Mr. Speaker

Before I call the hon. Member for Ebbw Vale (Mr. Michael Foot) to move his Motion, I wish to inform the House that I have selected the Amendment in the name of the Prime Minister and his right hon. Friends.

4.25 p.m.

Mr. Michael Foot (Ebbw Vale)

I beg to move, That this House deplores the persistent uncertainty in the steel industry created by the pronouncements and policies of the present Government, and calls upon the Government to give steady backing to the British Steel Corporation in carrying through the greatly-enlarged investment programme in the industry which the national interest requires. Perhaps I could satisfy my hon. Friend the Member for Ealing, North (Mr. Molloy) by reminding him that I speak in this House not as a Privy Councillor. Therefore, I hope that I will be able to represent some of the views he might wish to have put on some of these questions.

In moving this Motion, perhaps I may be permitted to suggest that there is a connection between the matter of supreme importance which the House has been discussing only a few moments ago and this debate which we are initiating on the steel industry. In seeking to illustrate the connection between the matter of Britain's entry into the Common Market and what might happen to the steel industry, perhaps I could quote a paragraph which appeared in the Sunday Times on 9th May in an article by Mr. Keith Richardson in one of the financial pages of that newspaper. In that article he discussed the connection, or alleged connection, between these two matters and the question, which has been mooted in certain quarters, that the Government might be eager to secure some foreign capital to be invested in the steel industry. What Mr. Richardson said at the end was this: The possibility of foreign cash being used to buy off parts of the British Steel Corporation seems now more remote, however. One British group has approached German steelmakers for financial support only to be told 'We see no point in investing in British steel, for once you are in the Common Market we shall put your steel industry out of business anyway'. I do not subscribe to that doctrine. I do not believe that anybody, not even the present Government, wishes to put our steel industry out of business. I do not believe it can be put out of business. However, I believe that, whether or not we go into the Common Market, it is of the utmost importance that we should do everything in our power to strengthen the British steel industry certainly. If, by any misfortune, we eventually go into the E.E.C., we will need a powerful steel industry to sustain our place in the Community, and, if we stay out, a strong steel industry will also be very necessary. Therefore, one of the reasons that we are eager to have this debate is in order to examine what has happened to the steel industry over the past year and to discover what proposals the Government are now to bring forward.

The Government may well say that they would have preferred to have had this debate at a slightly later date when they could have come forward with the proposals which arose from the investigations which were announced by the Government in the debate on the steel industry on 18th March. But the settlement of the timing of this debate conforms exactly with the time available as laid down by the Secretary of State for Trade and Industry and his hon. Friends in that debate. They then said that they were undertaking an extremely urgent investigation into the steel industry and that they hoped they would be able to make their report to the House about this matter within six weeks or two months. The two months are now up.

The Minister for Industry said in that debate that he hoped that it might be possible that the period would be shorter, and I am sure that he must recognise that every day that passes prolongs the uncertainty in the industry. There are the most powerful reasons for the Government to announce their policy as speedily as possible. Therefore, even though the Government have told us that they are not yet ready to make this statement, we thought it right to go ahead with this debate so that the Government should once again have the opinions of those who represent the steel constituencies when they go forward with their plans.

Although of course we regret the delay, we would like to have the right decisions after Whitsun than the wrong decisions before Whitsun. Therefore, if after Whit sun the Minister comes along with comprehensive proposals for removing the uncertainty which the Government have created in the steel industry, and if he outlines the long term proposals as a penitent sinner but as one who wishes to reform, there will be rejoicing on these benches and also, I gather, in celestial quarters as well. Therefore, we look forward to the statement to be made by the Minister, and it is in that spirit that we initiate this debate.

I am sure that the Minister will hardly wish to quarrel with the first part of our Motion, which deals with the present feeling of uncertainty in the steel industry. Anybody who has any knowledge of the steel industry knows that during the past weeks and months there has been serious uncertainty about Government policy and about what is to happen to the industry. Indeed, The Times Business Section in an article a few days ago described this uncertainty as "intolerable". The article went on to say that it hoped the Government in bringing forward their short term proposals would also bring forward their long term proposals. I will say a little more about that matter later.

Mr. Campbell Adamson of the C.B.I., who knows something about the steel industry, has also stressed the unhealthy nature of the uncertainty surrounding the industry at present. I am sure that the right hon. Gentleman the Secretary of State for Trade and Industry would not dissent from the proposition that he should end the uncertainty as swiftly as possible. If he cannot do so today, I hope he will recognise that we shall expect him to make his announcement immediately after Whitsun and that the Government will ensure that we shall have a further debate at that time.

What are the Government's reasons for intervening in the way that they have? I shall refer to the matter briefly, but it is necessary, because these are the grounds which the Government have put forward for intervening in the industry. They say that their action was necessary because of the mistakes or grievous errors in the British Steel Corporation's forecasting. The right hon. Gentleman has quoted the figures on a number of occasions, as indeed have other Government spokesmen. Their charge has been that the British Steel Corporation was £150 million out in its forecasting.

The way that the right hon. Gentleman quoted those figures was most unfair. The new structure of the steel industry had been in operation for a short period only when this Government came into office. In July, 1970, the Steel Corporation prophesied a profit of £33 million for the year 1970–71. In fact, I understand that there will be a loss of about £14 million. We have to take into account also the increased revenue which the Corporation had from increased prices during the period of, I gather, £21 million.

If all those figures are gathered together, it means that the mistake in the forecast, if it can be put that way, amounted to £68 million on a turnover of £1,400 million. Of course it is a mistake. If the right hon. Gentleman examined the accounts of many other companies during the past year, I am sure that he would find that mistakes in forecasting had been about the same or worse. But the right hon. Gentleman has taken a figure of £100 million which had been mentioned previously by the Steel Corporation, which was certainly not an official figure and was hedged around with all manner of qualifications, and presented a picture or an accusation to the House and to the country that the British Steel Corporation have been most mistaken in its forecasting.

The whole premise on which the right hon. Gentleman acted was unfair to the Steel Corporation and gave an unfair picture of the real state of its finances. I mention that partly because the Secretary of State has used the argument so frequently and because the Government, on the basis of those figures, have taken the most extraordinary action.

Because of its difficulties, its financial situation, the general inflationary situation and difficulties with cash flow, the Steel Corporation had to go to the National Loans Fund to get extra cash in the latter part of last year. That is not an extraordinary occurrence. Indeed, the Corporation has a fairly good record in this respect. However, that is no reason for the Government taking measure after measure to put the screw upon the industry. As I say, they took extraordinary action against this great nationalised industry.

Since January of this year the Government have insisted that major investment plans should be submitted, and resubmitted in certain cases, for investigation before the Corporation was given the right to go ahead. Since the debate on 18th March a joint steering group has been established which has conducted further surveillance over the industry, so that for the whole of the intervening two months nobody could know for certain where responsibility lay in the conduct of the operations of the Steel Corporation. It is partly on that account that we have had such confused answers from different Members of the Government about the various investment schemes throughout the country which are of such importance to the steel industry and to my hon. Friends who represent steel constituencies.

The right hon. Gentleman understands the situation perfectly well and he stated it fairly in the debate on 18th March when he initiated this joint steering group. He knew what was happening. He knew that the Government would hold up various investment schemes until they had examined them. We were not told how the process of examination would take place. The right hon. Gentleman understood that, but the Prime Minister and other Members of the Government did not, because when we put questions about the hold-up of particular investment schemes—for example, the investment scheme at Ravenscraig—we got contradictory answers.

