Orders of the Day — Iron and Steel (Amendment) Bill

– in the House of Commons at 12:00 am on 11th May 1978.

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Order for Second Reading read.

[Relevant Documents: The White Paper on the British Steel Corporation (Command Paper No. 7188) and EEC Document No. R/540/78.]

4.1 p.m.

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

I beg to move, That the Bill be now read a Second time.

The purpose of the Bill is to raise the statutory limit on the amount of external finance that the British Steel Corporation and its wholly-owned subsidiaries can raise by borrowing. The Bill follows the Government's White Paper, Cmnd. 7149, and the statement that I made to the House on 22nd March. I told the House then that I would be presenting legislation to raise the Corporation's borrowing limit pending capital reconstruction.

The Bill is needed to ensure a substantial bulk steel-making capacity in Britain to meet the needs of our industry. I do not think that anybody in the House today, particularly Opposition Members, would deny that the aim is to have a substantial steel industry, although I note from the amendment on the Order Paper that the Opposition want to deny a Second Reading to the Bill. The Government are concerned to secure an efficient, profitable, modern industry able to compete with the rest of the world and to ensure future employment. We are determined to take all the steps which are needed to achieve that aim.

When the borrowing limit was increased in July last year, the Minister of State told the House that the limit then fixed should carry the Corporation through until the spring of 1979. At the beginning of April this year the British Steel Corporation's borrowings were estimated at £3,070 million. So, contrary to all the statements made by some hon. Members and all the silly comments in the Press, our original estimate of the British Steel Corporation's requirements was about right. It was not far short of the mark. As I told the House on 22nd March, we now need to carry the Corporation through until capital reconstruction, which is necessary, as I made plain on 22nd March, can safely take place.

The extended borrowing powers which we seek today are designed to cover the British Steel Corporation's needs for up to three years. Our aim is to carry out the capital reconstruction sooner rather than later in this period. But it would be foolhardy to do so while the world steel market is still suffering from the worst crisis that it has known for more than 40 years. We need only to look across the Channel to understand that lesson.

For example, a major effort was made in France only a year ago to reconstruct the finances of the major steel industries there, but the continuing worldwide steel recession undermined that effort, and the French Government are now studying further measures to help their industry. Therefore, it is right, in our judgment, to seek immediate approval for finance for the British Steel Corporation for up to two years ahead, together with provisions for us to come back to the House for an affirmative resolution to cover a third year if that should become necessary. As I have already indicated, that is what we want to do, but I understand that the Conservative Opposition have put down an amendment opposing Second Reading of the Bill today.

The Bill will provide the British Steel Corporation with finance for three years and will, in my judgment, give Parliament an adequate opportunity to assess the Corporation's progress. I do not believe that those who want to oppose Second Reading today have bothered to investigate the facts properly. In some respects, they may genuinely have misread the position. The Government's proposals allow for proper parliamentary control of funds advanced to the British Steel Corporation.

An increase in the borrowing limit is not by itself all that is needed to put into effect the financing policy described in the White Paper. As I told the House on 22nd March, all future capital to the British Steel Corporation will be subscribed under Section 18(1) of the Iron and Steel Act 1975. These advances have to be made out of voted money by par- liamentary approval of annual estimates. The actual borrowings of the Corporation will also continue to be regulated by the annual system of cash limits.

As I have said, we are asking for finance for only two years. Parliament will have an opportunity to consider the uses proposed for the second £750 mililon if it should become necessary.

The Government's approach is one of prudent planning coupled with parliamentary control. It would be unacceptable to us to be faced with inadequate provisions leading to a cash crisis. That is what would happen if the House did not pass the Bill today and let it proceed to Committee. The Corporation would be faced not only with having to look at its plans quickly and hastily but with a cash crisis. That might provide some satisfaction to those who would like to see the British Steel Corporation driven into greater difficulties, but I believe most hon. Members would regard such an attitude as highly irresponsible.

If the Corporation were dependent on an annual consideration of its finances, it would increase the uncertainties which surround it and make it impossible to plan ahead. The BSC is a massive, not a tiny, organisation and it cannot change course quickly. It employs 197,000 people directly in iron and steel making. It supplies most of British industry's steelmaking requirements. Therefore, it must have freedom to plan ahead and to carry out the major investments on which both its viability and the success of much of British industry depends. The Bill is designed to give it that freedom.

As I have said, we intend to finance the British Steel Corporation by subscription of capital under Section 18 (1) of the Iron and Steel Act 1975. We do not expect the Corporation to borrow more money overseas unless there is some particular advantage, such as an offer on exceptionally favourable terms. There is no question of Section 18 money being a soft option. It is a realistic method of interim finance pending the reconstruction which I think all hon. Members now accept will be needed.

As I have told the House on previous occasions when we have debated this matter, the British Steel Corporation is not the only steel company in the world to be receiving what some people have described as tide-over finance. There are also many companies in Europe and in the United States of America whose steel operations are being kept afloat only by subsidisation from other activities in a way which is not available to the British Steel Corporation.

All new capital under Section 18 subscribed from 1st April this year will have to be properly remunerated by dividends once the reconstruction has taken place. We do not expect any remuneration of the public dividend capital now on the British Steel Corporation's books before that reconstruction takes place.

I understand—if the Press reports are accurate—that the hon. Member for Kingston upon Thames (Mr. Lamont), who is to open for the Opposition, would like to know more about the Corporation's investment requirements. The largest financial requirement is for capital investment, and hon. Members certainly have a right to know more about it. To meet this need, the Corporation provided detailed information on its investment plans in its booklet "Prospects for Steel", which was published on 27th April and circulated to all hon. Members, or at least to some hon. Members who have expressed a great interest in these matters.

It would be foolhardy not to allow the British Steel Corporation to complete the major schemes at Ravenscraig and South Teesside, the cost of which is estimated at nearly £1,000 million, to supplement the scheme at Llanwern. New investment is needed also for replacement purposes, the balancing of primary and finishing facilities, quality improvement, cost reduction schemes and so forth—the sort of thing which I outlined in my statement on 22nd March.

The Corporation has made plain, and I am glad that it has, that it intends to follow up its successes at the Thrybergh bar mill, the productivity of which is equal to anything anywhere in the world—it is a magnificent works—by installing continuous casting of billets at Templeborough, which also is in the Corporation's Sheffield division. Also, subject to the financial evaluation of the conditions which I spelled out on 22nd March, the Corporation hopes to make an early start on the installation of continuous casting facilities at Port Talbot.

Those are the sorts of investment which are required if, when the world steel market begins to climb out of depression, the British Steel Corporation is to be able to compete on an international basis. I want the Government to give it every opportunity to do so.

Photo of Sir Anthony Meyer Sir Anthony Meyer , Flint West

The right hon. Gentleman said something a moment ago about completing some investment at Llanwern. Could he give a few details of that? I do not entitrely understand. Perhaps I have missed something, but I could not find a reference to that investment in this document.

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

I understand from the Corporation that there is an investment taking place at Llanwern which has to be completed. I do not know the precise nature of that investment, but I think that the amount is quite considerable. If it is not adequately covered in the document which the hon. Gentleman has in his hand, I shall make sure that further information is given to him. My understanding is that investment has to take place there to complete a scheme which is under way.

I want—and I believe that the whole House wants—the Corporation to be given the opportunity to complete the investment programme. That was one of the principal recommendations of the Select Committee in its report.

The Corporation's booklet "Prospects for Steel" also underlines the need for capacity to be more in line with demand. Neither the Corporation nor the country can afford to maintain massive surplus capacity in excess of reasonable expectations of future demand. That is why, in the Corporation's judgment, there is no case for new starts now in steelmaking capacity which would add to the surplus which we know exists. I think that that probably has been made clear on previous occasions.

In a number of areas, the BSC has negotiated with the TUC steel committee and the local work forces concerned agreements for the early closure of high cost plants. The House is well aware, as I am, of the bitter consequences of the closure of existing plants—the consequences for the men who have devoted their working lives to the steel industry, and certainly for the communities in which they live.

In the White Paper, "The Road to Viability", we were able to announce the measures we intend to take to help those communities, and I do not think that I need go over them today. But in many of these communities there is little alternative employment at this stage, and they need all the assistance we can give. We shall be looking at that closely in the months ahead.

I understand—again according to the Press reports—that the hon. Member for Kingston upon Thames and some of his hon. Friends have certain criticisms about the level of payments to redundant steel workers. It is clear, I think, that they do not understand the situation, although I do not charge them with not caring about the consequences of redundancies or not wanting to see that men who have been declared redundant are adequately compensated. But I saw criticism in The Daily Telegraph, I think—referring to redundancy payments of £17,000 or something of that sort.

I wish to make absolutely plain that £17,000 is wholly exceptional, and the average payments are. I think, round about £6,000—within that area. There has been a lot of exaggerated Press comment, and I want to put that matter in perspective today.

The Corporation has my full support in its negotiations of the settlement which deals fairly with the work forces being made redundant. This is also in the Corporation's own financial interest.

The revenue side of the trading account is just as important as the cost side. The British Steel Corporation must meet the needs of its customers at competitive, prices, but these prices must be realistic. That is why we have given active support to the measures being taken by the European Commission to deal with disruptively low-priced imports through agreements with supplying countries and through minimum price levels within the Community for major categories of products. We also expect the Commission to take account of users' interests and to deal with their problems.

The Select Committee on European legislation has recommended that as part of our debate today we should consider EEC Document No. R/540/78. This document bans Community producers from aligning their prices with those for imports from EFTA. It has since become Commission decision No. 527/78, and is extended to alignment with imports from Japan, South Africa, Spain, Czechoslovakia and Hungary.

This approach is in many respects novel and represents a new arrangement. From our point of view, I believe that there is everything to be gained from it—and certainly a great deal to be gained in the world steel situation from dealing with problems by negotiation and agreement. So we welcome the proposals which which have there been made.

The Opposition have on previous occasions asked when we expect the British Steel Corporation to return to profitability. Both the Government and the Corporation share that aim. Can we be precise about how quickly the Corporation will move to profitability? The stage-by-stage approach which the Corporation has advocated, and we as the Government have supported, means a disciplined approach. The BSC has already shown how, by co-operation with the unions and with the local work force, not dealing with these matters in an arbitrary fashion, the financial situation can be helped and, I believe, dramatically improved.

For the current financial year, the British Steel Corporation has projected, on stated assumptions, losses of about £400 million, and this figure is reflected in the negative internal resources figure of £220 million in the current Financial Statement and Budget Report. The House should appreciate that the £400 million figure includes a substantial amount for contingencies and other provisions. The projected trading result before depreciation, contingencies and other provisions is in fact a small profit, representing an improvement over 1977–78 of about £180 million.

But I have to tell the House that, although there will be an improvement, losses and projected losses of the magnitude which I have just described are still unacceptable. That ought to be made clear to everyone who is managing the Corporation and everyone who is working within it. Any objective person who is prepared to look at the situation worldwide must acknowledge that conditions will be difficult and that international competition will remain intense for many years to come. In these circumstances, we look to the management of the British Steel Corporation to maintain its close consultation with the unions and the local work force and to continue to improve on the projected losses in every possible way.

It would be wrong for the Government to do what I think was called in the Select Committee "second guessing"—always trying to assume that we know best how to run the Corporation. On the other hand I can assure the House that the Government will be monitoring carefully the Corporation's performance as the results come in. I was able to announce in March that we have strengthened the reporting procedure. We shall expect a substantial improvement over the year as a result of the action that is now being taken and the close monitoring with which the House is familiar.

Photo of Mr Hugh Fraser Mr Hugh Fraser , Stafford and Stone

There is some confusion. Can the Secretary of State give the House a notion of what the losses are likely to be this year and in 1976–77? Am I right in thinking that they add up to about £600 million?

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

The figures have been published. I am not sure about the figure for 1976–77, but I think that it was £150 million. I shall check the figure. The loss which was announced for the last financial year, 1977–78, was about £440 million, although the final report and accounts have yet to come out. For this financial year the Corporation has projected a loss of about £400 million. A substantial proportion of that is for contingencies unforseen circumstances. We want to see an improvement on that because we regard it as unacceptable.

The House has had an opportunity of debating the report of the Select Committee on Nationalised Industries. The Committee made specific recommendations for improving the Corporation's efficiency and the Government's relationship with the Corporation. We published a White Payer setting out our response in detail. No doubt hon. Members who were members of the Committee will tell us whether they regard the replies to their recommendations as adequate.

We and the Corporation had already adopted many of the ideas that were put forward by the Committee. We are studying others to see whether they are appropriate and can be implemented. We have rejected some of the Select Committee's recommendations. I have given reasons. Some of the recommendations are unacceptable to us.

The Bill is a necessary first stage in financing the British Steel Corporation during the period of great difficulty which it is now facing. The difficulty is fully understood by all hon. Members. The Bill is designed to secure the future of the British Steel Corporation as an efficient, competitive and eventually profitable organisation which provides secure livelihoods for those employed by it. The Government are determined to help the steel industry to overcome the difficulties. The Bill is a clear demonstration of that determination

Mr. Deputy Speaker:

Mr. Speaker has selected the amendment in the names of the Leader of the Opposition and her right hon. and hon. Friends.

4.24 p.m.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

I beg to move, to leave out from "That" to the end of the Question and to add instead thereof: This House, while welcoming the steps being taken to improve the financial position of the British Steel Corporation, declines to give a Second Reading to a Bill which, at a time of continuing high losses, in effect provides finance for three years without adequate opportunity for Parliament to make an annual assessment of the progress of the Corporation. Our attitude to the Bill can be stated simply. We think that the Government's past policies for the industry have been deplorable, that their present policies are a bit better, and that their future policies are dubious. We approve of the belated attempts that the Secretary of State is making to grapple with the Corporation's problems. We recognise that the Corporation requires more money, but at a time of colossal losses we do not believe that it is prudent to provide finance for three years, subject only to an affirmative resolution of the House. While the Secretary of State was speaking it was confirmed that that is all that will be guaranteed.

There will be a one-and-a-half-hour debate on the question of the Corporation receiving more money. One and a half hours is too little for £1½ billion. It is too much money and too little debate.

The late Hugh Gaitskell once remarked that if a man could not ride two horses at once, he should not be in the bloody circus at all. He would be proud of the Secretary of State. He manages not only to ride five or six horses galloping in several directions but to perform somersaults on at least two of them.

Our case is that the Secretary of State has hedged one or two crucial points in the argument and that he has one or two ambitions for the Corporation which contradict each other. But at least the Government are now half way to a sensible policy for steel. Perhaps that is why the Secretary of State was more subdued than usual today. He has had to accept a large part of what he has spent a long time in office denying.

For the Government this has been the most expensive adult education lesson in history. It has been expensive for the taxpayer, who has had to go on forking out to meet the Corporation's losses. It has been expensive for the Corporation itself, because it has seen projects deferred. It may turn out to be tragic for a large number of people who will lose their jobs because of the failure to act earlier and more quickly.

We have only to compare the Corporation with certain companies in America to appreciate the situation. Ministers were keen to compare these companies with the Corporation when discussing the losses. Many of those companies took action earlier and because of that those who work for those companies now know that there is a chance of security of employment.

The Government have produced another White Paper, "British Steel Corporation: the Road to Viability". This is yet another road. We have had enough of them in the past. We have been up a number of cul-de-sacs and at times we appeared to drive off the road completely. But there is quite a lot in the White Paper with which we agree.

It is a pity that civil servants have allowed themselves to draft into that White Paper some crude political propaganda. The White Paper's criticisms of the last Conservative Government's interventions in the steel industry hardly deserve consideration when there is not a word of acknowledgement of the way in which this Government have intervened and overruled commercial management about plants remaining open, about the way in which the Secretary of State's predecessor allowed himself to be used as a court of appeal against the management and how the Government's own interventions cost the Corporation £150 million a year.

The Corporation has produced the document "Prospects for Steel", which sets out some of its views for the future. We welcome it. There has been a degree of unhappiness in the relationship between Parliament and the Corporation. Last year, when we had a debate on the raising of borrowing powers, a number of hon. Members felt that when the Corporation, wanted to raise its borrowing powers it should at least, each year, present to Parliament a document comparable with a commercial prospectus. The Corporation has done that. We are pleased that it has gone a long way to meet the criticisms that were made last year.

The House has to answer certain questions before it passes this legislation. Has the Secretary of State taken sufficient remedial action in the Corporation? Has he the willpower to finish what he has begun? Can we be confident that the Corporation can become internationally competitive? Do the facts that are spelled out in the Steel Corporation document—if it is to be treated as a commercial prospectus—justify the investment of the sums of money on the scale proposed?

Is it right that there should be finance for three years? The Corporation has the money to carry it forward for another year. This Bill, which is subject to the affirmative resolution, will give it finance for three years. Would it be better if it asked more frequently?

Photo of Mr Mike Thomas Mr Mike Thomas , Newcastle upon Tyne East

I recognise the hon. Gentleman's desire to leave the Corporation relatively free of interference by this House, and I accept that in the broad terms in which he has advanced it. But does he not want the Corporation to have a reasonable sense of forward financial security?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

Of course I want the Corporation's management to be free to behave commercially, but no private sector company could raise money for three years ahead without having an annual review of its progress. For this House to have the opportunity once a year to examine the Corporation is not, I submit, over-frequent interference.

Photo of Mr Neil Kinnock Mr Neil Kinnock , Bedwellty

Is the hon. Gentleman not making a semantic point about an extremely serious subject, in that even if the BSC were a private company and subject to the scrutiny he has outlined, it is highly unlikely that it would get even one and a half hours of the precise scrutinising examination that this House will give it, let alone the other examinations that will take place by Opposition and Labour Members, inside and outside the Government?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

I think that the bankers of any private sector company would scrutinise a company for much longer than an hour and a half. The main point is that if the BSC were a private corporation, it would not be able to raise any money at all.

The merit of the document that the Corporation has put forward is its realism. But the very realism of that document makes it all too clear why we should not provide finance for three years. It makes it clear that the BSC will be a major burden on our national economy for years to come. This year its cash limit is 10 per cent. of the PSBR. The losses this year are expected to be about £440 million. We read in the newspapers that it is believed that the Corporation has built into that an element of overestimation because it does not want to get into the sort of trouble that it had with the Select Committee this year.

I am sure that the Corporation is right in one thing. It has based its expectations on the assumption that inflation will be worse than the Chancellor has forecast. But other assumptions in the document could easily prove wrong. The assumption that exchange rates will remain unchanged, the assumption that the negotiations with the unions will go well, and the assumption that interest rates will remain unaltered, are in question. Indeed, the final assumption there has been proved wrong since the document was printed.

After losing £440 million this year it is claimed that by the end of next year the Corporation will be breaking even. I do not believe that curves go like that. I do not believe that the Secretary of State believes it, because it is nowhere mentioned in the Government's White Paper.

But it is in the longer term that the document makes particularly depressing reading, because it makes it quite clear that we are to be burdened for a long period with a wealth-consuming, not a wealth-creating, industry. The document says that there is no prospect of the Corporation's being self-financing. For the last few years it has provided only one-sixth of the money for investment, compared with the half that it was originally supposed to provide. It is clear from the document that the future will be exactly the same as the past.

I turn now to the question of investment cuts. The Secretary of State has announced the cancellation of certain electric arc projects, and the cuts at Port Talbot and Teesside. Much of what he said we would regard as being sensible. But the question that we have to ask is whether the balance is about right. Some projects are nearing completion which he says are to be completed. There is not much alternative to that.

