I beg to move,
That this House takes note of the Report of the Iron and Steel Board for the year ended 31st December, 1961 (H.C. 213).
This is the first debate that we have had on the affairs of the iron and steel industry for a considerable time. I hope, therefore, that I may begin by saying something about the present state of the industry. I apologise to the House in advance for the fact that the first part of what I have to say includes a number of figures.
After the expansion in the early months of last year, the balance of payments difficulties led to the corrective measures which were taken by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) in July last year. Partly as a result of this, there was a reduction in fixed investment and expenditure on consumer durables, with a consequent slowing down in the economy towards the end of last year. None the less, industrial production in 1961 was slightly higher than in 1960.
In the last quarter of last year there was a significant fall in steel consumption. There was an even more significant fall caused by the reduction in stocks. Compared with the previous year, steel consumption in 1961 dropped by 600,000 ingot tons, but lower stocking reduced the demand by 2 million ingot tons, and although this was partly offset by reduced imports, the net effect of the changes was that steel production last year dropped by more than 2 million tons to just over 22 million tons, with a use of capacity of about 83 per cent.
Coming to this year, the low consumption requirements have been aggravated by consumers using up stocks of com- ponents, while stocks of finished steel are still being run down. In the motor industry, which had a relatively bad year in 1961, prospects have improved due to increasing exports. While this was good for the wide strip mills, the steel industry was otherwise working well below capacity. For example, in Scotland and the North-East, where the industry's close connections are with heavy engineering, including shipbuilding, the rate of operation in the first half of this year was down to 60 per cent. of capacity compared with 76 per cent. for industry as a whole.
I hope I may be forgiven the platitude that the recovery of the industry depends more than ever on a return to normal consumption by the steel-using trades. I think the remark is not quite so obvious as it might be because the slowing down of the draw on stocks will bring some relief, but it seems likely that the future level of stocks will be lower than in the past owing to the existence now and the existence in the foreseeable future of adequate steel-making capacity.
But in this otherwise sombre picture there is one very bright spot. In spite of the very strong competition at the end of last year from European, Japanese and American producers, which caused the actual rate to slacken, exports of finished steel in 1961 were nearly 3 million tons, the highest figure since the war, and as imports of steel fell sharply from the high level of 1960, the net exports in 1961, more than 2½ million tons, were the highest ever recorded.
No industry can stand still, and the iron and steel industry least of all. It is essential that its new and up to date capacity be increased and that the old plant be gradually closed down. I want to say something about these closures, because they very often bring serious and urgent problems, particularly for the older workers, in areas where there is no strong alternative demand for labour.
When there is little margin between demand and productive capacity, obsolescent plants tend to enjoy a year or two of prolonged life. On the other hand, where productive capacity exceeds demand, the opposite happens and the closures are accelerated. Recently, as has been brought to my attention by conversations with a number of hon. Members, there have been several difficult cases where the transfer of workers to newer plant has not been easy. I want to say that my right hon. Friends the Minister of Labour and the President of the Board of Trade are most anxious to take the positive steps of putting into new employment workers who have lost their jobs in odd plants and of bringing new industry into areas which need it.
In one sense, these difficult problems have been thrown up by the developments carried out by the industry itself, but without these developments we should face even greater difficulties in the future in competition with foreign producers who are rapidly and continually modernising their steel-making capacity.
A Special Report on Development was issued in April last year by the Iron and Steel Board. Since then there has been a considerable change in the economic climate, but the industry's difficulties since the publication of the Report have certainly done nothing to shake the Board's faith that the objectives of the plan are still correct. The plan aims to provide about 32 million ingot tons of modern and efficient steelmaking capacity by the middle of this decade. This was thought to be the appropriate crude steel capacity which would be sufficient to meet demands estimated at 29 million ingot tons—I quote the Iron and Steel Board's Annual Report—
on reasonably optimistic assumptions about the growth of the economy, and to provide an adequate margin for contingencies and fluctuations.
Most of the individual companies' development schemes are also going ahead as planned, with the exception of some schemes for light re-rolled products and the expansion of pig-iron production at Appleby-Frodingham. Altogether, in 1961, the industry spent nearly £200 million on development, largely due to the strip mill programme reaching its peak investment then. Investment this year will be rather less but still probably above the level of 1960.
Although for some time ahead productive capacity will outrun demand, it would be quite wrong, for these reasons, to suggest that the industry's investment plans and the Iron and Steel Board's Development Report were misconceived. For reasons we all know, the economy has not moved forward as quickly as was expected early last year, but in the past, as we also know, the industry has been criticised for lack of sufficient capacity and it is quite clear to anyone who knows anything about this industry, or even to people with common sense but no special knowledge, that these new plants cannot be brought into production exactly at the same time as demand increases or even at the same time as demand happens to be growing.
After long periods of planning and construction, vast additions to the country's productive capacity take place almost overnight, and it is quite impossible to synchronise these changes with movements in demand. Nowhere has this been more evident than in the production of sheet steel and tinplate. The remedial measures for post-war shortages which were planned long ago are about to go into production, as I have said.
The Government, as the House knows, underwrote two important projects. First, there was Colvilles hot strip mill at Ravenscraig, which is not far from completion and should be working this autumn. Then there was the associated cold reduction plant at Gartcosh, which was completed last year and has been working successfully on bought-in coil.
When agreement about Colvilles scheme was reached with the Iron and Steel Board, the Government agreed to lend up to £50 million. Last year the company agreed with the Government that the maximum should be £45 million. But, as I announced on Monday, it has now been found necessary to reinstate the maximum of £50 million. I explained at the beginning of my speech this morning that it is in heavy products that trading difficulties are most severe. Heavy products are the mainstay, as the hon. Member for Motherwell (Mr. Lawson) knows, of the company's business, and they naturally affect its ability to finance the new strip mill. But the prospect for sheet, on the other hand, and its importance to the Scottish economy, leave the Government quite confident that the decision to support the company's scheme was wise and that the installation of the new capacity will be justified.
The other main project, the Spencer Works at Llanwern, is due to be opened by Her Majesty the Queen in three months' time. The first battery of coke ovens and the first blast furnace have now been working for some weeks. Successful trials have been carried out on the universal slabbing mill and the first steel was made last week.
Here, the Government provided a loan of £70 million, and I have little doubt that this investment will be justified, because, without new sheet capacity, any increase in activity in this country would create conditions of scarcity and the need for substantial imports. Unlike at any time since the war, the country will now have sufficient supplies of this essential commodity to meet any demands which increased economic activity will inevitably bring. It will also have competitive, modern plant ready to meet other demands, and this is the situation for which I foresee the Board earning great praise instead of the criticism it frequently incurs at the present time.
From various quarters.
I want to deal now with the question of fuel supplies to the industry, in which the hon. Member for Motherwell and other hon. Members have recently expressed interest. I have been left in no doubt by him and other hon. Members of the importance that rightly attaches to this aspect of the industry's operations. The Board's Report, for instance, comments on the Government's refusal last year to allow imports of American coal. As a result of my recent reappraisal of the coal industry's future with the National Coal Board, I was not satisfied that freedom to import coal would bring to importers gains sufficient to outweigh the disadvantages to the country as a whole.
In this examination, I had to take into account a number of factors. One was the investment which had already been made in our own coal mining capacity. Another was the special problems which at present face the coal industry. A third and most important factor was the possibility of our entry into the European Coal and Steel Community. There was also, naturally, the difficulty of limiting the quantity of imports to a figure we could physically handle without very large investment in port facilities. Yet another potent factor was the very probable rise in freight rates across the Atlantic if substantial quantities were imported.
My right hon. Friend the President of the Board of Trade therefore announced yesterday that there would be no change in the present policy on imports for the time being. Again, the Iron and Steel Board drew attention in its Report to the effect, especially in Scotland, of selective coal price increases at the beginning of 1962. I have explained, in answer to Questions in this House and to an Adjournment debate by the hon. Member for Motherwell, the need not only to regard the fortunes of steel industry but also the fortunes of the coal industry and to ensure its viability.
I pointed to the losses incurred by the National Coal Board by its operations in Scotland, and I hope that I made clear to the hon. Member what I believed to be the great danger if the alternative of a general national increase had been adopted by the National Coal Board instead of the selective price increases which it decided upon earlier this year. The Report also referred to the fuel oil tax.
I am grateful to the right hon. Gentleman for his attempt to explain this matter in some detail. He is making the point that the decision not to permit imports of coal—and I am not arguing about that at this stage—was taken on the basis of the general national position. As has been pointed out to him and may be pointed out again, the coal policy is discriminatory and falls most severely on the Scottish sited industry. Is it fair to decide on the basis of what is good for the nation as a whole and at the same time operate a discriminatory policy injurious to one part of the nation?
I see the point which the hon. Member is making, but if the coal imparts were allowed the effect on the investment made by the Coal Board in Scotland as in other places would also be very serious indeed. A major fact weighing with me and my right hon. Friend the President of the Board of Trade against permitting imports of coal at present was that the effect on the present investment in our coal mining capacity in Scotland and elsewhere would be very serious. That is why we decided that for the time being the imports should not be allowed.
Does not the right hon. Gentleman agree that it is no solution to our overall coal and steel problem in Scotland in effect to transfer the losses which are incurred on coal to the steel industry in Scotland?
I do not think that that is the position, because, as I have tried to explain, although I recognise that the increase in coal prices in Scotland certainly has an effect on the steel and other industries, that effect is relatively marginal, whereas the effect on the coal industry, unless there were selective price increases in Scotland, would have been very great indeed. As Lord Robens has recently announced, his objective is to see that the Scottish coalfield covers its operating cost whereas the interest charges will be borne by the other divisions. I should have thought that that was the basic minimum which the coal industry must attempt, and it is the objective which it has set before it. No doubt hon. Members will have the opportunity to make their views more widely known and to state them at greater length during the debate.
I was going on to mention the Report's reference to the fuel oil tax and its effects on the costs of the steel industry. As the House knows, this tax was imposed last year for fiscal reasons. It is very difficult—and I have spent a lot of time trying to do it—to make accurate and valid comparisons of fuel costs here and in Europe, but the studies I have made suggest that on average fuel costs for British industry, taking oil and coal together, are not heavier in this country than in the countries of our main Continental competitors.
I should like to say something about the negotiations now taking place with the European Coal and Steel Community. I think that the House wall expect me to say something about these negotiations, their implications for the industry and the possible future of the Board, and the effect Which they may have on our own pricing system. As the House knows, my right hon. Friend the Lord Privy Seal began the negotiations in Luxembourg last week. I hope that the House will forgive me if I first point out some of the differences between the Treaties of Paris and Rome which seem relevant to the questions which I have to pose.
First, the High Authority of the E.C.S.C. is financially independent and can impose levies, while the European Economic Community is dependent on its member governments for finance. Further, the High Authority has power to raise loans and to re-lend for investment, and to determine pricing rules. Secondly, and more important, the coal and steel Common Market already exists, whereas the Common Market for other commodities is still in the process of creation.
While there are similarities between the two Treaties, there are also differences of emphasis. Tariffs are to go in both cases, but they are to go more quickly in the European Coal and Steel Community, and my right hon. Friend has said that we would be prepared, by mutually agreed dates, to abolish all tariffs and quantitative restrictions. Secondly, Commonwealth questions are raised by both Treaties, but they look like being less difficult in the case of the Treaty of Paris than comparable questions for the European Economic Community. Thirdly, of course, under both treaties unfair pricing practices are not allowed.
If we accede to the European Coal and Steel Community, we shall find it necessary to make very considerable Changes in our pricing system. One of the difficulties which we shall have to overcome is the question of the transport element in our pricing requirements. The pricing rules of the E.C.S.C., as the House knows, require each undertaking to publish its prices. They also allow any undertaking to match, but not to undercut, the delivered price of any other undertaking in the Community. These pricing rules naturally have an effect on the system—our system at present—whereby maximum prices are determined by the Iron and Steel Board.
The Board would be precluded from fixing maximum prices and prices would come to depend on competition among the Community's undertakings. At the same time, non-discriminatory pricing and rules against uncontrolled undercutting would help to maintain stability.
I am sure that it is, and I am also sure that the hon. Member will have a chance to develop thoughts which I think I see in his brain.
This new system of pricing will need practice, and the Iron and Steel Federation, with the encouragement of the Board and my own full support, plans to hold a rahearsal if and when it is reasonably certain that we shall enter the Community, subject, of course, to continued supervision by the Board
The Board's other important power at present under Section 6 of the Iron and Steel Act is to veto investment, but, naturally, because of the possibility of conflict with the High Authority in the event of Britain's joining the European Coal and Steel Community, the Board would not be able properly to continue to exercise this power of veto. Therefore, these two important powers, fixing maximum prices and vetoing investments, will go if we join the Community and, naturally, the loss of these two powers by the Board raises the question of its future.
I am giving and shall continue to give this very careful thought, but I should like to tell the House that my consideration so far suggests that a decision to join the Community would not necessarily mean that the Board should be wound up. The High Authority's duty will be to the Community as a whole, but Her Majesty's Government is clearly vitally interested in the well-being of our own steel industry at home. In my opinion, the Board has shown itself in the past to be an effective instrument of supervision, and I feel that we should examine the possibility of adapting the Iron and Steel Board to continue supervision over certain aspects of development.
It is much too early to take a final decision about the best organisation for the future, but it would be very unwise lightly to annihilate this body which has performed a most useful function for nearly a decade and which may well have a useful part to play, particularly as the work of the National Economic Development Council develops.
I have tried to give a picture of the present state of the industry and of its development preparations for the future. Things are not easy either for the industry or in the economy at the moment. This was fully debated yesterday, and I do not think that this would be the opportunity for me to recapitulate it. It will be some time before there is a substantial improvement, but the upturn in the economy will now be backed by a sufficient capacity in this industry not only in quantity but in quality, among the most modern and up to date in the world.
The steed industry is in good shape preparing and prepared for future expansion, and this at a time when we may be entering the Common Market when we shall be needing all the help that we can get from such plant towards improving our balance of payments by direct steel exports and by offering first-class material at a low cost to our engineering industry on which our future prosperity must depend.
The right hon. Gentleman has given us an interesting and valuable review of the situation in the steel industry. He started by calling our attention to the different ways in which the slack in the economy had affected different sections of the industry, and I shall return to this a little later.
The right hon. Gentleman said that net exports last year were the highest ever recorded. Before we get too excited about this, let us remember that the consumption, or use, of steel in the world is expanding rapidly and that exports of steel are also increasing rapidly. What we cannot claim is that we are doing as well as other steel exporting countries. While our exports may be higher than ever before, we should not delude ourselves into thinking that we are doing well. We are not. The other steel exporting countries are doing far better than we are, and our share of world markets is relatively small.
The right hon. Gentleman thought that the Board's plan for an increase in capacity up to 32 million tons of crude by 1965, as set out in the special report of April last year, should be supported. I am sure that hon. Members on both sides support this. I do not think that anyone holds the view that in consequence of any recession through which we have gone we should have second thoughts about having an industry of this size by 1965. Indeed, if we are to have second thoughts, I should like them to be about having an even larger industry rather than a smaller one.
I think all hon. Members on this side of the House support what the right hon. Gentleman said about the Government backing the development of Colvilles strip mill in Scotland. Without this kind of production Scotland's economic prospects would be dim indeed, and it is obvious that with the industry running at about 60 per cent. capacity it is unlikely that the company could raise the money to carry through this development which is so badly needed.
The right hon. Gentleman said a little about the request by some companies in the steel industry for a licence to import coal from the United States of America. I was a little concerned when the right hon. Gentleman said that there would be no change in the meantime. This rather suggested that the Government still had an open mind on the subject and that they might at some time change their policy and give these companies permission to import such coal. If the Government granted permission for this coal to be imported, these companies would import coal which was not produced and transported in accordance with normal commercial practice. They would import coal, the transport of which was being subsidised, and it seems foolish for us to contemplate undermining our coal industry still further by insisting that it must pay its way and not have a subsidy of any kind, and yet allow the import of coal the transport of which is being subsidised. We must support not only our steel industry, but our coal industry, and there is no reason to believe that by maintaining the present policy of not allowing the import of coal the fuel costs of our steel industry will be higher than those of its competitors on the Continent.
I do not at this juncture wish to say much about the possible or probable effects on the Board or the steel industry of this country of our going into membership of the Coal and Steal Community. This is a big question worthy of considerable discussion. I have endeavoured to discuss this matter with leaders of the steel industry and with spokesmen of the British Iron and Steel Federation. We all know their views, because they have been published, but I have tried to discuss this subject with them in detail because it is a complex matter and an extremely important one. If, however, we spend too much time discussing it today, we shall lose this rare opportunity of discussing the state of the steel industry, and I shall therefore say no more about it.
The recession in trade in the past year has had more serious repercussions on the iron and steel industry than on industry generally. As the Minister made clear, with the iron and steel industry running at about 76 per cent. capacity, and with some sections of it —the wide strip mills in particulars— running at near capacity, other sections have been running at very much less than 76 per cent. capacity, and, as the right hon. Gentleman made clear, in the North-East and in Scotland they have been running at about 60 per cent.
The fluctuation in stocks since May is a very serious problem for the industry and one that must be tackled and solved if we are to relate production to demand and avoid having too much costly spare capacity. The right hon. Gentleman did not devote any time to that this morning, and I hope that the Parliamentary Secretary will be able to make some observations on it when he replies.
I have mentioned the need to reduce stock fluctuations and to avoid incurring too heavy a cost in maintaining spare capacity. My point is that at the end of the day spare capacity has to be paid tor out of prices, and any undue increase reduces our competitiveness not only in steel exports but in exports of capital and consumer goods which have a substantial steel element in them. It is for that reason that although I want to see this industry continuously expanding and the 1961 plan for 1965 being fulfilled, I do not want to dodge the problem of fluctuations in stocks. It is only by solving that problem that we shall be able to create an industial setup which will meet the requirements of this country without having unnecessary capacity.
As the right hon. Gentleman hinted, however, it is clear that the problems of the steel industry cannot be solved within the industry or by any changes that he, as Minister of Power, may wish to make in its organisation. A steadily expanding economy is essential to the success of the industry. The minor recession that we have had in industrial production—if we look at the figures we see that it appears to be only a minor recession—caused a substantial reduction in the demand for steel. Last July the economy measures were announced. They were calculated to prevent a further expansion in consumer spending. That might have been expected to affect the demand for hot rolled strip and sheets—and it did for a while. But the principal victim of last summer's policy was capital investment, upon which our future depends.
Before proceeding further, I want to quote what the Iron and Steel Board has to say about this in paragraph 5 of the Report. Discussing developments, it goes on to say:
Unless therefore there is an early end to the recession, the further improvements in productivity and costs which these developments are technically capable of bringing about will be frustrated by uneconomic levels of operation.