We need not have much dispute on this matter. When some of my hon. Friends and I went to see the right hon. Gentleman recently to discuss the matter, he received us, as is natural, most courteously and discussed it with us. I asked—I am sure that he will not mind confirming it in the House—whether he would give a clear confirmation that, when he gave the interim report of the joint steering group to the House of Commons on its findings about the future of the industry, he would give an undertaking that absolute authority would be restored to the British Steel Corporation according to the Act of Parliament laying down its rights and responsibilities. The right hon. Gentleman said "Yes" to the proposition that when the interim report was made—we had hoped to have it now, but I presume that it will be made immediately after Whitsun—full authority would be restored to the Corporation to go ahead with its jobs and thus remove the uncertainty which has surrounded these various investment programmes. He told me that that was going to happen, and that was confirmation of the interference which the joint steering group has been conducting during this period.

The Government held up all the major investment programmes of the Steel Corporation, but they have now released one or two. The Secretary of State for Wales announced the release of the Llanwern project, which had been agreed by the previous Government and by this Government, but which was held up by them. They have now revoked that hold-up.

We were told that Ravenscraig was held up under the same kind of arrangement, but the Government have not yet made any statement about their decision, so confusion remains. I have no doubt that my hon. Friends representing different steel constituencies will go through the list today and put questions to the right hon. Gentleman. I hope that he will have clear indications for my hon. Friends about the position.

Prior to the establishment of the junior steering group, or prior to the establishment of the surveillance which the Government made over the investment programmes of the industry at the beginning of the year, under the arrangements which had already been announced by the Steel Corporation, and confirmed by the Minister for Industry when he visited the area, Ebbw Vale was to have a new pickle line and the plans for going ahead were ready. When we get the single word, "Yes", the plans can be put into operation immediately. That is another project which is held up by the process which the Government have established for surveying all the different investment projects of the Corporation. Even a new precipitator for our open hearth furnace, which is essential for ensuring that we conform to the rules and regulations laid down by the inspectors who deal with these matters, is held up by the Government's restriction on the various invest- ment programmes which should be going forward.

I ask the right hon. Gentleman to answer the following specific questions. First, will he reassure us that when he makes the interim announcement absolute full authority over all investment programmes will be restored to the Steel Corporation? Secondly, will he answer the question which I put to him in the debate on 18th March by telling us how much money has been wasted by the holding up of these programmes during these two months—the period will be over two months by the time he makes the announcement—because many of these programmes have already increased in quite heavy cost in the interim period?

The pickle line in Ebbw Vale will make a profit, and the quicker that we can get on with it the better for all concerned—better for the finances of the Corporation, better for our prospects in Ebbw Vale, and better for the nation as a whole. I hope, therefore, that the Government will give us an estimate of the extra cost that has been added to the burden which the Corporation has had to bear because of the Government's intervention.

The joint steering group which has been in charge of the steel industry over the last few months is a kind of constitutional monstrosity. It is a most curious arrangement that governing the investment programmes and influencing the pricing policy and recommendations about hiving-off of this great industry there should be a body on which sits representatives from the Treasury, from the right hon. Gentleman's Department, and from the British Steel Corporation, including Lord Melchett, the Chairman, himself. I think that if such a body had to be established the right hon. Gentleman himself should have presided over it. To have civil servants in charge of such a body is a most curious way to proceed, particularly when they are able to shuffle off responsibility from one to the other.

I am not claiming that the relationship between Parliament and the nationalised industries is perfect—I think that we have a great deal to learn about it—but every report that has been presented to this House in recent years, and in particular reports from the Select Committee presided over by my hon. Friend the Member for Poplar (Mr. Mikardo), has emphasised how important it is to draw the lines absolutely clearly between the responsibilities of the Government and those of the Corporation. That is the only fair way to proceed. If those responsibilities are muddled up and the decisionmaking body is partly Civil Service, partly Treasury, and partly the Corporation itself, nobody knows whose is the responsibility for different matters.

It may be that one reason why that has been done is that the joint steering group has discussed, in some measure, the hiving off proposals. I am not sure whether that is the case. The Minister shakes his head, and I am glad to note that he dissents. Is he confirming that the hiving off proposals are not to be discussed by the committee that is to examine other matters, and that there is to be a quite separate body to examine that issue? That, too, is a curious constitutional arrangement, if there is a joint steering group to govern the whole of the immediate conduct of the Steel Corporation, and another body to discuss the hiving off proposals.

Whether the joint steering group has been discussing the hiving off proposals or not, I think that what the Government have been seeking to do in this respect is to persuade the Corporation to give some sort of support, backing or power, to the hiving off proposals which they wish to bring forward, because they need some support. The Government realise that they would have the greatest difficulty in getting any hiving off proposals through on their own recommendations, because everybody knows how prejudiced they are in their actions. They therefore want some support from the Corporation itself so that they can put the proposals forward and say that they must not be too strongly opposed by hon. Gentlemen opposite because they have the approval of the Corporation.

I hope that the Minister will not proceed in that way. I hope that he will take responsibility for any proposals for hiving off that are put forward. I hope that he will not try to implicate the Corporation in those proposals, because he knows as well as I do—and he can confirm it today if he likes—that the Corporation has, from the beginning, been opposed to all the proposals which have been made by some hon. Gentlemen opposite for splitting up the Corporation. The Corporation has been opposed to the proposals for taking away whole sections of the industry, such as special steels, constructional engineering, chemicals or tubes. It has opposed all those proposals, and I hope that the Government will not try to conceal that fact.

What the Corporation has said—and there is no secret about this, because this is what it proposed to the Labour Government during their last few weeks of office—is that there should be a little hiving off in certain areas, and a little hiving on. That is a different process from the one which has been recommended from some other quarters. I hope, therefore, that the Minister will make it clear that there will be a statement in the very near future, which will carry forward the statement that he made in April, to the effect that bulk steel-making is not to be split, and that he has abandoned a large part of the hiving off or splitting up process which he had previously proposed. I hope that the Minister will undertake to make a statement on that subject, as well as on the financial questions which have been discussed by the joint steering group.

I do not want to embarrass the right hon. Gentleman. It may be that in this respect he has been fighting a good fight. He may have been somewhat late in coming to his conclusion, but I think that he has difficulties with which he has to contend—the Prime Minister, and some of the people in his Department—and some people say that we must regard the right hon. Gentleman as a good man who fell among Powellites. It may be that that is the position that he occupies in the Conservative Administration, but I hope that he will give a clear undertaking that the hiving off programme has been abandoned. I believe that that is how the Government's mind is moving, and I should like to assist the right hon. Gentleman in carrying through these proposals. I should like to assist him by what is known as the Kutuzov strategy of offering a golden bridge by which he can escape from the territory which he should never have tried to occupy.

We remember the Napoleonic flourishes of the right hon. Gentleman at his conference last autumn. We remember him talking about disengagement, hiving off, splitting up and selling off, but the more he considered the question the more he realised that it was a hopeless cause and so he made his announcement of two or three weeks ago. We hope that very soon he will clear up the whole question, and thus avoid wasting time, energy and money on this whole business of hiving off.

To assist the right hon. Gentleman further, I ask him for an assurance, which I am sure he will wish to give me, about the steel industry. When we discussed the Coal Bill in Committee and in the House, we secured from the Government an undertaking that if any proposal was made for hiving off a part of the coal industry the matter would come before the House, and we would be able to debate it. That provision is written into the Bill which the right hon. Gentleman approved. I suggest, therefore, that he should give that kind of undertaking in respect of the steel industry. I do not want to celebrate a triumph too soon, but I hope that we shall be allowed to forget the whole matter once the right hon. Gentleman says that the sections of the steel industry which were not dealt with in his April announcement will be dealt with in his announcement after Whitsun.