It is when we consider the investment to modernise and improve the quality of the Corporation's products that we are entitled to be sceptical. There is not much of a cut there. The Corporation is having to invest about £500 million, and it makes clear in its document that although it is one of the world's worst losers among steel companies, it is investing more than any other European steel company.

We do not believe that one can just pour investment into a company regardless of its losses. It cannot be force-fed, in the hope that that will turn it into an efficient, profitable enterprise. The company needs many other things. It needs management, and the discipline of living within its means. If investment were all that was needed to make the BSC efficient, it ought to have been efficient already because since nationalisation almost £4 billion of investment has been poured into the Corporation, yet it still is not competitive. We are back where we started, at another financial reconstruction.

Photo of Mr John Mendelson Mr John Mendelson , Penistone

Steelworkers and management will want to know from the Opposition, in view of the amendment and what the hon. Member is saying, whether they want the BSC to go on modernising. Does the hon. Gentleman wish to be able to decide after 12 months that the process should be discontinued? Will he come clean on that point?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

We want the Corporation to tell this House how it is getting on and whether it is making the progress that it claims it will make. Labour Members seem to be mesmerised by investment. They seem to believe in quantity rather than quality, regardless of whether the investment can actually be managed. They used to complain that before nationalisation the private companies did not invest enough. The two events may have been connected—the lack of investment and the threat of nationalisation. But Labour Members ought to ask themselves why the private companies have been investing on a much smaller scale and why they have become profitable as a result. A recent survey indicated that only six out of 60 private sector companies in this country did not make a profit in steel last year.

The extraordinary feature about the Secretary of State's speech and the papers that have been presented to Parliament is that they all indicate the investment of £500 million but give no figure for a reduction in capacity. I suggest that the Secretary of State should try to borrow £1·5 billion while telling his bank manager that he plans to proceed only "step by step". For a Government who are normally addicted to strategies and initiatives it is extraordinary that they should tell the House that there is no blueprint for the future—that progress will be only step by step. Step-by-step progress should be matched by step-by-step scrutiny by Parliament.

The Corporation has a serious problem of over-capacity. Its capacity is 26 million tonnes. It needs to produce and sell 23 million tonnes to break even. Last year it produced only 17 million tones, and for the next few years it is forecasting sales of only between 16 million and 22 million tonnes. It is taking out some capacity, but that is to be matched by other capacity created by the projects that are about to be completed. Judging from what the Secretary of State said and from the figures we have been given, it seems that there will be substantial over-capacity for some time.

The other area on which we have considerable doubts is the vexed and appallingly difficult question of overmanning. The Corporation has some of the most expensive and some of the best steel equipment in the world, yet it still cannot operate it profitably, because of the manning problem. Predictably, and perhaps rightly, the Government have said that they do not want to set an overall target for manning reductions.

The Government may be right in not accepting the recommendation of the Select Committee that there should be an overall target, and a target for year-by-year reductions. I have no idea what the figure should be. One reads in the newspapers that the Government are talking in private about reductions of 40,000 men. I have also read comments from Sir Charles Villiers, comparing the British Steel Corporation with Bethlehem Steel—100,000 men compared with 168,000 engaged in iron and steelmaking. Whatever the correct figure is, we are chasing a moving target, and the danger is that we shall take five years to achieve what the Germans are achieving today.

The Government may well be right in believing that the best hope is not in an overall target, but that this matter should be left to negotiation between management and unions. If that is the only way ahead, it is all the more reason why the Corporation should not have money for three years, but should then tell the House of its step-by-step progress, how the negotiations are going, and whether the Government can succeed. We are perfectly entitled to be sceptical about the question whether progress can be made in achieving competitive manning.

Photo of Mr John Ellis Mr John Ellis , Brigg and Scunthorpe

In all his comments about the future policies of the Government, the hon. Member for Kingston-upon-Thames (Mr. Lamont) has not said a word about the Common Market. We have the draft instrument R/540/78 from the Common Market before us. The Conservative Party was in favour of going into the Common Market. Is the hon. Member aware that all these answers about future levels of production and manning are available from the Common Market?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

I shall refer to that document in a moment. We are entitled to be sceptical about the Corporation's ability to achieve manning. The Secretary of State has told us about the agreements that have been achieved and what will be done in the future, but we have seen a certain amount of this before. There was the agreement of 23rd January 1976, the night when we had the Brussels-style negotiations. The clocks were stopped and the talks went on into the early hours of the morning. We were told that it had been agreed that changes would have to be made now to reach European levels of productivity. The document issued at the time said: Having regard to the Corporation's present financial problems, the Steel Committee agrees that the necessary reductions in manpower must take place. That document, signed then and there between the Corporation and the steel unions, analysed two types of overmanning—recession and fundamental or inbuilt overmanning. The document said this about the two types of overmanning: The task of making reductions in both categories will begin immediately. In the case of "recession overmanning" the reductions should be completed in three months and in the case of the "inbuilt overmanning" within a period of not longer than two years. That was in January 1976. What has happened since then?

We do not need to ask my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), whose statistics are never believed by Opposition Members. These figures have now been confirmed by the Government's own White Paper. There it is in black and white. Opposition Members may get very angry about what my right hon. Friend has said, but it is now confirmed by the Government's own White Paper, their own publication, and their own estimates. There is no ambiguity about the degree of overmanning; the only thing that is ambiguous is the Government's determination to back up the management of the Corporation in achieving competitiveness.

I do not want to suggest that the failure to reach the 1976 targets has been the fault of the trade unions. A large part of the blame lies with the Government, with their rigid incomes policy which has made it almost impossible for the Corporation to buy out overmanning. That has happened in the past. How can we be sure that it will not happen again?

Only this week, on 8th May, The Times carried a report by its industrial correspondent referring to the fact that Steel industry unions and the British Steel Corporation are heading for a fresh clash over plant closures, heightened by Government intervention in negotiations of new steelworks incentive schemes. The report said that the Department of Employment was once again hindering the negotiations between the Corporation and the trade unions to achieve competitive manning. The Department was trying to examine these agreements to see whether they conformed with the Government's anti-inflation policy. According to this report, Mr. Sirs and the unions have been in touch with the Secretary of State about this matter which he did not mention today. I hope that when the Minister of State replies he will give an assurance that the Corporation will be able to proceed as it wants in questions of productivity agreements to ease the manning problem.

We do not in any way minimise the human problems involved in coping with overmanning, particularly in areas where the steel industry has been the dominant employer for years and where there is no alternative employment. As the Secretary of State said today, the Government and the Corporation have an obligation to compensate people who are affected. It is because we are concerned about the problem that some of my right hon. and hon. Friends have raised the question of selling to the private sector some of the plants that the Corporation wants to close.

Many of those plants are profitable because they do not have the burden of interest payments and they are fully depreciated. They are profitable, even though they are old-fashioned. But of course they do not fit in with the strategy of the BSC of concentrating production in a few modern plants.

We hope that the Government will not prevent the Corporation from selling to the private sector. The Government and the Corporation have—

Photo of Sir Anthony Meyer Sir Anthony Meyer , Flint West

In view of the great mirth from hon. Members on the Government Benches about the prospect of the BSC selling plants to private firms, perhaps my hon. Friend will mention the example of Brymbo Steelworks, in North Wales, which was on the brink of being closed down when the British Steel Corporation sold it to GKN. Ever since then it has been profitable and expanding, and it is providing a steady source of employment.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

I am extremely grateful to my hon. Friend. There are many examples where this has happened. Another example recently was that of Redpath Dorman Long, which was handled in the same way. No doubt it is hoped that this may improve that company's position. The Government and the Corporation have said that people will not be interested in buying these plants. But that is not the attitude that the trade unions have taken. The trade unions know that old plants can be converted fairly cheaply into electric arc plants to provide a more viable and modest way of making steel.

Photo of Mr Martin Flannery Mr Martin Flannery , Sheffield, Hillsborough

On the point about Brymbo, the truth has not been told.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

I shall not give way, because I am not talking about Brymbo Steelworks. I am sure that if the hon. Member for Sheffield, Hillsborough (Mr. Flannery) is fortunate enough to catch your eye, Mr. Deputy Speaker, he will make his own point in his own inimitable way.

Photo of Mr Peter Hardy Mr Peter Hardy , Rother Valley

On the point about electric arc furnaces, the hon. Member seemed to be suggesting that we should seek a large number of electric arc furnaces as a way of operating efficiently. Does he agree with me that there must be limits on that sort of development?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

That is absolutely right. I was making the point that that process is a cheap way of making steel which will be attractive to many people. It is right that a steel industry cannot operate entirely, or even largely, in that kind of process using scrap. All I was saying was that these old profitable plants that are to be closed could easily be converted. Many people might want to convert them on the ground that it would be a worthwhile investment.

We do not want the British Steel Corporation to damage its own commercial interests, but it does not say much for the Corporation's confidence in its own past investment, or its ability to manage those investments, if it thinks that the modern plants to which work is to be diverted cannot compete with the old plants in somebody else's hands.

There is another reason why we are doubtful about providing finance on a three year basis for the Corporation. We know from the Secretary of State that there is to be a capital reconstruction. In many ways it would seem to us better if we had had this Bill at a time when we could have had the details of that capital reconstruction. We are a little puzzled to know why it has been shoved back. At one time it looked as though it was almost imminent, but the newspapers suggested that competitors were taking the view that the BSC was being financed by subsidies. If that is the view of competitors, I do not see that they will take any different view just because handouts under Section 18 are to be labelled "subscriptions of capital".

Along with the White Paper the Government have published their reply to the recommendations of the Select Committee. I very much hope that the Committee's members will catch the eye of the Chair in this debate and will give us their views on the Government's reply. There are two of those recommendations on which we have some doubts about the Government's reply. The first is the Government's rejection of the splitting of cash limits into revenue and capital. No very good reason seems to have been given in the White Paper for rejecting this suggestion, other than that it would reduce the Corporation's flexibility. That might be the case, but we have to bear in mind that the Corporation is, in effect, unbankruptable. It needs the extra discipline, and we believe that there is much to be said for the Committee's suggestion.

There is a second matter on which we shall be interested to hear the Minister's reply. The Select Committee drew attention to the extraordinarily high break-even point—amounting to 92 per cent. in the Corporation, compared with a figure of 60 per cent. for the Europeans, and 70 per cent. for the Japanese. The White Paper does not give very much enlightenment about the reasons for this. It says, on recommendation 6: The high break-even ratio results from the disparity between the Corporation's costs and the prices which can be realised in the market place. That does not amount to anything more than a blinding glimpse of the obvious. If the Corporation were in a position in which it had only the plants it wanted to operate, and if it had the manning levels it required, what do the Government and the Corporation think the break-even ratio would be? The nagging doubt and fear in some people's minds is that we might find ourselves in a position when, with a completed investment programme, there was a very high break-even point which might be extremely difficult to operate in a country with our industrial relations record.

I have noticed the comments of Mr. Sirs, who doubted the ability of the Corporation to manage these large plants. We do not wish them to remain empty monuments to the ambitions of a bygone age. Therefore, since the White Paper does not give adequate information about the high break-even point, it is important that the Secretary of State should say something more.

Another document which we have had to consider—I think perhaps somewhat unfortunately—is the EEC document on the alignment of prices with EFTA countries. As that document relates to the Davignon plan I should like to stress one point that has been put to me by many business men about that plan. I do not question the existence of that plan on a short-term basis, but there is a danger that the breathing space will not be used to rationalise and remove capacity and that the provisional will become the permanent. If that happens, the problems of the steel industry will be shifted to one section to the other—from the steel-producing industries to the steel-using industries. We should remember that the exports of the steel-using industries are 20 times greater than those of the steel industry, and that employment in the steel-using industries is 13 or 14 times greater than that in the steel industry. If we travel down a permanent road of damaging the competitiveness of the steel-using industries, we shall damage jobs across a wide sector of the economy.

Furthermore, if the Davignon measures are expanded to last indefinitely, there will be a considerable dancer that investment in steel-using and steel processing will move out of the Community into countries such as Spain and Yugoslavia.

The Secretary of State is right when he says in his speeches, as he often does, that a steel industry is basic to an industrialised nation, but that is an argument for ensuring that people get the steel they want, from whatever source, at the right price. It is not an argument for permanent protection or for cosseting an industry; it is an argument for striving to make the steel industry flexible, adaptable and, above all, competitive.

We think that the Secretary of State is doing some of the right things for the industry, but we cannot be sure of his will to finish the job or his political freedom to undertake the task. Many of his right hon. and hon. Friends seem to take a very different view from the right hon. Gentleman. We saw that in the extraordinary taproom brawl that broke out on the Labour Benches at the time of the debate when cuts were announced. We have doubts whether the right hon. Gentleman will go ahead with the programme he has started. We hope to be proved wrong, but there is sufficient doubt for us to feel that the Corporation should not have finance for three years but for some shorter period. Therefore, we shall vote for our amendment.

4.58 p.m.

Photo of Mr David Watkins Mr David Watkins , Consett

I do not intend to take up very closely the remarks of the hon. Member for Kingston upon Thames (Mr. Lamont)—if only for the simple reason that he opposes the Bill, whereas I rise to support it. I shall be saying some critical things, but I hope that I shall indulge in some constructive criticism and not engage in purely negative hole-picking in the Bill, the philosophy behind it and everything, connected with the steel industry.

I think it would have been as well if the hon. Gentleman had checked the sources of his quotations, as indeed it would have been as well if his Front-Bench colleagues had checked their arithmetic last night. He and his colleagues would be much more effective if they did so, and one could have more confidence in their quotations and arithmetic.

My right hon. Friend the Secretary of State for Industry pointed out, as does the Explanatory and Financial Memorandum, that the proposed increased borrowing limit will cover the British Steel Corporation's financial needs for about another three years. I hope that that forecast will be realised. Notwithstanding my right hon. Friend's justified defence of the estimates of the last year or so, a major problem in the industry for a long period of time is that so many expectations have been invalidated by events. I accept the contention by the Corporation and the Government that forecasts will continue to be subjected to uncertainy, but it needs to be noted that recommendation No. 3 of the Select Committee was that the Corporation and the Department of Industry should improve their financial forecasting. The Government's reply was that they would continue to seek ways of improving "timeliness consistent with accuracy".

As Member for a steel constituency in the North-East of England, a region where almost every forecast made since the early 1970s has been invalidated by subsequent events, I hope that they will succeed. I hope that, given the difficulties in a changing and serious situation, the Bill is based upon the most careful appraisal of the situation that is possible in the circumstances.

The problem over the next three years, and perhaps for a good deal longer, is twofold. The most intense and prolonged world recession since the 1930s shows every likelihood of continuing, with a continuing depression in demand for steel. Yet alongside that is the fact that over-capacity in the production of steel is likely to increase rather than even to remain level or decrease, because every developing country is set on having its own steel plant, not only for reasons of prestige but to reduce its imports of steel.

The overall effect of that, not only on BSC but on steel producers in the devel- oped industrial countries, is that they will be confronted with a continuing low level of home demand side by side with a reduced demand for exports, and furthermore with low-cost imports being more and more likely to be seeking to penetrate into the market of the advanced industrial nations.

The effect of this will be especially serious in those communities which are heavily dependent on the steel plants. Both my right hon. Friend and the hon. Gentleman referred to this serious aspect of the problem. It is a theme that I want to develop.

One of the most serious—indeed, perhaps the most serious—of all the effects in those areas will be those of reductions in manpower, which I remind the hon. Gentleman is central to the whole strategy of the industry. This is something that is not just starting and projecting into the future but, as I shall indicate in relation to the position in my own constituency, has already been going on for a considerable time in the steel industry. The heavily dependent communities will suffer even more severely than many of them have already if there is not financial and other provision, with special reference to their situation.

As I said I would, I give the example of my own constituency, not only because I clearly have a duty to speak for my constituents but also because this is indicative of what has happened. I am certain that those of my hon. Friends who are similiarly placed and catch the eye of the Chair will say that this is indicative of what has happened in many steel communities throughout the country.

In the town of Consett about half of all the employed men are employed by the British Steel Corporation. In the wider area of north and north-west County Durham, about 30 per cent. of all employed men are employed by the BSC. There are many others in that area employed in industries such as transport and construction whose employment is directly related to the BSC and directly dependent upon it.

All this is in an area where unemployment is consistently double the national average, even in good times. One of the sad features about this debate is that we are talking about bad times and bad times projected into the future.

In the late 1960s there were about 6,200 persons employed in the steel industry in Consett. Today, with a current scheme for 450 redundancies nearing completion, the number employed is approaching 4,800. That alone is a loss of 1,400 jobs in a community where there is very little alternative employment.

The plate mill at the Consett works has been under sentence of slow death ever since 1972. At the same time, there has been—again, this is nearing completion—a massive programme of investment in billet making to modernise the plant. But the whole point from the angle that I am putting before the House is that that will mean fewer, not more, jobs. In terms of people's ability to earn their livelihood and the injection of wealth into the economy of the area as a whole, this means a continuing serious situation. This is in an area in which 15,000 mining jobs have already gone since the 1950s.

With all this background, this is not unnaturally a special development area where there are applied the maximum available incentives for bringing in new industries. Successive Governments of both parties have recognised the need for that. Yet, for all that and the application of the maximum available incentives over a period of years, the total of new jobs provided has been only about 3,500, whereas the total lost is about 16,500. In communities such as this, so severely hit, it is clear that far from there being less intervention there must be more public intervention.

The Government have rejected the Select Committee's recommendation No. 24, to the effect that the Bill should include specific provisions for Government intervention in the Corporation's affairs where that was necessitated. The Government rejected that on the ground that they prefer not to define such powers, because that would limit the flexibility, of the powers. I agree with the principle of not limiting their flexibility, and that it can be limited by definition, but I press upon the Government that there must be flexibility of action, not inaction. I should like some assurances from the Government Front Bench in the winding up speech of the debate that that is likely to be the position.

Developing the theme that much more must be done in areas such as that I am talking about, I suggest that among the uses of the money to be raised under the Bill it is essential to include efforts to expand BSC (Industry) Limited. This is the Corporation's subsidiary which was created especially to attract new industry to the hardest hit steel communities. If that activity were expanded, there would be a spin-off effect, in that the EEC Social Fund would be likely to be available further to add to such efforts. But the initiative must come from the home country. That is one of the fundamental principles. I strongly suggest that BSC (Industry) Limited needs to be strengthened in order to add to the initiatives to bring alternative industry into the hard hit areas.

In Cmnd. 7149, "British Steel Corporation: the Road to Viability", the Government pledged full support in the use of their powers to assist industrial development in the hardest hit steel communities. My right hon. Friend repeated that assurance in his speech this afternoon. But, as I have pointed out, using my constituency as a case in point, even with the deployment of all the available powers to their maximum extent, new jobs provided have been only a fraction—less than a quarter—of what has been needed.

My hon. Friends and I are not pressing specifically for compensation. We certainly are pressing for it where people have no alternative, but we are pressing above all for alternative employment for the people who are made redundant, so that their skills and energies can be put into the production of wealth and not wasted, as is likely to happen otherwise.

Still more is needed. Areas such as Consett should be considered for something on the lines of designated district status, such as is provided in the Inner Urban Areas Bill, which would enable a further concentration of resources in order to regenerate such areas.

I realise that many hon. Members on both sides of the House are seeking to catch the eye of the Chair, so I move to my conclusion by saying that I recognise that the Bill is a step towards financing a viable modern steel industry, but it must also be used as a step towards dealing with the social problems in the steel communities as well as with the productivity problems and the general build-up of the industry both in those areas and in the country as a whole.