That would be a pity. I would have thought that we would much more readily overcome our balance of trade and other difficulties by securing the most economic level of operation in all our productive industries.
In the course of yesterday's debate the Prime Minister once again asserted that the policies of the past twelve months have laid a sound basis for growth.
That is what has been said over and over again. That means that having a good many thousands of steel workers unemployed in the northeast and in Scotland, and many more thousands on short time, with steel prices increased to meet the cost of idle capacity, provides a basis for growth. I do not regard this as being at all a good prescription for economic good health; to me it is just the opposite. The Government's policies have had an opposite effect from that which they claim.
It is not unfair to say that the most substantial reductions in consumer spending that we have been able to secure have been on consumer durables and other commodities in those areas where large scale unemployment and under-employment has flowed from Government policies. Not only the few hundred or few thousand steel workers whose wage packets are reduced have suffered as a result of this; the communities in which these people live have also suffered. Many other trades have suffered in consequence of this considerable reduction in the income of steel workers and the activity of the industry.
I have said that the effects of Government policy have fallen more harshly upon the heavy section of the industry, and it is worth while studying some statistics. I shall not bore the House with very many. The weekly average of finished steel products, such as heavy rails, for April, 1961, was 10,500 tons, whereas for last April—the last month for which statistics are available—it was 7,000 tons, a 30 per cent. reduction. In April last year the figure for heavy and medium plates, used in heavy engineering, shipbuilding and the like, was 65,500 tons—and no one will claim that this side of the industry was very active or prosperous then—whereas last April the figure was down to 46,500 tons.
I admit at once that to get the matter into proper perspective we must consider the other sections of the industry. Production of hot rolled strip and sheets in April this year was slightly in excess of last April's figure. After having taken a sudden and steep dip in the autumn of last year production climbed back into its present position in this section of the industry.
But the prospects for heavy steel are not at all bright. On Wednesday, 25th July, the Financial Times said:
According to quarterly statistics published today by Lloyd's Register of Shipping the ton-age under construction in the United Kingdom at the end of June was the lowest since March, 1945 and … at only 141 per cent., was the lowest ' in all her history, excluding the war years.'
This does not give much ground for comfort for those of us who have a greater interest in the heavier than in the lighter side of the industry. I would have hoped that the Government would be able to do something to assist us in this direction.
The orders in hand for engineering industries generally bring no comfort, either. The work on hand fell during May to its lowest level since October, 1960, and the Board of Trade Index for the end of the month, at 118— 1958 being the basic year at 100—is 8 par cent. less than it was a year ago. We are 8 per cent. down on a year ago in respect of orders in hand in the engineering industries.
I am always a little amused at the way in which the Government allow the economy to run down to a vary low level and, when it has reached the bottom— when it cannot but start to rise again— fix this as the basic figure for future calculations. This is always done. If we study the Government's statistics of the country's economy, we will find that they are all calculated on the basis of the 1958 figures, because it was in that year that they reached the lowest level. Them they start building up again. That seems to me to be a rather base way in which to fix the base.
All that I have just said about the orders in hand for the engineering industry generally and the prospects for the shipbuilding industry are particularly serious for the North-East Coast of Scotland, and if one looks at the unemployment figures published today one finds that those are the areas in which unemployment is rising, and rising rather steeply. As a matter of fact, unemployment rose in the past month by some 3,000 for Great Britain as a whole. The right hon. Gentleman will know that un- employment in Scotland rose by exactly the same figure, so that Scotland had the whole increase for the past month. Therefore, those parts of the country take little comfort from what knowledge is available to us of the prospects in those industries in which such a large proportion of their workpeople are employed.
I wonder whether the right hon. Gentleman would consider pressing on his right hon. Friends to discriminate a little in applying these economy measures in future. The economy measures applied last year were not at all required in those areas where there was, and still is, heavy unemployment. These measures were not required in those areas in which a great part of the heavy section of the steel industry operates. But those are the areas which have suffered most, so, to use the metaphor so much favoured by the Prime Minister, I ask the right hon. Gentleman to see whether he can secure in future that the brakes are applied on the car which is hurtling towards the precipice and not on the car which is climbing the hill in the other direction. That is precisely what happened in respect of the measures applied in July last year.
I know full well that to do what we on this side want the Government to do requires a measure of planning which they would not feel it very easy to adopt, but it is to be expected that in time the N.E.D.C. will make some recommendations on these matters. One would expect the N.E.D.C. to advise us in due course not to apply our economy measures indiscriminately. But do we need to wait for such recommendations which are bound to come from any body of people which looks at the matter objectively? Is there any way in which the Government can give the shipbuilding industry a boost? I should have thought there was.
Are we going to modernise our merchant fleet? I should have thought that we would want to do that and that the Government would start now with measures towards that end. That would be a great help to our lagging shipbuilding industry and to that part of the steel industry which supplies it. Could we not modernise our railways instead of scrapping them? I note the figure for heavy rail production this year compared with last year, and I think it would be to the credit of the Government if they would go ahead with a lot more railway modernisation.
Could we not proceed a little faster with the capital re-equipment of some of our industries, particularly some of our older industries, and make some progress with the construction of bridges, factories—where they are most needed —schools, hospitals and houses? To do all these things would be a very great help to that section of the steed industry which is in the most unhealthy state at this time.
It must not be thought, of course, that all is well with the lighter side of the industry producing strip sheets and tinplate. Indeed, as reported in paragraph 19 of the Report:
Production of motor cars in 1961 was 26 per cent. less than in 1960, but the motor industry's purchases of steel fell by a considerably larger proportion because manufacturers were adjusting their stocks to the lower rate of working.
I would just add that cars have picked up since the second half of 1961, but it is difficult at the moment to foresee the full market for the new capacity that is coming along in the new strip mills in Wales and Scotland. It is a little alarming to read in recent statistics that whereas hire-purchase sales of oars were very high in May they dropped off very sharply in June and that the average is once again below that of two years ago. We ought never to overlook the fact that industrial growth in the modern world is measured in terms of the production and use of steel.
In that connection, I turn to the Germain International for June, 1962, and I see there listed the figures of the steal producing countries in Western Europe, the Eastern bloc and the non-European world. I find that the country which is at the bottom of the league table is Great Britain. In 1961 we had a decrease of 9·14 per cent. in steel production compared with 1960. There is mat another country in the world with a decrease of as much as 2 per cent.
I take my hon. Friend's point, and I hope that he will succeed in catching your eye, Mr. Speaker, so that he may develop it. However, I am dealing with Great Britain as a whole. We had a decrease of 9·14 per cent. and there is not another country in the world with a decrease of 2 per cent. Indeed, the whole of the Eastern bloc, that is to say, the Communist countries, has an increase overall of 8·08 per cent. Even the non-European world has an increase of 544 per cent. Western Europe has a decrease of 0·92 per cent.
If we take Britain out of Western Europe it would show an increase of 1·4 per cent. but Great Britain being in with a decrease of 9·14 per cent. it produces a decrease for Western Europe as a whole. This makes very sad reading and, I should have thought, could not have brought any great comfort to the right hon. Gentleman who is responsible for the wellbeing of this industry in this country.
If I may, I will leave the figures for 1961 and come to 1962. I would remind the House that for the first six months of 1962 the home production of steel was very considerably down on the first six months of 1961, and even on the first six months of 1960. Indeed, it was down by 12 or 14 per cent., which is rather a serious matter. It is rather interesting to recall that the steel companies believed the Tory propaganda when they spent so much in helping the Conservative Party to win the election some three years ago. The Stock Exchange quotations show that investors were also misled at that time. They have since paid dearly for their misplaced confidence. I find, for instance, that the quotation for Colvilles shares at this high period of 1959–60 was 83s. 3d. and is now 27s. The figure for Consett was 27s. and is now 9s. 7½d. Dorman Longs was 56s. 10½d. and is now 15s. 3d. The Steel Company of Wales was 55s. 9d. at that time and is now 22s. 3d. Stewarts and Lloyds was 63s. and is now 27s. 6d. Stewarts and Lloyds, I understand, spent at least a quarter of a million pounds on propaganda in order to get the Tories returned. As I say, at that time, its shares were standing at 63s. and are now down to 27s. 6d. Some of the company's works are idle, and have been for the past 12 months.
The problem about which the Minister should be able to do something is that which arises from stock fluctuations. The right hon. Gentleman is also responsible for the coal industry. In 1958 and 1959, when the economy was running at a very low level, the Coal Board was able to put coal into stock and the social consequences of the recession were ameliorated. The Coal Board put about 20 million tons into stock and thereby saved the jobs of probably 50,000 miners. One sees a different picture in the case of steel.
In 1957, a year of relatively high home consumption, we put nearly half a million tons extra into stock. In 1958 we took a plunge and home consumption fell considerably. Of course, stocks were reduced by almost a million tons. In 1959, the position was the same. Then we had the upturn in 1960, when home consumption of steel went up by more than 2 million tons. At the same time we increased our stocks by 2 million tons. Instead of having steel in stock when the economy was slack and taking it out as it was needed, we have stocked steel when the economy was high, and put further pressure on production. When we needed steel for home consumption we had to supply the needs of our producers and the consumers, and at the same time we had to start building up the stocks once again. When the recession came last year we found once again, when the consumption of steel went down, that the stocks were also run down. Incidentally, when we were building up stocks in 1960 and putting another 2 million tons into stock quite unnecessarily, we were to some extent assisted by an increase in the imports of steel by a little more than a million tons.
All this shows that there is something which is far wrong. I recognise at once that there is a difference between the two industries, steel and coal. I recognise that there are many finishing trades between the production of crude steel and its ultimate delivery to users in a finished form, and that this results in complications which do not exist in respect of coal production. But there are other industries in this country—for example the textile industry—where there are many finishing trades and they have been able to do something about it.
To a large extent the Government are responsible for the reduction in steel production in times of difficulties. A lot of stock is carried on credit. Users of steel as well as the producers must have credit to enable them to maintain stocks. But last July, as on other occasions when economic measures have been taken to depress the economy or prevent it from expanding more rapidly, the price of money was put up. The banks ware requested not to allow their customers to have so much credit. It is therefore not the case that the industrialists are foolish or unwilling to play the game in building up stocks when consumption is low. The Government, by their policies, have obliged the industrialists to adopt a certain course of action because they could not get the credit to enable them to carry on.
In his recent and most outstanding maiden speech my hon. Friend the Member for Middlesbrough, West (Dr. Bray) made a proposal to deal with this problem by fiscal means. His proposal was not adopted, but I hope that it will be given further consideration. Many countries have adopted fiscal measures to encourage the holding of reasonable stocks of commodities essential to manufacturing industry, and I think that we should consider fiscal measures to regulate the stocks of steel in this country.
All this would require planning, but I should have thought that the steel industry would be the last industry to object to some planning. The experience of the 1920s and the 1930s will be within the memory of the steel companies and no doubt as a consequence—and even under a Tory Government—we have the Steel Board. In the 1930s the industry decided to get rid of the silly nonsense of private enterprise companies competing with each other. That competition was removed and has not been renewed since, not even when the steel industry was denationalised. So it may well be that if he could work out a solution to the problem, and even though it might involve a measure of planning, the Minister might find that the steel industry would not be unwilling to co-operate.
Of course, it would be easier to arrange all this if, like coal, steel was under the control of a public authority.
Before I was sent to this House, I earned my living in the private enterprise coal industry, and I well remember what happened when there were ups and downs in the economy. I remember the periods in the year when workers in the coal industry were over-employed, and the longer periods when they were grossly under-employed. Men would go to the pits, as I did, six mornings a week and would be sent home again on three of them. One was not told when there would be work, and sometimes men were recalled from the pit face and sent back home. That is what happened under private enterprise. It does not happen today. Had coal still been controlled by private enterprise, the stocking of supplies, as happened in 1959 and 1960, and the consequent saving of the jobs of 50,000 miners, would have been impossible. Anyone with even average intelligence must recognise that if similar action is to be taken in the steel industry it would be easier to do so were the industry under a public authority in the same way as is the coal industry. There is no doubt about the desirability of such a course of action and so I should have thought the Government would "have a go". I hope the Parliamentary Secretary will be able to say something about that.
The real problem does not involve the steel industry alone. It can be solved only by keeping the economy expanding steadily year by year by about 4 per cent. to 5 per cent. It would be wrong if I pretended that I think the present Government can keep our economy on a sound basis. Our failure to keep pace with the economic expansion of countries on the Continent and elsewhere is not, as I think the Minister would admit, due to any inherent shortcomings on the part of management and workers in industry. What the right hon. Gentleman may not agree with, but what I propose, is that it is due to the inadequacy of the Government's policy to deal with the problems of our times. However, in the short time which is left to the right hon. Gentleman and his hon. Friends before the electors relieve them of their burdens, I hope that at least they will make an effort.
The hon. Member for Hamilton (Mr. T. Fraser) has made an agreeable and relatively uncontroversial contribution to the debate. I think that many of his suggestions have considerable value. I am g?ad to think that they came from that side of the House, because our experience in these matters are that remarks from that side of the House are followed with greater attention by my right hon. Friends on the Government Front Bench than anything aid from these benches. I hope to develop that a little later in my remarks.
The hon. Member mentioned shipbuilding as a contributor to steel production. What we have to do in shipbuilding is to get the Treasury moving at the right time. We lost many orders for ships over the last few years because we were not able to offer the appropriate credit terms. These things have now been arranged, but, of course, the orders have been missed. This is something in which it is absolutely no good taking anything but forethought, and that forethought was lacking, I think, because of the obstructiveness of the Treasury. I hope that the hon. Member's remarks will be pondered by the Government Front Bench and in the Treasury.
I was a little less responsive to his other suggestion, because I cannot help feeling that if we talk about the construction industry it is important to remember that a great element of stool is used in those same office buildings of which his party is so anxious to stop the construction.
I am glad to have this new elaboration of the doctrine, which up to now has not been so explicit.
My right hon. Friend the Minister said chart it is some time since we had a debate on this subject. Having refreshed my memory of past debates in the last three years, I am not at all surprised at that because nearly all of them have been on a very much more controversial level than the debate today. I wish, first, to welcome my hon. Friend the Parliamentary Secretary to this debate, because in the past he has made very valuable contributions on this subject from the benches on this side of the
Gangway. I remind him of something he said in March, 1960:
It seems to me that now the House of Commons is in very grave danger of becoming the Administration's Pekinese. It may snarl and snap a bit after the event, but is never possessed of that current knowledge which is so essential if we are to have any chance at all of performing the function of the taxpayers' watchdog."—[OFFICIAL REPORT, 22nd March, 1960; Vol. 620, c. 261.]
I apologise for my ill-pronunciation, but I am sure the HANSARD reporter will get this right. I did say "snarl". My hon. Friend is now a member of the Administration and we count on him to show the same zeal he displayed when he sat on this side of the Gangway.
In 1952, Mr. Adlai Stevenson, was a candidate for the United States Presidency and was defeated. He was to be interviewed by a reporter immediately after the election. The reporter was told that Mr. Stevenson was having breakfast and he asked what Mr. Stevenson was having for breakfast. The answer came back, "Post-mortems on toast." I am going to offer the House a few post-mortems on toast. I shall address my remarks to page 66 of the Iron and Steel Board Annual Report, Command 213 which, in appendix VIII, under the heading: "Development Schemes approved before 1961 and not yet completed" refers to
Construction of new integrated works including coke ovens, sinter strands, two blast furnaces, L-D steelmaking plant, a continuous hot strip mill and cold reduction mills at Llanwern, Newport (Spencer Works".
of Richard Thomas and Baldwins.
In the General Election of 1959 the Tory manifesto contained the words:
We are utterly opposed to any extension of nationalisation by whatever means.
Those words were enthusiastically endorsed by the nation, but I think that the electroate did not appreciate the double negative contained in them. I took it to mean that if we were opposed to nationalisation we were in favour of de-nationalisation. This view was held by many of my hon. Friends, but not by
the Government, whose steps to curtail nationalisation have not been very evident in the last few years, particularly in the case of Richard Thomas and Baldwins.
In March, 1960, we had the Iron and Steel (Financial Provisions) Bill, the object of which was to provide £70 million for Richard Thomas and Baldwins and £50 million for Colvilles for purposes which have already been discussed and which I do not need to go into now. At that time it seemed clear to all of us that this was a step towards denationalisation of Richard Thomas and Baldwins. How wrong we were. At that time, I remind hon. Members, the Stock Exchange price of Colvilles shares was 71s. and the price of shares of the Steel Company of Wales was 46s. 6d. I mention the Steed Company of Wales, not because it is to be confused in any way with Richard Thomas and Baldwins, but because, roughly speaking, it is analogous. I do not want to be taken up on detail, but that is the rough idea.
In that debate the right hon. Member the Leader of the Liberal Party made a reference to the Governor of the Bank of England saying that too much money was chasing too few shares and how much it would improve the health of the financial community if £25 million of the steel equities were made available to buyers, one suggestion being that the ordinary shares in Richard Thomas and Baldwins should be sold. It was thought that that was likely to take place.
A very important event took place on 27th June, 1960 It was a debate raised by the Opposition on the Motion:
That this House deplores the decision of Her Majesty's Government to proceed with the sale of Richard Thomas and Baldwins, Limited, to private interests.
The interesting thing about the debate was that, although the Opposition were defeated on a vote, their ideas obviously succeeded because, subsequently, Her Majesty's Government were much more impressed by arguments raised by the Opposition than by those raised on this side of the House.
The Leader of the Opposition said, in summing up:
why not hold on to the shares to make a much larger profit by earning additional profits later?
He shared the error of the Government in believing that larger profits would be
made, but, in fact, much smaller profits were made. Later, my right hon. Friend the Member for Luton (Dr. Hill) said:
My right hon. Friend the Member for Kidderminster (Mr. Nabarro), … asked why the disposal of Richard Thomas and Baldwins was not carried out between October last year and January of this year.
The hon. Member for Kilmarnock (Mr. Ross), said:
You were too busy. Tell him that.
My right hon. Friend the Member for Luton said:
The answer, in fact, refers to the preoccupation of others. At that time the Treasury, the Agency, the Board, the Ministry and the company were heavily involved in planning the expansion and acceleration of the Newport scheme and in working out its financial implications. The answer is that it just could not be done."—[OFFICIAL REPORT, 27th June, 1960; Vol. 625, cc. 966, 1088–1089 and 1092.]
Now my right hon. Friend has plenty of time to consider whether it would have been right to take that action. He may possibly regret that he did not find time then, when it was possible to take the action which was implicitly promised to the electors at the General Election.