Mr. Frederick Lee (Newton)

My hon. Friend is speaking in the future tense. Does he realise that we are confronted now with the virtual hiving off the wire section of the steel industry, which is highly profitable? Irlam Steel has made profits for the last few months, and we have a problem now, let alone what might happen in the future.

Mr. Foot

I appreciate what my right hon. Friend says and the feelings of his constituents from Irlam, many of whom I believe are in the precincts of this House today making their representations. As my right hon. Friend will recall, when we had a meeting with Lord Melchett, the Chairman of the Steel Corporation, he made it clear that that was not a closed subject but was one on which representations could still be made. I am sure that my right hon. Friend would agree that much the best solution, if it can be secured by some different method, is for the Irlam works to be kept in being, as many of us would wish to see, under the Steel Corporation. That would be the best way to do it, but that is a matter for consultation between the unions, those who work there and the Steel Corporation according to the undertakings given by the Corporation.

Mr. Churchill (Stretford)

As the hon. Gentleman well knows, the Corporation has no interest whatever in continuing its steel-making capacity at the Irlam works, and it has made this clear. In these circumstances, could the hon. Gentleman tell us where Her Majesty's Opposition stand if private enterprise was willing to make a bid which would safeguard the jobs of approximately 4,000 men who live with their families in that area?

Mr. Foot

There have been different statements of the kind of proposition put forward about the Irlam works. As I have said in reply to my right hon. Friend the Member for Newton (Mr. Frederick Lee), the proper way for this matter to be dealt with, immediately, is by further consultations between those concerned in Irlam, the unions and the British Steel Corporation.

If the hon. Gentleman turns to further questions of what would be the attitude of the Opposition or anyone else to propositions for maintaining the works or for fresh investment in different parts of the industry, I would not think it right for me to pronounce on any individual project without looking at the details. [Interruption.] I will come to the case put by the hon. Gentleman. The right hon. Gentleman in his statement made a proposal about inviting private capital into the industry and said that he would not impose severe or unnecessary restrictions if private capital was to come forward. He welcomed the idea of such private investment in the industry.

It was a very strange announcement to be made by a Government who at that time were holding up a whole series of investment projects in the publicly-owned section of the industry, projects which had been subjected to far more severe scrutiny, as I understand it, than any of the projects put forward about Irlam or anywhere else, for introducing private capital. What the right hon. Gentleman is saying is that he is eager to invite private capital into the industry for investment. By doing that he is going back, not merely on what was decided when the industry was nationalised, but on the general proposition accepted by everyone who knows anything about the steel industry in this country, that there must be some central Government control of some kind, or some central board control over the various investment plans of the industry.

Without such control we will run into the trouble that we have had many times before in the industry whereby investment is begun in one area and then in another and one investment project cuts the other's throat. To some extent that is what happened between Llanwern and Ravenscraig, as many people will understand. Anyone who appreciates what has happened in the steel industry before would be very chary of thinking that the ideal way to solve the problem is to have increased private investment, particularly uncontrolled investment as the right hon. Gentleman was suggesting in his April statement.

It would be a retrograde step which could do great injury to existing projects and which could injure the whole, careful and ambitious investment plan which has been drawn up by the Corporation. When such proposals are made as the right hon. Gentleman has made, I wonder whether they are motivated by the desire to assist the industry or by a desire to injure public ownership.

Let me turn now to the question of prices which has played a big part in all these discussions. In some respects the most arbitrary action taken by the Government in interfering with the affairs of the steel industry was the way in which they interfered with the fixing of the prices. According to newspaper reports, the right hon. Gentleman is again on the side of the angels, if I can put it that way, The Sunday Telegraph of 16th May said: The Prime Minister vetoed a demand in April for a 14 per cent. increase. The Cabinet halved it. Mr. Davies was convinced that the Corporation's case was just but he was overruled. I do not expect the right hon. Gentleman to reveal when he was overruled or how, but that is the general supposition. To do the right hon. Gentleman credit, he did examine the case of the Corporation very carefully. He took some time to do it, but I suppose that was justified and certainly we on this side are in no position to argue that there should be no intervention at any time in the fixing of the prices of the Steel Corporation or other of our major industries. Some of my hon. Friends, when they were in government, intervened to keep down the price of the industry's products. We could not argue that there should never be such intervention and I do not argue that.

I do say, however, that if there is such intervention that has to be taken into account in judging the performance of the industry. It is not fair to say, "We will restrict your price in what we regard as the national interest" and then to pillory the industry for not making a substantial profit. That is what has happened with the steel industry. If it had not been for the prices fixed by the Labour Government, the Steel Corporation would have made a handsome profit throughout the whole period of public ownership, which is more than could be said for some of the parts of the Corporation when they were privately owned.

That is the first argument. It might be that if it had not been for the prices fixed by the Labour Government the Steel Corporation would have made something like £200 million more during those few years, and that would have meant making a considerable profit in that period. The further reason why we believe that this intervention was unjustified is that it was discriminatory. If the Government are taking action to deal with fuel prices, cement prices or oil prices, seeking to restrain prices in those areas, there may be a case for saying that they have a right to do it with the steel industry. There is, however, no case for picking out the steel industry for particularly vindictive and discriminatory treatment, which is what has happened here.

There are no grounds for action which injures the position of those in the steel industry. What does the right hon. Gentleman think will be the effect of this interference with price on negotiations and relationships between the Corporation and its workers? Interference with the price interferes with the whole prospects of the industry. We say that the right hon. Gentleman should certainly look again, and immediately, at this question of the price which the Corporation was demanding. Apparently it was reported that he was in favour of the full increase or at any rate a larger increase than the Government eventually conceded and I hope that he will give us an early statement on that point too.

The price affects not only the wages of steel workers and the profitability of the Steel Corporation and morale in the industry. There is also the question of what was raised by Lord Melchett and others long before this argument on price—that what the steel industry needs in Western Europe is greater freedom in making price decisions, and that if it is to be required to compete and to carry out huge investment programmes, it must have the power to makes these decisions as well. It is grossly unfair first to deny the industry this freedom which is exercised by practically every other industry in the country and then to assault and attack it because it has not achieved great profits.

Let me give a further reason why some of us regard this question of price as of major importance. What worries us about this arbitrary intervention on top of all the other actions which right hon. Gentlemen have taken with the steel industry—the clumsy way in which they have dealt with the investment programmes, the manner in which the joint steering group has operated, the way in which the affairs and energies of the Corporation have been distributed by the hiving off programme and the arbitrary intervention about the price and many other items which we have debated before, such as the abandonment of investment grants—all these matters which injured the profitability and financial position of the Corporation, is the effect that they may have—I do not say "will have" because we want to avert the catastrophe—on general investment programme of the steel industry.

I could quote the statement made by The Director, a paper I do not normally study with great care. In an article on 11th May it confirmed what I said about the way in which the Government had in effect taken over control of the industry, saying that by this action,

… the Government has committed itself to the active management of the British Steel Corporation. The article dealt with the interim report which is expected by the Government as a result of the investment, and concluded: The Government's urgent study of the financial structure of the steel industry must not result in Ministers becoming so preoccupied with today that they forget about five or ten years hence.

Mr. John H. Osborn (Sheffield, Hallam)

Would the hon. Gentleman also comment on the early part of the article, which says that the steel industry … would not be in the mess that it is today had it not been nationalised after a long and bitter political battle."? Would he read the whole of that article?