But I believe that even then on its own it will be inadequate to meet the problems of the industry, and that wider measures of governmental and other public intervention, such as, for example, a more active role by the National Enterprise Board are also necessary if the problems of these areas, already so seriously hit and likely to be still more seriously hit in the future, are to be resolved with equity.

5.10 p.m.

Photo of Mr Hugh Fraser Mr Hugh Fraser , Stafford and Stone

It is a great pleasure for me to follow the hon. Member for Consett (Mr. Watkins), because a few years ago I was happy enough to be chairman of a company using steel in his constituency. I shall return to the question of the steel users' position later.

The Secretary of State was somewhat hesitant in the way he produced the Bill—notably so. The situation is undoubtedly very serious world-wide. There is an over-capacity of steel of about 150 million tons this year, while, in its internal financial position, the British Steel Corporation has lost about £800 million to £900 million over the last three years. Now we have a projection as to profits that is highly uncertain, and it is especially alarming, when one looks at the plan—and I think that the right hon. Gentleman will agree—that in the next three years there will be about 5½. million more tons coming into effect while the actual reduction of old plant will be between 2¼ million tons and, at the most, 3 million tons.

This means that if we continue with much the same world demand as there is today, instead of our plants working overall at about 66 per cent. capacity, they will be working at between 55 per cent. and 60 per cent. capacity overall. That could throw up very serious losses indeed.

Thus, we are working with extremely dangerous figures and projections, and this is why I believe, among other reasons, that we need tighter control of what could be a major bleeding of the national cash investment and the public borrowing requirement, with the effect on taxation and all the other things that must flow.

I am, therefore, entirely with my hon. Friend the Member for Kingston upon Thames (Mr. Lamont) in saying that the Bill is not adequate to meet what is a highly critical situation. I fully agree and sympathise with those hon. Members who represent steelmaking constituencies in the problems that they face. I shall return to a local problem later—the question of Shelton, where some of my own constituents are employed.

The situation has been summed up, with a statement of how it may be solved, in Sir Charles Villiers's last report, for the year 1976–77. Sir Charles says that there are two keys to our problem, and that these are the two essential keys to a British steel industry. First, we must regain our home market share, which has fallen as low as 53 per cent. in 1976, and, secondly, we must expand our sales overseas. Always in the British steel industry there was a favourable balance of steel exports and steel imports until 1973, when the situation went into a decline. I believe that these are the two answers to the question. First, we must get flexibility for home supply, and secondly, we must cope with the overseas market.

The root trouble with the Government's attitude, which is intense and strong, and so forth, is that they have not thought out the total problem of steel which faces the country. It has changed completely since the original paper drawn up in 1973 by the then Steel Board and the Conservative Government. The present plan is just a modification of that plan which I think is now totally out of date.

We must face the fact that a plan based on massive exports of cheap carbon steel is no longer on. The hon. Member for Consett put his finger on the problem. The great concept of these cathedrals by the sea turning out prayers in the form of millions and millions of tons of steel for the world is no longer possible. I wish it were possible, but it is not.

In the rest of the world there is a steel surplus of 150 million tons. Yet steel plants are still being erected in Mexico, Ghana and elsewhere, both in the semi-developed and in the developing world. We must face the fact that the great sale of what I believe is called in the business cheaper carbon steel is no longer possible.

I believe that we have to concentrate on two areas. First, we must get flexible sales to provide our steel-using engineers with the right type of steel. That means smaller plants. On that point, I shall refer to Shelton later. Secondly, we must realise that it is only steel with added value by the workers of this country that will make a profit overseas in the foreseeable future. This is where there should be the concentration that is lacking at the moment in the approach of the British Steel Corporation and Ministers.

I turn now to the internal question. I believe that a company such as the BSC, with these terrifying losses of £900 million in three years, with capital projections that are dubious, and with markets that are falling, should turn to one obvious thing—that is, to get rid of some of its assets held in subsidiaries.

If I were in charge of British Steel I would be going through the various subsidiary companies and asking "Can I sell it? There are some 140 subsidiary companies, some making chemicals and some of which are quarrying, for example. I do not think that they would fetch very much money but they are taking quite a lot of overheads.

But then one comes to the much more important question—to back assets which at the moment are making money. It is crazy to get rid of a plant like Shelton which, even working at 75 per cent. of capacity, is making £1 million, and which if it had the arc furnaces put in, would make, I am told by the ex-manager, between £3 million and £4 million. People who want to get rid of a plant like that when they are losing £900 million over three years should have their brains examined.

Hon. Members opposite always laugh at the idea of selling off working assets. My hon. Friend the Member for New Forest (Mr. McNair-Wilson) has some interesting correspondence, which I hope will be shown, between himself and Sir Charles Villiers. I hope that he will develop the point I am making. But it has happened in the past. I will take one case as an example—the works at Openshaw in Manchester.

The BSC said four years ago that it must close down, but Edgar Allen, the company with which I once had some connection as a merchant banker, took the works over and is now, I am happy to say, employing 1,400 people. I assure the House that none of those people wants more nationalisation. It can happen, and it can happen effectively.

It would be better if the BSC reviewed the Shelton situation, but otherwise I believe that the Shelton plant should be offered for sale. It could still employ 1,200 people and could still make a dashed good profit for someone who had put £30 million into it. It would be very good to get 10 per cent. on one's money during a steel slump.

In conclusion, the provisions in the Bill may well not be enough to meet the future losses and capital requirements, many of which are going to the wrong area. Therefore, there must be stricter control of the Minister and of the Corporation, because we are faced at the moment with nothing less than a financial disaster in British steel, and that is why the Government must come forward with something better.

5.20 p.m.

Photo of Dr Jeremy Bray Dr Jeremy Bray , Motherwell and Wishaw

The House is, I think, settling down into its across-the-Floor argybargy on the industry, after an outbreak of cross-Benchery which, perhaps to our relief, is fading.

After the appalling speech by the hon. Member for Kingston upon Thames (Mr. Lamont)—who set a new standard in carping and superficial criticisms of a nationalised industry—the House should be grateful, by contrast, for the clear and lucid statement made by the BSC in support of its case and by the Government.

As the hon. Gentleman complained, the information is not entirely up to date. Ravenscraig, in my constituency—the same story can be told by my hon. Friends elsewhere—is achieving record levels of output per shift on a very much reduced volume of output, well below what it could achieve with full shift working. BSC's technical performance is improving very rapidly.

How can we provide the BSC with the environment in which it can be a success not only technically but commercially? Here again we have a clue, in that so many of the assumptions, on which the projections of the prospects for the industry depend, relate to the prices that the industry can get.

At a time of major economic disturbance, it is the most capital-intensive enterprises which suffer most, and among them it is the capital goods industries, such as steel, which suffer most of all. In this position, the BSC is bound to be making heavy losses. Given this situation, it is an enormous benefit that the EEC has had on the stocks for a long time now the Davignon plan. It is right that that plan should be associated with the name of the Commissioner responsible, but we should also recognise that there have been pressures, negotiations and discussions over many years in support of that plan.

Far from sounding the kind of warning that the hon. Gentleman sounded in his conventional, capitalist, competitive-economy spirit, we should be asking whether the Davignon plan goes far enough. First, we should know more about how the plan operates. It is taking a great deal of the time of steel executives in this country. We welcome the information given in the EEC document but would like to know more about how minimum prices are fixed, what percentage of sales in different countries is produced in those countries' industries, what percentage is sold at the minimum prices, and so on. I am sure that criticisms of the plan such as those which have been made from the Opposition Benches will mount, and we shall have to mount a strong defence of it from the Government side.

At the peak of demand, capital-intensive industry is liable to make its prices excessive, to provide poor service to customers and to install far too much capacity. We have been through such phases in the steel industry, I regret, since nationalisation. At these times the response from the Government should be to restrain price increases, to protect consumer interests and to moderate the investment ambitions of the industry.

But at a time of recession, inevitably the pricing gets cut-throat, many backdoor selling methods develop, and there are moods within industries to cut back severely their investment plans. Faced with that position, the Government should set up and supervise pricing systems and make sure that investment is sustained at high enough levels.

If the hon. Gentleman had a little more experience of industry, he would know more about the way in which capital-intensive industry has come to work in the last 15 to 20 years, as compared with the previous period. The higher the level of the board, the more it has to pull against the tendencies of the operating divisions to cut back investment too sharply at a time when lack of demand is threatening their own profits at divisional level.

For that very reason, the Government should be asking the BSC whether it is sure that it is maintaining adequate levels of investment. I refer to one very important figure given in "The Prospects for Steel". It is that the replacement value of the fixed assets in BSC is now approaching £10,000 million, yet in the balance sheet for 1977 the fixed assets are listed at £2,000 million. The replacement cost is five times the balance sheet figure. The depreciation is calculated on the balance sheet figure at only about £100 million a year. At that level, we are depreciating at realistic replacement values the value of plant in BSC over 100 years, which is totally unrealistic.

Whether it should be a matter of Government policy to value nationalised industry assets at replacement value, and what the depreciation should be, are matters for argument, but I think that we would get much nearer the right solution if we moved in that direction. If we were to move in that direction, we would again have stronger support for the kind of policy now pursued in the Davignon Plan.

I believe that the investment priorities which were stated in the Government's White Paper on the completion of existing schemes, replacements, new technology, and cost reduction are entirely right. I say to my right hon. Friend the Secretary of State that we have a number of very important further capital investment projects in Scotland, not only in my constituency but in the constituencies of my hon. Friends, which deserve to come under these categories. We shall be pursuing him with regard to these plants. There is the secondary steelmaking at Ravenscraig and also the new forging machine at Craigneuk Works and others, all of which, I believe, are under favourable consideration by the Corporation.

I most strongly support the plea made by my hon. Friend the Member for Consett (Mr. Watkins) when he said that much greater emphasis needs to be placed on job replacement. I was glad to hear from him that at least a quarter of the jobs lost in his constituency have been replaced. But in my own constituency not one job has been provided to replace the jobs lost in steel. I know that a new and fresh effort is being made and I wish it every good fortune, but I am sure that, by whatever means are needed, we must place a much greater emphasis on job creation in the areas in which jobs have been lost.

The industry has been through a very difficult time and it has not always had the support or understanding that it needs in the House. Perhaps in the course of the last few weeks we have come to a better understanding. I hope that those Opposition Members who understand some of the problems of the industry will be able to keep their party on the rails, because I tremble to think what would happen to the industry if the point of view put by the hon. Member for Kingston upon Thames were ever to become the policy of a Government.

5.28 p.m.

Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley

Today's debate is one more incident in the baffling search for means of democratic control of a nationalised manufacturing industry compatible with highly efficient management. This is a search to which Liberals believe that there will be no satisfactory solution, because that particular circle simply cannot be squared. But, faced with the existence of the BSC, we have to do our best and to hope to make at least some progress.

I believe that some progress in effective democratic control, consistent with commercial behaviour, has been made in recent months. In particular, the priceless boon of a unanimous Select Committee ought to be welcomed. I hope that it is being welcomed by the British Steel Corporation, which has every reason to complain of having been the victim of political bickering in the past.

I am very glad that the Government have produced, for once, prompt replies, within 10 or 11 weeks, to the reports of the Select Committee, and that we have them available for today's debate. As has already been said, the British Steel Corporation is now very much closer to reality, and we are no longer having the grandiose and Olympian plans which used to appear in the past.

I also believe that minority Government is proving to be a healthy thing for realistic treatment of the British steel industry. No minority Government could have committed the disastrous error of the Beswick review because it would not have been allowed to do so. The hon. Member for Kingston upon Thames (Mr. Lamont) has not made sufficient allowance, in his dire prophecies for the possible future of the BSC, for the changed position as a result of minority Government.

As to parliamentary control, impossible as it is to arrive at anything approaching a complete solution, there is no answer to be found in trying to put such a high technology industry into a totally precarious financial position by subjecting it to the doling out of money on a calendar adjusted to the rhythm of seed time and harvest, which has nothing to do with the modern manufacture of steel. That is why my hon. Friends and I cannot agree with the amendment of the Conservative sector of the Opposition.

I was surprised at some of the other objections to the Bill raised by the hon. Member for Kingston upon Thames. He said that he had hoped to see the scheme for capital reconstruction available so that it could be considered with these new borrowing powers. I understand the pious hope expressed by the Government and the BSC that they will before long have a stable position in which they can hope to devise a realistic and long-lasting capital reconstruction. However, I see no sign of this on the horizon. A basic difficulty would be putting any kind of realistic value on the fixed assets of the British Steel Corporation. It does not need arguing that the value of these cathedrals by the sea, to which the right hon. Member for Stafford and Stone (Mr. Fraser) referred, depends almost entirely on whether they can sell their products at a profit.

The only part of the admirable and realistic "Prospects for Steel" document, which the BSC has supplied, which I would criticise is the unhelpful emphasis that it places on an alleged value of £10,000 million worth of fixed assets. Who can say what these fixed assets are really worth, even at a replacement value? Who knows whether we shall ever want to replace them? We cannot start a capital reconstruction until we have some idea of the commercial worth of the fixed assets. There is no Solomon available in the highly unstable position of steel industries throughout the world today who can say what a big modern steel works is worth.

Photo of Mr Michael Marshall Mr Michael Marshall , Arundel

I think that the House is listening to the hon. Gentleman with close attention. This is a very important matter. Does he not assume that the capital reconstruction to which all the past speculation has been directed is essentially a matter of reconstructing debt rather than the capital structure to which he is referring, which, I agree, is a much vaster and wider horizon?

Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley

Yes, but the debt cannot be reconstructed without reference to the value of the fixed assets. I shall ask the Minister of State for a reassurance when he winds up the debate—which I am sure will be forthcoming—that in the ordinary conventional, commercial way, if and when the House is asked to consider capital reconstruction, the borrowing powers do go back into the melting pot. This should be self-evident, but it would be helpful to have it confirmed on the record. It would be making a monkey of the House to retain huge borrowing powers, having just cancelled an enormous part of the existing borrowing.

If it had been the case, which it is not, that the BSC was projecting enormous new capital projects over the next three years, there might have been a case for saying that before the BSC embarks on some vast new enterprise in a year or two's time, Parliament should have a full chance of considering the matter. However, that is not so. The plans, although enormously costly, are not packed with new and original projects. The BSC's new document says: The finance now required for the Corporation is: for investment

  • —to complete existing projects
  • —to make essential replacements
  • —to improve quality
to finance working capital increases and trading operations in the short term. There is nothing there to warrant a cutoff point at which the House could usefully re-intervene and impose some different decision as a result of the passage of a year or two.

The third hopeless aspect of trying to impose this crude kind of parliamentary control through ladling out the cash in dollops on a precarious basis is the extraordinary proposal that the cash limits should be divided between capital and revenue. Such a division implies the Victorian fallacy that there is a distinction between capital and revenue of kind rather than of degree, whereas everybody in the House, I am sure, takes the view that capital is simply expenditure that can be written off over more than one year but that revenue items are written off within the year. Therefore, it is entirely a matter of degree.

If the House were ever so foolish as to try to insist on splitting cash limits between revenue expenditure cash and capital expenditure cash the most grotesque diseconomies would occur. If an enterprise found that it was running short of revenue cash to pay wages it would lavish from its capital cash the most uneconomical capital expenditure in order to do at vast expense by some absurd machine what could much better be done by labour, who would have to be paid from the extraordinary concept of a revenue cash limit. I hope that we shall not hear anything more of that.

I thought that the House had learned its lesson about the folly of trying to apply this crude form of supply control to a sophisticated, competitive industry from the appalling disaster of the Ryder method of doling money out to British Leyland, which turned out to be the farce of the century—the idea that the financing of British Leyland capital expenditure could be done by instalments dependent upon a good headmaster's report. The House had to bury its red face in its hands when Mr. Michael Edwardes appeared on the scene and had to confess that the Ryder method of parliamentary control had proved to be a nonsense.

As the British Steel Corporation is operating by the express will of the House, it would be humbug to deny it a financial programme which will enable its customers, who depend upon long-term assurance of supplies, to have confidence in its future over the next few years. It would be wrong to deny those who supply BSC with extremely complicated plant the assurances that they are entitled to have for the next three years of operation of their businesses. It would be wrong to leave those of the BSC's staff who possess highly marketable expertise in a position of working for a corporation which might be left stranded within about 18 months.

It is of the greatest importance that the House, especially through the Select Committee mechanism which the Government have at last genuinely accepted, should continue a dialogue with BSC that will ensure the highest degree of parliamentary control. It is unrealistic to put up a token opposition to the Second Reading of the Bill, which the Conservative sector of the Opposition knows perfectly well would bring a total disaster to the industry if it took the trouble to try to get the Bill actually defeated tonight.

5.40 p.m.

Photo of Mr Peter Hardy Mr Peter Hardy , Rother Valley

I welcome the instruction that the hon. Member for Colne Valley (Mr. Wainwright) has given to the Opposition Front Bench in teaching them the diseconomies that would arise as a result of confusion between current and capital expenditure.

However, I could not agree with what the hon. Gentleman said about the value of minority Government. Beswick reviews and such things are far more likely when we have a minority Government than if the Government have a substantial majority of the sort that I expect this Administration to enjoy after the next election.

With minority Governments, far from having fewer Beswick reviews, we would get far more short-term consideration, far more ridiculous reversals of policy, such as we have seen this week, and far more of the sort of arithmetic in pursuit of cheap popularity that the comments of the hon. Member for Kingston upon Thames (Mr. Lamont) on economic theory suggest—and that the hon. Member for Colne Valley would acknowledge as inaccurate and not entirely responsible. I am glad that the hon. Gentleman at least recognised that we are seeing movement towards successful operation and adequate democratic control of the British steel industry, and I think that moves in recent months will prove historically valuable.

I support the Bill. I am particularly pleased that the Secretary of State referred to the Thrybergh bar mill in my constituency. The only thing that worries me about that mill is that attention is too often focused on its success, which has been tremendous. The mill has shattered world record after world record, but we in the Rotherham area are accustomed to seeing records shattered in other local works. The hon. Member for Arundel (Mr. Marshall) has some knowledge of steel in South Yorkshire and he will not be able to deny those achievements.

My hon. Friend the Member for Rotherham (Mr. Crowther), who is in the Chamber, will agree that, in recent weeks, we have had records established in Templeborough in his constituency, at Aldwarke and in the other areas in which residents of the Rotherham, Rother Valley and Dearne Valley constituencies work. The Aldwarke plant has been a world record heater, as has the Templeborough plant. The Orgreave chemical plant in my constituency is leading the field in seeking the defeat of the pollution that such heavy industry tends to generate.

We in South Yorkshire are entitled to be extremely critical of Conservative Members who always seek to carp and to criticise this important public enterprise. The Opposition would have been more honest and honourable if they had been critical, if they wish to be critical, of the details and aspects of the attitude of Government policy, but they should have recognised that if we are to retain a steel industry, this Bill is necessary and should be welcomed.

As my hon. Friends the Members for Motherwell and Wishaw (Dr. Bray) and Consett (Mr. Watkins) said, those of us who have constituencies in which steel is successful, and will be increasingly successful, have not seen that achievement gained without painful experience. In my part of South Yorkshire we have seen thousands of jobs lost in the last 12 years or

That painfulness was accepted as a result of careful negotiation, and sensible agreements were made. I suspect that if many Conservative Members had their way, as a result of panic in reaction to present difficulties, the jobs of thousands of steel workers would suddenly be lost, and that would prevent the sort of agreement and development that will allow success to be guaranteed in future. If the Opposition had their way, the sensible arrangements made in South Yorkshire over the last decade would not have been possible and world records would not have been broken now—or in future, as I I am confident that they will be.