Now we come to the big decision which was announced on 27th October, 1960, when in reply to a Question by my hon. and gallant Friend the Member for South Fylde (Colonel Lancaster), my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), the former Chancellor of the Exchequer, quoting his right hon. Friend the Minister of Power, said:
… it is still … 'the firm intention and, indeed … the confident hope that the work of the Agency will be substantially complete,' by the end of this Parliament. That certainly includes Richard Thomas and Baldwins.
It is our intention to sell the company … Certainly. We have never concealed the fact that we were intending to sell it. We have said so time and again. At election after election we have said that we intended to return this industry to private enterprise."— [OFFICIAL REPORT, 27th October, 1960; Vol. 627, c. 2563–5.]
At this time, I would remind the House, the price, of Colvilles shares was 72s. 6d. and those of the Steel Company of Wales 42s. This was at a time when the decision was announced that instead of sailing Richard Thomas and Baldwins it was proposed to sell the large holding of prior charges in the steel
industry which were really wholly irrelevant to what we were then discussing. After that announcement it took four months before the sale of prior charges came before the House.
On 23rd March, 1961, the Minister of Power said:
Each election since 1951 has seen the return of more Conservatives who are pledged to denationalise steel, and fewer Socialists who are wedded to the idea of State ownership … I offer the opinion that, while they remain wedded to it, their numbers here look like becoming smaller and smaller. … We are convinced that the country wants denationalisation."—[OFFICIAL REPORT, 23rd March, 1961; Vol. 637, c. 703.]
I think that it is now only necessary to bring the story up to date. I quote from the OFFICIAL REPORT when my hon. Friend the Member for Kidderminster asked the Chancellor of the Exchequer
what further progress has now been made in steel denationalisation; what steps he now proposes to take in connection with the sale of Richard Thomas and Baldwins Ltd., in view of the impending completion of the Spencer works. …
My hon. Friend the Financial Secretary, as he now is, in reply quoted the previous Chancellor of the Exchequer:
'We have said again and again that our intention is that the concern should be devested, but when depends on the circumstances. I think that the important factor is to judge the time at which a fair price can be obtained, and that depends on the development plan which is not yet completed.'."—[OFFICIAL REPORT. 24th July, 1962; Vol. 663, c. 1269.]
We have heard a good deal about the development plan. I should have thought that now that the Spencer works of Richard Thomas and Baldwins is about to be opened by royalty it is about completed. Meanwhile the price of Colvilles shares has fallen to 29s. and, those of the Steel Company of Wales to 24s. 6d. So it is reasonable to assume that during those three years the value of the assets for which my hon. Friend the Parliamentary Secretary is now responsible had fallen by at least 50 par cent. and probably 75 per cent. I ask ham to think very carefully about his responsibilities as a guardian of the public purse, responsibilities which he took most
seriously when he sat on the back benches and I hope that She will not be carried away by his change of status to change his ideas in this way.
His Royal Highness the Duke of Edinburgh said recently:
It never seems to be the right time to raise money.
From what I have said, it seems clear that for Her Majesty's Government it never seems to be the right time to sell Richard Thomas and Baldwins. Frankly, I see no value whatever in a situation in which thirteen major steel companies have been denationalised and one remains nationalised. I do not see how it can be anything but pure doctrinaire thought to think that there is a virtue in keeping 7 per cent. of the industry nationalised when the rest of it is not nationalised.
Can the hon. Member point to any respect in which Richard Thomas and Baldwins is less efficient than any of the steel companies now under private ownership? Why does he say that it would be better from any point of view, even a doctrinaire point of view, to denationalise Richard Thomas and Baldwins?
I am not concerned with comparing the efficiency of Richard Thomas and Baldwins with that of other companies. I am asking what doctrinaire point can be served by insisting that 7 per cent. of the industry should be nationalised when the remaining 93 per cent. is denationalised.
When we have one part of the industry nationalised and the other part not nationalised we are in a position to compare the two; each can compete with the other, and we have a measure of assessing which is doing better. I should have thought that for someone to say that it must be wholly nationalised or wholly denationalised—whether right or wrong—is plainly being doctrinaire.
I am glad to hear that comment, because at least 61 of the hon. and learned Gentleman's colleagues signed a Motion demanding that the 93 per cent. which had been out of public ownership should be returned to public ownership. I am not able to say whether his name is among the signatures or not.
I am sure that this will greatly enlighten students of Labour Party policy at the next election. We have to face the fact that the threat of denationalisation which has been dangled by hon. Members opposite as an attraction for the electors during the last few elections may well be used again. I think that this time it will not frighten the shareholders at all, because I think that in nearly every case re-nationalisation at a price at which the stocks were originally denationalised would prove favourable to them. This is an entirely free option to the Labour Party.
If the Labour Party is so anxious, for doctrinaire reasons, to obtain control of this industry, it has occurred to me, and to other people as well, that when the industry was doing very well it was a much more attractive purchase than in these days, when the life of the industry is linked with the whole fortunes of this country.
I am much obliged to the hon. and learned Gentleman for that minor tribute.
I am quite certain that many of us have quite opposite views to express, but I should not like the debate to go by without putting on record the views of a very large number of people in this country that the anomalous position of Richard Thomas and Baldwins has been allowed to continue much too long and that the final decision must be taken in the immediate future.
The debate is on a Motion to take note of the Report of the Iron and Steel Board. For the last ten or twelve minutes we have been listening to a dissertation about the lack of opportunities for the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) to invest some spare money in what has proved to be a very advantageous enterprise to the Government. He should not take his Front Bench to task for retaining ownership of something which earns money at a time of financial distress to the nation. He should allow the Front Bench to have an opportunity of saying that they are glad that they held on to something which has proved a winner to the finances of this country, because they dearly need finance.
I have only two regrets about the compilation of this Report. It should have been brought out a fortnight ago, which was Friday the 13th, and it should have had a broad black band around the front cover. It is not that I wish to talk about its contents, many of which are good. I am concerned not so much about what is in the Report as about what has been left out. It is true that vis-à-vis the world production of steel this country has fallen lamentably behind. Even the so-called "Wogs", as we termed them when I was a soldier, the Italians, are showing us the way to go in increased production every twelve months.
Let us set out the facts. We have a high regard personally for the Minister, and he has explained the present situation in pleasant Parliamentary language, but, at the end of the day, the picture is deplorable. At Easter I was with the football team from the steelworks with which I have been engaged since before the First World War. They went to play at Middlesbrough on Easter Saturday. But that day was spoiled for me by a friend of mine who presented me with a bill which was advertising a public meeting in Middlesbrough on the Sunday night about the 6,000 fully unemployed members of my union. I did not watch the match. I felt too distressed and upset to think that in that great steel town of Middlesbrough 6,000 men were walking the streets fully unemployed.
That was at Easter, when we were celebrating events of a different character, which took place centuries ago. By now many more of these men are unemployed. The story is the same wherever we go, particularly at Colvilles, Mother-well, South Wales, the North-East and the Midlands. Thousands of men are unemployed—the best men in the world. Why? Because of the Government's lamentable failure to bring about an expansionist policy to provide what the world needs. Who will tell me that this country does not need steel? I happen to be a justice of the peace—and no doubt some of my friends will tell me that sometimes I am in the dock. In my constituency I hear complaints from magistrates that they cannot find remand homes to which they can send juvenile delinquents and that the prisons are overcrowded. In the schools we have overcrowded classrooms with 50 or 60 children in them. We have outmoded hospitals. We have talked about a Channel bridge and the electrification of the railways. Schools, houses and hospitals—they all require steel; and yet we are told by the Government that the steelworkers must walk the streets. It is a fantastic situation.
The Steel Board has produced this Report in very pleasant language, but it has expressed its opinion about Government policy in no uncertain way. Of course, members of the Steel Board have to be a little careful. They are appointed by the Minister. At a time when Ministers get the bullet, get the sack, at five minutes' notice, although they are telling us that the labourers in the steel works should have a month's redundancy notice and some compensation, members of the Board must tread warily.
The Report talks about having capacity which can be used as and when required. In other words, it says that we should have more capacity than we need. I am concerned about using the capacity which we have. This country could have got a lot more steel out of its modern and outmoded capacity— outmoded, relatively, by comparison with what is taking place on the Continent.
I have seen practically every steel works in the world. I have been out of the country 54 times since the war, including visits behind the Iron Curtain, and I have seen what is going on in West Germany and East Germany. I advise the newly-appointed Parliamentary Secretary to go and look for himself. He will see some of the reasons why this country is in its present position. I shall never forget the steel debates when we nationalised the industry. Rightly or wrongly, we held to our convictions, and we shall again. As the House knows, I have sweated and strained and worked as a practical steel smelter at the furnace. Next Friday it will be 50 years since I joined my union. I am proud of what that union has done.
What has caused the present situation? Is it because the steel workers have been on strike and have held the country to ransom for high wages? Let me tell the Parliamentary Secretary and the Minister that my men today, who are producing 4,000 tons out of one unit with nine men, are getting about a third of what my father would have had if he had produced the same tonnage out of the same type of furnace. The bigger capacity has led to the rate per ton being far less; about l⅝d. per ton is being paid to good men. They do not complain because, with increased production, they get good money —and they need it because of the increased cost of living.
But the present situation is not due to industrial disputes or to greedy trade unions. It is not due to inefficient management. I know some members of many managements, and let me tell the Parliamentary Secretary that they are disgusted with the present situation. They are fed up to the back teeth with the see-saw of the present rates of interest, Bank Rate, credit squeezes, relaxation and restrictions. We are told in the Report—these are not my words —that it is remarkable how the national economy reflects itself in steel production in such a short space of time. It is truly remarkable. We are told that the situation arises because of the running down of stocks. Which man who holds a big stock of steel will continue to hold it after the Bank Rate rises to 7 per cent. and 7½ per cent.? When the interest rises, he gets shut of Ms stocks. He waits for the day when the credit rates are more suitable. It is this see-saw of Government policy of credit and Bank Rate, down today and up tomorrow, which causes the trouble. Two years ago the Government told the young couples to get all they wanted from the banks; the bank managers would be glad to lend them money, they were told. They could pledge the next year's unemployment benefit—for that is what it came to if they were not careful.
I am the welfare supervisor to a big steel organisation, and I know what happens to these men in a period of restrictions when overtime is knocked off and partial unemployment occurs. It is remarkable how many men find difficulty in paying their house mortgages and rents. I am not among those who are remote from this problem; I live with it and see its effects every day.
Let me turn to the question of production. A long time ago I talked about the use of oxygen induction in the steel furnace and about the use of magnesite refractories. Today we find, because of the urge to get on, that the need for complete oxygen induction is imperative. Some companies are now putting in new equipment, but the Continental steel works have had it ever since the war finished. The magnesite brick can be made from sea water, which is cheap enough. The refractory plant at West Hartlepools make them. But they were not used because of the silica-brick interests, and because of the interests which the steel owners had in the old-fashioned, outmoded steed-silica refractory, which gives a shorter life, brings down production and increases costs and puts us in a difficult position vis-à-vis our competitors.
Today we must do something. The question is whether we are too late. The Report talks about new processes. Simple fellows like myself who left school when they were 13 or 14 talked about these things fifteen or sixteen years ago. This cannot be denied: it is in HANSARD. These things should have been done. I am not unmindful of the fact that many steed owners are good em-ployers. By and large they have seen the light and have become extremely good employers themselves. However, they are beset with the evils to which I referred.
It is no good sending their labour adviser, as they have, to tell a trade union which has a legitimate complaint and a reasonable demand for a better wage "We should like to give it to you, but the Government's policy prevents us doing so". That is the most ready excuse that labour advisers can now use in reply to trade union requests for better money—"The Government do not agree." This has actually been said in negotiations. There are part-time members of the Iron and Steel Board who have said in no uncertain terms through their trade union journals and through the T.U.C. what they think about the Government policy.
I have a great regard for this little island of ours. Despite the debâcle of last week and the continuation of this Government, who have brought us to this state of affairs, I still think that this is the finest place under God's sun. I have great admiration for this island, for which we have fought and bled and for which we will continue to fight econo-mically. Today it is not a question of politics. Today it is a question of economics, which political party can best put into operation an economic policy which will save the nation.
If we allow the steel industry to go by the board, Britain will be sunk. Let us make no mistake about that. I have made hundreds and thousands of tons of steel. Incidentally, I made some bad steel in my time, but I did not get away with it—the boss knew his job. Nobody can compute how much employment one ton of good steed creates in the engineering industries. I ask hon. Members to go to a lace-making factory and look at the intricate machinery—one-eighth inch steed which might break because of the fault of the chap who made it.
The steel industry is the foundation of our future prosperity. It has been said that it is a long time since we had a debate on this industry. We do not come to the House moaning and yelling. The textile industry has had its go. Other industries have complained. The steel industry wants only to be given a fair and reasonable opportunity under a stable and expanding economy so that it can do its job.
I am not concerned at the moment about whether nationalisation can succeed, but the hon. Member far Walsall, South gave us a perfect example of his anxiety about a company which is succeeding. He gave us a perfect example of how anxious he is and how he wants to restrict the period of success of a nationalised steel company. He wants to shorten the period. The longer the period during which Richard Thomas and Baldwins succeeds the more time the public will have to learn that it is in their best interests. The iron ore of this country, given to us by Almighty God, should be used for the benefit of the people and not for the benefit of those on the Stock Exchange and all the sharks kicking about. Let us get the picture right.
The Iron and Steel Board stressed many things Which are happening. There is talk of having additional capacity. I ask the Parliamentary Secretary to tell me what is the use of having a high cost, efficient and wonderful capacity standing still on a care and maintenance basis because of something which might happen, because there may be am upsurge and a period of temporary demand. Every pennyworth of capacity which is not used is an on-cost on the production of the capacity which is being used. They do not employ these sort of tricks in Germany, or on the Oder-Neisse, or in Russia, or even in America, if they can avoid it Our competitors work their capacity, good modern first class capacity, to the fullest possible extent. We are talking as if it does not mean anything to the industry to have something which we might be able to use.
I do not want to delay the House any longer. Many of my good friends from the steed areas want to put their point of view. So far I have not said a word about my own constituency—Rother-haan, next-door to Sheffield. Actually Sheffield was a village next door to Rotherham, but that is beside the point. In Rotherham, not only the men, not only the members of the union, but the owners, the controllers, men in high places—good men, good managers—are very concenned about the future of our industry. They are wondering which way to turn. I myself see every week— I shall see it tomorrow and indeed tonight—the wonderful new rod mill plant which has been erected. Everybody is wondering whether the orders will come along to make it possible to run it There are mills going up at Ravenscraig using steel which might be made in Rotherham to provide work there. The Report says that it will continue until it produces its own ingots. What good will that be if the men who have produced ingots elsewhere are thrown out of work so that men somewhere else can produce what they originally produced? It is a movement of labour, a movement of unemployment.
Until there is a Government in this country which can plan expansion— new hospitals, new schools, new roads, the Channel tunned, the Tay bridge— we shall get nowhere. Coast erosion has been mentioned. Great chunks of our coastline could be repaired by the use of steel and concrete and men could be put to work. All these things want looking at. We can find thousands of millions of £s over the years to destroy things. It is about time we found a few thousand millions to provide the capacity for employing people to build things rather than destroy them.
When that is done this Government will be in a different situation than they are at the moment. They stand discredited in the eyes of the nation as a whole because of their overall policy. They stand discredited also because of the policy which they have allowed a system which has brought this great industry to its present parlous condition.
I congratulate my hon. Friend the Parliamentary Secretary on his promotion. I believe that the Government were reshuffled so that new men with new ideas could be brought in. I hope that both the new men and the ones who remain will have new policies. This morning I want to suggest some for their consideration.
The hon. Members for Hamilton (Mr. T. Fraser) and Rotherham (Mr. Jack Jones), in two very eloquent speeches, made much of the decline in the steel industry's order book, particularly in the heavy section. This, beyond any doubt, is our most serious problem. I fully share their concern, but I do not agree with their analysis of the causes, nor with their proposed solutions. We must admit that in a very small measure there has been a change to other materials. People are not using steel to quite the same extent as before. Other materials are on the market. Other countries are continually developing their own indus- tries and protecting those industries. This is so not only in the case of steel mills, but also of shipyards and heavy engineering factories, which produce goods which shut out our own industries. These reasons are beyond the control of our Government, though I hope they do what they can to help our industry.
I believe that the main cause of the steel industry being An a mess is the Iron and Steel Board, I do not want to become involved in an argument about the merits of public ownership. Alongside public ownership, there is the question of public control, so-called planning and direction. I have always criticised in the House the fact that when we took back the ownership of 93 per cent. of the industry we did not do anything to leave the ultimate control of investment and prices in the bands of those companies themselves. This is a classic example of State planning failing.
I firmly believe that the Iron and Steel Board has incited the steed industry to increase its capacity too quickly, still relying on a very large increase in the next few years. Already, the industry is running at 75 per cent., with the heavy end running at nearer 60 per cent. or 65 per cent. I cannot help feeling that this is the result of centralised planning which may have been wrong. It is horribly close to the same sort of optimistic attitude there was about coal in 1956, when we suddenly reached the edge of the precipice, the planners were confounded, and there was serious overproduction.
I hope that I am wrong, but I think that we have very much over-estimated Che requirements for steel in the next few years. Even on 23rd March, 1961, at the height of the steel boom, my right hon. Friend the Minister of Power said:
This demand has been growing steadily throughout 1960, and a survey recently made by the Board of Trade shows that it is likely to go on strengthening."—[OFFICIAL REPORT. 23rd March, 1961; Vol. 637, c. 699.]
That was the official view of the Government in March, 1961; since then the whole thing has fallen about our ears.
The second most dangerous function of the Board is the fixing of maximum prices. The Board has powers to fix maximum prices which, as one might expect, have become the sort of "ring" prices for similar products throughout the whole steel industry. It is to that subject that I wish to devote most of my time to discussing.
The serious consequences of this excess capacity, this shortage of demand, cannot be over-exaggerated. The steel industry is a very capital-intensive one, and as soon as one gets below 80 per cent., down to 70 per cent. or 65 per cent. or 60 per cent. capacity, one almost immediately operates at a loss compared with the higher capacity. Last year, £200 million, and, in the last ten years, very nearly £1,000 million, of capital has been invested. Some of it is dying idle, but interest charges have to be paid on it, so I think that the Board is right to accept that as a responsibility in determining maximum prices.
The Report states:
The provision of wider margins of capacity is of direct benefit to steel consumers and was one of the considerations which in February, 1962, led the Board, after a detailed price review, to authorise increases in the maximum prices of steel.
The Board accepts that responsibility.
