§ Order for Second Reading read.
§ 3.38 p.m.
§ The Secretary of State for Industry (Mr. Eric G. Varley)
I beg to move, That the Bill be now read a Second time.
The main purpose of the Bill is to raise the statutory limit on the amount of external finance which the British Steel Corporation and its wholly-owned subsidiaries can raise by borrowing and by the receipt of public dividend capital.
My right hon. Friend the Chief Secretary to the Treasury informed the House when the borrowing limit was raised to its present level of £2,000 million that a further increase was likely to be required in the present parliamentary Session. The present borrowing limit, taken together with the corporation's internal cash flow, will be insufficent to provide the cash needed because of the scale of modernisation and expansion and because of low profitability resulting from inadequate past investment and working practices which have fallen behind international standards.
At the beginning of April, the British Steel Corporation's borrowings and receipts of public divdend capital counted against the borrowing limit were approximately £1,400 million. A margin must be allowed to cover short-term borrowings and day-to-day fluctuations in the corporation's cash balances. When these are taken into account, it appears likely that the corporation will run up against the present borrowing limit by the autumn. The full amount of the increases proposed in the Bill should last the corporation up to three years.
We have reviewed with BSC its financing requirement for 1976–77 and examined likely requirements up to five years ahead, although there must inevitably be a considerable measure of uncertainty in attempting to forecast far ahead.
In line with other nationalised industries, BSC is now subject to a cash limit, which has been fixed for the current financial year at £950 million. This allows for a small element of self-financing by 33 the corporation in meeting a total financing requirement of approximately £1,000 million. Of this, some £650 million is accounted for by new fixed investment, nearly all in the United Kingdom, and the remainder by working capital.
A further measure of BSC's forward capital requirements can be seen from the corporation's intention to spend over £2,600 million on new investment between now and 1980. Some of this will come from internally generated funds but a substantial proportion will have to be found by way of loans and PDC advances.
Clause 2 of the Bill provides for an immediate increase in the borrowing limit from £2,000 million to £3,000 million and allows this to be raised to a maximum of £4,000 million by Statutory Order subject to Affirmative Resolution.
§ Mr. Michael Heseltine (Henley)
Will the Secretary of State tell us how much of the funds will come from external provision and how much will be self-generated by the corporation, along the lines of his discussion with the corporation?
§ Mr. Varley
I cannot be any more precise at the moment than I have been. This is something that perhaps we ought to develop at the Committee stage of the Bill, but it depends on the upturn in the economy on steel capacity, on the pricing policy of the British Steel Corporation, and other factors of that sort. I am sure the hon. Gentleman is well aware of that.
Clauses 4 and 5 provide for technical changes to the borrowing powers of BSC and the publicly-owned companies—in effect, the wholly-owned subsidiaries registered in the United Kingdom. Borrowing between BSC and a publicly-owned company, and between publicly-owned companies, will be freed from any restriction or need for Government consent.
The Government have accepted representations from BSC that the flexibility of group financing arrangements should be improved by removing unnecessary restrictions. The borrowing concerned will not count against the borrowing limit but borrowing by the publicly-owned companies from outside the group will count against the limit, so there is no loss of overall control.
The second aim of the changes is to relax restrictions on the financing of 34 BSC's wholly-owned subsidiaries. BSC undertakes certain investments in the United Kingdom and overseas through two holding companies, BSC (United Kingdom) and BSC (International).
The corporation has agreed to negotiate for the purchase of the small shareholdings of well under 1 per cent. which exist in these two companies in order to bring the two companies within the powers of supervision provided by the Iron and Steel Act 1975.
These two companies need to continue to be able to borrow long-term from sources other than BSC when this is advantageous both to the corporation and the Government, so that the proposed legislation provides for the publicly-owned companies to undertake such borrowing subject to my consent and the approval of the Treasury.
Finally, the Bill proposes to update the requirements relating to accounts. The consolidated accounts of BSC and its subsidiaries which are used by Government, and provide the main focus of public attention, are in future to become mandatory every year. The preparation of consolidated accounts of BSC and the publicly-owned companies, which appear now to be of very little interest, will cease to be mandatory and will be required only if the Secretary of State so directs.
The consolidated accounts of BSC and the publicly-owned companies are more restricted in their coverage than those for the corporation and subsidiaries, because not all BSC's subsidiaries fall within the definition of publicly-owned companies as set out in the Iron and Steel Act.
The accounts of the individual publicly-owned companies must continue to be laid before Parliament.
In providing BSC with the financial support it needs, the Government have the objective of ensuring the future success of a vital part of our industrial economy. Steel is one of the basic requirements of our engineering industry. Nearly half our total exports contain steel in one form or another. Steel shortages which occurred in 1973 and 1974 demonstrated the dangers of relying on an industry suffering from past under-investment in bulk iron- and steel-making capacity, and in part suffering the effects 35 of premature closures, at a time when steel is short world-wide.
The lack of a relatively small quantity of the right steel can delay a capital project or halt an export order. It is for these reasons that steel is one of the sectors of industry selected for special study in our industrial strategy.
In bringing forward this Bill we are showing our continuing support for the programme of capital investment which the corporation is undertaking within the framework of its development strategy.
We consider it vitally important that BSC should press ahead with this programme—important for our balance of payments, for the corporation's own commercial prospects, for the many industrial customers for steel, for employment, regional and social reasons, and not least for the United Kingdom plant and equipment manufacturers who are heavily dependent on orders from BSC.
The basic aims of the development strategy are to reduce costs and improve productivity, to improve the quality of the products sold to customers, to increase capacity, both to meet new home and export opportunities, and to eliminate bottlenecks.
In all these areas many opportunities were missed in the 1950s and early 1960s, when our main competitors were re-equipping themselves with modern plant and equipment while the private owners of the United Kingdom industry preferred to go on taking profits from existing and ageing plant. We are still suffering from the legacy of that chronic under-investment. But at least now we can plan ahead on the proper scale, with bulk steelmaking in public ownership. The White Paper of 1973 still provides a basic framework for this but it was never intended to be a rigid schedule of events and priorities, and we do not propose to treat it as such.
Inflation has, of course, hit BSC as it has hit everyone else, and the £3,000 million estimate for the total cost of the development strategy at 1972 prices would be well over £4.500 million in current terms. But this does not reduce the need for investment, as long as individual projects make sense commercially.
It would be completely unrealistic to expect to build new productive capacity 36 on the physical scale required by the steel industry without heavy expenditure. We have already faced up to this. In the past two years we have endorsed major BSC investment projects with a total value of over £700 million at September 1975 prices, the largest of them being the new 10,000 tonnes a day blast furnace for Redcar.
The corporation has embarked on a number of very substantial projects, including a £96 million stainless steel development strategy, £53 million for a direct ore reduction plant at Hunterston. and £78 million for new coke ovens and materials handling installations at Port Talbot.
As the latest White Paper on Public Expenditure shows, BSC expects its rate of capital expenditure to go on increasing through the rest of the decade—in March 1975 prices from £500 million this financial year to some £600 million in 1979–80.
But there is another side to the process of modernisation. When the Conservative Government published BSC's 10-year development strategy as a White Paper in February 1973, they endorsed plans not only for investment on a massive scale but also for closures on a massive scale. We came into office a year later with a firm commitment to review those closure plans, because of their damaging effect on communities heavily dependent on steel industry employment.
We introduced a new and important review procedure with the views of the work forces concerned being considered by the Government in parallel with examination of the management's case. This was a vital necessity if the outcome was to achieve general support and establish a new climate of co-operation between management and workers in achieving the efficient industry we all want.
The House will know that decisions on most of the plants under review have already been announced, in statements on 4th February and 6th August last year. I know that the House will agree that my noble Friend Lord Beswick's achievement was impressive in arriving at a set of proposals which were not only acceptable to the corporation but were also widely accepted as fair and reasonable by the work forces directly affected.
We are taking action, in co-operation with BSC and with local authorities, to 37 attract new industry to areas where closures have been a particular worry. The deferment agreed in many closures dates will help here, and, of course, in the cases of Shelton, Hallside and Craigneuk, BSC has agreed to invest in new development instead of the initially proposed closures.
We all have to accept that replacement of out-dated plant by new investment cannot be carried through without establishing internationally competitive manning levels. Unless this happens, the corporation will not be able to compete in world markets. This necessity has been recognised by the trade unions in the agreement on cost-saving and manning levels which they reached with BSC culminating in their meeting on 23rd January. I regard this agreement as being of particular importance because it recognises the problem and provides a framework within which negotiations can take place plant by plant.
The TUC Steel Committee and BSC are continuing to hold discussions about the implementation of the agreement and to deal with general problems as these arise. This is very necessary, and I intend to give them my full support in their task.
§ Mr. Roy Hughes (Newport)
On the subject of closures, can my right hon. Friend say whether he will be taking the opportunity of today's debate to make a statement about the future of the Shot-ton works?
§ Mr. Varley
No, I shall not take this opportunity to make any announcement—[Interruption.] I hope that Opposition Members who are jeering will understand that the issue of Shotton is a very complex one. It involves a whole community. It is probable that it involves the jobs of 6,500 workers, and I think that it is as well that we study the matter closely so that we can take all these factors into account.
§ Mr. Michael Marshall (Arundel)
Does not the right hon. Gentleman agree that it also involves the whole future of the tinplate industry in South Wales and whether it is to be competitive? Is not it vital to have an urgent decision about this matter?
§ Mr. Varley
It is important that we get a decision. It is a matter of how we interpret "urgency". As the hon. Gentleman knows, the closure of steelmaking 38 at Shotton proposed by the Conservative Government would be due to take place in 1980. There have been representations not only from my own side of the House but from the hon. Gentleman's side about the problems in Shotton. I see the hon. Member for Flint, West (Sir A. Meyer) in his place. He has taken a great interest in this matter. We are determined to take all these factors into consideration. It is important to have supplies for the tinplate side of the BSC and that is a factor that we are taking into consideration.
With early signs of the coming upturn in demand, BSC is now moving into a new phase of its development. With the exception of strip mills activities, where the pick-up in orders has not been so rapid, the corporation is now operating at more than 90 per cent. of avail-able capacity. Restructuring and modernisation are well under way, and progress is being made over the problems of manning levels and improved productivity.
The need now is to make progress with the initiatives which have been taken, to restore profitability and to realise the potential of the very considerable resources which the corporation has to deploy. BSC must improve its sales volume as the market picks up and reassure customers that delivery dates will he met. For this reason, substantial finance is being provided to increase the physical level of the corporation's ordinary stocks and work in progress needed to provide reliability of supply. Consideration is being given to further counter-cyclical stockbuilding.
The large increases in working capital involved represent the requirements of a strategy aimed at commercial success. This year, BSC should be able to improve very considerably on the 17 million tonnes of steel produced in 1975–76. There should be a modest increase in home sales, but the big gain should come in exports. The corporation has ground to recover in re-establishing its share of the United Kingdom market by displacing imports, both in relation to sales of finished steel and intermediate products supplied to the private sector steel companies.
The corporation is now planning to break even in 1976–77, and I welcome the spirit with which it is tackling this 39 task. The task is not easy, but there are good prospects that the corporation will be trading profitably before the end of the financial year.
Government, management and unions alike share the responsibility of seeing that the best possible use is made of the money invested in the corporation. BSC's capital requirement of £950 million is equivalent to 8 per cent. of the total forecast public sector borrowing requirement for 1976–77. It represents a major choice in the allocation of resources which might otherwise be spent on a wide variety of other economically and socially desirable projects. Inefficiency, low productivity and high costs equal a burden on the whole economy which we as a country have to bear.
Prices must be realistic, too, if the corporation is to function economically. Under the Conservative Administration, steel prices were held substantially below market levels. The prices of other nationalised sectors of industry suffered in the same way with effects which are still being felt in other industries. BSC is not alone in having to overcome the effects of mistaken past policies. Prices must be realistic, and we shall encourage the corporation to price its products realistically.
The mechanisms of financial discipline lie as much within the corporation as outside. There are strict internal cost control systems, and I know that the management is highly cost-conscious. My Department receives a regular series of monthly financial statements and quarterly progress reports from BSC which are discussed with the corporation to try to identify developing trends, and we are kept informed of the actions being taken to deal with problems.
The corporation has to modernise many of its iron and steelmaking operations, expand output and improve efficiency and productivity. BSC must retain profitability and must become internationally competitive. The corporation has to pursue policies which are responsible to the wider national interest and to the needs and aspirations of its employees.
The difficulty of combining these many objectives and making a success of them cannot be under-estimated and it offers a very considerable challenge to manage- 40 ment and workers alike. A considerable amount of progress has been made and I am optimistic about the outcome.
The Government are committed to giving the corporation and the British steel industry as a whole the support they need and it is in that spirit that I commend the Bill to the House.
§ 4.1 p.m.
§ Mr. Michael Heseltine (Henley)
Anybody who judged the speech of the Secretary of State against the harsh commercial decisions which have to be taken in the management of our nationalised industries would understand why the nationalised sector of British industry is in such an appalling mess.
The right hon. Gentleman's speech was the prototype of one I have heard in every circumstance which has brought Ministers to the Dispatch Box to ask for more funds for the public sector. We had the same combination of something for everybody, with no harsh decisions expected on the part of any sector. Where there are pressure groups, they are persuaded that their interests have been looked at. We are promised a brighter future tomorrow, and nobody is expected to make any difficult decisions today. In such speeches, the difficult consequences of the implications of investment programmes are not faced, we are not told what the profits will be and we are not told about the rate of return. The Government say that they will do their best and keep us informed. That is the broad paraphrase of such speeches. I have heard the Secretary of State's speech a thousand times from Ministers steering legislation through the House.
If there is one reason why the results of the public sector are so appalling, it is that Ministers have been prepared to come here with such speeches which contain none of the answers needed to make critical appraisals without which not only the British Steel Corporation but no part of British industry will enjoy the sort of future which is flourishingly described by Ministers but which never turns out as the promises anticipate.
§ Dr. Jeremy Bray (Motherwell and Wishaw)
The hon. Gentleman is making a powerful point, but would he apply his strictures equally to the behaviour of his 41 right hon. Friends when they were in power?
§ Mr. Heseltine
Yes. It is a weakness of publicly-owned industry that Governments and Ministers are not able to get the sort of control over them which is necessary if they are to get an adequate rate of return from investment.
A distinguishing feature of the British economy is that, alone among Western economies, we have tried to run major sections of industry, as no other nation has tried to do, with a suffocating political preoccupation. It is because the political framework within which we run these industries is so deficient that the parliamentary accountability is virtually nonexistent and because the disciplines within which managements are expected to operate are similarly lacking that we have never been able to obtain the right results from nationalised industries.
§ Dr. Bray
The hon. Gentleman is making his point effectively, but has he taken into account the fact that the public sector of manufacturing industry is larger in some other European countries than here? Is it the nature of the control which is wrong in this country or are the enterprises themselves deficient?
§ Mr. Heseltine
I know that the hon. Member takes a keen interest in these matters, and he will be aware that the more we look at international comparisons the more we realise that there are no complete comparisons between Great Britain and other parts of the world. We all have our own special problems.
With all the parliamentary privileges that we treasure so highly in this country and the theoretical answerability to Parliament, we have still not devised a system within which the public ownership of industry can flourish commercially. This Government have not even recognised that situation, let alone done anything to put it right.
The debate provides an opportunity to discuss the publicly-owned British steel industry, which is at the centre of Britain's manufacturing capability. We need to look no further than the record of political treatment of the steel industry over the last 25 years to understand why Great Britain's industrial capacity has been so tragically debilitated. lb/> 42 The post-war recovery was conducted under a threat that the industry would be nationalised. No other major industrial nation sought to achieve additional capacity and modernised facilities in so politically dogmatic a way. Our competitors concerned themselves with the real questions of industrial efficiency and strategy, while the Labour Party started political controversy by seeking to obtain narrow Socialist ends, rather than the industrial development of the industry, by threatening to nationalise it.
