§ Order for Second Reading read.8.40 pm
§ The Minister of State, Department of Industry (Mr. Norman Tebbit)
I beg to move, That the Bill be now read a Second time.
The purpose of the Bill is to raise the statutory limit of the amount of finance which the British Steel Corporation and its wholly owned subsidiaries can raise by borrowing and by receipt of sums paid by the Secretary of State. The need for the Bill arises because the corporation's essential requirements for further finance will shortly take it over its present borrowing limit of £5,500 million. Under the Bill the corporation will be permitted to take an additional £500 million of finance. There is also a provision for the limit to be raised by order by a further £1,000 million. As I shall explain later, however, I hope that it will not be necessary to make use of that provision.
As I said in my statement to the House on 11 February, the Bill is basically an interim measure. It is intended primarily to enable the corporation to continue in operation while we come to our decisions on the corporate plan and then while the House gives due consideration to our proposals arising out of the review.
Nothing in the Bill empowers the Government to give or lend the British Steel Corporation any more money. That will require my right hon. Friend to set and announce new external financing limits for the corporation, which he expects to be able to do soon, and after proper provision has been made to provide the necessary finance. The Bill is an essential first step in the process of providing finance to the British Steel Corporation, but its immediate effect will be simply to permit the corporation to continue its short-term commercial borrowings from the banks and other financial institutions within the limits that are set for it.
The Government's response to the MacGregor plan will be in two stages. First, there will be my hon. Friend's statement to the House announcing the Government's conclusion on the review of the plan. In that statement he will also announce a final external financing limit for the 1980–81 financial year and a limit for next year. The new provisions are bound to take the British Steel Corporation over the current borrowing limit of £5,500 million, and it is only proper that Parliament should have already given authority under the Bill for the Corporation to take up the borrowing inherent in the new provision.
Secondly, the Government will introduce a further Bill which will deal with the future of the corporation and its financial reconstruction. This will seek to write off a substantial amount of the BSC's capital which presently counts towards the limit which is being raised by the Bill. If this capital is written off, the limit of £6,000 million provided for in the Bill will afford more than enough headroom to finance the British Steel Corporation for the foreseeable future. The further Bill will therefore contain a clause reducing the borrowing limit so that the BSC cannot accumulate an excessive amount of new borrowing without the House being given the opportunity to debate the issues. In these circumstances, and provided that the Royal Assent to the further Bill is given in good time, it will not be necessary to take up the provision in this Bill further to increase the borrowing limit by order.
338 The provisions in the Bill will therefore be short-lived. They will be overtaken very shortly by the second Bill to reconstruct the corporation's capital. It would, of course, have been preferable to deal in a single Bill with the problems of the British Steel Corporation running up against its borrowing limits and the longer-term reconstruction, too. However, I hope that the House will agree with me that it is better to deal with the urgent difficulties in this separate legislation, both for good reasons, of financial propriety and to avoid asking the House to legislate under the threat of an imminent deadline which would have to be met to avoid the British Steel Corporation simply running out of money.
A Bill to deal with the increase in borrowing limits of the British Steel Corporation usually affords to the House an opportunity to debate the wider issues affecting the corporation and the steel industry generally. I hope that the House will recognise that it might not be appropriate to widen the debate too far on this occasion. There will be a full opportunity to consider the wider issues in the course of the passage through the House of the further Bill which will follow the decisions on the corporate plan.
Since taking my present office I have been anxious about the problems of competition between the British Steel Corporation and the private sector. I know that that anxiety is shared by many hon. Members on both sides of the House. My right hon. Friend the Secretary of State has already made it clear to Mr. MacGregor that he should ensure that the corporation competes fairly with the private sector. He has also drawn Mr. MacGregor's attention to the increasing complaints that have been made that the corporation's pricing policy is unfairly undercutting private sector competitors.
Mr. MacGregor has assured us that the corporation does not set price levels for steel below those of imports. However, it has to match them, as do private sector companies if they are to remain in business. What the corporation can no longer do, as it did before the steel strike last year, is to maintain prices at the level set out in its formal price list. That state of affairs no longer exists. The strike opened our market to our competitors and things will never be quite the same again.
The corporation now finds that it must offer rebates on the list prices. However, its policy is to match lower prices from competition and not to lead in setting lower prices. Mr. MacGregor has further undertaken personally to investigate any specific allegations of unfair pricing that are put to him by companies or by members of Parliament and to keep me informed of the results.
§ Mr. Barry Jones (Flint, East)
May I tell the Minister of the consternation in my constituency on hearing that BSC Shotton works is to receive 20,000 tonnes of hot rolled coil from Holland, from Royal Dutch? Trade union leaders are somewhat flabbergasted, as the steel making was taken away from Shotton only 13 months ago on the basis that steel would be supplied to us from Scotland. I should be grateful if the Minister would give me some guarantee that supplies will be available for Shotton and that the remaining jobs at Shotton are safe for the foreseeable future.
§ Mr. Tebbit
It would be a bad practice if I were to be tempted into getting involved in the corporation's business. Equally, it is only right for me to try to set the hon. Gentlemen's mind at rest, as well as to try to allay the anxiety of his constituents.
339 I know that there was a failure of part of the machinery at Ravenscraig after Christmas. It was therefore necessary to import from Holland to keep Shotton in production. I understand that all is now working well again and that there is no reason to believe that it will be necessary again to import in that way. It was the difficulty of restarting after Christmas that was the cause of the problem. Nobody can give absolute assurances, but I hope that what I have said will help the hon. Gentleman and his constituents.
When allegations are made about unfair pricing, I hope that they will be made either through me, if they stem from Members of Parliament, or, if Members prefer, direct to Mr. MacGregor. I hope that they will be made promptly after the incident arises, and concisely, with supporting evidence. I shall follow closely the progress of the complaints.
§ Mr. D. N. Campbell-Savours (Workington)
Are the Government likely to promote market share agreements between the public and private sectors for any of the products to which he has been referring?
§ Mr. Tebbit
I think that that would be going too far. There is a great difference between promoting market share agreements and monitoring to ensure that the corporation is not pricing its products unfairly. Almost every company in the steel business is suffering severely. They are all losing money. Financially, they are bleeding. It is extremely unfair that merely because the British Steel Corporation has access to virtually unlimited funds through the taxpayer it should put its competitors out of business. I do not think that that is the corporation's intention. We must be clear and make it plain to everyone that that is not happening.
§ Mr. John H. Osborn (Sheffield, Hallam)
Will my hon. Friend give me some guidance? In Sheffield, Firth Brown has had to declare 1,250 redundancies, though not necessarily among those involved in the Phoenix I or Phoenix II operations. There is concern that there should be a dialogue between the British Steel Corporation and the private steel manufacturers. At the moment I have no evidence that such a dialogue exists. Will my hon. Friend assure me that such a dialogue is taking place?
§ Mr. Tebbit
I believe that it is. I hope that my hon. Friend will take what I have said about the undertaking given by Mr. MacGregor as evidence of that. The effort being made to bring together parts of the public and private sector industries in new free-standing companies is also evidence of that.
§ Mr. Frank Hooley (Sheffield, Heeley)
The Minister used the expression "free-standing". Those companies are already flat on their faces as a result of Government policies.
§ Mr. Tebbit
I do not think that that is a helpful remark. I am not talking about being helpful to me or to my colleagues. I should have thought that there was common ground in seeking to be helpful towards the industry. That is the objective that we have in hand. When I say "free-standing companies" to be formed, what I mean, and what the House understands me to mean, is that any company formed which is jointly owned by the private and public sectors should not be dependent upon subsidy in the long run. The company should be capable of standing on its 340 own feet and should not have recourse permanently to injections of capital from the public sector. I hope that that is common ground between us. I believe that it is.
§ Mr. David Penhaligon (Truro)
I am fascinated by the idea of fair competition, an aim with which I have considerable sympathy. Is the British Steel Corporation's steel pricing to be considered fair only when it prices its steels at a price at which the private sector can afford to manufacture? Is that the new criterion?
§ Mr. Tebbit
That is not the criterion. The criterion is that the corporation should not rebate its prices by more than is necessary to meet foreign competition or competition from the private sector. But it should not lead the market downwards by undercutting below what is necessary to maintain not only its share of the market, but an adequate British share of the British market. As I said earlier, that was not a problem in the past, but the access gained to our market by foreign competitors during the steel strike means, unhappily, that we no longer live in the rather helpful world that we did.
§ Mr. John Bruce-Gardyne (Knutsford)
I want to put what is perhaps a hypothetical case to my hon. Friend. If the British Steel Corporation is relating its prices to what is required to meet the imported price, and is using finance provided by the House for that purpose, but the private sector does not have access to that finance is not the ineluctable conclusion that the finance provided by the House will enable the corporation to eliminate the possibility of the private sector competing with imported steel?
§ Mr. Tebbit
We are not providing any finance for the BSC. My hon. Friend must get it right. Essentially, we are providing a foundation upon which, if the House so wills, in the light of my right hon. Friend's statement, we can provide an increased external financing limit and increased financing for the BSC. Let us be sure that we know what we are doing tonight, and not imagine that we are doing something else. Perhaps my hon. Friend could consider the matter in a different light. If we prohibit the BSC from meeting the prices being offered by its foreign competitors, what are we doing to help the private sector? All that we would do would be to ensure the BSC would close steadily as imports flooded in. I am sure that our foreign competitors will not stand back and say politely "The British have been so terribly decent that we will no longer compete with their private sector companies"— [HON. MEMBERS: "Come to the point."] I shall indeed come to the point. The key issue is to restore some rationality to the European market. That will not be an easy task. It would be foolish to allow the major parts of our steel-making capacity to disappear before we got round to discussing and making decisions about the matter in Europe.
I am well aware of the difficulties faced by the private sector. I hope that through some of the joint companies, and through a degree of reasonableness in the competition offered to the private sector by the BSC, it will be possible to ensure that we come through this period of over-capacity in Europe and return to a sensible market with the private sector still intact. As my hon. Friend the Member for Sheffield, Hallam (Mr. Osborn) said, that will be extremely difficult.
I understand that Firth Brown has withdrawn from part of the market, primarily because it felt that it was too small 341 to survive in that area. It intends to concentrate on the areas in which it is strong. It may be that others will have to do the same. I am anxious to retain a steel industry in Britain while we are negotiating for a more rational steel market in Europe.
§ Mr. Peter Emery (Honiton)
My hon. Friend has been most generous in giving way. On the question of rationalisation, not only in Europe, but in the private and public sectors, is he able to add anything tonight to the considerable amount of rumour that has been abundant in the past three days about Phoenix I? Is that any nearer completion?
§ Mr. Tebbit
The birth throes of Phoenix are somewhat difficult. If one attempts to act as midwife, it is easy to burn one's fingers. I can only say that I am optimistic—more optimistic than I have been in the past—about its prospect for success. It would be wrong of me to go further than that tonight. I hope that my right hon. Friend notices that I am looking relatively cheerful as I say that. There have been intensive negotiations. I hope that an announcement can be made before long. I ask my hon. Friends to take me on trust in that respect. I have no choice but to ask that of them.
As I have already explained, it is appropriate to remember that this is not, and cannot be, a Bill to give more money to the BSC. But without the Bill money will not reach BSC in time for it to pay its wages. We need the Bill first, with other legislation to follow. There will be ample opportunity to discuss these matters again before the money is made available.
In that light, I commend what is a modest Bill, except in terms of the sums of money involved, to the House.
§ 9 pm
§ Dr. John Cunningham (Whitehaven)
I compliment the Minister of State on the fortitude he has displayed in moving the Second Reading of the Bill. It is a little surprising, to say the least, for him of all people to be bringing this measure before the House in these circumstances. He has performed with not a little skill in the way in which he has managed his tightrope act, balancing on the one hand or the one foot his party manifesto commitments, and being dragged down on the other side of the tightrope by some of his hon. Friends on the Back Benches.
It is important that the Bill should be given a Second Reading now. There is a huge crisis in the steel industry, not only in the public sector but, as the Minister rightly says, in the private sector. The crisis exists not only in the United Kingdom but in most of Europe. That crisis has been tragically underlined by the news from Sheffield today of the loss of a further 1,200 jobs at Firth Brown.
The British Steel Corporation is particularly badly off, being burdened with massive investment loan charges, overheads and rising unit costs. Those costs have been rising as capacity utilisation went down. Capital for redundancies must be a major charge for the industry. The industry is the biggest single consumer of energy in the British economy, so its energy costs are also enormous.
The Bill proposes that a further £500 million of borrowing should be made available. The Minister was right to stress that it is to enable the corporation to increase its borrowing legally. I assume that hon. Members would not want to force the corporation into acting illegally. We welcome that proposal.
342 I am a little concerned at the further proposal to allow an increase by order of another £1,000 million. I listened carefully to the Minister's expressed hope that that provision would not be necessary. We firmly echo that because we cannot go on deferring indefinitely the grasping of the nettle with regard to the British Steel Corporation's capital reconstruction. It is already long overdue.
§ Mr. Tebbit
I thank the hon. Gentleman for what he has said. I think he would agree that it would be wrong of me to assume that the House would give assent to the capital write-off. It would be a little off if I were to assume too much.
§ Dr. Cunningham
I accept what the Minister has said, if it means that he is being prudent. He is giving himself a fall-back position. We would not criticise it on those grounds, but we sincerely hope that the provision will not be necessary.
It is sad that the introduction of the Bill means a further postponement of the decision on the MacGregor proposals. Irrespective of whether we accept the proposals in detail, they cannot sensibly be postponed for much longer in the interests of the private sector and BSC. When he announced his proposals in December, Mr. MacGregor stated:The timing of the Plan is vital. The measures it describes must be implemented immediately, without obstruction. No later than July, 1981, the results of the Plan will be reviewed.On the first day after the Christmas Recess the Secretary of State said that there would be a statement on the proposals before the end of the month. We should like an assurance tonight that we shall have a date for the announcement.
§ Mr. Campbell-Savours
In many areas BSC is already introducing the plan. People are turning up at the plant in my constituency day by day to look at the equipment. The unions are being pushed into the position where they have to negotiate. We want a clear undertaking from the Government about whether BSC is correct in carrying out the activities before the Secretary of State tells us whether the corporate plan is to be accepted.
§ Mr. Michael Brown (Brigg and Scunthorpe)
I echo the sentiments of the hon. Member for Workington (Mr. Campbell-Savours). In my constituency BSC is implementing the MacGregor plan to the letter. In about 10 weeks the Normanby Park steelworks will cease to produce steel.
§ Dr. Cunningham
I do not know whether the hon. Gentleman considers that to be good or bad. When we debated the announcement of the proposals, the Secretary of State made it clear that BSC could go ahead with closures without reference to him, notwithstanding the fact that they were part of the plan. Regrettably, I assume that that is what Mr. MacGregor and his board are doing.
The closures are serious, but they are only part of the plan. It also envisages capital reconstruction. It envisages the corporation taking a vigorous attitude to the market, and that aspect has given rise to some of the objections from the private sector. In announcing his plan, Mr. MacGregor said that the corporation would act aggressively to regain its share of the market, but he has made no attempt to take over the position occupied by the 343 private sector. The private sector is well represented on the Government Benches. Where is the evidence that the corporation is doing what it is accused of doing?
It does not make sense, whichever side of the House we sit on—whether we are supporters of the public or the private sector—to see jobs disappear at the rate at which they are disappearing in this and indeed other industries because we are importing steel that we could just as well manufacture in our own factories in the United Kingdom. That is another very good reason for having as little further delay as possible.
I recognise that the Government have to make some difficult decisions, and I hope that the Minister does not think that I am being too hard about this. Nevertheless, there should be as little further delay as possible in getting to grips with that aspect of the problem.
I am bound to say—and here I am critical of the Government—that the Government must accept responsibility for this situation in significant measure. They were hopelessly implicated in the lead-up to the steel industry dispute. They appointed Mr. MacGregor, as an aggressive, competent business man with a good reputation, to reinvigorate the British Steel Corporation, to get back into the market place and fight for the corporation and to sell its products. They trumpeted that appointment with some flair, to not a little amazement from friend and foe alike. Yet they now seem to be asking him to fight with one arm tied behind his back—[HON. MEMBERS: "Oh, no".] I will rephrase that. Perhaps it is the Ministers' right hon. and hon. Friends who want Mr. MacGregor to fight with one arm tied behind his back.
Why has the vacuum created by the disastrous strike not been filled by the private sector? Not all private sector companies were involved in the strike. As the Minister said, the major share of the market went to foreign steel producers. If we want a future for the manufacture of steel for the benefit of the public and private sectors, we must have arrangements to allow us to claw back the imports, which probably now equate more nearly to 30 per cent. than 20 per cent. of the steel being consumed in the United Kingdom.
§ Mr. Tebbit
I think that the feeling among my hon. Friends is that they do not like being asked to pay for Mr. MacGregor's boxing gloves before he hits them on the nose. That is the problem.
§ Dr. Cunningham
I think that what the Minister's hon. Friends are asking for is not so much that as for the Government to pay for some boxing gloves for them so that they can square up to Mr. MacGregor. I have no doubt that that is the kind of discussion that is taking place behind the scenes, and the Opposition would not necessarily dissent from that.
We recognise that the Minister of State and the Secretary of State will be in some difficulty in producing a plan to assist private steel makers because it runs contrary to their whole philosophy, but there is no doubt that that is what they are currently involved in. [Interruption.] The hon. Member for Knutsford (Mr. Bruce-Gardyne) speaks of subsidies in the private sector. 344 That is exactly what the private steel manufacturers are asking for, and I have little doubt that we shall soon have an announcement to that effect.
§ Mr. Bruce-Gardyne
I did not wish to interrupt the hon. Gentleman's flow, but I should put the record straight since he has referred to me. My sedentary observation was to the effect that he was saying that the Opposition would probably see nothing wrong with subsidies for everyone. They never do. That is the trouble. That is why we are in this mess today.
§ Dr. Cunningham
I stand by the comment of the Minister of State. He asked just a few moments ago whether it was not in our interests to ensure that our steel industry in the public sector and the private sector survives in order to give it the opportunity to do what I and the hon. Gentleman would like to see it do—that is, not only to survive but to prosper. If, in the short term, that means assistance to the private sector, the Opposition make no apology for saying that we would welcome that. We also welcome the proposal for joint venture companies. There is nothing wrong with that proposal either. On the contrary, it could make a great deal of sense.
I remind the hon. Gentleman and others who smile about support for the private sector that some private sector companies, including companies such as Firth Brown, are not in difficulties because of what the BSC is doing. They play, have played, and I hope will play, an important part in the general framework of steel making and steel production in the United Kingdom economy. Labour Members at any rate want to see them survive, and I hope that the hon. Gentleman will subscribe to that view.
The Government also have some responsibility for other problems which the steel industry faces. Their policies towards energy in Britain have had a significant and deleterious effect on the financial situation of steel makers in Britain. I know the Government have agreed that, through NEDO, discussion should take place.
