§ Order for Second Reading read.
§ Mr. Deputy Speaker (Sir Paul Dean)Before we begin the debate, I should tell the House that Mr. Speaker has not selected either of the amendments on the Order Paper.
§ Mr. Michael Fallon (Darlington)On a point of order, Mr. Deputy Speaker. Regarding the conduct of the debate, you will be aware that Mr. Speaker has received many applications from right hon. and hon. Members to participate in the debate, but you will have observed also that there is no amendment on the Order Paper standing in the name of the Leader of the Opposition. As the trade union movement seems to be in support of the Bill and Labour Members are divided on whether to oppose the Bill in principle, will you be taking that into account when you consider whether to conform with your usual practice of calling hon. Members alternately across the Chamber?
§ Mr. Bryan Gould (Dagenham)Further to that point of order, Mr. Deputy Speaker. If I may correct a quite erroneous assertion by the hon. Member for Darlington (Mr. Fallon), I have the authority — which is hardly needed, given their well-known position on the subject — on the basis of recent conversations with the TUC steel committee and the Iron and Steel Trades Confederation, to make it clear that they are totally opposed to the Bill, as is Her Majesty's Opposition. There is no amendment because we propose to vote against the Second Reading.
§ Mr. Deputy SpeakerI am sure that all will be revealed during the debate.
§ Mr. Alex Salmond (Banff and Buchan)On a point of order, Mr. Deputy Speaker. Would it not have been in order for the Chair to select the amendment in the name of my hon. Friends and me or that in the name of the Liberal party?
§ Mr. Deputy SpeakerAs I am sure the House knows, Mr. Speaker does not give reasons for selecting or not selecting amendments. I have announced Mr. Speaker's decision to the House, which is that neither amendment has been selected. That does not mean, of course, that the arguments on those amendments cannot be advanced in the debate; they can.
§ The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Kenneth Clarke)I beg to move, That the Bill be now read a Second time.
I welcome the unusual exchange through points of order between my hon. Friend the Member for Darlington (Mr. Fallon) and the Opposition Front Bench. Like my hon. Friend, I had not received a great deal of opposition from the Labour party before today. We look forward to the arguments of the Opposition. We are sure that force of persuasion in the course of the debate will get them, even at this late stage, to reconsider their position and to vote for the Bill's Second Reading.
In the past, steelmaking as an industry has given rise to high passions and strongly held views. Anybody who pays a visit to a steelworks, as no doubt most of us have, 170 understands the excitement of the steelmaking process. It conjures up memories of the finest days of the industrial revolution and it is an exciting industry with which to be associated. That high public interest has in many ways been the misfortune of the steel industry over the past 40 years.
The industry has attracted the attention of politicians who wish to control the course of the British economy and have repeatedly sought to impose their own strategies on the industry. Those strategies, not surprisingly, were essentially political and took insufficient account of the market forces which govern industry, even nationalised industry. Many of those strategies led to difficulties.
It is high time that British Steel is seen for what it is. It is a key modern industry, of course — but it is essentially a normal commercial enterprise like any other. It is successful and it belongs in the private sector.
The Government believe that good commercial enterprises should be in the private sector because they thrive better there. They are free of Treasury control, free of ministerial control and further away from political lobbying which raises problems now or in future. Management and work force in a private company are faced by the reality that their prosperity and their job security depend on their success in the market and the satisfaction of their customers. They are exposed to commercial disciplines when they raise their capital. The management are free to take the best decisions about how to tackle the market place. The present management of British Steel and those who work for the corporation will be able to tackle the problems of the market place with great effect.
Echoing what my hon. Friend the Member for Darlington said in what might have been a helpful intervention, I think the nationalisation-denationalisation debate is effectively over in this country. Looking back over the past few decades, that is quite remarkable. After 40 years the public have seen that the great state corporations dreamt of by Herbert Morrison are not in practice efficient providers of goods and services.
Steel debates have aroused great passions in the past. Then, my hon. Friend the Member for Darlington never could have made that comment about whether to nationalise or denationalise steel. Steel is one of the great issues that has caused divisions between parties and within parties — and definitely within the Labour party at certain times in the past. I do not think that those old battles will be fought again. I do not wish to provoke the hon. Member for Dagenham (Mr. Gould), but I shall be surprised if any hon. Member speaking for the Labour party threatens to return the corporation to the public sector, if ever there is a Labour Government. If the hon. Gentleman makes such a promise, he will live to regret it when he returns to his main role of trying to reconstruct the Labour party and make it electable again.
§ Mr. FallonMy right hon. and learned Friend has spoken about the view of the Opposition and the view of the management of the British Steel Corporation. Does my right hon. Friend accept that the management and the workers of the British Steel Corporation at BSC Redcar who live in my constituency look forward to the passage of the Bill? They consider that it will give them greater freedom from political interference and the opportunity, for the first time in recent memory, to take a stake in their own industry and have some control over their future.
§ Mr. Clarkel am grateful to my hon. Friend, who is closely in touch with the opinions of steel workers in his constituency—[interruption.] In due course I shall listen to speeches from the Opposition which will seek to refute what my hon. Friend has said, but I believe that the underlying current of public opinion in Britain on the nationalisation of such industries has changed irreversibly.
I agree strongly with my hon. Friend that steel workers have also undergone a change of opinion. My contacts with steel workers confirm that most of them realise that the change in the steel corporation in recent years have been beneficial, and they look forward to privatisation.
§ Mr. Donald Coleman (Neath)rose—
§ Mr. ClarkeThe debate is showing signs of arousing passions that I thought were extinct in the Labour party. It is good to see history repeating itself.
§ Mr. Campbell-SavoursIf the terms of trade were to change against the steel industry, and if it were suddenly to move into a period of international pressure, which could happen under any Government, and if it suddenly were to be losing a lot of money, does the Minister rule out the possibility of bringing it back into the public sector? Would the Minister's attitude be to let it go and to lose it, or would the state have a new role to play in those conditions?
§ Mr. ClarkeI must not spend too long discussing issues of principle, though they are interesting and I would like to spend as much time as possible on them. As the hon. Member for Workington (Mr. Campbell-Savours) appreciates, whether a company is nationalised or denationalised, it cannot be immune to movements in trade and changes in the market place.
Essentially, the well-being of a state corporation and its employees or a private sector company and its employees depends upon the market and the conditions of trade and how well the company thrives within them. A private sector company has to react when market conditions move against it. History shows that the great private corporations in Britain are more effective at doing that than the nationalised industries, which are usually constrained by the Government not to react until it is too late. That was the case with British Steel, with disastrous consequences, from which we took some years to recover.
§ Mr. Bob Cryer (Bradford, South)Will the Minister give way?
§ Mr. ClarkeIn a moment. I should like to make a little progress. No doubt this theme will be raised throughout the debate.
I shall be interested to see whether the Labour party is in favour of renationalising our key modern industries. That would he quite a surprise, even to people who voted Labour at the last election.