In the 1950s, when the Conservatives came to power, we saw a re-creation of the private sector and by the 1960s high investment in a profitable industry had been re-established. But once again, the Labour Party ignored the facts, not only of our domestic industry, but throughout the world among our major industrial competitors and once again the damaging threat of nationalisation was resurrected.
An interesting but sad part of the Secretary of State's speech was when he sought to explain how investment had been inadequate under the private sector. I would have been more impressed if he had quoted the figures, because they reveal an exactly opposite story. The investment levels of 1960, 1961 and 1962 were never again reached throughout that decade. At 1972 prices, the annual rates of investment were £276 million in 1960, £370 million in 1961 and £299 million in 1962. Discounting inflationary effects, they had fallen by the end of the decade to £128 million in 1967, £119 million in 1968 and £125 million in 1969. Those figures are a most damaging indictment of the political threat which the Labour Party placed over the steel industry. I know of no other figures which tell the story so clearly.
No one need look any further for the reasons for our outdated mills, our lack of international competitiveness and the fact that British manufacturers have to import steel because our industry cannot supply it. These were all wholly predictable consequences of nationalising this industry twice in 20 years.
Does the Secretary of State realise the implication of his statement that the British Steel Corporation is now operating at 90 per cent. of capacity? We are at the bottom of one of the worst industrial recessions in living memory. What 43 will happen when the industrial situation recovers in the way assumed by Government strategy? We shall find that the corporation is totally incapable of meeting the demands placed upon it and we shall once again have the bottlenecks and import bills which have been all too familiar in every past upturn.
The last Conservative Government, faced with the consequences of the political devastation of the industry, tried to remove the element of uncertainty by approving a programme of modernisation to bring the industry back to levels of international competitiveness.
Let us not ignore the implications of modernisation. Everybody believes in modernisation, calls for investment and recognises that there has to be change. But the moment the Conservative Government sought to introduce an investment programme to bring that about, the Labour Opposition tried to exploit all the human consequences, which will always be associated with industrial change, for their own narrow ends.
The Labour Opposition had a simple choice in 1972. They could have backed the £3,000 million programme announced by my right hon. Friend the Member for Worcester (Mr. Walker) in the House and helped to introduce, in a publicly-owned industry, the modernisation which was generally agreed to be necessary. Instead, they sought to exploit every local grievance and capitalised on them in every constituency which was affected. They gave a pledge that if they were returned to power the programme would be brought to a standstill so that they could use the same civil servants and managers in the corporation and the same statistics to talk over the whole programme again. When the choice for the Labour Party was the national interest or its own narrow party interest, as always its narrow party interest won.
Therefore, it is no surprise that the British Steel Corporation's programmes have been carried forward less effectively and less quickly than we would have wanted. It is no surprise to anyone who understands the cynicism with which the Labour Party conducts its industrial and other strategies that, the Government having got into office and the noble Lord who has now been put in charge of the 44 debilitation of British aerospace having conducted his "phoney" review, the same decisions, give or take a year or so or give or take an advance programme here or there, as were announced in 1972 were again incorporated in the strategy for investment in the British Steel Corporation. It was cynicism run mad.
We then come to the Bill which, the Secretary of State has rightly explained, takes the ceiling for the corporation's borrowing requirements up to £4,000 million. The Labour Party is much given to the virtues of planning. Therefore, it is relevant to ask: what kind of corporate plan exists within the BSC upon which the Government have been able to come to a conclusion that the £4,000 million ceiling will now be relevant for a further three years? If they have no such figures, they have simply said "We need another few years. Another £2,000 million should see the thing carried past the next election, and no one will ask questions. If anyone does, we will find ways of fudging the answers"
If the management of the corporation acted under the disciplines which any commercial management would welcome, it would know that a detailed corporate strategy was necessary to justify an investment programme of this kind. But there is no such strategy. The Government have not insisted upon one, and they would not be able to approve it if they did.
The answer was given when my hon. Friend the Member for Chingford (Mr. Tebbit) put a Question which was answered by the Minister of State. Personally, I am glad that the hon. Gentleman is still surviving in the Department of Industry. It is not a department where Ministers survive very long. However, I am glad that his long, hard work on the Aircraft and Shipbuilding Industries Bill, which I suspect will be even longer and harder before the Bill comes back to the House, has been rewarded. On 29th January, when asked about the targets set for the British Steel Corporation, the Minister explained that the target which had been set in 1972 for the four-year period 1973 to 1977 was still the target. The British Steel Corporation is expected to operate on a target which was set by the previous Government before the major world inflation and recession. The Government have not changed the target. Have they not changed it because they still 45 believe in it or because they have no elementary idea how to deal with the affairs of the BSC? Is it that they would rather allow the matter to drift in the hope that they will never be called to account for such negligence of duty?
There is not the slightest prospect of the 1972 target—an 8 per cent. return on assets—being met. This year, losses of between £250 million and £300 million will ensure that the target is not met. Therefore, the only clear mandate facing everyone from the top to the bottom of the British Steel Corporation is "Let us know how you get on, and we will do our best to find the money to meet the bills." No one in the BSC knows what is expected of him and the Government have no concept of how to explain the situation. The only inevitable certainty is that the taxpayer or the Government will end up paying the bills.
In the absence of any agreed corporate plan—we all know that it does not exist—no calculations can be made about the level of funds which will be generated internally by the corporation towards its modernisation programme, on the one hand, and the amount which will have to be provided by the taxpayer in the form of public dividend capital or loan capital, on the other hand.
I interrupted the Secretary of State in his speech to ask whether he knew or had any idea of the division between loan capital and PDC or self-generated or externally generated funds. The right hon. Gentleman had no idea. But he had a whole range of reasons why it was difficult to calculate these matters. It is very difficult to calculate them. That is why private enterprise is such a difficult and risky business. But public enterprise is immune from these disciplines. That is why, in the last resort, there can never be what might realistically be described as fair competition between the private and public sectors. No board room would be allowed to answer the question which I put to the Secretary of State in the terms in which he answered it. The absence of discipline in the public sector means that the consequences always end up a great deal less desirably than we anticipate.
On all the evidence, the BSC cannot generate its own funds on anything like the scale which is necessary. Let us con- 46 sider the scale of funds which will be needed. The right hon. Gentleman's speech was full of new statistics—large figures in various years' money terms. Therefore, there was no way in which anyone listening could relate them to the overall figures about which this debate should be taking place.
The Bill asks for another £2,000 million to take the BSC's borrowing limit up to £4,000 million. But the reality is that there is no way in which the corporation's modernisation programme can be carried through by this legislation. It is wholly inadequate. The Secretary of State implied this when he said that his calculations showed that it was enough for another three years. I do not believe the calculations on which he worked to start with. The fact is that he must make clear that three years is the maximum that the extra £2,000 million will cover. This money has to cover the costs not only of the investment programme but of coping with overmanning, the losses on hard currency borrowing —we did not have much reference to that, but I shall come back to it—and to deal with any losses incurred by the corporation from now on.
The Secretary of State talked about profitability towards the end of the financial year. That means that there will be losses for the bulk of the financial year. The likelihood is that we shall see a loss by the corporation during the current financial year in addition to the year which has just ended.
Let us consider the latest estimate of the investment programme. It was estimated to cost £3,000 million, in 1972 money terms, of which a significant part could be expected to be generated internally. I thought that the latest figure would be about £4,500 million, but the Secretary of State, in a carefully-worded phrase, referred to a figure substantially over £4,500 million. In reality, the figure is substantially more than £4,500 million, although it has not been announced. Why not? The reason is that it would be acutely embarrassing for the Government to tell the House and the people who are experts in this industry that the £3,000 million in 1972 money terms is about £5,500 million to £6,000 million in 1976 money terms. Therefore, we see that the programme has already virtually doubled.
47 If we project forward at rates of inflation which many would regard as optimistic but which would allow for single-figure inflation towards the end of the decade, the original £3,000 million programme will end up costing about £8,000 million to £9,000 million by the time the original decade for this strategy comes to an end.
I wonder whether the Secretary of State has considered the implications of an investment programme on that scale for the British Steel Corporation. If we are looking for a return of, say, 10 per cent. on the total new investment, it means that every year the BSC will have to show a surplus on trading of about £800 million to £900 million. If we assume that the corporation's turnover towards the beginning of the next decade is about £5 billion, it means that about 20 per cent. of its turnover must be surplus, after meeting all trading expenses, to cover the return on the assets which are to be committed. That must come from a corporation which in five of the last nine years has lost money, after interest.
At the moment, the corporation is receiving new funds comprised of 45 per cent. loan and 55 per cent. PDC. In practice, its interest charges will rise much less quickly than would be the case if a full charge for the funds employed had to be reflected in the profit and loss account. But the device of PDC means that less than half of the new taxpayers' investment has to show a return. The larger balance may be rewarded with only notional returns, and it could still be shown in the corporation accounts as a profit. Unless there is a realistic target backed by a realistic financial statement, there is no way in which an appropriate return can be expected. The Government, in this industry and in virtually every other industry, have no such target. My second question concerns the progress of the overmanning negotiations which dominated the headlines earlier this year. The agreement between unions and management followed five years in which the number of disputes rose consistently. It was interesting to hear the Secretary of State talk about the new sense of partnership which the Beswick review had incorporated as a result of 48 the new consultations. He did not say that the period of that review was the worst period of industrial unrest which had come in the last five years. So much for the argument that nationalisation provides a framework of industrial harmony.
After the tension of an all-night negotion, it was agreed in January that, plant by plant, the unions would be given the facts of international comparison. They were to be shown exactly what was involved in order to make our industry competitive. That was in January 1976. I am at a loss to understand, eight years after public ownership, why this had not happened years before. It is a classic example of why the debate about industrial policy is so artificial. How can one expect to attract any sympathy from the men working on the shop floor in the steel industry, who are expected to bear the brunt of the social and human change, when they are not told the whole story? That is public ownership in practice. The men were never told. Neither Government nor management had spelt out to the British Steel Corporation the full awfulness, plant by plant, of the international comparative figures.
It is no use talking about the over manning situation as though it were a self-curing disease. As we saw with the CPRS report on the motor industry and a host of other reports, industry in this country uses its manpower inefficiently and pays it less well than do our competitors. To cure that problem, we need additional resources for retraining, information and persuasion. I believe that the British Steel Corporation had a good record in redeploying people in the 1970s. It did it sympathetically. But there is no doubt that there has been a breakdown for which Government, management and the unions bear a responsibility in not examining the problem in those critical plant-by-plant discussions. The figures were not given to the unions until late-January 1976, eight years after the corporation was nationalised.
May I ask the Secretary of State for a progress report on how the agreement reached on 23rd January is working out? The right hon. Gentleman said that it was important. That is a platitude. Of course it was important. We know it is 49 important that there should be agreement. We want to know whether progress is being made and implemented in the agreement. It has massive implications in the cost incurred by the corporation and in the borrowing requirements which will be higher to meet the consequent losses.
We were told that the Secretary of State would aim at the best European standards. I have with me a chart which was appended to the agreement of 23rd January, showing a whole range of targets which are being reached in Europe. They start with France, which is the nearest to us in the number of men required for a given unit of output, and work down to the Dutch position. At which one is the right hon. Gentleman aiming? There is a massive divergence between the two. Are we aiming at the Dutch, Italian, French or German standards? Until the figures are clearly set out, how can anybody in the unions and management understand the purposes for which they are supposed to be striving?
I come to my next question. If the unions agree to move towards more realistic manning levels, are they supposed to adopt those manning levels, which will mean fewer men doing the same amount of work, if there is no incentive for the men to accept the situation, when there may be 80 per cent. of the existing work force in the plant and those 80 per cent. are not able to get additional remuneration other than the 3 per cent. or 4 per cent. which may be in the Government's new pay code? This is a classic example of the irony of the Government's industrial programme. On the one hand the Government are saying the right sort of things, while on the other hand they deny the men on the shop floor any incentive to make the modernisation agreements stick.
§ Mr. James Tinn (Redcar)
I accept the dilemma of proposing a modernisation programme with higher wages as an incentive to the workers, which would work against a pay policy which would restrict their incomes, but will the right hon. Gentleman say which he would choose? Would he throw aside the modernisation programme, or would he throw aside the incomes policy and accept lower manning?
§ Mr. Heseltine
The basis of the present agreement known broadly as the social contract is not calculated to bring about the modernisation of our industry, and, indeed, events in the last two years have made it less likely that we shall modernise our industry. The Government have abdicated any sense of responsibility in their negotiations with the unions. They have said to the unions "Tell us what you want". The unions, handed that negotiating card, have no choice but to take upon themselves terms which seem to be reasonable to the people in the unions. But it would have been better if the Government had appeared to be negotiating with the unions rather than surrendering to them. It would have been better had the Government found a more realistic method of appealing to the people on the shop floor. Anyone who doubts this should have listened to the programme conducted the other day when a large number of union members on the shop floor in a steel plant clearly understood what was needed but there was no incentive to them to co-operate within the framework which the Government devised.
§ Mr. Peter Hardy (Rother Valley)
The right hon. Gentleman is not approaching this matter realistically. He is demanding that we have proper manning levels. Will he say whether he wants those levels to be geared to the production of steel at 17 million tons a year or 30 million tons a year? This is important.
§ Mr. Heseltine
If we go on with manning levels for 17 million tons a year, we shall never be able to reach a programme which will sustain it because we shall not be able to afford the public expenditure required. New plant is coming on stream within the steel industry. If we could get the manning levels right in the plant while phasing out the old plant, we should be achieving the sort of redeployment of labour which is essential if we are to achieve an industrial strategy based upon competitiveness. I believe that in their handling of the negotiations with the unions the Government have made it less likely that we shall see the modernisation which Sir Monty Finniston has devoted so much of his career to trying to achieve.
There is another factor that I should like to draw to the right hon. Gentleman's attention. I was surprised that in 51 his speech, in which he asked for thousands of millions of pounds, he made no reference to the needs of the corporation as a result of the depreciation of sterling. The corporation has been a major borrower of the funds in hard currency. There was a time when this was regarded as one of the new fashionable ways of financing the public sector. With the drift of the pound, however, there have been unexpected consequences which are costing a great deal of money. I shall be grateful if the Secretary of State can confirm how much money has been lost on the foreign exchanges as a consequence of the depreciation of sterling against the hard currencies in which the British Steel Corporation's losses took place.
The House will be familiar with the fact that the British Steel Corporation used to borrow in its own name and carried the risk of the depreciating pound. But the corporation is now wiser than the Government. It began to realise the way in which Government policy was drifting. It was sharp; great management flair was displayed, and it persuaded the Government to insure the sterling debts.
As I understand it, about £200 million was borrowed recently by the British Steel Corporation with a Government guarantee at a premium of 2 per cent. on the rate of borrowing. This meant that the £200 million cost a premium of £4 million where upon the risks of the loss in foreign exchange were transferred to the Government. Needless to say it was a risk which was a certainty, and with depreciation of the currency, a debt of about £20 million fell on the Government. The British Steel Corporation paid a premium of £4 million. Who is to pick up the tabs for the £20 million? It is the British taxpayer.
Perhaps the Secretary of State can explain exactly how much of the borrowing requirement which we are discussing is expected to come from the drift of sterling which was in no way anticipated when we arranged the original borrowing under the Bill which is to be replaced by the one we are discussing today.
This debate has been a typical example of the way in which industrial policy has been debated in this country for too long. None of the real issues has been ventilated by the Secretary of State for Industry. I am afraid the sad conclusion which one reaches is that the 52 Secretary of State is so overworked with the minutiae of his task that he has no time to pursue the critical issues which confront this nationalised industry or any of the others for which he is responsible. This Bill is not even a half measure—it is a quarter measure. It will provide about 25 per cent. of the cost of the current investment strategy of £3,000 million, which will escalate to nearer £10,000 million in money terms by the time the programme has been completed.