I must say—and this is partly based on my experience in the previous Administration as an Energy Minister—that British Steel's case on energy costs stands on its own. It is an entirely different case, and probably a far better case, than the case of the generality of British industry where energy costs commonly are only about 5 per cent. or 6 per cent. of costs as a whole. Therefore, the situation in respect of steel is very different from the situation in the rest of British industry. It is a grave mistake to treat British Steel's energy problems in the context of industrial energy problems as a whole.
One of the reasons why industry is asking the Government to look at energy costs is that it is one of the few items on which it thinks it can get some quick action, given the parlous state of the economy. They cannot do very much about other costs. I hope that the Government will at least think about treating British Steel and private steel makers separately from the rest of industry when they look at the problem of energy costs.
I said that Mr. MacGregor had said that the timing of his plan was vital. We have lost two months. I hope that I do not over-tax the generosity of the House if I re-emphasise that point. He said that in December and we are now in the middle of February. Further delay in making 345 decisions will not give the corporation or its managers or work force much of a chance to get anywhere near meeting some of the targets which they were hoping to achieve.
I read with interest in the Financial Times recently that the real cause of the delay in making an announcement was none other than the Prime Minister. I do not know whether that is so. The Financial Times of 13 February said thatThis follows the delaying of the main BSC funding announcement earlier this week at the instigation of the Prime Minister. She acted when it was clear that a number of back bench Conservative MPs were lobbying hard on behalf of GKN and other private steel companies.I have some sympathy with the point made earlier by the hon. Member for Sheffield, Hallam (Mr. Osborn) that the House was entitled to know a lot more about what is being discussed, by whom, who is involved and who will give their blessing to whatever may emerge from Phoenix II as it is now commonly called.
We are entitled to have more specific information on that, particularly as it may involve a public corporation, which has been massively supported by the taxpayer, divesting itself of assets. I urge the Government to be more open about exactly what is taking place.
§ Dr. Jeremy Bray (Motherwell and Wishaw)
I entirely agree with all that my hon. Friend has said about the probable reasons for the delay in the Government reaching a decision on the MacGregor plan. I am sure he will agree that Labour Members do not entertain any serious fear that the Government are ratting on their financial commitments to the BSC. We do not wish the Government to have to face the same difficulties in the steel industry as they are currently facing in the coal industry and having their plans so misunderstood.
§ Dr. Cunningham
My hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) makes a most timely intervention. I have a sneaking feeling that today's outcome in the coal industry, whereby the Prime Minister moved quickly to get her Ministers out of hot water, may be reflected, at least in part, in what is to be proposed for the steel industry, both private and public sectors. I certainly hope so.
The Government's economic policies as a whole have damaged British Steel's chances and the opportunities of steel makers throughout the economy. Last year we had a 16 per cent. slump in manufacturing industry, a massive rundown in building and construction, punitive cash limits on the coal industry—now, apparently, to be changed in some way—British Rail and others, and a general collapse in manufacturing investment in Britain. All these events have damaged companies such as Firth Brown in the same way as they have damaged the British Steel Corporation.
§ Mr. Bill Homewood (Kettering)
One of the reasons why the corporate plan should be debated as early as possible is that many of us feel that it contains faults. It may cater for the current situation, but it will not cater for an upturn of the position the hon. Gentleman is now describing.
§ Dr. Cunningham
I agree. Nowhere is that more evident than in West Cumbria, where a foundry which last year invested £12 million and which was to be opened by 346 Her Majesty the Queen with a fanfare in March was to be closed before the end of the year. That was an astonishing decision. I agree that there are a number of points of detail in the corporate plan to which we take serious exception.
The Secretary of State and the Minister of State have been drawn into a major exercise in replanning the future of both the public and private sectors of the steel industry. I welcome his baptism of fire in his new post. He is being battered by the realities of industrial life in this country. It is a pity that he comes reluctantly to the position that he has reached. It would be better for both public and private sector industries if the Government were to take a more positive attitude towards them. They should take a far more positive attitude to the planning of our industrial future and to have in mind some strategic aims for industry.
At the moment the Minister of State is involved in planning the future of the steel industry in Europe. He cannot escape the reality of the situation. Interestingly enough, in spite of some reservations, even the chairman of Thyssen was recently quoted as saying that, if the present arrangements within the EEC were to end, it would only be sensible to end them if a voluntary agreement were put in their place. We have heard that before, particularly from the Federal Republic of Germany.
Therefore, in regard not only to the need for decisions on the MacGregor plan but industrial strategy as a whole, we shall have no excuses if we again fall into the trap of taking people on trust and then finding to our cost that, because they are not as good as their word, our industries continue to be undermined. I do not necessarily refer to the chairman of Thyssen when I say this.
The Secretary of State has had his views on cash limits for the corporation and his views on non-intervention blown sky high. I have received an interesting letter from an employee of Duport, in the constituency of my right hon. Friend the Member for Llanelli (Mr. Davies). The writer talks about the problem of the British Steel Corporation perhaps undercutting the private sector, but also about high interest rates undermining the investment that has taken place, the incomparably high energy costs, which are 40 per cent. more than those imposed on the Continent, and the strong pound, which has done so much to curtail overseas activities of the private sector of British steel making. So even within the private sector there is a realisation that the Government's policies have been very unhelpful.
We want a decision on the MacGregor proposals to be announced as quickly as possible, in the interests not only of BSC and other steel makers but of our other industries that rely on steel, its use and steel products, and of the workers in those industries.
We accept the Bill. We regret that a number of Government decisions and attitudes have not helped the steel industry. I repeat that the Government cannot escape a significant measure of responsibility for the problems.
§ Mr. Edward du Cann (Taunton)
The hon. Member for Whitehaven (Dr. Cunningham) was right in a number of his statements—not all, but a number. He was wholly right to emphasise the need for a healthy and strong private sector. He was also right to remark, at the beginning of his speech, that there was some irony in a Conservative Minister demanding huge subventions for public industry. 347 By no means least, the hon. Gentleman was entirely right to pay tribute to the skills and undoubted capabilities of my hon. Friend the Minister of State, Department of Industry, whom we all wish very well in his heavy responsibilities. We are glad to see him in his post. He will have every encouragement and support that we can give him from the Conservative Benches.
As my hon. Friend and my right hon. Friend the Secretary of State know, I have a personal interest to declare. I am the chairman of a company—and a director of its parent—that includes among its engineering subsidiaries a steel maker in the engineering steels sector—alloys, high-grade carbons, and the like. Every ounce of steel that we make the BSC also makes, so we are in competition. That is fine, provided that the competition is fair. The problem that my colleagues and I face is that the competition is not fair. Therefore, I cannot agree with my hon. Friend's request that we should not widen the debate. It is necessary to speak out now, before final decisions on the MacGregor plan and other matters are made.
Let the whole House insist that, in the face of the foreign competition that we have heard something about, steel production is a vital British industry, and an industry to be preserved. I have the greatest admiration—as I am sure the whole House has—for the men who work in it. I admire their loyalty and I am proud to be associated with them, if only in a minor way. I am sure that the House will agree with my ambition, namely, that the industry should become viable, profitable and efficient in both the public and private sectors. We want both sectors to thrive.
It is tragic and unsatisfactory that—alas—both sectors are on their backs. As my hon. Friend the Minister said, the market is difficult. In the area of steel making with which I am concerned excess capacity is said to total about 2 million tonnes a year. My right hon. Friend the Secretary of State was kind enough to apologise for his inability to hear the whole of the debate. As the hon. Member for Whitehaven properly acknowledged, my right hon. Friend, my hon. Friend and the Government face problems.
Fortunately, at the 1980 annual general meeting of the British Independent Steel Producers Association a clear policy was enunciated. I shall remind the House of that policy. It was that:The United Kingdom's steel industry should emerge as more independent with no operating subsidies and without any significant incursions of public ownership or use of public money to damage the interests of private companies.I strongly support that item of Government policy.
Let us examine the matter. The House is being asked to vote an amount that seems to me—and no doubt to many of my right hon. and hon. Friends—to be large. We are being asked to vote £500 million now, and a potential further £1,000 million—which will bring the aggregate of borrowings by and investment in the BSC to the astounding total of £7,000 million. These are very great sums. Therefore, we should see how the position has developed in the last 13 years.
Let us begin by taking the profit or loss, before tax, of the public and private industries. Over the past 13 years the BSC has clocked up a total loss of £1,528 million. The private sector has clocked up a profit of £700 million on which it has paid tax at full rates. That is nearly £¾ billion. 348 What a contrast! The BSC's borrowings have come to a cumulative total of £5,080 million in the past 13 years. Let us be plain about it. It is a Rake's Progress. Continually the numbers increase. Continually the scale increases.
With great respect to my hon. Friend, it is the duty of the House to look carefully at the immediate position. Let us consider the amount of cash aid given to the BSC to date, in this financial year. Under the previous chairman of the BSC, cash aid amounted to £450 million. My hon. Friend's predecessor said that no more money would be voted. He said that the cash limits were inviolate. In June 1980 a further £400 million went in cash aid. In addition, £121 million was carried forward from the previous year, making a total of £971 million. We are now being asked to vote a further £500 million. I do not know, but I imagine that about £200 million of that will be used in the current financial year ending 31 March 1981.
I do not know whether there was a trading loss in this financial year, because one cannot tell from the BSC's accounts. They are very uninformative on the question whether loans have been repaid and whether there have been payments for redundancies. Let us use a different term—the cash outflow. For this one financial year the cash outflow will be £1.2 billion.
As to production, again one cannot tell. It is not stated. I estimate that the saleable tonnage is about 8 million tonnes, so the best estimate is that the loss on every tonne of steel produced by BSC is now about £150.
I repeat a point that I have made previously in the House, and I hope that right hon. and Hon. Members on both sides of the House will think it right that I should make it again and again. It is proper—as we say in the West Country—and it is our duty, always to examine with care the purposes for which we are called upon to vote taxpayer's money. How appropriate it is that we have an opportunity to do that in this instance.
I agree totally with the hon. Member for Whitehaven that it is profoundly unsatisfatory that we should be asked to vote this money while we in Parliament have not had the sight, whatever others may have had, of the corporate plan. Nor do we have any proper account of the purposes for which this money is to be voted.
§ Mr. Tebbit
I emphasise that the House is not being asked to vote money tonight. It is being asked to take the step of allowing the corporation to be ready to receive moneys when the House votes them. These are two different things, because there is clearly another stage before the money can go to the corporation.
§ Mr. du Cann
It seems to me that they are, as we would say in the West Country, truly Siamese twins, and one cannot differentiate one from the other. Perhaps my hon. Friend wants to split the processes, but in so doing he is splitting hairs.
It is a very old principle in the House that we seek to remedy or, at least, to discuss grievance before Supply. That is what I now propose to do. A certain suggestion is being made. Let us be direct and plain about it. My hon. Friend the Minister of State is a very direct man, and I am sure that he will appreciate it if I am direct, in my turn. A suggestion is being made, especially in the engineering steel sector, that the BSC is using taxpayers' money to undercut private steel makers' prices. My hon. Friend was 349 good enough to refer to this suggestion. It is said that the purpose is to drive them to the wall and thus to inherit their business. It is said, further, that the BSC is delaying any agreed plans for phasing out surplus capacity in the industry until losses in the private sector force closures.
What are the facts'? It is undoubtedly true that the BSC is cutting prices not just below but far below what the most efficient private steel makers can quote. In my view—to answer exactly the point made by my hon. Friend—the BSC is leading in this regard. I accept my hon. Friend's invitation to supply details to him or to Mr. MacGregor. I can only tell my hon. Friend that I am told that in the alloy field BSC is quoting 20 per cent. below BSC list prices, and for grade 5 carbon it is about 30 per cent. below. Therefore, BSC is selling at a loss and, there is unfair competition. If it were not for the taxpayers' cash, BSC would be in the hands of the receiver.
I noted the point made by my hon. Friend the Minister when he appealed to us. He said that this money was necessary to pay the wages. Any company in the private sector that found itself in such difficulties would sell an asset in order to raise cash—it would not come to the taxpayer—and I think that that is the course that the BSC should adopt.
It is undoubted that the various schemes for restructuring the industry—Phoenix I and Phoenix II—have not yet been announced. I noted the optimism of my hon. Friend the Minister of State about Phoenix I.I am sure that it will be justified. My hon. Friend is a wise man, who does not make predictions without good reason. It has, however, not yet been announced. I know that the discussions have been going on for at least 18 months, perhaps longer
As to Phoenix II, I should like to tell the House of the experience of the company with which I am concerned. We sent in our submissions to the Department of Industry in October, four months ago. They have never been acknowledged. They have never been discussed with the Department. Although they were confidential, they were passed immediately to the British Steel Corporation. That is the sort of situation with which we are dealing.
I said at the beginning of my speech that I felt obliged to widen the discussion. I know that my hon. Friend the Minister of State will understand why I feel that I have good reason for doing so. Why have we not yet had these schemes for restructuring the industry? There has been enough time. Mr. MacGregor has been quoted as saying:Time is of the essence".I agree. Time is the one commodity in human existence that is invariably in short supply. With the problems faced by our great British steel industry, it behoves us all to act as rapidly as we can.
It should be plainly stated that so long as the BSC's losses continue to be borne so handsomely by the taxpayer, BSC has no incentive to act. It is private industry that is closing. One has only to read the newspapers to see the predictions. I have not seen any announcements about BSC plants in this area closing. [HON. MEMBERS: "Oh".] My words were "in this area." I am talking about the engineering steel sector. There are no proposals in the engineering steel sector that have been announced.
There are remedies for this situation. I would like to make some recommendations to my right hon. Friend the Secretary of State and to the Government—whom, I repeat, I strongly support—and also to my hon. Friend. I believe that it is wrong that the responsibility for 350 restructuring should be exclusively in the BSC's hands. It is an interested party. It is the judge. It is not fair that the responsibility should be put upon the BSC. There are, I believe, two alternatives. One is to appoint the Department of Industry. There are difficulties about that. I suggest arbitration, with instructions to be prompt. The solution has to be imposed. Time is running out. Everyone knows it.
Secondly, undercutting by the British Steel Corporation, as a matter of policy, must stop forthwith. If there were dumping from foreign companies we could object and get it stopped. The same should apply to our big domestic producer. A lot of nonsense is talked about prices in relation to imports from the Continent. I have seen foreign exporters come into our markets with deliberately low prices, particularly in the textile world, smash British companies, and go on to charge whatever they feel is appropriate. That is the risk that we are running here. While we are restructuring the industry—never mind the rules of the game—let us stand up for our own country for a change. Let us keep the imports out, if we need to.
I thought that the Minister of State put it very well in answer to questions in the House on 11 February, when he said:it would be wrong to allow the private sector to die just because it does not have access to the same sort of funds as the BSC."— [Official Report, 11 February 1981; Vol. 998, col. 874.]How right that was. I repeat that undercutting by the BSC, as an aspect of policy, must stop forthwith.
Thirdly, the acquisition of downstream activities on the part of the BSC should be prohibited. There is great nervousness among stockholders throughout the country, as one finds if one talks to them. The position in cold rolling is exactly as I have described it in relation to alloys, steel and high-grade carbons. The market is being undersold substantially.
I hope that my hon. Friend will tell the chairman of the BSC—that very remarkable man, Mr. MacGregor—that the first task for the BSC is to produce steel at a lower cost per tonne. That is its job. It is its first and, at this moment, its only responsibility to make a viable business. Everywhere I go I am told—
§ Dr. John Cunningham
I hesitate to intervene in this very eloquent defence of the interests of the private sector, but a moment ago the right hon. Member was talking about fairness. Is it fair to suggest that the British Steel Corporation should be forced back into bulk steel production and out of the added-value end of the market, such as stockholding. Is that what he describes as fair? If it is, that tells us why there has been failure to agree for so long between the corporation and the private sector—something that the right hon. Gentleman has just been complaining about.
§ Mr. du Cann
If I did not make it entirely clear, I apologise to the hon. Member and to the House. I thought I said that at a time when so much public money—taxpayers' money, hard-earned money—is going into the BSC it is essential that it should concentrate on first things first. That is precisely what it is not doing. It should cease at once to compete unfairly with the private sector. That is what it is also doing.
As I was saying, everywhere I go I am told that taxpayers' money—here is the irony of the point made by 351 the hon. Gentleman—is underwriting the aggrandisement of a nationalised industry at the expense of the existence of private business.
It is the classic case of the big bullying the small. That is a charge which I at any rate wish to be able to refute, not simply out of philosophical prejudice—although I admit that I am a profound believer in private enterprise and in the smaller companies against the huge corporations, such as the BSC. There are practical reasons, too. Those who use steel in this country are always going to want a second source of supply. The way things are heading, if, in the future, there is only a nationalised corporation to buy from in the United Kingdom, it will buy steel from abroad, and 1 do not want to see that.
§ Dr. Bray
The right hon. Member is making a powerful case, particularly on pricing. I wonder whether he has thought through the complaint that he is making. It is true that British Steel is undercutting, for example, specifically where a major engineering firm has a large export order for which it needs cheap steel to compete with engineering firms overseas. Would it not be better to suggest that where the private sector needs to match overseas competition it should receive the prices from the BSC on the same terms as the engineering industry receives prices from the BSC, namely, to be able to compete, in its markets, with overseas competition? I understand that the Minister of State was suggesting something like this in matching import prices, which is a different point from that which the right hon. Gentleman
§ Mr. du Cann
I would be very happy to debate this in some depth with the hon. Gentleman, who has much experience of these matters, and has views that are always of significance and worth pursuing. There is a whole series of possibilities. What I refuse to accept is the excuse that is currently being given by the BSC that it has to pull down its prices below the cost of production in order to compete with foreign penetration of our market. It puts that forward as a universal excuse. It is simply not true on that scale, or anything like it. There is a whole series of possibilities to be explored if the private sector and the public sector are to live together.
At the risk of incurring some unpopularity from my right hon. and hon. Friends in particular, I would say that huge penalties are imposed upon the steel industry because of the costs of some of its facilities of production, notably fuel, and the pricing policies of the nationalised industries.
I must come to the end of my remarks. As my hon. Friend said, a further measure will be brought before us fairly shortly. I can speak only for myself, as a private Member of Parliament, but I would not feel able to support any proposals of that sort unless we had the opportunity to inspect and discuss the corporation's corporate plan. I would say "No more cash until we know where we are—until we know what is going to be done with it".If the House is to be called upon to vote additional sums in substantial measure, I should not be ready to entertain such a proposal unless I were entirely satisfied that we would have in future a genuine partnership between the private and public sectors, and that there would be an end to unfair competition.
352 This measure needs to be fully discussed. There is a limit to what those of us who are keen to see a flourishing private sector—including, as I understand it, all Opposition Members—can possibly accept in this over-friendly support of the public sector. Let us support the public sector by all means, but let us do so only on terms that are fair.
§ Mr. Denzil Davies (Llanelli)
As my hon. Friend the Member for Whitehaven (Dr. Cunningham) said, the Opposition support the Bill. Britain needs a steel industry and it needs to produce steel. Most of the steel will be produced by the British Steel Corporation, and the corporation, whether one likes it or not, needs the money that will be provided by the Bill. It has to have the money and the Government, whatever their views on these matters, have to be realistic and provide it with the money.