Mr. Foot

It is not really astonishing that some of the people who produce The Director are opposed to public ownership. They have been for years. The extraordinary fact is that, even though they have been opposed to it, they have now come around to the view that what is required is a long-term plan for the steel industry, which is something that the industry never had under private ownership. One of the reasons that it is in such difficulties today is because the hon. Member and some of his friends starved the industry of proper investment when they were in charge. The record of investment in the steel industry over the previous 10 years was a disgrace to this country and I am amazed that any spokesman of the steel masters should dare to raise his voice in the debate at all.

Mr. J. H. Osborn

I was only drawing to the hon. Gentleman's attention at this stage the content of the article to which he had referred. I will deal with the other matters if I am called later in the debate.

Mr. Foot

The hon. Gentleman was drawing my attention to the false premise; I was drawing attention to the correct conclusion—and it makes quite a big difference.

I say again to hon. Gentlemen opposite who have anything to do with the steel industry—not that there are many—that no one who bore direct responsibility for the low investment programme of the years before 1967 has much right to lecture the Steel Corporation today.

One of the achievements of the Corporation during this period has been to draw up a plan for the development of the industry over the next 10 years, to raise the figures of production—I will not go through the figures; right hon. Gentlemen know them—from £25 million to more than £40 million. This ambitious and intelligent programme will cost a lot of money. There are many people in the steel industry who want to see this plan go through successfully. It is extremely delicate——

Mr. David Lane (Cambridge)

The hon. Gentleman might at least do the House the courtesy of doing his homework before he lets loose a speech like this. He was accusing the former industry of having no long-term plan. Has he overlooked that, in the 15 or 20 years after the war, despite the threats of nationalisation from the party opposite, at least three long-term plans were drawn up and put into operation by, the industry?

Mr. Foot

I understand that, but the three long-term plans were derisory, compared with what was being done in most other countries. The percentage increase in production year by year in the steel industry for the 10 years prior to nationalisation was something like 2 to 2½ per cent. a year—a miserable record. There are people in the Corporation, whose names it would be improper for me to give, who were opposed to public ownership and who are now ready to admit that it is only through the combined, far-seeing, centralised programme that they can draw up a sufficiently bold investment programme.

There are people in my constituency and in the other constituencies represented on this side of the House who wish that programme put forward and pressed through successfully; so even more important than the interim announcement which the Secretary of State was to make is the statement which he will make later on about the whole future of the industry. We should like that announcement brought forward to a much earlier date, because we fear the consequences of continued uncertainty.

What the Steel Corporation is seeking to carry through is not a programme for feather bedding but a programme which will involve a considerable reduction in the total numbers of people who will be employed in the industry over these 10 years. That is a very difficult operation to carry out in a civilised manner, but if it is to be done, the workers in the industry must be assured that, as parts of the industry are run down and as some closures may be made—some closures will have to be made—at the same time the development part of the programme is going ahead at a steady and improving pace.

So every time, when there is an intervention which causes redundancies, without the guarantee that the plan is going ahead, this causes difficulties. I know what happened in my constituency, and it is the same in all the other steel plants of the country which are to be sustained as part of this programme. We must give the workers in the industry an assurance that the industry itself will not be run down—rather, the industry will be raised to a peak which we have not known before. That is what the Steel Corporation has planned for and that is what the Government should back. That is where the Government should be giving their encouragement and support.

The opposite will happen. My fear is that, if the Government continue with all these impositions, restraints, restrictions and interferences in the industry, there could be in the steel industry the same kind of situation as there was in the coal industry, which was run down too fast, in my opinion and those of the National Union of Mineworkers and the National Coal Board. It was a decision taken by the previous Government, which some of us contested. But they ran it down too fast, and now there are problems in building it up again. In the steel industry we can learn from that. We can combine the two processes. At the same time, if we can carry the confidence of the people in the industry, we can carry through the great transformations which have been needed over the last 20 years and the great expansion which we have needed as a great industrial nation. We could carry it through. That is the prospect on one side.

The prospect on the other side is that demoralisation in the industry will go so deep and the interference of the Government will be so continuous that morale will be broken. That would be a catastrophe not merely for the steel constituencies but for the country as a whole.

Therefore, what we fight for in the debate, and what I hope the Government will support, is that we should give the British Steel Corporation one of the great advantages in carrying through this programme—that the leadership of the Corporation commands support and confidence amongst the people who produce the steel up and down the country. If the Government destroy that confidence they will have done the greatest possible injury to an industry on which all other industries depend.

I hope that the right hon. Gentleman and his Government will start approaching the affairs of this industry in a very different mood. I believe that the right hon. Gentleman has learned a great deal about it during the past year. I hope that when he comes forward with his interim statement, if not today, he will be restoring to the British Steel Corporation the power and authority and the financial backing to carry through the great expansion of the industry which the national interest requires.

5.12 p.m.

The Secretary of State for Trade and Industry (Mr. John Davies)

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof: 'endorses Her Majesty's Government's decision to undertake thoroughgoing reviews of the financial performance of the British Steel Corporation and of the structure and future development of the British Steel Industry'. Before coming to the real meat of the debate, I deal with three questions, all of which have been raised, in one form or another, by the hon. Member for Ebbw Vale (Mr. Michael Foot). The first relates to the complaints that the first phase of the review now being carried out has not given rise to a statement before this debate or during the course of it. The second matter is the charge that the institution of the review which has been put in hand has led to a serious deferment of investment plans within the industry. The third matter is the imputation which has arisen that there is a deterioration in the relationship between the British Steel Corporation and the Government and that the discussions which have taken place have been in an atmosphere of hostility.

On 18th March, during the debate on the steel industry, I said that I hoped that the first phase of the review would be completed within six weeks to two months. In fact, the results of the study were put before me only last Thursday and that represents a slippage of two days only with regard to the target I set. I should not have thought that that was too bad. The predictions that I made in other debates and at various Question Times are also borne out in exactly the same terms. I cannot accept that this review has been late in coming or that the House has not had the chance of a sight of it which it expected.

I made it perfectly clear that once I had the first phase in hand I should need to devote some considerable time to considering the recommendations put before me. In any case, if account is to be taken of points to be raised in this debate, obviously there has to be a certain amount of time before I can make a statement.

During questions on the Business statement last week, the hon. Member for Motherwell (Mr. Lawson) said that, in discussions with a group of Opposition Members, I had given an undertaking that I would make a statement before Whitsun. This is not correct. I said to him and to other hon. Members that I hoped very much to do so but that I could not give an undertaking. As things have turned out, I am not able to do so and take into account what may go on today.

A word on the subject of deferment of investment plans. This has been a subject which has created a great deal of heat, and I fear that the situation is still not perfectly clear. First, the terms of reference given to the joint steering group were given in mid-March, and they do not in any way relieve Ministers of their responsibilities. The object of the joint steering group is to analyse the problem and to make recommendations. This they are doing, and it is these recommendations which Ministers have to consider.

What I said on 18th March was that I would need to call for a deferment of all starts of new projects from that date until this first phase had been completed. Equally, I said to the Corporation that I wished it to inform me of any new projects which it wished to start before that first phrase has been completed so that I could consider them. I did not conceal for a moment—I accept what the hon. Gentleman said—that that was a limitation on the chairman's normal authority. In other circumstances, he would be entirely entitled to proceed with the investment project in accordance with the programme laid down and agreed with me last autumn to the tune of £185 million. I did so because it seemed that with this major review in hand, it would be wrong to proceed willy nilly with all the projects approaching without further consideration.