The Bill is part of no carefully-considered corporate strategy pursued with Government approval because no carefully-considered strategy has been quantified or approved by the Government. The assumptions upon which the Bill is based embrace a modernisation programme which the Government held up so that they did not have to face the very real and understandable political consequences of taking decisions. We had confirmation today that there is to be no announcement about Port Talbot or Shotton. There will be more delay in that critical matter.
Parliament is given no information on which an informed judgment about the corporation can be made. What information we have is discouraging rather than encouraging. I must warn the Secretary of State that, if we do not obtain a much more satisfactory set of answers to the questions which I have raised and which my hon. Friends will raise, we shall have to consider carefully whether we can give this Bill an unopposed Second Reading.
The final irony is that a Government who came to power on the concept of open government have treated the chairman of the industry which took them at their word by showing him the open door.
§ 4.34 p.m.
§ Mr. James Tinn (Redcar)
I agree with the hon. Member for Henley (Mr. Heseltine) in the welcome he gave to the opportunity which this Bill has given us to discuss the steel industry. I cannot help reflecting that it is a little odd that one has to take these too rare opportunities to discuss such an important industry, whereas in our parliamentary year there are built-in requirements for discussion of certain other areas of public interest—sometimes with an obvious 53 lack of interest on both sides of the House.
I also had a certain sympathy with the hon. Gentleman's criticism of political interference in the steel industry and the delays and uncertainties which this occasioned from time to time, but we parted company on the implications of the questions put to him by my hon. Friend the Member for Motherwell and Wishaw (Dr. Bray). The hon. Gentleman seemed to dodge the implication, which was that the responsibility or fault lies equally with both sides. Indeed, bearing in mind the record of the Opposition in interfering with pricing and their deep-seated review, as it was called, of the corporation's development programme which held it up for two years or more, I cannot accept their chiding us unilaterally for political interference.
When the hon. Gentleman made that general criticism he might have paid tribute to the fact that this Government, for the first time, have grasped the nettle of the cyclical nature of steel by mentioning the counter-cyclical stockpile agreement. This piece of jargon may not sound attractive to those who are unaware that this industry, perhaps more than any other, has suffered necessarily and unavoidably from the cyclical nature of demand. Clearly, in times of depression, demand falls for motor cars and other products manufactured from steel, and so the demand for steel falls. Also, when investment programmes are cut in that phase of a trade cycle, the demand for constructional steel is cut. Demand for steel is volatile and particularly susceptible to these variations in the trade cycle.
We should provide for the industry to be kept at a reasonable operating capacity so that we can stockpile the steel which we know only too well from past experience, will be needed. The steel industry has suffered continually from a failure to produce the steel needed in one phase of the cycle and then being told that it must cut back and accept a reduction or slowing down in capacity at times when the demand does not exist. This Government have for the first time set up a fund to enable the corporation, which otherwise could not carry the cost, to stockpile steel at such times. I welcomed the Secretary of State's suggestion of an increase in the funds available.
54 This debate allows us to discuss the future of the steel industry—which means the modernisation of the industry. I urge upon my right hon. Friend the urgency for a speedy decision on the proposals from the BSC which I believe are now with his Department. What the industry needs is a speedy decision.
In this connection, I thank my hon. Friend the Minister of State for receiving a deputation from my own constituency in connection with the proposed development at Redcar. I also thank him for the assurance which he then felt able to give us. If I am wrong, I am sure he will correct me, but as I understood him—I noted his words—when we asked for a speedy and favourable decision about the completion of the development of a massive deep-water site at Redcar, he gave us an absolute assurance that the decision, when it was made, would not be based on political expediency, as, I believe, too often in the past such decisions about the steel industry have. The Minister said he could not ignore social considerations, that it would be callous to do so, and that the decision would be based on the needs of the industry. I ask only for a speedy decision, which he also promised.
It is now for me to say why I believe that any proposal by the British Steel Corporation for the completion of the full development at Redcar should be approved, including the third stage, incorporating the basic oxygen steel-making plant and a plate mill plant. My arguments can be divided into two areas. The first are the technological and marketing arguments, which the corporation is better qualified to advance. Nevertheless, as an ex-worker in the industry and one who has represented a steel constituency for some years, perhaps I could legitimately make one or two points.
First, the technology of the industry has pointed inescapably to the growing importance of the large-scale, deep-water plant—though not to the exclusion of all others. There will always be a place for the smaller specialised plant catering for the needs of particular markets and customers and more adaptable than any large plants to the changing scale of demand.
But accepting the qualification that there will still be a place for the smaller 55 plant, perhaps fulfilling the rôle of the bespoke tailor in the era of mass-produced clothing, the bulk of the industry's production must be from large plants with ready access to deep water if the industry is to remain internationally competitive. The Redcar development admirably fulfils those conditions, as has been shown by the stages of development already under way. It is also well placed to take advantage of markets in Europe and elsewhere. We should remember the importance of steel to our export prospects. Far from being dependent on imports, the industry has a great rôle here.
My second point in favour of the completion of the Redcar development relates to the social considerations, the arguments of employment, which from other quarters might be viewed as arguments against the development. A massive development in one area cannot be carried through without consequences elsewhere. I have every sympathy with hon. Members representing constituencies where closures or cuts are envisaged, including my home town of Consett. Therefore, my support of modernisation at Redcar is not glib.
However, in the 12 years that I have represented Redcar, and in the longer time that I worked in the area, I have seen the dole queues of steel workers lengthening. The point I want to ram home to Ministers is that Teesside has suffered in the past, and is still suffering, from unemployment of steel workers, which was accepted with remarkable acquiescence as the price of modernisation.
I urge Ministers not to yield too sympathetically to claims from other areas which are facing threats of future unemployment at the expense of an area like mine whose steel workers, through accepting the desirability of modernisation, had to accept the inevitability of massive unemployment. The fuller development of Redcar will do little more than restore to Teesside the employment that it previously enjoyed—making up for jobs lost and taking into account those we shall lose in the very modernisation that I am advocating.
Turning from the local issues, in an intervention in the speech of the hon. Member for Henley, I raised the problem of encouraging men to accept modernisation and lower manning rates 56 in the necessarily restrictive atmosphere of an incomes policy. The hon. Member was not very forthcoming. He would have done better to accept that this is an inescapable dilemma. When present exigencies are eased, a good incentive must be given and a fair reward paid, in return for the jobs lost, to the workers retained in the industry.
As a trade unionist, I have always been prepared to accept the logic of modernisation and a high technology economy, provided that we have a high wage economy too. We have suffered too much the consequences of unions being pressured, persuaded and even coerced into accepting, far more than they are given credit for, a high technology economy and a cut in labour with insufficient rewards in wages.
When we are asking unions to accept massive labour cuts, they are entitled to demand that those who remain get commensurate increases in income. Just as the community invests in the industry in return for high productivity, those who are still in the industry have invested the livelihood of their comrades who have departed. They are entitled to a reward for that.
§ 4.50 p.m.
§ Mr. Anthony Nelson (Chichester)
The hon. Member for Redcar (Mr. Tinn) made an admirable speech, not least for its strong constituency interest, which is perfectly understandable in this debate when so much is at stake for his constituency. Many of us are aware of the high level of unemployment in Redcar and the benefits that the plant to which the hon. Member referred will bring to a substantial body of people in that area.
Some of us on this side of the House also have a greater degree of sympathy for the anti-cyclical stockpiling scheme than we have for some of the other measures of finance which are made available to State industries.
We are, however, considering a Bill which will potentially allow the British Steel Corporation to increase its borrowings by up to £2,000 million, which on the basis of capital employed on the last figures available in the annual report, is tantamount to doubling the capital employed of the corporation. Yet, amazingly but increasingly, we have no 57 adequate financial information on which to sanction such a facility. We have no up-to-date report and accounts of the British Steel Corporation. It is nothing less than fantastic that we should be considering doubling the size of the capital employed by this major British industry, which will consume 8 per cent. of the prospective public deficit in the next year alone, without an adequate prospectus or the report and accounts, which are at present being compiled.
Had I been in the Secretary of State's position I would have made sure that up-to-date figures as at 31st December were available before asking the House to consider sanctioning a Bill such as this. It is a public disgrace that we are considering in this nebulous fashion the provision of a massive amount of public finance without the necessary financial information.
I want to comment on three aspects of the Bill—the composition of the finance to be made available, the justification for it, and a particular aspect of proposed expenditure in the development programme.
My hon. Friend the Member for Henley (Mr. Heseltine) pointed out to the Government the increasing dangers inherent in incurring large foreign currency borrowings. It is frightening that the public sector has now borrowed over £4,000 million abroad—£3,500 million of it by the nationalised industries and public sector undertakings, and £735 million by local authorities. Out of the former total, £290 million has been borrowed by the BSC in foreign currency—£213 million from the European Coal and Steel Community and £77 million from the European Investment Bank.
The Government in 1970 encouraged the public sector to borrow abroad under the Treasury exchange rate and guarantee schemes as that was regarded as a suitable alternative to the Government financing the deficit on the balance of payments by direct State borrowing. The estimated losses on these foreign borrowings incurred since that date by the public sector must amount to £1 billion. That is merely the exchange loss. On top, the interest rates have risen by £80 million a year. It is a reflection of the devastating performance of sterling, on which the Chief Secretary to the Treasury 58 answered a Private Notice Question this afternoon, that it has depreciated by 22 per cent. under this Government. I accept that it depreciated under successive Governments, but the depreciation was only 4 per cent. under the Conservatives. It was again substantially more under the previous Labour Government.
The lesson must be clear to this Government and successive Conservative Governments. Major dangers are involved in borrowing money abroad to finance expenditure in this country. It is one thing to borrow money abroad if the proceeds are applied in foreign assets, but it is quite another thing to use the proceeds for British assets because that gives rise to an uncovered position.
Therefore the British Steel Corporation, with £290 million of foreign currency borrowing, has a massive liability which may have already taken it over the aggregate borrowing ceiling provided for in the Iron and Steel Act last year. I would welcome some clarification of that in the winding-up speech.
The foreign loans interest rate is an average of 10.7 per cent. and the major portion of foreign currency borrowing is in United States dollars, most of which have been converted in the last set of report and accounts at the rate applying in March of last year. While these figures and the contents of the annual report may be somewhat dry, they involve thousands of millions of pounds which all of us, whether or not we have a steel plant in our constituencies, are accountable for. It is the taxpayers and the ratepayers who have to finance the deficit and losses.
I question whether the Government are sincere in their intentions to modernise the steel industry, given their record so far, and whether the British Steel Corporation has shown sufficient progress or performance to justify such massive increases in public money injected into it. The record is well known to us all. Last year losses of about £250 million were incurred, mainly in the Welsh steel division, which is still continuing largely without any decision on the future of some of the major plants there. Losses amounting historically to about £5 million have been increasing to an estimated £8.5 million a week. These are frightening figures when the Government are 59 considering doubling the amount of capital employed by the industry.
Plans to reduce manning from 214,000 to 175,000 over the two years envisaged in the agreement are considerably less than the 210,000 reduction in manning needed over the longer period. Will even the lower figure be achieved? So far there is little indication that it will. Last year the industry made 17 million tons of liquid steel as against a capacity of 26 million tons, yet it needs to work at 95 per cent. capacity before it can make a profit.
We are told that the investment programme will go ahead and that by 1980 £2,000 million will have been spent under the provisions of the Bill before the Secretary of State returns to the House with his begging bowl for more money. But the financing cost of this capital is immense. I believe that the average rate for loan funds is approaching 14 per cent. a year. Therefore, in sanctioning these loans we must ask whether there is the slightest chance of making the surplus which is held out to us.
We are lagging behind other countries in our basic oxygen steelmaking process capacity. In 1974 half our production was from the BOS system, whereas in Japan—an extreme example, I admit—it was 81 per cent. In all other major industrialised steel-producing countries it was substantially more than our 50 per cent., which displays the inadequacy of successive British Governments in recognising the need for long-term capital investment in the industry, and the need not just for good intentions but actually to undertake surgical reorganisation programmes.
We have been waiting since January 1975 for a decision on the Port Talbot expansion which would provide 6 million tons extra capacity. I recognise that 6,000 employees will lose their jobs at Shotton if the steelworks there are closed down, but we must be more progressive in our outlook and consider the substantial number of jobs which will be created by the necessary capital input at Port Talbot. There may be a short-term cost in relocating people, but that will have to be met.
The Government appear to be delaying modernisation of steel rather than 60 encouraging it, and the lack of co-operation from the unions over cost savings, the 400 unofficial stoppages last year and the high level of absenteeism are no way to persuade Parliament to sanction the Bill.
Finally, I should like to draw the attention of the Secretary of State to one aspect of the prospective expenditure under the facility of the Bill, and that is the importance of an adequate research and development programme for the BSC. In 1974–75, £14½ million was spent on research and development by the corporation. I should like an assurance that the Government will ensure that an adequate proportion of the prospective development programme is spent on research and development. The achievements of the corporation in research and development are a matter for which it should be given credit, and continued expenditure would be a great investment for this country and for the industry.
The BSC has been involved in research and development on systems for monitoring operational plant conditions, energy-saving systems, reclamation and recycling, and also steel recovery from refuse, where the corporation joined the Metal Box Company and Batchelor Robinson Limited to form Material Recovery Limited. That one small example resulted in the formation of a company which will recover more than £14 million worth of scrap metal and thus save millions of pounds on imported iron ores and coking coal. The investment can easily be recovered in the profits from one such venture.
I hope that the results of the research on corrosion and the human factor in steelmaking done by the corporation and financed by the European Coal and Steel Community in conjunction with a number of other steel companies in other European countries will have similar successes and will spur the Government to give a proper financial allocation not only to applied research in the corporation but also to fundamental research, which in many of these companies can be the springboard for tremendous innovations which will be the saving grace for future generations and, I hope, for this industry as well.
I hope that we may have assurances on the points I have raised, because, 61 while there are many matters into which the Standing Committee will wish to delve, it is not adequate to come to the House with inadequate financial information and ask for £2,000 million at a time when the pound is diving, when we do not know how much of that money will be borrowed abroad, when the record of BSC over the last year or two has been looking worse and worse, and when there are still inadequate assurances from the unions in the agreement reached that the necessary level of wage restraint and redundancies will be encouraged in order to put the industry on a better footing for the future.
§ 5.3 p.m.
§ Mr. Peter Hardy (Rother Valley)
The hon. Member for Chichester (Mr. Nelson) knows a little about steel, and from that standpoint part of his speech is to be welcomed. I can understand his anxiety about overseas borrowing. He is frightened of borrowing abroad, even though if it is from European sources. I am more afraid of high unemployment, of economic devastation, of the retention of old plant, and of the failure to modernise, which are the consequences of reacting to the fear that he mentioned.
I was surprised to hear the hon. Gentleman say that he would not mind so much if we were borrowing abroad to invest abroad rather than to invest at home. It seems to me that it would be more desirable to borrow money abroad to build a factory in Britain rather than to build one in any other area. I may be doing the hon. Gentleman a disservice in saying that, but I hope not, because I welcomed the latter part of his speech when he referred to the achievements of the corporation acting either on its own or in partnership with other organisations. I have seen some of these results in and around my constituency.
The hon. Gentleman's speech was a more balanced contribution to the debate than that of the hon. Member for Henley (Mr. Heseltine), who appeared to enjoy his vigorous, if utterly illogical, attack on my right hon. Friend. The hon. Gentleman emphasised his view that we ought to indulge in manning in the steel industry at a level geared to the lowest possible production—that which applies at the bottom of a deep recession. He apparently fails to understand that when 62 there is a recovery from a recession, an industry manned to a production of 17 million tons will not find it easy to produce 30 million tons, which is what the corporation will have to produce during 1977. The hon. Member for Henley appears to be familiar with the less significant boardrooms of Britain. He does not seem to be particularly knowledgeable about the steel industry or its history, not even during the past 20 years.