However, there is a private steel sector. I have a constituency interest because there is a private steel works in my constituency called Duport, which has its headquarters in the Midlands. It has a large private steel making capacity in Llanelli. I make no apology for mentioning the plight of private steel manufacturers, and especially that of Duport in my constituency. By all means let us support BSC, but let us give similar support to the private steel industry. If we do not do so, the competition will be unfair and some of the private steel manufacturers will be put out of business.
The Minister of State described this measure as a modest little Bill that provides for only £500 million of borrowing. The hon. Gentleman knows that we are talking about a friendly banker that is providing £500 million at a reasonable rate of interest through the national loans fund. I do not know the rate, but it is 14 per cent. or perhaps even less. It is a reasonable rate, given present rates. We are not talking about a modest little Bill. The corporation is enabled to borrow from a banker that will never put in the receiver or liquidator. That is the difference between the corporation's position and that of another steel maker going to his banker and finding that he applies different commercial yardsticks.
§ Mr. Roger Moate (Faversham)
The right hon. Gentleman will recall that my hon. Friend the Minister of State described it as a modest little Bill except for the money that is involved.
§ Mr. Davies
With respect, there is nothing else in the Bill. That is what the Bill is all about. It is about borrowing but not about commercial borrowing. The Bill is not a modest measure. It is an important Bill for the corporation and it is one that we welcome. The Bill provides for a great deal of money, and does so on the terms that a commercial banker could not possibly meet in the same situation.
§ Mr. Hooley
I hope that my right hon. Friend is not giving the impression that 14 per cent. interest charges are modest and reasonable. They are lunatic charges that are heavily penalising British industry in general as well as the steel industry.
§ Mr. Davies
Indeed, but they are reasonable in the context of what others may have to pay to their bankers. There are those who pay far more than 14 per cent. The corporation is borrowing at about the lowest rate at which one can borrow in the United Kingdom. Everybody knows that. I accept that interest rates are too high, but I was comparing the rates on this loan with the rates on other loans that are available to steel manufacturers.
Duport would be happy to have its debt written off. It is not a large debt. If it were written off, the company could continue to trade without too much difficulty for some time. There is no equality of treatment. That applies to not only interest rates but to the next Bill to come before the House on this subject, which no doubt will write off some of the debts. We are asking for equality of treatment. We are saying not that the British Steel Corporation should have the benefits but that other companies should have similar benefits to provide a viable steel industry.
We are not talking about what used to be called a lame duck company. I remind the Minister and his colleague the Under-Secretary, who was courteous enough to see us the other day and to listen to our arguments, that we are talking about a company and a work force who have done all the right things for the past six or seven years. An investment of £30 million has been made during the past seven years in the Llanelli plant. The work force has been reduced from 2,700 to 1,100 and the production and productivity of that steelworks are as high as any in Western Europe. We are talking about help not for a lame duck, but for a steel manufacturer. The work force has co-operated with management, improved productivity, accepted redundancy and done everything that successive Governments have asked of it. Despite that, it now finds itself in considerable difficulty.
The Government have an obligation to help. The plight of the steelworks in my constituency and the plight of other steelworks has been caused by Government policy. I make no apology for saying that. My hon. Friend the Member for Whitehaven mentioned energy costs. The Duport steelworks in Llanelli, because of its processes, is heavily dependent on energy. It spends 70 per cent. on electricity and 30 per cent. on gas. The Government have raised the price of energy not because it was justified commercially, but to reduce the public sector borrowing requirement.
In the four-year or five-year monetary plan the reductions that the Government hope to secure—the irony is that they will never secure them—will be secured to a considerable extent not by cutting public expenditure and thereby reducing the PSBR, but by putting up charges and costs, especially the charges of the nationalised industries. At a time of recession and depression, we have the irony that energy costs are raised by the Government not because they need to be increased but to reduce the public sector borrowing requirement. That has hit the British Steel Corporation as well as the private steel manufacturers because of their heavy reliance on energy. That is a specific instance of Government policy affecting the public and private steel industry.
Now we are told that gas prices are going up yet again. Why? Not for commercial reasons, but because a gas tax is to be imposed as we need to reduce the public sector borrowing requirement even further. The irony is that we shall not reduce it because by raising energy costs the Government will put more people on the dole, who will have to be paid unemployment benefit, which pushes up public expenditure and the PSBR.
354 The second reason for these firms being in difficulty is also due to Government policy. My hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) chastised me for talking about reasonable interest rates. But the Government put up the minimum lending rate to 17 per cent. Why? Because they have increased the rate of inflation. Deliberate Government policy puts up the rate of inflation and interest rates follow, whatever policy any Government wish to pursue. The cost of servicing the large loans is considerable for Duport and the other steel-making companies.
The third factor is the high value of the pound. I do not blame the Government entirely, because other factors are involved, but that is a secondary matter. It has affected the steel industry and steel manufacturers.
Finally, the policy of deflation has caused further recession and depression, and that, too, has affected the steel industry. Time and again during the past two years policy after policy has affected the industry to ensure that it is in financial difficulty. The last straw is the pricing policy of the British Steel Corporation. I do not know the truth. I accept that BSC has to compete with imports, that the French and German manufacturers are bringing steel into this country, and that Mr. MacGregor has to compete with them. The Minister assured us that the BSC would not go below the prices charged by companies exporting to Britain. But the BSC cannot compete with them without the favourable terms that it receives from the Government. We do not object to that. It is the only way that the BSC can lower its prices to the level charged by exporters to Britain. It is no good saying that Mr. MacGregor has given an assurance on the matter. Unless the Government are prepared—
§ It being Ten o'clock, the debate stood adjourned.
§ Question again proposed, That the Bill be now read a Second time.
§ Mr. Davies
Unless the Government are prepared to provide other steel manufacturers with the same favourable terms as those granted to the BSC, it is no assurance to say that the BSC will not cut its prices to
below the level charged for imports. We are talking about costs. We are not comparing like with like. We are comparing commercial enterprises—often in the hands of private bankers—with a public enterprise that has a quite different banker in the shape of the Government. My plea to the Minister is to give Duport and the private steel manufacturers that are efficient, and which employ thousands of people, the same terms as those given to the BSC. We do not ask for any more than that. We do not want anything taken away from BSC because it is the major manufacturer in the market.
I turn to the question of jobs. We are talking about steel, but that involves jobs. In my constituency 1,100 steel workers are already unemployed, and another 700 or 800 who work for the same group in the Midlands may also be affected. The unemployment level in my constituency is 15 per cent. If the steelworks closes, it will be 20 per cent. Some of those who work in the steelworks are aged between 35 and 40 years. They will never work again because there are no jobs for them, wherever they may go. They are highly skilled men who will be on the dole for 355 the remainder of their lives. No Government should countenance that.
I ask again for help. If we are not given that help, the 356 anger, distress and cynicism that will be created will last not only through this generation but for many generations to come.
§ 10.2 pm
§ Mr. Patrick McNair-Wilson (New Forest)
If nothing else, the debate has demonstrated clearly that the mixed economy is a mixed-up economy and that we are getting the worst of all worlds. I am profoundly uneasy about the future of the private sector. I am equally uneasy about the future of the public sector. Those of us who have studied these matters throughout the years will not be unfamiliar with the previous attempts to restructure the finances of the BSC. Some of us with sufficiently long memories can even remember that rather bizarre attempt at public dividend capital, upon which dividends were never paid.
I want my hon. Friend the Minister to tell us in more detail—although I know that he cannot do so tonight—for what purposes the new facility that we are debating and voting for tonight will be used. Can we be sure that, even at this moment, the corporation is not shopping around in what remains of the private sector to pick up bargins so that eventually it can rub out competition altogether? My hon. Friend and I know that that is exactly what is happening. We must recognise that the steel business has never been played by Queensberry rules. Anybody sitting here tonight who thinks that as the result of a pleasant discussion both parties will sit down and behave like good boys has something else coming to him. It has always been a cut-throat business. I hope to show how it may be possible to redefine the areas of activity.
My hon. Friend is a modest man. He does not appear to realise quite how significant is his presence here, promoting this sort of legislation. The private steel companies do not have the ability to rub the magic lamp and to produce a genie at the Dispatch Box who can clear credit lines for them. The private companies realise only too well that in competition with them is someone with his hand deep in the taxpayer's pocket and for whom Government money is tuppence a bucket. Until that situation changes there can never be fair competiton between the two sectors of this great industry. It does not matter how we dress it up with any words that we may use in the House. By our activities here tonight we are placing colossal power in the hands of the British Steel Corporation in its dealings with the private sector. Nothing else is the fact of what we are doing here.
There is a danger that the so-called rationalisation which we are promised will turn out to be a form of nationalisation. I regret that for a number of reasons. If the private companies cannot perform satisfactorily under private ownership I am certain that they will not do well under public ownership. All that one is doing is giving Mr. MacGregor and his colleagues the pleasure of paying out redundancy money to the businesses that they take over. The fact is—my hon. Friend knows it well—that many people in the private steel business want out of it, and out of it completely. Unfortunately, nothing has been said in the debate which would lead them to change their minds.
What is required is a total redefinition of the position of the British Steel Corporation as it was defined in the first Iron and Steel Act in 1967. It was as a result of the definition in that Act that the private sector sprang into being. It consisted of the companies which because of their output, did not qualify to be nationalised.
After 13 years, it is not unreasonable to redefine the position. As my right hon. Friend the Member for Taunton (Mr. du Cann) said so lucidly, the British Steel 358 Corporation must be about bulk steel making. The special steel business is the only part of the business in which the private steel maker can operate. We must make that separation. I accept the point made by the hon. Member for Whitehaven (Dr. Cunningham), but if we are to keep these two businesses together and not merge them totally into one nationalised concern something like that redefinition will be required.
Over the last few years the corporation has faced the problem that, regrettably, the technology in which we are now involved is the technology upon which we embarked late in the day. I make no apology for the fact that under the Conservative Government of 1970 the British Steel Corporation, on the advice of the chairman, thought that we were talking about a production target of 35 million tonnes a year and then embarked on massive investment. In those days it was fashionable to talk about the large, integrated plants. Therefore, there is now in being something like what we promised ourselves.
That technology has been overtaken by events. The energy crisis of 1973 is but one of those events. We do not know whether it makes sense in an industry of such a size, which has perhaps a saleable quantity of between about 8 million and 12 million tonnes of liquid metal to be sold, to be building huge blast furnaces at a time when we are in difficulties in respect of the provision of coking coal for the blast furnaces, not to mention the bringing of iron ore from the other side of the world. It is difficult to know whether we have created enormous leviathans which are already white elephants.
My one plea—I must make it tonight before the final die is cast— is that once again the British Steel Corporation should consider its direct reduction plant in Scotland. I hear encouraging rumours, but no more. Here is a new technology, a technology which for us with our plentiful supplies of natural gas, could put us back in the pound seats.
We are all familiar with the story of the Hunterston project, so I shall not weary hon. Members with it. The plants were opened and closed on the same day. They have never made an ounce of metal, which is a tragedy. They lie in that beautiful part of the mouth of the Clyde waiting for someone to buy them. They were built originally by the BSC to stop the private sector moving in and doing it instead. The tragedy is that that technology of using direct reduction rather than the blast furnace route and then on to electric melting is probably the future that should lie ahead for the BSC. My hon. Friend is skilled in these matters. I should like to think that he will urge Mr. MacGregor to look again not at the white elephants on the Clyde but at what could be the key to success in our steel making in the future.
We in the House have seen money lavished on the British Steel Corporation in the 13 years that it has been around. They have not been happy years. The companies were making more steel when they were nationalised than they have ever made since, and they are now without landmarks. We no longer have the option of restoring the industry to the position that existed before it was put into Government hands. However, through the House we at least have the opportunity to demand of the Government a redefinition of the role of the BSC.
In supporting what my right hon. Friend the Member for Taunton said about wishing to see the corporate plan, I should also like to see a definition of what the role is to 359 be and what is to be its relationship with the private sector. Without that definition, the future of private sector steel making is bleak in the extreme.
§ Mr. Frank Hooley (Sheffield, Heeley)
The Bill is a good example of the inherent contradiction in the Government's economic policy. They set out with the objective of cutting the PSBR, but are constantly forced back into the position that the result of their policy is gigantic and increasing expenditure in every possible area. The classic example is the expenditure on unemployment and social security benefits, which is running at about £10 billion because of the increased unemployment resulting from their policies. Not only are they not reducing the PSBR; they are creating gigantic bills for the Exchequer to compensate for the social consequences of their policies.
We are now seeing the same backlash effects in industry. Industries such as coal, cars and steel are being forced into the ground by the Government's monetary policies and are now having to be compensated by public-funds, because even this Government do not have the temerity to destroy industry on the scale that would be necessary if they did not provide from the Exchequer the funds needed to maintain steel, British Leyland and coal, and soon there will be others. We have the absurd downward spiral of their self-defeating inflationary policies, which, even by the Government's own standards, do not produce the objectives that they profess to want to achieve. The Bill is an excellent example.
The Minister has rightly said that he is not setting out to spend the money that he is having to provide, but there is every likelihood that it will be spent unless he comes along with another rescue Bill that does some financial juggling with the capital structure of BSC and probably provides more money to carry it through another two or three years. Not long ago the present Secretary of State for Trade was honest enough to say that we had three years of famine and misery to put up with before the Government's policies were likely to succeed.
§ Mr. Hooley
I prefer to use ordinary words, such as "misery", which my constituents understand. If the hon. Gentleman prefers "unparalleled austerity", we will stick to that.
I am not sure how far we are through the three years, but it is absolutely clear that the impact of those policies on a fundamental industry such as steel has been, and will continue to be, appalling. Quite a lot has been said about steel production, capacity and tonnage. My right hon. Friend the Member for Llanelli (Mr. Davies) pointed out that we are also talking about jobs and about the livelihood of men and their families who depend upon a flourishing steel industry.
In this respect, I refer to the appalling headline in the Sheffield Morning Telegraph today that Firth Brown, one of the great private sector steel and engineering firms in Sheffield, is to cut 1,250 jobs—one-quarter of its work force. The article suggests that that may not be all, and that the figure may rise to 1,400 or more as a result of the recession through which we are passing. As my right hon. Friend the Member for Llanelli said of the Duport firm in 360 his constituency, Firth Brown is not a lame duck firm. It is not an imcompetent, backward firm. It has put massive investment into new products and techniques in recent years. It is technologically advanced and priduces technologically advanced products, but its efforts have been totally cancelled out by the absurdities of Government policy over the past two years.
My right hon. Friend refered to energy proces. As a result of Government policies, Firth Brown is landed with energy bills running at about £10 million or £12 million per year. That is an increase of £4 million or £5 million on what it was paying not long ago. As my right hon. Friend correctly said, this does not derive from some arbitrary pricing policy on the nationalised industries. It derives directly from the fact that the Government are using electricity and gas as commodities on which to raise taxes for the purpose of their monetary policies and to reduce the borrowing requirement.
The result is that intolerable burdens are being imposed on industries such as the steel industry, for which energy costs are a vital ingredient of overall costs, which simply cannot escape these enormous charges and this extra taxation. Consequently Firth Brown is now suffering the penalty.
Again, it is not a question of strikes or of bad industrial relations. Industrial relations at Firth Brown have been excellent. There has been full co-operation with the shop stewards there. Indeed, the stop stewards committee at Firth Brown is famous in Sheffield for the forward-looking and constructive attitude that it has always taken in dealings with the management, both before and during the present crisis. Only recently a special agreement was reached with the management about working practices. That agreement was designed to avoid exactly the kind of tragedy that has now hit that firm and is likely to destroy the jobs of 1,400 of its workers.
I wonder when the Government will realise the kind of industrial devastation that their policies are causing. Their overall deflationary policies are destroying demand in this country, with the soaring interest rates that have already been mentioned, the energy costs to which I have referred and the effect of an over-valued pound.
The Government have argued that all those problems are common to Europe as a whole and that there is a steel crisis in Europe as a whole. There are certainly difficulties. But I draw the attention of the Minister and the Government to an OECD report on steel, published a little while ago. It states that during 1980Italy's output rose by 9.1 per cent. to 26.5 million tonnes"—that is considerably higher than own production—and that of Spain by 4.1 per cent. to 12.7 million tonnes.It is fairly clear that there are some countries in Europe which are not massacring their steel capacity and, indeed, are not cutting down on their output. They are successfully producing, and they are now beginning to produce at levels which 10 years ago we regarded as perfectly normal. In fact, about 11 or 12 years ago, this country was producing 28 million tonnes of steel, but we have now slumped to the miserable level of 10 million of 12 million tonnes.
§ Mr. Tebbit
The hon. Gentleman makes an extremely interesting point. He blames the Government's policies for all the ills but then makes the valid point that this decline has been going on for about 10 years. Therefore, it cannot all be due to the Government's polices, can it?
§ Mr. Hooley
I did not say that the declines had been going on for 10 years. In fact, the decline on the scale that we have just seen set in two years ago. I think that I am right in saying, although I quote the figures from memory, that in 1978 the BSC crossed over and exported more steel than was imported. In terms of both tonnage and value, this country moved into an export surplus by about 1978, which it has now lost.
It is also true to say that up to 1978—certainly in 1977–78—the BSC successfully held on to between 56 and 57 per cent. of the home market despite all its reconstruction difficulties and the difficulties associated with new plant and investment.
The Sheffield area is unique in that it has important plants both in the private and public sectors. It is not my view that we should enter into an argument tonight about the relative importance of the one or the other, because it is of vital importance that both should survive. What characterises the plants in the Sheffield area is new investment, good industrial relations and high productivity. In fact, in recent weeks the productivity of the famous Thrybergh bar-rolling mills, in the constituency of my hon. Friend the Member for Rother Valley (Mr. Hardy), has broken world records for output. The stainless steel plant, which was completed not long ago, is also doing extremely well.
The capacity is there. We have the skills and the technology, both in Firth Brown and in the BSC plant. What is wrecking both is the Government's policies, which are placing intolerable and impossible burdens on the steel industry both in the private sector and in the BSC.
Of course I welcome the Bill, which provides the financial leeway to make the BSC operate legally and properly within the financial limits until there is a decision on the MacGregor plan.
However, I can hardly do better than to quote the comment of the Morning Telegraph this morning on the Firth Brown tragedy. The Morning Telegraph has never been anything remotely approaching a Socialist newspaper. This is what it says about the Government's current economic policy:Is the Government able to lift its weary eyes north of Watford? Can it not see the immeasurable damage now being wreaked in Britain's industrial heartland—the source of the nation's wealth which so many are so anxious to spend?Sir Keith Joseph, that fountainhead of strong and free enterprise, the man who would make British industry a place for the efficient, unsubsidised entrepreneur, seems unaware of, or incapable of visualising the damage being done to private-sector steel, either through monstrous energy prices, compared with foreign competition, or the money he is pumping into BSC's ever-open but never accountable pocket.If he needs proof, indeed, if he is willing to face stark facts, he can now find them in Sheffield.That is a condemnation not from the Daily Worker but from a local Conservative newspaper in Sheffield. The people of Sheffield and the country are getting fed up with the Government's economic policies because they are driving our basic industries into the ground.