Lord Melchett understood the reasons for my request and readily accepted them. Since then—this is the point about which I must give some clarification to the hon. Gentleman——

Mr. John Mendelson (Penistone)

He had no choice. You imposed them.

Mr. Davies

I simply say that he readily accepted them. I hope that the hon. Member will not question the fact that he did. I assure the hon. Member that he did so.

The point which is, perhaps, slightly clouded is that since that time, Lord Melchett has put to me only one new start which, because of the hold-up that I had requested, would not have proceeded—that is with regard to Llanwern. It took us a few weeks to reconsider that and to give the go-ahead. The extent of deferment, such as it is, revolves around that single project. The Ebbw Vale pickle line, for instance, has not been submitted to my investigation.

In a more general sense, it would be quite wrong to imply that the Government's attitude will bring about a fall of investment in the industry. On the contrary, the curve of investment in this industry during the period since nationalisation shows that relatively low figures occur in the early years—£62 million in 1968–69, £81 million in 1969–70, and £140 million in 1970–71. With a programme agreed of £185 million for 1971–72, a large part of which, in any case, is in course of commitment, it can be expected that e investment this year will also be very considerable.

Mr. Eddie Griffiths (Sheffield, Brightside)

Is this £185 million, before price escalation, what the Corporation anticipates spending this year, or is it the cost of projects some part of which will be spent next year? Is this money to be spent during this financial year?

Mr. Davies

Yes, it is the amount anticipated to be spent in this financial year, including, therefore, the continuation expenditure for projects already in course and the institution of new projects.

As regards the question of hostility between the Corporation and the Government, I am very conscious of the frequent allusions to these alleged tensions. I want to refute them. It is obvious that, when one is consulting on these quite difficult issues, there are undoubtedly differences of opinion. How could it be otherwise, and what would be the use of consultation were it otherwise? It would be very misleading to read into them any great sense of hostility between the Corporation and the Government. It simply does not exist.

Moreover, I would refer in the same sense to the question of uncertainty. The hon. Member for Ebbw Vale had much to say about the state of uncertainty which had been created in the industry. Any uncertainty which has resulted from the reappraisal which we have set in course pales into insignificance in relation to the uncertainty which was caused in the industry throughout the whole of the decade of the 1960s and the suspense in which the industry was held as a result of the policies of the Labour Government.

We have had over the last few months a considerable number of debates and discussions on the steel industry. I certainly make no complaint about them. I believe that it is an absolutely key industry in many respects, whether it be in respect of manpower or investment, and particularly, perhaps, in the way it permeates every other part of British industry. It warrants a very special place. It warrants very close attention. It is certainly getting it.

We have in past debates covered very largely the question of the B.S.C.'s financial and operating performance and its manpower policies and decisions in relation to that. I do not propose to go over the ground again.

The hon. Member for Ebbw Vale sought to correct the figures which I gave some time ago on the subject of the apparent deficit—the turn-round in the performance of the finances of the Corporation. I realise that there can be contention as to what figures were given as positive estimates and what were given as generalised indications. What was of fundamental importance was to get a proper forward estimate for this year's out-turn—the out-turn for 1971–72—rather than for the past year to which the hon. Gentleman was referring. Therefore, I would not propose now to go over all that ground again. It relates largely to the past, and what I think we are all concerned about is the future.

I want to say a few words on the reasons, because the hon. Gentleman questioned them, why we decided to carry out a very complete reappraisal of the Corporation's future, both in terms of its development and of its structure. I do not think that there could be any real disagreement that over the post-war years the industry has failed to undertake the level of investment and to rationalise its operations in a manner allowing it to retain its position as a leading steel industry in the world league.

That a major factor in bringing this about has been continual changes in status and great uncertainty cannot be seriously disputed. Although so much of the former Government's 1965 White Paper contained unwelcome views to my right hon. and hon. Friends, who were then in Opposition, we can only concur with its objective, which was to secure a positive development of the industry as a whole, even though we entirely deplore many of the methods which were advised in that White Paper as being the ways to achieve it.

It is interesting to recall the views expressed by the right hon. Member for Barnsley (Mr. Mason) in the debate on the 1969 Act, when he commented as follows: The corporation took over the industry at a low point in its fortunes … already, we can see a distinct improvement … Referring to the introduction of public dividend capital the right hon. Gentleman said this: Looking at the next few years as a whole, there would seem to be ample justification for this further experiment … an experiment I feel confident will succeed."—[OFFICIAL REPORT, 8th May, 1969; Vol. 783, c. 685–6.] Yet as we have taken stock of the situation since last summer we found an industry which had continued to operate in deficit, whose forecasts gave little prospect of doing otherwise without disturbingly high price increases, and whose long-term investment programme to put it back at the top of the world league was enormous and would make vast calls on public funds.

Faced with this paradox of unprofitability on the one side, and vast investment plans, on the other, it was only right that the first line of action should be to carry out a very penetrating reappraisal of the industry's future both in respect of its financial and its investment objectives—long and short-term—and in respect of its structure, to ensure that it was organised in the best way possible to face the future, There was certainly nothing doctrinaire or prejudiced in either of these lines of inquiry: quite the reverse. The whole object was and is, after years—almost decades—of change and dislocation, to set the industry on a new and resolute long-term course determined only on the score of its own best interests.

This penetrating reappraisal is composed of four inter-related but separate studies. The first is that which has just come into my hands—the financial review for 1971–72. The second is that which constitutes the next phase of the economic review and seeks to chart a strategy for the industry for the present decade. The third, which runs in parallal with both, is the structural examination of the industry with a view to defining on a rational basis what broadly should remain in the public sector, what should be in the private sector, what should stand between the two, and how it should be done.

Mr. Michael Foot

When does the Secretary of State expect that the Government will come up with final proposals on the final matter? How long will that cause of uncertainty be allowed to continue?

Mr. Davies

I intend firmly to do so.

Mr. Foot

When?

Mr. Davies

I intend firmly to answer the question. The hon. Gentleman also asked whether this was being carried out by the joint steering group. It is not. It is carried out directly between the Ministers concerned and the Corporation.

The fourth part of the re-appraisal is the reorganisation of the relationship between Government and Corporation aimed at ensuring to the former an ability properly to discharge its responsibility to Parliament and to the public and to the latter the freedom to manage its own affairs within agreed authorities and for the attainment of agreed objectives.

I should like to say something about each of these four parts. As to the short-term review, here we are concerned with achieving the best result we can in this current year—1971–72. We will take all relevant factors into account, including price factors and including not only home price factors but competitive prices abroad. As I have said, I plan to make a statement to the House after the Whit-sun Recess to make known the decisions I have arrived at in the light of that study.

Mr. Michael Foot rose——

Mr. Davies

May I continue and perhaps answer the hon. Gentleman's questions almost as he poses them?

These will cover, first, the expected out-turn of the Corporation's operations in this financial year; second, the investment programme authorised to be undertaken, bearing in mind the previous figure to which I have referred of £185 million; and, third, the extent of funding from public funds as opposed to those generated from within the Corporation.

An indication of the size of the figures involved is to be seen in the White Paper, Cmnd. 4635, where a figure of £289 million as a call on public funds was indicated for one year.

The second part—the longer-term review—is a question, as I have said, of charting a strategy for the industry. The hon. Member for Ebbw Vale said that this had never existed under private ownership. The hon. Gentleman may have forgotten that in 1966 Sir Henry Benson produced a complete forward study of the industry's investment requirements. What is certain is that during the course of the previous Government's tenure there was not such a positive long-term investment programme. This longer-term review will be difficult, ambitious and complex. It will form the framework within which this great industry will evolve in the future, in both its national and international context. It will require a very great effort and—this may prove a disappointment to the hon. Gentleman—I shall be surprised if all those concerned can bring it into my hands any earlier than I have indicated already. I said the autumn. I am confidently hoping to have it before the end of the year. It will be a mammoth task to perform.