There are still Conservative Members who, although they have been quiet today, subscribe to the view that we do not need a steel industry in Britain. I thought that the right hon. Member for Stafford and Stone (Mr. Fraser) was beginning to hint at that, but he did not say it and I found myself in some agreement with him.

While there may be horror at contraction and fear of recession, Britain cannot afford to be without an important and significant steel industry if we are to remain an important industrial nation. If we were to vote against the Bill logically and sincerely, we should be saying that there is no future for steel as a significant industry in Britain. Of course, the Opposition are not taking that view. They are voting against the Bill for not entirely sensible or responsible reasons.

We have to support the steel industry, but there is a great deal in what the right hon. Member for Stafford and Stone said. We have to rely not so much on general steel and bulk steel as on the development of high technology in steel and the supply of special steel of the sort that we in South Yorkshire are particularly skilled at making.

We must emphasise that Britain is determined not to descend to an agrarian economy in the twenty-first century, and the sort of money with which the Government are prepared to back the BSC is essential.

If we are to maintain that success, the painful experiences that we have had in South Yorkshire will have to continue, but that means that we are entitled to suggest that even further concern and maintained arrangements are necessary to provide alternative occupations.

I am gravely worried about the Conservative Party's attitude on this matter. I recall that when I had the second Private Member's motion on the Order Paper one Friday about two and a half years ago, I sat all day waiting for the opportunity to talk about the future of the steel industry and the consequences of the developing recession that we faced while one Conservative Member after another prattled on about the price of ice cream and the penalties of Government taxation policies on self-employed ice cream merchants and other such people. I question the attitude, values and priorities that the Conservative Party illustrated on that occasion, and we have seen nothing this week to remove that suspicion.

Photo of Mr Michael Marshall Mr Michael Marshall , Arundel

The hon. Gentleman seems to bear the scars of that occasion much more deeply than even I had realised. I remember that when the Bill was in Committee, he raised the same question and my hon. Friends and I invited him to take a full part in the Committee proceedings. For reasons that we all understand, he felt that he had to be rather shy in his contributions, agreeable though they were.

The hon. Gentleman should not get this out of proportion. We all know that on Fridays one cannot always reach the business that one wants to deal with. The point of our amendment is to get more frequent opportunities to debate steel matters in the House.

Photo of Mr Peter Hardy Mr Peter Hardy , Rother Valley

I am pleased that I gave way to the hon. Gentleman. I believe in these courtesies. In fact, I took part in Committee and made a relevant speech which was extremely useful in the Rotherham by-election which followed shortly afterwards. I shall never apologise for reminding my constituents and others engaged in heavy industry in Britain that, at a time of real importance, the Conservative Party preferred to talk about ice cream rather than about steel.

I heard the Finance Bill debates yesterday and on Monday when Conservative Members gave a commitment that they wanted to help the people who were succeeding in British industry—the salesmen for our exports, the engineers maintaining the skills and qualities of British industry and so on. I considered the workers of the Thrybergh bar mill—I could as easily have considered Temple-borough or any of our South Yorkshire works, including the River Don works, which was under threat of disaster when the Conservative Government were in office and has recently secured a very large order—and related their position not merely to the words that we have heard from the Opposition but to the tax changes that have been made this week.

I discovered that the record breakers in management or on the shop floor will get little or nothing from these tax changes. However, if one of these men has a son with a particular deformity of tonsil or a particularly skilled manager who can package him so that he gets a gold disc—I believe that that is the correct term—he will be able to make more in a few weeks than his father, working in a successful steel enterprise of the sort that we have in South Yorkshire, could make in a lifetime. That is a valid point, given the Opposition's opportunism in seeking to oppose the Bill. I do not want to say more than that, otherwise my speech might become somewhat contentious, and that is not my intention.

However, I should like to make one further point which I believe should be taken into account. The special steel area of South Yorkshire uses a great deal of energy and iron ore, but it also uses large numbers of sometimes quite mysterious substances, such as molybdenum, vanadium, tungsten, nickel and chrome. All of these can be found in the highly successful and specialised products which we send throughout the world. For instance, parts of Concorde will contain some of those substances and they will be manufactured in my constituency. I am rather worried because very few of these commodities are found in Britain. We are entirely dependent on overseas supplies for these key and sometimes wondrous materials. I am rather anxious that in a rather unstable world, which will be subject to vast change over the next few decades, Britain should have adequate resources of these particular commodities.

I recall that three or four years ago a group of South Yorkshire MPs urged the British Steel Corporation to embark upon a policy of ingot-stocking in order to smooth out the cycles which in those days were very much less severe than they are today. Ingot stocking would assist in sustaining employment for short-term periods. Eventually, after rather too long a delay, the BSC accepted part of that policy. I believe that the BSC should be told that a portion of this very large sum of money, which the Bill will properly provide for the Corporation, should be used in operation on its own or in partnership with other steel-using organisations in Britain, be they public or private, in order to ensure that Britain can have a larger and valid strategic stock of these essential materials.

I do not want the Minister to delay the House this evening by telling us what sort of months of supply we have in reserve, but plainly it would be highly desirable—since world inflation may continue for a long time—that we should have adequate reserves of these commodities and that we should begin to spend a little money upon them now. I am not suggesting that the BSC should suddenly embark upon mad purchasing sprees on world markets, because that would put up the price of these goods. But we should steadily and sensibly develop our reserves of these particular commodities which are so essential to South Yorkshire.

I support the Bill because the success of a steel industry is absolutely essential to Britain. As our successful steel industry in South Yorkshire will require the Bill to be enacted as soon as possible, I should like to compliment my right hon. Friend on its introduction. I hope that we can get the Bill without any delaying tactics from the Conservative Opposition.

5.53 p.m.

Photo of Sir Anthony Meyer Sir Anthony Meyer , Flint West

I do not think I differ very much from the hon. Member for Rother Valley (Mr. Hardy). None the less, he might be slightly astounded to hear me say that I shall go rather further than my right hon. Friend the Member for Stafford and Stone (Mr. Fraser) in suggesting that there is no longer an economic argument in favour of maintainng a major bulk steelmaking capacity in this country.

There may be an argument for maintaining a highly specialised steel capacity—I am sure there is—but I do not think there is an economic argument for maintaining a major bulk steelmaking capacity. There may be a social argument for that, and I shall come to that later. There certainly is a strategic argument for maintaining a basic minimum capacity. But if, as I propose to argue, the case is strategic rather than economic, it is surely unwise to concentrate production—as the BSC proposes to do—in five large new technology plants. A technical breakdown or an industrial dispute in any one of those would be crippling to the nation, and experience shows that the likelihood of an interruption in production is substantially larger at a very large greenfield plant using new technology than at smaller plants, with established patterns of good industrial relations, which use well-tried techniques, such as at Shelton and Shotton, whose case I shall shortly be putting forward.

I do not always find it possible to support my right hon. Friends in steel debates because of the very special interest that I have in maintaining steelmaking at Shotton. I am glad to see the hon. Member for Flint, East (Mr. Jones) in the Chamber. In view of the unpleasant things that I said about him the other day, I should like to pay tribute to the great work which he does in defending the interests of the steel works.

Tonight, however, I shall have few hesitations in supporting the reasoned amendment that has been put forward by my right hon. and hon. Friends. If the amendment were carried it would not merely enable this House, but would oblige it, to examine year by year, the priorities, projects and future plans of the BSC to see whether they are still appropriate to the capacity of the British economy to attract or generate investment capital. That will enable us to make sure that the BSC plans are still appropriate to the actual and projected level of world demand for steel. Above all, it will enable us to see whether proper account has been taken of the growing competition in steel-making from countries whose labour costs are necessarily very much lower than Britain's could possibly be. I believe that it is this competition from low-cost countries which is the clinching argument against the attempt to maintain a steel industry of a size to which the ten-year strategy commits us.

I have said that I have a special concern, shared with the hon. Member for Flint, East, in maintaining steel-making at Shotton. I shall be putting forward arguments why that should be done and suggestions how it should be done. However, I, like hon. Members in all parts of the House, must recognise that the resources consumed by the BSC, whether for investment or for losses on current account, are resources which are not available for other and perhaps equally desperately needed things. Members of the Tribune Group are always telling us that is no good having well-manned and well-equipped defence forces if we thereby impose such burdens on the rest of the economy that we can no longer afford a society worth defending. That argument applies infinitely more strongly to the steel industry. It is no good bankrupting the rest of our industry in order to maintain an indigenous steelmaking capacity. If we get to the point where we can maintain a steelmaking capacity only by laying an impossible and unbearable burden on the rest of industry, we would do far better to import a higher proportion of the bulk steel which the rest of industry needs and which the finishing and specialised processes in steel can use.

It is against that background, and subject to those limitations, that I argue the case for maintaining steelmaking at Shotton. I want to keep it, but not if it means sacrificing the rest of industry and all hopes of a decent social fabric—schools, hospitals and roads—in the rest of my constituency. I argue the case for the retention of steelmaking not primarily on the ground of the almost unbearable effect on employment which closure would have on the county of Clwyd. At the last count Clwyd had 11·4 per cent. unemployment, the third highest rate of unemployment in the United Kingdom after the Western Isles and Cornwall. That is even higher than Merseyside and substantially higher than those regions in the North-East whose unemployment problems we all know so well. Within the county of Clwyd, in the Deeside travel-to-work area, no fewer than 27 per cent. of the 40,000 jobs available are provided by BSC.

Photo of Mr Roy Hughes Mr Roy Hughes , Newport (Monmouthshire/Gwent)

Politically, is not the hon. Gentleman standing on his head, because four years ago Shotton would have been closed under the proposals of his own Government which he fully supported in the Lobby? If that had happened, there would now be no case for arguing that Shotton should remain open. It would have gone.

Photo of Sir Anthony Meyer Sir Anthony Meyer , Flint West

The hon. Gentleman knows perfectly well that I supported the strategy of BSC, which at that time envisaged a substantial expansion of the British steel industry, only on an express undertaking given to me at the time by Mr. Tom Boardman, the then Minister for Industry, that the closure of Shotton would be deferred in order to enable that particular question to be re-examined. [HON. MEMBERS: "It was not in the White Paper."] I got an express undertaking from Mr. Boardman that that question would be reviewed. It was as a result of that that Shotton was included in the Beswick re-examination. In situations of the kind that I am talking about, the loss of 7,800 jobs through the closure of steelmaking at Shotton would be shattering for the area which I have the honour to represent.

But it is not on these grounds that I argue my case. Frankly, I do not believe that it is possible any longer to think in terms of a fully competitive British steel industry which is able to compete against those of Korea, Brazil and other countries with natural advantages and very low labour costs. On the other hand, as I said, for strategic reasons we have to maintain some indigenous steelmaking capacity. That being so, we have to consider carefully the relative case for having these five very large steelmaking plants on which everything is based against the policy of spreading the risk amongst a larger number of smaller plants.

It has been shown in a document produced by the Shotton action committee and by Clwyd County Council that, for a surprisingly small capital investment, steelmaking could continue at Shotton by modernising the open-hearth furnaces. The arguments which I deploy here are valid for other medium and small steel producers throughout the United Kingdom using proved technology and producing small to medium quantities of steel.

By a programme costing a mere £25 million spread over three years, the open-hearth furnaces at Shotton, which cannot long continue in their present form, could be modernised by installing tandem furnaces. The advantage of this scheme is that during the period that these tandem furnaces were being installed, production could continue virtually uninterrupted.

At present, Shotton is under a suspended death sentence. Naturally, we welcomed the decision from the Government that steelmaking should continue into the 1980s. That is very welcome as far as it goes, but it is meaningless without a commitment to provide the minimum investment to enable steel to continue to be made in those open-hearth furnaces. They cannot go on as they are for more than a year or two. Something has to be done.

But it need not be nearly so expensive as seemed necessary at one time. The capital costs of these tandem furnaces would be about one-third of that of the BOS or QBOP processes which were envisaged orginally. Moreover, experience abroad in the United States and Canada, and most strikingly of all at Ostrava in Czechoslovakia, show that really high levels of output and annual average rates of 160 tons per hour can be achieved by this well-tried technique installed in existing equipment with the minimum of disruption.

I hope very much that the British Steel Corporation will look sympathetically on these proposals, which would enable Shotton to continue and to make for itself the steel needed to supply its own newly and very expensively modernised finishing lines which are now perhaps the most efficient in Europe. I am sure that this will be the best solution, and I hope that the Minister will encourage the Corporation to adopt it.

I should like finally to ask the Minister a question, which perhaps he will reply to at the end of the debate. If he is not able to do so, perhaps he will be good enough to write to me about it. If, despite the case that I have been arguing and in spite of logic, the Corporation ultimately persist in its intention of phasing out steelmaking at Shotton, the corollary would be that Shotton's finishing lines would be supplied with hot-rolled coil by Port Talbot. But if the projected expansion at Port Talbot is now to be scaled down drastically, as I understand it is, will Port Talbot produce enough hot-rolled coil to meet the needs of Shot-ton's finishing lines and, even if it does, what will be the cost of this steel if the much vaunted economies of scale which were expected from the vastly increased output are to be swept away by a reduction in that output, bearing in mind that the high transport costs to North Wales will remain? Will not hot-rolled coil from Port Talbot in the new circumstances be insufficient for Shotton's need, and will not it be quite hideously expensive?

6.5 p.m.

Photo of Mr Roy Hughes Mr Roy Hughes , Newport (Monmouthshire/Gwent)

As I listened to the hon. Member for Kingston upon Thames (Mr. Lamont), I appreciated that the steel industry was not exactly entrenched in his constituency or in that of the hon. Member for Arundel (Mr. Marshall), from whom we hear contributions on this vital industry from time to time.

However, in passing I must say that I have a measure of sympathy for the Opposition amendment, because I have argued for some time for greater accountability to this House from our publicly-owned industries. The need is even greater in the case of the British Steel Corporation, bearing in mind that it is in receipt of so much public money.

However, I do not intend to support the Opposition amendment, for different reasons. As I see it, what I call the Joseph doctrine means that the Conservative Party would be prepared to allow our publicly owned steel industry to go to the wall. As the Opposition see it, bulk steelmaking in this country should come to an end. The cat has been let out of the bag by the hon. Member for Flint, West (Sir A. Meyer). But, as I pointed out when I interrupted him, at one time he supported the closure of that key works which, incidentally, I have always believed, bearing in mind the excellent labour force there, should be retained as a steelmaking works. If the Conservative Party has its way, we shall have to rely very much more on imports, and such a course for a heavily industrialised nation would be a hazardous one, because eventually a boom would come and we should be left to the tender mercies of overseas suppliers.

In addition, we have to take account of the social consequences, and I make no apologies for mentioning them. We in South Wales rely heavily on the steel industry. This is the other basic reason why, although I have a measure of sympathy for the amendment, I cannot support it and instead intend to support the Bill.

Having said that, I must add that I have felt for a very long time that the administration of the BSC leaves very much to be desired. This state of affairs has gone on for a good many years. Nevertheless, I appreciate that the present crisis in the industry is due to the stagnation of the British economy, which is not only a British problem but part of the crisis affecting the Western world.

Bearing in mind that we are being asked to authorise these huge sums of money for the British Steel Corporation, we have to ask ourselves one vital question. When the British economy picks up again, will it be the BSC which supplies our needs, or will it mean an additional flood of imports?

We have heard the argument about what the capacity should be and what the future demand is likely to be. The key question, if all this money is to be allowed to British Steel, is, will the BSC benefit when the upturn in the economy comes? There is no guarantee of that, particularly now that we are a member of the EEC and our basic needs could be supplied from Germany, Italy, France or Belgium—let alone suppliers in other parts of the world. The case for import controls, therefore, grows stronger every day. When will the Government face this vital question? The basic need is to save British manufacturing industry, including steel.

Photo of Dr Colin Phipps Dr Colin Phipps , Dudley West

My hon. Friend raises an important point. Unfortunately, much of the steel we import has to be imported because it is not made here. Perhaps one of the problems with the proposed investment is that it will go not to those areas which could save imports but only into straight steelmaking.

Photo of Mr Roy Hughes Mr Roy Hughes , Newport (Monmouthshire/Gwent)

Many firms in this country still go overseas for supplies which could be obtained from our domestic industry. The BSC's share of the home market dropped from 70 per cent. in 1970 to 53 per cent. in 1976. That is a significant drop.

Photo of Sir Anthony Meyer Sir Anthony Meyer , Flint West

Why do suppliers go overseas for their steel if it is made here?

Photo of Mr Roy Hughes Mr Roy Hughes , Newport (Monmouthshire/Gwent)

If I may develop my argument, I shall come to that point.

The increase in imports has been due partly to an increase of activity in the private sector, but it is largely due to imports, which amount to 5·4 million tons in 1976. That is roughly equivalent to the output of two Llanwerns. At the same time, our steel exports have slumped from 3·7 million tons in 1971–72 to 2·7 million tons in 1976–77.

Part of the reason is that there is still antiquated machinery in some parts of our steel industry. That affects our product, and major customers such as the Ford Motor Company are turning elsewhere. Large investment is needed, so I support the Bill.

However, besides all this money going into the BSC, we need a real show of planning and commercial enterprise by the Corporation. It has not excelled itself in that respect over the years. The undersea pipe plant used by the North Sea oil industry, which is revolutionising our economy, has been supplied from Italian, West German and Japanese sources. The redundancies and closures cannot go on much longer. The BSC must show enterprise and initiative.

I agree also with the Opposition, to a certain extent, about the need for flexibility in the industry. That applies to Shotton as much as to Shelton. That is why I have supported those two vital plants remaining open. Flexibility is the reason that many small private firms are successful at the moment, to the detriment of the BSC. There is speculation in authoritative steel circles that there is to be a post-Beswick list of closures and that the present programme is not the end.

Perhaps the biggest concentration of steelmaking in the country is in my constituency. There are persistent rumours there at the moment about the future of the former Whitehead's works, now owned by the BSC. We need an official statement from the Corporation that those rumours are absolutely without founda- tion, otherwise, the morale of the workers there will be undermined.

We in South Wales have suffered enough over steel. It is our basic industry and now employs far more people than coal. Almost the whole investment programme at Port Talbot has been cancelled. Steelmaking has ended at Ebbw Vale, with the loss of 3,000 or 4,000 jobs. East Moors has been closed. These are all in close proximity. Previously, we lost the Newport tube works, with almost 1,500 jobs. The BSC then imported from overseas the very product which that works had been making, with all the consequent harm to our balance of payments. The time is coming when the unions in South Wales will say that enough is enough. The former White-head's works will have a full part to play when the upturn in the economy comes. Although I support the Bill, the BSC must at last start justifying our faith in a publicly owned British steel industry.

6.17 p.m.

Photo of Mr Patrick McNair-Wilson Mr Patrick McNair-Wilson , New Forest

I start by declaring an interest. I am associated with a company that makes consumable electrodes for electric are furnaces, and with a company in the area of special steels.

No one has a monopoly of wisdom about the British steel industry. It has been subject to political interference since the First World War. Some might think that even Mr. Clarence Hatry and the great collapse of 1929 had as much to do with the reorganisation of Sheffield steel as anyone or anything since.