§ Mr. Peter Emery (Honiton)
While it is fair to say that there have been major falls in the demand for steel during the past two years, it is not correct to suggest that all the problems of the steel industry have happened within the past 18 months. Many of the figures that I shall give will bear out what I say.
362 It needs to be said loudly and strongly by Members on both sides of the House that the British Steel Corporation is a national asset, just as much as the private steel-making firms that have served British industry for many years such as GKN, Hadfields and Duport are national assets. Both sides of the industry should be made successful and profitable.
Today must be difficult for my hon. Friend the Minister of State. It cannot be a pleasant task for him to have to bring forward this Bill. I am certain that he would have preferred the corporate plan. It would have been preferable if the finances of the British Steel Corporation had lasted long enough for the House to have all the information before being asked for borrowing requirements of this nature.
None the less, it is right that the House should have certain figures and assurances before it votes those amounts. It is not just a matter of £500 million. We dismiss that sum today as though it is a small amount. We are approving a £1.5 billion borrowing power. Once that has happened, there is little that we can do to stop it—other than in a 90-minute debate on a statutory instrument which we cannot amend.
It is therefore worth while to look at the short history of how the borrowing has grown. In 1975 the Labour Government, in their Iron and Steel Bill set a borrowing requirement for BSC of £2 billion. After 18 months, it had to be increased by 50 per cent. immediately, with a right to draw £4 billion. Two years later the sum was upped to £4.75 billion, with a drawing right of £5.5 billion. Now, in 1981, we are increasing the figure yet again to £6 billion, with the possibility of drawing up to £7 billion.
It is hardly an encouraging record in just over five years to have an increase of over 350 per cent. in the borrowing requirements of the industry. It does not say much for the management concept of the industry's requirements, for the financial understanding of the financial advisers of the corporation, or for the Government's financial supervision of this nationalised industry.
It was suggested in the Select Committee on Industry and Trade earlier today that British Leyland was becoming the permanent pensioner. The BSC seems to be the constant money drain on the economy. It is for us to begin questioning how that money should be spent. In view of the losses sustained by the corporation over five years, when it is suggested that we should vote money that could turn the profitable private sector into a loss-making structure hon. Members must begin to consider very carefully whether it is right that this extra money should be used.
Let us look at the cost of the corporation to the taxpayer over the five-year period from 1975–76. The total operating losses are £1,647 million. The closure costs in addition are £226 million, and there are other special items that increase the extraordinary costs to £1,067 million. The total loss of the corporation over the period is £2,714 million. Those are telephone numbers in finance. Let us express them in such a way that ordinary people can understand them. They mean that every family in the land over the past five years has had to pay £23 a year to the BSC to keep it in business.
My hon. Friend the Minister made it clear that the external financing limits had not been set for the coming 12 months. Therefore, the amount that can be borrowed once the Bill has been passed is not yet absolutely clear. Will he estimate what loss the corporation will make in the 363 next 12 months? He must have some figures. If he has not, we should not be voting the money; nobody should be in that position.
We are not asking for the whole BSC plan to be revealed, but how much does my hon. Friend estimate will be the cash requirement in the next 12 months? These figures are important, and the House has a right to have them when we are considering the amount of money that is having to be loaned.
From 1975 to the end of 1979–80, about £4,700 million has been extended in total. How much of that is short-term money? How much of that finance has been revolved? How much has been paid back? I cannot believe that that is the outstanding debt. If it is not, what is? If we are funding possibly another £1,500 million, we should know how that compares with the present indebtedness.
When he made his statement about the Bill last week, my hon. Friend told me that one should not compare the past capital when dealing with a restructuring of the capital as opposed to a new borrowing. But if he had borrowed £4,700 from his bank manager and then said to the manager "Lend me another £500. Forget about the £4,700. I cannot pay that back", I can tell him what the reply would be. These figures are relevant to the discussion of a Bill such as this.
I turn to two points that I urge my hon. Friend to deal with. If this money is not voted, BSC will probably become bankrupt within six, eight or 10 weeks. The receivers will have to be called in. If we are to back the MacGregor reorganisation, the Bill, however much we may dislike it, must be enacted. However, we have a right to ask my hon. Friend and the Department to spend a reasonable amount of time considering the rationalisation and specialisation of activities—I think that that is the in phrase, although I am never certain whether I like such phrases—in the private sector and in the BSC. Unless we achieve some form of structured rationalisation, the future of the private steel sector will become non est. It will come to an end.
My hon. Friend gave the impression that Phoenix I will come into operation. GKN has spent much time and effort trying to bring that about. Perhaps it could set a pattern. However, we should get on with Phoenix II. If my right hon. Friend the Member for Taunton (Mr. du Cann) is correct, as no doubt he is, it is shocking that that matter should have been left for so long.
Will my hon. Friend try to drum some sense into the German, French, Italian and Belgian steel industries? We do not want a permanent merry-go-round, with every Government subsidising every steel industry so that they can compete with each other. It is like the ramp of export subsidies. Somebody has it and, therefore, somebody else has to have it. The system goes round and round and the public sector commitment from Europe ever increases so that artificial prices can be structured. That does not benefit the steel industry. The Secretary of State should try to take a major lead in rationalising that area.
I hope that my hon. Friend the Minister will pay attention to a certain factor that affects all sectors of the steel industry. The Select Commitee on Industry and Trade published its first report this year on imports and exports. In paragraph 71, the Committee had a number of things to say about energy prices. It is an all-party report. 364 Representatives of the Committee range from some of the more extreme Tribunites to some of the more Right-wing members of the Conservative Party. The report states:the BSC … submitted to us a copy of a study they had produced jointly with the British Independent Steel Producers' Association (BISPA). The conclusion of the study was that in the United Kingdom the monopoly position of the energy supply utilities effectively made it possible for Government to impose on them pricing policies unrelated to the requirements of the market place with detrimental and near disastrous consequences to manufacturing industry. The British steel industry is being increasingly handicapped vis-à-vis its competitors as a result of UK energy policies.In the memorandum to which that refers, BSC suggests that it has a cost penalty of between £50 million and £70 million per annum. If that argument is correct—serious people have looked at it and could not find any fallacy in it—surely the Government ought to attend to it to see whether action could be taken.
There cannot be any sense in the Government imposing a policy which is so hindering the major steel industries, both private and public, against our European competitors. All I ask of the Minister is an assurance that the Government will look at that report with particular care in relation to the steel industry. I believe that that is one of the ways in which perhaps we could get some benefit to both sides of the industry out of this debate.
I shall support the Government, but with a heavy heart. However, I hope that the rationalisation that we might be able to get from the Minister will be carried out quickly.
§ Mr. Bill Homewood (Kettering)
The debate has been of great interest to me because some 15 months ago in the House, on at least three occasions, I think, I called for an investigation into the British Steel Corporation, and Conservative Members showed no interest whatsoever. Tonight, however, we have heard a number of suggestions that come close to that, and we have had reams of statistics criticising the BSC thrown at us in support of that very careful watch which should now be placed on the BSC.
What has happened is that in the past 12 months the private sector of the steel industry has run into serious trouble, which did not exist 12 months ago. Nothing concentrates the minds of Conservative Members more than private enterprise getting into trouble. With public enterprises, that has no effect on them. The hon. Member for Brigg and Scunthorpe (Mr. Brown) intervened in a mildly apathetic way, if not a pathetic way, on behalf of his constituents in Scunthorpe, but apart from that we have heard scarcely a peep from Conservative Members.
Basically, as has been said by some of my hon. Friends, the problem for both sectors of the industry stems largely from the Government's economic policies. I cannot criticise the right hon. Member for Taunton (Mr. du Cann) on that score, because I have listened to him on a number of occasions when he has been critical of his right hon. and hon. Friends in respect of their economic policies. However, it is true to say that we have heard little of this in general from the Conservative Benches, which is basically where the steel industry's problems come from.
In 1980, usable tonnes of steel produced in Britain amounted to only half of what was produced in 1979, and only three months of 1980 were affected by the strike about which we have heard so much. If we are to believe the production figures for January this year, from both the public and the private sectors combined, and if the year's 365 production follows the pattern of last year, in combining both public and private sector tonnages we shall not get anywhere near the 14.2 million tonnes that Mr. MacGregor posits in his corporate plan.
The restructuring of the BSC's finances is being further delayed. The corporate plan poses the prospect of a further 20,000 job losses in the BSC. As already stated from both sides of the House, the embryo of that policy is already effective and these things are happening in some areas. Yet the Government cannot at this time produce their attitude to the full corporate plan. I wonder why. The plan has been before them for months. I understand that, apart from my own trade union, there is no union opposition. Yet we are told that the plan cannot be brought before the House. Instead, we have this messy, little Bill to tide the BSC over for the next few weeks until, as I understand the matter, some reconciliation can be made between Conservative Back Benchers and the Government and we can get the facts.
The problems of the private sector stem, apparently, from Mr. MacGregor's aggressiveness. This has been music to my ears. On every occasion when Conservative Members discuss public enterprise, I begin to feel that it is so weak, so unenterprising and so deplorable in its attitude to commercialism that it would not be competitive with anyone. It must be remembered that an enormous amount of money was paid for Mr. MacGregor. The Opposition did not want to pay it. The Government wanted to pay it. Having paid that large amount, it would be wholly wrong for them now to expect public enterprise to live up to the image they portray of it.
We are told that there is an overlap between the private and public sectors. I am sure that this is true in some instances. I am sure that it is true that the BSC, through Mr. MacGregor's aggressiveness, is undercutting the private sector in some areas. It seems to me, however, that Phoenix I and Phoenix II—that is not what they were called many months ago, when I first heard of them—are taking so long to get off the ground because of a fear in the private sector of the industry that it will be asked to conjoin with the public sector. Conservative Members should get together as quickly as possible. I am sure that the private sector of the industry will be coming to the House for subsidies. The quickest way to get them is through this plan.
Although these discussions have been proceeding for months, there has not been a single word of consultation with the trade unions in the industry. We have heard about them through the back door. We know most of what has been going on. Not once, however, has either sector of the industry approached the trade unions to consult them on projects. There is a requirement within the nationalisation Act that consultation shall take place on matters of this kind. As usual, we shall be told in the House that such and such an activity has been agreed and will be enacted. Public money will be involved in the transaction.
The main reason for the problems of the private sector is the high value of the pound. That is quoted in relation to most of economic problems linked with exports. It is probable that the private company which I intend to mention has no director in the House or an hon. Member who supports its activities.
Sheerness, one of the most efficient, highly capitalised private companies in the steel industry is in dire difficulties because it has almost lost its export trade. I see the hon. Member for Lancaster (Mrs. Kellett-Bowman) pointing, 366 so I understand that there is an hon. Member on the Government side who will speak on behalf of Sheerness. As I understand it, 70 per cent. of its production 12 months ago was going to export, and that has been practically destroyed. Very few exports are now being dispatched from those works.
§ Mr. Moate
Will the hon. Member give way? I am grateful to him. As he rightly surmises, Sheerness Steel is in my constituency. I concede something of what he says about the loss of its export market. May I also make the point that that company can still produce steel for the home market without subsidy but it cannot expand its activities, which would be of great benefit to the taxpayer, because of the massive subsidies going to the British Steel Corporation? If it were to compete even more in the domestic market, the BSC would simply bring down its prices at the expense of the taxpayer, i ask the hon. Member seriously which is better for the taxpayer and for the country—Sheerness Steel producing steel without subsidy and expanding its sales, or the British Steel Corporation carrying on as it is, losing perhaps £100 a tonne on every tonne it produces?
§ Mr. Homewood
It is a moot point in the current situation in the domestic steel market, in that if the hon. Gentleman had his way and Sheerness were enabled to take over what he claims to be the section that the British Steel Corporation is now supplying by subsidy, obviously British Steel would be thinking in terms of more jobs being lost. Quite bluntly, this has never been any gain to the Government in their public sector borrowing requirement arrangements. Indeed, I said in the House when Corby was being closed that there would be no gain to the Government on the public sector borrowing requirement argument. I proved to be right.
When I said that, the Secretary of State said that I obviously believed that nobody would ever get a job. The fact is that nobody has ever got a job. In Corby, 22.1 per cent. of my people are out of work. If there was any gain in that when the British Steel Corporation in Corby was losing only £10 million, I am afraid I cannot see it. I think that the same thing is relevant to the hon. Member for Faversham (Mr. Moate), who represents Sheerness.
The other thing that worries me about the MacGregor plan is that the sharp rundown in capacity which obviously will be part of it appears to indicate that there will be no possibility of the steel industry being ale to cater for our domestic demands, as I mentioned in an intervention, if there should be even the mildest upturn in economic activity.
It was mentioned that Shotton was importing some 20,000 tonnes of sheet steel coils simply because there had been a hiccup in the Ravenscraig output because of a breakdown. What sort of situation does this suggest that we are getting ourselves into where one breakdown of limited duration in a major mill means that we immediately have to start importing steel from the Continent to make up for it? What would be the situation for members of the Government who spend enormous sums of money on defence if we got into the situation that they are catering for? What would they do with a steel industry that was capable of producing only 14.2 million tonnes of steel? I do not believe strongly in that argument, but I believe in the argument that the steel industry is being 367 run down to such an extent that it will not be capable of taking on board any increase in economic activity in this country.
One of the reasons for the steel industry's difficulties in both the public and the private sectors is energy costs. The electric furnace is used to produce much of our steel, especially by the small companies. I understand that energy costs represent 25 to 30 per cent. of the cost per tonne of producing steel from the electric furnace. Our electricity costs are about 30 per cent. higher than those of our EEC competitors. Gas prices have risen rapidly, and the gap between our energy costs is probably not as great as many of us imagine. It is about 10 per cent. Heavy fuel and gas-oil are more expensive in the United Kingdom than anywhere else in Europe.
Productivity is increasing daily. Competitiveness in wage costs must compare favourably with anywhere else in Europe. There has been a substantial increase in output per man, and the wages paid to our steel workers are much below those paid in other Common Market countries. Since the strike, there has been no question whether industrial relations have been good. Most of the members of the union that sponsors me would say that since the strike the scales have been tipped heavily in favour of management and against the workers.
There are still some tube works at Corby. The corporate plan means increased unemployment. I am told that BSC (Industry), which is a charge on the funds that we are discussing and is responsible for aid in the provision of jobs in areas where there are steel closures, has decided that Corby and South Wales no longer have a job creation problem and that that problem has been solved. It is justifying that decision on the naive assumption that exclusion will enable more aid to be given to other areas. More aid will be needed in other areas, but neither I nor my constituents would accept that the Corby problem has been solved with 22 per cent. of the work force being out of work.
I should like to see an investigation into the BSC's affairs. I do not believe that the strategy has ever been right. Mistakes were made in the beginning, but they could have been corrected long before now. If there were an extensive in-depth investigation into the corporation's activities, there would still be an opportunity to correct deficiencies that are proving to be inordinately expensive to the country.
§ 11 pm
§ Mr. John H. Osborn (Sheffield, Hallam)
If I were in the Minister's shoes, I should be in a real and intolerable dilemma. To that extent, I am sympathetic towards him, and wish him good luck—despite the fact that I shall not help him or my right hon. Friend the Secretary of State tonight.
From 1965 to 1967 many Conservative Members could forsee the dilemma in which any Government could find themselves if British steel was nationalised, and if bureaucrats and others were given their heads. The BSC is a monster that has caught successive Governments, Socialist as well as Conservative, by the ears. No one can control it.
My hon. Friend the Minister asked his colleagues to trust him. I know my hon. Friend, and also the Minister who is to reply, but I have to meet leaders of the private 368 sector of the steel industry this weekend and early next week, and they do not trust any Minister. They are struggling for their lives. We must bear in mind that the Government are asking for a blank cheque for £500 miillion, possibly rising to £1,500 million. That is no small sum. A portion of that would keep the private sector on its feet.
The Bill is presented on the day that one of the stalwarts of the private sector, Firth Brown, has announced redundancies. Reference has been made to quotations in the Sheffield Morning Telegraph. I had intended to quote the words that were quoted by the hon. Member for Sheffield, Heeley (Mr. Hooley). The article talked ofthe money he is pumping into BSC's ever-open but never accountable pocket.I did not hear those last lines quoted by the hon. Member for Heeley.
Foreign competition is involved in Sheffield. Warehouses are packed with Austrian, Swedish, German, Korean and Japanese steel. Anyone operating a warehouse can write off excess stocks. That provides the competition that sets the low selling prices in the heart of Sheffield where the British steel is manufactured. I mention that because not only have I continually urged Members of the European Parliament to raise that matter with the Commission, but yesterday in Geneva, with the Council of Europe, I pressed EFTA about the matter, especially in relation to Sweden and Austria. I hope that the Secretary-General of EFTA and Austrian Members now know our concern about the unfair competition that has put BSC on the run, and which is also affecting the private sector.
I hope that when my hon. Friend replies he will give us his impression of the Davignon pressures on the steel industry of Europe. Is the restricted production being carried out in practice? Why are we in this country faced with unfair competition from without, as well as from within, the EEC?
Hon. Members have referred to the scale of the money for which we are asking namely, £500 million. It is not the full £1,000 million mentioned before the statement last week, with a possible write-off of £3,000 million or £4,000 million. Since nationalisation, the BSC has had £1,500 billion worth of accumulated losses, quite apart from capital investment. During the same period the private sector made a profit of £700 million. We are asking for fair treatment for the private sector as against the public sector. We would like both to survive and do well. However, there is the inescapable fact of over-capacity in Western Europe, although it is alarming to learn that in other parts of the world, perhaps with cheaper raw materials and newer factories, there is some expansion.
The impact of taxation on industry generally, to a limited extent on the private sector in the steel industry, is being diverted to pump money into the BSC, which is now setting up in severe competition. I relate that to a David and Goliath situation. David, the private sector of the steel industry, has had to provide sustenance for a Goliath which is out of control. I should go a stage further. The BSC, the Goliath, should not be given a dominant control. The hon. Member for Sheffield, Attercliffe (Mr. Duffy) asked the Minister of State on 11 February:Will the hon. Gentleman now assure the House that in any such mergers it will be the BSC that fills the dominant role?"—[Official Report, 11 February; Vol. 998, c. 870.]369 Firth Brown is in his constituency. The hon. Gentleman's views of last week might be tempered by the experience of that factory in his constituency.
We are faced with a dilemma. We want both the private and the public sectors to succeed, because they provide employment and wealth for our country. I am certain that my right hon. and hon. Friends are aware of that.
However, we want more information about Phoenix I and Phoenix II. We are asking for the reorganisation of middle companies, such as Roundoaks, which is a balanced 50:50 TI BSC operation, Du Pont, which has subsidiary companies in Sheffield, Hadfields and GKN-BRYMBO. They should be one part. The rest of the companies are mainly in Sheffield—Thrybergh, Aldwarke, Tinsley Park, Stocksbridge and Templeborough. There should be an assurance that Ian MacGregor, with his blank cheque, will show a responsibility towards those other companies, and will not allow them to go into liquidation and then pick up the parts he wants for a sop. Such treatment could never be tolerated by the House. As a Member for Sheffield I would not be able to support a Government who allowed that to happen. That is a real fear, not only of the managers of the private sector industry, but of those in the trade unions in that part of the industry.