It will cover the following matters: the expansion of, and consequent investment by, the Corporation at home, including the principle of a major new green field site; the means by which the Corporation will secure in the long-term adequate supplies of ore and coking coal, with particular concern for the forecast short-fall of world supplies of the latter; the assessment of the desirability of undertaking a greater manufacturing operation at the source of raw material supply, perhaps in Australia, by pelletisation or some such process.

It will take into account the general assessment of the impact of major technological changes which are taking place in the industry. It will consider the scope for international partnerships in manufacture or in raw material procurement or in capital provision. It will concern itself with the critical importance of the industry to the Government's regional policies, bearing in mind that, today, about 50 per cent. of the Corporation's manpower is employed in development areas. It will deal with the manpower consequences of alternative solutions. That those consequences entail a considerable reduction in the ratio of numbers employed to production is known to all. As with the coal and textile industries in the post-war years, to which the hon. Member referred, it is no good concealing that the re-creation of a dynamic and prosperous steel industry in this country will not be attained without rationalisation of the same kind, if not on the same scale.

What is essential is to see the future clear and to be able to plan for it: to ensure that redundancies are anticipated and preparations made for them in good time; to ensure that the imaginative and effective provisions of the Corporation and the Government, in consultation, in forewarning and in shielding those concerned are brought into play at an early date and in an effective way.

That will be the broad area covered by the longer-term review. It will be a major exercise, and it will form the framework within which, I hope, the steel industry will attain again the kind of importance which it has had in the past, to, which the hon. Gentleman referred.

Mr. James Callaghan (Cardiff, South-East)

That list of criteria did not touch on one question: how does the British Steel Corporation determine what the growth rate is to be? Is it advised by the Government? In other words, how does it determine the level of demand it is supposed to aim at over the next ten years, or whatever the period be?

Mr. Davies

The right hon. Gentleman will be aware that, in terms of defining major development, this industry is not subject to very fine tuning arrangements. It moves forward in rather large bounds. This is particularly so at present. Although forecasts of likely development of demand are of great importance, they are not, perhaps, as easily tuned to in steel as in some other industries.

Mr. Callaghan

How does it find out?

Mr. Davies

It finds out as a result of the consultation which it has with the Government. This is one of the purposes of the review.

Mr. John Morris (Aberavon)

I do not follow the point which the right hon. Gentleman is making. I fully understand the difficulties in tuning to particular needs or demands, but how is the British Steel Corporation to be told over the next 10 years, say, what is the estimate for that period?

Mr. Davies

Clearly, forward estimates of demand for steel and its various products are a necessary part of the estimation. The right hon. Gentleman probably knows that forward estimates of this kind are made in broad brackets of alternative levels of supply. This, clearly, will be part of the basis of the appraisal.

Now, the structural examination of the industry. I have already announced what I think was the major conclusion of this work, namely, to leave the bulk steel making activity intact within the frame work of the British Steel Corporation. We are now making progress in reviewing with the Corporation the remaining parts of the industry. The hon. Gentleman asked when I hoped to be able to make a statement about this subsequent part of the review. I hope very much to be able to make this statement also shortly after Whitsun. It will give an indication of the arrangements which have been discussed and agreed—agreed with the British Steel Corporation, despite what the hon. Gentleman may think—and I shall thereafter continue to keep the House informed on any subsequent developments.

I come now to the fourth part of the reappraisal, that dealing with the relationship between the Government and the Corporation. As the House knows, I am anxious to disengage from excessive involvement in the management problems of the Corporation. A whole series of circumstances have combined to procure a closer involvement than I should wish, notably the scale and the scope of the reappraisal which I have been describing. When the reappraisal is completed, the course will be charted for the future, and the final section of this very great undertaking will come into play, namely, the guidance and control mechanism which has itself been the subject of careful and prolonged study. This will allow for objectives to be set, for programmes to be agreed, and for both to be monitored in an orderly manner so that the management can proceed on its way in confidence and the Government can be sure of how the Corporation is progressing along its planned path.

By the time that is finished, the reappraisal will have constituted an enormous task of prediction and planning appropriate to the scale of this vast industry. It will, I believe, have set the industry on the course of regained prosperity and confidence in its own future.

5.36 p.m.

Mr. James Tinn (Cleveland)

Although this is not my maiden speech, hope to be forgiven if I say a few words about my constituency. From time to time, I have found a certain misconception or misunderstanding in some people's minds, and the thought that Cleveland is in the State of Ohio in the United States. Lest there is any hon. Member under that misapprehension, I should make clear that Cleveland lies on the northern aspect of the lovely Cleveland hills, on the coastline stretching from a few miles north of Whitby, including the old ironstone mines, of which the villages and settlements have new gone, Skinningrove iron works being the sole remaining outpost of steel in that locality. Swinging then north and west to the Tees, one comes to the tremendous steelworks on the south bank of the river, including the development at Lackenby.

To a visitor, Tees-side must seem to have an air of purposeful prosperity. He will see the tremendous physical investment there, the largest petro-chemicals complex in the world at the I.C.I, works at Wilton and Billingham, the oil refineries on both sides of the river, the tremendous port development, and the land reclamation works; and he may have heard that this is the only area of the northern planning region which has over the years experienced an inflow of population rather than an outflow.

A visitor may in that way form a favourable impression. But what he might not see, unless he looked closely, would be the length of the dole queues. Paradoxically, and sadly, although Tees-side and Cleveland have seen the injection of scores of millions of pounds of capital, the dole queues seem to have grown longer all the time.

The oil refineries do not employ many men. I.C.I. has been shedding labour by what is euphemistically called natural wastage, which, in practice, tends to mean that the older workers are shown the door even more brusquely than usual, while school leavers and others find the door closed against them.

As a result, on Tees-side, despite the impression that a passing visitor might have, we already have an unemployment rate which is only marginally lower than that of Tyneside. In terms of numbers, we have more men unemployed than even on Wearside. It is no consolation to an unemployed man to know that the unemployment rate in his area is a little lower than in another. Yet Tees-side, for some reason, is excluded from special development area status.

Our concern today is to look at the steel industry, especially in the light of recently announced plant closures. As I mentioned a moment ago, our unemployment rate is already tragically high, but by the end of this year it could be disastrously higher, because of the area's dependence on steel, for the reasons I have endeavoured to outline. Estimates which take account of previously announced steel closures, in addition to those more recently announced, show by the end of 1971 unemployment on Tees- side could be over 8 per cent., and, in the nearby Hartlepools area, approaching 15 per cent. Surely, by any measure, in any year, by any standards, those figures must be regarded as appallingly and unacceptably high. If those figures had already been reached we should be pretty near the top of the unemployment league. But in this year who knows, when the time comes, what area will be able to claim that dismal distinction.

On Tees-side, however, as I have hinted, there is at least one immediate and practical step which the Minister could take and which lies to his hand. That is to grant the area special development status immediately. Its exclusion can no longer possibly be justified. It is the least the Government can do, and it is something that people of all parties and none on Tees-side unit in demanding. In this I am sure that I have the support of the hon. Member for Middlesbrough, West (Mr. Sutcliffe). I ask the Minister for some assurance on this point. The need is already urgent; it cannot wait.