The Bill heralds the start of a new chapter in the history of the British steel industry. It will lead to the end of the saga which began in November 1948, when the Minister for Supply the right hon. G. R. Strauss, during the Second Reading of the Iron and Steel Bill, said:
There is general agreement that this Bill is profoundly important and vehemently controversial … the great majority of the people will share the Government's view that if our country is to prosper and our people to live a higher and a better standard of life, this Bill is essential." — [Official Report, 15 November 1948; Vol. 458, c. 53.]172 That is what was said 40 years ago, and I put it to the House that the wheel has now turned full circle. The Bill is not vehemently controversial. It is, however, an important Bill that will allow British Steel to escape from the politial arena and return to the mainstream of British industry in the private sector.The Iron and Steel Act 1948 and its successor Acts did not achieve all that was hoped for. Thirty years of intervention one way or another could not keep market forces at bay. This is no criticism of the men and women employed in the industry. Despite their best efforts, they were trapped in an industry which was repeatedly obliged by successive Governments from both sides of this House to take decisions which satisfied politicians and which often did not accord with commercial realities. They were also in part the victims of the downturn in the world economy after the mid 1970s. But as a nationalised industry answerable to politicians the corporation lacked the flexibility to cope with the new challenges imposed by that recession. The net result was that the corporation became increasingly hopelessly ill-equipped to compete in the market place. As hon. Members will recall, in the late 1970s it made increasing losses, culminating in 1979–80. in a net loss of nearly £1.8 billion in one financial year which had to be paid for by the taxpayer. That catastrophe was in large measure attributable to the refusal of previous Governments to allow the corporation to face up to commercial realities and take the necessary decisions, painful though they inevitably were.
When the necessary steps were finally taken, they were sometimes more painful than they need have been if a more gradual, market-oriented approach had been adopted from the outset. I readily acknowledge that the price of BSC's present success has been high in terms of job losses. But it is counterproductive to put our heads in the sand and pretend that market forces do not exist. We cannot ignore the market in the private sector, and we cannot afford to do so in the public sector.
§ Mr. CryerWhen the Minister talks about the reaction of the steel industry, the reaction is to sack workers. Has the Minister made any calculations about the cost to the public purse of putting workers on the dole, the loss of tax revenue, and the cost of unemployment benefit and supplementary benefit payments to the several hundred thousand people who have been put on the dole as a consequence of his Government's policy?
§ Mr. ClarkeIn the short-term, such costs obviously have been incurred, but what was done was not done as the hon. Gentleman characterises it. Workers were not simply sacked; surplus capacity was closed. Redundant plant that would never again make products of a quality that would sell was closed. There was investment in good quality plant and alteration of working practices to ensure that plant again became competitive.
The hon. Gentleman was a Minister in my present Department when the last Labour Government refused to face up to the fact that anything needed to be done until the very last years of their term of office. For a time Labour Ministers forced the corporation to invest in new capacity based on fanciful market forecasts. The Labour Government pursued such a policy when it was, obvious that they were being unrealistic. They refused to turn around until they took some faltering steps by closing the plant at Ebbw Vale and some other plants right at the end of their period of office.
§ Dr. John Reid (Motherwell, North)The Minister spoke at great length about the huge losses that were incurred during the period of public ownership. Will he accept that those huge losses and all the financial sacrifices throughout that period, which have led now to a profit, were made by the taxpayer? Can he explain to the taxpayers why, when their money was used during the hard period to subsidise losses, they are not to get the profits now being made, which are to go to a few of his friends in the City of London?
§ Mr. ClarkeThe taxpayer will get the benefit of the proceeds of privatisation and will get the value of what the company is worth on the market. I have never understood the extraordinary argument which is sometimes made by Opposition Members that billions of pounds' worth of losses made over the years are somehow an asset which the taxpayer now owns instead of being money which the taxpayer has waved goodbye to for ever. The Opposition seem to think that somehow the new owners are capable of compensating the taxpayer for those losses. In a good flotation the taxpayer will get the value of the British Steel Corporation as it now is as a result of what has been achieved over the last few years.
§ Several Hon. Membersrose—
§ Mr. ClarkeI always spend too long opening debates by giving way too often. I will give way again in a few moments, but I should like to proceed on this theme which is obviously of interest to Opposition Members.
I want to explain what has been done since we inherited the problem to get the corporation back to its present much healthier state. Basically, what we have sought to do is to give the corporation greater freedom to get on with its business even though we as Government remain the owners of it on behalf of the state. The corporation has responded magnificently. The enthusiasm and the commitment of the management and the work force have brought their own rewards. The management and the work force—not the Government—have through their own efforts brought about a remarkable transformation in the fortunes of the corporation.
The corporation recently announced half-year profits of nearly £200 million and all the signs are, and all the reports I am getting indicate, that this success will continue. That is an impressive record and I am delighted to pay tribute to all involved in the British Steel Corporation. In many ways I think that what has happened to British Steel is symbolic of what has happened to the British economy as a whole since 1979. The improvement in BSC's performance is all the more creditable for having taken place in the European market, where there is still substantial overcapacity and under a production quota system which has tended to restrict BSC.
The British Steel Corporation is well placed to consolidate its present strong position as the liberalisation of the European steel market proceeds. As the House knows, I shall have the opportunity of referring to where we are in the European steel regime in more detail in a separate debate later.
§ Mr. Martin Flannery (Sheffield, Hillsborough)The Minister has talked about what happened in 1978–79 and attributed it to a nationalised industry here not understanding market forces. Can he explain what happened to American, German and French steel 174 throughout that period? Did those industries not lose on a grand scale in exactly the same way, even though they were not nationalised?
§ Mr. ClarkeThe losses and the consequences of the crash would have been less if British Steel had not been allowed to charge headlong to the buffers until far too late in the 1970s. Of course, there was a big downturn in steel demand, as I have acknowledged, in the recession, but all the indications were ignored for a long time by Ministers in the Labour Government who pressurised BSC not to take the decisions which were required to try to prepare for what was to come until far too late. The losses were thereby made much worse.
I have been asked how many jobs were lost in consequence. A large number of jobs were lost. I hope that Opposition Members are not about to assert that it would have been a sensible policy for steel to keep all those people on the books and to keep all the plants open. [Interruption.] Of course, it is the point. If Opposition Members intend to oppose the Bill by saying that they think we were wrong to shed all the labour from British Steel, are they really saying, as was said on behalf of the Labour party by the hon. Member for Kingston upon Hull, East (Mr. Prescott) not long ago, that nationalised industries should largely be looked upon as a way of creating extra jobs and that Government policy on nationalised industries should be to make them take on extra labour as a cure for unemployment? That folly—and it is folly—led British Steel into its problems in the first place. If the Opposition propose to oppose the Bill on the grounds that they still look upon nationalised industries as an employment creating machine, I fear they will take us back to where we used to be.
§ Mr. Campbell-SavoursDoes not the Minister understand that the impact of what he did on Workington was to give thousands of men no hope for the future? Many of those men have never found work. I would have had no objection to the rundown of the steel industry if at the same time it had been accompanied by real measures of employment which insulated communities like mine from the ravages of unemployment. But it did not happen like that. The Government imposed a huge dollop of unemployment on my constituency and we have never recovered. We have schemes, but they do not give people the sense of identity with an industry which they had in the past. The Minister fails to understand. We wanted change in the steel industry. We understood it, but the Government gave us nothing in return.
§ Mr. ClarkeThat is the issue between us. It is a great tragedy that Workington as a town reached the position where it had no future as a major steelmaking town for a variety of reasons which were not the fault of the people of Workington. Those plants could no longer produce steel that had a sensible prospect of being sold in the market place. Therefore, the future for Workington lies in finding alternative employment and new industrial activity of a kind which will give new hope to the town. As we have come out of the recession it has sometimes been difficult to find new jobs on an adequate scale for towns that are disadvantaged by geography and other problems, as Workington is.