I see that on the Opposition Front Bench we have today the hon. Member for Arundel (Mr. Marshall). He is yet another denizen from the comfortable fastnesses of rural Sussex who is interested in the steel industry and in our older urban areas. This is an interesting development, and I welcome it. I am sure that my constituents in South Yorkshire and those in the North-East will be fascinated to hear the interventions in the debate of Members from the rural South and will note the absence, with the exception of the hon. Member for Flint, West (Sir A. Meyer), of those who ought to be a little more interested in the debate.
§ Mr. Michael Marshall
The hon. Gentleman is trying to tweak our tails a little early in the debate. He ought to get the matter straight. He knows that many of us have worked in industry for many years, even from Sheffield, his home town, but we do not advertise it on a regular basis. We do not dispute the ability of all hon. Members to contribute to the debate, irrespective of the area which, because of electoral uncertainties, they happen to represent.
§ Mr. Hardy
The hon. Gentleman should not be over-sensitive. I was going on to say that I hoped he enjoyed his recent return to South Yorkshire to address the Conservative Party in my constituency. The hon. Gentleman might recall that Conservatives in South Yorkshire were somewhat annoyed a few weeks ago when I drew second place in the ballot for Private Members' motions and thereby had a chance of debating the steel industry, but the House was unable to do so, largely—not entirely—because of the procession of Conservative Members who seemed to want to talk about all kinds of things, none of which was in any way as significant or important as steel.
63 In opening the debate the hon. Member for Henley referred to the failure of the public sector adequately to invest in the steel industry following nationalisation in the sixties. He referred to investment in the industry in the years immediately preceding that nationalisation. A good proportion of that investment was made in my constituency, and it illustrates the fact that those who look at investment purely as global totals are sometimes in error because they may be misguided about the quality or appropriateness of the investment.
The substantial investment that incurred in my constituency in the early sixties was, to a large extent, useless as the hon. Gentleman knows. For example, a good deal of money, even by the standards of those days, was spent on the Kaldo plant. I think the hon. Gentleman will agree that that was a real mistake. The plant no longer operates, but we still have plants that are 40 and 50 years older than that in operation. A good part of the investment of the early sixties was mistaken. It was probably done with a good will, but it was carried out on an inaccurate basis.
The Kaldo decision, like so many other investment decisions in British industry, not least in many areas of the private sector, was not particularly well thought through. Adequate vision was not applied to the decision to make that investment. The hon. Member for Arundel was engaged in the steel industry before he came to this House. I hope that he will realise that I am not blaming him for that mistake, but mistakes there were, and they contributed to the large amount of the foolish investment which preceded nationalisation in the sixties and which was a justification for the Labour Government at that time taking a large part of the industry back into public ownership so that better-considered decisions would be made.
The great pity, as the hon. Member for Henley fails to perceive it, is that we started playing party political football with the steel industry after it was nationalised by the post-war Labour Government. I believe that the industry would be in a more robust and vigorous position today if it had not entered into the period of uncertainty that followed 64 denationalisation. We can see the deleterious effect of denationalisation from the decline in the share of the world's steel trade which Britain experienced during the 1950s. Britain's share fell by at least 30 per cent. during the 1950s, largely as a result of the jockeyings and manipulation which followed denationalisation.
The hon. Member for Henley perhaps knows more about steel than I do. He will appreciate that, despite massive investment, we entered the 1970s with inadequacies in certain kinds of mill and a surfeit of other kinds of mill. That seems to suggest that the global effect of the operation of the private sector of the steel industry before 1967–68 was not altogether wise or sensible.
I hope that we shall not return to playing political football with steel. We need an expanding, vigorous and modern steel industry. They must be the criteria which the Government are pursuing, and I regret that the undertones of the Opposition spokesmen's contributions to the debate suggests that if the Opposition were back in power, we should return to the uncertainty of the recent past. The hon. Member for Henley failed to take a sufficiently long view. He appeared to be demanding that the British Steel Corporation must be yielding a high rate of return before the 1970s are over. I suggest that our decisions today should be based on a longer-term view.
It is right that the House should debate steel at this time, and I am glad that we have the Bill. If the Bill had not been forthcoming, some of my hon. Friends and I would have pressed the Government to provide time to debate steel. There is just cause for anxiety. It is clear that shortly the worst recession will be over. Orders are already coming in. We need to be sure that the BSC is poised to react to the improvement in world trade and to get a greater share in world markets in the next recovery.
I see the prospect of a reduction in the number of jobs in South Yorkshire. The area I represent is one of the most profitable and effective in the activities of the BSC. I am anxious that South Yorkshire, which has the capacity to contribute to a greater share of the world market for British steel, should have the ability to benefit from improved economic conditions.
65 The hon. Member for Chichester said that research was proceeding in the BSC. That there is development of interest and importance taking place can be illustrated by the work which is going on in and near my constituency. Although we have had low production and there is great anxiety in the industry, the electric are furnaces at Templeborough and Aldwarke have been crashing production records week by week since January this year. That suggests that, despite the anxiety and uncertainty, the Rotherham area has a capacity to make a vigorous contribution to a greater drive for production and sale.
While we have been smashing production records, we have also been carrying out tests and trials which have relevance to scrap. We have been carrying out trials for continuous charging in furnaces using directly reduced pellets and granulated iron, and trials for the mixing, weighing and blending of those pellets and granules. Trials are also going on at Aldwarke in the use of the submerged injection of oxygen and in the improvement of furnaces by the use of water cooling panels. These trials are of great importance, not least those concerning the direct reduction feeding of furnaces, because the scrap problem can be acute.
According to the latest assessment of Britain's future steel capacity, electric steel-making is likely to increase from 6 million tons to 9 million tons by the end of 1978. Unless we can have adequate capacity to make iron to give us a cushioning against excessive dependence on scrap, the BSC may not be able to fulfil its targets, because the demand for scrap will either cause the price to escalate or will result in an overall shortage.
My hon. Friend the Member for Brigg and Scunthorpe (Mr. Ellis) will agree that so long as we have scrap problems in Rotherham the need for an adequate iron-making capacity to support the magnificent Anchor project in Scunthorpe is vital. I am reminded of the time when my hon. Friend the Member for Brigg and Scunthorpe and I visited steel works in Japan. We went to a works near Tokyo—by no means the largest in Japan—which is very successful and from which some of our North Sea pipelines came. The Japanese are able not only to produce steel but to sell it.
66 That is the area we should tackle first as the world recovers from recession. We should make sure not only that Britain can produce the goods—which we can in many sectors with matchless efficiency, although it is fashionable to denigrate British economic activity—but that we can sell the goods. Japan is far more effective than we are in selling steel.
The Rotherham and Scunthorpe areas and the proposed developments in Redcar can compete with the Japanese, the Germans, the Americans and anyone else, but where we have recently failed to compete successfully is in our ability to sell what we produce. The BSC is to be congratulated on having come to realise this. I note from the Press in the last day or two that the BSC is to devote more of its resources to promoting salesmanship and improving its selling record.
§ Mr. Tinn
I am interested in my hon. Friend's visit to Japan. It is commonly alleged that there is overmanning in the British industry in comparison with other countries. But international comparisons are often invalidated because we do not compare like with like. Will my hon. Friend tell us something about that?
§ Mr. Hardy
My hon. Friend is correct. In certain sectors of British steel there is overmanning in comparison with other countries. Comparing the old traditional bar mills with the new bar mill in Thrybergh in my constituency, the new mill is much more capital intensive and much less labour intensive. Many of our international competitors are not operating out-of-date plant. Where we have modern plant, as in Scunthorpe and Redcar and parts of the Rotherham works, we can operate with an efficiency and an economy of labour at least comparable with the examples that are often quoted.
The Chiba works which we saw in Japan were very efficient. The coking plant there was the cleanest coking plant I have ever seen. The sintering plant was probably as good as anything we have in Britain, if not better. Indeed, it was as good as any such plant which can be found anywhere in the world. The plant was lawned and trees were growing around the works. Old steel workers of the days before the new bar mill and Anchor would probably have found it unbelievable.
67 This came about because the Japanese were able to invest and, having invested, they had the drive to sell. We must now do the same and, as the investment begins to take effect, we have a capacity to rival almost across the board the achievements of other countries. In our best plants we are matching them today.
As I have said, we have a number of problems. A serious one in my area is that of the lack of guarantee of scrap supply. If we are not to have an adequate guarantee in this regard, my hon. Friend and his colleagues in the Department should do their utmost to ensure that the direct reduction alternative is rapidly expanded, otherwise there will be a repetition of the short-time working we have had in the Rotherham area and many other areas during the period of the recession—not because of lack of demand for the product, but because of lack of supply of one essential raw material.
I must mention one point on which I agreed with the hon. Member for Chichester, who expressed support for ingot stocking for stockpiling. About four or five years ago with my late right hon. Friend the Member for Rotherham, who would have been very interested in this debate, I went to see the corporation and pleaded with it during a relatively minor recession that it should seek to smooth out the ebbs and flows of economic fortune by engaging in ingot stocking. The corporation did not seem particularly well disposed to the suggestion. I believe that the late Mr. O'Malley had actually floated the idea in the late 1960s before I came to the House. However, we repeatedly pressed the corporation on this point and were delighted that it became more receptive to the idea.
Given the fact that recovery from this dreadful recession is beginning, the corporation should be encouraged by the Department to engage in the maximum possible level of production, even though it may involve certain economic costs, so that we can immediately begin to deliver the goods when the orders come in. To do that it is essential to have an adequate capacity to engage in anti-cyclical stockpiling.
I should like to have said a great deal more, but I have already taken rather longer than I intended, largely because 68 I felt it essential to respond first to what the hon. Member for Chichester said and then to the regrettably short-sighted speech of the hon. Member for Henley. I believe that the Government are to be congratulated on bringing in the Bill. The moneys involved are essential. We need also to ensure not only that the Government give the financial green light to the corporation, but instruct it to get on with producing steel in the greatest possible quantity and in the most efficient manner. Further, for areas like mine, which were not really covered by the Beswick review, nor in detail by any previous reviews, the Government should spell out the reasons for the confidence which the men in the industry are entitled to possess.
As I have said already, we in the Rotherham area have in the last few weeks been breaking production records. That increase in production, that use of common sense, and the ingenuity which is to be associated with the trials and tests which are proceeding in my constituency, deserve not merely the Minister's commendation today but the provision of real evidence that steel in South Yorkshire, particularly in the Rotherham area, has a very important future before it.
§ 5.25 p.m.
§ Mr. Richard Wainwright (Colne Valey)
In the interests of underlining areas of agreement between the two sides of the House, I should like to endorse immediately two major points in the speech of my fellow Yorkshire Member, the hon. Member for Rother Valley (Mr. Hardy), in his admirable debating contribution.
With a very apt illustration, the hon. Gentleman rebuked us—I think that he intended to rebuke many outside the House also—for the regrettable trend to seek to measure investment by its cost rather than by its efficiency. The illustration he gave from his constituency of investment thrown away through bad judgment was an apt reminder which I hope will be taken to heart very widely at Lime Grove, Broadcasting House, Printing House Square and all the other institutions which have fallen into the absurd error of measuring investment and other policies by the mere expenditure involved rather than by the value received. I endorse also the point which the hon.
69 Gentleman made very forcefully about the appalling fate which has befallen the steel industry as a result of its having been a political football for so long.
It seems to Liberal Members quite lamentable that, especially at a time when the financial world overseas is looking very askance at the British economy, in a House of Commons debate so little reason should have been given for appropriating to one industry, albeit an important one, a vast share of national resources. I hope that it is not too much to plead with the Minister of State that in winding up he tries to sketch in some context of industrial strategy within which the House is being asked to open the door to this enormous expenditure.
Hon. Members need no persuading of the importance of the steel industry, but those of us who represent areas with a great variety of successful exporting manufacturing industries are bound to be worried that time and again the Government have asked the House—without any suggestion of general strategy, without any approach to an overall industrial budget —to appropriate vast resources to particular industries all of which during the past 18 months have had very strong political overtones: they have been industries to which votes are directly attached.
One of the unfortunate aspects of the steel industry is that, because of the vast numbers of people it employs in concentrated areas, it is closely associated with vote-getting. That has been illustrated by Governments of both parties in recent years.
It is the misfortune of some things in this country under our present deplorably primitive political system to become political totems. It is peculiarly unfortunate when a great manufacturing industry which is fundamental to so much of our economic activity becomes one of these totems. As the hon. Member for Rother Valley said so forcefully, it is plain that steel is a political totem and, as a result, investment and confidence in British steel have from time to time withered seriously during the past 30 years.
The hon. Member for Henley (Mr. Heseltine) suggested that the blame for this arose during recent years when Lord Beswick held up the development plan 70 of the corporation. It suits hon. Members on the Government Front Bench to suggest that the hold up in investment is of much earlier origin when the industry was in private hands. I believe that blame arose during both periods, but it must be traced not to the frailty of Ministers or of boards in private enterprise, but to the absurd nature of our political system which is utterly incapable of assuming control of vast and fundamental manufacturing industries.
The hon. Member for Henley said that there was no political framework capable of controlling industries in public ownership. He did not choose to develop his theme, but certainly Liberal Members agree that we do not have a political framework to deal with these matters. We have a framework that virtually ensures that industries associated with public ownership will have a political cushion every two or three years when political propaganda hots up and when rival factions of extremists are urged either to demonstrate for public control or industry or, in an equally misplaced way, for a return of publicly-controlled industries to private enterprise. Either way there is a concentration on the mere fact of ownership, which is miles away from the question of operating efficiency and marketing success.
§ Mr. Heseltine
I follow the hon. Gentleman's argument, but does he not appreciate that that was exactly what the Conservatives did not do in the early 1970s when we sought to carry our development within the public sector? The consequence was that the Labour Party then sought to exploit that in a new way, and it has had the effects which we have described.
§ Mr. Wainwright
Yes, I am happy to give the hon. Gentleman that point straight away. It was one small mark of success. But the then Conservative Administration was so busy being abrasive and seeking confrontation on other issues that it did not take time to seek a confrontation with the nationalised steel industry.
In earlier years we had the disastrous attempt to unscramble the steel omelette which seriously set back investment. We are now being asked to open the door to the appropriation of vast sums of public money. We are dealing with a situation 71 in which at least half of the extra borrowing power being sought in the Bill is due simply to political delay. I am confident that if in recent years this matter had been handled wisely and with a reasonable degree of political courage, the cost of the British Steel Corporation's development plan would be considerably less than it now faces.
Before the House gives this Bill a Second Reading—and no doubt it will do so reluctantly when facing these grim facts—it should be on record that so vast an appropriation of public resources would have been avoided if the corporation had been allowed to go ahead on a reasonably commercial basis in years which have been wasted both by former Conservative Governments and now by a Labour Government. It is in that reluctant and disappointed spirit that Liberal Members feel obliged in the circumstances not to divide the House against the Bill.
§ 5.34 p.m.
§ Mr. Roy Hughes (Newport)
The hon. Member for Colne Valley (Mr. Wainwright) has, as usual, made a thoughtful speech, but I am concerned about the regrettable fact that it is now over two years since the House last debated the steel industry.
I listened carefully to the principal Conservative spokesman on steel, the hon. Member for Henley (Mr. Heseltine), but he did not protest about the fact that this subject had not been debated for so long. There have been protests on this score from the Steel Group of the Parliamentary Labour Party, of which my hon. Friend the Member for Redcar (Mr. Tinn) and I are joint chairmen. Numerous Labour Members have questioned the Leader of the House when we have discussed forthcoming business on Thursday afternoons, but he has always pleaded lack of parliamentary time. Nevertheless, we must face the fact that steel is a basic part of the British economy and comprises a vital industry.
We cannot expect too much support from the Opposition on these matters. As my hon. Friend the Member for Rother Valley (Mr. Hardy) said, they represent the most salubrious parts of England—sunny Sussex and all the rest of it. They are not particularly con- 72 cerned about the steel industry, and they certainly do not represent steel workers.