It also accepts the point that increased prices of steel-making material must be reflected in the prices that can be charged. Already, over the last year, we have had an increase of £6 million in the price the industry has to pay for fuel oil, consequent on the increased tax. According to the Report, coal has gone up by about £1 million. There have been increased National Insurance contributions under the graduated pension scheme. There are increases in rates ahead, and many other increases. All those have resulted in an ever greater pressure on steel makers' margins.
We have the assumption throughout the whole of the Board's pricing policy that the capacity will be up to date and modern. In fixing its figures, the Board always allows for the new capacity to come in and the old capacity to go out, but very often that old capacity is still in operation, so that the figures that the Board produces for capacity can, in many oases, differ from those of the industry itself. The Board has some magic formula by which it takes these factors and many other factors into account in determining the maximum prices, and some of these are mentioned in the Report.
The Report says that private plant is important—and, of course, it is. It also says that the correct period over which new steed plant should be amortised is twenty-five years, but there is strong evidence that that is far too long a period and that, with modern developments, twenty years, or even fifteen years, is more likely to be the time during which modern steel-making plant is still com-petitive. The Board's assumption for the level of present capacity, which is the third factor it takes into account, was 84 per cent. during the February, 1962, price increases, whereas the industry was working at nearer 70 par cent. capacity at that time.
All these factors have worked towards squeezing the existing margins of profit. There are many instances in the Report where the Board has granted a proportion of what was asked, or covered a proportion of the increased costs, and has held prices down in the last few years to, I think, a very severe degree. The curious thing about the 1962 price increase was that the strip makers got considerably increased prices, whereas the heavy end, which is the end in trouble and the end that cannot make two ends meet, has been hold down to an almost 1 per cent. increase in prices. That is a strange situation, when the strip producers are making quite a lot of money.
What is the effect of this price control? It distorts the market, it destroys the real price of steel, it does not allow free market conditions to operate and, in my view, it destroys competition, because all the companies immediately align their prices on the maximum price. There may be some excuse for a system of this sort when there is a shortage of steed, because then we have to try to keep prices down, but I cannot see any justification for controlling price when there is shortage of demand and we cannot sell to the capacity we wish.
Many hon. Members in many steel debates have alleged that the industry has made too much money and that it has bean a speculator's paradise, but I think that the opposite is true. In the years gone by, the industry has not made enough money to cover its investment and its liabilities, and to save for a rainy day. In the last major steel debate, on 27th June, 1960, the Leader of the Opposition made a strong attack on speculators and on the profits made out of steel. He took the ten largest steel companies and stated what the public bad paid for their stares. He said that at that time the figure was appallingly inflated.
I have checked back on what the figures were. The ten largest steel companies ware sold to the public for £238 million, including the extra capital invested at various times since they were sold back. The value rose at the time of the speculative peak to about £700 million, but those same shares have now dropped back in value to £303 million. There has been as big a loss since 1960 as ever profit was made before then. It is completely wrong to assume that this has all been good for the shareholders. In three companies the equity is now worth considerably less than it was at the time of issue. Shareholders in the Steel Company of South Dunham have lost £12 million, Consett shareholders have lost, £7½ million and the shareholders in Colvilles have lost £6 million.
The Leader of the Opposition has talked about the Steel Company of Wales saying that it was scandalous that shares which sold for 20s. in 1959 were root long after worth 45s. However, they have now dropped to about 24s. This shows that whatever may happen as a result of Stock Exchange dealings, the quoted prices of steel shares and the nominal value of the shares, the industry must undertake new investment and save up its resources for the future.
Before the hon. Member departs from the question of prices and profits in the steal industry, would he say Whether he would prefer prices to be fixed by the Iron and Steel Federation? Does he mot consider that the capital structure of the industry is such that one has only the choice between price-fixing arrangements by the industry itself and price-fixing toy a public board?
I intend to deal with what should happen. The answer to his question is quite simple, because if we join E.C.S.C., as I hope we will, we will have to take similar action to the other countries in which there is no form of price control although, I agree, that there are some disciplinary effects in a complicated system of which I am sure the hon. Member for Middlesbrough, West (Dr. Bray) is aware. These latter arrangements tend to equalise prices.
I consider that I have answered it fully.
I shall say more about that subject later, but I want to emphasise that the result of price control has been that two companies have not been able to raise money directly in the market. There has been quite a lot of lending through the Government and we have had to find this money through taxes and Government borrowing. We have made a mess of the whole investment structure of the steel industry by having to find a large proportion of that investment ourselves. We have got into trouble over the Richard Thomas and Baldwins question because of the investment of public money and the position here is by no means clear.
The last few years have seen us holding down our steel prices at levels which are too low compared with our competitors' prices, who have been, all this time, saving money to reduce prices on bad times and to be more efficient. This matter of saving money for a rainy day is important, particularly for this industry. The table in Appendix V of the Report of the Iron and Steel Board is extremely interesting, because it clearly shows the comparable prices of steel in this country and the rest of Europe. The comparison made in this table is be-tween opera hearth and basic Bessemer for each country. Bessemer steel is, inevitably, much cheaper to produce than others and one would expect the figures to be much as they are. However, in almost every item there is a margin of £3, £4, £5 and even £6 showing that we are cheaper in our open hearth production than Germany, France and other European countries.
This is strange, because our labour rates are the same, our coal prices are not greatly dissimiliar and although our ore prices may vary by certain amounts, the difference in prices shows that we have tended, due largely to politics and an inefficient piece of denationalisation, to keep our steel industry's prices at such a level that they are unable to cope with the industry's liabilities in the future.
To change this whole system we must join E.C.S.C. I hope we shall do that so that we may go on to the basing points system and so that the Iron and Steel Board's rôle of fixing maximum prices will come to an end. The Board will certainly not be able to fix such prices under the Treaty of Paris. This will have the effect of allowing our prices to rise to levels which are comparable with the rest of Europe. It will enable us to begin to pick up a little and to earn enough money to prevent the serious danger we are at present in of busting the heavy end of our steel industry.
The capacity problem is serious and we must consider how we can increase demand. Do not let us. through our own mistakes, force some of our steel companies out of business through the doctrinaire idea that we must control prices in order to stop exploitation.
I listened with interest to the speech of the hon. Member for Ciren-cester and Tewkesbury (Mr. Ridley), especially his remarks about prices. Since he used the word "doctrinaire" regarding the approach one makes to the steel industry, I think that we can, in fairness, deal with the subject on that basis, because I have seldom heard anything more doctrinaire and out-of-date than that hon. Member's approach to the questions of capacity and prices.
The hon. Member for Cirencester and Tewkesbury may have forgotten the history of the steel industry which has brought us to today's position, in which there is a modicum of public accountability as is represented by the Board. I would remind the hon. Member of the history of the industry before this modicum of accountability was established. In a Report of the British Iron and Steel Federation of October, 1958, was a review containing the results of an interesting examination. It revealed the development of this public accountability, as represented now by the Board, and details of a plan which the steel companies themselves, for the first time in their history, had been persuaded to produce because they were faced with what they considered to be the threat of nationalisation.
At the time of that so-called threat to bring this vast industry under public ownership and control, and only then, the industry set about trying to put its house in order. The Report to which I refer describes the condition and events in the industry prior to nationalisation. Dealing with the mass unemployment of the 'twenties and early 'thirties, the Report states:
… the industry was … intensely competitive"—
as the hon. Member for Cirencester and Tewkesbury wants it to be now—
and it was also exposed to remorseless competition from abroad. As with all heavy industries with high overheads, the consequence was chaos … when the vanguard of economists and industrial experts were obsessed, not as they now are with the danger of stagnation through over-cautious policies and restrictive practices, but with the imperative need for what in the fashionable jargon was called 'rationalization'. The plan necessarily involved many amalgamations, but the great preoccupation of the time was not with preserving competition, which was not in danger, but with stopping it from degenerating into chaos … it has left a strong imprint on the structure of the industry today. It marked the beginning of an era in which the steel industry was to be rescued from anarchy and in which the public emphasis shifted from concern to promote stability to anxiety about monopolistic exploitation.
That, of course, is absolutely true. That was the most blatant example of retail price maintenance ever known. It was, however, quite different from a Government maximum price control arrangement.
I was quoting what the steel industry itself thought about the situation when there was freedom for the industry to fix its own prices on a competitive basis. The editor of the Economist, Mr. Geoffrey Crowther, in his book Economics for Democrats which was published in 1939, stated:
The result of Conservative steel policy has been to confer enormous advantages on the businessmen of the industry. They have been granted a monopoly and assured of its exclusivity and permanence; and they have been encouraged to use it to raise prices for their product. The policy has beyond question put large profits into the pockets of the …
shareholders. Lord Nuffield in 1935 also attacked this policy and said that the position was scandalous, so scandalous that if it went much further motor car manufacturers would have to set up
their own steel production plants and cut the existing steel industry out of sheet production or import steel from abroad. This was the position at the time of the discussions on nationalising the industry and other forms of reorganising it. Even when the denationalisation proposals ware going through this House Mr. Oliver Lyttelton, as he then was, one of the most rigid representatives of Conservative policy, said:
On the one hand, we believe that the steel industry must have the benefit of a massive central organisation. On the other, we think that a great basic industry like the steel industry, employing a large number of men, and considering the widespread use of steel in other industries, and the power of the steel industry to contribute to our exports, is so important that it should have Government supervision.
We do not believe that it would be right, where such large and vital interests are concerned, to permit competition to play over the steel industry without any Government interference or without Government approval." —[OFFICIAL REPORT.]
This was said by a leading Conservative spokesman, referring to the failure of a policy which the hon. Member suggested should be reintroduced—free competition, and freedom by the steel industry to fix its own prices.
I was surprised at his new doctrine, that in order to succeed in a competitive world, in steel or whatever else it might be, the secret is not to cut one's prices to capture the market but to maintain them at the highest figure in order to build up one's reserves and go in for increased expansion. One never ceases to wonder at the variations in the Conservative approach to these matters.
The hon. Gentleman talked about the problem of excess capacity. He talked about the dangers of the situation and said that we are faced with this enormous excess of capacity and that we must do something about it. If he reads the Report of the Board he will find that the problem is not excess capacity as such, but that it is one created by the deliberate policy of his own Government in reducing consumption. The capacity is there and has been developed for the purpose of meeting the assessed needs of this country under normal conditions of consumption.
Why have we not reached these normal conditions of consumption? The Board states that the fall in steel production was
…in part a consequence of the disinflationary policies culminating in the measures announced in July, 1961, which the Government pursued with the object of improving the country's balance of payments. The fall in the home consumption of steel reflected the slackening in industrial production which was largely a result of the restraints on the general level of demand"—
induced deliberately by Government policies.
The Board goes on to say:
The prospects of an early general recovery are not, at the date of submission of this report, very promising.
Why? Presumably because the Government have continued this policy, and, according to the statement of the Prime Minister yesterday, despite the dismissal of his Chancellor, they intend to go on pursuing that policy.
It is true that they have held out certain baits to the electorate for the election which is not so far off. There are going to be modifications, a loosening up and all the rest of it. They are not very specific proposals to satisfy the electorate. But we have the clear statement from the Prime Minister that nevertheless he intends to pursue the policy which was pursued by the Government until these changes—the policy which, in fact, is so clearly exposed by the Steel Board's Report as being responsible for this disastrous position of one of the last of our key industries upon which this country's prosperity has been built.
Does the hon. Member think that a certain amount of reflation would increase steel consumption by 5 million tons, which is the sort of thing that is necessary?
I am not sure that I understand what the hon. Member is suggesting. What I am discussing is the general policy as expressed by the hon. Member and the general situation as clarified in this Report.
The Report says finally:
Unless, therefore, there is an early end to the recession, the further improvements to productivity and costs which these developments are technically capable of bringing about will be frustrated by uneconomic levels of operation.
So much for excess capacity. We are concerned here not so much with the problem of excess capacity as with a policy of restricted consumption brought
about deliberately as part of the Government's policy. Whatever hon. Members opposite may say, that in fact is what is facing the steel industry.
Another hon. Member opposite mentioned another of the key industries which have suffered from the same policy and whose sufferings have been reflected in the problems of the steel industry. He alluded to the effect of the Government's policy on our shipbuilding industry, which in turn has had its repercussions upon the consumption of steel in that industry and, therefore, on the production of the steel industry itself. The Report of the Board is interesting. But one of the things that are clear from the Report of the Board is that complete lack of power which the Board has to do anything at all about the problems which it raises.
It is true that it takes part in certain consultations. It has representatives on the Accident Prevention Committee of the Iron and Steel Federation—a very good thing. I have no doubt, however, that the Accident Prevention Committee of the Federation itself, provided that it had adequate trade union representation on it, should get along very well without having representatives of the Board on it, although I think it is a good thing that while the Board exists they should be there.
It has been consulted on certain price matters by the industry and it has, according to the powers laid down in the Act of Parliament, powers of veto of schemes proposed by the industry, but there is nothing in the Report about the exercise of the veto and I do not think there has been An any of the Reports which have bean submitted, which is what we said would happen when the Board was set up.
While I would pay a tribute to the members of the Board for the attempts that they have made to carry out such duties as were laid on them by Parliament, I must again point out that this is not the kind of body with the kind of powers which it is necessary even at the minimum should exist in order to safeguard the public interest, to protect the steel industry itself and to ensure fair prices and development throughout the industry. When the setting up of this Board was first promulgated and we were discussing it in 1952,
my right hon Friemd the Member for Vauxhall (Mr. Strauss) said:
I say straight away that in our view the proposed Board is a sham and that the supervision it will exercise will be neither public nor adequate.
It is certainly not adequate.
We did not like, and do not like, the blurring of public and private responsibility.
He said later:
I say, therefore, that this Board as a measure of adequate public supervision … is a sham. It is a piece of calculated deception and an attempt to trick Parliament and the country into the belief that there is to be some effective control over this industry once it passes into private hands."—[OFFICIAL REPORT. 25th November, 1952; Vol. 508, c. 284, 285 and 287.]
That was our view about the powers given to the Board at the time. Whilst, as I have said, within the limitations within which it has to work, the Board and its members are performing as much a service as they are permitted—and it is useful that we are able to have such a Report as an excuse for a debate— nevertheless, do not let us get the idea that the Steel Board is anything like adequate for the purposes for which it should have been established and which it should be carrying out.
In parenthesis, may I say that I am sometimes surprised when I hear cries of horror at the idea that if Britain joins the European Coal and Steel Community we might lose our Iron and Steal Board. In view of the general attitude of this party towards the Board and its adequacy, I do not think it would be a terrible loss.
I want to get clear what the hon. Gentleman's criticism is. I understand that he has repeated the complaints that the Board is a sham. Would he care to say which sort of added powers he thinks the Board should have?
Frankly, I would not like to suggest that any board created by the Government outside the industry, with no real powers of its own, would be adequate to perfom the functions which are necessary in order to ensure economic development in the public interest of an industry of this kind.
That can be done only by the body which actually owns and controls the industry. The effective powers in the industry at present rest with the steel owners themselves and the Iron and Steel Federation, and in (the event of public ownership of the industry all the powers would rest with the Government and, through the Government, with Parliament. That is the only effective way in which public interest can be protected, and the only effective way in which one can ensure proper control of an industry of this kind. This has been said over and over again by loaders of all parties, including the Liberal Party.
Short of that, one could make a number of suggestions for extending the power of the Board to enable it to act without being subject to a veto by a Conservative Minister. But I will not suggest a long list of proposals for strengthening a Board which I do not believe can be adequately strengthened since the only control and supervision effective for the purpose must be that of the Government or whatever body of persons owns the industry.
This was the trouble with the recent Belgian attempt to create a price-fixing board outside the privately-owned industry there. It was vetoed by the High Authority of the Coal and Steel Community, which pointed out. rightly, that to establish a single body outside the industry, which would have no direct responsibility for the industry as such, to control the prices of separate private concerns or nationalised concerns would be to establish a monopoly practice not in accordance with the principles of the Community. As the High Authority pointed out, had the industry itself been under national ownership, it would have been open to the national body to establish whatever authority it liked to control prices and investment policy, but it is a different matter to set up an ad hoc body outside the ownership and control of the industry to govern such activities.
The hon. Gentleman is referring to coal cartels. It was sought to establish one in the Belgian instance. The Coal and Steel Community turned it down on the ground of monopoly. Is the hon. Gentleman saying that simply because one has a State monopoly, it becomes virtuous on that ground alone?
I was quoting what the High Authority said, that the decisions about prices and investment policies in any industry should rest with the industry itself, with whoever is responsible for the general direction of the industry. If it is a number of private concerns, they should fix their own prices and investment policies. If it is a national concern or a private monopoly, it is the owners who should be responsible for the pricing and investment policy. That is what the High Authority said. I am not arguing the merits or demerits of monopoly, national or private, at present. I am talking about the ability of ad hoc bodies to control affairs where the effective powers do not lie in their hands. Because of these shortcomings in the powers of the Board, I say that it is an inadequate instrument for these purposes.
The fact is that in regard to the powers the Board was supposed to have was a veto. It has not been able to exercise it. It can do so only with the permission of a Minister, and since the Board was set up it has been under a Conservative Minister, who certainly would not allow it to veto anything which can be done by the Mends of the Government in the private steel industry. Throughout the development of the industry, the possibilities of the consuming capacity have been prejudiced by the deliberate policy of the Government.
This is not a matter affecting just Scotland. We are all conscious that at the moment Scotland is suffering more directly than any other part of the industry or the economy from the Government's policy. But this affects the whole of the steel industry, and the steel indusitry reflects the health of the national economy.
We have heard a pungent speech from my hon. Friend the Member for Ratherham (Mr. Jack Jones). I am one of those who are privileged to represent Sheffield. Sheffield has probably not been so badly hit as some parts of Scotland and Birmingham because Sheffield produces more high-quality steel. None the less, even in Sheffield furnaces are closing down, men are going on short time, overtime has been cut out and women are going out of the industry. The impact on the economy and on the psychology of the inhabitants of a great city like Sheffield is enormous. Fear is growing in the steed areas just as it is in many of the coal, shipbuilding and cotton areas —key industries upon which the prosperity and economy of the country has in the past depended. Those areas are now in the doldrums, most of them directly as a result of the Government's restrictive policy.
The Prime Minister suggested yesterday that he would carry on the policy of restraint. At the same time he suggested that he had some gimmicks to offer the electorate at the next General Election. Apart from what is in the Report, it is clear from what has been said that electoral gimmicks, however attractive they may sound, will not solve problems such as these. The fact is that the steel industry, under the free enterprise system for fixing prices, investment policy and so on, before the war, during the war and until nationalisation, had come to complete chaos on every test. That is recorded by every expert who has examined the industry. It is the record admitted by the Iron and Steel Federation itself.
