending hundreds of millions of pounds encouraging inward investment, often from companies from abroad which close outlying factories down as soon as any recession appears? Would it not be better for this country to spend a little more time encouraging domestic industry?

Lord Sainsbury of Turville

My Lords, we shall do everything right and proper to encourage inward investment and British companies. We are doing everything we can within the permitted rules to support the British steel industry.

Lord Islwyn

My Lords, does the Minister appreciate—

Lord Renton of Mount Harry

My Lords, perhaps I may—

The Lord Privy Seal (Baroness Jay of Paddington)

My Lords, I think that it is the turn of this side to ask a question. There is plenty of time to take all the questions.

Lord Islwyn

My Lords, does the Minister appreciate that the Welsh steel industry is efficient, well managed and has a well motivated, highly trained labour force? It is at present bedevilled by the high value of the pound which has led to a flood of cheap foreign imports into this country. What measures are the Government taking to improve that situation, bearing in mind how vital the future of the industry is to the Welsh economy?

Lord Sainsbury of Turville

My Lords, British steel is to be congratulated on the fact that it has increased productivity per man by nearly 10 per cent. a year for 20 years. Nearly 70 per cent. of UK steel types available today have been developed in the past 10 years to meet demands for stronger, lighter materials. It means that we have a competitive world-class steel industry.

We are taking specific measures to help the industry. The Department of Trade and Industry is supporting a range of activities to improve the steel sector's competitiveness. It has provided grant support through the UK Steel Association and Steel Training Ltd. for a range of products involving bench-marking, education and training. We are currently supporting a sector's challenge project on the training and development needs of steel industry managers into the 21st century; and have funded a recently completed study of the wire and reinforcement sector.

Lord Renton of Mount Harry

My Lords, while I fully endorse what the Minister says about action against dumping, is it not clear that steel is an internationally traded commodity? The British Steel Corporation has announced the intention to move some parts of its steel production from the United Kingdom into other parts of the world in order to achieve cheaper basic production costs.

Lord Sainsbury of Turville

My Lords, there is a clear difference between dumping and taking a decision to move production to an area where the cost structure will be more favourable. Those are quite separate issues.

Lord Hardy of Wath

My Lords, will the Minister make clear that the British steel industry is internationally competitive? My noble friend also commented on fair trading in Europe and on being vigilant. Is he aware that the former government in periods of difficulty promised to be vigilant but did nothing in the face of clear evidence of unfair trading? If the vigilance results in observance of unfairness, will very firm action be taken?

Lord Sainsbury of Turville

My Lords, I can assure the House that we shall be vigilant and will take action if there are any cases of illegal state aid.

As regards unfair trading, it is a matter for the industries concerned to take action. The European representative body for the steel industry lodged a complaint with the Commission on 23rd November on hot rolled coil imports from India, Iran, Taiwan, Bulgaria, South Africa and Yugoslavia.

Lord Ezra

My Lords, as the steel industry is notoriously subject to cyclical movements, does the noble Lord feel that the industry in the UK at present may have over-reacted to what may be a temporary market difficulty? To what extent would that impair its ability to react when the market improves?

Lord Sainsbury of Turville

My Lords, I should not wish to second-guess the decisions of the industry. I should point out that one of the principal changes in Wales has been the opening of a new continuous annealing process line at the British Steel plant at Port Talbot. That cost £120 million and is the company's single largest investment since privatisation. That is a massive vote of confidence in the future of the Welsh steel industry.