However, I am concerned about the fact that the Labour Government appear not to want interference in the industry by Members of Parliament. Yet the fact is that if Sir Monty Finniston, the Chairman of BSC, and Sir Richard Marsh, the Chairman of British Rail, are to be believed, the Government are intervening in nationalised industries in a big way. We have heard squeals of anguish from time to time and it appears that the heads of nationalised industries have now established some kind of trade union committee to protect their position. It is no good Ministers talking about open government if they do not practice it.
I have taken a close interest in the steel industry over many years and I believe that it needs more parliamentary oversight—certainly far more than it is now receiving. The industry requires a good deal more worker participation in terms of overall management control. Government without proper scrutiny can develop into authoritarianism, and that is the last thing Labour Members want.
This Bill is almost an excuse for a debate on the steel industry since the Bill relates essentially to financial matters. We see from the Title that the Bill seeks tomake provision with respect to the limit on the sums borrowed by, or paid by the Secretary of State to, the British Steel Corporation…".As a result many hon. Members have strayed a long way from the basic concept set out in that Title.
My criticisms are directed at three fronts. The Government are asking Parliament to authorise vast sums of expenditure in the public sector of the steel industry. In turn, there must be far more parliamentary scrutiny of this vital industry. It is no use making the excuse that all these matters are investigated by the Select Committee on Nationalised Industries. I appreciate that such bodies have a vital part to play, but they often turn into mere talking shops. More parliamentary accountability is required, and if it is denied, that will be a negation of democracy.
I have some mild criticism to make of the chairmen of publicly owned industries 73 generally and the chairman of the British Steel Corporation in particular. Such chairmen are for ever protesting about interference by politicians in the affairs of the industries which they have been appointed to run. They must realise that they are essentially heads of publicly owned industries and as such they are publicly accountable. What is more, Members of Parliament are the representatives of the public. I agree that organising things in this way tends sometimes to make the job of the head of the nationalised industry a bit more difficult. It means, too, that Ministers must be more careful when appointing heads of these vital concerns.
It is fair to say that the British Steel Corporation is not exactly a success story. I speak as a fervent believer in the public control of this vital industry. We must face the fact that it has been bedevilled by industrial disputes and it has had management that has not particularly excelled itself. We have had needless disputes in my area. I have felt that many have been due to mismanagement of the plant. To be fair, the plant managers are subordinate and are waiting for directives from corporation headquarters. There is too much bureaucracy in the corporation. I can only hope that the appointment of the new chairman, Sir Charles Villiers, will mark a new era in the history of the corporation. I wish Sir Charles well in his formidable task.
I wish next to refer to Clause 2(2) which relates to the £3,000 million limit on borrowing or up to £4,000 million with the consent of the Treasury. It is worth pointing out that these sums are not peanuts. The Bill illustrates the Government's financial commitment to this basic enterprise. This public money must be safeguarded. We must bear in mind that at a time when the Government are asking Parliament to authorise vast sums of money there is a great influx of steel imports. I noted this afternoon that the Secretary of State for Trade offered no positive action to halt imports.
A week ago Mr. Bill Sirs, General Secretary of the Iron and Steel Trades Confederation, made a strong protest about this at the Scottish TUC. He is absolutely right. Eventually the Government will be forced to tackle import control. As I said clearly in the Budget debate, the theory put forward by the 74 group of Cambridge economists is an essentially correct analysis of our present difficulties. I join with the TUC in calling for selective import controls. The future success of the British economy primarily depends upon action here.
I received in today's post a letter from the motor manufacturers saying that over the past three months EEC car manufacturers had boosted their sales from 18.9 per cent. of the British market to 22.4 per cent. The manufacturers point out that the Japanese have over 9 per cent. of the British car market, which means that about one-third of the total British car market is now the prerogative of overseas suppliers.
The state of the steel industry can be related to that of the motorcar industry. If we could have a boom in the motor industry, it would do an immense amount of good for the steel industry. I want to see the jobs of the thousands of people employed in the steel industry in my constituency made more secure. I should like to see these imports of cars stopped.
How much longer can we allow our basic industries to be undermined in this way? The cornerstone of the economy of Newport is the great plant at Llanwern. It is a works of fantastic potential, being one of the most modern and up to date in the whole of Western Europe. At present it is going well, particularly now that the third blast furnace is fully operational. I hope that morale there will build up.
I still feel that there is room for considerable change in the management of the industry in Wales. Iron and steel have been made in South Wales since the early days of the Industrial Revolution. In the past few years it has been as if we were receiving divine revelations from the former United Steel management from the North of England, telling us how things should be done in South Wales. It is fair to say that chaos was created in the South Wales industry and that there were a host of industrial disputes. We have never before had such a state of affairs. I believe that the whole managerial set-up in South Wales needs to be examined.
This great works at Llanwem certainly needs its own iron ore terminal. Previously the ore was brought in by small ships to Newport docks. That was 75 not a particularly efficient way of transporting vast quantities of the ore. In 1967 parliamentary approval was given for a terminal to be known as Uskmouth, to serve the works.
Unfortunately when the corporation took over, it pigeon-holed this project and now the ore for Llanwern is brought overland by rail from Port Talbot. This operation is fraught with all sorts of difficulties. I hope that the new chairman will take this project out of the pigeon hole and will give the go-ahead for the iron ore terminal for the great Llanwern works, which it needs to make itself the success it should be.
§ 5.50 p.m.
§ Sir Anthony Meyer (Flint, West)
I assure the hon. Member for Newport (Mr. Hughes) that I care passionately about the steel industry and, furthermore, that I represent thousands of steel workers, many of whom voted for me at the last election and a lot more of whom, I suspect, after what has happened in the past few years, will vote for me at the next election.
I do not intend to speak solely or even primarily about the future of the Shotton works, but I must say a few words in view of some remarks made by my hon. Friend the Member for Chichester (Mr. Nelson). If we accept the logic of the strategy of the British Steel Corporation, which ties Port Talbot and Shotton indissolubly together and decrees that the expansion of Port Talbot depends on the phasing out of steelmaking at Shotton, clearly it becomes difficult to argue that Shotton should continue steelmaking. It is a case I shall continue to argue, but it becomes more difficult.
However, I see no reason, other than the obstinacy of Sir Monty Finniston, why the two plants should be so inseparably tied together. I shall be querying the whole strategy of the corporation, but even within that questioning I accept that the expansion of Port Talbot should go ahead. I do not accept that expansion necessarily implies the phasing out of steelmaking at Shotton.
The Bill, increasing as it does the capacity of the BSC to call on the very limited supplies of investment capital, provides the House with the first oppor- 76 tunity for a long time to consider the achievements and prospects of the nationalised steel industry. The tone underlying the speeches of hon. Members on both sides has been one of anxiety. It must be said that nationalisation has fulfilled few of the hopes and most of the fears which were expressed at the outset and which were so ably set out by my hon. Friend the Member for Henley (Mr. Heseltine). There were, of course, valid theoretical arguments for nationalisation: there was the need for rationalisation; there was the low output of pre-nationalisation steel; there was the lack of investment. They were all perfectly sound arguments in favour of nationalisation.
But what has been the result? Output, whether in terms of output per man or in terms of output per £1,000 of capital invested, has continued to grow more slowly in the British steel industry than it has in the competing steel industries of other countries; and the gap is still widening. The result has been that the long-delayed plan for investment—delayed for seven years—has come under fire from every pressure group, of which I am unashamedly a part, and it is still not in operation.
In any case, the argument that the poor performance of the British steel industry is caused by the lack of investment—the Minister made much of this argument today—is not borne out by the experience of Llanwern, which, as the hon. Member for Newport said, is one of the best equipped steel plants in the country, but it has one of the worst records of production. It is tempting and probably correct to assume that nationalisation and efficiency are incompatible—at any rate, under the British system of parliamentary democracy. Certainly they seem to have been so in the steel industry. If anybody wants to know why they are incompatible. he should study carefully the speech of the hon. Member for Newport.
The contrast is not only with steel industries in other countries but with other non-nationalised heavy industries in Britain. In The Times of 1st March there was an article by Mr. E. G. Wood, of Sheffield University, which made some comparisons particularly between the steel and chemical industries in 1973, the last year for which figures are available. In 77 that year both industries were investing £700 per man employed, three times the national average, but output in the steel industry was 7 per cent. below the national average whereas output in the chemical industry was 70 per cent. above the national average. Mr. Wood wrote:If the steel industry in 1972 had achieved the same net output per head as the chemical industry, it would have needed 110,000 fewer workers, not the 20,000 quoted by Sir Monty.There are many other figures to show that the performance of the nationalised steel industry is deteriorating in relation both to foreign steel producers and to other sections of heavy industry in the United Kingdom; and the gap is getting wider all the time. Therefore, it is not safe to assume that massive investment, as in the 10-year development plan and as still further increased by this Bill, is money well spent. That same amount of money might bring more jobs and better living standards if it were invested in some other industry.
Even if we could ignore all these considerations, even if the British steel industry were achieving production per man and per £1,000 invested at a level comparable with foreign steel industries, even if it made as good use of capital and manpower as, for example, the chemical industry, would it be right to allot such a massive share of investment capital to this one industry? Are the assumptions underlying the 10-year strategy right now even if they were right at the time?
It is notorious that the steel industry particularly is affected by the ups and downs of the trade cycle. It would be the height of foolishness to argue that, because there is now recession where in 1973 there was expansion, the whole development programme of the steel industry should be drastically cut back. Boom times will return and, with them, increased demand for steel. But underlying the waves of boom and slump there are deeper currents. It now seems unlikely in the highest degree that the growth rates of the 1960s and early 1970s, either in Britain or in the rest of the developed world, will resume at the same pace. Indeed, there are purely physical constraints on growth at such a pace. If growth resumes, it will be much more evenly spread round the world.
78 Whether we like it or not—and we had better like it—the next decade will see a massive transfer of industrial potential from the developed to the developing world. If we mean the pious platitudes that we mouth about the importance of assisting the under-developed countries to make progress, we must not stand in the way of that development. It would be the height of foolishness to try to do so.
It is already becoming only too painfully apparent that the assembly of motor vehicles on a very large scale is ceasing to be an appropriate activity for a fully industrialised country. It is an activity which will transfer more and more to less developed countries. On the same basis, I suggest that over the next 20 years the same kind of thing will happen to bulk steelmaking. In this context, is it right to assume that Europe, the United States and even Japan will maintain their completely dominant position in steelmaking?
The targets set in the 10-year strategy, which were derided by the Labour Party and the unions as being far too low, now look absurdly over-ambitious, especially in view of what is being produced by the British steel industry. They are also extremely ill-defined. There is much talk of total tonnages and almost no talk of product mix. However, it is notorious that it is precisely in the matter of product mix that the British Steel Corporation has fallen down most grievously.
The air has been thick with complaints of massive imports of steel products at a time when some of the closures planned under the strategy were taking place. There are repeated demands for import controls, when it is obvious to all that without massive imports of certain types of steel products large sections of British industry would have ground to a halt long before now.
There is every indication that this trend of over-production of certain steel products—notably sheet steel—and underproduction of others—mainly large-diameter pipes—will continue for some time, although the motor and domestic appliance industries are unlikely ever to grow and step up their demands for sheet steel at the rhythm of the early 1970s, and although the growth industries of the future, including deep-sea oil exploration, will demand different types 79 of steel. But one thing is reasonably certain—that there will be a continuing demand for the kind of special steels of which the hon. Member for Rother Valley (Mr. Hardy) spoke.
§ Mr. Roy Hughes
I was interested in what the hon. Gentleman said about the motor industry. Does he agree that whereas the British motor industry previously largely supplied the British market, more than a third of the British market is now being supplied from overseas? I gave figures showing that that is so.
§ Sir A. Meyer
I know that the hon. Gentleman thinks that import controls are the answer to all our problems, but if he were unfortunately to have his demand granted, he would find that the protected British motor industry rapidly became so expensive and inefficient that the demand for motor cars would drop as dramatically as if imports were totally banned. There is no answer along that road. I foresee that in a few years' time the hon. Gentleman will complain as loudly about imports of motor cars from India as he now complains about imports of motor cars from Japan.
There is now very little left intact in the 10-year strategy. In any case, it was not even consistent with its own principles. The strategy was allegedly based on large-scale, integrated steelworks close to harbours deep enough to take giant ore carriers. But of the five plants selected to fulfil that rôle only two—Port Talbot and Redcar—meet the stated requirements of the strategy. Ravenscraig, Scunthorpe and strike-torn Llanwern, all of which are to be expanded, are further from a deep-water port than is Shotton, with its strike-free record, which is to be phased out as a steel producer. It makes no sense and cannot he justified on its own merits, or even within the twisted logic of the strategy.
The whole strategy should now be drastically revised before still more capital is squandered on a white elephant more voracious and less productive than Maplin Airport, the Channel Tunnel or—very relevant in the present water shortage—the Dee Barrage scheme. We should stop thinking in terms of an unrealistically high total tonnage produced by huge, integrated steel works on the Japanese 80 model. We should stop thinking of an expanding steel industry as an efficient method of keeping the unemployment figures down.
Instead, we should be thinking of the steel products that a more slowly expanding world economy and a nearly static British economy will need over the next 10 to 20 years. We should think of what is the optimum size of a British steel industry to meet that need.
I suspect that what the British steel industry achieves will be achieved by methods which smack rather more of make do and mend and rather less of science fiction, by patching up and keeping going steel plants of small and medium size which have a good track record—and of which Shotton is an obvious example—rather than by trying to carry out grandiose schemes based on the theory that if one takes a plant with an unproven record, or a proven bad record, and doubles its size, one will land up with anything worth having.
§ 6.7 p.m.
§ Dr. Jeremy Bray (Motherwell and Wishaw)
The hon. Member for Flint. West (Sir A. Meyer) is rightly concerned with the future work and well-being of his constituents in the steel industry, but I was not entirely persuaded that he had reconciled their interests with his political position and political doctrine and some of the views about world development which he put forward. I do not believe that the prospects for world growth, and particularly growth in the demand for steel, are anything like as dismal as the hon. Gentleman suggested. He does not make sufficient allowance for the myopic view that we take because of our balance-of-payments position.
I have just returned from a week in the United States. There is there, and in Eastern Asia, where I was a few weeks before that, every confidence in an expanding world economy, expanding markets and expanding demand for steel, for motor cars—for all that we can produce and all that the developing countries can invest in and produce for themselves.
I agree that there are major questions about the broad strategy of the British Steel Corporation, but I also agree with the hon. Member for Henley (Mr. Heseltine) that we do not yet seem to have a proper framework in which to evaluate 81 that wider strategy. What we need is undoubtedly an industry-by-industry, sectoral and firm-by-firm analysis of our overall national economic problems. The steel industry suffers more than any other from stop-go. Until we have a sensible approach to the overall management of the economy, the steel industry will take the rap. However, this is a debate about the steel industry in particular, and I shall confine my remarks to that.
The corrigendum to the Bill nicely sums up our problems about steel when it says:Clause 2, page 1, line 16, after '£2,000' insert 'million'.The sheer scale of the industry with which we are dealing, the scale of the investment, never mind that most important aspect with which we are concerned as constituency Members—employment—are so huge that we need to give much closer attention to the affairs of the industry than we have given. I find it a matter of some concern that, were one able to look beyond the confines of the Floor of the House, it would be apparent that nobody from the corporation seems to have thought it worth while to come here to listen to the debate.
Concerning industrial relations, we are at a very delicate stage of developments in the British Steel Corporation. The industry and the unions were engaged in a constructive course of negotiation on the introduction of WMIS, which is the industry jargon for work measured incentive schemes. This was brought to a complete stop by the £6 pay limit, and will now be held up for a further year, in all probability, by the agreement that necessarily has to be reached on the incomes policy for the next year.
There is a development with which the industry could proceed, and from which, I am sure, both the unions and the industry would benefit a great deal. I refer to the setting up of works joint trade union committees, by means of which all the trade union representatives in a works, within the official negotiating framework of their own unions, can meet together to discuss common works problems.