That is the record of private enterprise in this key industry. It began to produce plans only when it was clear that the Labour Government in 1945 intended to nationalise the industry and reorganise it on modern lines. The industry was nationalised, and no one can challenge the fact that during the period of nationalisation, for the first time an effective plan was produced and implemented which made possible the recapitalisation of the industry and the establishment of more modem plant, enabling the industry to reach the capacity which it has attained today and which, until a couple of years ago, was a capacity which was able to find a market in this country and abroad.
These are the facts of the record, and they will not be denied. There was disaster under the free enterprise system. The industry began to become an effective factor in our economic life only under the nationalisation scheme. Since denationalisation, the industry has gone into regression again, and we are again talking in terms of fear of returning to the old chaos that ends with overcapacity and under-consumption.
It is not much good asking the present Government to do much about the situation. We shall have to ask the electors to do something about it. I am sure that the anxiety which has been expressed about getting on with the denationalisation of Richard Thomas and Baldwins was somewhat inspired by recognition of the fact that time is rapidly running out and there will be no denationalisation of that firm. I should have thought that after all the talk we have had from Conservative circles over the years about the un-desirability of the great industry like this being brought into politics and being threatened with one change after another, if another change was inevitable over the whole field one would not make a partial change now for the sake a few months. The fact is that the Government will not be able to denationalise Richard Thomas and Baldwins in the time. If they did, it would mean more confusion in getting the industry back to the position in which it was after nationalisation.
May I now ask the Minister for some information on one or two points in the Report? What are the intentions with regard to pricing, referred to in paragraph 74 of the Report on page 22 which says:
… the Board discussed the question of a further price increase with the Federation and at meetings of the Board in November and December. The Federation had previously informed the Board that they were considering the introduction, as an experiment, of a pricing system similar to that of the European Coal and Steel community.
I make no comment on whether or not it is desirable, but since some time has elapsed since that passage was written, I should like to know whether the experiment is under way. Can we have reports on the results at a reasonably early date?
I was surprised that the right hon. Gentleman did not say much more about what is contained in pages 70 and 72 of the Report, where the Board makes a great deal of the vital necessity of the improvement of the ore unloading ports in the United Kingdom, which it says is a matter of paramount importance. Indeed, paragraph 20 on page 72 says
In short, it appears to the Board essential that steps be taken at once to ensure that a great part of the imported ore needed by the iron and steel industry can be brought directly to the works in carriers of at least 35,000 tons. Unless this is done the modern iron and steel industry built up in this country at a capital cost since the war of over £1,000 million will be rapidly outstripped by works on the coast of Europe which are being provided with such a facility.
This is obviously a matter in which the Board cannot do very much and in
which the industry itself has not done very much. What do the Government propose to do about it?
I have listened today to a number of arguments about the value of nationalisation. It is true to say that we had at least six years of Socialist planning, not merely of nationalisation, in running the country. We had devaluation of sterling in September, 1949. In the light of these experiences, do we still suggest that the steel industry should be subjected to that form of State control?
This is a good Report, well written and containing a lot of factual information, which I commend to hon. Members opposite. The hon. Member for Sheffield, Attercliffe (Mr. J. Hynd) said that there was complete chaos before the State took the industry over. But the State only had control for a year before the industry was denationalised. In. any case, we had had an element of State regulation since the early 1930s, and prior to nationalisation other big industries had had State regulation in their investment programmes.
The hon. Gentleman mentioned the fierce competition from Europe. He may care to observe the position in West Germany. The iron and steel industry there is largely not nationilised and is very competitive indeed. He may find one or two examples to suit his purpose, such as Finsider, in Italy, which is owned by I.R.I., in which there is a certain amount of public participation. But his format of the industry being completely taken over by the State is a very different matter. Let us take a look at Europe. We are negotiating with the European Coal and Steel Community. How many countries concerned run privately-operated enterprises? The hon. Gentleman will find that the privately run enterprises are remarkably competent and efficient.
Flexibility of prices has been mentioned, and this experiment may be effective very shortly prior to our going into the European Coal and Steel Community. But Europe also has difficulties in this matter. I have been reading the Report of August Thyssen-Hutte Aktien-gesellschaft, which points out the difficulties of the added-value tax in France and a similar tax in Western Germany. This is what happens.
If Germany exports steel to France, a turnover tax of 6 per cent. is deducted. When the product enters France there is an added-value tax of 20 per cent. In the reverse direction—from France to Germany—there is an added-value tax of 20 per cent. deducted and a turnover tax added at the frontier of 6 per cent. The hon. Gentleman will see the significance of the United Kingdom in this.
The Thyssen Report says:
Thus, while the turnover tax burden on French products sold in Germany decreases substantially, turnover tax manipulations affect -the interstate movement of goods result in a considerable increase of the tax burden imposed on German products sold in France.
We in the United Kingdom have for some time been living a rather sheltered life behind a high tariff structure. When and if we join the European Coal and Steel Community, this tariff will come down. We have no turnover tax in the United Kingdom at the present moment, but if we are to export, a very substantial added-value tax will be rated against us in France. In importing from France, if the tariff is limited for a number of years, the French will have a competitive advantage inside the United Kingdom. I hope that my right hon. Friend will bear in mind some of the difficulties being experienced inside the Common Market between the present members. From the analogies, he may be able to think of effective steps here.
There is also the possibility of having an integrated fuel policy for Europe. I listened to my right hon. Friend's remarks on this with considerable interest when he talked about confirming the view, which was expressed yesterday, that we should not import cheap Virginian coal into the United Kingdom. But we must take note of the fact that something like 4·4 million metric tons of American coal is entering West Germany, a similar figure is entering Italy, and 2·2 million metric tons is entering Holland. Altogether, about 12·5 million metric tons of American coal is entering the European Common Market.
Obviously, the Community would not import this coal unless it was profitable to do so. There is a price differential. My right hon. Friend may say now that a licence will not be granted for the importation of American coal but if and whan we go into the Iron and Steel Community—if we go in—he will not be in such a position. He would have to say that if the other States accepted it we too must be in a position to accept it. I therefore ask him the simple question—could he resist such importation later on? I am saying that my right hon. Friend should allow American coal into the United Kingdom now.
His answer will be that that might lead to an increase in freight rates, but as he knows full well freight rates have been depressed for some time and that at least 12 million tons of coal have been moving across the Atlantic into Europe without upsetting the freight market. Do hon. Members opposite consider that 2 million or 3 million or 4 million more tons of coal crossing the Atlantic to enter the United Kingdom would upset the freight market?
There is another way of considering it. There are many ore carriers which are normally used for the conveyance of iron ore from abroad but which are not being used for that purpose at the moment. They might be used for the conveyance of Virginian and other American coals if there were a price differential. That might be a considerable advantage to the steel industry not merely in Wales but also in Scotland.
The hon. Member for Hamilton (Mr. T. Fraser) said that Colvilles were receiving rather poor treatment because of the differential price structure ordained by my right hon. Friend. I fully support his reason for that, but if a particular industry is to be singled out to suffer in this way, if we can find some other way to alleviate its distress, we should resort to it.
The best way is to allow, as certain European countries have allowed, a certain amount of coal from the United States to enter the United Kingdom under quota. The country should be prepared to permit imports for a term of ten to fifteen years whatever the freight rates might be, and upon terms that the manufacturers would not have the right to accept coal from the home market. If they were forced to do so because freight rates moved against them, they would have to pay penalties to the National Coal Board.
We are dealing with the Report and not with the farming community, although those matters will arise later. I am trying to be constructive and to help my right hon. Friend with these problems. What we are concerned with in the United Kingdom is a reorganisation in the steel industry after the muddle caused by the nationalised industries, the railways with freights going up and the coal mining industry which has not even been able to hold its costs. Fortunately, the great bulk of the steel industry has been denationalised.
The result is that the steel industry, which is a highly dependent industry—it depends on the rest of the economy—is now faced with the possibility of a slight reinflation of the economy to ensure expansion, and the first industry to benefit from that will be the steel industry.
If the denationalisation of the railways could have helped to put the steel industry on its feet, will the hon. Gentleman explain why eleven years have passed during which the present Government could have done it but did not?
I did not mention the denationalisation of the railways, but the hon. Member will probably remember that we decided that we could mot convulse one industry after another. Parliament had taken the decision and when we returned to power in 1951, we accepted that verdict. But we did not accept it about the steel industry because that had been nationalised within a year of our taking over. What we have to notice is that the losses of the mining industry in Scotland alone have been more than £100 million while toe losses of the railways have been enormous. The only way in which those industries are able to succeed is by having monopolistic positions and making the consumer, that is the public, pay through the nose. I am trying to recommend to my right hon. Friend that he should not fear the consequences of importing American coal providing that it is done on very strict quotas. I think that the hon. Member for Hamilton will appreciate that the steel industry of Scotland would benefit from such a move.
Another question which my right hon. Friend mentioned was that of the fuel oil tax which has been a heavy imposts on industry. He said the fuel prices in this country were not much heavier than those in competitor European countries. I wonder whether that is consistent with the Report which in paragraph 55 says:
But such evidence as is available suggests that fuel oil is significantly cheaper in most E.C.S.C. countries than in this country. This is partly because of the lower rates of tax. but mainly because lower prices are obtained from the oil companies.
The Report goes on to give several reasons for that. That I confess was my view, but there is another side to it.
I should like to read to the House the approximate prices of fuel oil to the steel works of several countries. These are the facts, and I think that we should start with the net price measured in £ per ton. In France it is £6·1, West Germany £5·2, Italy £5·2, Holland £5·0—those are ex-refinery prices, while the delivered prices in Bel-guim are £5·7 and in the United Kingdom £6·4. One would be entitled to subtract from the last figures the transport costs.
The figures would them appear to be roughly in line, but one has to add to these figures the fuel oil tax in the various countries concerned. In £ per ton those figures are France £09, West Germany £2·4, Italy £1·8, Holland £09, Belgium £1·9, the United Kingdom £2·0.
We then have the situation that the highest tax level in Europe is Western Germany followed by the United Kingdom with all the other countries coming off rather lightly. On those calculations at least, that would appear to make the gross price higher in the United Kingdom than alsewheere, although the prices fall into line when they are compared strictly on an ex-nefinery price basis.
The importance of this is that medium fuel oil is used very largely in the steel industry. I return to one or two rather interesting observations made by my right hon. Friend in a Written Answer on 4th June when he said that between 1949 and 1961 the published price of minimal bulk load of medium fuel oil had risen by 74 per cent. I was rather surprised when I saw that figure and on 2nd July I asked the Parliamentary Secretary for clarification of it. He said in a Written Answer that after adjustment for the tax imposed in 1961, the increase between 1949 and 1961 was about 55 per cent.
But I say that even that is wrong because in the United Kingdom we ought carefully to distinguish between scheduLed prices and rebates which are granted. The rebates are rather interesting. It may be true that scheduled prices went up between 1949 and 1961, but net prices went down, because in that time rebates rose from less than ¼d. to more than 3d.
When one considers these facts, one can see that one of the basic fuel industries in the country has been doing its maximum to provide an economic fuel available to the steel industry to assist it in its difficulties in Europe and the United Kingdom, while on the other hand we have the experience of the coal mining industry where prices have continued to rise.
My right hon. Friend mentioned technological improvements in the industry. I think it is well known to most of us that over thirty years the amount of coke taken to produce a ton of iron has been reduced from 25 cwt. to about 16 cwt. If coking coal is to be made expensive and not readily available and if there is to be more efficiency in the industry, with resort to oil injection and so on, it may be possible to reduce that figure still further to 12 cwt.
What I am seeking to show is that the industry is efficient, and becoming more so. It is not being thrust into chaos by the type of administration under which it is operating, but by the policy which has been adopted by the National Coal Board and others not having available adequate supplies of material, and by my right hon. Friend not allowing the importation of good coking coal from the United States at reasonable prices. The industry has therefore had to look in another direction. I thought it right to deal with coke and fuel oil because we have to compete with one or two rather efficient companies in Europe, and it is as well to remember this.
The Europeans have had some advantage over us in that the rehabilitation of their steel industries since the war has been carried out largely by American and other funds. We had to use our industry under the most exacting circumstances and although we have introduced a programme of development some of our plants are not in the same shape as those of some of the newer European concerns. When we bear that in mind, we realise that this industry must be competitive, especially if there is a fair possibility of us going into the European Coal and Steel Community.
That brings me to another factor about ore supplies. We receive large quantities from North Africa, Canada, Sweden, and some of the new African States. We are gradually moving over to the idea of fuel oil injection in blast furnaces. This is reducing coking requirement and greater uses being made of sintering processes. These are valid arguments, but if we are to make further technological progress it is essential that we should import higher quality ore.
I wonder whether my right hon. Friend can elaborate on what is in the Report about our sources of supply and the iron content of these supplies? Are we bringing in one with a 60 per cent. and 65 per cent. iron content? Are we going to continue to use much larger supplies of lower quality ore in the United Kingdom, or what is the general policy in this direction? Will my right hon. Friend also say something about the direct reduction of the ore in blast furnaces? Can we see the way clear to the complete elimination of coke from blast furnaces? Will my right hon. Friend also say something in connection with steelmaking? In what direction are we moving? I do not think that we can compare our position strictly with that of Europe. Here we have chiefly open hearth furnaces but in Europe they favour the Bessemer process. What is our process? Are we going more over to the electric furnace, or are we going increasingly to use a new and improvised form of the Bessemer furnace? In other words, what are the lines of technological progress?
I endorse my right hon. Friend's proposal that our aim is 32 million ingot tons, even though demand envisaged is only 29 million tons. We hope that consumption will rise, but we must look ahead and seize opportunities when they arise. The industry is not spending too little, and I think that it is spending its its money wisely, but I should like the information given in this Report to be elaborated in some detail. The authors of this Report have done a good job, and I agree with my right hon. Friend that even if we go into Europe and the present arrangements are altered so that the Board does not have the control it has at the moment that is not in itself a reason why it should be abolished.
The hon. Member for Willesden, East (Mr. Skeet) has on more than one occasion emphasised that this is a good Report. What emerges from a close study of it is that the prosperity, or the absence of prosperity, of the steel industry depends on the prosperity, or the absence of it, of Britain. The fact emerges that the state of the economy will determine whether the recent planned expansion of the industry will be an advantage or a disadvantage.
One point made by the hon. Gentleman rather puzzled me. If he accepts my view that the economy of the steel industry is related to the economy of Britain as a whole, I cannot make head or tail of his remark that the root of the trouble is the muddlement, as he put it, caused by nationalisation. The steel industry has been largely denationalised and the difficulty in which it finds itself at the moment is not of its own making. This difficulty has been created by the Government, whatever hon. Gentlemen opposite say to the contrary. It stems from the position of the country and not from any consideration whether it is a nationalised or denationalised industry.
I endorse the right hon. Gentleman's view that Colvilles should be assisted to complete the redevelopment on which it is engaged at the moment. It would be tragic if the programme were cut down now. Unless this development is carried out in full, Scotland will never have the basis on which to found a prosperous modern industry. I am sure that all my Scottish colleagues agree that this assistance should foe given to the company, and we wish it success in its efforts.
The Minister referred to differential coal prices, and this point has been mentioned by various other hon. Members. It is not my intention to stimulate antagonism or hostility between these two important industries, coal and steel. They are essential to each other. But, I put it to the Minister, and through him to the Chairman of the National Coal Board, that the argument that the national interest calls for this policy is resulting in discrimination against Scottish steel. If one considers the state of the coal industry, one must agree that it is necessary to control the importation of coal. In fact, it would be absurd to allow substantial quantities of coal to be imported. This is especially so if we remember what the coal industry did for the steel industry in the past. We all know that the steel industry was provided with coal at lower prices than economic prices. From this point of view the steel industry owes a substantial debt to the coal industry, and I would be the last person to say that the steel industry had wiped it out.
I ask the Minister, and through him, the Chairman of the Coal Board, to recognise what he is doing. He is treating a particular part of the steel industry—the Scottish part of it—in a way which puts it at a disadvantage vis-à-vis the rest of the steel industry. That is why I feel that this is a wrong policy. Most of those in the industry are against this policy. They do not wish to see discrimination against Scotland.
This development is already placing upon the Scottish steel industry a burden that might prove too heavy for it to carry. The right toon. Gentleman knows as well as I do that it is the reiterated policy of the Government that everything must be done to attract industry to Scotland and to other development areas. But the Government are pursuing a policy which is making it more difficult for industry to be established and to grow up in Scotland. It is so contradictory as to be quite absurd. Even at this late hour I hope that this matter can be reconsidered.
I am not in favour of coal being imported for the steel industry, but the steel industry of Scotland has a powerful argument for coal being imported there, if it is imported anywhere in the United Kingdom, since this policy of discrimination is being followed against the Scottish steel industry. Bearing in mind that Glasgow is a wide open port for the United States and that Colvilles is tied up wiltfh Glasgow and has excellent facilities, making it easy to bring in coal, Colvilles could do this job very well. If coal can be brought in cheaply it would be difficult to justify the continuation of this policy of discrimination against Scotland.
The state of the Scottish steel industry is now most precarious. Those who work in it are very doubtful about their future. For more than a year virtually everybody making steel in Scotland has been on short time. The Minister himself has said that the steel industry there is operating on a basis of 60 per cent. of its capacity. In fact, many mills are operating at less than 60 per cent. capacity. I should like to give the House a few figures. First, there is the Blochairn works in Glasgow. This is an old works, but it is very im-portant to many people. Its plate mil is now operating at 34 per cent. capacity. Hallside, in Lanarkshire—just outside the constituency of any toon. Friend the Memlbar for Hamilton (Mr. T. Fraser)— is a new works, from which much was expected.
Scotland has concentrated its production of special steels there. It was opened early last year but has never functioned at anything near its capacity. At present, it is functioning at less than 50 per cent. of its capacity. It is producing special steels, and not the heavy steel that we hear so much about. Its melting department is operating at less than 50 per cent. capacity and its cogging and billet mills at only a little more than 33⅓ per cent. of their respective capacities.
Another new mill from which very much was expected, and which was mentioned when we were discussing Scottish industry and employment, is the Clydesdale mill, which produces seamless tubes. The oil industry and this mill are intimately tied together. The mill was laid down because of the expected demand for this type of tube from the oil industry, but in July, 1961, it was stopped, and it has never rolled since, although I understand that it is one of the most modern mills in Europe. It had virtually only just been installed when it stopped production. It has never been properly engaged in production; it has merely done a few odd jobs.