The independent steel producers have suggested that section 41 of the Iron and Steel Act 1975 be used so that the Minister might bear in mind what is in the public interest. There are powers in the Industry Act, perhaps to take the two sectors out and form a compromise body. The French example might be followed. Those are all possibilities.
The hon. Member for Heeley and other hon. Members blamed Government policies for the dilemma facing the BSC. We must bear in mind that the BSC has failed to realise the opportunities of 15 years ago, with targets of 35 million to 38 million tonnes. They talk about monetary policies, but many of the dilemmas facing the BSC are dilemmas of incompetence and unnecessary Government interference over the past decade.
There is also the energy problem. In France, Germany and elsewhere energy costs apparently are much cheaper than those facing our steel industry.
There are two aspects to the matter—the cost of electricity, and the cost of gas. So-called subsidies are provided for our European competitors. Within a few days the task force initiated by NEDO may prove that some of the bulk tariffs have gone against Sheffield particularly. When electric arc melting was proposed, there was a good presentation, particularly for Templeborough. In the neighbourhood there were coal and coal-fired power stations and the grid was not very long. It was, therefore, natural to give special bulk tariffs for electric arc melting in Sheffield. With nationalisaton both industries have averaged their prices. The local advantage for arc melting in Sheffield has gone out of the window. That was as much the fault of Socialist Governments as of a Conservative Government.
I have to check my figures, but between 65 and 80 per cent. of electricity generated in this country is coal-fired from deep-mined coal. Gas is another ingredient that must be charged at the correct price if the extractors are to take the gas from the more difficult fields in the North Sea and elsewhere. Electricity depends on coal. Cheaper coal would enhance the competitiveness of electricity. Cheaper electricity would mean that the electric processing of steel 370 would be carried out more cheaply. If the pits in Scotland and Wales, particularly those that are costing possibly £200 million in subsidies, were ruled out, we should have cheaper steel, particularly from the plants with electric arc furnaces.
The problem facing the trade unions in South Yorkshire is to decide how many steel workers to keep in jobs by not keeping people in employment in out-of-date and inefficient pits. As a country and particularly as a Parliament, we must face the problem boldly.
§ Mr. Roy Hughes (Newport)
What about the huge coking coal subsidies in West Germany, a country which makes considerable steel exports to Britain?
§ Mr. Osborn
In spite of the subsidies, German coal is much more expensive than the coal available in this country. The cost of extraction there is about 40 per cent. higher. British coal is still the cheapest in Europe. However, as I have said many times before, Danish electricity producers are buying coal not from Britain or Europe but from opencast mines in America, Australia or Poland, where it is cheaper.
Previous chairmen of BSC have asked why we, too, cannot import cheap coal. I believe that the demand for coal in Europe at present is about 300 million tonnes a year. About 70 million tonnes are imported. I should like to have the figures checked.
§ Mr. Allen McKay (Penistone)
The hon Gentleman's argument is that if the BSC is allowed to import coal at a cheaper rate steel costs will drop. That is in the short term. When that coal ceases to be cheap, the steel industry will be destroyed.
§ Mr. Osborn
That is a problem, of course. Our coal is deep-mined, and it is bought at immense price in human endeavour, even in the best pits in Nottinghamshire, Derbyshire and Yorkshire. As I have said many times, coal which comes in from the United States, and which could come in from Canada but for difficult shipping problems at the present time, is opencast coal. Some of the seams are hundreds of feet thick, with small overburden, so that coal can be extracted more cheaply there than in this country.
That is the kind of problem that the Community has been considering boldly and squarely, particularly as the other member States have had no coal worth having for a long time. The Community countries have considered purchasing British coal. I do not wish to talk about the coal industry in this debate, but it is a deplorable tragedy that with the present high stocks we cannot export our coal.
I come to my final point. Management of the British Steel Corporation presents a challenge. I believe that in Mr. Ian MacGregor—I have been asked about this many times—my right hon. Friend has chosen an excellent man. He knows how to look after the BSC and its interests, but he presents a challenge to those who are not in the BSC. I think that my hon. Friends find Mr. MacGregor a very headstrong horse. I am convinced that he has his hands on the reins. I hope that my hon. Friends will ensure that he goes in the right direction and does not trample too many people, particularly in the private sector, underfoot in his progress.
§ Mr. John Bruce-Gardyne (Knutsford)
My hon. Friend the Member for Sheffield, Hallam (Mr. Osborn) 371 touched upon a point of some relevance to some of the comments that we have heard from the Opposition. A number of Opposition Members have spoken of the impact of energy costs on the steel industry. As my hon. Friend rightly pointed out, one of the prime reasons for the high energy costs faced by the steel industry is the dependence of the CEGB on domestically produced coal. He pointed out that if there were greater access to, and use of, imported coal, the cost of energy to the steel industry could be brought down.
It goes further than that. In recent days we have heard from the National Coal Board and the National Union of Mineworkers insistent demands—which, from all that we read tonight, may even have been acquiesced in—that, far from any increase in availability of imported coal, there should be a very substantial reduction. I am sure that that would be greeted with great enthusiasm by the Opposition, yet they have the nerve to talk at the same time about energy costs driving the steel industry into a corner.
I wish that we could have heard from some Labour Member—perhaps we shall hear it during the winding-up speech—exactly how the Opposition reconcile enthusiastic support for the determination of the NCB and NUM to eliminate coal imports with the insistent demand that energy costs to the steel industry should somehow be reduced. If they can square that circle, they are better logicians that I took them for.
§ Mr. Bruce-Gardyne
My hon. Friend says "Lower wages". I do not think that proposition will be advanced by the Opposition.
A number of my hon. Friends rightly paid tribute to the skill and ingenuity with which my hon. Friend the Minister of State introduced what has been described by the Opposition as a miserable little Bill. I am not sure at what stage a Bill ceases to be miserable. I suppose that it would have to be reckoned in billions rather than hundreds of millions of pounds.
The tributes that have been paid to my hon. Friend the Minister of State are entirely justified. All Conservative Members sympathise with him in the dilemma that he faces. He asked us to take him on trust. I am quite sure that we would all do that with enthusiasm. We know my hon. Friend. We have the greatest possible respect for him. Of course, we would take him on trust.
Our anxieties relate to this splendid, new, entrepreneurial chief of the steel industry, Mr. MacGregor. How far do we take him on trust? The hon. Member for Kettering (Mr. Homewood) berated Conservative Members because we started complaining at the BSC being aggressive in its marketing tactics. He remarked how agreeable it was to find a nationalised industry being attacked for aggressive marketing and not for being a sort of clapped-out deadbeat on the floor. Of course, anyone can indulge in aggressive marketing if he does not have to pick up the bills. That is what concerns us.
My hon. Friend told us that the Government had made it clear to Mr. MacGregor that he should ensure that he did not indulge in unfair competition with domestic producers. We were led to understand that Mr. MacGregor had given such an assurance. But, at the same time, he had to point out that he had to match import prices. That is his 372 privilege. That is what the Bill is designed to enable him to do. But it is not a privilege that is open to the private sector, because the private sector does not have Bills such as this to bridge the gap between the cost of its production and the price that it realises for its products.
I know that we must not talk about the Bill providing money for the BSC. My hon. Friend assured us, and repeated the assurance, that there is no money in it. I was somewhat bemused when he went on to say that this legislation was urgently needed, otherwise the BSC might not be able to pay its wage bills. In that case, I am not sure what it pays its wage bills in. I do not know whether one can pay wage bills in clauses of a Bill or schedules thereto, but I doubt whether they would be accepted as speci of currency of the realm with which those employed by the BSC would be entirely satisfied.
§ Mr. Tebbit
I am sorry if I did not make myself entirely clear. The point is that without the Bill the corporation would not be legally empowered to receive the money which may be granted to it following my right hon. Friend's statement, following his approval of a new EFL and following the Supplementary Estimates which would be required.
§ Mr. Bruce-Gardyne
I do not want to labour the point, because we are really arguing about a distinction without a difference. However we look at it, the Bill is part of the process by which the BSC is enabled to meet its bills regardless of the relationship between its production costs and the price that it receives for its products. The anxiety of Conservative Members is that that sort of availability is just not there for the private sector.
The hon. Member for Whitehaven (Dr. Cunningham) said that he would like to have evidence of the conduct of the pricing behaviour of the BSC to which exception was taken. I should like, therefore, to detain the House for a few minutes with an account which I received from a constituent who is engaged in the bright drawn bar industry.
This is one small example. The information may now be out of date, because it relates to three or four months ago. Nevertheless, it is relevant to today's experience which the private sector has to meet.
My constituent tells me that the British Steel Corporation at that time—three or four months ago—was supplying East German companies with billets which were rerolled in East Germany, supplied to West Germany as semis, bright drawn by Besse, in West Germany, and sold in Britain at a price which compared almost precisely at that time with the price at which the bright drawn bar industry in this country had to buy its semis from British Steel.
That is a clear example of how the private sector cannot match the marketing behaviour of British Steel. It is hard to believe that British Steel could act in this manner unless it had fairly open-ended access to the taxpayer's money.
We shall have to see what proposals are laid before the House when the Government come forward with the BSC's plans and the consequential legislation. I suggest to my hon. Friends and to my right hon. Friend the Secretary of State, who, with his usual courtesy, has listened to so much of the debate, that we are in danger of creating the impression, not only in the steel industry but on a wider scale, that there is one law for those great corporations of State in which the taxpayer is the only 373 shareholder and another for the private sector which has to earn its bread in world markets. It would be unfortunate if a Conservative Government were to give much more of the impression that there was virtually an open-ended cheque book for those in the public domain and a wall for those in the private sector.
§ Mr. D. N. Campbell-Savours (Workington)
I think that the British Steel Corporation is out not to undermine the private sector but to protect itself from the ravages of heavy imports which have traditionally put great numbers of people out of work in the public sector over the years.
Before I venture to make my somewhat extended contribution to the debate, Mr. Deputy Speaker, I should refer you to a letter which I wrote to Mr. Speaker yesterday evening pointing out that I had outstanding with the Committee of Privileges a matter in relation to Mr. MacGregor and that I felt that I should seek his approval before speaking in the debate on matters relating tothe closure of Distington Foundry, the evaluation of Foundry capacity within the corporation and the effects of such matters on the borrowing arrangements.I also asked to be allowed tocomment on the British Steel Corporation management's decision taking procedures, my attempts to gain access to information on the background to BSC closure and redundancy decisions and the failure of the Secretary of State for Industry to gain access to information within BSC by using powers available to him under the 1976 Iron and Steel (Amendment) Act.In his reply to me yesterday Mr. Speaker said that he had taken advice on the matter and was able to assure me that there was no reason why, if I was called in the debate, I could not refer to the matters set out in the third paragraph of my letter, which is the paragraph to which I have just referred.
I draw that to the attention of the House because I wish to make a number of comments which may well invite the response from hon. Members, not only on my own Benches but on the Government Benches, that in speaking in the debate I was doing so without understanding my position in relation to the complaint.
I wish also to express my gratitude to a number of my hon. Friends who have given way to me this evening to allow me to make my speech. I know that they also would wish to speak, but, of course, they know that the matter which I wish to raise is of major importance to me not only in my constituency but in a far wider context. I refer to the whole decision-taking machinery within the British Steel Corporation, the working of which I have been able to witness at first hand during the past nine months, not particularly because of the appointment of Mr. MacGregor but because of the historic decision-taking process in the corporation.
The British Steel Corporation is a major employer in my constituency, and during the past 12 months, taking into account also the constituency of my hon. Friend the Member for Whitehaven (Dr. Cunningham), we have lost over 2,000 jobs in the industry. The impact on the sub-economy of West Cumbria has been considerable.
As I understand the Bill, as it has been explained from the Government Front Bench, it is about extending to the corporation power to borrow further money to enable it to pay its immediate bills and to preserve it against the possibility of going into liquidation, if I may loosely use that term. In other words, it is to avoid the bankruptcy of the corporation. However, although I support the Bill, 374 since I understand that the unions and the management of the corporation recognise that it is important to its future, I have to express considerable reservations about the way that the British Steel Corporation uses the moneys which are made available to it.
When I express those reservations, I have in mind, speaking from my own experience, the decisions surrounding the closure of the Distington foundry. In many ways, this underwrites the comments of the right hon. Member for Taunton (Mr. du Cann), who, in what I thought an excellent speech, appearing to spell out to the Government the essential requirements of the corporation, especially in regard to protection against unfair imports, added—perhaps the right hon. Gentleman will tell me if I misinterpreted what he said—that he believed that it was time that the Department of Industry was brought into certain areas of decision taking within the corporation, if only to monitor decisions being taken by Mr. MacGregor and the board.
I wish to prove that the right hon. Gentleman is absolutely right. In the case of the Distington foundry in Workington, I submit to the House that if the Secretary of State for Industry had used the powers available to him under the 1975 Act and he had done his homework, that foundry in my constituency would not have been closing. I am referring to a foundry which, at a cost of £10½ million, was to open on 21 March 1980, with the Queen in attendance. Unfortunately, she was not able to attend the opening, due to some industrial action which had the effect of making it impossible for arrangements to be made for her to meet people on the site, but, certainly, the intention was to open the foundry, with a Royal opening, on 21 March last year.
In the glossy literature produced by the British Steel Corporation, the foundry was described as the most advanced and one of the finest foundries on earth. It was certainly termed the most advanced foundry in Western Europe, and throughout the period of its construction it was regarded by the corporation as a jewel in the diadem of foundry capacity within the corporation. After it should have been opened, on 21 March, and throughout the summer months of last year, further works were carried out to the foundry, and it was not until the end of August—a vital date—that the final installations were carried out and the foundry was put on to an operational basis.
On 7 November, within two months of that development, the corporation issued the following press release:Management, staff and the work force of BSC Cumbria were informed earlier today that, due to continuing and depressed trading levels affecting certain of the businesses within the group, a further 826 redundancies must be implemented in order to help restore financial viability by the end of the current financial year.The two businesses most affected by this announcement are … The Distington Foundry: due to a heavy reduction in demand on the three main ingot mould and bottomplate foundries of the BSC which is likely to continue as the corporation's investment in continuous casting proceeds, an ongoing study of the BSC's future foundry capacity needs is under way. At this stage and under present demand circumstances, the interim decision has been made that the Distington foundry will deman to provide a capacity of 58,000 tonnes per annum.The impact of that announcement on Workington was, devastating, because the foundry, with this major investment, had been regarded as a major opportunity for the future, and it was seen as a commitment by the 375 corporation to the future. The response of the local authorities and a number of other bodies in Workington was to protest. The statement that this was being doneto help restore financial viability by the end of the current financial year",more than anything else, was regarded by the trade unions in Workington as a commitment to the future, and it was on that basis that they were willing to enter into negotiations with the corporation with a view to a demanning of the foundry.
The distress in Workington and the anxiety over the retention of the foundry were also relieved by an article in the corporation's Cumbria News of November 1980, which said:General Manager Langton Highton stated at meetings with the unions during the day and with the media and press, that though this had been a regrettable decision it was essential …We are now in the position where we have been forced to accept a lower level of operation in both the blast furnace and Distington foundry businesses and work out the cost basis from which we can, in the future, operate successfully in profit.The general manager went on to say:So I think it is essential to be flexible in how we approach the finding of solutions to become viable again. I am still as confident and sure as I ever was that a substantial core of business will remain in Cumbria.Under the headingRecoverywe read:He continued: 'What we are endeavouring to do in Management at Cumbria is to provide a core survival kit in each of the business areas concerned. If we can do that—and our plan is to do exactly that—then we have a basis for the future recovery of a country (our country) in the product areas in which we are involved.' He added grimly: "If we fail to do that then we have no basis from which to expand.'It was such statements that led to an acknowledgment by the work force at the Distington foundry that the BSC was committed to the future of the foundry in Workington, and it was on that basis that it entered into meaningful negotiations with the corporation and accepted the principle of demanning.
The redundancies were presented as a plan for survival. It was said that at 57,500 tonnes capacity the foundry could operate at a profit. The statement, which the work force accepted and which led to the negotiations on demanning, was seen by the shop floor at Distington foundry as a declaration of intent by the corporation, a promise and a commitment to the future of its operations in Workington. It was called "Operation Slimline", and shop stewards on that basis willingly participated in persuading people in the plant to give up jobs in an area of particularly high unemployment, an area that until only last August was a special development area. I make that point because I want to impress upon hon. Members that in areas of high unemployment, particularly in the development areas, it is not with great ease that people give up jobs in such industries.
Those who rejected that analysis—I can proudly say that I was one, because I did not give credit to the commercial assumptions behind the corporation's statement—were dismissed in the same publication under the concluding headingWho really understands:—?My comments were treated with derision in that document, as were the comments of the trustee mayor of Workington, who also objected and was not willing to accept the corporation's commercial assumptions.
376 The corporation sought in that document to quote a man who subsequently maintains that he was misquoted, the chairman of the joint crafts shop stewards and deputy-chairman of the Workington bench, which is how he was there described. It reported him as saying:Mr. Highton has kept the options open; that I admire in the serious circumstances. A sensible man must understand. Now it is up to us. It truly is not a Government involvement. We must be our own men. If we do not accept the challenge, then God help us …That was the statement of a man who was used by the corporation in the foundry to sell the principle of a document, a statement, a slimdown operation, that was to be discredited within a short time.
The BSC was playing cheap politics and was subsequently to be found out. Its objective was to squash debate and any local rejection of its proposals. As I have said, despite the assurances that had been given, I was not convinced of the need for the slimdown operation. I was curious about the commercial arguments and assumptions. I appealed for information locally to try to gather together, if only slim amounts of information, at least sufficient for me to be able to challenge the corporation's assumptions. I wrote to Mr. MacGregor asking for a meeting. I wrote to the general manager of British Steel (Cumbria).
I am going through this exercise in order to draw the attention of the House to what happens when the BSC takes a decision that involves public money. Indeed, we have heard much argument this evening about such money. In my letter to Mr. Highton, general manager of the BSC (Cumbria), I said:I must say that from my part it is impossible for me to meet with Trade Unions to discuss in an informed reasonable way, the background reasons and implications of the announcement, and I would ask you again as a matter of urgency, to provide me with a detailed statement, perhaps even some of the discussion documents that must have circulated inside the Corporation prior to decisions being taken.As I have on a number of occasions said in my conversations with you; in publicly owned Industries there is in my view a right in the hands of Trade Unions to have access to information that has a direct bearing on the future employment prospects of their members. Although at the meeting that was convened on the Plant, according to a number of people I have spoken to, you ventured in some detail into the area of discussions surrounding the decisions.That is a reference to the meeting about the announcement. The letter continues:I am also informed that no written submissions were made to the Unions, detailing much of the information I am now seeking".Indeed, I think that the right hon. Member for Taunton wanted such information to be made available to the Secretary of State so that the Department of Industry could monitor decisions made by the BSC.
The letter continued:I do hope that you will respond to my written request, as this week-end I am convening a meeting in Workington and I would hope that the Corporation would wish to ensure that at such a meeting any discussions that take place are based on an informed analysis of the Corporation's difficulties in Workington".Mr. Highton's reply made it clear that much of the information could not be made available to me. He wrote: "There is absolutely no way in which I could let you have any Corporation documents and hope that you will accept that I have done my best as I see it to keep you as posted as possible." The truth was that no one had any information. I submit that not even the general manager of BSC (Cumbria) had information.
