HL Deb 01 February 2001 vol 621 cc799-810

3.28 p.m.

The Minister for Science, Department of Trade and Industry (Lord Sainsbury of Turville)

My Lords, with the leave of the House, I shall now repeat a Statement on Corus which was made in another place by my right honourable friend the Secretary of State for Trade and Industry. The Statement is as follows:

"I would like to make a Statement concerning the steel industry and the announcement made today by Corus.

"The House will be aware that since early December Corus has been conducting a review of its operations. The results of this review were announced this morning. Corus has said that it intends to introduce radical restructuring measures which will involve significant job losses in England and Wales. Over 6,000 jobs will be lost. Around 3,000 of those will be in Wales and 3,000 will be in England.

"Corus has failed to discuss its plans with the Government. Relevant information has not been disclosed; it has been resistant to any meaningful dialogue and has refused to discuss in detail its plans for the industry. We have expressed our concerns to the company about this lack of information at the highest possible level.

"There is no doubt that Corus has been facing difficulties. Trading conditions are tough and there has been a clear need for the company to take steps to address these problems. The Government recognise that it is for Corus and any other company to take the commercial decisions they feel are necessary, but in this case capacity will be reduced and thousands of jobs lost as a result of a short-term response to the difficulties it faces.

"The Government recognise that at a time of globalisation many sectors of industry are going through major reconstructing. In these circumstances the role of government is to provide economic stability. That is exactly what the Government are doing.

"There are over a million more men and women in work than in 1997. Inflation now remains around or below the target of 2.5 per cent. Long-term interest rates are at their lowest level for 35 years. We have put an end to the old cycle of boom and bust. Building on that platform of stability, the Government have been driving forward an active industrial policy to enable established industries to modernise, to adopt new processes and technologies and to support the development of new industries.

"We have seen manufacturing productivity increase by around 3.5 per cent over the past year. Exports are growing, with manufacturing export volumes up by more than 9.5 per cent in the past year. Manufacturing output is rising, too. The prospects for manufacturing are improving, with most forecasters expecting growth to pick up over the next two years. Only this morning, the latest Chartered Institute of Purchasing and Supply report showed manufacturing growing at its fastest since March last year.

"Today's announcement by Corus stands in stark contrast to other manufacturing companies. Those companies are prepared to take a long-term view. In recent weeks, both Toyota and Nissan have taken positive decisions on production in the UK when they could have gone elsewhere in the world. These companies have decided that they have a future as manufacturers in the UK. They have committed to substantial new investment. They have demonstrated confidence in their workforces and in the economic stability and favourable business environment the Government have established. Corus should—like Toyota and Nissan—weigh up its long-term interests and prospects and, in responding to the real challenges it faces, it should put greater weight on the new opportunities that exist for developing into new markets.

"Even after today's announcement, Corus will remain a major employer, with around 22,000 employees in the UK, a demonstration of the fact that there is a future for the steel industry. It is because there is a future for the industry that Corus should think again about these proposed closures and redundancies and instead work with the trade unions, government and the National Assembly for Wales to identify a better way forward.

"We recognise that this is a commercial decision to be taken by the company and that action has to be taken to tackle the losses being suffered by Corus. But Corus should now engage openly and work constructively with all the relevant parties, building on the strengths that exist in the steel industry.

"UK steel workers have improved productivity dramatically in recent years. They are the most highly productive steel workers in the whole of Europe. Between 1998 and 1999 alone, they increased productivity from 533 tonnes per person to 571, well above the levels in Germany and France. We have been working with the industry to help it improve productivity, to modernise and adopt new technology.

"The workforce at Corus has shown its long-term commitment to the industry and to the company, and I share its anger at Corus's behaviour. Corus should now work with its employees and the communities affected. If Corus refuses to change course, then it must meet its obligations. It must pay the costs of the clean-up of the sites involved in today's announcement. It should then release them quickly and play its part in helping the communities affected.

"The Government will not walk away from the innocent victims of this decision. We will be there alongside them. We will provide help for the individuals affected, support for local communities and backing for regeneration schemes to support the local economy and bring new jobs for people.