As the British economic revival has speeded up, it has steadily had consequences on deprived regions, including steel towns. The more we succeed in getting growth in the 175 economy and in reviving attitudes which encourage enterprise, the better prospects we have of getting new business and new jobs in towns like Workington. It is happening. Unemployment is falling more quickly in the older industrial parts of the country. If the hon. Gentleman goes to places like Consett, Corby or Scunthorpe, which suffered terrible losses through the closure of steel plants, he will find large numbers of new enterprises, large numbers of new jobs and a whole new future.
One thing which we all appear to be agreed upon and which has to be accepted is that the British Steel Corporation is an example of a flourishing industry. It is a flourishing nationalised industry; it is not because it is nationalised that it is flourishing, but despite that. It is, in fact, an example of an industry which, through considerable efforts by management and workers, has made a success of itself despite being hampered by the inevitable constraints imposed on the commercial freedom of nationalised industries. It is an industry which now knows that its success is dependent on meeting the requirements of its customers. British Steel understands that it operates against a background of world overcapacity in steel and that if it is to prosper in that environment it must place itself in the forefront of new technology, provide the highest quality and operate to the maximum efficiency. This it has done, and will continue to do. British. Steel knows from experience that it is no use relying on Governments. That does not work in the longer term.
The time has come to give the corporation the opportunity to stand alone and to give it the flexibility and independence that it needs to face up to the highly competitive international environment.
The Bill is short and is well precedented by other privatisation Acts. Its provisions are, however, somewhat technical and it may help hon. Members if I spend a short time explaining them.
The Bill itself does not bring about privatisation; it will enable privatisation to take place. The Bill provides, in clause 1, that all of the property, rights and liabilities of the corporation will vest in a successor company. That company will be a Companies Act company limited by shares which in the first place will be wholly owned by the Government. Privatisation will take place when the Government go on to exercise their ability to offer their shares for sale to the public.
The successor company will inherit the whole of the corporation's undertaking, both assets and liabilities. Technically it will be a different person in law from the corporation, but it is our intention, which is represented in the Bill, that it would be regarded for all practical commercial purposes as the same company representing an unbroken continuation of the corporation's undertaking. The vesting is required only to enable the flotation to take place, by changing the status of the corporation from a statutory corporation to a Companies Act company. This transformation amounts to a change in the legal constitution of the company, but does not affect the nature of its activity or the extent of its assets and liabilities. I make it clear at the outset, and this is important, that the corporation will not benefit from any special Government handouts in the process of privatisation, nor do we propose that there will be any write-off of debt.
After vesting has taken place, on a day nominated by order of the Secretary of State, which we call the appointed 176 day, British Steel plc will be a public limited company wholly owned by the Government. The Government will then be able to sell its shares at any time, and decide the exact timing of that sale according to market conditions and the performance of the company. But for various technical reasons, including the passage of this Bill through both Houses of Parliament, I do not anticipate that it will be possible to contemplate selling those shares until the end of this year, at the earliest.
The corporation will not be dissolved immediately after vesting has taken place. It will continue in existence as a shell. This is necessary because some of the corporation's assets and liabilities are located overseas, and are governed by foreign law. United Kingdom law might not therefore be effective in securing the vesting of all those assets immediately on the appointed day.
The corporation will stay in existence until it has taken such steps as may be required to secure the effectiveness of the vesting of the assets and liabilities in the successor company. As soon as this process has been completed, the corporation may be dissolved by the Secretary of State by order, under clause 10. We are calling the period between vesting and dissolution of the corporation the transitional period. During that period, the corporation will have no powers other than those necessary to effect vesting of its overseas assets.
The successor company will require a capital structure that fits with the requirements of the Companies Act. Clauses 2, 3 and 7 of the Bill provide for that capital structure. At present the corporation has an accumulated deficit on its profit and loss account. That is not debt, as the corporation does not owe the money in its profit and loss account to anyone; it is simply a record of past trading losses that reflects the erosion of the original capital base of the company through its trading losses. It is open, in the private sector, to any Companies Act company to go to the court and apply for a reduction in its capital to write off such accumulated losses. The amount of capital shown on the balance sheet after a restructuring of that kind will then more accurately represent the value of the net assets of the company.
As a statutory corporation, BSC is unable to go to the court to apply for a reduction of its capital, so that will be authorised by the Secretary of State under clause 2. That clause further provides for the extinguishment of the public dividend capital that remains after the reduction. That will not, however, result in taxpayers' money being lost, because, in exchange, securities will be issued to the Secretary of State or to the Treasury, as his nominees, at his direction under clause 3.
§ Sir Giles Shaw (Pudsey)Will the Minister give way?
§ Mr. ClarkeI should like to finish with this point. Only the public dividend capital will be extinguished. The successor company will be obliged to continue to meet the terms of any loans from the Government or outside bodies that are vested in it.
§ Sir Giles ShawOn the question of treatment of the company's debt and the accumulated loss, I understand my right hon. and learned Friend's reluctance to eliminate the debt. He is describing the somewhat complex and awkward proposal of a company that is about to float being required to continue to take a debt of the order of £700 million, and presumably accumulated losses substantially greater than that. Does my right hon and 177 learned Friend think that there will be difficulty in achieving the return on the assets, which I believe the company clearly will have?
§ Mr. ClarkeIt will require capital restructuring. I have been endeavouring to describe the nature of capital restructuring that the Bill will facilitate. The accumulated losses on the profit and loss account will need to be written off, in just the way that a private sector company with this kind of trading background would seek to have authority to do, by an application under the Companies Act.
What we are not intending to have is straighforward debt write-offs. That would amount to an attempt to subsidise the corporation by the back door, which we have no intention of doing. We want to give the corporation a proper capital structure. It would be behaving as we would expect it to do if it was in the private sector and able to operate under the Companies Act, by seeking to get its capital structure to reflect its present capital assets and liabilities, and to wipe off these long-standing losses in the profit and loss account.
To the extent that the nominal value of the securities issued to the Government in exchange for cancellation of the Government's investment in the corporation is less than the value of the capital extinguished, the balance will go to make up a statutory reserve of the successor company. That is specified in clause 7. The nominal value of the shares will have to be no more than their sale issue price at the time of the flotation, because the Companies Act forbids the issue of shares at a discount. In practice, it is usual to set a nominal value significantly lower than the anticipated issue price.
Private sector companies generally have a mixture of share and loan capital and reserves. The process of restructuring the balance sheet of the corporation is complementary to the vesting provisions of the Bill. Instead of a nationalised corporation funded by public dividend capital, the successor company will be a Companies Act company, with capital and reserves similar to other Companies Act companies.
The remaining provisions of the Bill are subsidiary and technical. Clause 4 allows the Government to invest in securities of the successor company to maintain the proportionate level of any residual shareholding, if one is retained. The Government's securities in the successor company may be held by nominees, under clause 5. The Government may fix a limit on its future investment in the successor company, under clause 6. Clause 8 provides for the Government to lend money to the successor company while it remains in the public sector. Clause 9 allows the Government to impose temporary restrictions on the borrowing of the successor company. Clause 11 contains provisions relating to taxation of the successor company. Clauses 12 to 17 and schedules 1 to 3 contain other supplementary provisions.
In deciding whether to invest in the new private sector company, potential investors will obviously have to form their own judgment about the track record of the corporation and, in particular, the prospects of the new company. When I came to the House last December and announced our plans for the privatisation of the corporation, I was able to report the good news about the corporation's impressive half year profit. I regard that figure as a reflection of all the hard work that has been put 178 in by the employees of the corporation, which helps to make it one of the most profitable steel producers in the world. Its productivity has improved every year since 1980.