This industry has been variously described as a commanding height and as one of the most vulnerable industries in the country. We are seeing it in the latter guise at the moment. We would be unwise to lose our nerve about its future merely because of the recession, which is afflicting so many other industries as well.

I take a much rosier view than my hon. Friend the Member for Flint, West (Sir A. Meyer) about the future, but that does not mean that everything is perfect. There are obviously areas that we must look at seriously.

The Secretary of State for Industry and I made consecutive maiden speeches on this matter in 1964. I had just come from the British Iron and Steel Federation—before nationalisation, of course—and he had come from experience of the industry in his area. Many things said today are similar to what we said then.

I cannot recall a period when this industry has not faced terrible problems. No one can gainsay the fact that it has had colossal investment. It is right that it should have received that investment, but that in itself has not solved the problem.

I remember the old complaints about getting rid of the open-hearth capacity and introducing the oxygen-making converters. We were told how the whole industry would be transformed. When listening to the hon. Member for Consett (Mr. Watkins) I remembered how his own works were threatened by failure. The hon. Gentleman is now able to tell us that they are highly successful. There is no one cure-all to which we can all turn to make everything right. We must face the fact that there is a major glut throughout the development world. That is largely because of what happened in 1973.

The increase of the OPEC prices in 1973 reduced the circulation of money in the Western world in a way that we have not been able to overcome and repair since. That has had its effect on demand. Reduced demand has led to over-capacity in steel, chemicals and a whole range of other products. There is no quick answer to solving the difficulty. Nevertheless, we must all try to do it as I know others are.

We must recognise that the glut has led to a price war. Throughout the world there is a fight to retain the share of the market at all costs. Of course we shall get comments about dumping. Of course some countries will think that they are being unfairly treated.

Since nationalisation the price of steel has been an irresistible target for politicians. That tendency has, to some extent, landed us in the situation in which we now find ourselves. As a result of the constant intervention in steel pricing by all Governments we have been unable to take advantage of shortage when it was there and so make money. Therefore, we have not been able to build up any reserves to meet the present situation. All Governments have been responsible. Poli- ticians seem to find it irresistible to interfere with the industry. That leads us to discuss these matters and to go into considerable detail. At the same time we have to balance that approach by being proper guardians of the taxpayers' money.

There is a level of intervention that recently made itself especially obvious to me in the sale of the old steel plants. Reference to the issue has already caused ribald laughter from some Labour Members, but it is not a laughing matter. The livelihoods of many are tied up with the plants. Oddly enough, even in this period of recession and depression the old plants can offer an attractive bargain to would-be purchasers. I know that the sale of the plants is laughed at by many, but if it is so funny why is there such resistance to their being sold?

My interest in the sale of the plants began when the Corporation's industry division took full-page advertisements in a number of national newspapers in March. The advertisements were asking investors to go into the areas where closures were taking place to set up new operations. I asked the chairman of the Corporation if that would include the sale of complete steelworks. I was delighted to receive an answer on 30th March. It was the answer that I had hoped to get. The chairman wrote: BSC would of course be interested to hear if there were purchasers for complete steel works. This is something that we would be ready to discuss either directly or, perhaps better, through BISPA. That is the British Iron and Steel Producers Association. The letter continued: I should, however, point out that the equipment in each case is very old-fashioned and would not be suitable for modern economic operation. Indeed, with steel prices at their present levels, I doubt whether even the hardiest investors would be able to work up an attractive proposition. That is clearly a letter from someone who has excess old capacity. It is clear that he does not want it. He is prepared to discuss possible sales with those who might wish to buy the plants. It is because he is an honest business man that he enters the caveat at the end of the letter that he cannot see how investors could be found to buy the plants.

There were others in the industry, including those in the unions and elsewhere, as well as some hon. Members, who were asking the Corporation of its intentions. I was delighted to receive the letter that I have quoted from the chairman, and there was a measure of excitement. There was, perhaps, some over-excitement. Steel companies from abroad were being named as possible purchasers. It is no secret that Korff Stahl was mentioned as a possible buyer for the Glengarnock works. The rather elliptic way in which we arrive at that company can be worked out. It was mentioned because it is responsible for the direct reduction plant at Hunterston. It was a question not so much of finding purchasers as discovering whether the plants were available for sale. Surely the letter to which I have referred is an unequivocal answer from the chairman that he was prepared to consider such sales seriously.

Without wishing to weary the House, I should mention that I raised the matter during Question Time. I subsequently wrote again to Sir Charles Villiers because it appeared from a comment that he had made in Germany that the plants could be sold only if they were to produce something other than bulk steel. I was surprised by the comment. If the plants had been available to make jam tarts, he would not have made those comments about steel prices and the difficulty of working up an interest. It is clear that in his mind he had seen the plants going again into steelmaking.

I received a letter from Sir Charles on 24th April in response to my letter. I was surprised to find that he wrote: At this time of continuing over-capacity in steel BSC must safeguard its commercial interests in any deal involving the sale of any of its assets". That represents a substantial change of ground. The original proposition from the chairman was that he was prepared to consider selling the plants. He entered the caveat that there were problems because they were old capacity plants and might not be attractive propositions. That was perfectly fair. Between his first letter of 30th March and the letter of 24th April it seems that the Department had told hi it seems that the Department had told him that there was no way in which he would be allowed to dispose of plants that could compete with the Corporation.

That raises a number of fundamental questions, many of which were asked by my right hon. Friend the Member for Stafford and Stone (Mr. Fraser). The first question is "Why not?" Even if the older plants, which are still capable of making money, are to take business, they may be taking business in areas other than those covered by the Corporation. I do not believe that the protected market makes for success and efficiency. I am worried when I hear the hon. Member for Newport (Mr. Hughes) and others talking about such things as import controls. We shall not make a healthy industry by protecting it. By the sale of the older plants we have an opportunity of retaining employment. If they can make money, so much the better. If they are profitable, that will make the Corporation look to its laurels even more.

There is the idea that we have to sacrifice the older plants, even if they are capable of making a profit, on the altar of cartelised monopoly. That idea has led the industry to suffer world-wide for so long and is especially unfortunate. If the Corporation, with its new gleaming giants, is afraid of what I am told are decrepit, clapped-out old open-hearth furnaces, there is something funny about the large new plants. As we well know, the older plants have been written off. I was told that they had been written off and not written down. They are labour-intensive. At present that is a good thing, bearing in mind our high unemployment. They are comparatively small, and that would enable them to get into the corners of the market that the giants cannot touch.

I am sad to tell that unhappy story. I hope that when the Minister replies he will come clean and tell us that the plants are not available for the making of bulk steel as they would jeopardise the future of the Corporation. I think that someone had better say that, because I understand that today there is a demonstration by Bilston workers, and other people in the country are worried. They want to know the truth about the sale of the old plants. It is not enough to tell us, and to laugh when it is mentioned, that all the equipment is clapped out. We know that those plants still have a lifetime ahead of them.

It is not only the old plants about which I am concerned. There is one shining, glowing example of a new plant about which we need further illumination as to the future. I am talking about the direct reduction plant at Hunterston, to which I referred earlier. All those who are concerned with the industry know that there are a number of ways of arriving at the product about which we are talking—steel. We know that we have to start with iron. We know that the normal route with iron is the blast furnace. We also know that blast furnaces are getting bigger. But there is another route—the direct reduction of pelletised ore, which produces a sponge iron, for which considerable quantities of gas reforming agent have to be used.

For a number of reasons, the British Steel Corporation has been comparatively cautious in approaching this method of production. But, as a result of a great deal of pressure by Labour Members—one in particular, who is not present now—the BSC decided to develop Hunterston as the first site for direct reduction in this country. Hunterston is a very beautiful area at the mouth of the Clyde—Hunter's Quay. It has already got a nuclear power station. Now the ironmaking plant is being developed, and it will be completed this year.

The question to which we must have an answer, because we have been talking about old plants so far, is: is the new direct reduction ironmaking plant at Hunterston to go into commercial production when it comes on stream, or is it, as I understand, to go straight unto mothballs? If so, the livelihoods of many people will be affected. Therefore, an answer is required. I hope that the Minister will be able to answer the specific question whether the Hunterston direct reduction plant is to go into commercial production or into mothballs. That, again, could raise issues about under-utilised capacity.

In drawing my remarks to a close, I should like to make one positive suggestion. The hon. Member for Newport (Mr. Hughes), who has now left the Chamber, and his hon. Friend the Member for Rother Valley (Mr. Hardy) talked about special steels, the need for independence and so on. Even in this time of glut, there are steel shortages. A few days ago I was talking to someone who was complaining of shortages of special steel. One reason is that the marketing of products by the BSC leaves something to be desired.

I should like to see a wider extension of sophisticated service centres. We know the service centre. We are all familiar with the steel stockholder. Therefore, let us start from that point. That is up-rated to the point of the service centre which holds stocks of finished product which people can buy. But, because many service centres do not have proper laboratories, they cannot cater for the market to which I have referred. For example, age hardened steel reaches its peak or its limit in 45 days. Therefore, we need people with laboratory experience who can reclaim what is left after that period has been reached. If we had proper service centres in the narrow market to which I have referred, we could have an automatic advantage over the importer who has to bring his product a long way and in the process uses up many of those days. Therefore, an improved service centre approach could make a significant difference to the selling of our products.

Indeed, I go further than that. Reference has been made to exports and to third countries. I think that before going out and building a big steel mill in Qatar, or wherever it is, it might be a sensible idea to put down a service centre and to start shipping some of our products to test the market for the customer before he buys the plant.

Reference was made to the fear of third countries. It is said that we should be swamped with cheap steel from South-East Asia and so on. I do not fear it. It is no argument to say that we must stop bulk steelmaking. I think that, as these countries become industrialised and find, as they often do, that their steel is of a rotten quality—I am not saying that against them, but I think that in the early days they may have a lot of problems—it will stimulate an interest in steel-based products and we shall be able to export more. I do not think that people in various parts of the world making their own steel will lead to the door being shut in our faces. I think that people who are concerned with what steel can do will be stimulated to find export possibilities for our products.

I said at the beginning of my speech that we must not lose our nerve. I am sure that is right. I am in favour of looking thoroughly at all the options that are open and of discussing the matter as we go along. Here investment will not solve our problems. We have pumped thousands of millions of pounds into the steel industry over the years. Regrettably, we must face the fact that, in common with many of our traditional industries which are declining, the steel industry is also declining. Some of those industries may decline and come up again. I think that steel is one of them.

It is a fact that we have not made as much liquid steel as we did in the days before nationalisation. One has only to look at the graph to see that it is going down all the time. When I left the Iron and Steel Federation the figure was about 26 million tonnes. It is now about 17 million tonnes. That is one example of a traditional industry in decline. Shipbuilding is another. But that does not mean that we should lose our nerve. Neither does it mean that we should scrap all our expertise and technological know-how, because we can build on it. The slump will not last for ever. It will end one day.

The steel industry is central to our economic future. Therefore, as one who has worked in, is again associated with and knows many of the people in it, I believe that it is for us in this House, even if we may disagree as to how accountability works and whether we should examine it every year, to say to people in all parts of the industry—even in the older parts where morale is at a desperately low level—that we in Parliament have faith in the future.

6.38 p.m.

Photo of Dr Colin Phipps Dr Colin Phipps , Dudley West

No Labour Member will deny investment to the British Steel Corporation, but I think that it is pertinent to ask two questions about that investment. First, where will the investment be made? Secondly, how will the investment be made?

The question where the investment is to be made affects me personally, in my constituency, and several of my right hon. and hon. Friends. The investment will obviously not be made in Shotton, Shelton, Bilston and Cookley, in my constituency. In fact, Dudley, West has two steelworks and a number of steel finishing plants, and there are two steelworks immediately outside its borders, both of which employ large numbers of my constituents. Those steelworks provide jobs not only directly but indirectly. The whole infrastructure of the area of the Black Country which I represent is built around steel—everything from the provision of scrap to various kinds of steel finishing and, indeed, the manufacture of a number of special steels.

In considering what is happening in the West Midlands, I think that it is necessary to look at the broader regional policy. As it happens, the Secretary of State is also responsible for regional policy. The regional policy which is now being developed seems to point to the West Midlands being phased out as a steelmaking and finishing area.

We have heard about the five cathedrals by the sea. That is where the investment is going. The hon. Member for Flint, West (Sir A. Meyer) said that to revitalise Shotton no more than £20 million is required. I understand from my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) that no more than £12 million is required to revitalise Shelton. The Bilston action committee, which has been here today, has put out a document which shows that £13 million is required to revitalise the Bilston works. To revitalise the Cookley works, which is an electrical steelmaking plant, requires even less. For less than £50 million we could fully modernise these excellent steel companies which employ large numbers of people. That sum is much less than that which it is proposed to put into any one of the cathedrals by the sea.

Why are we facing this gradual dismemberment and closing down of the traditional steelmaking industry in the West Midlands? The reason lies within the overall regional policy which has been followed by successive Governments. I have culled a quotation from the diaries of the late Dick Crossman which seems to be apposite to what has been going on for the last 15 years. I shall quote from the diary entry for Monday 13th December, 1965. It refers to the then Labour Government's economic development committee, of which Dick Crossman was a member, and to a discussion on the change from tax allowances for industry to the regional industrial grant system. This was part of the early change of regional policy which led to the introduction of the development areas. Dick Crossman said: So I didn't oppose the switch from tax allowances to grants; but I did point out the danger of this one-sided approach, which might really hold up development in important growth areas such as the West Midlands. My plea was listened to in silence and then I was courteously told that none of my ideas could be written into this Bill without upsetting the political applecart.In the Labour Government there is of course a tremendous over-representation of the old development areas, the North-East, Scotland and Wales; and all those MPs are determined to see that their parts of the country get a bigger slice of the cake and that we don't get anything in the West Midlands or in London. I don't blame them for it; but from a national point of view, if our resources are limited and we spend them all on developing the less essential and rather backward parts of the country, we may well find that we haven't allocated enough to extending the growth areas, which is vital for the Government's success. All my colleagues understood the force of my arguments. What depressed me was that no one was willing to apply them in practical politics. How depressed Dick Crossman might be today I shudder to think. The regional policy of successive Governments has totally failed to do what it set out to do. It has not created new jobs in the development areas. It has propped up jobs in those areas and ensured that jobs are lost in the growth areas.

This has been a false economy. I calculate that if the net effect has been a retardation in growth of 0·25 per cent. over the last 15 years our GNP is now nearly 4 per cent. below what it might have been. That is almost exactly the same as that achieved by North Sea oil. We could have had North Sea oil all this time.

I accept that enormous social problems are associated with allowing growth to take place in the growth areas, but had we put all this effort and money to help people to retrain and move from the old development areas to the growth areas we might now be living in a richer and better economy.

Exactly the same is happening with the BSC. We are spending vast amounts of money on large steelmaking capacity, generally close to the sea and in the development areas. Anyone making a basic commercial or social decision about how best to invest would decide to revitalise all these small efficient plants, which are close to their markets, and to close down one of the cathedrals instead.

Not only would that be cheaper than the current investment policy; it would save more jobs. It would be socially more efficient than the decision that has been taken. Not only is this a silly commercial and social decision; it is a bad decision, in terms of what the country requires from its steel industry. That has been pointed out already by a number of hon. Members.

I shall describe an example about which I know a great deal. It concerns the development of steelmaking capacity in this country directed at the needs of the North Sea oil industry. All the pipe that is used in the North Sea must bear the American Petroleum Institute specification. This covers the large pipes, which are used for pipelines, the casings, which are used for the drilling of wells and the drill pipes and collars, which are used in the drilling of the hole. Vast quantities of these have been used in the North Sea. None has been produced here.

I have raised this matter on many occasions. The first time was over four years ago. When I asked why the BSC would not invest in these types of pipe I was told that it was because it involved work on too small a scale. That is at the core of the Corporation's problem. All the time it looks at the huge scale. It does not look at the small scale.

That small-scale market is now worth over £500 million. If that is too small for British Steel I wonder what it is aiming at. We have vast steelworks, which can work profitably only at 92 per cent. capacity, yet the Corporation is closing down works which employ between 5,000 and 6,000 people in the vicinity of my constituency. That labour force is highly skilled and is certainly able to make the special steels and equipment that are required in the North Sea.

The whole approach is nonsense. It dates back to the 1969 Finniston plan. It is about time that that plan was buried completely. The future of steelmaking in the West Midlands is finished. The Corporation has decided not to continue in the West Midlands. That has not been said by Ministers or the Corporation, but steel works and plants in the West Midlands are being picked off one by one.

We need a definitive statement from the Front Bench or the Corporation about the intentions. Only then shall we be able to turn the full force of the work forces and Parliament on to the Ministry and the BSC. Only then shall we be able to say "Here you have a vital resource. You have men with skills, plant and equipment. The country is importing 47 per cent. of its steel needs, often because we do not make the kind or quality of steel that is used in this country. We are told that the scale is too small, but here we have lots of supposedly small-scale plants which are due to be closed down. For goodness sake, let us turn them into small-scale plants producing what we actually need for the benefit of everybody."

Surely it is time that we sank one of the cathedrals and kept afloat these vital small plants, which have always provided us locally with what we need and which can do so in the future if given the chance.

6.50 p.m.

Photo of Mr Dafydd Elis Thomas Mr Dafydd Elis Thomas , Merioneth

The only point on which I agree with the hon. Member for Dudley, West (Dr. Phipps) in his analysis of regional policy is that it has been ineffective. It is desirable that regional policy should spread job creation and employment throughout the whole of Britain, but particularly into the areas that in the past have relied upon a narrow range of jobs. My party supports the replacement of jobs in the older heavy industries with jobs in manufacturing industry through a far more aggressive regional policy.

However, we wholeheartedly support the Bill. I support much of what was said by the hon. Member for Newport (Mr. Hughes), who highlighted the impact of the continuing steel crisis on the Welsh economy. Before the recent major closures at Ebbw Vale and East Moors more than 56,000 of the BSC's total work force of 208,000 were working in Wales. Steel industry redundancies have therefore had a disproportionate social and economic effect on Wales where 27 per cent. of the Corporation's total work force was concentrated.

With the steel work force concentrated in Wales in that way, unemployment in the Principality increased from 34,000 in 1974 to a peak of 90,000 last winter. There has been a decline in other basic industries. Between 1948 and 1971 the number of men employed in the coal industry fell from 115,000 to 41,000 as a result of the closure of 171 NCB mines.

In the 10-year period up to 1975 there was a drop of 100,000 in the total number of men employed in Wales. With the closure of steelmaking at Ebbw Vale and East Moors we are witnessing a further massive run-down of another of our basic industries.

One factor that has made the steel industry in Wales particularly vulnerable has been the lack of product balance and the concentration on steel coil. In 1974, 64 per cent. of all steel produced in Wales was coil, compared with 27 per cent. for the United Kingdom and 30 per cent. for the EEC. The Government and the Corporation are continuing this imbalance. In the past we have put this point to the Government and to Sir Charles Villiers. According to the European Coal and Steel Community it is planned that 67 per cent. of Welsh steel capacity will still be given over to coil compared with 29 per cent. in the United Kingdom and 32 per cent. in the EEC. We have been pressing, and we shall continue to press, for this product imbalance to be eradicated in the Welsh division.

We are concerned that, because of this product imbalance, the proportion of the BSC's losses will be higher in Wales than in other parts of the country. We derive no satisfaction from the fact that Wales, with 30 per cent. of the steelmaking capacity, incurred 40 per cent. of the £200 million loss in the first half of 1977–78. The losses, we believe, are due to the imbalance in the industry's structure in Wales.

