The British Steel Industry

HL Deb 28 March 2000 vol 611 cc633-5

2.36 p.m.

Lord Islwyn

asked Her Majesty's Government:

What is their most recent assessment of the future of the British steel industry.

Lord McIntosh of Haringey

My Lords, the UK steel industry has undergone substantial restructuring since the 1970s. Productivity and yield rates have increased and emissions have declined. The industry continues to take positive action to maintain its international competitiveness through such measures as greater teamworking, the introduction of new technology and the development of new products. I believe that it has excellent long-term prospects.

Lord Islwyn

My Lords, with BMW in mind and with uncertainties in other sections of the motor industry, will the Minister give an assurance that the Government will keep in the closest possible contact with Corus, formerly British Steel, in order to be fully aware of the company's future policies? Does he appreciate that steel is still the cornerstone of the Welsh economy, so that, whereas we can argue for matching funds for objective one status, nevertheless a major steel closure would make a difficult situation even worse?

Lord McIntosh of Haringey

My Lords, I entirely agree that the health of the motor industry is quite essential to the steel industry. I acknowledge the difficulties with BMW at Longbridge. However, we still have Land Rover at Solihull, the Peugeot 406 at Ryton, the R75 at Cowley and the Jaguar S-type at Castle Bromwich. There is a good deal of the motor industry over which that question does not hang.

Ministers are in almost constant contact with Corus. They had a meeting with its representatives only this morning about the issue raised in the Western Mail regarding Nedcar in the Netherlands. They were reassured to learn that Corus has good relations with both the old and new management at Nedcar. We are also entirely seized of the importance of the steel industry to the Welsh economy.

Lord Ezra

My Lords, is the Minister aware—as I am sure he must be—that 70 per cent of steel exported from this country goes to mainland Europe and that, although, as he mentioned, the steel industry here has substantially improved its productivity, in terms of sales in euros this has been totally overtaken? There has been a 10 per cent improvement in productivity over recent years but a 30 per cent increase in the price in euros. Is it not time that the Government seized the problem of the exchange rate and made a firm commitment on what we are going to do about the euro and avoided putting further imposts on the steel industry, such as the rerating which has apparently occurred in South Wales?

Lord McIntosh of Haringey

My Lords, the Government have consistently rejected the view that they should intervene directly in the exchange rate or set exchange rate targets to the Monetary Policy Committee, as opposed to the interest rates and price stability targets which it sets. It is of course true that the majority of British steel exports go to Europe, but it is encouraging that, with the recovery of the soul h-east Asian economies, there is an opportunity for increased exports there as well.

Lord Brookman

My Lords, is my noble friend aware that Corus, formerly British Steel plc, has obtained—I am pleased to say—a substantial order from the Turkish electricity industry for some 70,000 metric tonnes of steel? That is good news against a backdrop of a company which lost a quite considerable amount of money last year. In that respect, does my noble friend share my concern and that of the workers, mainly because of the strength of sterling but probably also because of the multinational nature of the company now, that orders could go abroad as easily as remain in the United Kingdom? Does he agree that there is therefore, as he indicated earlier, a need to keep in close contact with the company in that regard so that there will be tangible support such as is now being obtained with the climate change levy?

Lord McIntosh of Haringey

My Lords, I am happy to join with my noble friend in congratulating Corus on the Turkish order. I believe that I have made clear the importance which the Department of Trade and Industry attaches to close contact with Corus. I hope that I have given evidence that we are maintaining that close contact.

Lord Mackay of Ardbrecknish

My Lords, the Minister will recall that I expressed sympathy for him last Thursday when he had to come along instead of the Minister responsible at the DTI, the noble Lord, Lord Sainsbury. I express the same sympathy for him today. Is the Minister aware that I am delighted to hear his song of praise for a privatised industry? I cannot remember hearing the same song at the time it was privatised by the Conservative Government. However, the problems raised by the previous two speakers are real. I refer to the problem of Longbridge perhaps reducing its demand for steel and to the weak euro. Can the Minister promise that no more burdens, especially along the lines of emissions, will be placed upon the steel industry in this country?

Lord McIntosh of Haringey

My Lords, when the noble Lord finally asked a question as opposed to expressing sympathy, he asked me to promise that no more burdens should be placed upon the steel industry. Burdens have not been placed upon the steel industry. Within the limit of our abilities we have done everything we can to support the steel industry in this country.

Lord Stoddart of Swindon

My Lords, does my noble friend deplore those on the Liberal Benches and elsewhere for wanting to talk the pound down? Is it not a fact—I asked this question before and I shall ask it again—that the pound has been extremely reasonable and steady against the major currencies of the world? It is the euro which has declined, not only against the pound but against all other major currencies in the world. Therefore, it is not sterling that needs to be dealt with but the euro. That will be done when the rest of the world has more confidence in Europe than it has in this country and others.

Lord McIntosh of Haringey

My Lords, my noble friend has asked this question before and I have answered it. I agreed with him that the strength of the pound has increased in relation to the euro very much more than it has in relation to the dollar and the yen. However, if he is suggesting that we should do something about the weakness of the euro, he is slightly outside the realms of possibility of government policy.

Baroness Hogg

My Lords, can the Minister confirm that the budget forecasts of the economy are based on a decline in sterling and that, as the Red Book states, if it does not occur there will be further losses in market share?

Lord McIntosh of Haringey

Yes, my Lords. We believe that the position of sterling is over-valued in the long term. Our budget forecasts are based on that assumption.

Lord Shore of Stepney

My Lords, if my noble friend believes that it is over-valued in the long term, why does he not do something in the short term?

Lord McIntosh of Haringey

My Lords, my noble friend and others always seem to think that there is something which the Government can do about exchange rates. We believe that the best we can do for exchange rates and for the economic future of this country is what we have been doing; that is, to ensure economic stability consistent with high levels of growth and employment.