It is the policy of the ISTC as I understand it, and of the National Craft Coordinating Committee that these joint works committees should be set up within 82 the union hierarchies. They are not now part of the union hierarchy. The only works in which one has been set up, where the greatest priority was given, is, I understand, at Llanwern. But the basis of it exists in the action committees at Shotton, at all the works in my own constituency and at the other works in Scotland. They have been extremely effective within the limited objective of perpetuating the life of a particular works.
These action committees have shown that a powerful works interest exists, which ought to be accommodated within the structure of each trade union, which the trade unions nationally wish to achieve and which the people on the shop floor wish to achieve. I wonder what is holding up the proper setting up of these committees.
Outside the area of industrial relations there is a continuing war for modernisation in the industry. It is a war not between management and unions but a war in which they both fight on the same side. It is becoming rather confused in those works which have faced major redundancies and the threat of closures in recent weeks and months, because, frankly, the operation of the redundancy payments scheme has totally obscured the industry's economic problems, both in the shorter and longer-term future.
I wonder whether the current figures on profitability quoted by the British Steel Corporation charge redundancy payments fully to the profit and loss account, or whether they are written off against some kind of capital reserve. Enormous sums are being paid out in redundancy payments, admittedly not to all workers, because not all of them have very long service, but in some instances one or two years' wages are being paid in advance in a lump sum, and this must be a heavy blow to profitability. I wonder whether even yet, in considering the relative loading of different works and the manning of those works, this is fully taken into account.
But, despite those difficulties, the timetable laid down in the Beswick Report seems to be being implemented. Some rough passages are being experienced in particular works, but on the whole the unions and the management locally seem to have found a way through, and I pay tribute to the useful work done by Bill 83 Sirs and the national and Scottish level organisation of the ISTC in pressing the interests of particular works. I refer particularly to the Lanarkshire works and to the Craigneuk works in my own constituency. At the national level, Bill Sirs has made sure that the interests of these works are protected.
In the battle for modernisation, I wonder what is happening about the investment programme. I have repeatedly written to my right hon. Friend and to the Chairman of the BSC to ask what specific capital development proposals are being held up by lack of decision by Government. None is being held up except Port Talbot. For the rest, it is an internal matter within the corporation as to why investments are not going ahead faster.
The Craigneuk works, the biggest single development in the Chancellor of the Exchequer's scheme for funding the development of the steel foundry industry, has been held up for months and months by the internal appraisal and design studies. This appraisal should have been completed a long time ago, but it seems to have been bandied about from the board to the lower level of management and back again to the board. I hope that the internal management appraisal of schemes like this will in future be conducted a great deal more expeditiously and effectively than has been the case so far.
Another major current operating question is why BSC has not made better use of the attempt to build up counter-cyclical stocks. There were complaints over many months by BSC about the slowness of Government Departments in agreeing the details and financial arrangements required to finance these stocks. The BSC has failed to take full advantage of the facility to expand output. It has been using only two-thirds of the funds available. Furthermore, the building up of those stocks has gone solely into the lowest cost plants, such as Scunthorpe, where the BSC felt, for its own internal reasons, that the stock could be most cheaply produced.
For whatever reason, maintenance or operational, we read in this month's steel statistics that there have been plant maintenance problems at Scunthorpe. Having failed to achieve the output there, the 84 stockbuilding was not switched to the smaller works where output could perfectly well have been increased and advantage taken of the financing facilities the Government were prepared to offer. The corporation owes the unions, the public and this House an explanation of why the stockbuilding facilities that we have provided have not been better used.
Finally, there is the question of the appointment of the new chairman. I have found it necessary in the procedures of this House to criticise the present Chairman of the British Steel Corporation, Sir Monty Finniston, but I also have respect for the contribution he has made to the corporation. I am sure that his influence will be felt for many years to come in the strategic development and the technological shape of the corporation. No one could ever doubt his own devotion to what he believed to be the well-being of his industry, and I am sure the House would wish him well in whatever he does in future years.
I also welcomed the appointment of Sir Charles Villiers as the new chairman. I had some personal dealings with him when he was managing director of the Industrial Reorganisation Corporation. I have a great respect for his relaxed and effective methods of working, and in particular his approach to industrial relations. I am sure that the unions will find him a good man to deal with. He is nearing the end of his career, and his years with the corporation will, therefore, necessarily be limited. It is no disrespect to him and no disapproval of his appointment when I express the hope that his successor will be found from within the ranks of the steel industry.
We have in the past had much discussion of the problems encountered in appointing the heads of nationalised industries, and I have contributed to that discussion in recent weeks. Part of the reason is that we have not had a proper policy in the public sector for the development of people to fill the top levels of posts. This applies not only to the industries themselves but to the civil servants at deputy-secretary and undersecretary level who will be called upon to handle the affairs of the industry.
We have within the public sector a very great deal of experience of top level staff college work in the Armed Services. The staff colleges, from what I have seen 85 of them, work very effectively and play a very important rôle in training the top level of officer in the Armed Services. The problem in the nationalised industries is totally different, and a different pattern of training would be required. But it justifies no less time than that given to it in the Armed Services.
In order that the people concerned are able to gain experience of the problems that they will face at the top level, it should bring together the industry's management, the national trade union officers, the civil servants dealing with it and, I venture to suggest, even some Ministers and hon. Members. It need not be a very expensive operation. There are ample management training facilities at the moment which are under-used both in the public sector of industry and in the university sector, and those people there who are training already could well lift their sights to the strategic issues with which we have been concerned in this House and which are not as well handled as we should wish to see.
I find it an unsatisfactory parliamentary proceeding to deal with financial authorisations for such major increases in borrowing powers in this way, and I agree with a great deal of what the hon. Member for Henley said about the treatment by this House of the investment programmes and pricing policies of the nationalised industries. It is possible without unduly interfering in the management of the industries to conduct our proceedings in a way which would help the discipline that is undoubtedly needed in the management of the nationalised industries and to which I am sure hon. Members of this House are well equipped to contribute.
§ 6.21 p.m.
§ Mr. Michael Marshall (Arundel)
This has been a constructive and useful debate, and it is in that spirit that I join the hon. Member for Motherwell and Wishaw (Dr. Bray) immediately in paying tribute to Sir Monty Finniston. With the retirement of the Chairman of the British Steel Corporation in a few months, we are seeing many of the problems in embryo as a result of which this House, in its relationship with the Government, with Government Departments and with the corporation, has been going through a very difficult and testing time. It is in 86 that spirit that we welcome the appointment of Sir Charles Villiers as chairmandesignate of the corporation. But the view which has been expressed on all sides of the House has reflected many of the worries and much of the concern and unease which hon. Members feel about the state of the corporation.
It was in that context that we listened to the Secretary of State today, and all of us who heard him will perhaps agree that there is a great deal more that we need to have answered if we are to give the Bill a fair wind. He gave us what my hon. Friend the Member for Henley (Mr. Heseltine) described as the classical presentation now by Ministers of the present Government in asking for more money. It is one which is long on basic general assertion and very short on facts. When the Minister of State winds up the debate, I hope that he will fill some of those gaps. It is right to put the Government on notice that when the Bill goes into Standing Committee the Opposition will seek to probe a great deal. I shall return to some of those matters presently.
At the outset, I wish to take up some of the points raised by hon. Members on both sides of the House. As I say, this has been a constructive debate, and a number of the contributions to it deserve comment.
The hon. Member for Redcar (Mr. Tinn) was perhaps putting forward a view typical of many of the views we have heard today in advancing an unashamedly constituency argument. That reflects one of the views which we are bound to have on these occasions. Whenever we get the chance to debate steel, inevitably we must expect to hear constituency points of view such as those put forward by the hon. Member for Redcar and by my hon. Friend the Member for Flint, West (Sir A. Meyer). There is no shame in that. But perhaps I should nail fairly quickly the rather loose assertion which the hon. Member for Newport (Mr. Hughes) made, perhaps supported by the hon. Member for Rother Valley (Mr. Hardy) in a more lighthearted vein, that an hon. Member has to represent a steel constituency to be able to speak about steel. That is such a self-evident ridiculous proposition that I almost blush to pursue the argument today.
87 However, it is right to put on record that those of us who take a keen interest in these matters have to reflect the views of the widest possible perspective. Therefore, it is right to have hon. Members representing steel constituencies putting forward their views, but equally it is of value to the House to hear from hon. Members who take an interest in steel and who are able to take a broad view given that they have no constituency commitment.
It is only right to say too that, if Government supporters wish to argue that only those representing steel constituencies should speak about steel, some of us who have worked in the industry might just as well argue that only those who have worked in the industry should speak about it. However, I hope that we are all sufficiently well aware of the problems to be clear about our joint interest in trying to resolve many of them, because they are problems which all of us face.
Listening to the Secretary of State today, I found it a little ironic to hear him using words that he used to advance when he was in Opposition about the need for urgency, the need to get on with things, and about unparalleled intervention. I could quote many of his earlier speeches which in the post-Easter glow of this amiable atmosphere I shall spare him. But he will appreciate that intervention in the steel industry goes back to the very birth of the BSC, and it is for us to do a job of work in trying to improve the present situation.
If it does nothing else, the Bill gives us an opportunity to debate these issues and, as I said just now, it will give us an opportunity in Committee to get down to a great deal more detail than we are able to do today.
To Government supporters who say that we do not have enough opportunity to debate steel, let me say that the Opposition share their view entirely. On a number of occasions we have put down Adjournment debates on steel. We had an opportunity to debate steel on 2nd April under the general heading of British industry. We shall continue to call for these opportunities.
The Minister of State will recall the matters that we discussed on 2nd April. 88 The problem of how and when we look at the difficulties of the BSC is one which exercises us greatly, because we are well aware that under present arrangements it is entirely a matter of chance whether we are fortunate enough in Ballots and on other occasions to get the kind of scrutiny that we would like in many of the affairs of the corporation.
It is perhaps worth making clear that at present there are studies going on which we hope will have a definite effect and be of considerable value for the House. There is the NEDO study of the relationship between the Government and the nationalised industries. We regard that as extremely important. Starting at the moment, we have the study by the Select Committee on Nationalised Industries of the BSC and the problems of technological change. These are important studies, and we hope to see from them answers to some of the crux questions which many hon. Members have raised today. Those which are not answered will, we hope, at least be developed in a way which will assist our thinking in the House. But they are essentially longer-term studies. Therefore, the Bill is of significance in providing us with an immediate opportunity to review the problems of the corporation.
When we look at what the Secretary of State said on this subject, we see that he made it plain that he was once more pressing for an urgent review, because he rightly brought out that the corporation will, in effect, have exceeded its borrowing limits by the autumn. It is in that sense, because we wish to adopt a constructive attitude, that we have not taken a fractious view of opposition today. We realise the cash difficulties that face the corporation, and these will affect our judgment when we come to the question of a vote at the end of this debate.
Having said that, however, it is not good enough for the Government to come here with another "We need £2,000 million"—yet another instalment—argument. As the hon. Member for Motherwell and Wishaw said, the Government's approach is to come forward in such a casual manner that we have to have a corrigendum tidying up the £2,000 to £2,000 million. It is this attitude of a few million pounds here or there which makes many of us so worried about the way 89 in which the Government approach their industrial strategy.
The Secretary of State referred to the special study for steel in relation to industrial strategy. Many of us feel that if he were willing to accept the Chequers strategy and say that the Government would hack winners in relation to the corporation we would at least be making constructive progress.
At present, as the hon. Member for Colne Valley (Mr. Wainwright) said, we get a totally confused picture and a feeling of ad hockery. Time and again, voting patterns seem to determine where the money goes, whether to steel or to the motor industry. The Government cannot square this approach with the Chequers strategy.
We cannot allow the Secretary of State to get off the hook again on the question of Port Talbot. This is not just a handy battle cry. It is a worry which has been expressed by hon. Members on all sides. As my hon. Friend the Member for Flint, West fairly indicated, it is a matter of crucial importance. Despite his own obvious problems with his constituents in relation to Shotton, my hon. Friend was among those urging an early decision.
Sixteen months have gone by since the closure review was started. The matter has been so drawn out that the Minister of State, who is to reply to the debate, must be turning over in his mind some way of breaking out of this situation.
What is the Government's attitude to giving the go-ahead to Port Talbot and leaving Shotton in abeyance? After all, under the original proposals Shotton is not due to close until 1980. My hon. Friend the Member for Flint, West made a powerful case which deserves examination. Hon. Members from both sides who have recently been to Velindre and Llanwern are fully aware of the tremendous loss of morale in the tinplate division in South Wales. The workers feel that they are losing out in the international tinplate market, in which not many years ago Wales was preeminent.
To see this happening causes the greatest regret and concern on all sides. The Government know that I try to take a serious view on these matters, 90 and I believe that a decision on Port Talbot is now absolutely crucial. It is long overdue and must be given the go-ahead if the tinplate industry is to be saved.
I am trying to make constructive points, but I must nail some canards put out by the Secretary of State in the faster passages of his speech and which I know the Minister of State will find it difficult not to repeat. The Secretary of State used the argument about the lack of investment in the independent days and referred to the joint steering committee and delays in previous investment programmes. If the House wishes to be taken seriously in these matters, we cannot accept that kind of naive view when it is thrown across the Chamber by the Secretary of State or the Minister of State, who did so on 2nd April.
As my hon. Friend the Member for Henley pointed out, investment in the years immediately before nationalisation was good. The figures of the 1960s before and after nationalisation show in the most logical way that investment dries up when there is the prospect of nationalisation.
Is it not time that we laid aside the tired old charges about how we got where we are and tried instead to decide where we are going from here? If one takes the view that investment is a major problem for the corporation, it has now existed for so long that it does not help to seek to apportion blame to one Government or another or to elsewhere. We have to deal with the problem as it exists.
The Secretary of State spoke about the delay when the Conservative Government set up the joint steering committee. We were trying to sort out the problems of the industry, and in doing so we had to work within the rules laid down by the previous Labour Government. I am urging the House to have a fresh look at steel and to change the rules.
We welcome the basic views of many hon. Members, and I urge the Minister of State to give us some fresh thinking. I urged him to do precisely that on 2nd April, but with little success. This approach of ad hoc-ery to the industry is worrying many hon. Members who seem capable of taking a more considered 91 and balanced view about the problems of the industry than do the Government. I wonder why this is.
One of the major difficulties in assessing the Bill is that we do not have a proper financial picture of the corporation's affairs. My hon. Friend the Member for Chichester (Mr. Nelson) was absolutely right. It is nothing short of scandalous that we should be asked to consider a further borrowing requirement of £2,000 million when the only report and accounts we have are almost exactly 12 months old. The Government and Ministers must know that, with the end of the financial year having just passed, the corporation must have struck some tentative balances and that its reports must be in preparation. There is an autumn deadline on the borrowing requirement and this smacks, if not of fraud, certainly of something which is very difficult for hon. Members to understand. Why are the Government pushing the Bill forward at this moment? This is a matter to which we shall return in Committee.
If we say that this is not sharp practice but bureaucratic nonsense, we must assume from the whole history of the Government's attitude to the corporation that this measure is once again a stopgap and that, despite the Secretary of State's talk of three years, we can have no confidence in his estimates of the time scale required or of the effectiveness of the money to which he referred.
It is incredible that in 1972 the corporation's borrowing requirement was only £300 million and that in the profitable years which followed it was at one time covering up to 70 per cent. of capital investment from internally generated funds.
Capital expenditure is obviously the largest part of the borrowing requirement, which was increased from £1,250 million to £2,000 million in the Statutory Corporations Bill last June. Hon. Members who served on that Committee will recall that we tried to establish what was in the Government's mind. Referring to the increased borrowing requirement, the Financial Secretary to the Treasury said:This is a short-term measure, and I accept the point made by the hon. Member for Arundel, and by my hon. Friends as well, that in discussing even a short-term measure it is right to ask the fundamental questions as to 92 how this breathing space is to be used—I do not shirk from it—in order to bring about the important and vital changes that are needed." —[Official Report, Standing Committee E, 26th June 1975;c. 117.]In a nutshell, that sums up the problem we face. On the evidence put before us, we do not know how the breathing space has been used or how the additional £2,000 million is to be used.