Its selling prices have risen much more slowly than inflation. Exports are up in absolute terms and as a share of total sales. Capital expenditure has increased steadily since 1982, and customer service has been given much higher priority than before. All that has resulted in great improvements in the quality of the product and the efficiency with which it is produced and dispatched. The results are plain for all to see, and they are all the more impressive for having been achieved in a difficult market.
§ Mr. Rhodri Morgan (Cardiff, West)Is the Minister aware that at a recent meeting with the parliamentary Labour party the chairman and chief executive of the corporation said that, after it was privatised, they would have to reduce the proportion of material exported, because its price was so poor that it would not enable them to maximise profitability?
§ Mr. ClarkeThat would depend on movements in international steel prices. We shall have to see what happens to steel prices when European quotas come to an end, as I am sure they will in the next few years; and possibly in six months' time — I shall be dealing with that later tonight —and also what progress is made in getting rid of the excess capacity in other parts of the world.
The fact is that the record of achievement that I am reading out has not been achieved by other European steel corporations, many of which still have vast overcapacity. Once that excess capacity has been reduced, we shall see how the markets shape up.
§ Mr. Peter Hardy (Wentworth)The Minister has clearly recognised the enormous contribution to the achievements to which he has referred by the work force. In view of that contribution to success, could he not give some reassurance to the work force, before he sits down, that their terms and conditions of service will be no worse under the private operation than they have been heretofore?
§ Mr. ClarkeThe employees of the corporation will continue under the contracts of employment that they have now. As I have said, for all purposes, the new company will be the successor, with all the assets, liabilities and contractual obligations of the previous corporation. I can happily give that assurance.
I hope—and I am not pretending to describe how it can be done today—that we shall enter into discussions to reassure the work force that their accrued pension rights will not in any way be affected. We shall no doubt have plenty of opportunity to discuss pensions between now and the flotation, perhaps in Standing Committee, if not in discussions. It is also our intention, as everybody knows, to move on to the prospect of offering the employees—who, I quite agree with the hon. Member for Wentworth (Mr. Hardy), have made a substantial contribution to the present position — the prospect of having some shares in the successor company and a share of future profits.
The corporation knows that, if it is to survive and progress and protect its business as a whole, it must continue to change and adapt to suit the needs of the market. To do that, it must continue to take decisions on 179 a commercial basis. Fortunately, here again, we have been able to give reassuring news to the House. BSC has been able to give its commercial judgment of the future for its five integrated plant, including Ravenscraig, which has given rise in recent years to a quite unnecessary level of political controversy north of the border.
§ Mr. ClarkeI am going to say more on Ravenscraig, so perhaps I had better leave Scottish interventions for a moment or two.
I remind the House that the corporation has been able to say that, subject to market conditions, it expects that there will continue to be a commercial requirement for the steelmaking and continuing casting capacity of the corporation's five integrated plants for at least the next seven years. The hot strip mill raises other problems because there is surplus capacity in hot strip at the moment throughout Europe, and British hot strip mills are running at very low capacity indeed. But, even there, because of the strength of BSC's present position, having reviewed the position thoroughly, the corporation has concluded, on the basis of commercial judgment, that the Ravenscraig mill will continue to operate until at least 1989. [Interruption.]
I look forward to hearing which plants the Opposition are prepared to guarantee against market conditions, which ones they are going to reopen and how they are going to put the clock back to the days when BSC was operated on the basis on which they operated it.
The commercial judgments that I have given are some of the best news that has been given to people working in the Scottish steel industry for very many years and they reflect the advances that I have described.
§ Mr. ClarkeI will give way to the hon. Gentleman in a moment. I am aware, of course, that a report published last week by the hon. Member for Motherwell, South (Dr. Bray), with the support of the local Labour party and his council, tried to cast doubts on the future of Ravenscraig. I have to say, as an Englishman who now makes frequent visits to Scotland, that I have the greatest difficulty sometimes in coming to terms with the nature of the Scottish political debate. The Scottish Labour party appears to thrive on trying to represent to the world that Scottish industry is in a desperate state of decline and is loss-making. When it gets the commercial assurances that I gave a moment ago, which I have described as among the best news that has been given to the population of Motherwell and west central Scotland for many years, the Scottish Labour party spends its time desperately trying to find someone who will cast doubts on the good news, no doubt to reinforce the unworthy position that it took in the last election when it tried to represent Scottish industry as on the verge of collapse and its members as the only rescuers of it. I see absolutely no point in members of the Scottish Labour party going to outside bodies which cannot have full access to all the commercial information available to BSC to try to rubbish good news about the commercial prospects of the steelworks.
§ Dr. BrayWill the Chancellor acknowledge that the so-called undertaking, which reads:
Subject to market conditions, there will be a commercial requirement for steelmaking at Ravenscraig for at least the next seven years",180 is not an undertaking at all, but an economic forecast? And, given BSC's forecasting record, does he think that it means very much?
§ Mr. ClarkeThe previous three-year undertaking was subject to market conditions. Of course it is subject to market conditions. It is the best commercial judgment that can be made. There is no other sensible proposition to put forward. The hon. Gentleman has great expertise in economic policy and is one of the more erudite Members of the House. If he suddenly got to his feet and gave in ringing tones a guarantee about the future of an industrial plant regardless of market conditions and commercial considerations, he would destroy his reputation with me and with most other people. I should regard him as an idiot. Any politician who says that his political party can guarantee the future of an industrial enterprise regardless of market conditions is an idiot. Anybody who believes such a guarantee has only to look back over the history of nationalised and private sector companies in the last few years to know that such guarantees are worthless pieces of paper, given by people who do not understand how the steel or any other industry works.
The reason why I criticise the hon. Member for seeking to undermine what he calls the undertaking is that it is extremely good news that the management, which is in the best position to know and at the moment is the most successful management in steelmaking in western Europe, is able to give as its considered commercial judgment that it will require steelmaking at Ravenscraig for the next seven years — subject, of course, as any sensible management has to say, to market conditions remaining satisfactory.
§ Mr. Malcolm Bruce (Gordon)In view of what he is saying, will the right hon. Gentleman acknowledge that his right hon. Friend the Secretary of State for Scotland gave a guarantee that he had an assurance that the mill would stay open for three years, and that he was very proud to boast about his record on that? It is well known that the management of British Steel wanted to close Ravenscraig. If it had done so, how could Ravenscraig now be there to contribute profits? Was not that guarantee necessary and beneficial to the steel industry?
§ Mr. ClarkeThe assurance on which my right hon. Friend relied and, to the extent that I was pressed about it, I relied as well when I went to Scotland during the election, was subject—[Interruption.] No doubt I left a trail of devastation behind me, but on the assurance, I was on very sound ground. Not only was that three-year assurance expressly subject to market conditions, but it turned out, despite all the doubts heaped upon it by the Opposition, to be a valid assurance. It has been lived up to, to the deep disappointment of the Scottish Labour and Liberal parties. The assurance expired at the end of three years, but was replaced by the much better assurance that we now have, that Ravenscraig steelmaking is required, in the commercial judgment of the corporation, for the next seven years, so long as market conditions allow.
§ Mr. SalmondWith regard to the Minister's foray into Scotland during the general election, I seem to recall that on a previous occasion he said that it had substantially benefited the Opposition parties. The right hon. and learned Gentleman referred to worthless pieces of paper. Was he referring to such things as golden shares? Is not the 181 scepticism in Scotland regarding the Minister's seven-year guarantee for Ravenscraig based on a realistic assessment of the investment patterns in the steel industry, which most certainly leave Ravenscraig vulnerable?