Scottish steel workers cannot help feeling uncertain about the future of the industry when they see not merely the old works but the new works, from which much had been expected, functioning at only one-third of their capacity. It is too early yet to speak of Gartoosh and its rolling mill, but it is functioning at only about one-third of its capacity, although it is hoped that it will improve on that. But when the hot strip mill is rolling and the strip steel is moving out, it will be displacing the steel which is now being produced elsewhere. This, too, is a big factor in the minds of many steel workers in Scotland, and especially in Lanarkshire. We must have modern industry, because without it there will be no hope for the future, but it must be realised that what happens there will affect the jobs of many workers in other sections of the industry.
It might be of interest to the right hon. Gentleman to consider the size of the labour force engaged in the steel industry in Lanarkshire. Lanarkshire is not the whole of Scotland, but it contains the largest pant of the Scottish steel industry, with Motharwell at its centre. In mid-1948 the labour force in Lanarkshire was just under 22,000, and in mid-1961 it was only a fraction over 15,000. On my calculation, the labour force engaged in the production of steel in Lanarkshire has contracted by about 32 per cent. in twelve years.
That is the present situation. There is no doubt that groat progress has been made in madernising the Scottish steal industry. The great problem arises from the fact that the disposal of steed is not keeping pace with the capacity to produce it, and as yet shows no signs of doing so. I have here an index which I worked out partly by myself and partly with the add of the night hon. Gentleman the Minister of Power and the right hon. Gentleman the Minister of Labour and others. It is an index of the output of steed in Britain as a whole and in Scotland from 1948. It is very significant and brings out just what is happening in the two parts of the country.
If we take 1948 as 100 and look at Britain as a whole, we see that the output of steel went up to 163, an increase of 63 per cent. This was from 1948 to 1960. As we have already heard, it actually fell by some 9 per cent. in 1960–61, taking Britain as a whole. In Scotland, the increase was only 20 per cent. so that the rate of increase in the production of crude steel in Scotland has been roughly one-third of the increase for Britain as a whole. But the rises and falls of the level of production are much more marked in Scotland than they are in Britain as a whole. For example, in 1961 Scottish production of crude steel was only 4 per cent. higher than in 1948, and in quite a number of years between 1948 and 1961 the Scottish production of crude steel was substantially lower than in 1948. In 1959. the production of crude steel, taking 1948 as 100, represented only 87·5 per cent.
We see the wide swings which have taken place. There is no doubt whatever that those movements in terms of the production of crude sited are the result of Government policy. In 1957, Scotland was at its peak, just as Britain was at her peak, though, of course, it was a much lower peak than that of Britain. Then we had a change of policy and Scotland went down further than Britain. As my hon. Friend said, Britain's production of steel went down 9 per cent. and Scotland went down a good 13 per cent. We see how exposed and dependent Scotland is upon a sound economic policy being followed by the Government.
It seems to me that what we are really concerned about is the state of the industry at present, not whether we are to nationalise or denationalise it in future. We are concerned with what is wrong and with what should be done to put matters right. There is no other industry in the country which is more dependent upon Government policy than the steel industry. No industry has so much to gain and so much to lose from bad planning as has the steel industry. Indeed, the industry was on its knees in the inter-war years and it was only because plans were imposed upon it that it got to its feet and is where it is today. This was not due to private enterprise, but to effective planning. But all the planning on the world will not make the steel industry prosperous and enable it to meet the needs of the nation unless the nation itself plans its economy and, in fact, the consumption of steel. The consumption of steel is not being planned.
The industry is operating on a hit-and-miss, stop-and-start basis which injures it very much and causes the steel workers to be on short time or even out of jobs, as so many are, to find their jobs disappearing. As was pointed out earlier, in Lancashire there has been a net loss of 32 per cent. of the jobs over a short period. I associate myself with my hon. Friend the Member for Hamilton concerning the need for the Government to bring about and stimulate growth—to sustain growth. It is no use stimulating it for a year or two and then allowing it to collapse. Growth must be sustained. We know enough about the economy now to enable this to be done.
Listening to what has been said from the back benches opposite, one would imagine that the spending of public money is merely to waste money. Why should it not be regarded as an investment? Is it not regarded as an investment when we build schools and electrify our railway system? If we are to face competition in the world today our industries must have the most efficient transport system that we can provide them with. That is essential. We have to see that the hospitals, schools and colleges, and their equipment, are the finest that can be provided. It is not a question of the cost, but of the labour—men working with tools and materials. We have the men and the tools and we can get the materials if we produce a satisfactory financial system.
There is much to be done. I have no doubt at all that if we approach the matter sensibly we shall see Britain steadily increasing her production of wealth, and the steel industry, and especially that of Scotland, steadily producing an increasing amount of good steel. On this basis we shall be giving the steel workers of Scotland some confidence in the future.
One of the ironies of parliamentary timing is the feat that immediately alter last night's debate, when so many hon. Members opposite wore upholding the policy of the present Government, we should be debating a Report which is a severe indictment of the Government's whole economic policy. It is an indictment, I submit, which as all the mare remarkable and convincing because it comes from the Iron and Steel Board which, even if it is not a neutral agency, is certainly one which is not hostile to the Government. It is also all the more remarkable and convincing because the indictment is not in denunciatory form but arises from the facts stated in the Report.
If we look at the facts we find that all the general points that were made in defence of the Government's policy yesterday—and the Government found themselves in the difficult position of not being able to criticise their own past policies because had they done so that would have meant the resignation of the Prime Minister and of the right hon. Gentleman the Minister of Power who is facing us this afternoon—were contradicted by the experience of this mast important industry, the steel industry. The reasons for this indictment have meant very serious consequences for a great many of our people. We have rightly heard about Scotland and heard something about the North-East, but even in those areas not so (harshly affected the consequences have been serious.
If I may, I shall refer, as my hon. Friend the Member for Rotherham (Mr. Jack Jones) has done so convincingly with his vast store of knowledge of the industry, to the position of south Yorkshire and Sheffield and my constituency of Penistone and other areas. There we have the position that whilst the number of people actually unemployed in the industry is not vary high, the number of those on short time is very high indeed. If I may, I will support this point with the latest figures published on 24th July. In the Sheffield area there are over 6,000 people on short time. The steel works at Stocksbridge, in my constituency, is a very efficient works, organised on modem lines. Recently, it further advanced its modernisation. Out of a total of 7,000 people employed there, 2,200 are on short time.
Even that does not give the true picture, because there are a number of people who do not appear in the statistics relating to short-time working. Sometimes workers drop a shift here and there, and so do not qualify to be included under the arrangements made with the Ministry of Labour and with the National Insurance offices.
That is correct. The overall picture is not complete unless there is added the point made by hon. Friend the Member for Rotherham about the severe drop in overtime.
The general case has been made in an able fashion by my hon. Friends. I wish to deal with one or two specific points upon which I should like the Minister to take some action. For the number of officially registered unemployed in the Sheffield and Stockbridge area, there arises a peculiar difficulty. Because of his responsibility for the industry, the Minister will know that in that area we work a continuous working system. As a result, a considerable nu-ber of workers are on rota system. As a consequence of the arangements under which the workers qualify for unemployment benefit, we find that a number of people are unable to obtain benefit because to do so they must not have worked for two consecutive working days within a period of six working days.
This leads to injustice, particularly in the case of people who are on short-time. They may be out of work for several days for which they cannot claim unemployment benefit. There is also injustice as between man and man, because it may mean that two men working side by side—it may be that they live in the same street—may have lost the same number of working days. But one will be able to claim unemployment benefit when his neighbour will not.
I have discussed this matter with representatives of the Joint Steel Committee in Stockbridge, with the manager of the Sheffield Employment Exchange and with some employers. I am able to tell the Minister that in all circles the opinion is unanimous that these circumstances led to bad feeling among employees and that something ought to be done about it. I urge the right hon. Gentleman to consult his right hon. Friend the Minister of Pensions and National Insurance about this matter. That Minister is a newcomer to that office and it may be that he will be eager to examine some of these old problems once again.
But it is the responsibility of the Minister of Fuel because these difficulties and injustices apply to people in the steel industry for which he is responsible. It would be unreasonable to expect a detailed reply about this matter today, but I urge the Minister to give the House an assurance that he realises that it is a serious matter and that he will consult his right hon. Friend to see whether something can be done.
Another specific case concerns the problem which was discussed by my hon. Friend the Member for Hamilton (Mr. T. Fraser), but mot, to my surprise, by the Minister. I refer to the problem of steel stocks. One point which has not yet been mentioned is that the Board is fully aware of the problem. It is absurd that we should find ourselves in a situation where, in contrast to what has happened in the coal industry, there is no encouragement to stock steel during bad times and thereby allow production to continue at a high level.
I agree with my hon. Friend the Member for Rotherham that it is particularly important to ensure that the productive capacity of the industry is fully utilised, particularly now that we have persuaded firms in the industry to add to their capacity to produce. If periods of idleness do occur, not only is the industry not producing new wealth, but it is losing money. If that happens, people in the industry must assume a serious responsibility. But there is also a responsibility on the Government.
As I was saying, the Board does not need to be told that this is a serious problem. The awareness of the Board is indicated on page 8 of its Report, where it states:
The Board made inquiries of producers and users whether steps could be taken to moderate the reduction in stocks which was the main cause of the fall in the production of steel in the second half of the year; but no solution was found.
Can the Minister tell the House why no solution was found? What were the opposing forces and the reasons advanced by those who were consulted by the Board, and what made them turn down the suggestion that a solution ought to be found? Here there is involved the attitude of producers and steel owners. A lot has been said today about the advantages of having the
steel industry privately owned by individual firms. It is no use discussing this matter in general terms in which there would be a clash of opposing theories. The only way in which such a discussion makes sense is to get down to details. Here, we are considering such details. It would have been of great advantage to the industry if production could have been kept at a high level by having a National Steel Board responsible for stocking steel.
The Board states that the main cause of the fall in the production of steel which occurred in the second half of the year was the reduction in stocks. Here we have a Board, which has limited and insufficient power, realising that a serious problem exists, and suggesting a remedy to the producers. No doubt the Board could have told us more about its suggestions in its Report and about the negative nature of the reply to them. But the Board has chosen not to do so and to that extent I am critical of the Report. Parliament and the country, and, above all, the workers in the industry, are entitled to be told by the Board what proposals were made and the negative answers given to them.
In the sentence I have quoted is indicated the difference between the standard of living of the people working in the industry before the new crisis and the lower standard which they have today. The Minister has an obligation to the House. He, or his Parliamentary Secretary, ought to tell hon. Members what proposals were made and why they ware turned down.
Other hon. Members wish to speak, so I will content myself by making one more point. The annual meeting of the Consett Iron Company will be held in August, but the chairman, Lord Ridley, has circulated his annual report in advance. In it he refers to price difficulties and his statement contains an implication which was echoed by the hon. Member fox Cirencester and Tewkesbury (Mr. Ridley), who is not now in the Chamber, because, obviously, he believes in making his own speech, but not waiting to observe the reactions to it by other hon. Members. Lord Ridley is critical of the Iron and Steel Board for having any say at all in the fixing of prices. The interesting question arises about what would happen to the powers of the Board—limited as they are—were this country to join the European Coal and Steel Community.
I will quote from Lord Ridley's statement, because, obviously, he has made up his mind about what is to happen. He says
Looking to the future, the indications are that the steel-making capacity in the world will, at least for some time, exceed demand for most steel products. The picture is made more obscure by the fact that alongside the application to join the European Economic Community this country has applied for membership of the European Coal and Steel Community. The problem is being very carefully studied. I believe that in the long run this system will enable us to secure realistic prices which are competitive and not subject to arbitrary control by the Iron and Steel Board.
That is the accusation made by Lord Ridley against the Iron and Steel Board, that its decisions are arbitrary and have no regard for the serious interests of people concerned.
As we are engaged in discussing the future prospects of this industry, I put this to the Minister. If Britain were to join the European Coal and Steel Community would it not be clear that any organisation we regarded as desirable for a nationally-owned industry or one under the limited control of the Iron and Steed Board would be completely impossible if such an organisation in this country wanted to control the price policy of our own steal industry? I am completely convinced that not only would the two main functions of the Steal Board go, but it would be virtually impossible for any organisation in this country, even though desired by the electorate to be responsible for the most important items the Minister mentioned, price policy and the policy on future investment.
The Minister should take us into his confidence. There are to be major debates on this subject, but as this is a matter which affects the steel industry in particular as well as the coal industry, we should be given a reply on this question.
I am always grateful to my hon. Friend the Member for Rotherham for the speeches he makes about the industry and people in it. I was quite unaware of that connection, but I admit that it adds point to what I have said.
The people most directly concerned, those working in the industry along with those who have detailed interests which I have been putting forward are equally interested in the future of the industry. It ought to be put on record that more and more more people working in the industry who might not in the past have taken so great an interest in organising for the future are seeing more clearly that the way in which the industry is organised in future will have a great effect on them. How it is run national-ally, and on what lines and what happens to them from time to time, are matters which are closely interconnected.
In recent meetings I have had it put to me that in earlier discussions these people were not made completely aware of what might happen to their jobs, to short time working and to their income. There is a growing volume of opinion of which the Government ought to take note which would never forgive the present Government if beyond all their other shortcomings they did not take measures to see that by a change in economic policy it is possible to work at a higher level of capacity in the industry.
I do not believe in making doctrinaire cases and merely waiting for changes of Government. All the additional capacity made available in the industry—in which we have a part because we urged the industry to go on expanding because that was good national policy and good for the industry—puts an obligation on us to demand that the policy of the Government in matters which affect steel should take note of the circumstances and do something about them People working in the industry at all levels are deeply disturbed. They are beginning to think as they have not thought for some years where their future will lie in this industry. Invested in it is a great deal of knowledge and skill which has come down through the generations. The vast majority of people in it have no other interest but to continue their work in the industry. But now we so often have the boom and decline periods. We had that three and half years ago and are having it now and many people are beginning to get worried.
There may not be a large number at the moment who have not sufficient confidence in the future of the industry, but some people are beginning to ask whether surplus capacity and the decline in the number of jobs will make the industry uncompetitive in future. It is a severe indictment of the Government's policy that they should be more interested in easy triumphs, votes of confidence and fradulent statements of policy, than in the well-being of this vital industry.
I am continually astonished in these debates in the House on details of the economy at the sparseness of attendance of hon. Members opposite. Where As the hon. Member for Cleveland (Mr. Proudfoot), who has in his constituency, which is next door to that of my right hon. Friend the Member for Midddlesbrough, East (Mr. Bottomley), some works which have put out 2,000 men from employment? Where is the hon. Member for Darlington (Mr. Bourne-Arton) and the hon. and gallant Member for The Hartlepools (Commander Kerans)? We on this side of the House, my colleagues from Scottish cootistituencies from the North-East Coast, from South Wales, are continually hammering at the Government without any effect.
My than. Friend the Member for Hamilton (Mr. T. Fraser) referred to the question of stocks, which has been a nigger in the woodpile of the industry. Many proposals have been put up, not only by those inside the industry but those outside, but what is needed is (initiative by the Government, and that has not been forthcoming. I urge the Minister to look at the proposal, to which my hon. Friend referred, which I made on the Report stage of the Finance Bill, on 3rd July. That is only one suggestion.
Today I point to a truly astonishing omission from the Report which we are debating. The hon. Member for Willesden, East (Mr. Skeet) thought that this was a good Report, but my hon. Friend the Member for Penistone (Mr. Mendelson) cast some doubt on it. I should like to oast some more. Is it not astonishing that in a Report which is meant to cover the whole activities of the industry we find no chapter headed "Sales and Technical Service"?
Is it not extraordinary that this Report should talk merely of users of steel, as if the Board bad never heard that there are people such as customers, who might or might not be users of steel, but who are or are not dependent on sales effort put across to them? We have no more members of the Front Bench to spare for this industry an order to sort out its problems. The Minister himself will have to put some effort into solving the problems of the steel industry.
There is a take-it-or-leave-it attitude to sales in the industry which is truly shocking. If the Minister will go to exhibitions of the building trades he can compare the sales effort put into constructional steel compared with that for reinforced concrete. He should go to university engineering laboratories and compare the research effort put into the use of reinforced concrete as opposed to steel and the design methods for the use of constructional steel. Methods which were formulated ten or fifteen years ago are not yet in use by major manufacturers. Does he not think there is a need for initiative in the industry?
As a neighbour of the steel industry, I have not the least hesitation in advocating the nationalisation of this industry because I see no other way of introducing the drive and enterprise that is needed in it today. The old steel masters have gone. They were in many ways remarkable men. But their successors are completely different. The industry is completely different. It does not depend any more on the handing down of experience of a lifetime from father to son by the method of ownership. It depends on successful training and on research.
There are grave human problems here. Let us consider the case of a steel company which has been used to employing graduates perhaps only on the board but nowhere else in the firm. The chairman knows full well that to modernise his firm he has to introduce trained men throughout the firm. It is not easy for him to upset the balance of power in his own firm. It is impossible for him to do so if he is under the supervision of a Government which encourages that clinging to power which sets such an unfortunate example to the big firms and their bosses today.
Will the Minister send someone round to investigate the research efforts of the steel companies and talk to the people who are carrying out research in the steel industry to find out what they are doing with the processes of the steel industry today? Will he talk to the men in the laboratories who are carrying out routine analyses to find out how their work compares with the work of comparable men in the oil and chemical industries? If so, he will find that there is a sharp divide between the ancient world and the modern world. Today too much of the steel industry is in the ancient world.
What change is needed? Only a radical change of ownership can provide the impetus and momentum. There is something useful which the Minister could do in getting a clearer view of the industry in the remaining months left to him in office. I hope that he will urge the Iron and Steel Board to include in its next year's Report a chapter on sales and technical service. I hope that he will consider those questions and the use made of steel in the newer industries, because many of the customers of the steel industry are themselves not living in the modern world.
In an industry like the steel industry which has suddenly shifted over from working in a sellers' market to a buyers' market there must be change in the balance in the industry itself. This means a change in the field of sales and technical services. It also comes back to design and the planning of production. Too many of the steel mills are designed on the assumption that one can turn out steel like sausages and the public will use the steel coming out at the end. There is no consideration given to the logistics of construction and the provision of the steel that we need in the form that we need it promptly.
I am sure that when the steel industry goes into this question it will find that there are great economies that could be made in the use of steel. It will find that the same structure, the same vessels, can be made with a great deal less material; and new uses of steel must be found if the level of production is to be maintained and increased. An industry like the steel industry, technologically based originally, and in the future technologically based, of necessity can and must diversify activities. I do not want to trouble the House with the technicalities involved, but we are getting away from the use of merely homogeneous materials and going over to the use of such materials as plastic covered steel sheet and structures which are a combination of steel and plastic.