The Secretary of State swept aside, with a skilful deflection to leg, the whole notion of how the money was to be made up. He talked about future pricing policies and about not being clear on foreign exchange requirements and so on. He would have been totally unable to carry anybody with him in a board room of a major company. Hon. Members on both sides, as the taxpayers' representatives in looking at the corporation, must regard the Secretary of State as a board member of the British Steel Corporation in this kind of discussion.
That is the kind of problem that we see again and again. It is a problem which must be resolved if we are to monitor public expenditure effectively in the widest context apart from trying to get the BSC into an effective working position.
That brings me to the reasons for the increased borrowing requirement. This requires a certain amount of assumption on our part because, as I have explained, without proper up-to-date accounts we have to make certain assessments, guesses and judgments.
Assuming that the £3,000 million capital expenditure programme of 1972 now stands in excess of £5,000 million—I think that is right; many experts put it nearer £5,500 million—the question which comes to mind is whether the Government are being honest with the House in implying that the level of borrowing requirement put forward today will be adequate and, indeed, whether they believe that they can find the money when the BSC decides to draw upon that borrowing requirement.
The Government are in many ways the guarantors for the British Steel Corporation. Unless we have a more precise view about the interplay between the Treasury, the BSC and the Department of Industry, many of us will feel that we are again being asked to vote for, or, at any rate, to receive a Bill which is improperly prepared and does not bring together all the elements which will have a vital say in 93 the matter. Indeed, we do not know who is the master of the situation.
That brings me to the point to which I referred earlier—that the Statutory Corporations Bill, which gave another £750 million to the British Steel Corporation, was a Treasury Bill. The Financial Secretary to the Treasury was in charge of the Committee stage. On that occasion, whenever we raised questions on industrial policy the classic reply was "That is a matter for the Department of Industry. I shall pass it on to my hon. Friends."
As today's Bill is sponsored by the Department of Industry, no doubt the Minister of State will say that he will pass our views on to the Treasury. Therefore, we get this round-the-houses, passing-the-buck approach to legislation of a massive kind. The Minister of State mutters in his constructive way. Surely it would make more sense to the working of the Bill if both the Department of Industry and the Treasury were represented on it. Will the hon. Gentleman, in winding-up, give us a categorical view whether we can expect to have his Department and the Treasury represented on the Bill in Committee? In my view, such a course is essential if we are to begin to tackle many of the difficult problems which have been mentioned today.
One of those difficulties is the massive delay which has been caused by the Government's closure review. We have tried to take a fairly friendly line about it. We are trying to see how to get out of the difficulty. To understand the difficulty, however, we must be clear about the cost of that delay. I have quoted the £3,000 million and the £5,500 million, as many people now believe it is, for the overall cost. But within that total cost we need to break down the constituent elements. For example, I understand that the £400 million originally projected for Port Talbot is now £600 million. We must look at all the constituent parts in more detail to understand their commercial validity in the present perhaps more difficult overall economic circumstances than in 1972.
Regarding Port Talbot and Shotton, if the Government are unable to give a decision they ought at least to try to end the uncertainty by putting some deadline on that decision. The arguments regarding Shotton, which we recognise, are no 94 different from those which applied years ago. Therefore, the Government's silence on the subject is difficult to accept as being based on anything like proper analytical grounds. We on this side suspect that political expediency rules the day again.
I turn now to capital and operating costs, because it is not only the question of capital but the hidden additional operating costs which come from delays in expenditure of which the BSC complains most bitterly. There are the costs not only of the many BSC staff and shop-floor operatives who have to take a make-do-and-mend approach to life while major expenditure is held back, but of the planning staff, draughtsmen, designers and others who put schemes together at considerable cost. These must go into cold storage. These are hidden costs which we are unable to quantify in considering the Bill but which we recognise are a substantial part of the current operating loss of the BSC.
Leaving those costs aside and looking at the direct increases in capital costs which I mentioned at the outset, we come back to the need for the Government to make clear who is responsible for doing what in this matter as between the Treasury, the Department of Industry and the BSC. I have already mentioned the way in which the last increase in borrowing powers was handled. It is not enough for the Government to assure us that the points we have brought up today will be looked at. We shall again get into the situation where in Committee we will be told "These are matters of commercial judgment, and the British Steel Corporation must be given a free hand." We have reached the stage where, if we are to make sense of this matter, we must look carefully at the proper feasible relationship which might end some of these problems.
I trust that in Committee we shall have opportunities of going into these matters in more detail, but I should like to give one example now. In the Bill, a distinction is drawn between the borrowing limit to be raised in two stages from £3,000 million to £4,000 million and the borrowing powers within that limit.
That distinction is most important, because under the present system the overall limit of the BSC's finances is the 95 only decision which effectively belongs to Parliament. Once the limit has been set, all other financial decisions relating to the BSC are taken by one or other part of the unholy triangle which I have just described. For example, no Act is required to approve either the BSC's investment programme or any specific investment, however large. Surely that makes the point that we in this House should be entitled to take a view upon some of the largest investment decisions within the overall strategy. I agree with the hon. Member for Motherwell and Wishaw on a number of points made by him, not only now but when we discussed these matters on the Statutory Corporations Bill. I think the hon. Gentleman may agree that we have not had an answer to the repeated cry for us to be given the benefit of considerably more detail, which we would use with responsibility.
Apart from this one aspect of the parliamentary decision-making power, Parliament approves the methods whereby the take-up of funds—the borrowing—is implemented, even though it does not deliberate on the sums or on their application. We need a better idea of what the take-up means in terms of borrowing requirement in relation to particular plants, regions and parts of the corporation's commercial strategy. My hon. Friend the Member for Flint, West was right to bring out the point that the market mix is a crucial ingredient in trying to reach a proper judgment on the overall investment programme of the BSC.
One of the alternatives before us is to try to increase the range of decisions which come before the House, and this I am reluctant to urge because many of the problems of intervention in a direct sense would not be faced only by the House overall. They are matters which could be looked at in Committee and, indeed, they are matters to which Select Committees are increasingly turning their attention.
But if Parliament should not itself look at matters in great detail on a day-to-day basis, it still remains a charge upon the Government to ensure that Parliament is given a proper opportunity to see that methods of control which it delegates to non-parliamentary bodies are being 96 effectively and properly carried out. I am not thinking only of the provision of accurate and timely information. There is the question of foreign exchange depreciation. It is matters of this kind which the House ought to know about. They are matters which affect the whole credibility of the British Steel Corporation, and we have a right to know what is at stake here.
Broader matters such as the qualifications and numbers of personnel and how effectively they are being used in relation to particular investment decisions are also issues about which, at least in Committee, we shall hope to hear a great deal more. I believe that there are many detailed questions which at that stage must be considered, but the Government should certainly understand that, if we accept the need for urgency in looking at the overall borrowing situation because of the autumn problems which will arise when the limit is exceeded, this does not mean that we can agree in principle that the whole way in which the British Steel Corporation is to continue is one that we can accept on the basis put before us by the Government, and certainly not on the basis of the Secretary of State's speech. Not only do we look to the Government but we look also to the corporation to show what it is doing to reduce its borrowing requirements.
Concern has been expressed about problems such as scrap and the question of availability of scrap, which I agree is a matter of concern. These matters could have a crucial effect on the cash flow situation for the corporation. There is also the question whether direct reduction should replace scrap. These are matters with which we should deal in a sophisticated way if we are properly to understand what is at stake.
Similarly, when the corporation has certain loss-making activities, such as Redpath Dorman Long, and other parts of its activities are showing a continual high-loss record, we should have a good idea what it proposes to do to put the situation right.
I give my answer to the hon. Member for Rother Valley, who was perhaps inclined to make the perfect case for backing the winners once again. I subscribe to that general philosophy and I urge the Government to do the same. The hon. Gentleman spoke from the 97 luxury of one of the profit sectors of the corporation. I thought that his basic argument was valid. Indeed, I would take it further. I would ask the corporation to look beyond its traditional and perhaps politically-influenced view about capital expenditure and to look to joint ventures—joint ventures perhaps within the EEC—which will assure it of markets as well as of productive capacity. It should look at more opportunities of joint ventures with the independent sector.
There is the example of Round Oak, a fifty-fifty company with the British Steel Corporation and Tube Investments, a company with excellent labour relations and an excellent profit record. I cannot believe that with all this wholesale catastrophe going on in the steel industry the idea of a joint venture is irrelevant to the argument. Within the context of BP and other activities, this approach must be considered by the corporation if it is to break out of many of the strangleholds which surround it. These are a few of the detailed questions which we shall expect to pursue in Committee.
I urge the Minister of State to give us some idea of his thinking, because I feel that he failed to do this when we invited him on 2nd April to comment in reply to the debate on British industry. While we on this side of the House may have criticisms, if we thought that there was some new thinking by the Government we would be willing to support them, particularly if we thought that it would bring to an end many of the previous injuries from which the steel industry is now suffering.
On the question of industrial relations, we welcome the fact that the hon. Gentleman took a more constructive line than his predecessor, and we believe that the art of self-restraint and letting the trade unions and management get on with it was right. But if restraint is advisable from time to time, so also is urgent and prompt action. The British Steel Corporation certainly needs the prompt action of the Government in bringing out into the open the whole argument which has been advanced today. If the House is left with the feeling that the Government are once more buying time while failing to grasp the nettle of the difficult decision which has to be faced, I can only say that we on this side of the House not only reserve our position but 98 shall have to do once more what we can to preserve the taxpayer from unnecessary loss.
§ 6.56 p.m.
§ The Minister of State, Department of Industry (Mr. Gerald Kaufman)
The hon. Member for Henley (Mr. Heseltine) was good enough to make some kind personal remarks about myself, and I greatly appreciate the spirit in which he did so. He also described the debate as being a typical debate on these matters. Certainly his own speech was typical and characteristic, and I look forward to hearing it again tomorrow in Standing Committee on the Aircraft and Shipbuilding Industries Bill. I have heard the speech a number of times during the last 49 sittings on that Bill, and I like it the better the more I hear it.
Hon. Members opposite certainly have made this a typical debate from their point of view. What they have done, as they generally do in debates of this kind, are three things. First, they have attacked very vigorously the Labour Government's record between 1964 and 1970. Secondly, they have dissociated themselves from the record of their own Government between 1970 and 1974. Then, having covered the years between 1964 and 1974, they have gravely warned our Front Bench spokesmen not in any circumstances to rake up the past but instead to look to the future, because the past is behind us.
The hon. Member for Arundel (Mr. Marshall), who is always extremely courteous to me, once again asked for new thinking in dealing with these matters. The hon. Member referred a number of times to industrial strategy and asked where the Government's policy for the steel industry fitted into that industrial strategy in the years between 1970 and 1974, when the hon. Member for Henley was at the Department of Trade and Industry, was a document on which the present Government heavily rely, namely, the Industry Act 1972, the "John Davies Blank Cheque" Act.
The industrial strategy which the Conservative Party had, in so far as it had one at all, was to bring before Parliament the Industry Act 1972, which the 99 hon. Member for Oswestry (Mr. Biffen), Mr. Jock Bruce-Gardyne and the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) attacked day in and day out up to one Friday night, the purpose of the Act being to dole out money to failed industries without a test as to whether that money should be doled out. Hon. Members opposite have certainly been typical not only in dissociating themselves from the activities of their Government in the years between 1970 and 1974, but in asking for things which their Government never thought of providing.
The hon. Member for Arundel asked for a categorical statement by me that there would be a Treasury Minister on the Standing Committee. Bills of this kind came up repeatedly during the years between 1970 and 1974 and we were never offered a Treasury Minister on Standing Committees during that period. It was felt that Ministers from the relevant Department would be appropriate and helpful. We shall not have a Treasury Minister on the Standing Committee on this Bill, but we shall have the inestimable advantage of the presence of my hon. Friend the Member for Nuneaton (Mr. Huckfield), who is now a welcome recruit to the Department of Industry. He will be able to bring a breath of industrial fresh air to the proceedings of our Committee since he represents a steel-consuming constituency, just as I used to represent steelworkers before the Conservative Government so wantonly closed down the Irlam steel plant without doing anything to help the social position there.
The hon. Member for Chichester (Mr. Nelson), who has always been deeply interested in financial practice, asked for all kinds of financial information which might, I am sure, be extremely interesting if we were to provide it. But that kind of information was never provided by his party. It never issued instant reports in order to coincide with legislation of this kind which it brought forward a great deal.
I assure the hon. Member and the House that the British Steel Corporation will be publishing its report and accounts in July in the normal way and we shall abide by the normal practice in these matters. It may well be that the normal practice is satisfactory for a Con- 100 servative Government, but more is expected of a Labour Government. It is quite right that more should be expected of a Labour Government. During the 49 sittings on the Aircraft and Shipbuilding Industries Bill I have gone out of my way to provide information of a kind never provided by previous Governments. I realise that 1 cannot rely on briefer Standing Committee proceedings on this Bill, because at some time towards the end of each sitting "Heseltine time" will arrive, when we shall have a rodomontade from the hon. Member for Henley. I hope that during the necessarily briefer Committee proceedings on this Bill we shall be able to provide a great deal of information for hon. Members.
The hon. Member for Flint, West (Sir A. Meyer) was one of the hon. Members —I think the only one from the Conservative Benches—who took a consistent interest in steel during the period when his own party was in office. He spoke in pretty well every debate—and he spoke for all his constituents in Shotton—between 1970 and 1974. I shall not embarrass the hon. Gentleman by reminding him that he voted for the White Paper under which Shotton would now have been closing down had it not been for the Beswick review ; I would not dream of reminding him about that.
However, hon. Members opposite cannot have it both ways. They cannot on the one hand say that it is wrong for the Government to interfere in the internal workings of the British Steel Corporation and, on the other hand, rest upon the record of their own Government as against ours. One remembers that well-known serial story in which somebody was chained up with poison pouring down him and the sea about to drown him and all kinds of other things happening at the end of one episode and everyone was left wondering how the chap was going to get out of it all. The next episode of this serial story revealed how he did it. "With a bound he was free", said the first sentence of the next episode.
With a bound the Opposition are free from their record of interference in the internal affairs of the British Steel Corporation simply by describing it. There was a joint steering group which interfered as no Government did either before 101 or since in the internal workings of a publicly owned industry. "A constitutional monstrosity" was how my right hon. Friend the Secretary of State described it, with his customary moderation.
Compared with that period of delay and interference this Government have gone ahead with a massive investment programme. In the first three years of this Government—the two years which have elapsed and the year just about to come —there will have been£1,400 million of investment in the British steel industry. The British steel industry's investment programme is at present the motor of investment in the British economy. This year it is something like 12 per cent of all industrial investment.
While I agree with the hon. Member for Colne Valley (Mr. Wainwright) that the citing of large sums is no excuse for the expenditure of large sums, at the same time we cannot on the one hand be chided for holding up investment programmes and on the other be blamed—as I know the hon. Gentleman was not blaming us—for allowing such vast investment programmes to go on.
It is all very well for hon. Gentlemen opposite somehow to imply that if only we had not had the closure review—which was an election pledge and therefore had to be carried through—there would have been no inflationary factor in expenditure under the 10-year development programme. The 10-year development programme was not one in which £3.000 million would be spent all at one time. The inflation which has taken place in the period in which this Government have been in office is inflation which was let loose by the Barber measures of late 1973, and we cannot be blamed for that inflation.
However, even if that inflation had not taken place at that level, even at some moderate inflation rate there would have been an increase in the cost of that programme simply through the lapse of time. It is absurd to imply that the closure review alone has been responsible for the inflationary increase in the cost.