§ Mr. ClarkeThere is a £15-million investment going into coal injection plant at Ravenscraig at the moment. Investment decisions are best made by the commercial management of a company, having regard to its market needs and its judgment of the best way of serving them. The moment politicians of whatever party — Scottish National, Liberal, Labour or Conservative—start to get deeply immersed in the investment decisions of a corporation, one gets into difficulty. While this corporation continues to be nationalised, all major investment decisions above a certain size have to come to me and, unless there is some obvious flaw in them, naturally I shall tend to approve those proposals by the corporation between now and the date of flotation.
One thing that I shall certainly not do is start arguing with the corporation that its proposed investments should be altered for political reasons contrary to the commercial interests of the corporation, because I believe that, if it acts contrary to the commercial interests of the corporation, it acts contrary to the interests of the work force. If the work force at Ravenscraig looks at the assurances that it has had, which have been lived up to, it should be very cheered by the assurance which it now has of the seven-year future in the circumstances that we have given.
I do not think that the hon. Member for Motherwell, North is doing a service to British Steel or the Scottish economy as a whole by seeking to advertise the economy of his region as being much more fraught than it is in the judgment of the major employer in the town.
I have looked at the report, and it recommended that the Government should consider—and I stress that the recommendation was no more than that we should consider it — the separate sale of the plants at Ravenscraig, Dalzell and Shotton. I emphasise Shotton, because this is sometimes referred to as a separate Scottish privatisation. It is nothing of the kind. It is a Scottish and a part of Wales privatisation. Perhaps a Welsh hon. Member will catch your eye during the debate, Mr. Deputy Speaker, but I understand that the trade unions at Shotton are horrified by the suggestion. There is not much Welsh support for the amazing idea that Shotton should be swept into a separate company.
§ Mr. Barry Jones (Alyn and Deeside)Will the right hon. and learned Gentleman give way?
§ Mr. ClarkeAs I have referred to the hon. Gentleman's constituency, I had better give way.
§ Mr. JonesI can only say at this stage that if I am lucky enough to catch your eye, Mr. Deputy Speaker, I shall be able to give the House the view of the Shotton steel workers. I would rather it was me than the right hon. and learned Gentleman, but in the interests of brevity I must tell him that my steel workers wish very much to remain in one unit with the BSC if there is privatisation.
§ Mr. ClarkeThat is rather as I thought, and the hon. Gentleman will be glad to know that that was my reaction to the report. We considered such an option—indeed a whole range of options for dividing the corporation up or 182 privatising it as a whole—in detail with our merchant bank advisers and with the British Steel Corporation before our initial decision to privatise it as a single entity. I am not questioning the bona fides of Arthur Young, which is a reputable and expert consultancy company. However, it did not have access to some of the commercial information. BSC could not be expected to reveal that information because it would have been of value to BSC's competitors had it leaked out—as tends to happen even with the best will in the world. Nothing in the report issued last week cast any doubt on the conclusion that we had already reached on the basis of the better information to which we had access—that it was in the best interest of BSC, its work force and, indeed, the taxpayer to maintain the corporation in its present form into the private sector. I should make it clear that it remains the Government's intention to privatise the corporation as a single entity.
The privatised British Steel will use its independence to respond even more effectively—
§ Mr. Donald Dewar (Glasgow, Garscadden)Before the Minister passes on from Ravenscraig, let me ask him whether the seven-year guarantee — perhaps assurance would be a better word — will be repeated in the prospectus of the company at privatisation?
§ Mr. ClarkeSubject to there being no sudden changes in market forces or commercial judgment between now and then, the answer is yes. We said when it was issued that it would in effect be reflected in the prospectus.
The privatised British Steel will use its independence to respond even more effectively to the needs of its customers. By doing so it will contribute enormously to the economy, through both its domestic activity and its export earnings. The British Steel Corporation belongs in the private sector and it is there that it will best prosper. The Bill represents a historic opportunity and I commend it to the House.
§ Mr. Bryan Gould (Dagenham)The Government's reasons for bringing forward legislation are often obscure, but never more so than in this case. None of the reasons advanced by the Minister, either today or on other occasions, stands up to examination. His difficulty is that the true reasons are reasons of dogma, partiality and cowardice, and therefore cannot be stated.
The Minister puts his case in terms of the industry's success. It is that success, he says, that now makes privatisation both possible and desirable. Yet that argument is a total non-sequitur. There is no causal connection between success and privatisation. Success has been brought about with no help from privatisation and does not depend on privatisation for its continuation.
The success is of course undeniable, and it is very welcome. In terms of productivity and profitability —though not in terms of output or market share — the steel industry has indeed recovered and is now among the most successful in the world. Let us be clear how that success has been achieved. It has been achieved at very considerable expense to the taxpayer and as the consequence of very great sacrifices and contributions by the work force.
The Minister declined to estimate in his statement of 3 December how much the taxpayer has contributed over recent years, but £5 billion seems a not unreasonable estimate and that is confirmed in a written answer given 183 by the Under-Secretary of State for Trade and Industry on 15 December. In other words, the public purse has provided the necessary investment on which the industry's recovery has depended. There is no way that private owners would have been willing or able to provide the money needed to carry the industry through difficult times and to emerge stronger at the other end. If public investment was the precondition not only of the industry's success but of its survival, experience, and particularly the experience of the past 10 years, also gives the lie to the argument that the industry cannot function efficiently under public ownership. It is precisely under public ownership that the industry has made its gains in productivity and efficiency. We do not need privatisation because essential improvements are still awaited. They have already been achieved, and it is not possible to argue, on the basis of experience, that they cannot be maintained or extended under public ownership.
As so often with the Government's privatisation measures in recent years, this privatisation is produced to take advantage of industrial and commercial success, not to provide it. The steel industry provides perhaps clearer evidence of that than any other. The history of the industry shows clearly that it is under private ownership that the industry gets into difficulties, fails to invest, takes refuge in price cartels and begins to operate against the public and national interest. Under public ownership it has made the necessary investment, put its house in order and begun to serve the national interest and guarantee its future; so much for the argument that privatisation is needed to grapple with the industry's problems.
§ Mr. ColemanWould my hon. Friend like to contemplate how the British steel industry could have succeeded had we not brought into public ownership the 14 predecessor companies in 1967? Does my hon. Friend think that had those companies remained the British steel industry could have succeeded in modern conditions?
§ Mr. GouldMy hon. Friend is right. The investment record — in particular the investment record of those private companies in 1967—shows exactly what would have happened to the steel industry in the difficult conditions that it faced subsequently had it remained in private ownership.
If there is no argument from practicality, the Government's real reasons must be those of dogma—a belief in the principle, without reference to practical evidence, that it is simply wrong for the Government to be involved in the ownership and management of the steel industry. Yet that argument is equally unsupported by reason or practice. The notion that the Government can stand aloof from the future course of the steel industry is plainly nonsense. That is mainly because the industry is by its very nature extremely cyclical. Private owners will be very happy with their investment as long as the industry, its markets and profits are buoyant, but private owners quickly become disenchanted when the industry has to face tough times. It is then that the necessary investment fails to be made, and the industry gets into further trouble. Only public ownership provides the vision and long-term approach to make the counter-cyclical investment that is required.
§ Mr. Richard Holt (Langbaurgh)Will the hon. Gentleman say whether it is now Labour party policy to renationalise the steel industry after it has been denationalised?