"But it need not come to that. Corus should adopt a different approach. If it were to do so, it would have the support of the Government. On behalf of 6,000 steelworkers, their families and the communities in which they live, I urge Corus to think again and to work with us to identify a better way forward".

My Lords, that concludes the Statement.

3.35 p.m.

Lord Roberts of Conwy

My Lords, I am sure that we are all grateful to the Minister for repeating this very worrying Statement made in another place. I fear that the loss of 6,050 jobs is a severe blow to the British economy. Those job losses will, of course, have a ripple effect and other jobs will be lost in ancillary businesses of all kinds.

It is a particularly devastating blow to Wales, which is due to take about half the job losses, mainly at Llanwern and nearby Ebbw Vale and Bryngwyn, which are to close completely. Shotton in North Wales also loses more than 300 jobs. All this in spite of the high productivity which the Minister was happy to acknowledge.

One has to remember, too, that the job losses announced today come after 2,000 jobs were shed by Corus in its Welsh plants last year—4,200 in all in England and Wales. Employees and people generally in Wales have been deeply disturbed by this news, which comes on top of other job losses in manufacturing at Sony, Panasonic and elsewhere. So I am not quite as sanguine about the prospects for manufacturing as the Minister appears to be.

I understand that the company argues that the job losses are necessary because of over-capacity in the industry—this may explain its refusal to accept the Iron and Steel Trades Confederation's proposal for a take-over of Llanwern—although it is only the heavy end, as I understand it, that is being closed at Llanwern. Corus also blames lack of demand in the UK for certain of its products.

My first question to the Minister is whether it can be argued that Corus is engaged in reconstruction of the steel industry in the United Kingdom and whether it would qualify for financial assistance in this from the European Commission and its Steel Aid Fund. The company's losses have certainly been high and it will surely need such assistance. Have the Government sounded out the Commission? If not, will they do so?

Judging by the exchanges at Welsh Questions in the other place yesterday, the Government are critical of Corus for keeping them in the dark about its plans. The Minister echoed those feelings today. I find this rather difficult to understand because Sir Brian Moffat, the Corus chief executive, met the Prime Minister and a number of his Cabinet colleagues in Downing Street last week. As the Minister acknowledged, rumours of the company's difficulties and impending cut-backs have been circulating for quite some time. I cannot believe that the Government were unaware of them. My second question is, therefore, what did the Government do when they heard these reports? Did they really press Corus for its plans? Certainly they should have pressed the company harder than they did because we are told that Corus did not produce its plans.

Although it is understandable in view of the imminence of an election that the Government should attempt to load as much of the odium for these closures on Corus, it is also fair to ask whether they think that the climate change levy—80 per cent of which will be paid by Corus alone—is appropriate at this time. Will the Government consider the suggestion put forward by the noble Lord, Lord Ezra, when we discussed the steel question on Tuesday, that the Government seek to postpone its effect or to modify it in other ways? In the present circumstances the business rate paid on some of the plants should also be considered. I am told that Corus raised that issue with the Welsh Assembly some weeks ago.

On Tuesday, we were reassured by the noble Lord, Lord Sainsbury, that, If further job redundancies are announced shortly, we shall take the action that we have taken in similar cases to ensure that we create jobs in the area and enable people to search for new jobs".—[Official Report, 30/1/01; col. 554.] What exactly do the Government propose? Who will take the lead on this? Is the First Secretary at the Welsh Assembly to take the lead so far as concerns Wales? Will it be the Secretary of State for Wales; or the Secretary of State for Trade and Industry; or will it be the Prime Minister in person? There seems to be some confusion as to who is in the lead in this area. Frankly, it has to be said that too many cooks spoil the broth.

Each area affected is very different in character. Ebbw Vale, for example, is almost totally dependent on its steelworks. Each area will require special treatment. I hope that the Government will bear in mind that south-east Wales in not in the Objective One area and cannot benefit from the resources available under that heading.

When Ravenscraig, Llanwern's sister plant in Scotland, was closed a decade or so ago, there were much better prospects of attracting major inward investment projects and every effort was made to secure alternative employment in the Ravenscraig area. It will be much more difficult to do that now, in spite of the high-quality workforces available in Gwent and elsewhere, because there is not so much mobile industry available.