In any case, it was made clear in the White Paper published by the right hon. Member for Knutsford (Mr. Davies) in February 1973 that that document was 102 not holy writ, and no one ever expected it to be holy writ. I presume that hon. Members have not dissociated themselves from that document, because they have quoted it. They did not say that it was nonsense and I assume that they still accept its contents. Paragraph 27 said:…to aim too high, or decide on a fixed target of capacity to be achieved by a particular date, irrespective of the way the market might develop, would be foolhardy.Those are wise words. Hon. Members must not chide us for not having carried out to the letter a White Paper which they themselves never said should be carried out to the letter.
Indeed, as the hon. Member for Colne Valley aptly pointed out, to cite investment levels is not necessarily to prove that that investment was the right kind of investment. My hon. Friend the Member for Rother Valley (Mr. Hardy) emphasised this in some of the information he provided for the House. The hon. Member for Henley was somewhat angry that we had not, immediately after public ownership, achieved the kind of investment which was taking place under private ownership in the early 1960s. But a lot of that investment was highly ill-conceived.
For example, during that period in the early 1960s a steel industry under private ownership was building new open-hearth steel plants when our competitors were building BOS plants. That is one of the reasons why the British steel programme has been handicapped by having plant which, although fairly modern, is obsolescent. It is all very well for the hon. Member for Chichester to compare our BOS plants with those which are operated abroad, but we were still installing them when others were realising that there was no point in doing so.
§ Mr. Michael Marshall
Would not the Minister agree that, if he wants to pursue this argument, he should try to strike a fair balance and that the hindsight judgment is not always good value because, clearly, investment practices change? Would he not accept that Anchor, which was one of the main residual investment decisions at Scunthorpe, is now the only plant in Great Britain which is competitive by international standards, with 350 tons per man year?
§ Mr. Kaufman
I shall get a copy of tomorrow's Hansard, turn to the appropriate column, get out my green Pentel pen and underline the words that the hon. Gentleman has just spoken—that hindsight is not always the best way of judging investment decisions. He is absolutely right, but hindsight is hindsight, whoever exercises it. I accept what the hon. Gentleman says about Anchor. It is a model of productivity under the aegis of the British Steel Corporation—but it is under the aegis of the corporation. We cannot have it every way.
Several hon. Members have mentioned the major problem facing the Government today—the outstanding problem following the closure review—that of Shotton. I am not ashamed that we have taken the time we have taken over the Shotton decision. Since I took over my responsibilities, I have spent a great deal of time personally studying the Shotton issue—as has the Secretary of State. This is a crucial decision, of great importance not only for steel investment but for communities like those represented by the hon. Member for Flint, West and other communities much more widely on Merseyside.
When I went to speak in the Wirral by-election—with signal success, as the result showed—I was accosted in some small town on the Wirral peninsula by the Shotton Action Committee which had made its way there to discuss these matters with me. I do not apologise for the fact that we have not yet reached this decision, because it is an important one which we are weighing carefully.
I recognise of course the implications for Port Talbot. I recognise all the options open to us and I assure the hon. Member for Arundel that they are being studied with great care and that we shall reach a conclusion as quickly as possible.
I shall not pretend that this decision has not taken a long time or not caused a great deal of anxiety. Of course it has. But I want to make sure that we get it right. The hon. Member for Flint, West said that Shotton was to be phased out of steel production. That decision has not yet been made one way or another, but if the Conservative Party had remained in power, it would at this moment be being phased out of steel production. If the closure had gone 104 ahead on the time scale laid down in the Conservative Government's White Paper, it would considerably have worsened the supply position during the next upturn, because the replacement capacity could not possibly have been ready in time.
§ Sir Anthony Meyer
I am grateful and I take some reassurance from the Minister's last words. But is he aware that, although there is certainly gratitude in the Deeside area for the reprieve, there is not only anxiety but, now, the beginnings of a rundown at the plant, precisely because of the uncertainty, with the loss of key personnel? One of the main problems facing Shotton now is the difficulty of keeping production going because skilled men are being lost as a result of this uncertainty.
§ Mr. Kaufman
I recognise all those factors. The hon. Gentleman has always taken a very fair approach to this matter. He has a strong constituency interest which he has never concealed, but he has also placed that interest in the wider context of his concern for the future of the steel industry. It is possible that we may quarrel on this matter at some time, but it has not happened yet.
My right hon. Friend said that steel was one of the most basic requirements of our industrial economy and that the corporation must be successful if our steel-using industries were to prosper. Otherwise, there will be a worsening balance of trade in manufactured goods as well as steel. The dependence of the motor industry on steel was emphasised by my hon. Friend the Member for Newport (Mr. Hughes). Higher imports ultimately lead to a loss of job security, not only in steel production but right across manufacturing industry, with lower living standards for all.
In an industry as capital-intensive as this, it is people above all who count. No organisation can be any better than the people in it and probably the British Steel Corporation's greatest strength lies in a dedicated work force and management. As the corporation has recognised, it is essential that it establishes internationally competitive manning scales, which involve a process of change, in which social factors such as exist on Deeside and Merseyside have to be weighed with economic factors. This is not a question of looking to the corporation to carry 105 part of the costs of change but a matter of recognising both that social hardship must be mitigated and that the corporation will never prosper on a legacy of bitterness and mistrust.
The hon. Member for Arundel defended his party against a possible absence from the debate of Conservative Members from steel-making constituencies by saying that it was open to any hon. Member with an interest in the subject to seek to speak in a debate like this. That is true, of course, but it is interesting to compare this debate with the steel debates between 1970 and 1974, every one of which I attended, when the House was much fuller than it is today, when hon. Members on both sides, not just members of the then Opposition, were consumed with anxiety about the implications for the steel industry and its workers of the plans which were being considered by the Conservative Government.
Although certainly this Front Bench, let alone our Back Benchers, would be the last to claim that there is any room for complacency about the British steel industry today, it is interesting that when we are debating a Bill which seeks to provide vast sums for the BSC and under which it has been possible to debate any aspect whatever of the corporation's activities, hon. Members for steel constituencies and others have not felt it necessary to stream into the Chamber and make the kind of speeches which were made on both sides of the House during the period 1970–74.
With all the misgivings which exist, the mistrust has gone. The feeling that this Government are committed to the future of a firmly-based steel industry is such that, although we get some criticisms—those criticisms should be made, even when they can be rebutted—at the same time there is not the anxiety, bitterness and mistrust of the recent past. One of the reasons is the kind of relationship which is growing up, gradually of course, between the corporation and the unions under the first-rate leadership of Mr. Bill Sirs, to whom the workers owe a great deal for the statesmanlike attitude with which he approaches the industry's proposals.
The tripartite consideration of major closures has helped to create a new atmosphere, which has been followed by the 23rd January agreement on cost saving and de-manning, which my right hon. 106 Friend has welcomed. Hon. Members may be interested to know that in the first two months after the 23rd January agreement about 6,000 applications for voluntary redundancy were received. Negotiations are continuing at local level on reduced manning, but this is essentially a matter for management and unions. There has been considerable retrenchment of weekend work, which was one of the most bitter matters of contention prior to the 23rd January agreement, and there has been increased co-operation in tackling unofficial disputes. There has been a meeting at national level this month following the agreement which is an extremely important landmark in progress towards the kind of relationship that the British Steel Corporation requires, and that will be advanced a great deal more by the extension of industrial democracy in the corporation. I look forward to the work force playing an increasingly important part in shaping the corporation's policy and in the decisions needed to give effect to those policies.
Hon. Members have referred to the financial aspects of the Bill and the condition of the corporation. Finance is a vitally important area in which strength needs to be built up. The corporation entered the recession in steel demand which developed at the end of 1974 financially weaker than many of its major competitors because of its inability to take advantage of the high levels of world demand in 1973 and in most of 1974. Many of the reasons for this can be traced back to the policies of our predecessors.
Despite its difficulties, BSC made pretax profits of£56 million and£89 million in 1973–74 and 1974–75 respectively, and dividends were paid on public dividend capital. Final results for 1975–76 are not yet available, but it seems likely that the loss will be between£250 million and£300 million. Results for the year which has just started depend largely on the way in which demand develops over the coming months. With the trend in world steel markets which has emerged since the beginning of 1976, the corporation's prospects for breaking even in 1976–77, on which it is now basing its plans, appear appreciably better than they did a few months ago.
Hon. Members have shown their interest in the Government's policy in 107 advancing public dividend capital to the BSC. Here we echo the words of the right hon. Member for Wanstead and Woodford (Mr. Jenkin) when he was a Treasury Minister. We regard public dividend capital as the most apt way of financing the corporation, and the corporation as the most apt example for investing public dividend capital. We, too, regard this form of finance as appropriate because of the cyclical fluctuation of the world market in which the corporation has to compete.
Taking one year with another we expect the corporation to earn an adequate return on the equity capital invested in it. We encountered a problem in the financial year just ended stemming from the financial arrangements our predecessors entered into with the corporation in 1972. I do not know whether they thought that they had solved the BSC's financial problems at a stroke, but they certainly did not provide for the situation in which the corporation makes a substantial loss.
§ Mr. Heseltine
In order that we may understand what the Minister is talking about through all the meaningless generalisations will he tell us what will be an adequate return over the three years before the£2,000 million runs out?
§ Mr. Kaufman
We have on many occasions defined an adequate rate of return. My right hon. Friend has explained why it is not possible to respond to that kind of question. The hon. Member could not answer it when he was in office.
§ Mr. Heseltine
How did we manage then to fix a target of 8 per cent. on net assets for the corporation for the four years 1973–77?
§ Mr. Kaufman
The Conservatives fixed all kinds of targets. They were great target fixers. But fixing a target is not the same as achieving it, and the electorate relieved them of that responsibility after 1974. The hon. Member for Henley was good enough to accuse me of indulging in meaningless generalisations. Meaningful generalisations are his own stock-in-trade. We are constantly treated to meaningful generalisations and no doubt tomorrow I shall get another instalment of them.
108 I was trying to explain to the House, not in a generalisation but in a "specific-ation", our approach to the proportion of public dividend capital.
§ Dr. Bray
I am sure that the Minister would not wish to treat this merely as a matter for party badinage. The Chancellor is trying to fix with the unions a target for wage increases. That kind of target of a percentage increase is something as important as wages for all workers cannot conceivably be fixed unless in separate parts of the economy the Government are prepared to take an equally serious attitude in spending public money and controlling taxation. I warn my hon. Friend that I will press this matter very hard in Committee. We should write into this Bill financial targets and approval schemes for investment by Ministers and, if necessary, by the House.
§ Mr. Kaufman
My hon. Friend approaches this matter with great seriousness. Sometimes, in order to embarrass the Government, the Opposition climb aboard his band wagon and vote for his amendments in which they not believe in order to try to defeat the Government—and they sometimes do. Of course we have to approach these matters responsibly and to have appropriate financial targets. One target which is a requirement is the imposition of cash limits on publicly owned industries. That did not happen during the profligate years of the Conservative Government. There is a cash limit on the corporation which is a great deal more stringent than anything done by the Conservatives.
The Conservative arrangement was to maintain the ratio of shareholders' funds in the corporation—in effect PDC plus reserves—to long-term borrowings at 55:45. The effect of this in any year in which the corporation made a loss would be to require that the whole of such a loss was offset by a further injection of PDC. With the likelihood of a loss of the order of£300 million in 197576 the Government felt it necessary to review the arrangement.
After careful examination of future prospects, which suggested a return to profitable trading by 1977–78 with dividends to follow, we decided that further advances of PDC were justified but that the profits forecast for any business several years ahead must involve a 109 measure of uncertainty and judgment so that until the prospects became more certain the provision of PDC should be limited to 55 per cent. of the corporation's further financing requirements. In the light of progress towards regained profitability we are ready to review the financing arrangements. In the meantime it will be necessary for the corporation to meet more of its financial needs by means of medium and long-term loans giving rise to a further interest burden of about£30 million in the current financial year.
The imposition of such a burden was not undertaken lightly. There would be no advantage in driving the corporation into a situation from which it could not escape by its own efforts. We have sought to avoid this. But we could not ignore the situation which was developing. We could not maintain a financing arrangement which was clearly defective and we could not continue to advance unrestricted quantities of PDC without thought of the justification for such investment or the prospects for remunerating it.
The hon. Member for Chichester made welcome remarks about the corporation's capabilities for research and development, and the strength of the technological base is another aspect of the corporation that is frequently underestimated. Great progress has been made in the past few years, and 75 per cent. of the corporation's steel-making capacity now uses modern processes—basic oxygen or electric arc—compared with 33 per cent. on vesting day in 1967 That is a considerable achievement. The position is that 8 per cent. of steel is now continuously cast, against 2 per cent., and there are major developments on this front at Ravenscraig, Lackenby and in the Sheffield area. My hon. Friend the Member for Rother Valley referred to the great concern felt in this area and I hope that some reassurance will be felt, as a result of those developments.
My hon. Friend mentioned our late right hon. Friend Brian O'Malley. I think that it is fitting that we should recall his constant interventions in steel debates before he became a member of the Government, and his imaginative approach and ideas which were adopted. It is some satisfaction that the area which my late right hon. Friend and my hon. 110 Friend jointly represented, and which my hon. Friend still represents, is one of the profit centres for the corporation.
The hon. Member for Chichester referred to the research and development expenditure of the corporation. This is currently about£14 million a year and it is paying dividends in the form of greater efficiency, improved products and new plant developments, such as the opposed zone reheating furnace and the new twinstand installation for rolling bars. These and other developments have excited interest across the world. The corporation is well to the front in steelmaking technology and has taken the lead in the European steelmaking club.
My right hon. Friend in his opening speech dealt at some length with the corporation's investment programme and I do not propose to go over this ground again. I have dealt with Shotton, which a number of hon. Members mentioned.
My hon. Friend the Member for Redcar (Mr. Tinn) also dealt with the controversy and the concern felt in his area about the new investment there, because the other major issue from the development plan which remains from the review is the future of the plate mills at Consett and Hartlepool. In December 1974 the corporation agreed to our suggestion that it should discuss with the Hartlepool and Consett work forces its plans for plate mil investment at Redcar to see whether alternative schemes might preserve the future of the existing mills. We have very recently received the corporation's formal proposals made in the light of those talks. We have begun our consideration of the proposals and aim to complete it as expeditiously as possible, bearing in mind the magnitude of the project and the social issues involved.
If hon. Members wish to hear about the massive developments in the corporation's investment in Scotland, I shall be happy to help them in Committee. I put this into my speech in the expectation of a massive attendance by the Scottish National Party, but the situation being what it is, I think that the House will not complain about being deprived of those remarks now.
§ Mr. Kaufman
I shall be glad to do so. If the SNP had its way, Scotland would be an overseas country, with the deficit that it would then incur as a result of such a separation.
As the House is to be deprived of my lucubrations on Scotland, hon. Members may wish to hear something of the corporation's commercial strength and standing in general in overseas countries. It has considerable commercial strength both in its position as the largest steel business in Western Europe and in its market development and sales activities both home and abroad.
The corporation's new organisation, which came into effect at the beginning of this month, has strengthened the commercial function and is designed to improve relationships with the customer and to meet his needs more speedily and efficiently. We are supporting the corporation's efforts to add to its sales outlets abroad, which have recently included the acquisition of a majority shareholding in a leading German stockholder.
It is perhaps a sympton of our national problem that we are always ready to criticise those institutions and activities on which our prosperity depends. So it may come as a surprise to some hon. Members to know that the corporation has a high reputation abroad for its expertise. The corporation is undertaking work on steel projects in Mexico and Iran and is working with United Kingdom plant makers to secure major overseas contracts for new steelworks developments. As far as direct exports of steel are concerned, there is ground to be covered which was lost in the last period of high demand when the corporation gave priority to the needs of United Kingdom users at the expense of customers abroad. The uninterrupted use of present capacity, together with the new investment, will enable the corporation to increase both the quantity and the quality of its exports, and is making firm plans for this.
As I have said, it is vital for the corporation to build on its strengths. To do this the House must be prepared to give the corporation the financial backing that it needs. I do not believe that there is 112 any disagreement between us and Opposition Members about the objectives or the resources needed. I ask the House, there. fore to give the Bill a Second Reading.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills.)