§ Mr. GouldOf course, I expected that question to be asked at some point, although it is wholly inappropriate to this part of my speech. However, for the reasons that I have yet to develop fully, Opposition Members and the trade union movement strongly believe that the steel industry is most appropriately owned in a form of public ownership. We shall decide that form and the order of priorities by which it is to be secured when we return to power and we have no intention of having our agenda dictated by Conservative Members this afternoon.
It is impossible to expect the private purse to finance the investment that the industry requires when the going is tough. That is inevitably so.
The industry's current and foreseeable need is for annual investment amounting to about £300 million. That can be financed at present levels of profits, but, as one of my hon. Friends said earlier, it would require only a slight change in market conditions or comparative costs to throw that into jeopardy.
The industry is cyclical because it requires substantial investment in expensive plant to compete, and it can provide a return on that investment only if it is used at or near capacity. If it is required to run below capacity for any length of time, unit costs rise alarmingly and profitability is immediately threatened. That threat occurs all too frequently because the industry is sensitive not only to movements in its own costs and to the intense competition which it inevitably faces, but to the level of demand in the industrial economy as a whole.
A cold summer can mean a lower than expected demand for tinplate because less beer is sold; an industrial dispute in the car industry can reduce demand for hot rolled coil; and that is to say nothing of such matters as movements in the exchange rate which, at the time of the 1980 steel dispute over a possible 2 per cent. increase in overall costs, managed to raise British prices by 40 per cent. over Japanese prices without anyone in the Government appearing to notice. Of course, the customer did notice.
That vulnerability to cyclical movements is exacerbated by the international, and particularly the EEC, context in which the industry has to operate. The EEC concludes in its latest report that there is still 30 million tonnes overcapacity in the EEC and that a further 80,000 jobs will have to be shed. The present reaction of the British industry is, understanably, to take the high ground—to say that in view of its present strength it is not dependent on EEC regulation of the industry and that it could well expect to survive and flourish in a free market. That is why the net of the quota system is widely welcomed, with our support, as providing a real opportunity for the British steel industry to make progress. There is certainly a powerful case at present for resisting any further pressure for cuts. We only wish that the Government had taken that line a little earlier because the British industry has already taken its medicine and a good deal more.
No one can be confident that the present advantages that we enjoy in terms of cost and efficiency can be maintained over a long period, particularly given the uncertainties introduced by privatisation. It is impossible to say that within a short time, for the cyclical reasons that 185 I have given, we shall not again be fighting for the industry's survival. In those circumstances, the notion that the Government can wash their hands of the industry, particularly at a time when other EEC Governments are becoming increasingly involved with their steel industries, simply cannot be sustained.
The question asked by my hon. Friend the Member for Workington (Mr. Campbell-Savours) is relevant and must be answered. What would the Government's attitude be if they found the EEC context and market conditions generally as adverse as they have been at certain times during the past decade? Would they stand by and refuse to intervene or, as some of us suspect, would they be forced, for the reasons that I am about to deploy, to renationalise the industry, as they have done in other cases, notably Rolls-Royce? We are again forced to the conclusion that private ownership is at best a fair-weather friend. The Government and the taxpayer will again be called to the rescue, in both an EEC and a national context, when the going gets rough, as assuredly it will.
We can be confident of that conclusion because the steel industry cannot be allowed, when in private hands, to follow the course which would normally be followed when an industry ceases to be viable. The steel industry may, as the Minister explained, no longer be quite the commanding height that it once was — many of its customers have since changed to other materials—but let there be no misunderstanding that it remains a fundamental underpinning of our industrial economy and of great strategic importance to our future development. It is unthinkable that it should be allowed to disappear, be substantially reduced in size or pass into non-British hands. The loss of a sizeable indigenous steel industry would be a body blow to the British economy and would render us incapable of providing from within our own resources the basic materials needed by our armed forces in time of war. Public ownership remains the only guarantee that the steel industry will be sustained.
If the Government's ideological prejudices provide no acceptable rationale for the measure, their other reasons are no less disreputable. The privatisation will provide the usual bonanza to private interests who, having allowed the taxpayer to pick up that sizeable bill for so long, will now step in and expect to pick up the profits. That is to say nothing of the huge fees and commissions for which City institutions are already queuing up and which they will expect to charge for their part in this charade.
It may be, too, that the Government are keen to privatise because they are anxious to put a privatisation programme, much undermined by the British Petroleum fiasco, back on the rails, politically and financially. But it can surely hardly be the case, given all the boasting about how much money the Chancellor now has at his disposal, that the sale is needed to raise the cash. But some explanation is required for the unseemly haste with which this privatisation has been rushed forward.
It is only a matter of months ago that Ministers and British Steel were talking of a three or four-year time scale for privatisation, following a well-established track record of profitability. What has happened to change that perspective and to produce the current urgency? Do the Government know something that we do not? Is some window of opportunity about to close? Why have past statements been so quickly jettisoned? The Minister looks 186 puzzled, but why is the measure now being brought forward with such haste when it was mentioned neither in the manifesto of less than a year ago nor in the Queen's Speech of a few months ago? We need some explanation for this sudden volte face.
It is for all those reasons that we believe that privatisation is a disastrous option to take. It subjects the industry to disruption and uncertainty at a time when it needs to build on the successes achieved by the present regime. It offers short-term profits to private investors at the expense of a fair return to the taxpayer and at considerable risk to the industry's future investment needs. Moreover, it does so without any measureable benefit to the industry itself. That is why we oppose the Bill. Let there be no doubt that we oppose the Bill outright. We shall fight it, with total support from the trade unions involved, throughout its passage through the House.
Quite apart from the threat to the industry as a whole, and the quite unnecessary jeopardising of its future, there is a specific threat to the future of the plants at Ravenscraig and Dalzell under the privatisation proposals. The Minister, in his statement to the House on 3 December, gave what he claimed was an assurance about their future. But, as has already been pointed out, a moment's consideration of what he said on that occasion will show that any apparent guarantee was illusory. He made it clear that the only firm guarantee about Ravenscraig runs out at the end of the year, in 10 months' time, and any further decision on its future will be made by the new private owners on commercial grounds and according to market conditions which they themselves, by virtue of their plans for reinvestment, or rather the absence of them, will largely control.
As I have already explained, the considerations to which the Minister is now prepared to entrust Ravenscraig and its future would have meant the closure of the whole industry at almost any time over the past decade. The only thing that has now changed is that the Government clearly hope that by divesting themselves of the industry through privatisation they will also succeed in divesting themselves of the political responsibility for what happens to it and its constituent parts. It is clearly the Government's hope that they will be able to leave to private owners and market forces a decision which, politically, they have been too lacking in courage to take themselves.
I must warn the Government that they will not succeed in that hope. Even if the Bill proceeds, I put the Government on notice that they will be held responsible for the future of the 11,000 jobs and £100 million worth of wealth-creating capacity in Scotland which depends on Ravenscraig. We shall not accept arguments to the effect that those issues are entirely a matter for commercial judgment. They remain issues of the greatest importance to the economic well-being of a whole community and as such their resolution is the Government's responsibility. That community, with the full support of the Labour movement, will fight, both politically and industrially, to save the plant, the industry and those jobs, and to make the Government face their responsibilities.
If the Government think that they can shuffle off their responsibilities by claiming that the decisions are for private owners and have nothing to do with them, they have another think coming. [Interruption.] The Minister may say that that is an empty threat. We shall see, but the fact that he can use such a phrase shows very well what is in Ministers' minds.