Following the original slim down statement, the trade unions replied to the management of the BSC as follows: 377We criticise Management for not supplying the information in a proper written presentation, giving full details, which would have enabled us to present our case against the size of manpower reduction, and alternative proposals for producing the new tonnage factor.All this is a gross misrepresentation of the type of social control envisaged by those who supported public ownership of the BSC in the mid 1960s. They never dreamt that trade unions and key individuals in the management of the BSC would be denied access to precious information that related to their future. They never dreamt that such decisions would be taken without consulting them in a fair and reasonable way.
I can only quote the comments made by the right hon. Member for Henley (Mr. Heseltine)—now Secretary of State for the Environment—which I have quoted before in this House. During debate on the Iron and Steel (Amendment) Bill 1976, the right hon. Gentleman said: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 social and human change, when they are not told the whole story."—[Official Report, Standing Committee G, 26 April 1976, c. 48.]That was the response not of an Opposition Member but of a Conservative Member. He clearly understood the need to provide adequate information to those working in the industry.
I then wrote to Mr. MacGregor. I shall not quote from the letter as it would be improper to do so. I sought information from the corporation on all the matters on which I had sought information before, when I had been refused access. By 1 December, with no reply from the BSC on any of these questions, the position became quite desperate, so I contacted the BSC's offices in London to delay my meeting with Mr. MacGregor pending the possibility of receipt of information from the corporation; and yet still no information was forthcoming. The trade unions had no information; according to what I had been told, local management had no information; and I had no information. We were in the hands of senior managers within the BSC.
Meanwhile, the corporate plan was looming in the background. The Secretary of State or the Minister of State will be aware that on a number of occasions I or my secretary telephoned the offices of the Department of Industry to find out when the corporate plan announcement was due, because many of us in Workington were battling for time against the possibility of an early announcement of the corporate plan.
On the morning of Friday 12 December, I finally received a letter from Mr. MacGregor—at 9.30 am—telling me that we would meet next week in a meeting to which I am not in a position to refer. But I can say that within five hours of receiving that letter the BSC announced in Workington the closure of the foundry to which we have been referring. In other words, the BSC denied us access to any information on its evaluation. It deliberately prevented trade unions and local management from participating in a meaningful way in this decision. Then, finally, the BSC took a decision within hours of my being informed of the confirmation of my meeting. That was the announcement which shook Workington.
I cannot describe the feelings of myself and my constituents when that announcement was made. Over that weekend there were a number of hurried meetings with the trade unions and other interested parties, but they all culminated with a meeting I had on the Monday morning 378 with the trade unions on the foundry in Workington. It was at one of these meetings that I was handed documents which were subsequently to be referred to in a number of newspaper articles, inaccurately, as documents which had been referred to the Director of Public Prosecutions.
One of the documents which were brought to my attention was entitledIngot mould foundry rationalisation review—a document which I have been told I never had but which I have. I have it here in my hand. This is the document that I was handed by an employee of the BSC. It relates to the original evaluation that was carried out by the BSC. The remarkable thing about this document is not that it was dated December, or even November, or perhaps even October, it was dated 26 September.
In other words, within 26 weeks of the Queen being due to open the foundry in Workington, the BSC had published internally a secret document which was being used as the reason why the foundry in Workington was to be closed Furthermore, this evaluation was produced within four weeks of the final stages in the installation of new equipment in the foundry in Workington.
Conservative Members have been wondering where their money goes. I am telling them tonight. It is wasted when there is an overlap of decision taking within the BSC that shows up inconsistencies of this startling measure.
This document, as I have said, was internal—a secret document to the corporation. Its circulation was limited. Having proposed three options, it did not recommend the closure of Distington. It grossly misrepresented statistics relating to the operations of Distington. I have to say that I regard page 5 of the document as a lie. I use the word with great care. Whatever happens as a result of the decision taken by the corporation, I will always remember that the BSC tried to prove to my constituents in Workington and to the people who work in the foundry at Workington that the decision that it had taken was based on real and valid figures. Those figures, as I shall prove, have been totally discredited over the two months since the announcement by the BSC of the closure.
It made cost-per-ton assumptions on the basis of hypothetical mould sizes. Those sizes simply do not exist. They have no bearing on real evaluation of foundry products. It got the manning wrong in Workington. It got the energy costs wrong in Workington. It got the service cost reductions wrong in Workington. It got the industrial grant repayment liability wrong in Workington. It ignored criticially the whole question of quality of product in the foundries of the BSC.
Statistically, it can be proved that other foundries have to provide three ingot moulds to every two from the Distington foundry. That alone is worth £2 million a year to the BSC. That money was not taken into account by the BSC in its evaluation.
I have yet another document that I should not have. I can say no more except to quote from it and put to hon. Members that I should not be pressed as to what it is and whence it cometh. The document compares moulds from different foundries. It says:Using the figures for 1979–80 … had all the moulds purchased during that period been from"another foundry within the corporation other than Distington,a further 247 moulds at a net cost of £647,780 would have been required for the same number of ingots.379 Despite the other foundrymaintaining that performance would approach that of Distington foundry during the year 1980–81, the first six months indicate that for the full financial year had all moulds been purchased fromthe other foundrya further 246 moulds at a net cost of £687,257 would have been required. The additional net cost to Teeside for moulds for the year 1981–82 assuming the same level of improvement, if all of these moulds derive fromthis other unnamed foundrywill be in the order of £550,000. It is also evident that whereas in 1979–80, a settlement of £71,000 was obtained fromanotherfoundry for a part acknowledgment of loss of average mould life compared with Distington Foundry, this type of claim will not be feasible with the demise of Distington Foundry.That is evidence—I have other documentation—that vital areas that should have been considered by the BSC in its evaluation were not taken into account, at direct cost to my constituents.
The document ignored the need to spend additional moneys on other foundries within the British Steel Corporation, irrespective of capacity and the need to increase capacity in those foundries, if only to bring them up to the essential standards required by the Health and
Why did it misrepresent the foundry in my constituency? We have to go back to the reorganisation of foundries—something that I commented on briefly in my intervention in the debate on 16 December. Until 1978, Distington had been part of the Forges, Foundries and Engineering group of the British Steel Corporation. Whilst it was part of FFE, it was protected and its case was heard because it took its place at the table where decisions were taken in the BSC on the future of foundries.
The reorganisation of Distington foundry in 1978 was deeply resented locally. Many people felt that the future of the foundry would be undermined following that evaluation. Those who made that accusation maintain that in 1972 and in 1975 rationalisation studies carried out by the BSC on foundry capacity always showed the future of Distington to be secure. Whilst we were with FFE, our future was secure. The £10½ million was invested because we were part of FFE and FFE believed that the future of foundry capacity within the BSC should be based on Distington, even if it meant a unitary foundry at some time in the future. Even capacity updates within the corporation in 1976 and 1978 preserved the future of the Distington foundry.
Then, in 1978, it all went to the wind. We came out of Forges, Foundries and Engineering and went into BSC (Cumbria). I have mentioned the objection in Workington. That was the beginning of the trouble. Suddenly, all the figures changed. Suddenly, we were not the glossy foundry in the spectrum of foundry activities of the British Steel Corporation. Distington foundry lost its seat at the evaluation table where decisions were taken on the future of foundry capacity. Statistically, we suddenly slipped down the league because our case was not being put.
Perhaps I should refer finally on this area to the reason why the so-called statistics which I referred to as a lie managed to arrive in this document, the rationalisation review. I had a few brief years in business. When one is in business, one does one's homework properly and does not take quick decisions. One sits down, evaluates, thinks out the position and then takes the decision. The 380 consultations as part of the evaluation that took place in Workington to get the vital information which was used against the BSC's foundry were done in a most unspectacular manner.
I am told that there was the odd letter and a few telephone calls and that a few junior managers were put on the job and told to go out and bring in some figures. Even the people who provided those figures denounce today the procedure that was used to produce them. At open meetings that have taken place in Workington in front of senior managers of the corporation, these same people have said that they were not given the opportunity to provide real information and that if they had known that the information they were providing was to lead to the kind of decisions that were taken by the corporation in Workington they would have done their homework far more effectively. They were not given that opportunity. There was no checking of that information and no interdepartmental consultation in Workington about the value and the accuracy of the information that was given to FFE evaluators.
Another document was given to me at the meeting. It was entitledThe Ingot Mould Foundry Rationalisation Synopsis".It was not a formal document of the BSC. It was a "private" document. It stemmed from the initiative of a couple of managers, who sensed that something was wrong and that there might be a decision in the offing to close the corporation's foundry activities in Workington. They and some trade unionists hurriedly assembled a case against what they sensed was coming out of the offices of FFE, Sheffield.
On 10 December they published their document. It arrived on the desk of the general manager of Workington only two days before BSC announced the closure. I make no criticism of them. What they did they did without the formal sanction of the corporation. They took it upon themselves as a last move of desperation to produce a case to challenge the commercial assumptions being made by FFE. They sought totally to re-evaluate the assumptions on the basis of the other document which I was to ascertain subsequently they had already seen, the other document to which I have referred. That document was not formally sponsored by the corporation and, therefore, I was not able to use it as I wished during the debate on 16 December.
Following my intervention on 16 December and my meeting with Mr. MacGregor, to which I am unable to refer, Mr. Bray, the Managing Director of British Steel Holdings Ltd., came to Workington. There was considerable activity in Workington and there was public resentment at the decision that had been taken. Mr. Bray came to discuss with local workers at the foundry and management the implications of the decision. The assumptions in the document to which I have referred were challenged. As the trade unions still had not seen the document, it was agreed to publish the September evaluation and it was agreed by the managers of British Steel Holdings Ltd. to accept a reply from the work force. That was the birth of the new re-evaluation that was to be undertaken by the joint working party set up by trade unionists and managers in Workington.
On 6 January, the document dated 26 September was published. It was not quite the same as the one that was published and distributed with a limited circulation on 28 September. It was missing a vital front page. They produced selective statistics from the September document 381 to prove that the decision that had been taken was the correct one. It was a subtle move but it did not fool the BSC found
y re-evaluation working party, the new action committee that had been set up.
That document had been produced 16 weeks too late. It is my firm belief that if we had seen the document that had been produced in September, and if it had been fully published and made available to the trade unions, the foundry in Workington would never have been included in the corporate plan announcement for closure. We would have challenged the assumptions in late September and Mr. MacGregor would have been convinced, as would have been the entire board, that the recommendation to close Distington was the wrong one.
On 4 February, the action committee that had been set up to re-evaluate replied to the corporate plan announcement. It re-established the truth. It identified fundamental errors by the corporation in estimating costs at the Distington foundry. It identified important omissions in grant repayment liability. It identified important omissions in evaluation of Distington quality. It identified a major error in estimating output—so much so that there could be an £8 million error in the costings of the BSC. A £2. million saving could, under the new evaluation, become an £8 million loss. Furthermore, it sought a further evaluation of the closure. It required that in any new evaluation all the foundries should be represented, including Distington, that the chairman should be independent of the BSC and that there should be a fuller evaluation of the through costs to the consumers of ingot moulds and bottom plates. It asked for a serious study of export potential.
The response of the BSC at a meeting convened to discuss the report was cool. BSC representatives refused to reply in detail to the case put by the evaluating team in Workington. Many at the meeting were deeply distressed. I shall go further. From my inquiries, I am satisfied that the whole exercise was a deliberate deception to enable the BSC to play for time. It had no intention of responding to new information that challenged its decision. Its intent was to deceive foundry workers in Workington, which it did, whatever the cost to FFE credibility. The representatives lacked the guts to return to Mr. MacGregor and tell him that the evaluation was wrong and that the decision was a mistake.
Some may ask "Why?" I have a view, but it is an appalling view to express to the House. Despite statements by the BSC that discussions about the corporate plan excluded any political considerations, I believe that that was not the case. The punch and the clout of the Welsh and the Scots are such that there is a natural inclination in the Cabinet—perhaps proved only tonight—to respond and influence events accordingly, even if that proves detrimental to the English regions. It is significant that the Secretary of State for Wales is to accompany the Welsh team in the negotiation with the Japanese on the Nissan car deal. We in the Northern region must, as a matter of urgency, develop the same clout.
I have witnessed a grave injustice in my constituency durng the past three months. It is a betrayal of my town—despite statements by the BSC that it retains a commitment to certain parts of its activities in Workington. I have approached the Government, and it is only in desperation that I have risen tonight to put the case in greater detail. I have tabled questions asking the Government to use the powers available to them under 382 section 5(3) of the Iron and Steel Act 1975—the same section to which the right hon. Member for Taunton indirectly referred when he sought further information from the BSC about its plans, especially in relation to how they affected the private sector.
But the Secretary of State has refused to use those powers. He said that the determination of day-to-day policy by the BSC is a matter for that company. I put it to him, to the Minister and to the Under-Secretary that when such blatant mistakes are made by the BSC it is incumbent upon them to intervene. We are elected to the House by people in the constituencies to protect their rights. If the corporation makes mistakes of that nature, the Government, in a democracy, should intervene to ensure that those decisions are not implemented.
I do not profess to presume that I shall one day stand at the Dispatch Box, but if I were ever to do so and an hon. Member came to the House with such a blatent example of abuse of managerial power, I should respond. The Secretary of State and his colleagues should respond to the affair of Distington foundry, if only to assure my constituents in Workington that justice is done and is seen to be done.
I have made a long intervention in the debate. I do not abuse the procedures and privileges of the House. I thought long before I made this intervention and I consulted many of my hon. Friends. I had no option, because I found no response to my representations to the Government. If I was to carry out my electoral function, it was incumbent upon me to place before the House the facts as they relate to Workington.
This is our last chance for justice. The Ministers know that they can go back to the BSC and tell it to reconsider the decision that has been taken in Workington. They should ask it whether it has made a mistake. If it has, they should tell the management that that mistake should be reversed. A proper evaluation should take place in line with the recommendation in the final evaluation produced by the action team from Workington. That team said that all foundries should be kept open on the reduced profit-making capacity basis—as declared by the BSC—proposed in the September evaluation, pending a further evaluation. When that evaluation has taken place, a decision about reduction in capacity can be taken by the corporation.
I wrote to the Prime Minister following her announcement last Thursday. I sought a meeting to put my case on behalf of my constituents. We have a real case. I implore the Minister to ask his officials to check carefully the statement that I have made this evening and to intervene, if only in the name of justice.
§ Mr. Michael Grylls (Surrey, North-West)
It would be difficult to follow the hon. Member for Workington (Mr. Campbell-Savours) down the avenue that he has followed for the last three-quarters of an hour or more. We might reflect that his speech—I shall not comment on the merits or demerits of his case—might not have been made if there had been no nationalised steel industry. It vividly demonstrates the total absurdity of nationalisation involving the House of Commons in such decisions. That example illustrates that absurdity more dramatically than ever before.
383 Looking back over the debate on Second Reading of the Iron and Steel Bill in 1966, I chanced on a phrase used by the then Minister, Sir Richard Marsh. It seems wise in retrospect. He said:I do not believe that nationalisation of itself necessarily solves anything.Sir Richard Marsh is a friend of all hon. Members now. We congratulate him on his long-sightedness, and on how he hit the target in the middle, as he frequently does now. How right he was to say that.
In that debate, Lord Barber said something that turned out to be more serious and prophetic. He said that the nationalisation of the steel industrywill give comfort to our overseas competitors."—[Official Report, 25 July 1966; Vol. 732, c. 1228-41.]When one considers the consequences of the BSC strike in allowing in increasing imports, one realises that that is absolutely right.
My right hon. Friend the Member for Taunton (Mr. du Cann) described vividly the traumas of one private sector company. Others have had similar experiences. The difficulties are real. If we do not include legislation in this Bill to cope with the problems, we must do so in a future Bill incorporating the long-term plans of the BSC.
The EEC decision of 1 February 1980 clearly stated:when assessing aid no discrimination must be practised between undertakings, notably on account of their ownership, whether public or private.The Government must be and must be seen to be even-handed between the public and private sectors. There should not be too much difference between both sides of the House. We want to see the BSC succeed and become profitable under the fine leadership of Mr. MacGregor, but in the process we do not want to destroy the 70,000 jobs in the private sector. I ask my hon. Friend to consider carefully the Commission decision.
The decision further states:Criteria must be drawn up for investment aids, aids to cover expenses arising from closures, aid to continued operation and emergency rescue aid.The Government should stick to that decision and not allow the aid to be used to further unfair competition which will put private sector companies out of business. Mr. MacGregor is known as a fine marketing man with a great reputation. He is right to pursue a policy of aggressive marketing. It is necessary for the corporation to succeed. However, it should not be a licence to kill the private sector.
The principal problem is in the overlap areas. Is it necessary to cut prices so severely in the overlap areas of the special steel sector? No one wants to restrict aggressive selling by the BSC in order to improve its financial position. However, if it cuts in areas in which it does not need to cut, its financial position will become worse.
§ Mr. Hal Miller (Bromsgrove and Redditch)
The overlap is not only in steel making; it is downstream in drawing, stockholding, tubes and forgings, where competition is continuing at rates of up to 25 per cent, below what the private sector has to charge to remain viable.
§ Mr. Grylls
That is right. I mentioned only one area in order to be brief. There may be much less need to cut in the special areas, where the competition comes far less from imports.
384 My hon. Friend's problem is to protect the private sector. He is trying to get the first Phoenix combination between the private and public sectors off the ground. We should see the operation moving ahead in a matter of days, if not hours. That is certainly a good sign in a sensible and practical way which I am sure both sides of the House welcome.
Under the 1967 Act, brought up to date by the 1975 Act, the Secretary of State has considerable powers of direction. Section 4 of the 1975 Act provides thatThe Secretary of State may, after consultation … give … directions of a general character as to the exercise and performance by the Corporation of their functions".Perhaps the Government will consider giving some form of direction, which I believe would give comfort to many people in the private sector and to those in the House of Commons who are concerned about the private sector, to the effect that the money voted by Parliament may be used for redundancy or for restructuring but not for subsidising competition. Section 4 concludes by providing that the Secretary of State may use that power of direction if it is in "the national interest'". I believe that the case has been overwhelmingly made out tonight for something to be done along those lines. I believe that Mr. MacGregor would respond to a general direction not to use the money in that way.
The sum of money provided for in the Bill, which the British Steel Corporation will be allowed to borrow in addition to its present borrowing requirement, is very large. If this is a holding Bill, one wonders why the sum needs to be so large. If we are to have another Bill very shortly which will incorporate the main corporate plan of the corporation, why do we need to give so much money now? I understand that originally there was to be an increase of about £100 million in the borrowing. That would have kept the corporation going until the end of March or early April, by which time the Government would have reached a decision on the corporate plan. Surely that ought to be possible now.