Finally, we are all concerned about the proposed reduction in steel producing capacity and our possible need of it at a later date. Will the Government examine the national interest in this issue in some depth? There are clearly implications for defence procurement.

The Government cannot stand idly by, denigrating Corus, although that is understandable. They must be realistic. Although they may plead with Corus to change its mind, it is somewhat unlikely to do so.

3.43 p.m.

Lord Ezra

My Lords, I, too, should like to thank the Minister for repeating the Statement by his right honourable friend in another place. I join with him and the noble Lord, Lord Roberts, in regretting that this decision should have had to be taken and that this large number of highly skilled steel workers should no longer have employment.

From my days in the coal industry, I recall visits that I paid to both the plants in South Wales that are primarily affected, Llanwern and Ebbw Vale. Indeed, I was at Llanwern shortly after its opening in 1962, when I was shown round by the late Sir Campbell Adamson, then the plant manager. Therefore, I speak with enormous regret that such a wonderful plant, as it then was and as it has served the country ever since, should now face partial closure. I agree that everything possible should be done to reverse that decision if it is still feasible to do so.

The Minister said in repeating the Statement that it is clear that, at a time of globalisation, many sectors of industry are going through major restructuring". I should like to remind the noble Lord of the proposals that I made when the subject of manufacturing arose in this House on previous occasions, specifically in relation to the steel industry. I suggested that, because of the difficulty that many sectors of manufacturing were meeting, the Government should be studying the issue and should be bringing out a White Paper in which they could formulate a strategy. Had they done so, it would have been easier for the management of Corus to take a long-term view relating to such a strategy. I hope that it is not too late for that issue to be addressed.

I should particularly like to know, as the noble Lord, Lord Roberts, indicated, what the Government have in mind if the management of Corus were now, even at this late stage, to take a different view? What measures could the Government introduce to help Corus which would not contravene either European or British competition rules; and which could make such a material difference that we could retain these assets for the long term, as we should all like to do, maintain a higher level of employment than is presently envisaged, and at the same time enable the company to regain its viability? Those are the real issues on which we should like to be informed.

3.46 p.m.

Lord Sainsbury of Turville

My Lords, the noble Lord, Lord Roberts, was right to say that the closures will have a ripple effect. I hope that I was in no way over-optimistic about the situation in manufacturing generally—although it should be pointed out that output in manufacturing is up: we saw productivity rise by around 4 per cent throughout last year, and some parts of the manufacturing sector, such as aerospace or fibre-optics—one of the leading new areas—are doing extremely well. What we are seeing is a variable picture between the different parts of manufacturing. It is typically those parts of manufacturing with low margins such as steel, or where there is global excess capacity—for example, in automobiles—where the greatest pressure is being felt.

I believe that there is no question of giving help under the rules of the European Coal and Steel Community, which are very tight indeed. With the Prime Minister and the Secretary of State, we have had meetings with Corus. The company was pressed at the highest level to give us details of what it was planning to do and its long-term strategy. It is a measure of how out-of-touch the company is with current thinking on these matters that it should have refused to give us those figures, and that the figures and plans were only heard by us at eight o'clock this morning. I do not think that it is an appropriate way for a major company to behave in today's economy.

So far as concerns the climate change levy, it will be appreciated that, with the 80 per cent discount, it comes to only £10 million. Therefore, the figure has not been significant in the overall scheme. We suggested discussing a package which covered areas such as business rates and various other matters. We accept that it would not have been a huge package, because we cannot do that under the rules of the European Coal and Steel Community; however, it could possibly have gone some way to mitigating the impact of the severity of the cuts. I am sure the House will agree that any such mitigation should have been given serious consideration by the company. However, the view of the company was that it would not affect its decision in any way.

As I hope the Statement makes clear, we are asking Corus to reconsider and rethink its decision. If it persists, we shall obviously bring forward proposals on the basis of the figures that we now have. I had hoped that the other parties in this House could join with the Government in asking Corus to reconsider its decision.

As regards manufacturing industry, the Government are deeply concerned about, and have given great consideration to, the interests of manufacturing, which we believe can continue, as now, to play a very large part in the economy of this country. There are many opportunities going forward. I am not certain about a strategy, but we have policies that obviously impact on the different factors that influence manufacturing. As I believe I illustrated when I mentioned the varying situations in different parts of manufacturing, I doubt if a manufacturing strategy will take us any further.