187 We want to know what the Minister will do when, as is all too clearly presaged in the weasel words of his 3 December statement, the private owners propose to close Ravenscraig. We want bankable guarantees, which the Minister ought to give now, on the maintenance of those plants and the reinvestment programmes that will be needed to keep them viable. Other specific questions need answers. The Minister has provided at least partial answers to some of the questions that I intended to raise, particularly on the writing off of debts, and I shall be interested to pursue that with him in Committee. However, there are other questions to be answered.
What provision is to be made to ensure that control of the industry remains in British hands? Is the Government's apparent indifference to the issue on the same level as their indifference to the growing Kuwaiti stake in BP, or does the Minister accept the strategic argument that makes British ownership and control of the industry essential in our industrial and defence interests? If so, what does he propose to do to safeguard the position? He has said nothing about that today. Will it be a golden share, or is the experience with Britoil too painful to repeat? Will he take a Rolls-Royce solution and fix a limit for foreign shareholdings, at 15 per cent. or a similar figure —something he appeared to rule out on 3 December?
What has been done—this question was raised by my right hon and learned Friend the Member for Aberavon (Mr. Morris) —to safeguard the pensions interests of the work force? Is there to be a rejigging of pension arrangements to suit the interests of new private owners, as we have seen in some other privatisations? What date is proposed for the flotation, and what form will it take? What is to be said about EEC quotas in the prospectus, and what will be the initial target investment level? The Government's plans for the industry — I assume that they must have plans—are meaningless unless we receive some answers to those questions.
§ Mr. Campbell-SavoursWill my hon. Friend also press the Minister vigorously about what will happen if the new company starts to make losses? The national interest is at stake. Steel is a strategic industry, and I feel that we are entitled to know what will happen to it. Will it be allowed to go to the wall in sectors in which the product is of strategic importance, or will the Government intervene? If they do intervene, in what form will they be willing to do so? They must have considered those matters in advance.
§ Mr. GouldMy hon. Friend is right. This is the nub of the issue, and we have yet to hear anything sensible, helpful or constructive from the Minister on what is a vital and central problem.
We also need to know what safeguards will be provided for consumers and steel interests against unfair exploitation by British Steel in private ownership of its near monopoly. What guarantee will we have that British Steel will not become more and more a steel importer and marketer, rather than a steel producer?
The Bill is the product of suspect ideology, political cowardice and the Government's familiar readiness to provide goodies for their friends in the City at the expense of those whose livelihoods depend on a continuing and thriving steel industry. It is a product of a typically short-term attitude—the attitude that says that it is right to cash in on short-lived profitability rather than to make long-term provision for the industry's investment needs. It 188 is the product of a cavalier approach to national security and to our industrial future, and of a blind faith in market forces which, as bitter experience should by now have taught us, is a recipe for disaster. It is because we care about our industrial future, about the steel industry and, above all, about those who work in it and have made such a contribution to its current success that we will oppose the Bill.
§ Several Hon. Membersrose—
§ Mr. Deputy Speaker (Sir Paul Dean)Many hon. Members with strong constituency interests are hoping to speak. I appeal for brief contributions.
§ Sir Giles Shaw (Pudsey)It is interesting to hear the hon. Member for Dagenham (Mr. Gould) give such a weighty address about his views on nationalisation, denationalisation or renationalisation. I wonder whether he would use the same language when speaking to the Ford motor company in his constituency to find out its views on the long continuity of employment—to which, no doubt, he is wholly devoted.
It comes ill from the hon. Gentleman to castigate the Government, and to accuse my right hon. and learned Friend the Chancellor of the Duchy of Lancaster of dogma, partiality and cowardice, when we have just heard a fine demonstration from the hon. Gentleman of all three. My hon. Friend the Member for Langbaurgh (Mr. Holt), in a telling intervention, asked the hon. Gentleman what kind of policy he would pursue. I think that we can agree that the hon. Gentleman genuflected to dogma; he certainly referred with pride to nationaliation as a major part of the historical development of British industry. He was clearly partial as well, because he gave a partial response to my hon. Friend by suggesting that there would be some kind of public ownership, and he showed complete cowardice by refusing altogether to give any cast-iron assurance or guarantee on what exact form of public ownership would be used.
We have heard the Opposition Benches erupting into enthusiasm to try to obtain some kind of copper-bottomed guarantee on the future of a certain steel works in a certain part of the United Kingdom. I think that the hon. Member for Dagenham has let the side down pretty badly in entering the debate with a series of half truths. Not a single Scottish voter will sleep safely in his bed, wherever it may be.
My right hon. and learned Friend the Chancellor of the Duchy of Lancaster has brought a most important measure to the House, and I congratulate him on his courage in doing so. He is wholly right not only in what he seeks to do, but in the manner in which he seeks to do it. It is amazing that the transformation of the British Steel Corporation has achieved such a turnaround from a scale of loss to a scale of profit unmatched in the private sector during a comparable period. I echo the view expressed on both sides of the House, as well as by my right hon. and learned Friend, that that significant achievement was only partially due to the Government's policy towards the British Steel Corporation. It was largely due to the fact that the management and work forces in the various plants took on board the crucial importance, following the lean and desperate uncompetitive years of the 1970s, of refashioning their operation—of going for productivity, 189 customer satisfaction, price and investment. The management of BSC, led vigorously and effectively by chairmen of various kinds, have brought the company to its present profitable state.
I must pay a particular tribute to the corporation's existing chairman, the old anvil-hammerer of Wagnerian opera Sir Robert Scholey. Even he must now feel that the achievement of a privatised corporation is within his sights after so many years of trying.
§ Mr. ColemanLet me put to the hon. Gentleman the same question that I put to my hon. Friend. How does he think that the achievement would have been possible if the 14 companies that were taken into public ownership in 1967 had still been operating in the industry?
§ Sir Giles ShawI think that the hon. Gentleman has provided the answer to his own question. Obviously, if those 14 companies had not been taken into public ownership, there would not be a Bill taking their ownership back into the private sector. I am quite willing to argue with him that the 14 companies might well have been replaced by 24 other companies specialising in the production of British steel and services.
We have to satisfy Opposition Members on the question whether the security of state control will somehow guarantee jobs and development to a greater degree than would the private sector. Sir Robert and his team have now reached a point at which it is possible to privatise the corporation, and I am glad to learn from my right hon. and learned Friend that that could happen in months rather than years. The sooner it happens, the better.
I pay tribute to my right hon. and learned Friend for deciding to privatise the corporation in whole. The British Steel Corporation, as presently constituted, is a major asset for the United Kingdom. However, its prime role in the marketing of steel and steel products is essentially not a United Kingdom role, but a European and international role. The only future for the British Steel Corporation, whether in public or private hands, is to be able to compete Europe-wide in a market that is sufficiently large for the corporation's present share to look comfortingly towards successive periods of growth. If my memory serves me correctly, it has a 2 per cent. share of the European steel market—that is a low share.
From the point of view of the corporation's future— I trust that it will be in private hands—Europe will be where its future competitive growth will mainly lie. There are two reasons for that. The first is the huge contribution that has been made by the work force and the management to restructure the corporation from within. The second reason relates to the consequences of those ghastly years of contraction, of obsolete plants being closed and, if my memory serves me right, of the loss of more than 50,000 jobs from the numbers employed in the heydays of the 1970s. All that has left the British corporation with a much higher rate of productivity and competitiveness than any of its European competitors. However, its only prospect of competing in the European Community is to maintain its present scale of operation.
