§ The Minister of Power (Mr. Roy Mason)
With permission, I will now make a further statement on the N.B.P.I.'s recent Report on Steel Prices.
On 21st May, I told the House that the Government had accepted the main recommendation in the Report that the price increases proposed by the British Steel Corporation should be reduced to £40 million per annum.
The Government have now completed their consideration of the other recommendations.
The N.B.P.I. recommended that, since competition should make it impossible for private sector companies to exceed the B.S.C.'s prices by any wide margin, the private sector should be allowed to determine their own prices. The Government accept this recommendation for the products covered by the Report, subject to review in the light of experience.
1680 The Government also accept the recommendation that additional charges for small quantity orders should be introduced at 50 per cent. only of what the B.S.C. proposes, but have decided that the full charges should be made from the end of the year.
The N.B.P.I. suggested that the reduction in the total price increase should be spread over 12 products only, but the Iron and Steel Consumers' Council has recommended to me a spread across the board, and this view is supported by both the public and private sectors of the steel industry. The Government agree with the latter course.
The effect will be to reduce the prices proposed by the B.S.C. for carbon steel products by 1¾ per cent., except for tinplate, for which a reduction has already been proposed. The reduction covers sheet steel, which is a key raw material of the motor industry. Arrangements are also being made to see that the shipbuilding industry, which buys its steel under forward contracts, gets a comparable benefit.
The B.S.C. will be making fuller details available as soon as possible.
§ Sir J. Eden
While we welcome the Minister's decision that the proposed abatement should be across the board, will he make it clear that it is not part of his policy that the Steel Corporation should be required to subsidise the exports of other industries?
Since the right hon. Gentleman has made no mention of the N.B.P.I.'s assertion that the corporation is using its market dominance in some products to keep prices down in those areas where it has to compete with the private sector, will he say what investigations he has made into those charges? Since the whole operation began six months or so ago, what has it cost the corporation, and what will it now mean in terms of increasing borrowing?
§ Mr. Mason
There is no intention to subsidise exports through the Steel Corporation. The hon. Gentleman must be aware—I gave the figures to the House last time I mentioned the matter—that between 1961 and 1968 the price of steel went up on an average of 10 per cent. In private manufacturing it went up 21 per cent., so it is not that British Steel 1681 is subsidising exports, but no doubt that manufacturing industry is taking advantage of the low prices we have been offering.
I made no mention of cost reduction in my statement, but the corporation told the N.B.P.I. that it had carried out 80 different programmes resulting in a saving of £13 million in 1968–69. But I shall pursue that matter more vigorously with the corporation.
Mr. Eddie Griffiths
I welcome my right hon. Friend's statement on the N.B.P.I. Report. When will the corporation put the prices into operation? What will be the reduction in profits in the present financial year and in a full financial year, assuming that production targets are reached? Will he also say what is the difference the general abatement of about £13 million in a full production year will mean in the light of capital investment envisaged by the B.S.C.?
§ Mr. Mason
I hope that it will put its prices into operation within the next few days. It is not easy to work out the profits position because the B.S.C. may more vigorously pursue its cost-reduction programmes, and the cyclical trend may maintain itself for many more months yet. Who knows? Therefore, it may be able to gain the benefit of higher sales than were planned hitherto.
Mr. Edward M. Taylor
Will the right hon. Gentleman expand a little on the nature of the concession he claims to have given the shipbuilding industry? Is he just saying that for ship plates there will be the same increase as for other items, or is it going any way towards the recommendation in the Geddes Report?
§ Mr. Mason
The hon. Gentleman, representing a shipbuilding constituency, knows that shipbuilders place options for up to two years ahead and on the steel so far ordered for two years—1 million tons—the prices they were to pay on the proposed B.S.C. increase will be reduced by 15s. a ton, so this will be of help to the shipbuilding industry.
§ Mr. John Mendelson
May I press my right hon. Friend a little further on the last question put to him by my hon. Friend the Member for Sheffield, Bright- 1682 side (Mr. Eddie Griffiths) concerning the view of the corporation, if he cannot accept its entire proposals, that there might be difficulty about future investment? Will he couple that with an assurance that the industry will be allowed to be in a position to pay an adequate income to all those who give loyal service to it?
§ Mr. Mason
I do not think that what is perturbing my hon. Friend the Member for Penistone (Mr. John Mendelson) is causing any concern to the corporation. It has managed to get the abatement right across the board and will be able to put its price increases into effect very quickly, whereas if the Government had adopted the N.B.P.I. proposals to give special treatment to the 12 products it would have taken some weeks' to work out its schedules—50 schedules, with hundreds of prices—and delayed it in getting a return. The B.S.C. welcomed the method we adopted. Therefore, it will not materially affect any of the things my hon. Friend has in mind.
§ Mr. Ridley
Will the right hon. Gentleman confirm that his statutory authority for the decision he has just announced is simply under the Prices and Incomes Act? Does he agree that after 1st January, 1970, the corporation is at liberty to charge whatever it likes for any category of steel it manufactures?
§ Mr. Mason
As regards the prices and incomes policy, certainly I am within my authority. With regard to the hon. Gentleman's latter point, he is sitting on the Committee on the Iron and Steel Bill and knows that borrowing is going ahead for the next five years. The corporation could, if it wished at that time, increase its prices, but if they were major increases they would be subject at least to the early warning system for examination by the Government first.
§ Mr. Spriggs
Has my right hon. Friend seen The Times report this morning of the May production record of British Steel? What steps is he taking to congratulate the workers and management in the industry?
§ Mr. Mason
I have seen the Report. Nationalisation, even in its early stages, is beginning to bear fruit. As well as taking 1683 advantage of the cyclical trend, the industry has done remarkably well in spite of the fact that it took over an industry with a return on assets at that time of 1.9 per cent., and is planning to obtain a return as high as 13 per cent. It is up to the House to recognise the major task before the corporation, and how well it is doing so far.
§ Sir G. Nabarro
Will the Minister recognise at once that the increase of 10 per cent. in steel prices has been dominated and regulated by the growing volume of iron and steel imports, notably from Western Europe, and that that is where the competition is coming from, to the detriment of our balance of payments?
§ Mr. Mason
The hon. Gentleman is quite wrong. I tried to tell him this the last time we discussed the matter. During recent months the medium plate price increase in Germany has been 12 per cent. and in Japan 32 per cent. Some overseas nations have been able to take advantage quite quickly of the present rising trend to obtain higher prices, a bigger return and, therefore, more money to invest in the future. We have held the B.S.C. back so far.
§ Mr. Dalyell
For the benefit of those of us who represent sectors of the commercial motor industry, will my right hon. Friend explain what he said about sheet steel prices for the motor industry?
§ Mr. Mason
Sheet steel was not included in the N.B.P.I. proposals to apply the reduction only to the 12 products, but it is included in the across-the-board abatement and, therefore, the increase will be less. The industry will benefit to the tune of £1 million a year, and the increase on an average car would be less than 1 per cent.