I can tell the noble Lord, Lord Ezra, that, as I said earlier, we offered to try to put together a package that included business rates, but the company were not interested in it. Of course, the major factor as regards the company's profitability is the question of the exchange rate. But since the dismissal of the two chief executives in December the situation has moved on significantly by over 10 pfennigs. That, alone, would have an impact of £80 on the profitability of the company, which is the major consideration. In responding to that short-term situation, we have not been persuaded that the company has really given the proper and due weight to the long-term situation.

3.51 p.m.

Lord Shore of Stepney

My Lords, the Government need to be rather more self-critical about their failures to act in this matter. As has already been pointed out, we have known for a long time—much to the distress of many noble Lords on this side of the House—that Corus has been losing heavily financially. My noble friend the Minister gave us an illustration of just how much when he said that for every 10 pfennigs of change in the exchange rate between the euro and the pound £80 million of profit is wiped out. We are not talking about one lop or a 10 pfennig change; we are talking about 35 to 40 changes in the exchange rate over the past two years. Indeed, we are talking about hundreds of millions of pounds of loss. We are familiar with what happened with BMW and Rover and the closure, and large loss of car making, of the two great American car subsidiaries at Dagenham and Luton.

That being so, has it really not gone home to the Government that they have to do something about the exchange rate, if they believe that it is misaligned—and they do? Indeed, my noble friend told us just how much only yesterday. We are dealing with what we have been told twice from the Front Bench is the most efficient, productive steel enterprise in Europe. Yet we are here today calmly talking about a very substantial closure. Either the Chancellor of the Exchequer must wake up to the realities of what the exchange rate policy is doing, or the Secretary of State for Trade and Industry had better get much tougher in his dealings with manufacturers who are behaving badly.

Lord Sainsbury of Turville

My Lords, with the greatest respect to my noble friend, I believe that his desire to return to the policies of the past and the failed policies of boom and bust is not one that the great majority of British industry would in any way welcome. I see that my noble friend shakes his head, but, in reality, if we want to reduce the level of the pound, there is only one way that that can basically be done; namely, by convincing the financial markets that inflation will take off in this country and that there will be an extensive increase in the money supply, with all the inherent risks involved in terms of inflation rising. That is surely one of the lessons that has been learnt over the past 25 years. This Government have no intention of returning to those polices. If people want to put forward such policies, I believe that they should honestly say that increasing the money supply and the inflation rate is what they propose in order to bring down the pound. British industry should be asked whether that kind of instability and boom and bust is what they want.

Lord Brookman

My Lords, perhaps I may begin by declaring an interest. I worked for some 20 years at the Ebbw Vale steelworks, which is now one of those places destined to be closed. I must confess that I never thought that I would be present in this Chamber and hear from my noble friend the Minister—not of his making—that the heart would be ripped out of the Welsh steel industry. It is a sad day for me. Of course, even further job losses will take place in Redcar and elsewhere; and, indeed, there will be an unspecified number in other areas, probably 3,000, about which we do not know as I stand here today.

Corus is wrong. It is short-sighted and, as many noble Lords will I am sure agree, it is grossly unfair. The company should keep its nerve. My noble friend the Minister is correct: manufacturing has a future. Toyota and Nissan showed that recently with their respective announcements. Corus is wrong in the whole area of consultation. Quite frankly, the situation is absurd. My noble friend said that the Government knew about the company's plans at eight o'clock this morning. That is unbelievable. Therefore, if ever there were a case that proved that further legislation should be introduced so that workers could have their due rights discussed in consultation, this situation has surely proved that point.

My union, along with my successor, has worked extremely hard in a proper manner to put together a plan, a set of proposals. The latter was not formulated off the top of anyone's head in that sense: the proposals were properly constructed so as to try to save these jobs at Llanwern. They suggested the putting together of a consortium. That suggestion was rejected out of hand. That, in itself, is disgraceful. Workers have a right to be consulted and to have their views considered. If that union, the Iron and Steel Trades Confederation (ISTC), has a consortium ready to pick up the gauntlet in an effort to try to save those jobs, I believe that Corus should listen to the workers even at this late hour.