We want to guarantee a long-term future for existing steel-making jobs. It is in this context that we have been deeply distressed by the Government's decision not to go ahead with major new investment. There has been this massive cut-back in the planned £835 million investment at Port Talbot. We have been told by the BSC, as we were told by the Secretary of State when he announced postponement of the Port Talbot investment, that the Corporation is to keep under review on a step-by-step basis the need for further expenditure and for the investment at Port Talbot.

We believe that the failure to invest in Port Talbot means the loss of between 7,000 and 8,000 jobs in the 1980s. It has a bearing, too, on the achievement of international output levels of 500 tonnes per man year. The decision not to invest in Port Talbot has implications for the tinplate industry in the area. There are deposits of coking coal at Margam, and that combined with the port and rail facilities and the pool of skilled labour, makes Port Talbot one of the most suitable sites in Western Europe for steel making investment. The medium and long-term viability of the Welsh steel industry in the 1980s and 1990s will depend upon investment in Port Talbot.

We have had no indication from the Corporation of when it intends to undertake further investment to upgrade quality by installing continuous casting facilities. On page 13 of the Corporation's document we are told that the financial evaluation of investment in continuous casting is being undertaken, but we want to know soon whether the Corporation will undertake that investment at Port Talbot.

I turn now from the position at Clwyd. I endorse what was said by the hon. Member for Flint, West (Sir A. Meyer) about the activity over the years of the hon. Member for Flint, East (Mr. Jones) in attempting to retain steelmaking on Deeside. However, I cannot understand the logic of the hon. Member for Flint, West. At one time he voted for a Conservative strategy that would have closed Shotton—although we are told that he had some private assurances at the time, whatever they were worth—and now he is apparently arguing in favour of maintaining steelmaking at Shotton. I do not want to go into the social arguments about the number of jobs that would be lost in Clwyd and on Deeside with the end of steelmaking there. The total affected would be over 7,800. Instead, I want to take issue with the Select Committee over what it said about Shotton in its First Report. It failed to appreciate what Shotton is now doing and the sort of future that Shotton could have.

It galls me, as it galls members of my union in the area, that the Select Committee, while having time to go to Japan, the United States of America, Germany, Belgium, Italy and France, did not have time to visit Shotton, but made recommendations in paragraph 146 about the future of the plant without apparently understanding what was going on there. It told us in paragraph 146 that: Your committee believe that open hearth steelmaking should be phased out in favour of oxygen steelmaking which has lower overall costs. They therefore accept that Shotton should be developed as a centre for cold rolling and coated steels. It went on to talk about the specialised problem caused by the closure of obsolete plant units but it believed that the establishment of alternative employment is in the best long-term interests of the local community. Then it used the phrase that I am unable to understand, although I have studied it carefully. It recommended that the Secretary of State should take into account the need for the maximum productive efficiency in the Corporation when he comes to review the future of iron and steel-making at Shotton. That sentence can be taken at least three different ways. The way that I would want to take it, in answering the attitude of the Select Committee, is to press on the Corporation the investment that has already taken place in Shotton.

I endorse the arguments put forward by the hon. Member for Flint, West on behalf of the steelworks at Shotton, the unions and the county council, for a limited investment in the modernisation of the open-hearth furnaces and the creation of three new tandem furnaces.

At present we have at Shotton an integrated steelworks producing hot rolled coil, and a high proportion of what is produced is processed for coated steel products. We have the new coating complex which has been completed at a cost of £47 million and this has increased the coated steel capacity at Shotton to a maximum capacity of 20,000 tonnes a week.

We have the new cold mill—an investment of £20 million—which was commissioned in 1975. This mill, along with the existing cold mill, gives a total capacity of 35,000 tonnes a week. The present hot strip mill at Shotton, which was modernised in 1962 to a standard comparable with strip mills at Llanwern and Ravenscraig, which were commissioned at the same time, has the capacity to supply the potential of the cold mill capacity there.

A slab mill will be completed in the summer of 1978, the two blast furnaces were modernised in 1969–70, and the coke ovens were brought up to modern design and commissioned in 1970.

When the Select Committee talked about the position of obsolete plant units in the same paragraph as it talked about Shotton, it obviously did not understand the extent of investment and modernisation that had already taken place at Shotton and the potential for maintaining steelmaking there.

Photo of Mr Roy Hughes Mr Roy Hughes , Newport (Monmouthshire/Gwent)

In this case there is another major factor which the hon. Member has left out—the almost ideal state of industrial relations at Shotton. Surely that should be part of his calculations.

Photo of Mr Dafydd Elis Thomas Mr Dafydd Elis Thomas , Merioneth

I am grateful to the hon. Member for his intervention, and certainly I would endorse what he has said about industrial relations and the quality of management and decision-making at Shotton. That is an important and essential factor when one talks about the viability of maintaining the unit.

Photo of Mr Robert Cant Mr Robert Cant , Stoke-on-Trent Central

I speak on behalf of Shelton, which is the other plant under discussion. The workers there are ashamed that in 1894 they had the only strike in their history.

Photo of Mr Dafydd Elis Thomas Mr Dafydd Elis Thomas , Merioneth

This appears to bear out the point that we have always made—that within BSC there is a quality of industrial relations that is achieved in the smaller units.

The hon. Member for Flint, West quoted the submissions made by the steelworkers at Shotton, the unions and the county council, of the capital cost of £25 million for the three tandem furnaces. We put this to Sir Charles Villiers when we met him last month, and I am a little concerned at his response. He seemed to indicate that no undertaking had been given by the BSC of any investment on that sort of scale. However, it is my understanding—and I would be grateful to the Minister if he would confirm this when he replies—that investment of this order can be undertaken by BSC on its own volition without approval from the Department. Therefore, the question of investing £25 million on the kind of modernisation that we want to see is a decision that could be taken by the Corporation itself.

All that we have on the medium-term future of steel making at Shotton is the statement that Sir Charles Villiers made on 24th March 1977, when he said: The open hearths at Shotton will be brought up and kept in prime condition, and we shall want Shotton's steel make for many years to come. The 'Shotton option' remains open for technological progress, new commercial requirements and other potential development of hot rolled coil in the second half of the eighties. If that means anything today, it means that in the context of the present cutback in major capital investment in the Corporation, investment in modernisation on a limited medium scale at Shotton and at other similar plants is an investment which should be made, and made quickly.

There are two other issues that I wish to raise. First, there is the question of pricing. This is relevant to our debate, because it is raised in the EEC document. On my visits to the Community I have talked to people in the European Coal and Steel Community. In our studies of this matter in the steel policy group in my party, we have been deeply concerned about the fact that the Government seems rather unwilling to stand up for the English, Welsh and Scottish steel industries within the EEC. We take the view that the Community, although it has now produced its Davignon plan, has been unwilling to take tough action, and we feel very strongly that the interests of steelworkers in Wales are being sacrificed on the altar of Common Market ideology of the free market, the so-called non-distortion of competition and transparency of pricing.

We believe that the United States—that great bastion of capitalism—has taken a far firmer line in advancing the interests of its steel industry and steelworkers than either the EEC or the United Kingdom. The United States did in fact produce a trigger price system covering steel imports, based on full production costs, including profits, of the most effective foreign producers. The Japanese have been forced to provide data to the United States to do this. The United States has taken more aggressive action of the kind being advocated by the hon. Member for Newport in having a pricing mechanism which makes home production really competitive. Although I agree with the hon. Member that we may have to consider moving towards selective import controls in the not-too-distant future, a tougher internal pricing policy would ensure fair competition.

One of the arguments so often advanced by the official Opposition completely misses the point. They talk about the essential contribution of the free market to efficiency and competition. But they miss one basic point: if there is unfair competition within the free market, for whatever reason, that cuts against the whole basis of the argument. Steel dumping into the EEC and the United Kingdom gives an unfair advantage which could be overcome if we had a more effective pricing policy.

Secondly, one of the things that concerns me most is that there seems to have been an over-reaction by the BSC to the experience of recession and the inaccurate forecasting that has taken place. I am not impressed, reading this document, that the British Steel Corporation is still taking planning seriously. I am fed up with hearing chairmen and top executives of nationalised industries talking about a step by step approach, and thinking only of what they are undertaking this week instead of thinking about what they intend to do next year. That is not the kind of approach one should expect from a nationalised industry under a Labour Government.

The fact that the forecasts on one strategic plan were wrong is not an argument against medium or long-term planning. It involves building better information into one's planning models. Planning is a continuous process, and I hope that we shall not see the Corporation failing to undertake detailed medium- and long-term plans which may be updated as a continuing planning process. The fact that the Finniston strategy was wrong and that the 10-year plan was inaccurate is not an argument against planning. It is an argument against that particular plan, because it was overtaken by the turn in international events.

I hope that the Minister will give an assurance that by writing this cheque to the BSC we shall at the same time stress the need for the Corporation to undertake effective medium and long-term planning. The present document issued by the Corporation comes nowhere near the concept of an effective medium or long-term plan.

7.12 p.m.

Photo of Mr David Lambie Mr David Lambie , Ayrshire Central

Before I deal with the Bill, I wish to take up a point made by my hon. Friend the Member for Dudley, West (Dr. Phipps). He complained that the British Steel Corporation was picking on small steelworks in the West Midlands and that that policy was wrong because it was affecting employment and production in that area. I accept that, but that argument should not be widened to embrace the policies of successive Governments in carrying out regional policies to help the north of England, Wales and Scotland, where there is also unemployment. For a number of years the Corporation has been picking off small plants in those areas, too. Therefore, before my hon. Friend starts crying for the steelworkers in the West Midlands, he must remember that at least in that area there are alternative jobs.

Photo of Mr David Lambie Mr David Lambie , Ayrshire Central

There still are alternative jobs, compared with the problems that we face in the regions, whether in the North-East of England, Scotland or South Wales. In my area—the Garnock Valley area—in which we face the closure of the Glengarnock steelworks, we already have an unemployment rate of 12 per cent. or 13 per cent. If the Corporation gets its way and closes that steelworks, the unemployment rate will rise to between 35 per cent. and 40 per cent. There is nowhere in the West Midlands, or in any of the other parts of the Midlands, that can approach the unemployment rate that now obtains in my area, even without the closure of Glengarnock. I suggest to my hon. Friend that the enemies of the West Midlands steelworker are not the steelworkers in Scotland, Wales or the North-East; their enemies are those who are carrying out the policies of the BSC. I appeal to my hon. Friend to unite with me so that we may bring about some change in Government policy to force the Corporation to change its policy on the closing of small steelworks, where-ever they may be.

I welcome the Bill, because in the next three years it will increase the borrowing limits of the Corporation from £4,000 million to £5,500 million. But for this Bill the steel industry throughout Britain would be at the point of collapse. Therefore, I am surprised that the Opposition intend to vote against the Bill. If ever we needed united support for the steel making areas, it is in the vote tonight. If this Bill does not go through Parliament, not only the small plants but the whole of the steel industry will collapse. We shall hand over the British steel industry to our foreign competitors. I hope that the minor opposition parties will support the Government tonight. They have not always supported the Government on steel and similar issues, but I hope that they will give their support tonight, because the future of the United Kingdom steel-making industry depends on this legislation getting through.

My right hon. Friend the Secretary of State for Industry said that the BSC's course could not be changed quickly. My only criticism of the Bill is that the Corporation has not gone far enough, and that we have changed course too quickly. Since 1974 we have gone through a whole series of negotiations involving the Corporation, the TUC, the STUC, the Government and those Members of Parliament with constituency interests. We also underwent a series of negotiations and reviews under Lord Beswick, and I believe that we reached a good conclusion. We aimed at guaranteeing the future of the United Kingdom steel industry. At the same time, we aimed at modernising and retaining plants which could become viable after slightly increased investment. I believe that we should have had faith in the future of the British steel industry and carried out the proposals put forward by Lord Beswick, and that we should have supplied the money to finance them.

I am very much involved in the future of Glengarnock steelworks. The Secretary of State said that in areas of closure or redundancy the Government are actively examining the question of attracting alternative industry. I hope that the Minister will spell out what the Government have done in North and Central Ayrshire to attract alternative industry. I hope that he will make clear what other industry will be brought in if the Corporation is allowed to close the Glengarnock steelworks.

There have been many rumours about the importation into my area of a Jap- anese earth-moving firm. There have also been rumours that American chemical firms are coming to Scotland. If one reads the newspapers, one gains the strong impression that all these outside firms are about to come into the Garnock Valley. Unfortunately, the people who live in the Garnock Valley have never seen any sign of those firms, and our unemployment rate is still 12 to 13 per cent. Therefore, I hope that the Minister will spell out to my constituents in the Garnock Valley what industry the Government propose to attract to the area if they allow the Corporation to close the steelworks.

I am always an optimist—I suppose that politicians are born optimists—and I still believe that the Corporation will put up the investment of £7 million required for the reheating furnaces at Glengarnock. The open hearth furnaces can then be phased out. Such furnaces cannot be retained if we hope to retain a viable steel industry. We can phase out the open hearth furnaces so long as we put in the reheating furnaces, as was guaranteed under the Beswick plan. If we can obtain that investment of £7 million, we shall be able to continue to make steel in the Garnock Valley. The Government will not then need to go to Japan or the United States to attract industry into my area. The industries are already there, and we want to sustain them in order to retain the Garnock Valley as a steel-making area.

Although Hunterston is not in my constituency, I have always shown great interest in the steel developments in that area. The future of Glengarnock steel works has been linked to the development of steel-making capacity at Hunterston. We now know that in the plans prepared by the Corporation, accepted by the Government and spelt out in the Bill, investment in the electric are furnace at Hunterston is to be deferred.

What shall we get? A total of £150 million of investment will be mothballed at Hunterston. We have built an iron ore terminal and stockyards. We have brought in a new railway system, and we are completing two direct reduction plants.

Bob Scholey and Sir Charles Villiers told me at a meeting in the House that they would mothball all the site. Those are the men who are running the British steel industry. When I hear about getting rid of redundant workers, I wish that the Government would start with redundancies at the very top. If we got rid of some of the men at the top, we might not need to get rid of so many men at the bottom.

What has been wrong in the British steel industry is that we have not had men of capacity running it. Some of my hon. Friends were not happy with Sir Monty Finniston. I was one of those who, at the time, made representations to my right hon. Friend the Secretary of State that Sir Monty Finniston should stay, because at least he knew the position at Hunterston. His reputation was based on Hunterston. Unfortunately, the man who is really running the British Steel Corporation now—the chief executive and deputy chairman—was always against Hunterston. He now has the power to do what he could not do as the boy under Sir Monty Finniston.

I hope that the Government will put pressure on the management of the BSC to examine the continuation of the investment at Hunterston, because within the £5,500 million that we are voting on tonight there is still a certain amount of leeway to allow schemes such as Hunterston to go ahead.

Photo of Mr Hamish Watt Mr Hamish Watt , Banffshire

Does the hon. Gentleman agree that perhaps the best insurance policy that any steelworker in the West of Scotland can have is to vote SNP and have a strong SNP presence there, so that we can at least frighten the Government and ensure that they will go ahead with production at Hunterston, or even keep the works going at Glengarnock?

Photo of Mr David Lambie Mr David Lambie , Ayrshire Central

I do not mind the hon. Gentleman's coming from the North-East of Scotland to give the industrial workers in the West of Scotland some political advice, but I would rather he came to North Ayrshire and gave the advice to his own political friends in the SNP. As I have told his friends very often, among those who gave evidence at the Hunterston inquiry against the industrial development of the Hunterston area were the then prospective SNP candidate and the constituency parties of the SNP in North Ayrshire and in Kilmarnock and Central Ayrshire. If the hon. Gentleman has any advice to give people on how they should vote, luckily the people in Central Ayrshire know how to vote, as they showed in the regional elections. I am glad of that.

Photo of Gerald Kaufman Gerald Kaufman Minister of State (Department of Industry)

I may be able to assist my hon. Friend, if he needs any assistance, in his reply to the hon. Member for Banff (Mr. Watt). I draw the hon. Gentleman's attention to the intervention of the hon. Member for Perth and East Perthshire (Mr. Crawford) when my right hon. Friend the Secretary of State made his statement on 22nd March. The hon. Member for Perth and East Perthshire, speaking for the Scottish National Party, said: Is the right hon. Gentleman further aware that the Labour Government are presiding over the destruction of the steel industry in Scotland and that the voters of Garscadden will have a chance to say what they think about this on 13th April".—[Official Report, 22nd March 1978; Vol. 946, c. 1519.]

Photo of Mr David Lambie Mr David Lambie , Ayrshire Central

I am grateful to my hon. friend for that intervention. Not only did the voters of Garscadden take the opportunity, the voters in the regional elections in Strathclyde and throughout the length and breadth of Scotland took the opportunity and showed their faith in Labour national and local representation.

I should be very grateful if the hon. Member for Banff (Mr. Watt) and his hon. Friends would come down to North Ayrshire and convert their Tory friends who, unfortunately—or perhaps it is fortunate—are in the SNP at present, because they certainly need education on what should be the future of the steel industry in the West of Scotland and the development at Hunterston.

I was making the point that the BSC is mothballing £150 million of investment. The Industrial Commissioner of the EEC, Viscount Davignon, has already issued his scheme, which clearly states that there should be no increase in the overall capacity of the steel industry in the Common Market. But he also states that if an increase has to come about it must come in the electric arc sector. In fact, he is carrying out a policy contrary to that being carried out by the BSC. It is increasing capacity in the overall sector and reducing capacity by cutting out electric arc investment which was committed under Beswick, instead of going ahead as the Industrial Commissioner recommends.

As a convinced Socialist who believes in nationalisation, I have now reached a position at which I must make up my mind. If the BSC is not given the money by the Government to invest in Glengarnock in the reheating furnace or to continue its investment in Hunterston with the electric arc furnace, I should like to see the plant at Glengarnock or the site at Hunterston put up for auction. If a nationalised industry in Britain cannot find the money to continue the investment at this unique site at Hunterston, if someone else can find the money, I am prepared to say "Allow them in"

Photo of Mr David Lambie Mr David Lambie , Ayrshire Central

Constituency Members are in difficulty. I cannot see myself supporting policies that might mean an unemployment rate of between 35 per cent. and 40 per cent. in my area when I have a site unique in Western Europe waiting to be developed and not being developed because of the wrong policies of the BSC.

Photo of Mr David Lambie Mr David Lambie , Ayrshire Central

I am not giving way on this matter. I have given enough evidence to the Tories without helping the hon. Gentleman.

I am prepared at this stage to tell private interests or foreign interests that if they want to come in to develop Hunterston they have my full support as a Labour Member and supporter of this Government. If they want to develop it, they should be allowed to come in. If the BSC cannot find the money, we can find it from these other sources.

My hon. Friend who winds up the debate must provide answers on this matter and answers to the various questions that I have put. I welcome the Bill, because it will secure the future of the United Kingdom steel industry. But for the Bill there would be a complete collapse and breakdown of that industry.

7.28 p.m.

Photo of Mr Richard Page Mr Richard Page , Workington

I wish to make two quick points, the first being of a general nature and the second of constituency interest, as I am one of the few Conservative Members with a steel works in their area [HON. MEMBERS: "Not for long."] We all say that sort of thing. Let us wait and see. I should welcome a General Election today to prove the point. I am fairly confident of what the result would be and maybe there would not be so many Labour Members coming back.