The theory and use of many of these types of structure has been worked out in the aircraft industry, but there is no cross-fertilisation of ideas between the aircraft industry and the steel industry because the steel industry is not equipped to absorb the ideas.
There are, I admit, one or two outstanding exceptions, and one of these is Richard Thomas and Baldwins. I was astonished during the by-election campaign in Middlesbrough, West, when my opponent, the Conservative candidate, said that the reason that the shares of Richard Thomas and Baldwins were not being sold was that the firm had invested in a computer which would revolutionise the steel production of the firm and double the price of shares. I was so flabbergasted by this that I was unable to reply. But it is a measure of the fairy tale attitude of hon. Members opposite to modern industry, and also a tribute to a firm which is working efficiently and engaged in the most advanced processes, without any of the economic dogma of hon. Members opposite, a dogma which today is throttling and choking the development of an industry which is essential to the future of the country.
Everything that I wish to say on the general position of the industry has already been said much more effectively by my hon. Friends on this side of the House. I do not propose to repeat what they have said. I propose to ask the Minister only one question concerned with the future of Richard Thomas and Baldwins.
The hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) raised this question, and I can understand his feelings about it. If he feels sore that the Government have not carried out their pledge, it is natural that he should raise his voice about it and put questions. I make no complaint on that score. But as I understand the situation, whatever may be the reasons, the Government have made up their mind that in the foreseeable future they cannot denationalise Richard Thomas and Baldwins. That was a statement made to a private meeting of Tory Members by the previous Minister Without Portfolio. It was reported in the newspapers, it has never been repudiated, and it describes the situation.
I should have thought that in all honesty and fairness the Government should be prepared to state in public that that is the situation and that they have made a decision that they will not denationalise Richard Thomas and Baldwins, whatever view anyone may take about nationalisation. If that is the case, surely, in common fairness, it ought to be stated in public. I think that even the hon. Member for Walsall, South agrees with that. Instead of that, on every ocoasion when the hon. Member for Kidderminster (Mr. Nabarro) or myself, or others, have asked the Government what is their decision and what are their intentions about Richard Thomas and Baldwins, they have concealed the position with a lot of verbiage, repeating the formula which they have used before and saying that they still hope to denationalise it at some time. They conceal the decision which they made.
I ask the Government to make a statement about this matter. It is most unfair to the managers and to the people employed in Richard Thomas and Baldwins that they should be left in uncertainty about their future. Let us suppose that it were the other way round and that a Labour Government were in power which was threatening some firm with nationalisation but postponing from month to month making any statement about it. The Tory Opposition in the House would protest most violently, and justly, because a firm has a right to know about its future. The reason that the Government will not give a direct and honest answer to the questions which we have asked lies solely in a matter of inconvenience for them and their backbench Members. They think that if they announced in public the decision which they have made there would be trouble from the hon. Member for Walsall, South, the hon. Member for Kidderminster and others. This is a most disreputable reason for keeping a great firm and those who work in it in a state of uncertainty.
I do not expect an answer today. I fully expect the Minister to repeat the formula which has been repeated time and again. But possibly the Government could do this at the beginning of the Recess, at the end of next week. If the Government made an announcement then, they would be saved from awkward Questions in the House. If the Minister cannot reply to the question now, will he, a week after Parliament has departed, say openly in public what the Government intend to do about Richard Thomas and Baldwins?
I represent about 1,500 steel workers who are at present working only three days a week. Output is a good deal less than 60 per cent. of capacity. In the light of the Minister's statement, and paragraph 18 of the Report, the future prospects of the industry are particularly unhealthy.
But what worries me, in particular, is the Minister's remark that he will wait until such time as "normal consumption by the steel-using trade" starts again. What does this mean? I have an uncomfortable feeling that "normal consumption", as the Minister was using that term, will never come to industrial Britain again. The change to fibre glass in the car industry and the changing nature of armaments make this seem likely. No longer shall we have heavy steel for tanks. I am glad of that, but we must take industrial note of it. We must also bear in mind the problems of shipbuilding.
I wish to focus attention on the fact that the steel industry in Armadale and Bathgate cannot be divorced from the future of shipbuilding in Sootland. I look forward with interest to today's Adjournment debate, when the question of an atomic-powered ship will be raised, because I hope that this would be built either on the Tyne or on the Clyde— and this is the sort of public works which alone can come to the rescue of the steel industry in Scotland.
There are other public works which could be of value, such as special ships, heavy machinery, and possibly a monorail out to London Airport. It takes me longer to get from here to the airport than it takes from London Airport to my home. Perhaps we could also organise the coast erosion projects about which my hon. Friend the Member for Rotherham (Mr. Jack Jones) spoke. Could we please have from the Ministry a Hist of Worth-while steel-oonsuming projects which could be regarded as public works?
I know that there is another hon. Member who wishes to speak and who has a bettor claim than I have to speak about the steel industry, and I will, therefore, make way for him.
I have the privilege of representing a great steel city, renowned throughout the world. Like my hon. Friend the Member for Middlesbrough, West (Dr. Bray), I am glad to be present to take part in the debate. We bad a debate a short time ago on unemployment in the North-East, and I am glad that the North-East Coast was well represented on that occasion. I wish there were the same representation today, because the steel industry is basic to the recovery of that part of the country.
The Minister said that his right hon. Friends the Minister of Labour and the President of the Board of Trade were doing everything to send alternative employment to the North-East. That is not our experience. In the view of most of my right hon. and hon. Friends, the Government are far too complacent about the matter. Certainly, the President of the Board of Trade and the Minister of Labour could not have read this Report because it says:
This is not the first time since the war that the industry has operated well below capacity. But hitherto it has done so for only comparatively short periods whereas on this occasion the prospects of an early general recovery are not, at the date of the submission of this report, very promising".
Yet a spokesman of the Board of Trade was reported only two weeks ago as saying:
It is the belief of my Department that the recovery of the iron and steel industry on Tees-side will make an appreciable impact on unemployment.
The two things do not square up, and one wonders whether one Government Department knows what the other is doing.
The Board's report shows that there is not much prospect of easing unemployment by a speedy recovery in the steel industry. But there ought not to be a slackness in the industry, for it is the basis of our economy. We should be producing and using more steal, not less. Whether under private or semi-public ownership, for generation after generation the railways were neglected and run down. The war took a terrible Will. They need modernising and re-equipment, and this can be done only by the provision of more steel. Instead of Dr. Beeching talking about closing the railways, he should be thinking about building them up. Make no mistake about it: we stall build more and more cars until it will not be possible to drive along the roads. We should be speeding more money on capital development on the railways—and what is true of the railways is true of industry generally, and particularly of an industry which affects the steel industry, the ports and harbours.
The Report refers to the fact that there is a need for the development of ports and harbours. This, in turn, will consume steel. On page 29 of the Report, dealing with port development, we read that in 1961
the board drew attention to the need for improved facilities at ports handling imported ore and in particular for accommodation for larger ships than can at present be handled in United Kingdom ports".
What have the Government done? They have set up a Committee under Lord Rochdale. They ought to have been doing something long ago. They have had eleven years in which to do something about it and to deal with the ports and harbours which serve the steel industry. The Report says that there is a need for modernising and rebuilding. This, in turn, will consume steel.
Looking at the steel industry itself, in many cases the private industry has been re-equipped, but let us not lose sight of the fact that the major re-equipment was done under the Labour Government. I was in that Government at the time. If we had followed the policy adopted by the present Government there would not have been the investment in the steel industry which made it possible for Margam to be developed, the steel works where one can walk in at one end and come out at the other having walked for four miles.
It is only by a properly planned and controlled economy that we can get the best results. But certain parts of the steel industry are still nationalised. The hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) wanted the profitable one, but in Middlesbrough there is a nationalised industry which the private companies did not want to take over. In this one there is machinery which is about seventy years old. It needs re-equipping and changing, but there is not the money to do it, because the Government starve the public service, whereas they allow the private sector to have free play. In spite of that, Baldwins, a nationalised undertaking, can do better than private companies.
In present circumstances, as the Government will not take public control, they should devise means by which the companies can be encouraged to stock now. It is ridiculous not to build up stocks, because I believe that there is a great future for the industry. I believe that in the future there will be a greater demand. I do not want a situation to develop, as it did in the past, when there is suddenly a heavier demand and factories are built only to be closed when there is a slump. If we build up stocks now, when there is a demand we can meet it readily.
We have been told that the Common Market is a challenge to us. It is. Let us not lose sight of the fact that it is a supra-national body. It must plan. It has some direction of its economy. The Common Market's internal consumption is still rising, whereas Britain's is falling. Prices in the Common Market countries have risen less than ours have. We ought at least to be doing something comparable to what is being done in the Common Market.
The Government should be doing more to secure co-ordination, control and direction of the industry so that we can get better results than we are getting now. I agree with my hon. Friend the Member for Middlesbrough, West and others that the only way in which the industry will prosper and ultimately serve the country to the best of its capacity is by the public once again taking it into ownership.
Let me, first, commiserate with those of my colleagues who have spoken on behalf of steel workers who are underemployed and redundant. Speaker after speaker from this side has stressed the situation in various parts of the country. My hon. Friends the Member for Hamilton (Mr. T. Fraser), Motherwell (Mr. Lawson) and West Lothian (Mr. Dalyell), and the Minister have described the position in Scotland in some detail.
My hon. Friend the Member for Rotherham (Mr. Jask Jones), to whose speeches we always listen with great respect because of his great experience of the industry, described the situation in Middlesbrough and Rotherham. My right hon. Friend the Member for Middlesbrough, East (Mr. Bottomley) and my hon. Friend the Member for Middlesbrough, West (Dr. Bray) have also spoken on the subject, as has my hon. Friend the Member for Penistone (Mr. Mendelson).
I could go on at great length describing the situation in various parts of the country. The general picture is that the industry seems to be hit worse than any other part of our economy. The Report tells us that the number of blast furnaces working fell from 87 at the beginning of the year to 74 at the end. What is it now? Is it worse than it was in December, 1961? The output of pig iron was 1 million tons less in 1961 than it was in 1960. This section of the industry is operating at only about 70 per cent. of its capacity.
Paragraph 36 of the Report contains a long description of sectors of this part of the industry which have had to be closed or are working on short time. Works have been closed sooner than was expected. I know the situation in West Wales and the strong feelings running in Bynea and other parts of Llanelly. Ships have been laid up. That is the general picture throughout the Report of how the steel industry is faring today.
This month's issue of Man and Metal contains this description:
Not for a quarter of a century have steel workers been confronted with a more uncertain situation than exists today.
That sums up the situation of the industry. Last month's issue of Steel and Coal contains a description of what is contained in the Report. "There is little in the Annual Report of the Board to dispel the air of gloom which has settled over the steel industry this year. Rather, the Report tends to confirm the depressing view already widely held that the recession which began in 1961 is not likely to ease much before the end of the year, unless the run on stocks is halted soon." I checked all the newspapers when the Report was published. They all gave a very gloomy picture of the industry's prospects.
What is the cause of all this? What is the reason for the state of the industry today? It is the direct result of Government policy. A great deal of the trouble that the industry finds itself in today is the direct result of last year's disinflationary policy of the Government. I congratulate the Minister on keeping his head after the last reshuffle. He is left—I sympathise with him in this—as a sort of wet nurse caray-ing the brainchild of last month's Chancellor of the Exchequer. The state of the industry today is the direct result of the policy of the last Chancellor.
What we have seen has been the slowing down of the wheels of industry, and the general restraint has had its effect on the demand on stocks. It is not a picture of stagnation only, but of a contraction of productivity when there has been an increase in productivity in many other parts of the world. It has been said many times—so often that it is by now a platitude—that the steel industry is the thermometer of the nation's economic health, and that is perfectly true today. The very terms in which the Report itself is couched are a severe indictment of the Government's economic policies.
In 1951, denationalisation was said to be the panacea of all the industry's ills. For many people it was the El Dorado, but today we find a basic industry working at only 70 per cent. of capacity, and the people who screamed for the resale of the industry are the very people who recently had to go to the Board, cap in hand, asking for an increase in prices. When they have not got all they wanted, we have heard their contemptuous references to the Board. We have had 'the statement of Lord Ridley, Chairman of the Consett Iron Company, describing his feelings about the Board, and saying how much better off the industry would be if we entered the Common Market.
Let us look at the balance-sheet. At the beginning of last year, the industry was working at about 90 per cent. capacity; at the end of the year the figure was more in the region of 70 per cent. or 75 per cent. One must, in fairness say that parts of it are doing quite well. At Margam, in my constituency, there is no complaint about the sheet side, and the same goes for John Summers, whose plant is in the constituency of my hon. Friend the Member for Flint, East (Mrs. White). But even in Port Talbot there has been the closing down of the old melting shop, and throughout the industry there has been an acceleration in the closing down of many parts of the industry as a direct result of the Government's economic policies—
I appreciate my hon. Friend's reference.
I am satisfied that the industry's long-term prospects are good and that, in due course, with that expansion of the economy to which we on this side of the House are pledged, capacity will be such as to justify the Board's present policies. I should like to take this opportunity to congratulate the Board on sticking to its guns on development proposals, even in its present difficult circumstances. The Birmingham Post has described the Board as sticking to its guns bravely, but I would prefer to say that it is sticking to its guns wisely.
Paragraph 6 of the Report says that
… it is significant that the steel producers themselves … have with few exceptions taken no major steps to slow down their very substantial development schemes.
The exceptions are listed in paragraph 127, and it is strange to see that they are only in the privately-owned sector, and there is no tribute in the Report to the fact that a great deal of the expansion in 1960–61 has been, as the Minister has so properly said, in the publicly-owned sector, or in Golvilles, as a direct result of the injection of Government money.
Although the expenditure in 1961 was consequentially higher than that in 1960, the Report shows that it fell short of the original estimates by no less than £60 million. It is expected that 1962 will show a shortfall on the estimates and I would like to know by how much the development plans will fall short of the original estimates. That is the crux of the development issue when one is trying to discover whether the development plans of the industry will be fulfilled by 1965.
It is disappointing and unfortunate that the big expansion and modernisation plans of recent years should be coming to fruition at a time when industrial activity is sluggish and when the steal industry is undergoing a recession. This has been made worse by the stocking position, about which my hon. Friend the Member for Hamilton and my hon. Friend the Member for Penistone spoke. I was glad to hear the words of Sir Cyrill Maisgrave, when he said, speaking at Briedey Hill, that the plans of the Board were right and that he hoped that they would be fulfilled in the end.
An examination of the situation reveals that the Board's expansion plans are modest and moderate compared with similar activities in other countries. In Japan, for Instance, expansion has been taking place on a vast scale and has reached 132 pec cent. since 1958. In Britain, it has been 14 per cent. The Japanese plan to expand by an average of 8 per cent. per year until 1970. The rate of expansion planned by the Board is 3·2 per cent. pec year until 1965. The Board's plan is indeed modest compared with the tentative suggestion of "Neddy"; for a possible annual expansion of 4 per cent.
I support the Board and hope not only that the planned activity will be needed but that, if the economy is expanded, even more activity will be required. On the other hand, if the Government continue with their miserable record in the economic field in the future there will be moire idle mills, more empty furnaces and a greater number of unemployed steel workers. It is absolutely vital that the steel industry should prosper and that there should be economic expansion. It is vital that the industry should be economic because a large proportion— the Chancellor recently gave the figure of 55 per cent.—of our exports contain some element of steel. The Board pinpoints the situation in paragraph 5 of its Report when it states:
Unless, therefore, there is an early end to the recession, the further improvements in productivity and costs which these developments are technically capable of bringing about will be frustrated by unecomonic levels of operation.
That is the heart of the trouble. The plains of the Board may be defeated because the capacity available is not being used but is, nevertheless, having to be paid for. My hon. Friend the Member for Rotherham dealt at some length with this aspect of the problem.
Several speakers have touched on the topic of coal so I will deal with oil. I hope that the Parliamentary Secretary will note the Board is sympathetic to the Federation's complaints. It will be recalled that last April the Federation accused the British oil companies of talking advantage of "flabby market discipline" in the framing of their prices. I hope that we shall hear the views of the Government on the price structure charged by the oil companies.
It is important that the steel industry should have adequate pouts. The Report stresses the need for immediate steps to be taken to secure sufficient deep waiter approaches to bring iron ore into this country in sufficiently large and economical carriers. I read the report of an interesting and learned address given by the Managing Director of the Steel Company of Wales to the Institute of Transport. Mr. Cartwright said:
The United Kingdom has fallen steadily behind the other steel making countries in the world in the use of big ships almost entirely due to the fact that they simply cannot be handled in any of the major British ports.
He went on to say:
So long as the materials of the steel industry and its products are carried in little ships, little wagons and small trains then it will be that much more difficult for the industry to survive.
The Board, referring to the optimum size of iron ore carriers, states that they should be able to carry 35,000 tons and that an iron ore port should be adequate to deal with carriers of that size. It is startling to discover that in 1962 only one of the iron ore ports is capable of handling ships of that size. I am glad Che Parliamentary Secretary to the Ministry of Transport is here. I am sure that he, having been to my constituency and visited the port there, will be aware of the situation in Port Talbot. It is amazing that Middlesbrough, Glasgow, Port Talbot and Newport, the four largest of the iron one importing places, are not capable of handling ships of this size. Indeed, there are only four iron ore ports in the United Kingdom that are capable of handling ships of 20,000 tons.
The Report itself—and I am not making a constituency point here, even though it happens to refer to my constituency—pin-points the situation in South Wales and in Part Talbot in particular. Port Talbot, one of the biggest users, is only able to dock ships carrying 10,000 tons while the optimum is 35,000 tons. Therefore, iron ore has to be imported into this important port in South Wales in penny packets. It is just the same in Newport. The problem is acute in South Wales. What is to be the development? It is absolutely vital that there should be adequate deep water provision if this important industry is to be economic and able to compete with other countries.
I am sorry that I cannot give way. Time is short.
There are 14 Japanese ports which are being improved to deal with carriers of 40,000 tons. Amsterdam is being considered for development for 60,000 tons, Bremerhaven 100,000 tons and Wilhelms-haven 65,000 tons. It is planned that the port at Dunkirk should be able to deal simultaneously with two ships of 60,000 tons. Yet in this country there is only one port, on the Tyne, which is capable of handling ships of the optimum size. The ultimate should be something in the region of 60,000 tons. The Americans and the Japanese are already using ships of 45,000 tons, and we are well behind.