Can my noble friend the Minister tell the House what the Government actually put before Corus in relation to the package? Indeed, the Welsh Assembly also maintained that it did so. Finally, will my noble friend or the Government be attending further meetings with the company to try to persuade those concerned that what they are doing is irresponsible and wrong for the British people?

Lord Sainsbury of Turville

My Lords, I agree with my noble friend; there is a future for manufacturing in this country. Indeed, I believe that there is also a future for steel manufacturing in the UK. That is why we have asked Corus to reconsider its decision. I very much hope that the company will give serious consideration to the views that we have put forward today.

As regards consultation, it is most regrettable that people hear of these collective redundancies by way of radio programmes rather than through proper arrangements from the company. That is why, on 18th January in the light of events elsewhere, the Secretary of State announced a review of UK arrangements for collective redundancies. As I said, this is no way for people to hear about such developments. I can tell my noble friend that we did not go into great detail on the package of measures. It was not an enormous package, but it was dismissed out of hand by the company. Again, that is a sign that the company is not prepared to give serious thought to these issues.

When proposals—though not worked-out properly—were put forward for the workers to take over some of these operations, it is extremely unfortunate that they were not given any consideration. I hope that the company will now reconsider the issues involved and sit down with the Government, the trade unions and the National Assembly for Wales to see whether we can overcome at least some of these difficulties and identify a way forward.

Lord Marlesford

My Lords, I obviously realise the deep anxiety and concern of the local people in Wales as a result of this announcement. I recognise that Corus probably behaved less than tactfully. I also recognise that the company may have made a commercial mistake. I have not the slightest idea as to whether or not it did; indeed, I wonder whether anyone in this House knows whether or not it made a commercial mistake. Does the Minister recognise that the economic success of this country, over the past decade at any rate, has been largely due to allowing major restructuring of British manufacturing industry?

I take the latest figures available for steel. At constant prices, the value of output of iron and steel from the UK increased by 32 per cent between 1983 and 1999, during which period employment in the industry fell by over 50 per cent. In the eight major manufacturing industries in the United Kingdom, employment since the end of the war has fallen by over 80 per cent; in steel by 82 per cent. During that period the total employment went down from over 4 million to well under 1 million. Yet we have an economy with high productivity and high output. Inflation for the past decade has been less than 4 per cent. As the Minister rightly says, that is one of the factors that makes the pound high. I wonder whether higher inflation would be a price worth paying in order to get a lower pound.

Does the Minister agree that it is right to allow overall market forces to continue because otherwise we too could regress as France has done? France has considerable economic problems because it has failed to face up to restructuring.

Lord Sainsbury of Turville

My Lords, I do not think this is a question of tact; it is a question of how a major corporation in this country behaves to its workers. I believe that in this day and age consultation and discussion with them about long-term strategy when in this difficult situation is absolutely fundamental to running a good business. As I say, this is not a question of tact; it is about how one runs a modern business appropriately.

The Government are quite clear. We are not saying that we know better than Corus with regard to its strategy. What we are saying is that a company of this size in these extremely difficult circumstances should be prepared to talk to the Government to discuss its strategy and the way forward so that it can convince the Government that it is following an appropriate strategy and adopting a long-term view and that it is not reacting to a short-term situation. When it refuses to do so, it cannot expect the Government or any other parties not to suspect that it is taking a short-term view. The behaviour of this company is not in tune with what we would expect of a major company. Of course, we are well aware of the importance of restructuring and, indeed, the necessity for it in many industries. However, this company has systematically restructured over a long period and has achieved incredibly high—indeed, the highest—rate of productivity in Europe for this kind of plant. The question, therefore, that must be raised is whether it is a long-term sensible decision to take the action that the company has done. That is what we question, not the need for restructuring to take place where it is necessary.