With regard to the general state of the steel industry, those of us who have worked in it for years have a depressing feeling of having been here before—in fact, of having been here several times before. It has been a traditional problem of the industry that when there is a shortage of steel it is blamed for having failed to lay down sufficient capacity to satisfy the excess demand; yet, in no time at all, it seems often to find itself with a fall-off in demand, with excess capacity resulting in many families losing their livelihoods. It is a spectre that has always haunted the industry and inhibited its planning. But we had every hope—and now I am speaking from the point of view of the trade unionists in the industry—that the Corporation was trying to break free from this crippling cycle, that it was looking ahead, taking a long-term view, the broad international view, in terms of competition and of technological development.

We believe that it was planning to provide this country with a steel industry equipped to cope and compete with the best in the world. That is why the steel-workers, to an extent I believe to be unparalleled and without precedent in British industry, have co-operated with the Corporation in its plans for the future. Inevitably these have meant savage redundancies. The right hon. Gentleman does not need to tell us that; it has been long appreciated in the industry.

Even though the Corporation did its best to improve consultation and to take social factors into account, as it is required by Statute to do, the impact on the men and their families is bound to be savage. It is not easy for those of us more comfortably situated to appreciate what it means to a man who has worked hard on a 24-hour shift system, on bank holidays, at Christmas and at New Year as a matter of course, with skill and responsibility, in an arduous industry where poor working conditions and danger usually go together, but who has, nevertheless through the years managed to attain a position of some responsibility, to find that those years have been wasted and that he can be thrown aside in his mid-forties or fifties as "surplus to requirement".

There is a special quality about the average, typical steelworker. It is an industry which almost seems to breed its own kind of man. Fathers and sons tend to tread the same path—to the blast furnaces, to the melting shop, to the coke ovens, to the mills. They are hard men, yet generous; tough, but friendly; steady, loyal to each other and to their industry; loyal to their firm, even when they are cursing the day they set foot in it. These men, committed to and dependent upon, British steel, have co operated in its plans for its future which threatened their own.

Let me give the House some idea what the cold phrase "technological development" means in real terms to these men and their families. The basic oxygen steel-making process now being introduced can produce an amount of steel in a period measureable in minutes which previously would have taken many hours. It can replace 14 open hearth furnaces with two or three of the new units. It can reduce a labour force of over 2,000 to under 400. These are the facts that were faced up to. It can produce catastrophe in just as many homes if nothing is done, and done in time, to replace each job lost with another gained. The fact that the men and their unions have co-operated in this and similar developments puts a heavy responsibility not just on the Corporation, but on the Government and the country; otherwise, let us stop the cant and hypocrisy of blaming those workers who are sometimes less ready to accept new methods. Let the community face up to its responsibilities in good time, or let the workers and the trade unions look after themselves and their interests alone.

These men are not whining that the country owes them a living; but it does owe them a decent job. We owe their sons and daughters the same range of jobs and career opportunities as they would have had if they had lived in economically more favoured areas. I am sorry to say, even after what the Minister said, that there are disturbing indications that the Government do not fully accept, and are not fully prepared to honour, their obligations in this regard. I hope that we shall have further reassurances on this later.

I will not take up time in repeating criticism of the Government's action over the proposed price increase. But I take the Minister up strongly over his reference to the monopoly position of the industry. Steel can never be a monopoly as long as its customers can buy abroad. But why should they buy abroad when British steel is cheaper than steel on the Continent, as it has been in most cases? As my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) said, had the Corporation charged European prices when demand was high, it would now be £200 million better off and would not have needed to put itself and the industry in pawn to the present or any other Government. The critics of public ownership should bear that in mind, and that cheap prices to private enterprise are subsidies in reverse.

But the industry is in pawn to the Government. Its ambitious £3,000 million modernisation programme is undergoing review. The slide rule is being run over it. I am not sure who is doing that, but someone is doing it. The Minister assures us that Lord Melchett has been very co operative. If Lord Melchett and the Corporation have lain down so quietly under this treatment, it is not only capital but a good shot of adrenalin which the Corporation needs to make a more vigorous response to this kind of interference.

I hope that the danger of making a long-term review at a time when the future seems clouded by the present state of trade will be fully borne in mind. The Minister referred to the world shortage of coking coal. At a time of depressed demand for coal, the Labour Government—and I recognise that—closed mines in my part of North-West Durham which produced some of the finest coking coal in the world. I am glad to see my hon. Friend the Member for Consett (Mr. David Watkins) nodding agreement. They were closed because of what the experts said. Some of us did not agree with them. I am afraid that the same calibre of short-sighted experts, with their slide-rules, will be telling the Minister that, from today's viewpoint, the future demand for steel will be much lower than eventually proves to be the case.

I have spoken with some feeling of the sacrifices that the steel workers and their families have been prepared to make to ensure the future of their industry. Now much of it has been called into question. On Tees-side we were braced to accept heavy redundancies—although we did not expect them so soon—but we had promises of vast new development based on the iron ore terminal. Cannot the Minister give us some assurance, even before the long-term review is completed, that these developments will go ahead and that we may have a completely new brown field site based on Tees-side? I assure the Minister that if he has doubts about the viability of British steel on Tees-side he is calling into question the viability of British steel as a whole, because this deep-water site is perfectly situated, and will have the most modern ore-handling equipment, a labour force ready to hand and all the locational factors in its favour. If British steel cannot prosper in that area, then perhaps we had better give up and start buying elsewhere. I believe that it can and will prosper. I hope that the Minister will do his utmost to give some of the assurances for which I have asked.

5.54 p.m.

Mr. John H. Osborn (Sheffield, Hallam)

My right hon. Friend the Secretary of State is as aware as I am that when discussing this particular subject in the House it is dangerous to pay compliments. The steel industry will be relieved that the hon. Member for Ebbw Vale (Mr. Michael Foot) has not its destiny in his hands and will greatly appreciate the statement made today, in addition to the one which was made on 27th April, by my right hon. Friend.

I intervene in the debate with some trepidation as I have not spoken on this subject for two years, largely because, it has been claimed, I have an interest in the private sector, which is in competition with the public sector. There are trade associations and professional bodies where management, technologists, scientists and engineers from competing organisations in the public and private sectors meet. I have continued to attend their meetings, and many have claimed that I had as much right to speak for the public sector as for the private sector, because my interest lies in the steel industry and my constituency is concerned with the public and the private sectors.

There have been continuing discussions in Sheffield and elsewhere about what should be the right balance of plant, the economics of manufacture in this new age and how much more rationalisation should take place. As an outcome of that, Sheffield Rolling Mills—a combination of the Tinsley Mills of the English Steel Corporation, Balfour Darwin and Hallamshire Steel—was created by the Labour Government.

In my discussions, particularly with those who work in the industry and those connected with the trade unions, including B.I.S.A.K.T.A., I find that there is an increasing realisation that our productivity is still way behind that of many other countries. I have been told that the modern plant is capable of producing 700 tons per man per year. Some of the better plants in America are producing 300 tons. The American average is 200 and the United Kingdom average is 100 to 125 tons per man per year. I should like my hon. Friend the Minister for Industry to comment on the productivity in other countries compared with that in this country.

Trade union leaders are aware of the need for modernisation. As someone involved in the industry, I have emphasised in the House over the last 10 to 12 years the need for continuing capital investment in industry, as well as in the steel industry. Those who have spent their working lives in the industry want a healthy bulk steel industry and a healthy carbon steel industry as well as a healthy alloy, special and stainless steel industry. They want to see a healthy private and public sector activity. It is generally regretted—and I made this point when I intervened in the speech of the hon. Member for Ebbw Vale—that as a result of nationalisation so much rests with the Government and that so much decision-making is not being done outside Government. There is resentment that steel is being debated with such intensity in the House, because it is thought that these issues would be more effectively dealt with outside the House and away from Whitehall.