It does not seem right—and many of my hon. Friends made this point strongly in the debate—to give this blanket borrowing right. It is a very large sum. Indeed, it is more than British Leyland is to have this year, and we talked about that enough. My hon. Friend may say that increasing the borrowing limit by £500 million does not actually give the money to the BSC. Technically, that is true. But this is the last moment at which any of us in the House can comment upon it. As I understand it, there is no other way in which we may comment once the Bill becomes an Act. We lose all control over that £500 million the moment the Bill receives Royal Assent. We may or may not wish to do that, but it is no use pretending that we have any other control or that there is any other parliamentary process through which we can comment upon it.
It therefore seems to me to be an extraordinarily large sum. I do not believe that the case has been made out for such a very large sum at this time. We accept that eventually there will have to be a massive write-off for the corporate plan, and that there will have to be a very large amount of money for this year and next year. But why does there have to be such a large sum in an emergency Bill which is intended as a stop-gap? It seems a very large amount of petty cash, if that is really what it is.
I therefore hope that when my hon. Friend replies to the debate he will say something about that. I hope that he will give us some indication of what control he intends to put 385 on in order to protect the private sector, and will also say whether he is satisfied that the criteria in the EEC document that I mentioned will be met.
§ Mr. Matthew Parris (Derbyshire, West)
I shall be very brief, as so much of what I wished to say has already been said by my right hon. and hon. Friends, many of whom have a broader and deeper knowledge of the steel industry than I have. I pay particular tribute to what was said earlier by my hon. Friend the Member for Sheffield, Hallam (Mr. Osborn). His presence as my constituent, and as the Member for a neighbouring constituency usually discourages me from saying anything at all on the subject of the steel industry because he knows so much more about it than I do.
I wish to make one point, however. I am afraid that again it relates to the private sector. A great many people in the private sector of the steel industry are my constituents, and I know enough about their problems to know that those problems are real and in some cases very urgent indeed. That is why I cannot entirely accept what my hon. Friend the Minister of State said about being able to avoid the wider issues in this debate. For some steel makers and their employees, this may be the last chance to look at the wider issues.
He explained chat this was not a Bill to give the BSC more money. I remember that at the time, the reasons he gave were very clear. I am afraid that during this long debate they have escaped me. However, I must accept that this is not a Bill to give the BSC more money, although it seems to have something to do with money. It is at least a Bill to allow the BSC to carry on spending money which by ordinary standards it could be said it does not possess.
I was encouraged by what my hon. Friend said about Mr. MacGregor being under instructions, so to speak, not to undercut domestic steel producers in the private sector but at best only to match competition from abroad. What then is the money for? Is the subsidy needed in order to match competition from abroad, mainly from Europe? If so, does that mean that the steel coming from Europe has been subsidised? If that is the case, are not we in a rather unfortunate position with our European arrangements where one country subsidises and other countries also subsidise so that they can match?
Gradually, and not through any desire to do so, we unwittingly get what the Trotskyites would call statism whereby corporations supported by the State are able to advance whereas the private sector, not just here but in other European countries, is squeezed out because those subsidies are not available to it.
Are those subsidies designed to enable the corporation to meet foreign competition, or are they for other purposes? For instance, are they to help with the reorganisation or with the many redundancies that will have to be made? If so, there is a good case for providing a subsidy to help the BSC with redundancies. However, what is the case for giving this money when it is not available to the private sector which also has to face the necessity to make redundancies, as the news from Firth Brown this morning makes clear?
My hon. Friend also said that it was not the intention of the BSC to put domestic producers out of business. Why not? What is Mr. MacGregor's brief? If it is to run a company and to turn it into a profitable company which can compete in an essentially capitalist market place, 386 surely his brief must be to try to put domestic competition out of business if he can. That, among other things, is what any business man is supposed to do.
I am not saying that that is desirable, but if Mr. MacGregor has the healthy instincts for which he was purchased surely that must be what he wants to do. While I applaud my hon. Friend's determination to stop him from doing that, it seems to me to indicate the essentially cliff-hanging nature of the sort of mixed economy which social democracy is likely to give us. I would pursue that argument further if I were not aware that it might be as embarrassing to my own Front Bench as it would be to Labour Members.
My hon. Friend the Member for Surrey, North-West (Mr. Grylls) talked about overlap areas in the marketing of steel. I am not quite sure what he meant by that, but I had the impression that by "overlap" he meant someone producing something which was produced by someone else. That is also called competition and I had not realised that we were against it, or that it was necessarily an undesirable state of affairs in the market place.
Like many of my hon. Friends, I have listened to many of these debates, not just in this Chamber but in that perhaps even greater debating chamber, the Members' Tea Room. I have debated in particular with my hon. Friend the Minister of State. On many occasion he has put to me the arguments that in a faltering way I am trying to put to him. I wish that he were in my place now making the speech which I am trying to make, because he would be making it much better, in a much more hard-hitting way, than I am.
§ Mr. Tebbit
I should tell my hon. Friend that there have been many occasions this evening when I wished that anybody except me was in my position. I fancy that a number of hon. Members felt the same kind of emotion. None of us wanted to be here at that time. My views have not changed. I am glad that my hon. Friend is expressing them in such a forceful manner. I am pleased to hear them. They emphasise, as always, and as I have said on many occasions during the passage of nationalisation Bills, that it is difficult, if not impossible, to achieve fair competition between public and private sector organisations. It is extremely difficult. One is almost bound to be unfair either to the one or to the other.
§ Mr. Parris
I accept what my hon. Friend has said. I suspect that it is impossible to achieve fair competition between the public and private sectors. It can only ever be a transitional sort of arrangement.
I do not think that many Conservative Members would welcome subsidies to the private sector. On the whole, we do not like subsidies at all. But subsidies for the private sector may be announced. If there are to be continuing subsidies to the public sector—and there clearly are—I shall have to welcome subsidies for the private sector. They are becoming urgent in parts of the private sector of the steel industry, and I look forward to an announcement on that aspect in the near future.
My hon. Friend said that we would have to take him on trust. I certainly take him on trust. This has been a helpful debate in many ways. I understand the difficult position of the Government Front Bench. I do not know what any of us would have done were we in a similar position. However, I hope that many of us have succeeded in putting across to the Government the urgency of the problems of the private steel sector in Britain.
§ Mrs. Elaine Kellett-Bowman (Lancaster)
It is a great pleasure to follow that most refreshing speech by my hon. Friend the Member for Derbyshire, West (Mr. Parris), because it lightened a rather gloomy Chamber.
I appreciate that the Bill is limited. As my hon. Friend the Minister so endearingly put it, it is modest—except where the cash is concerned. At best, it is a holding operation. The Minister suggested that we should limit, not widen, the debate on the Bill. That is all very well, but, however limited the Bill, it must be looked at in the slightly wider context of the needs of the industry.
As the House knows only too well, last autumn the European Community declared a state of manifest crisis in the steel industry. Indeed, the traumatic crisis in the steel industry of every member State of the Community has in no way abated since then. One of the measures introduced under article 56 was to impose production quotas and minimum prices for the European steel industry. That is only one side of the picture.
But, as many hon. Members, including my right hon. Friend the Secretary of State for Employment, pointed out in the debate on the Redundancy Fund Bill earlier today, though many people desperately want to keep their jobs or to obtain jobs, there are many who would like to retire early. A proposal to assist this process which has been before the Council of Ministers for many months has, I understand, been blocked in the Council by one member, or possibly two members. We cannot find out exactly who, short of bugging the Chamber, but I know that it is not the United Kingdom Minister. This measure will be particularly valuable to the United Kingdom's steel industry because of the very high proportion of workers who are in the upper age bracket. In fact, it could reduce the British Steel Corporation's requirement to borrow.
Frankly, the committee on social affairs of the European Parliament, having pressed that measure since its inception, has finally lost all patience. All that is required is for the Council of Ministers to authorise a transfer of funds from the EEC budget to the ECSC budget, but all sorts of legal obstacles have been put in the way of this helpful and sensible measure.
I am sure that my hon. Friend the Minister of State will agree that the task of the British Steel Corporation would be greatly facilitated if the Council of Ministers could manage to agree on the special temporary allowances for social aspects of the steel sector and help in particular with voluntary early retirement.
So strongly did the social affairs committee feel yesterday that, instead of merely forwarding a resolution to the Council of Ministers, which is the normal way of going through the process, it took the unprecedented step—I do not believe that any committee has ever done it before—of issuing a press statement, bypassing the Ministers altogether, urging the Council of Ministers to shoulder its responsibility to the workers in the iron and steel industry.
That statement was supported unanimously by all parties and by all nationalities in the committee. I very much hope that my hon. Friend and his colleagues will put all possible pressure on the reluctant Council member, or members, so that this eminently sensible and humanitarian scheme can be brought in as soon as possible, for the benefit of everyone—for the benefit of the industry and benefit of the men working in it.
§ Dr. John Cunningham
Before the hon. Lady concludes, may I put a point to her so that it may be on record? I am sure that she is aware that one of the Governments objecting on legal grounds to that transfer is this Government, her own Government.
§ Mr. Michael Brown (Brigg and Scunthorpe)
If my hon. Friend the Minister of State finds himself in an unenviable position, I have to say that there is another Member on these Benches who finds himself similarly placed, for I confess that there are times when it is with a heavy heart that I rise to speak in steel debates or consider the state of the British Steel Corporation. I need not remind the House that I have the honour and the privilege to represent a constituency in which the steel industry—and, sadly, the British Steel Corporation—is the lifeblood of the community.
I suppose that I should be throwing my cap in the air with delight at the prospect of yet another infusion of cash to keep the wolf from the door, to pay the wages of my constituents and to pay the Yorkshire electricity board's bill. But, as I have said on a number of occasions, I derive no pleasure from representing a constituency which depends upon the begging-bowl approach, which depends on my hon. Friend the Minister coming to the House for a billion or two here or a billion or two there to keep the British Steel Corporation going. I find it a very unsatisfactory prospect for the long-term future of the steel industry in my constituency that we have to depend on Bills and other packages of this kind which come before us.
I shall not rest happy until such time as the steel industry in my constituency is actually selling steel at a price which enables it to cover its costs and make a profit at the end of the day. Until we reach that position, I shall remain unhappy. I find no delight in these infusions of cash having to be put into the British Steel Corporation.
I understand and appreciate the arguments advanced tonight by many of my hon. Friends who have private sector steel works in their constituencies. They fear for the jobs of their constituents, and I have much sympathy for them. My hon. Friend the Member for Derbyshire, West (Mr. Parris), for example, told us that he has a number of constituents who work in the private sector steel industry in Sheffield. Understandably, he and others of my hon. Friends are concerned at the possible job losses which could flow from unfair subsidies.
As one who, during the last 18 months that he has been a Member of this House, has had to face the prospect of about 8,000 of his constituents losing their jobs in the steel industry, I readily accept and understand the fears and worries of my hon. Friends who see job losses in their constituencies. I do not think that we should create some kind of two-rule society in the steel industry, where a steel worker's job in the BSC is any more important than a steel worker's job in the private steel industry.
The futures of the public and private steel industries are inextricably bound together, and what has come out of the debate is the fact that no longer can we try to isolate the problems of the private sector from those of the public sector. I say that as one who represents a steel 389 constituency, where all the steel making is carried out by the corporation. I readily concede that those who represent constituencies in which the corporation operates cannot ignore the plight of the private sector.
I suspect that Phoenix I will have implications for my constituency. I do not want to take issue too much with my hon. Friend this evening. I should have liked some clarification of what is to happen about Phoenix I. I suspect that the fact that a private sector company, GKN, is producing a product similar to that produced by the corporation's rod mill at Scunthorpe will involve GKN and the BSC No. 2 rod mill.
I should like the future of the BSC to be clarified as soon as possible. The House will recall that when I last spoke on this matter I endorsed the MacGregor plan because, even though it involved about 4,000 redundancies for my constituency I saw in it—and still see in it—the prospect of a profitable, viable steel industry. I hope that it will not be too long before we have some clarification of the Government's intention, because, as the hon. Member for Whitehaven (Dr. Cunningham) said, the action required to back up the MacGregor plan is already being taken. As I said in an intervention, even though the Government have not expressed their view on the plan, within a few weeks the Normanby Park steelworks at Scunthorpe will be closed and steel will no longer be made there.
I hope that it will not be very long before my right hon. Friend comes to the House with proposals to deal with this matter, because, after all the uncertainties of the previous years—and no one was more condemning than were my hon. Friends when they were in Opposition for the delays engaged in by the Labour Administration in the mid-1970s—there is nothing worse than delay in announcing decisions. I appreciate that there have been problems recently. I appreciate also the need to get this right, but we cannot wait much longer. The private steel industry cannot wait much longer to know where it is going, just as the BSC cannot wait much longer for a decision so that it knows where it is going.
I have considerable sympathy for many of my hon. Friends and for the arguments that they have advanced this evening. As I have said before, and as I have said to my constituents, steel workers in Scunthorpe and in the BSC do not have a God-given right to unending subsidies. I repeat that here this evening. I have repeated it consistently in my constituency. My head has been on the chopping block, so I have been told, but the body still walks around head there or not. It is very important for all of us whose constituencies would have been bust long ago if we had been placed in the same position as the private steel industry, and we should recognise that. I hope that it will not be long before we have a decision on the Government's intentions towards the MacGregor plan, for the benefit of the whole industry.
§ Mr. Roger Moate (Faversham)
My hon. Friend the Member for Brigg and Scunthorpe (Mr. Brown) and other hon. Members have said that a decision is urgently needed. Clearly, an early decision would be welcomed, but I would rather the Government took more time over making these decisions than plunge into some of the decisions that in recent weeks have been rumoured to be likely. Therefore, 390 I urge Ministers not to heed too much the cries for urgent action. It is more important to get the right answers than to get them speedily.
I was glad that my hon. Friend the Member for Derbyshire, West (Mr. Parris) cast some doubt upon the use of the word "overlap" in relation to manufacturing interests. That word, which seems to have found favour, particularly on the Front Bench, implies that we disapprove of duplication of resources of manufacturing interests. That is the language of State planning. Overlap can only mean, basically, competition, of which we used to be in favour.
I fully accept that, in a market that has been distorted by massive State subsidies, to talk about fair competition is perhaps unrealistic. But we must be careful to ensure that if we are restructuring an industry, which seems to be what we are about in both the private and the public sectors, we find a way of emerging from that with the facilities for competition and ensure that we do not create a structure that prevents competition from developing. Therefore, I hope that we shall be more careful about our phraseology.
When we look at the whole industry, we must have regard to both the public and the private sectors. Oppositon Members have asserted tonight that it is only because the private sector has suddenly been threatened that Conservative Members have taken an interest in the subject. Nothing could be further from the truth. When one looks at the massive sums that this Government, backed by their Back Benchers, have voted for the public sector of steel in the past 12 months, one sees that we can hardly be accused of neglecting the public sector.
Certainly, it is true that when the consequences of those massive subsidies started to threaten the very existence of the highly successful private sector we on the Conservative Benches, and many Opposition hon. Members, have awoken to the threat. It is alarming to hear from many people in the private sector that the manufacturing side of private steel could disappear altogether within a short time if matters are allowed to proceed as it appears they are now.
Naturally, that is of concern to all those of us who have steel companies in our constituencies, but it is much more than that. I hope that my hon. Friend the Minister of State understands this. I am sure that he does. The rebirth of private enterprise steel after nationalisation and its expansion and continued growth under successive Governments of both parties in recent years have been a great success story and a testimony to capitalism, to capitalism's vitality and strength.
If under a Conservative Government we saw the virtual elimination of private enterprise steel, that would remain on our conscience for many years. My hon. Friend the Member for Derbyshire, West used the word "statism", quite properly, to describe what is developing. It would be ironic if, under a Conservative Government, that trend was allowed to continue or develop.
I have no doubt that all the Ministers at the Department of Industry completely share the sentiments expressed on the Conservative Benches tonight. Nor do I in any way underestimate their immense difficulties in trying to find a solution.
There is immense danger in the way most things are developing. The very fact that Mr. MacGregor was engaged at a price in excess of the 6 per cent, cash limits that now apply in the public sector means that there is a 391 Government commitment to his success. It almost commits us to backing him to the hilt in everything that he does. Mr. MacGregor's failure could well be seen as the failure of this Conservative Government's appointment. It is noticeable that more doubt has been cast on Mr. MacGregor's position by Conservative Members than by Opposition Members. More support has been given to Mr. MacGregor's aggressive marketing philosophy by Opposition Members. That is a distinct reversal of the positions adopted when Mr. MacGregor was appointed.
We are all in favour of Mr. MacGregor's aggressive marketing philosophy as long as it does not have to be backed up by billions of pounds worth of taxpayers' money and at the expense of the private sector. We may have a commitment to him, but our commitment to the private and public sectors of the steel industry is greater. If the price of giving him full backing and of not tying one of his hands behind his back while we pump billions of pounds into the other is too high, Mr. MacGregor should go back to the United States of America. In that case he should return, because we should not sacrifice the private steel sector.
When my hon. Friend the Minister volunteered the point that Mr. MacGregor had said that he would study any accusations of price-cutting, he did so with a little less than his usual conviction. It sounded like one of those ministerial replies from the Dispatch Box which goes "I shall look into the matter if my hon. Friend will write to me." It sounded like a placatory remark. Mr. MacGregor is undercutting. My right hon. Friend the Member for Taunton (Mr. du Cann) said that he was producing steel at a loss of £150 per tonne, and I have heard that steel is being produced at a loss of £100 per tonne.
It is suggested that Mr. MacGregor should be judge and jury of whether the BSC is pursuing a predatory pricing policy and whether it is undercutting in major areas. My right hon. and hon. Friends cannot expect the private sector to regard that as a satisfactory formula. Before these moneys are voted to the BSC, we are entitled to an absolute assurance from the Government that they will demand "transparent accounting" from the BSC. The private sector could then see how the subsidies were being dispensed and could ensure that they were being used for restructuring and for redundancies rather than for predatory pricing policies. At present, such transparency of accounting does not exist. My hon. Friend the Minister should give us that assurance. That is the very least that we can demand to ensure that Mr. MacGregor does not use those resources to undercut private sector steel companies.
In an intervention, I pointed out that it was illogical that we should put out of business companies that could produce steel for the home market without subsidy when BSC was being heavily subsidised, perhaps to the tune of £100 per tonne. As a result of the subsidies, private companies cannot expand because British Steel can simply bring its prices down at our expense. All hon. Members have an equal interest in the survival of the private and public sectors. Therefore, there is no ideological difference between us on that point.
I wish to put two further points to my hon. Friends. First, it was suggested by the hon. Member for Whitehaven (Dr. Cunningham) that one of the things on which the Government could act quickly is the question of energy. I think that there is a bit of wishful thinking there, 392 because the one thing that the Government have not done—I am sorry to express this criticism, but it is valid—is to act quickly with regard to complaints on industrial energy costs. I am not criticising my hon. Friends on the Front Bench tonight, because I think that if they could do so they would probably express the feeling that they, too, have felt a lack of response from the Department of Energy on this vital question.
In the case of which I know something, it is alleged that the electricity costs are 50 per cent, higher than those paid on the Continent. In this case, that means a burden on the steel company of £3 million a year. If those facts are correct, it is incumbent upon the Government to act quickly. They could act quickly. It would make a major contribution to the survival of steel companies and other intensive users of energy if we could get some lightening of the burden of electricity costs in particular.