The amendment made to the Bill is to provide another £1½ billion over three years, and I have no doubt that all parties recognise the extreme importance of the steel industry to the United Kingdom. The BSC needs the money and it does not matter whether it gets it in a lump or in three stages, with reviews and investigations. But, equally, I believe that it will need a great deal more money than this, as BSC will use up this money and within the three years will be in exactly the same position again, near the top of the borrowing limit and probably calculating whether it can finance its plant renewals, replacements and maintenance out of revenue, leave alone considering any forms of new investment.

In saying this, I bear in mind that the current rate of renewal and repairs is costing some £400 million a year and that the Corporation in the last four years has managed to obtain only one-sixth of its requirement for its investment capital from its own internal revenue. When one puts that against the 50 per cent. that was planned, it does not give a very optimistic view for the future. Possibly I am being a little pessimistic. I hope that I am. But with the past record, the present world recession, and the series of assumptions in projecting the 1978–79 likely trend of trading results, British Steel has a very long and unenviable slog before being able to attain a viable position.

I cannot see how any corporation which has to operate at 92 per cent. capacity to reach profitability has the slightest chance of achieving it within three years. It is a daunting target to put before management and men, and the House must back the Corporation. It must not lose its nerve. It must put its faith firmly behind the Corporation. But in doing so it must ensure that it does so sensibly and that the Corporation does not embark on wild investment programmes which have very little chance of achieving even a modicum of success.

However, with this rather gloomy outlook ahead, the Corporation is starting. I think, to be a little more realistic on several points. One in particular in the forecast is the assumption of the rate of inflation. It is nice to see that it is being realistic, with a figure of 10 or 11 per cent. because I cannot see that the Chancellor of the Exchequer's 7 per cent. will come into effect. I think that the Corporation has faced reality as I believe that we will indeed be into double figures of inflation next year.

From the British Steel Corporation's point of view, it will also be extremely difficult to calculate the effect of this increasing and growing mood by the EEC towards what is euphemistically called orderly marketing and price stability". which I understand to mean protectionism. I do not say whether that is good or bad, but it will mean a very fine calculation within the Community as to just how much support will have to be given to the various steel industries, particularly in relation to the effect that it will have on the profitability of steel users and consumers within the Community.

It seems, however, that when times of crisis come round certain of our more important industries create and attract vast criticism. I often wonder whether the fault lies within these industries or within their managements, or whether it is because we—and I mean here not just the Government or the Opposition but the establishment "we"—have been slavishly following a "bigger is better" policy for far too long. That does not mean to say that large ownership is wrong—such as nationalisation. I do not want to be drawn into the argument whether nationalisation is a success or a failure. But I believe that the fault in most of our large industries today lies in there being far too many centralised functions and not enough initiative, decision-making and permission being given and being allowed to take place at plant level.

I believe that many companies, while not going wholeheartedly towards Schumaker's "small is beautiful", are now following a decentralisation policy, and I hope and believe that I can detect in the BSC an attempt to shift to some- thing more approaching a private corporate approach—the flexible restructuring of the finances—rather than having a rigid adherence to some specific long-term planning goals.

I give a small but potentially highly damaging example of over-centralisation, over-Government control and over-Government interference concerning the state of the present self-financing productivity deals under negotiation in British Steel. There we have one Government Department with one set of criteria of acceptance while another Government Department has a completely different set. Management sits somewhat in the middle, endeavouring to explain to sections of the work force why some of the provisional agreements in these productivity deals still have not been implemented three months later. It needs little imagination to think of the feelings of the work force having originally reached agreement on these schemes three months ago.

My final point is on a constituency matter. I have been very fortunate in having a steel plant in Workington which is just profitable. That in itself, for British Steel, is an achievement. But it is profitable, and it also has extremely good labour relations, which bears out the point that several other hon. Members have made. It is worth mentioning, too, that in the 1970s the plant faced a very difficult decision. It had been making steel for many years, but it had to make a decision on whether to stop making steel—and I can understand the trauma in the minds of hon. Members when they are suddenly faced with steel-making suddenly stopping in their constituencies. That hard decision was faced in Workington and it was decided to turn to and concentrate more and more on rail and sleeper production.

The plant has done it. It has been a hard period, but it is now working out right. Having gone through the subsequent reorganisation, the works is now in an extremely strong position, able to tackle practically any rail order in the world, provided, of course, that the customer has the money to pay.

The only thing that I am asking on this point is that we should give urgent consideration to refurbishing one last bit of the plant. Money has been put in for the rest, whether by this Government or by the Conservative Government, and while the works can soldier on for a few years with the present coke ovens, it is necessary to finalise the investment and also, incidentally, to improve the environment of the town of Workington.

I was rather disappointed that the Secretary of State for Industry at Question Time a few weeks ago, when I asked him about the future of the coke ovens, said that the application would be reviewed some time next year. A plant should know whether it is to get some investment, whether it be in one, two or three years' time. Surely the corporation or the Government Department can plan that far ahead and come up with the answer. This work has to be done, and the quicker it is done the cheaper it will be. I recall the old saying that it is better to back a winning team, and in the Workington steel plant we have a winning team.

7.38 p.m.

Photo of Mr Stanley Crowther Mr Stanley Crowther , Rotherham

I was pleased to hear the hon. Member for Workington (Mr. Page) stress the importance of the industry and the Bill, because at least one or two of his hon. Friends made it clear in the debate that they could not care less if most of the industry was closed down. I am glad that there is someone on the Conservative Benches who sees the importance of our steel industry.

Photo of Mr Mike Thomas Mr Mike Thomas , Newcastle upon Tyne East

But how will the hon. Member for Workington (Mr. Page) vote?

Photo of Mr Stanley Crowther Mr Stanley Crowther , Rotherham

My hon. Friend will have to ask the hon. Gentleman about that.

Photo of Mr Richard Page Mr Richard Page , Workington

I shall vote for the best means and the best ability for Workington.

Photo of Mr Stanley Crowther Mr Stanley Crowther , Rotherham

When I gave way I really thought that the hon. Gentleman was going to tell us something.

If I were making a constituency speech, I should simply congratulate the British Steel Corporation on its far-sighted decision to install continuous casting at the Templeborough end of the Rotherham works and leave it at that. I could say how wise it is to do what my hon. Friend the Member for Rother Valley (Mr. Hardy) and I have been telling it to do for a long time—back the winners, and so on.

But I want to take a rather broader view than that. I am going to express my disappointment with the document "Prospects for Steel". I make it clear that my criticism is made from the standpoint of one who is a friend and supporter of the nationalised steel industry. I am not criticising the document from the point of view of someone who is against the industry, but the main message in it seems to be that no one really knows what the prospects are. That is what is worrying me about it. I appreciate the reluctance of the BSC to make any forecasts, considering how wrong the forecasts have been in the past—not only the Corporation's forecasts but the forecasts of everyone else in steel throughout the world.

I can understand the BSC's not being anxious to make forecasts, but when it allows itself a margin of error of 30 per cent. in its estimate of liquid steel production—not in the distant future but only four years from now—I wonder how anyone can be doing any planning at all inside it. I certainly wonder on what criteria it has decided that some projects will go ahead and some will not, if it is so much in the dark about what the future holds. The BSC has some fairly considerable research facilities, and I should have thought that it could have produced something rather better than that.

Underlying the whole of the document the basic theme seems to be that we are at the mercy of forces over which we have no control. This is the complete antithesis of positive planning, which is concerned with making things happen, not with merely making contingency arrangements in case they happen. No attempt has been made, I am afraid, to set out any kind of objective in terms of capital investment for the distant future, or in terms of production levels or manpower requirements. How on earth the technical colleges, for example, can put on the necessary courses if they have not the faintest idea what the manpower requirements of the industry will be, I do not know.

Most important of all, there is no suggestion of any arrangements being made to safeguard supplies of raw materials. In this connection, I express the concern that I have previously expressed about the safeguarding of scrap supplies, on which the Rotherham works depend. My anxiety was certainly not alleviated by the Select Committee report, because the information set out on page 75 of the minutes of evidence very starkly confirms the suspicion that many of us had—and still have—that any substantial upturn in demand for steel will find the British steel industry once again totally unprepared.

It has happened time after time since the war, under private enterprise and public ownership. On many occasions I have seen the Rotherham works in grave difficulties and, in fact, on short time in a period of high demand, because there has been a shortage of scrap. It has happened over and over again, and I am afraid that the danger of its happening in the future is even greater, because the competition for scrap supplies will incerase as a result of the development of new electric arc production facilities, despite what my hon. Friend the Member for Central Ayrshire (Mr. Lambie) said about it. Arc smelting is increasing in the world in general; therefore, the demand for scrap will increase. Not only will there be difficulties in securing the right amount; it will be difficult to secure the right quality of scrap at the right price.

Photo of Mr David Lambie Mr David Lambie , Ayrshire Central

The value of the Hunterston site is that when our electric arc furnace is built it will not use scrap. We have the only two direct reduction plants in Britain. They are the most modern in Britain or Europe, and it is these plants that the BSC intends to mothball.

Photo of Mr Stanley Crowther Mr Stanley Crowther , Rotherham

My hon. Friend has anticipated my very next point. I am extremely concerned about this news. It may well be that the pelletised iron which that very plant can produce will be needed in works such as Rotherham in due course, when there is a shortage of scrap.

Photo of Mr Stanley Crowther Mr Stanley Crowther , Rotherham

I am sorry about that.

The point about the danger of scrap shortage was made to the Government by the Select Committee in recommendation 21. I am afraid that the Government's response is altogether too complacent. I hope that they will have another look at that.

The essence of what I am trying to say is that up to now the Corporation and the Government—and certainly the trade unions—have not had sufficient say in the long-term planning of the industry. These bodies should not just be looking at the prospects for steel; they should be making plans for steel. This is where we are going wrong. We are being carried along, we are drifting on the tide, instead of attempting to control events. We need a plan that will set out realisable objectives, both short-term and long-term and will give the men in the industry a sense of direction and security which is, I am afraid, largely missing at present.

Among other things, the plan must be concerned with creating demand. I do not accept the idea that there is nothing that we can do to affect the demand for steel and that we can only wait upon world events. I am sure that the Government, with their enormous economic influence in all kinds of ways, could stimulate demand for steel in the home market on quite a considerable scale. I shall not go through a catalogue of suggestions; I shall mention only one example—the construction industry. It is already using a fair amount of steel, but there is enormous scope for steel being used in that industry as a substitute for timber. I do not know how much work is being done on this, but the use of steel in this way could have a considerable effect.

It must be remembered that there are powerful enemies of our public owned steel industry. There have been signs of it on the Conservative Benches tonight. We all recall, no doubt, that not long ago the hon. Member for Eastbourne (Mr. Gow), under the Ten-Minute Rule, sought leave to introduce a Bill to denationalise the industry. Almost the entire Opposition voted for the motion, including the right hon. Lady the Leader of the Opposition. Therefore, we must presume that that is now official Conservative policy. Conservative Members have kept quiet about it tonight, but some of them let the cat out of the bag when steel was last debated.

There is no doubt that there are enemies of the publicly owned steel industry. Bearing in mind that anything which does not make a profit is intrinsically evil to Conservative Members, I can only assume that if they denationalise the industry they will sell off the profitable bits and necessarily close down the rest.

The hon. Member for Kingston upon Thames (Mr. Lamont) assured us some time ago that if the BSC were a private company no one would lend it any money. If that is so and the Conservatives were to introduce a Bill to denationalise the industry, clearly most of it would have to be closed, because no one would carry out the kind of operation that this House is carrying out tonight in putting up the money to keep the industry in operation.

The weapons which the industry needs to defend itself are not there yet, and I hope that in the future we shall see a clear plan which will show the way ahead for the men in the industry and for the management, and provide the necessary security which is somewhat lacking at the moment.

7.49 p.m.

Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester

I must express some regret at the tenor of the debate so far. It has always seemed to me to be very important that there should be, as far as possible, a bipartisan approach to the British Steel investment programme. It is certainly true that since 1972 or 1973, when the programme was initiated, despite certain policies of Government, whether they involved price control or, more recently, substantial cuts in projects, there has been a large degree of acceptance by both major parties in this Parliament of the need for a viable British Steel Corporation involving a considerable input of public money for the purposes of regeneration, for reinvestment in plant and equipment.

It is very sad that we should now be debating a substantial increase in the borrowing requirements after a traumatic and terrible period in terms of the profitability of the Corporation, when much of the original purpose and the original rapport has been increasingly brought into doubt. It is, nevertheless, important that we should be cautious about sanctioning a Bill such as this. The losses of the British Steel Corporation last year alone and prospectively this year form a considerable proportion of the public sector borrowing requirement. It is right, having taken one measure through the House—the Iron and Steel (Amendment) Act 1976—and having received certain assurances at that time, which were not matched by reality, that we should not allow the same things to happen again without asking for more information and security for the taxpayers whose interest we are here to represent.

However, I join those hon. Members who have welcomed the improvement in the financial information that has been made available, particularly by the British Steel Corporation. The publication "Prospects for Steel" is a welcome advance, to which I pay tribute. But I have always said that we should have, if possible, a full prospectus setting out in more detail the prospective cash flow and market conditions that will affect a major investment or subscription of this kind. I recognise the severe difficulties and uncertainties that are bound to exist in this industry, involving such a significant section of the economy. Nevertheless, more information could have been provided to enable us to make our judgment this evening.

I am disappointed with the tenor of the debate because I genuinely believe that the Conservative amendment is modest, should be regarded as reasonably uncontentious, and does not technically prevent the Government's allowing for a proper review period. I should like to see two Bills introduced. It is wrong that we should be considering a Bill for an overall amount of money, the second portion of which will be triggered off by an order in a couple of years' time, without knowing the circumstances that will force such an order to be introduced. As it is such a considerable sum of money, running into hundreds of millions of pounds, it should be introduced under two separate Bills.

It is difficult to accept the proposition that if the Bill is not given a Second Reading tonight, in some cataclysmic way this will destroy the confidence and budgeting of the British Steel Corporation. In any case, the Bill will not come into operation for another year because of the cash limits. Therefore, there is plenty of time in hand to ensure that if legislation is presented it is passed as good legislation rather than defective legislation.

The background and objectives of the Bill are different from those prevailing at the time of the discussion of the previous Bills, namely, the Iron and Steel Bill 1975 and the Iron and Steel (Amendment) Bill 1976. This Bill has raised a number of fears which were expressed Bills. There is little indication from the during the passage of those previous comments that we have had from the Government Front Bench today that the uncertainties of the future will be any less than those of the past.

In 1976, when we last considered the raising of the borrowing limits of the British Steel Corporation, it was forecasting project expenditure of £4,000 million. It was also expecting to spend £1,000 million on working capital. Of that £5,000 million, £2,000 million was to be met from internal resources. At that time many of us expressed concern and reservation in Committee. It is easy, with the benefit of hindsight, to say "I told you so", but because we are considering a similar Bill it is important to itemise this carefully. I asked the Minister in Committee: Will he try to substantiate that £2,000 million figure,"— —that is, internally generated resources— and has he personally looked at it closely? Is he satisfied that it really is viable and will come onstream? The Minister, in reply, said: In aiming at these profits, the corporation is looking for a strong recovery in its sales volume, and there are good prospects of that. Whenever I travel abroad—I have just come back from one of the British Steel Corporation's markets in South America—I find that the corporation has a good reputation and that there are promising markets for it abroad as well as, of course, in this country.Therefore, the BSC is looking for a strong recovery in its sales volume and for increased operating efficiency."—[Official Report, Standing Committee G, 8th June, 1976; c. 58.] The Minister was careful to state that one had to be circumspect about estimates in the future. It was right that, in answer to a question, he should make a judgment at the time.

The reality since has shown, as is acknowledged in the White Paper "British Steel Corporation: the Road to Viability" that the demand for steel has fallen by 23 per cent. over the last five years instead of showing a continued growth as was then expected. There has been a growth in world capacity for steel manufacture which, coupled with intense competition, has lowered prices and therefore margins for steel producers. The recession generally has reduced demand.

As a Parliament, we were wrong at that time. That is being generous to the Minister. The Minister was wrong then. It is possible that we shall be wrong again in our assumptions, although our assumptions on this occasion are more pessimistic and circumspect than those made at that time.

The second reason for my belief that consideration of the Bill is different on this occasion is that the investment programme has been slashed, if not almost abandoned. There was the closure of the high-cost Beswick plants in 1978 and 1979, the closure of the Clyde ironworks, Hartlepool and East Moors steelworks, and the dropping of the new projects at Port Talbot, Shelton and at Ravenscraig.

This indicates that the programme adopted for most of this decade is taking on a very different shape. Therefore, the original reasons why we as a Parliament sanctioned a substantial amount of public investment in this Corporation are worthy of review. Although we gave broad consent to the passage of the previous Bill and did not unduly hinder its progress, I argue that because of the substantial change in the investment programme this Bill is worthy of much greater consideration.

The new programme, basing its priority on improving quality, on essential replacements and on increasing the working capital, makes one wonder where our steel industry is going from now on. I have always felt that there is a place for the steel industry in this country. I believe that it makes an important contribution, not only directly but indirectly, to our economy and balance of payments.

Photo of Mr John Ellis Mr John Ellis , Brigg and Scunthorpe

I take it that the hon. Gentleman voted for the proposition that the steel industry should be denationalised. It has been said by the Conservative Party that with the present overproduction there are no buyers in the world. Therefore, there will be a bit of profitable steelmaking of specialist steels which have been flogged off to private buyers, and there will be no future for our industry. Is the hon. Member for Chichester (Mr. Nelson) in favour of denationalising the industry?

Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester

As far as I am aware, it was not nationalised in this Parliament, so I personally had no opportunity to vote on the matter. However, it is a fair question. My view is that for the foreseeable future a substantial, if not the major, part of the British Steel Corporation is and will remain a nationalised industry. That will be so under the next Conservative Government. That is the reality. I accept it and welcome it. I am a believer in a mixed economy.

I recognise that there has to be a public sector, but that does not prevent my saying that where things can be independent and independently financed, one should protect the taxpayers' interest by seeking those alternative means of finance. When there are desperate areas of social demand, such as hospitals, how can one justify diverting scarce public resources—our taxpayers' money—into retaining or even buying industries, companies or parts of major conglomerates that are self-supporting and happy to continue in the private sector? This is a wider argument, which is particularly relevant to the National Enterprise Board, but I do not wish to stray that way now.

I regret that there has been a widening of the rift in the bipartisan approach that has been applied to the investment programme today. Many hon. Members on the Government Benches have failed to understand the genuine concern and fears of my hon. Friends, which are not directed towards bringing down the BSC. We all have an important interest in ensuring its viability, but we are determined to ensure that there is a greater degree of accountability and that some of the massive losses of the past do not recur.

The financial situation of the Corporation, with a loss of £400 million estimated for the current financial year, is a frightening prospect at a time when we had great hopes for the results of some of the investment in new steelmaking equiment and plants.

It is tragic that we should read in the Corporation's own document: The Corporation's projection reflected in the Government's financial statement and budget report is of a loss of about £400 million. This is an estimate to which management action is being vigorously directed. It is a sad reflection that management will really have to work hard this year to create a £400 million loss. We have a great deal to learn from the past in determining how to behave in future towards this industry.

The present borrowings of more than £3,070 million will bring the Corporation up to its cash limits before the end of this financial year. We recognise that there will be a need for a Bill such as this to be passed, but it is proper that it should be passed only on the basis of considerably more information being provided and Parliament having the ability, during the course of the investment, to make comment and, if necessary, to have the sanction of refusing payment.