Lord Davies of Coity

My Lords, this is an extremely sad day for the people of South Wales. It is not the first sad day that the people of South Wales have had to suffer. I think that we all recognise that for well over a hundred years the economy of South Wales was based on coal and steel which produced hundreds of thousands of jobs in their heyday. I take a leaf out of the book of my noble friend Lord Shore when he says that we should not calmly discuss the eonomics of the situation. I am not concerned in this debate about the exchange rate or restructuring. What I am concerned about is the impact that this action will have on people's jobs, on communities and on the quality of life in South Wales when these closures are implemented. I have always believed that we should consider the economics of the situation but that we should also remember that the economics must be geared to improve people's quality of life. Sometimes we have to stand back and say, "What is most important is how this impacts on people".

My noble friend said that Corus employs 22,000 people in the steel industry in this country. When I left the industry 32 years ago in 1969, there were 17,500 people working in a single plant at Port Talbot where I had worked for 20 years. That is the difference. I congratulate the Government on attacking Corus for what I call "industrial vandalism" in this case. It is not considering the people who have produced the steel and helped to make the profits over a long period of time. The Opposition ought not to be carping about the Government's condemnation of Corus. They should support that condemnation. They should support the Government if and when they put in place support for the people involved. I say that for one big reason: it is not so long ago that the party opposite saw pit after pit close in this country, particularly in South Wales, damaging the interests of communities and people. This House needs to face up to the fact that people are more important than anything else. I believe that the Government recognise that.

Baroness Amos

My Lords, before the Minister replies, I remind the House of the statement in the Companion about limiting comments to questions to the Minister.

Lord Sainsbury of Turville

My Lords, I understand the anger of people caught in this situation, as expressed by my noble friend. This is a devastating blow for the communities involved and, indeed, also for the workers who raised their productivity in the industry year after year to the highest level in Lurope. That is why we are again asking the company—I stress this—to reconsider the matter and to work with us to find a way forward.

Lord Wedderburn of Charlton

My Lords, will my noble friend confirm two short points? First, long before eight a.m. this morning Corus came under legal obligations to inform and consult not only trade union representatives but also the Government. The failure to inform the Government has been sanctioned in statute by criminal sanctions for some 25 years. There is no need for a new law on this matter in the particular circumstances of the case we are discussing, although there may be such a need in the case of other employers. Does not my noble friend agree that when Ministers met Corus last week they should have told it that it was flying in the face of a criminal offence long dictated by statute and, indeed, departing from the normal consultation procedures of good employers? The good employers point has been mentioned, but as my noble friend mentioned Community rules, will be not also take account of the rules on our statute book of which Corus is flagrantly in contempt?

Lord Sainsbury of Turville

My Lords, the noble Lord has raised an extremely important point. I do not wish to comment on it without further information on the details of the conversations that took place as that may indicate when decisions were made to take these actions. However, I shall take further advice on the matter. If I can obtain any further information, I shall write to the noble Lord and place a copy of the letter in the Library of the House.

Lord Hardy of Wath

My Lords, some of us have watched the steel industry closely—I have watched the engineering steel industry closely and, I hope, helpfully—for a long time and have rejoiced at the enormous achievements of that industry. It was preeminent internationally only two or three years ago.

My noble friend may be aware that at that time the industry and parliamentary representatives established beyond doubt that there were areas of unfair competition in Europe. We have heard nothing from Corus in recent years about problems unless it has mentioned them today. As a result of our happy relationship with what was then British Steel, we attended the meeting two or three years ago when it explained the implications of the merger with the Dutch firm. We accepted its hopes and assurances which now do not seem to have been fulfilled. Is there any possibility that jobs are being lost in this country because workers here may have fewer employment rights than workers in partner firms in mainland Europe? Will the Minister pay particular regard to the point raised by my noble friend Lord Wedderburn about making clear that this business's interests are no longer with Britain? Instead they relate to the short-term calculation of profit wherever it can be planned, with no regard to the long-term interest in the United Kingdom which it should still possess?

Lord Sainsbury of Turville

My Lords, I do not believe that Corus has suggested recently that unfair competition is involved. Any suggestion of unfair competition would be immediately investigated. The question was asked as to whether people have been made redundant in this country rather than in Holland because it is easier to dismiss them in this country. There is no great difference in terms of costs, if not always of procedures. In this case it is fairly clear that the position relates to the performance and profitability of the individual plants rather than differences in costs or procedures for redundancy.