My last point concerns import controls. This matter was raised by my right hon. Friend the Member for Taunton. I recognise that this is a very difficult subject to raise in the context of imports from the European Coal and Steel Community, and I shall not go into it at great length. However, when we are talking about quotas on production—whether it be a statutory scheme, as we now have, or wherher we go into voluntary scheme, as is possible after June or July—I cannot see why we cannot also talk about voluntary quotas on imports decided by the ECSC.
This is a critical area, particularly if the BSC is using imports as the determining factor on prices rather than any other factor. It seems to me that if this is such a crucial factor my right hon. and hon. Friends should be raising in the Community the possibility of very rigorous quotas on imports, agreed within the Community, in order to protect our industry for a limited period during the very definite crisis that clearly exists.
Before my right hon. and hon. Friends come back with the scheme, I hope that they will give to the House far more assurances than they have been able to give so far. I know how difficult that will be for them. I am convinced that the delays in putting the scheme before the House arise because they are seeking the right solution. I have that confidence in them. Therefore, I give to my hon. Friend the Minister of State the trust that he asked us to repose in him, but that can be tested only when we see the final proposal put to the House, whenever it should come.
§ 1.2 am
§ Mr. Hal Miller (Bromsgrove and Redditch)
I apologise to the House for rising to speak when I have not been able to be present throughout the debate. I have a very close constituency interest in this subject. I also seek to represent the views of private steel makers throughout the West Midlands.
I do not wish to go into the political argument. I rehearsed that quite plainly during questions on the statement the other day. I wish to make two perfectly practical points, which I should be very grateful if my hon. Friend would consider, although they may not be able to answer them tonight. They relate to the hybrid forms of company which have been much canvassed in the financial press—Phoenix I and Phoenix II.
We need, first, to establish whether customers regard these hybrid companies as sufficiently different from the BSC to be willing to buy from them. In other words, I detect a great resistance among downstream custometrs to 393 being tied to BSC as a sole supplier, and I still have grave doubt whether they would accept these birds as being of a sufficiently different plumage from the BSC to be willing to be tied to them as a source of supply. My hon. Friend should inquire into that matter.
Apart from that commercial point, there is the extremely practical point about the redundancy terms. Earlier this evening, in the debate on the Redundancy Fund Bill, I spoke about the difference in redundancy terms available to the public and the private sectors, but what are the terms for the employees of these hybrid companies? Are they public or private so far as redundancy terms are concerned? This is an important factor to establish to secure the consent of the workforce. It is all very well talking of rearrangements. Hon. Members paint with a broad brush on occasion. However, to have the consent of those who will do the work means that their conditions of employment need to be clearly established.
Those are the two practical points that I have not so far heard made. I leave them with the Government.
§ 1.5 am
§ Dr. John Cunningham
With the leave of the House, Mr. Deputy Speaker, I should like briefly to wind up the debate from the Opposition side.
Almost all hon. Members taking part in the debate have stressed the urgency of the situation, whether they have spoken principally about the private sector or the public sector. I stress the importance now for the Government to come to decisions about the British Steel Corporation, its capital reconstruction, Phoenix I and Phoenix II and whatever aid, comfort and assistance they may intend to bring to the private sector. There is widespread agreement, I believe, on the need for urgent decisions in these matters.
I am tempted to say, as the hon. Member for Derbyshire, West (Mr. Parris) said, that we are almost all interventionists now, but there were one or two honourable exceptions on the Government Front Bench below the Gangway. I am sorry that the hon. Member for Knutsford (Mr. Bruce-Gardyne) wanted us to import more coal and close more coal mines. The same argument could be used for steel. We could close more of the private sector as well as the public sector of steel and import more steel. To close the industry altogether is perhaps the logical conclusion of that argument. It is not a rational position for the House to adopt. It would lead to further massive unemployment in areas that have already been heavily devastated.
I feel some sympathy for the Secretary of State in his dilemma over Mr. MacGregor. Having made this marvellously imaginative appointment, he has a tiger by the tail. Mr. MacGregor was urged to be aggressive, to fight and to compete to get the corporation back on its feet. Now he is told "Compete, but, please, not too much. Don't be as aggressive as we wanted you to be. Don't really bring all your talents and experience to bear." [Interruption.] If the hon. Member for Rochester and Chatham (Mrs. Fenner), who has intervened a number of times from a sedentary position, wants the taxpayers' interest to be safeguarded, she should allow Mr. MacGregor to get on with the job that he is trying to do. The Secretary of State, referring to the appointment, said:I both believe in, and adhere to, the philosophy that Ministers appoint chairmen to carry out the management function.394 —[Official Report, 16 December 1980; Vol. 996, c. 262.] It will be interesting to see whether he lives up to his words. We heard from the Minister of State, in his opening remarks, that Mr. MacGregor has already been subjected to a little arm twisting on pricing policy. How does that fit in with what the Secretary of State was saying about steel matters in that debate?
I have no doubt that the private sector will come up with a solution. It may offer Mr. MacGregor a job. It would be interesting to see the response. Whatever else has emerged from this debate, there is, I believe, broad agreement, with one or two exceptions, on the need to maintain a sensible organisation of our affairs in steel in both the public and private sectors. It is for the Government to ensure we get as quickly as possible to that state of affairs. I urge upon them the necessity now to make fundamental and important decisions for the long-term future of both sectors of the steel industry.
§ The Under-Secretary of State for Industry (Mr. Michael Marshall)
This has been an interesting and, I think I may say, a timely debate. My hon. Friend the Minister of State, in opening, perhaps with that generous nature of his, sought to protect me slightly by suggesting that the terms of the debate might usefully be not too wide because of the other measures which may follow. Although he hoped to achieve that, we have had some very interesting contributions from both sides of the House. I make no complaint, because I suggest to the House that it has been a timely debate and both sides of the House have put down a number of markers which will be helpful to us as we look at these matters over the coming weeks.
I apologise in advance to right hon. and hon. Members if I cannot meet in all particulars a number of the questions that have been put to me. There are obvious difficulties, which the House will recognise. Indeed, in addressing these matters the House has shown a certain commendable restraint in trying to strike a balance. For example, we have tonight discussed competition at great length. If we think only for a moment about competition between the British Steel Corporation and the private sector, we can all agree in principle that in the case of competition with imports we want to see our manufacturers, whether public or private, competing with imports. Indeed, it is necessary for them to do so if they are to maintain their level of business. The grey area which comes up in the process has been widely spelt out.
I should like to reiterate the point that my hon. Friend made in opening that Mr. MacGregor has made it plain that he is anxious to look specifically at any detailed instances which hon. Members put to him and to keep my hon. Friend and the Department advised. My hon. Friend expressed his interest in being involved in that process. That is something whch I urge hon. Members to consider carefully, because it is evidence of some good will which ought to be acted upon in many of the instances which have been referred to tonight.
I shall come back to this, but there is perhaps another difficulty in trying to look at the whole question tonight—that is, the very nature of the public and private mix and the degree to which there are at present negotiations in hand, as is known to the House, to evolve mixed companies. Obviously, this has a very important effect on the future of the BSC's corporate plan. 395 Therefore, I make no apology for the fact that it has been necessary for us to bring forward this measure as a holding measure with further measures to follow.
We should think for a moment about the importance of that kind of development. One of my hon. Friends said that Pheonix I would be the precursor to Pheonix II. We must hope so. These are very important initiatives. My right hon. Friend the Member for Taunton (Mr. du Cann) suggested that this had been a matter that had gone on for a very long time. There is some truth in that. It has to be made plain that the initiative for these discussions lies with the participants. The hon. Member for Whitehaven (Dr. Cunningham) was in rather mischievous form tonight, and I shall return to him later. When we speak of interventionism, we must define what we expect of the Department of Industry.
It has been urged upon me by some hon. Gentlemen tonight that we should move in a very detailed way. The hon. Member for Workington (Mr. Campbell-Savours) very much wanted us to go down the path of looking at every ingot mould in the Distington foundry. I understand the arguments that he is seeking to carry. He has been particularly active in this matter. I have to say to him that what he is urging upon the Government is not something that we can accept. Indeed, I suggest that it would not have been accepted by the previous Government. It has to be the case that in trying to strike a balance, as I would see it, Governments are looking at the overall picture of the financing needs. They cannot take a detailed marketing view or detailed views on questions such as productivity.
On the general question of what the Department of Industry should do in relation to the private sector, our role there is more that of the honest broker. I hope that that is a function that we can usefully perform. I re-emphasise that the initiative for many of the matters that have been raised during the debate lies in the hands of both the BSC and the private sector companies. There is a strict limit to the Department's role.
I turn to some of the specific issues that my right hon. Friend the Member for Taunton raised in a powerful speech—
§ Dr. John Cunningham
Do I take it from what the hon. Gentleman has said that the Secretary of State or the Government are unwilling even to ask Mr. MacGregor to consider the circumstances surrounding the Workington foundry?
§ Mr. Marshall
What I have said is what the Government have consistently said and what the Labour Government said—namely, that decisions on the commercial viability of individual plants are a matter for the corporation. That is a view that we hold strongly, and any other view would make the running of the corporation well nigh impossible.
In the light of the statements that are likely to be made in the next week or two, there are matters that I cannot refer to in detail. However, in reply to my right hon. Friend the Member for Taunton, I am concerned that the examples that he gave should be tested. I am given to understand that the corporation disputes strongly the basic argument that he has advanced, especially on engineering steels. It is no use my right hon. Friend and I bandying these arguments. I know that he will wish to pursue these matters separately. When he says that the views of 396 Hadfields were put to us in October and made available to the corporation, I have taken advice on that and I assure him that that is not the case. That advice was not made available by my Department.
§ Mr. Campbell-Savours
The Minister said in reply to the right hon. Member for Taunton (Mr. du Cann) that he put it to the corporation and that it was not as he had had it put to him. Does that mean that there are some matters on which he will consult the corporation—namely, the relationship with the private sector—and other matters on which he will not, such as the future of the Distington foundry? Where is the consistency?
§ Mr. Marshall
I think that the hon. Gentleman misunderstood me. I said that the references that were made by the private sector company to the Department—anyone is free to put his views to the Department—were not passed on to the corporation. There is no question of acting in any differential sense between the corporation and the private sector.
I turn to arbitration—
§ Mr. du Cann
I intervene concerning the memorandum to which I referred as being made available to the corporation. I assure my hon. Friend that I know that it was made available to the corporation. Perhaps my hon. Friend has forgotten—it may be that the House should be reminded—that a former member of his Department who was responsible in this area and a present member of his Department are both directors of the corporation.
§ Mr. Marshall
I am glad that my right hon. Friend has raised that. I know that some of my hon. Friends have been anxious to explore this area. With a considerable stake in the future of the corporation, the view has been under successive Governments that it is sensible to have directors on the board. The directors are non-executive. They are not concerned with the day-to-day management of the corporation. I need hardly emphasise that they are people of the highest integrity.
My right hon. Friend talked about arbitration. We shall want to weigh his suggestion carefully. I am sure he will want to consider the obvious problems that such a procedure might raise. If we consider for only a moment the sheer problem of commercial partnerships and of trying to bring people together to agreement under the terms of arbitration rather than voluntary agreement, we will recognise that there are immediate difficulties. My right hon. Friend was able to convey to the House that some of the negotiations that have been proceeding for some time have been moving strongly of late. They would not be applicable to his suggestion. If all goes as we hope, we shall have to consider how that leads us into wider issues. I note my right hon. Friend's remarks.
The right hon. Member for Llanelli (Mr. Davies) was concerned about Duport. My right hon. Friend, my hon. Friend and I have met him, some of his constituents and the management of Duport. I pay tribute to the vigilance with which he has sought to carry to us the arguments about the Llanelli steelworks. I had to tell him recently that I could add nothing tonight to the story that he already knows. The Government are fully aware of the concern felt by the right hon. Member and his constituents. He knows about the current delicate negotiations that apply to the whole of the group.
The right hon. Member also discussed energy costs—a theme taken up by both sides of the House. I can only 397 repeat something that is well known to the House, namely, the NEDC decision on 7 January to consider the whole range of energy costs and to consult those especially concerned in the steel industry in addition to all sides of industry generally. That study will be important. It is due by the end of next month. I hope that it will help us to see our way ahead.
My hon. Friend the Member for New Forest (Mr. McNair-Wilson) was one of many who asked me to explain a little more about the present position on borrowing. My hon. Friends the Members for Honiton (Mr. Emery) and for Surrey, North-West (Mr. Grylls) were among those who referred to that issue. I know that my hon. Friend the Member for Honiton is well informed about these matters. Expenditure against the external financing limit in 1980–81 is, to date, £815 million, against a £971 million limit. On unaudited figures, the BSC is about £146 million below the £5,500 million limit.
My hon. Friend the Member for Surrey, North-West asked why £500 million, rather than a lower figure, was required. It is to see the corporation through not only to the end of the financial year but until the next—and, we assume, larger—Bill reaches the statute book. That is unlikely to be for some time. During that time, the BSC may face heavy closure and redundancy costs. A significantly smaller sum than £500 million would not, therefore, be appropriate.
My hon. Friend the Member for Sheffield, Hallam (Mr. Osborn) was one of a number of hon. Members concerned about steel imports. The House recognises that that is a difficult area. We must look, within the Community, at a free-trading position. Indeed, we must look at a position in which our exports are of vital significance. It is especially significant that the somewhat slightly more optimistic pattern of the overall sales of the BSC is related in part to an increase in exports.
As to the balance between public and private sectors, there is a danger of getting the matter a little out of perspective. We must remember that the measures before us relating to the BSC in turn relate to about 80 per cent. of its steel-making activity, which does not compete with the private sector. There is bulk steel-making of that order, and there is also the more difficult area of the interface of the public and private sectors. That is where imports have proved to be a problem, with all the complications that we have discussed about pricing.
My hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne) made his usual pungent contribution about the cost position. He may wish to pursue his bright bar case with Mr. MacGregor On the question of competition, it is fair to remind the House that if there were no competition from the private sector impacting on the public sector—if it were all one way—it is strange that the BSC should be facing redundancies and closures on the current scale. There have been 50,000 redundancies in the current year, with another 20,000 envisaged in the corporate plan.
My right hon. Friend the Member for Taunton mentioned engineering steel. We have seen the cutback in capacity in Templeborough. A reduction in the work force by 20 per cent. is now planned in special steel in Sheffield. The closure of the foundry in Workington in a sense reflects over-capacity in the foundry industry for the private sector as well as the public sector. I need hardly remind the House that much of that over-capacity was specifically built up as a result of the activities of the 398 Labour Party when in Government, through the ferrous foundry scheme. Therefore, alas, we are beginning to pay for many of the decisions which stemmed from the Labour Party.
My hon. Friend the Member for Derbyshire, West (Mr. Parris) made an entertaining and perhaps too modest contribution. He raised some of the difficulties of trying to establish what is fair competition. I appreciated his thoughtfulness in allowing the Front Bench to answer his points on another day.
My hon. Friend the Member for Faversham (Mr. Moate) is another diligent man in seeking that difficult and challenging balance which is fair competition. He made a useful suggestion when he referred to transparent accounting. We should consider that carefully.
My hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller) asked me specific questions about Phoenix. I am sure he will appreciate that those questions must await further decisions in those areas.
My hon. Friends the Members for Lancaster (Mrs. Kellett-Bowman) and for Hallam and other hon. Members were interested in the situation in the Community. My hon. Friend the Member for Lancaster is fully aware of the debates regarding the proposals covering social measures. There is considerable support in the Government for the broad line that she urged upon us, although she must be aware of some of the legal complications that must be overcome.
On the question of production quotas, we must consider the situation beyond June. It is clear that we shall need to continue with a more orderly regime than in the past. Underlying much of the difficulty that the Government, the House, the BSC and the private sector face is the fact that we are now into the fifth year of a world steel recession. In Europe alone, there is estimated to be about 35 million tonnes of excess steel-making capacity. That is the background. Those are some of the major problems that make it so difficult to see one's way ahead. Those problems suggest that it is wrong for Governments to try to make detailed judgments about the market place. Even those who are in the market place find it exceptionally difficult now.
The question was raised about what might be done to assist the private sector. In the last week or so we have announced assistance to Aurora, in Sheffield, with a loan of about £836,000 on preferential terms from the European Coal and Steel Community and a grant of £450,000 from the Department of Industry under section 7 of the Industry Act. That loan is related to the rationalisation of its operation in Sheffield.
I remind hon. Members, particularly those who have taken such a close interest in the problems of the private sector, that the Government can give financial assistance to steel-making enterprises, under sections 7 and 8 of the Industry Act, with approval from the EEC. That approval was forthcoming for Aurora because there was no increase in capacity, and a substantial element of rationalisation was involved.
The hon. Member for Whitehaven was trying to tweak our tail on timing. I thought that that was typical of his elegant, bare-faced effrontery. He was a member of a Government who kept us waiting for 18 months for the Beswick review to grind its way through and come up with conclusions that said in the end that nothing would be different from the Conservative Government's White Paper of 1973, except that developments might be slower 399 with regard to closure. With the state of the market and with all the problems that I have outlined tonight, it is typical of the hon. Gentleman to try to hustle us into action. If he thought seriously about the positon, I do not believe that he would wish for one moment to uphold his argument. It is impractical.
Mr MacGregor said that he wished to get on with a whole range of activities. The financial aspect is not the whole picture. I hope that the House will applaud what Mr. MacGregor has been able to do. He has carried with him the majority of his work force in beginning to achieve what is widely recognised as necessary if his steel organisation is to survive.
The Member for Workington must appreciate that the timing must be got right. The many partners in the current negotiations have to reach their agreements. They are not there to be told when to reach agreements so that we can make announcements to suit the hon. Gentleman's convenience.
§ Dr. John Cunningham
Mr. MacGregor used the word "vital" in connection with the timing. The right hon. Member for Taunton (Mr. du Cann) urged urgent action, as did several other hon. Members on the Government Benches. If the hon. Gentleman criticises me, he should include almost everyone who has spoken from the Government Benches.
§ Mr. Marshall
As ever, my hon. Friends took a much more balanced view than did the hon. Gentleman. They are naturally anxious, as are the Government. We want to make the statement at the first possible moment. The hon. Gentleman rather went to town on the matter. He seemed to imply that decisions that a Labour Government were not able to deliver on the future of the industry should come from us now.
On 16 December my right hon. Friend made plain that the BSC did not need authority to reduce manpower or to close plants. It has been happening already, as presaged in the corporate plan.
400 I have mentioned the complexity of the competitive situation. We are on the brink of a number of important developments for the future of the public and private sectors of the steel industry. I am greatly heartened by the fact that there is so much general support for seeking to maintain the maximum degree of British steel-making capacity in whatever public or and private mix can best be determined. We should like it to be in the private sector as much as possible, but we recognise the coexistence of the two parts of a great industry. We have to sustain the industry. The debate will contribute to the further deliberations that may help to bring that about.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Committee of the whole House.— [Lord James Douglas-Hamilton.]
§ Further proceedings stood adjourned pursuant to the order of the House this day.