I hope that none of my hon. Friends disputes the principle of the Bill. It would be sheer folly to divide and break up the corporation from its present size. Looking around the European market, at the giants of Thyssen and 190 at the French and Italian companies and beyond them to Nippon, Pittsburgh and Bethlehem, one sees that those huge companies have grown to significant sizes and it is not possible to compete with them in the international arena for steel products and steel production unless the United Kingdom component is of a comparable size. Therefore, the single structure that my right hon. and learned Friend has chosen is the correct one.
I believe that the window of opportunity to which the hon. Member for Dagenham was looking is crucially to be observed. It is a window through which to see that as we move to a termination of the quota system within the European Community, the British Steel Corporation, in private hands, will be able to develop a significantly increased share of the European market. I must press my right hon. and learned Friend on the European issue. Obviously, I understand that that will be more closely addressed in the following debate, but perhaps my hon. Friend the Under-Secretary will at least say that the background to the Bill must be that the steady and, I trust, orderly return to a market in steel and steel products in the European Community should be the proper context in which a privatised corporation can work. If that context is not both orderly and sensibly arranged, it will be difficult to make full use of the new assets that we possess in a steel company with high rates of productivity, competitive prices and a much improved product basis.
I sincerely hope that the development of a free market in steel will be accompanied by significant reductions in overcapacity of other member states. As the hon. Member for Dagenham rightly pointed out, the British Steel Corporation has substantially reduced its overcapacity in past years. With the possible exception of rolling mill overcapacity, it has eliminated all the overcapacity that previously existed, at vast cost to the taxpayer and vast sacrifice to its work forces. If we are to move successfully into the private sector, it is crucial that the European market for steel should likewise address itself to its overcapacity before the British Steel Corporation can rightly look forward to a more profitable future.
We face somewhat difficult positions in relation to debt and accumulated profit and loss. I understand my right hon. and learned Friend's point. I recall that the European provisions on competitive practices are such that a significant debt write-off might be seen as anticompetitive. However, I beg my right hon. and learned Friend to examine more carefully British Steel's position in terms of both accumulated debt and accumulated loss to see whether there is a formula whereby some of the indebtedness from either side can be reduced prior to placing the corporation in the market.
I would not wish shareholders or investors to find that their first act might be trying to write off from generated revenue huge amounts of accumulated loss. They may well make application for a redress of the balance sheet, as my right hon. and learned Friend suggests, but if this is a form of privatisation, it is a pretty miserable form of privatisation which has an albatross of that size slung round its neck.
In my judgment, the Bill is correctly timed. It is the correct decision. It is not a decision based on simple dogma or even on the expediency which the Government may have wished to use when finding themselves with a corporation on their hands which has made profits so 191 rapidly. It is in the correct order of magnitude that the corporation should take its place among the largest private steelmakers in the world. I wish it well.
§ 6.5 pm
§ Mr. BruceIf my calculations are correct, the Bill represents the fifth change of ownership for the steel industry in just over 40 years. Therefore, in some ways the House may not be surprised when I say that I hope that it will be the last, although some of the questions raised suggest that it may not be quite as definitive as that. It is apparent that the Bill has been brought forward in something of a hurry compared with the original proposals, for reasons that have not been fully explained to the House, other than that the industry now appears to be in profit and, of course, the privatisation of electricity looks like slipping further down the schedule, and the Government wish to ensure a rolling programme.
Speaking after the hon. Member for Pudsey (Sir G. Shaw), it is worth recalling that profitability has been achieved at a substantial price. That price would not have been freely available to a private sector corporation. I am referring to the public write-off of a £3.5 billion debt, which has been accompanied by dramatic reductions in capacity and in the work force. The British Steel Corporation employed 24 per cent. of the total number of people employed in the steel industries in the European Community in 1975, but now accounts for only 14 per cent. of employees. That demonstrates the degree to which the British Steel Corporation has reduced capacity at a far faster rate than any of our European competitors. If it is any small consolation to the Chancellor of the Duchy of Lancaster, that is why I wholeheartedly agree with him that we have carried our share of the cut and should not have further quotas imposed upon us. Indeed, we should be able to benefit from a lifting of quotas which, I hope, will proceed rapidly.
It is a fair reply to the interjection from the hon. Member for Langbaurgh (Mr. Holt) to say that it is a reasonable challenge to the Labour party to ask whether it would renationalise the British Steel Corporation. It has certainly never been our view that one should wish to commit to change and to reverse policies for ideological reasons. However, the House must confront the possibility that the steel industry is crucial to the bedrock of our economy. What would a Conservative Government of the present complexion do if, after the flotation, given the considerable difficulties that steel has faced nationally and internationally over the years and the investment that has taken place, especially in Third world countries, our privatised steel corporation got into substantial financial difficulties?
I agree that nationalisation is not the only solution. However, I hope that whoever replies to the debate will give the House an assurance that there is a recognition that the strategic core of steelmaking capacity must be retained. I agree absolutely that ideally, in all reasonable circumstances, that core should be efficient, profitable and successful, rather than dependent on subsidies and acting regardless of proper rules of economic efficiency.
The reductions that have taken place mean that the British Steel Corporation now employs 59,000 people—that figure is a little out of date and the actual number of employees may have dropped —compared with 184,000 in 1975. The corporation produces about 12 million tonnes, although a 14-million tonne capacity is its stated 192 aim. However, it accounts for only 2 per cent. of the European Community market and that is obviously well below the target that we hope it may achieve. Such are the general circumstances in which the Bill has been introduced.
We are also left with the problem of the carry forward of a £700 million deficit which has not been written off. Against the background of an external financing limit of minus £300 million, which suggests that the corporation will not, apparently, be allowed to carry forward a profit against the accumulated deficit, is the Minister satisfied that the rather complicated formula that he explained to the House meets the European Community requirements? I believe that that formula is rather transparent and I am not sure that our European partners will be ready to accept it. However, if that is the case, obviously it is proper that anyone buying shares in the new corporation should do so in realistic circumstances rather than simply writing off the accumulated debt.
Inevitably, representing a Scottish constituency, I speak with some concern about BSC's operations within Scotland. Indeed, the reasoned amendment tabled by my colleagues and to which I have put my name makes it clear that our main concern is not with the principle of the sale of the steel corporation, but with the future of the industry in Scotland and the rights of the employees to ensure that they have a substantial stake within it. I was rather disappointed that the Minister, in his fairly long opening speech, did not address himself to that problem. I believe that the opportunity for the employees to secure a substantial stake is something which the steel unions and the employees rightly expect. I hope that such terms will be offered and will be attractive to ensure that those employees secure a substantial stake.
I was interested in what the Minister said about the future of Ravenscraig and the future of the Scottish steel industry. If I interpreted him correctly, he said that the Secretary of State for Scotland's proud boast that he had used his influence to secure the future of Ravenscraig through a given period — conveniently, during the last general election — was a worthless guarantee. The Minister said that his right hon. and learned Friend's guarantee was not what he had claimed it to be and that had he been Secretary of State for Scotland — God forfend — he would not have secured such a worthless guarantee and nor would he have made such a substantial claim for it. At least we have no reason to complain that we do not understand the Minister's position.
The Minister should be aware that within Scotland there is much concern—private and public—about the sustained hostility demonstrated by the management of BSC in general and by the current chairman in particular to the continuation of Ravenscraig. It can be argued that, if the Secretary of State for Scotland's guarantee is significant and if he succeeded in persuading BSC not to close Ravenscraig, that plant would not otherwise be operating to make a contribution to the profitability that has enabled the Government to in