I wish to ask my right hon. Friend the Secretary of State a few questions. The first concerns the headquarters of the British Steel Corporation. It was reasonable to move from a regional to a product basis, but the result was another round of musical chairs within the Corporation, and this led to greater bureaucracy combined with a policy of centralisation. During the Committee stage of the 1966 Iron and Steel Bill—the Iron and Steel Act, 1967—hon. Members on both sides hoped that a massive headquarters would not be erected in London but that it would be situated outside London. May we have more information about the size of the headquarters in Grosvenor Place, how many staff are employed, the annual salary bill and what it is costing to run?

I ask that because a retired manager of a plant in Sheffield, which, in my view, probably has a turnover of £20 to £25 million a year, said that, of his total overheads of £3½ million, £2½million represented plant overheads and £1 million went as a contribution to the headquarters in London, and he wished to know what good it was doing. I should like my hon. Friend the Minister for Industry to try to give an answer, as this is but one example of the unease which is developing in Sheffield.

Of course, at local and plant level there is need for greater autonomy. There is a view, which is prominent now, that at the headquarters with all its complexity, there are too many economists, statisticians and whizz kids. Therefore, I draw my right hon. Friend's attention to the fact that there is growing resentment in Sheffield, in the public sector, of course, but in the private sector, too, that the real decision-making has been taken from the city which knows how to run its own affairs and that the real decision-making is now in London, and even the special steels division has not the autonomy which many in that division would wish to see.

The new Sheffield management in the steel industry, public and private, realises the value of the corporate plan, modern management techniques, including computer technology, but holds the view that more of the decision-making should be at local level. I hope, therefore, that my right hon. Friend is aware that Sheffield wants to be allowed to manage the industry which it has known for years, and wants to see less decision-making being done in London, in Whitehall and Westminster.

Mr. Thomas Swain (Derbyshire, North-East)

The hon. Gentlemen is expounding the management's point of view, but is he aware that this is not a view shared by the trade unions?

Mr. Osborn

May I read the next sentence in my notes? This view is shared by the shop floor as well as management to an increasing extent. I thank the hon. Gentleman for his intervention. I will show him my notes, if he doubts me. I read from page 7 of my notes.

Mr. Eddie Griffiths

Will the hon. Member allow me?

Mr. Osborn

Let me finish this please, otherwise I shall make a longer speech than I intended.

The United Steel Company, for instance, perhaps the most progressive steel company in Europe, and highly profitable, some five to ten years ago, now finds morale from top to bottom at a low ebb. In Sheffield there has been reported the highest unemployment figures for 30 years.

Mr. Eddie Griffiths

The hon. Gentleman is making the point that the shop floor supports the view for autonomy in Sheffield. Will he accept from me that shop stewards and shop floor representatives at Firth Brown sent a resolution to the Labour Party headquarters demanding that Firth Brown, which has probably the biggest private sector plant in Sheffield, ought to be nationalised? Will he also accept the view that we are being inundated regularly by demands from Shepcote Lane rolling mills that the Corporation should take over 100 per cent. of that plant?

Mr. Osborn

I think that what shop stewards say does not necessarily reflect the view of the shop floor.

Mr. T. H. H. Skeet (Bedford)

Just misguided.

Mr. Osborn

The fact is that there is unease, and, firstly, the blame for this must rest on hon. Members opposite and their decision to nationalise, and then to renationalise after denationalisation. Secondly, there is some responsibility on management of the British Steel Corporation at the present time.

At a private gathering I was talking about the difficulties facing Lord Melchett and Mr. Finneston, and the scale of activities which they must resolve. The Minister should know that there is growing unease not only by some in the public sector but by its customers and suppliers, that if there are difficulties it was Lord Melchett's and Mr. Finneston's responsibility for taking up this impossible task given to them by the past Government. It has been to my surprise that I have been criticised for understanding and supporting this task which was placed upon Lord Melchett. But my right hon. Friend should bear in mind that Lord Melchett and those running the British Steel Corporation are subject to growing criticism.

Because it brought about more certainty I welcomed the statement of 27th April that the industry should remain intact. It is quite obvious that I would wish Lord Melchett to stay in this position, but I think that that outside anxiety should be noted. I shall read my right hon. Friend's pronouncement about the future of the industry with very great interest, because obviously we are not going back to separate companies as pre-1967.

The question of fair competition arose in our debates on nationalisation and the public sector is competing with the private sector, not only in steel, but throughout industry, for capital. Fair trading and fair competition will, I hope, be looked at, but what is important, and my right hon. Friend pointed it out, is that we are talking of an investment of £185 million this year and an investment to build up to £290 million, I think my right hon. Friend said, in future years. This is an immensely greater investment than had been undertaken by the steel industry, even in the years of the Labour Government.

With this investment the question of pricing arises as well. It would be useful if we could have some indication about international prices compared with those now being set as a result of the increase of 7 per cent. instead of a 14 per cent. addition after the April discussions. It is fair to say that the average increase in steel prices from June, 1969, to April, 1971, has been 23 per cent. It is not as great in the case of alloy steel, much of which is made in the private sector. Carbon billets, I am assured, have gone up by a much greater figure than this; namely, 36 per cent.

In the private sector there are many companies which have to purchase material, including billets, from the public sector. It is possible that with the best will in the world, manufacturing suppliers are tempted to supply to those who carry out finishing operations in competition with their own subsidiary activities at unfairly high prices unless there is competition. When the industry is restructured it would be right for my right hon. Friend to be aware that the private sector desires an alternative supply to the public sector for its billets, so that there can be competition. This, no doubt, will come out in the November Memorandum, but I hope my right hon. Friend will comment on this.

As regards prices, the British Steel Corporation must be given freedom, but if it is to have freedom of prices, then not all the capital it requires should come from the Government. Whilst I welcome the statement by my right hon. Friend that more capital should be generated from the steel industry's own resources—of course the steel industry should make profits and plough back profits for its own capital development; that is the reason for the Question which I tabled today—at the same time it could sell off capital assets which are not directly concerned with what it is in business for, and it should be encouraged to take part in joint ventures with outsiders. I am very glad that this encouragement is being given by my right hon. Friend.

My right hon. Friend spoke about international activities, including the manufacture of pellets. I went to a flotation and briquette plant in Venezuela at the Sidor works some months ago, where pellets of 86 per cent. iron content are being manufactured for the steel industry in the United States of America. It is right that there should be a British investment in these activities.

I hold the view, which I have held throughout our debates on steel, that the British Steel Corporation is too large and too diffuse. I think it right that we should review the structure of the Corporation. Some activities could well be part of international activities, perhaps based on the United States of America, and this might even involve a whole product group; and other activities could be in a European context. All this, I understand, will now be part of the long-term review, and I look forward to hearing of the outcome of this review when it is made public this year or early next year.

There are many more observations which I would have liked to make in this debate, but there is not time. Undoubtedly the debate is taking place as a result of the decision to nationalise steel. Many of the issues which we are now discussing should not, in my view, be discussed in the House of Commons. In some cases the Government should act as referee, and there should be outside agencies for achieving this.

In the British Steel Corporation there is a new management learning how to run an industrial dynosaur. It is still learning, and the bankers—namely, the Treasury, which will have to provide the necessary—are right to investigate every activity and undertaking, because the Corporation is running on an unprofitable basis.

No private concern would bring 14 large companies together in one fell swoop as was done on the nationalisation of steel without expecting the most ghastly and complex——