Mr. Cartwright, in his interesting article which confirms every word in the Report—he speaks with some experience in these matters—states that the British industry is operating at a disadvantage compared with its neighbours in Western Europe. I hope that when the Rochdale Committee's Report is published the Minister will do everything possible to ensure that something is done quickly so that the disadvantage under which the steel industry is now labouring will be removed and that in the fullness of time we shall be able to catch up with our competitors.
May I, quickly, ask a question about home ore supplies. The Board, throughout its existence, has been very anxious to ensure that adequate use is made of home ore. It backed Richard Thomas and Baldwins in its application in connection with the Oxfordshire application appeal. Having regard to the decision of the Ministry of Housing and Local Government, based mainly on agricultural and amenity grounds, what will be the result, so far as the costs of this company are concerned, if it has to develop Wroxton? What are the quantities involved? Will it have anything more than a marginal result on our balance of payments situation? Perhaps we can be told what the effect will be on our economy having regard to the Minister's decision.
Stocks have been dealt with by my hon. Friends the Members for Hamilton and Penistone. I hope that the Minister will have some observations to make on the subject and on whether some responsibility about stocking should be taken over by the Government in order to save the industry from short-time working.
A licence has been issued for the export of scrap. Is it wise at this stage to allow scrap to go abroad when, in future, we may have to re-import it at a far higher price?
Research was mentioned by my hon. Friend the Member for Middlesbrough, West. I should like to know how much money is spent by the steel industry on research, and how it compares with that spent by other industries. Is the Minister satisfied that enough of the resources of the industry is devoted to research?
I welcome the reduction in the number of accidents in the industry, which has a proud record in accident prevention. There are, however, other problems which concern some of the workers, and these include the scheduling of new diseases resulting directly from the work in which they engage. I think particularly of skin cancer, which may be caused by working in very hot temperatures. I hope that such matters will be given more attention in future Reports.
The Minister told us about the position as it is shown in the Report. But the position has become worse since the Report was published. In June, the weekly average of steel produced was about 404,000 tons, 6 per cent. less than in May, although one must allow for the fact that Whitsun occurred in June, but that is 10 per cent. less than in June last year, when again Whitsun did not occur in that month. Is it true that steel production continues to fall? Even though the figures were bad at the end of last year, are they continuing to fail throughout this year? We ought to be told emphatically not only that the industry is stagnating, but that the rot is continuing and that the Minister cannot offer much consolation to the workers who are now on shout-time.
Speaking of home consumption, the Minister said that recovery depends more than ever on a return to greater consumption. Preliminary estimates that I have for the first quarter of 1962 show that home consumption was nearly 3 per cent. less than in the previous quarter and 9 per cent. less than in the first quarter of 1961. So it is still going down, and we shall have to wait sometime before there is an increase in consumption. I hope that the Minister will be able to throw some light on these figures. My charge is that the industry has continued to deteriorate after the publication of the Report.
The Minister also mentioned exports and was vary proud that net exports were higher in 1961 than ever before. But he omitted to say that at the end of the year they were slackening off. I am told that in the first five months of finds year exports have been running ait 242,000 tons per month, which is substantially less than the 265,000 tons per month in the first five months of 1961.
Obviously, there is strong competition from America, Japan and Western Europe. But we would like to hear from the Minister what efforts are being made by the Government to increase our exports. A few months ago the present Home Secretary, when Chief Secretary to Che Treasury, spoke of the need to increase sited exports. What is the situation today? Are these figures accurate? What is being done?
I was glad that the right hon. Gentleman dealt with the possible position of the Iron and Steel Board if we join the Common Market. One of the things conspicuous by its absence from the Board's Report is mention of the rôle it could be expected to play if we joined the Common Market. Obviously, there is a conflict between the present rôle of the Board and membership of the European Coal and Steel Community. Nevertheless, if we do join, there may well be a new rôle for the Board. Certainly, some organisation would be needed to appraise the Government of the nation's needs, otherwise the Government would be entirely dependent upon the British Iron and Steel Federation.
I have already commiserated with those of the steel workers who are on short time. I have very little sympathy for some of the shareholders who have seen their profits crumbling away in the last few months. They gambled before the last General Election, voted for the party opposite, and then many of them made substantial fortunes as a result. Since then they have seen those fortunes crumbling away as a direct result of the inept economic policies of the Government they were responsible for electing We have seen that the aggregate earnings ware down 17½ per cent. in 1961 compared with 1960. There are wide variations in that band.
Very many attacks have been made on the price policy of the Board, but the Board has specifically stated that, even if it had granted all the applications, this would have mitigated by only one- third the falls in the earnings of these companies. Yet these attacks are continually made by large steal firms.
We ask for a further assurance from the right hon. Gentleman about Richard Thomas and Baldwins. I realise full well that the economic climate makes it exceedingly difficult for the Government to attempt to sell the company back to private shareholders. If they attempt to do so in the present political uncertainty, they will be doing a great disserve to the nation, knowing full well that there is a strong possibility— although I could put it higher—of the return of my right hon. and hon. Friends as a Labour Government and that if that happens Richard Thomas and Baldwins will be returned to the hands of the nation. There is every possible argument for the Government leaving Richard Thomas and Baldwins alone. This firm, which has done such a tremendous amount of work, should be told as soon as possible where it stands. In due course as a matter of common sense, the remainder of the steel industry will revert to the nation's hands.
The right hon. Gentleman's speech contained very little hope for the steel industry. He ended by saying that things were not easy for the economy and the industry, and that we might have to wait some time before there was substantial improvement. The Government have fallen down on the job. The prospects outlined in the Report are not too bright. The right hon. Gentleman's speech contained not a single ray of hope for the steel industry.
I hope that the hon. Member for Aberavon (Mr. Morris) will allow me to congratulate him. I think I am right in saying that this is one of the first major debates in which he has taken part from the Opposition Front Bench. At any rate, it was a most able speech. The ordeal is recent enough in my own case for me to appreciate the quality of his speech. At the same time, I should like to repudiate en bloc the whole of the last part of it. With the rest of it, it was possible from time to time to find some grounds of agreement.
The Rochdale Report is expected shortly, and I understand from my hon. Friend the Parliamentary Secretary to the Ministry of Transport that the Government hope to be in a position to publish this most important Report before Parliament reassembles. No one would expect me to comment on the very important and interesting views which the hon. Member expressed about the problems at this stage. It would be the amateur preceding the professional if I were to do so.
The hon. Member asked me whether we made an adequate use of home ore. That is a question for the industry—for the users of ore, to decide for itself, but home ore is used wherever it is economic to do so. Scrap exports are a difficult problem and one which has to be watched very closely—I am not using the time-honoured phrase. But it is essential to keep policy flexible, and I can assure the hon. Member that when my right hon. Friend decides whether to give a permit for the export of scrap this matter is very much borne in mind. The recent order which he made was made bearing in mind whether it might be necessary later to import scrap at a higher price.
The hon. Member also asked about research. I am informed that about £4 million was spent by the companies and about £1 million on co-operative research through the British Iron and Steel Research Association last year.
Before dealing with some of the important matters raised in the debate, I should like to reply to the hon. Member for Rotherham (Mr. Jack Jones), who asked about the interest rates applicable to loans from the High Authority of the E.C.S.C. I understand that interest rates vary between 3½ per cent. and 5⅜ per cent. The total of High Authority loans outstanding is about 250 million dollars.
I answered the hon. Gentleman's question. He has taken only half the answer. The rates vary between 3½ per cent and 5⅜ per cent.
I would not quarrel with much of the speech of the hon. Member for Hamilton (Mr. T. Fraser). He referred in particular to the fact that we were not doing as well as others in exports in an expanding world market. One comment which it is proper to make in passing is that part of the purpose of introducing modern new strip capacity is the hope that we will do very much better because of it. He went on to say that it would be foolish of us to undermine our own coal industry by importing subsidised coal. I am not sure what he meant by "subsidised coal", but I imagine that he was referring to coal imported from the United States. If so, I remind him of the answer given yesterday by my right hon. Friend the President of the Board of Trade to the effect that, for the time being at any rate, policy will not be changed.
If my hon. Friend is looking for an inner meaning in an answer given by my right hon. Friend the President of the Board of Trade, he had better put his question to my right hon. Friend and not to me.
Perhaps I might mention one or two points which I think must be borne in mind in deciding this immensely important question. First, we have to bear in mind that it would benefit only a section of consumers. The others would probably find themselves worse off, and, due to a distortion of the programme of the coal mining industry have to pay more for their fuel. One of the difficulties is to decide the point at which to fix the total quantity of imports. If imports became too large, they would inevitably land us in very heavy capital costs for extra handling facilities at the ports. In addition, they would certainly result in a rapid rise in freight rates. A further point is that it would be most unwise to change this policy before the question of our entry into the Coal and Steel Community was settled.
If we enter Europe, we shall have to change the policy. Secondly, will this change of policy affect freight rates? The present position is that 12 million metric tons enter Europe each year, but freight rates there have not been disturbed. If the quota were kept drawn, it would have virtually no effect on freight rates.
The first part of my hon. Friend's interjection seems to corroborate what I said. As regards the second part, I think that it would be very unwise to base our fuel policy on the assumption that substantial imports of fuel into this country would not result in an increase in freight rates.
The hon. Gentleman is putting forward the same argument put forward by his right hon. Friend, that the justification for the continuance of the policy of refusing to import coal is to ensure that the country is not injured for the sake of benefiting one section of the community. Should not the counter-argument be used, that this one section would not be injured by continuing the policy of not importing coal?
I have in mind the fact that this country has a substantial investment in the coal industry. However, I do not wish to debate the point at length because I have a long speech to make and not much time in which to make it.
I come to the important point raised by the hon. Member for Hamilton and others about stock fluctuations. This is mentioned in paragraph 23 off the Board's 1961 Report. It is clear that the Board shares the concern of everyone about excessive stock fluctuations, but I am sure the hon. Gentleman will agree that it is easier to pose these problems than to solve them. During periods of high demand and shortages the consumer is naturally willing to stock, and indeed to over-stock, but as soon as capacity is sufficient, and is seen to be sufficient, and also because of high interest rates, the consumer is apt and anxious to run down his stocks. There are certain remedies Which one could suggest, but they are only partial. The more that users feel able to rely on delivery the better, and stock-holding merchants, at any rate with regard to small and urgent orders, could play a very useful part.
As the Report makes clear, the Board inquired of producers whether steps could be taken to moderate the reduc- tion in stocks. In the latter part of 1960 and in early 1961 some steel makers increased their stocks in order to maintain production, but later on, when it became clear that demand would not increase in the near future, they considered it prudent to reduce the level of stocks. This was due partly to the fact that credit was expensive, partly because steel products were more easily and readily available than for many years, and partly because it was a matter of common knowledge that ample capacity existed. It is undoubtedly true that the peak of stocks will probably be less in the future, for the reasons that I have given.
The hon. Member for Hamilton said that problems cannot be solved within the industry or by changes in its organisation. I entirely agree with that comment. It is for this reason that I believe that talk about a return to public ownership begs the major question. Hon. Members on this side of the House are convinced that the greater flexibility provided by private ownership is an immense advantage.
The hon. Member has made his speech; perhaps he will allow me to make mine. In our view, the flexibility provided by private ownership is an immense advantage. I do not expect hon. Members opposite to agree with me about that. I am simply calling in aid what was said by the hon. Member for Hamilton, namely, that these problems cannot be solved within the industry or by changes in its organisation. With this point I fully agree, and we are burking the issue and avoiding the most important questions if we devote ourselves merely to arguments for or against public ownership.
Will the hon. Member now put my phrase into its proper context? At that point I was saying that the problems of this industry would persist so long as our economy proceeded with its booms and slumps and its ups and downs, and that the only way in which we could get the industry on its feet was to get our economy going again.
If the hon. Member had allowed me, I was going on to quote his next remark, that the heavy section of this industry was the main victim of the economic measures which were calculated to restrict spending. I was going to mention the fact—and I have no doubt that he would want me to do so— that he had no confidence in the ability of this Government to get our economy on its feet again. We know that that is the view of hon. Members opposite. They have reiterated their views on that point. But we have not yet heard them put forward any idea how they would get the economy on its feet.
I am not going to give way. I have only a short time left. We are surprised and disappointed that, in spite of the attacks which it has repeatedly made against Her Majesty's Government, the party which yesterday called for a General Election has not produced a scrap of evidence that it has any solution for our economic problems.
If the hon. Gentleman will bide his time, I hope to come to his speech.
The hon. Gentleman went on to express the view—this is a very important point, and I am not challenging what he said—that the problems of our balance of payments would be more readily overcome by securing the most economic level of operation of industry. All right, but what did he mean by that? What is the most economic level of operation? Is it wise economy or good sense to produce what we cannot sell? We have to bear in mind that our main problem stems from our weak balance of payments position. This is what prevailed last July and what made these measures necessary.
If we insist on building up stocks of steel, which is a very expensive use of capital resources, we shall, in fact, be pulling in imports which are in no way requited by exports.
Of course, very rightly, hon. Gentlemen opposite have called attention to the fact, which no one could deny, that the heavy side of the steel industry is the side that has suffered, and is suffering, very serious difficulties. I wish to make it absolutely clear that my right hon. Friend and my hon. Friends on this side of the House do not underrate the seriousness and gravity, both personal and national, of large-scale unemployment in an industry of the tremendous importance of steel.
Very rightly, a number of hon. Members have mentioned the question of shipbuilding. This is, of course, a very important problem, and before I put on my present hat I used to spend a certain amount of time in the House raising the question of the shipping industry and seeing whether, in the words of the hon. Gentleman, it was not possible to give some boost to the shipping industry which could be passed on to shipbuilding. I hope that I shall not be trespassing too much out of my ground if I lament once again the fact that in the shipping industry of all industries—an industry which should be the freest of all—and in this day when freedom of trade is at least talked about a great deal, the people concerned should be beset internationally with a whole mass of uneconomic, unfair discriminatory practices which, in the long run, will not do anyone any good, but which, so far as we a maritime nation are concerned, inflict really severe damage.
I am bound to say that I have always been disappointed and depressed that it has not been possible to shift those obstinate offenders against the freedom of the seas from their unpleasant practices.
We recognise that the steel industry has seen the diminution of a very large source of its business owing to the present state of the shipping industry. The hon. Gentleman advocated that the Government should discriminate in applying restrictive measures to the economy. I am quoting him quite fairly, I think. In one sense, the Government do so in the establishment of development areas, but in the wider sense it is exceedingly difficult to discriminate within the boundaries of one fiscal area.
The next call from the hon. Gentleman was for a measure of planning as a solution to the problem. I do not resent his use of that word. The difficulty is that we should have to plan our own economy and the use of our resources and also exert some influence of the planning of the economies of other countries. It may be that it will help if we enter the Coal and Steel Community. The hon. Gentleman and other hon. Members urged that we should modernise the railways instead of scrapping them. Already we have devoted huge amounts to the modernisation of the railways. The hon. Member for Middlesbrough, West (Dr. Bray) and others, who thought that it would be right to expand the railways rather than run them down, must bear in mind that this country has limited resources and that to make a larger investment in that way than we have made already might be an unprofitable use of our resources.
The hon. Member for Hamilton reminded us of the coal stocking programme of 1959. Although he admitted the difference between the situation in the coal industry and that in the steel industry, it was plain that he hoped the Government would adopt a stocking policy for steel similar to that in the coal industry. But again we cannot ignore the fact that using resources for stocking purposes is a very expensive procedure, and that resources used in that way would not be available elsewhere in the economy where they are greatly needed.
I find the speech of my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) particularly difficult to answer. My hon. Friend reminded me of a remark which I once made about a pekinese and administered a sharp and possibly well-deserved bite. I am extremely sorry to have to say to him—he was concerned about the future of Richard Thomas and Baldwins—that I am in the uncomfortable position of not being able to give an answer which will satisfy him, or the hon. Member for Ebbw Vale (Mr. M. Foot). I can only say that the Government's policy remains unchanged—
—and that the moment at which this firm will be sold to the public will depend on ISHRA. I wish to assure my hon. Friend that my change of status has not resulted in any change of my ideas about the deployment of the national resources.
The hon. Member for Rotherham (Mr. Jack Jones) said that Richard Thomas and Baldwins earned a great deal of money, and that is so. But the firm needs a great deal of money, and we maintain that it would be a good thing for all concerned if the necessary resources were found by the private sector of industry, instead of by the public sector where the demand has increased over the years to a frightening extent. If I may say a word to the hon. Member which will strike a personal note, we all respect his great concern for the steel industry and indeed for the welfare of the country, and I am glad of this opportunity to congratulate him on his 50-year anniversary which I understand he will celebrate next week.
The hon. Member said that it was not a question of politics if we are to save the country but of economics. One of the reasons why I made the remark about a pekinese, which was quoted by my right hon. Friend the Member for Walsall South, was a feeling which I had, when I occupied a seat on the Government back benches, that in this House we seem to spend so much time fighting battles of long ago and using phrases which have become worn out and which are hardly relevant to the difficult and intractable problems of today.
My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) complained that the Iron and Steel Board was a classic example of State planning. Had prices been quite as low and fixed at quite such a wrong level as he appeared to suggest, it is hardly likely that so heavy an investment would have taken place in the industry over the last two years. Quite apart from the £100 million that the Government have provided from public sources for the now strip capacity, £245 million have been found in those two years by the industry itself.
The hon. Member for Sheffield, Attercliffe (Mr. J. Hynd), having started his speech by complaining of the Government's most out-of-date approach, wont into a fairly lengthy examination of the inter-war years. It does not seem to help simply to reiterate that a question of ownership will solve this problem. I do not believe for a moment that it would. It depends on the levels of world trade and the competitiveness of our industry. For reasons I have given, I do not think that the competitiveness of the industry would be added to by the fact that it was publicly owned —very much the reverse.
I was sorry to miss the speech of my hon. Friend the Member for Willesden, East (Mr. Skeet). He asked whether in the event of our entering the Coal and Steel Community, we should have power to exclude American coal? The answer is, yes. Ore supplies, about which he also asked, is a question for the industry and the user to decide. They use home ores whenever it is economic to do so. The 1961 Development Report, table 20, will give my hon. Friend some information on furnaces, about which he asked.
I am afraid I have little time to deal with some of the other points mentioned.
I think the Under-Secretary of State for Scotland was present and heard the remarks made by the hon. Member in his speech. The problem concerning the steel industry in Scotland and in the North-East is very much the same. I have sought to deal with some of the problems affecting the heavy side of the industry.
Nothing would be more foolish than to conjure up glossy, hopeful pictures, but I do not think hon. Members opposite do themselves or their country a service in painting too black a picture. The Report of the Board shows that the steel industry has now been modernised, is in a position given good time, to compete fully and play on behalf of this country an honourable and prosperous rôle.