I read with interest the White Paper on the relationship between the Government and nationalised industries. In recent decades successive Governments have wrestled with the nature of their relationship with the nationalised industries. My approach is that, as far as possible, we should adopt the commercial, banking approach of ensuring that money is made available where it is deserved but that detailed information is provided and that, in the meantime, the highest degree of autonomy possible should be given to the people of ability in the industry to expend the moneys.

The Government's approach outlined in their White Paper has moved increasingly away from this towards more intervention. I predict that there will be substantial problems with such an approach. Indeed, the potential problems have been reflected in the debate with the inevitable pleading for constituency interests. That is a wholly honourable and proper activity in the House, but in overall terms one cannot expect Ministers, a Government or a Parliament to sanction or refuse payment on the basis of the excessive balance of representation of one area.

It is for that reason that nationalised industries and various other agencies within Government are given a relative degree of autonomy, but Parliament should have greater sanctions and greater powers of accountability. We ought to be able to adopt a bipartisan approach on this aspect. I find it dispiriting for the next 25 years, during which time I hope that there will be a steel industry which can return to profitability and employ a substantial number of people, that we still adopt these old divisive approaches when there is a great deal of common ground to be built on.

Even if the investment programme of the BSC were larger than that set out in the White Paper and its own document and the Government proposed an even greater increase in the borrowing powers, the reality is that much of that investment would flow into plant that would not employ as many people as have been employed in the past. Even if the investment programme were greater, there would still be a severe structural employment problem.

The international situation will have a severe impact on the projections and many of the assumptions set out in the Corporation's paper. It is assumed in that paper that rates of inflation will not significantly change, that interest rates will remain unaltered and that the gross domestic product will return to historical rates of growth of 2½ per cent. Sadly, but realistically, one must express doubts about whether this will be the case under any Government in the next few years.

Is it not, therefore, better to ensure that Parliament has a greater right of review before this considerable further amount of money is expended? There is a case for improving the analytical information made available to Parliament and the presentation of that information—although some progress in that direction has been made.

Our amendment is in the best interests of British steel, the workers in the industry and certainly the taxpayers, whose interests we are here predominantly to represent.

8.6 p.m.

Photo of Mr Edwin Wainwright Mr Edwin Wainwright , Dearne Valley

I listened intently to the speech of the hon. Member for Chichester (Mr. Nelson), but I was not sure which way he was going. He seemed at times to be supporting the nationalised industry to the hilt, but at others seemed to be criticising it unduly. I wonder why.

In the end he said that he would allow the industry to be run as a commercial enterprise but that a very tight hold should be kept on everything it did. That means that he has no faith in those who have been appointed to run the industry. I do not believe that we should take that attitude.

I have waited quite a while to take part in the debate and while I was listening to the other speeches, I thought that I had better disapear because so much criticism was levelled at the Sub-Committee and the way the industry is being run.

We have to look back at the history of the industry, not just to 1973–74, but to 1967 and earlier. Parliament has always had a strangehold on the industry and has always put restrictions on it. If it has not been run successfully, hon. Members have made a lot of criticisms. For at least three decades the steel industry has been, slowly but surely, not keeping pace with its international competitors. We all knew that, but we did not do a great deal about it.

The Sub-Committee considered the tonnages produced per year by each employee in this country and compared them with production in our competitor countries. We saw that there was a great difference. Our output was 118 tonnes, National Steel in the United States had a production of 280 tonnes, in Germany, Thyssen's production was 370 tonnes and Nippon Steel production was 520 tonnes per year. Why is that? The reason is that, even in 1967, experts said that the industry, which was being renationalised, needed at least £3,000 million. Because of the conflict between Governments, no one has been able to get down to producing a straightforward plan to bring the industry up to the level of its competitors.

The British industry has been starved of money and when the oil crisis and the world recession started, everyone looked for someone to blame and the BSC took the blame. Who could have foreseen those events in 1972—except the mining MPs who warned both Governments about the potential dangers in the sources of our oil? No one took any notice of us, but the crisis happened—though not in the way that we expected—and the shortages started.

At present Japan is spending £81,147 per employee per year. That compares with Britain's £13,943 per employee per year. Little wonder, therefore, that Britain's overall output is 34 per cent. of that of Japan's. When a group of us went to have a look at the Japanese system, we saw a vast difference in technology. The hon. Member for Chichester spoke about spending money in investment and the reduction in the number of jobs. That is true. Whenever one increases technology, the number of jobs is bound to go down unless one increases the markets. If we do not do so, we cannot compete in the international arena. That is one of the mistakes that we make.

I feel very sorry for some of the steel plants in this country. I saw the rundown which occurred in the coalmining industry and the effect that that had on districts and villages. If we develop our steel industry, particularly during the current recession, there is bound to be over-production. I have always agreed with the common sense view that it is no good producing anything unless we can sell it or consume it ourselves. But there is bound to be over-capacity because of the world recession. Even Japan has at least 30 million tonnes of extra capacity at present, but Japan will sell that if it is a question of maintaining her industries.

I expect that is the reason why there is talk of restriction of imports. Many of my hon. Friends are concerned about imports, but I have very great reservations. Being a market nation, I fear that if we close our borders too tightly, borders will be closed against us. As a result, certain markets will no longer be open to us and that factor must be taken into account.

We must continue our investment in the steel industry. I see my hon. Friends the Members for Sheffield, Heeley (Mr. Hooley), Rother Valley (Mr. Hardy) and Brigg and Scunthorpe (Mr. Ellis), all of whom have steel plants in their areas. Up to a certain point those plants were successful until the recession came. Although I feel proud of what has hapened in the Sheffield and Rotherham districts, there are some other areas about which one is deeply disturbed. My hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) has Shelton in his constituency. I have met some of the work force from Shelton and I have a very high respect for them. They have fought very hard to keep their plant open. I am not quite sure whether they will succeed, but at the end of the day, unless we can produce steel for our own home consumption in competition with other nations, we shall lose out in manufacturing industry.

When we compare our manufacturing industry, and investments in it with overall figures, we lose out badly. That is something which we must always bear in mind. I recommend Conservative Members to have a look at the National Westminster Bank Quarterly Review. That shows that manufacturing industry—private enterprise—rather than the steel industry is letting us down with regard to investments. One has to bear that in mind. We must ensure that we reach a high standard of technology. But, unfortunately, when that occurs, especially during a recession, there is a great danger that the economy will be gravely affected and that jobs will become scarcer. On the other hand, if we do not do so, jobs will still be fewer and our standards will be lower.

It is no good people thinking that we can have a reasonable standard of living unless we produce the wealth of this nation. This is where the steel industry is one of the barometers of the economy. Steel gets involved in every other industry. There are very few industries which one can mention in which steel is not involved.

I warned the Sub-Committee that any recommendations which emerged would be dynamite because they would mean a reduction in manpower. But without that happening we shall not have a viable and efficient steel industry. I concede that some plants are making money at present. Four of my hon. Friends and two Conservative Members have spoken about them. They appear to blame the Sub-Committee for what has happened to the steel industry, but it was the Sub-Committee's job to look at the industry and to make certain recommendations about it.

When I read the Government's reply to those recommendations I was greatly pleased. Considering the furore which occurred when we last debated steel, I fully expected that Members of the Sub-Committee would get their throats cut. But I do not think that I can find much fault with the recommendations. One, of course, is in dispute. That is recommendation No. 30, mentioned by the hon. Member for Come Valley (Mr. Wainwright), which talks about the amount of money for investments and current expenditure. The Sub-Committee was deeply troubled about what would happen if the recession continued. Unless we continue the amount of money for those investments I am certain that we shall not succeed. That is the reason why that recommendation was made.

I do not know what other members of the Sub-Committee feel, but I stand by that recommendation. Unless the Government make certain that sufficient money will be given to capital investments, the industry will find that it will not be able to carry on with its current expenditure because the costs will be too high.

I know that some of my other hon. Friends, who are much more involved than I, wish to speak. But I should like to say a word about redundancies. There are bound to be redundancies. I have heard Conservative Members criticise the amount of money that would be involved in redundancy payments. During the depression I was out of work for a period. Everyone ought to realise what being out of work means. Everyone should realise what it means when a man who has been trained for only one job at the age of 15 or 16 suddenly discovers at the age of 40 or 45 that there is no more work. Yet we are told that £10,000, £13,000 or £14,000 is too much money. If any of us suddenly were placed in the same position, I wonder what he would say about the amount of money proposed for redundancy payments. I beg the Government, through the BSC, to be generous where redundancies have to occur. Of course, the best solution of all would be to supply jobs in these areas. If we could do that, we could lessen the impact of the blow.

I hope that the Minister will take note of what right hon. and hon. Members have said today. I have a great deal of sympathy with them because I know in my heart how they feel and how the people feel when their jobs are in jeopardy. If we cannot keep their steel plants open—and in my view we should give serious thought to the possibility of selling them—we should at least do more than we have in the past to bring new jobs to these areas. If we do not, we shall have failed our people.

8.21 p.m.

Photo of Mr Anthony Durant Mr Anthony Durant , Reading North

I rise to speak mainly on behalf of the taxpayer, because in my view we have a responsibility to take his views into account when we are discussing a matter of this kind.

I sympathise with the hon. Member for Dearne Valley (Mr. Wainwright). I know his part of the world, as I do the Bother Valley and Rotherham. I know how crucial are the steel and coal industries to their constituents, and I understand their anxieties. However, we also have to appreciate the anxieties of the general public when the money provided to the steel industry is increased again and again. We are now asked for £5,500 million. In 1966–67, the limit was £950 million, as it was again in 1967–68. Then, in 1976, it went up to £4,000 million, Now, it is £5,500 million. This escalation is worrying in the extreme for the broad mass of our voters who have to meet that in the sense of advancing it. Then the loan has to be serviced, and an enormous debt has to be met.

The problems of the nationalised industries are very difficult. Constantly, Governments interfere with the policies that they follow and, constantly, they interfere with the managements of those industries and give them very little chance really to follow a steady programme and make steady progress. This is one of the problems that they encounter.

We have to realise that we have two types of nationalised industry. We have nationalised industries which provide services, such as the railways, and which have a social requirement. But when it comes to British Steel and British Leyland we have industries which are competing in the commercial world, and they have to face commercial realities. They also have to face international implications in competing, and this is a factor which must be taken into account far more than it is by Governments.

It must be depressing to be a manager in the steel industry, with all the publicity that there has been about it, and with the future slightly uncertain because the industry does not know where it is going. It must create tremendous difficulties There have been considerable changes at the top. One hon. Member said that he felt that we should make more changes at the top. However, we have had three different chairmen in the not-too-distant past, and I think that that is enough trauma for any industry.

We have seen a fair amount of excitement in the Press recently. We have seen the Leader of the House having exciting meetings in South Wales with his constituents about one steelworks, we have had the changes of chairman that I have mentioned, we have had the sudden enormous deficit that no one knew about, and we have had the report of the Select Committee. I respect the hon. Member for Dearne Valley and his work on that Committee. This has been a most valuable report, and it should not be pushed to one side. A lot of work was done on it. It may be that some of its recommendations are controversial, but it has made a valuable contribution to the general discussion of this important industry.

If the BSC were a commercial organisation, its board would be meeting, it would be rationalising the industry, and it would be looking at specialisation, because that is its profitable area. Instead, we are still going for heavy steel, and this is one of our major problems.

Of course, there may be an upturn in the economy. It is argued that if that occurs, there will be a sudden demand for steel and we must have the capacity to meet it, and, therefore, we must keep certain works open.

My hon. Friend the Member for New Forest (Mr. McNair-Wilson) said that he was not frightened of under-developed territories and their steelmaking capacity. I am afraid that I am. There is a problem with the under-developed territories. There is prestige in having a steelworks, and many under-developed countries are opening steelworks for prestigious reasons almost more than for marketing reasons. Korea is a perfect example and, though my hon. Friend said that the standards of their steel were not very good, he is living in cuckoo-land if he thinks that the Koreans will not get it right fairly quickly. He should not think that we have no need to worry because the steel is of poor quality. That is a little unrealistic.

We as Members of Parliament are the bankers of the steel industry. If a commercial undertaking went to its bank saying "We want to engage in rationalisation because we are losing money in this area and in that", the bank manager would support it. He would not say "I have some friends in that company. They are decent chaps. You had better keep it open." He would take a commercial look at it. We have to face this fact. If we do not, we shall be asked for more money later, and more again and, sooner or later, the crunch will come. The longer it is left, the worse the situation becomes. We have seen this escalation of debt, and suddenly we face an enormous problem.

The Select Committe made one or two interesting recommendations regarding what Parliament should do about the steel industry. Let me quote two of them from the First Report. Paragraph 106 reads: Of equal importance, the failure of the Corporation and of the Government to submit accurate forecasts to Parliament severely reduces the ability of the legislature to carry out its statutory duty of controlling the Corporation's borrowing. It is clear that we have a statutory duty to control it.

Decisions are taken and legislation enacted on the basis of information which, however well-intentioned, has in the past been grossly misleading. Your Committee recommend that the Corporation and its sponsoring department should seek to improve their financial forecasting, not least so that reliable estimates can be laid before Parliament. Here the Committee is making a positive statement to this House about the way in which we should approach the subject. That is why the Opposition are critical of this Bill. We think that it is too wide and open-ended and that we do not have the necessary financial control.

The other recommendation of the Select Committee to which I draw attention appears in paragraph 113: Your Committee recommend that the Secretary of State, in consultation with the Corporation, should give close consideration to the appropriate self-financing ratio. In addition, they recommend that financial commitments for capital expenditure should be authorised only for specific projects which promise to yield an average rate of return, having regard to the opportunity cost of the resources, and the degree of risk involved. There is a clear instruction to this House, and that is what we should be doing.

The Corporation does not have a good record for output. At full capacity, its output per man last year was only 118 tonnes, compared with 280 tonnes for US National Steel, 370 tonnes for Thyssen and 520 tonnes for Nippon Steel in Japan. Our production is poor, and since 1974, we have been a net importer.

Photo of Gerald Kaufman Gerald Kaufman Minister of State (Department of Industry)

The hon. Gentleman will be happy to know that we have now become a net exporter again.

Photo of Mr Anthony Durant Mr Anthony Durant , Reading North

I am pleased to hear that and am only too happy to be corrected. In winding up the debate, perhaps the Minister could give the exact size of that export.

The industry's decline has been caused by many things. We have heard about the world recession. The decline in construction of roads and hospitals has also affected it. As representatives of the taxpayer, we have a right to say that the Government cannot make this loan without more parliamentary control.

Photo of Mr Peter Hardy Mr Peter Hardy , Rother Valley

I am following the hon. Gentleman with great interest, but I am puzzled by an apparent contradiction. First he said that one of the problems of the BSC was excessive interference. Now he seems to be suggesting even more.

Photo of Mr Anthony Durant Mr Anthony Durant , Reading North

That is not such a clever question as the hon. Gentleman thinks. Any company in difficulty with its banks will find the bank taking an active interest in its finances, but not in day-to-day details of products, marketing and management. It is not reasonable to ask to see the figures. I am talking of ministerial interference in the day-to-day running of the industry. Shareholders in a private company can talk about finances at the annual general meeting, but they do not ask detailed management questions. So I am not frightened of that question. I welcome it to help explain what I mean.

We must take a serious view of this enormous sum. The Chancellor has been concerned this week about the amount that we have taken from his Budget. But the comparison is laughable. The sum involved there was £450 million. This sum is £5,500 million. I know that one is taxation and the other is a loan, but the money originates from overseas borrowing or the taxpayer. I have a responsibility to express the anxieties of my electorate about this industry and their desire for better control of its finances.

Several Hon. Members:

rose

Photo of Mr Myer Galpern Mr Myer Galpern , Glasgow Shettleston

I wish to be as helpful as I can to the House. There are still five hon. Members who have sat here all day, who are anxious to take part. If, with the co-operation of the Front-Bench speakers, speeches lasted a maximum of eight minutes, I should be able to accommodate all those who wish still to take part.

8.33 p.m.

Photo of Mr Ifor Davies Mr Ifor Davies , Gower

Although I heard both opening speeches, I regret that I did not hear many of the speeches of my hon. Friends because of parliamentary business.

The hon. Member for Reading, North (Mr. Durant) said that he was speaking on behalf of ratepayers and taxpayers. I wish to do the same—but the ratepayers and taxpayers I have in mind also happen to be employed in the steel and tinplate industry.

I fail to understand the amendment, which welcomes the steps taken to improve the BSC's financial position but declines to give a Second Reading to the Bill because of the inadequate opportunities to make annual assessments of the progress of the Corporation. The Secretary of State gave a clear assurance that he was in close liaison with the Corporation. I am confident that he will be assessing its progress not merely annually but at frequent intervals.

Several hon. Members have called for a viable industry. That is a unanimous desire, but if there is, as some have said, a partisan note in this debate, the amendment has contributed to it. If we are all concerned about a viable industry, we should be working together and not causing a division on such an important issue.

It is still necessary to emphasise that large-scale but selective investment is essential to make up for the neglect of recent decades. In July 1976 I recall sitting behind the Secretary of State when he announced that we should proceed immediately with the building of the new mill at Port Talbot. The House will recall that after a detailed and protracted study the British Steel Corporation produced its investment strategy. It accepted that on economic, technological and sociological grounds Port Talbot was the right place to expand to enable the British steel industry and the tinplate industry to remain competitive. That strategy is now water under the bridge. It has been deferred.

I was glad to hear, however, in the opening remarks of my right hon. Friend, the commitment to ensure continuous casting facilities at Port Talbot. But I am concerned with the hesitant phrases that are used in the White Paper, Command 7149. I shall quote from paragraph 26. In referring to the continuous casting facilities it states: The financial evaluation of this has still to be completed and the Government support BSC's wish to secure a renewed commitment of the work force to operate the works at international manning levels and to commission the project immediately on completion. There is a great deal of apprehension in the note of hesitancy about proceeding with continuous casting facilities when every report, including the Select Committee report, is agreed that there is a necessity to proceed with that part of the investment. I must express regret that there is that hesitancy in paragraph 26 of "British Steel Corporation: the Road to Viability".

Investment is an issue that affects not only Port Talbot but industry throughout South Wales. In various forms the industry of South Wales is interdependent on steel. Above all, our tinplate industry is vitally affected. I say "our" deliberately, because West Wales has been the home of the tinplate industry for the past 200 years. The Velindre plant in my constituency and the Trostre plant in West Wales stand as proud reminders of our great tinplate tradition.

However, the danger signals have gone up. Tinplate users are demanding better quality and closer tolerances. The industry must meet the demands or lose the trade. Hot rolled coil for the tinplate industry comes from Port Talbot. It is a necessity to improve the quality of coil to meet customers' demands. If that is not carried out, it will be no exaggeration to say that the West Wales tinplate industry faces disastrous consequences. The future of the tinplate industry is inevitably and inextricably bound up with what is to happen at Port Talbot.

Great progress has ben made with de-manning. However, because of the time factor and because of your appeal, Mr. Deputy Speaker, I shall not dwell on that. I merely say that a great deal of demanning has been taking place in Port Talbot. Thousands of employees have left the industry within recent years, which has made a great contribution to solving this problem.

I recognise that the steel industry has been caught up in a most savage recession. Time is not on our side. I urge that there should be no delay in proceeding with the selective investment that has been announced for Port Talbot. The steel industry is the lifeblood of all our industrial activities, and that is particularly so in South Wales.

Therefore, despite all our difficulties, it is imperative to proceed with selective investment. I repeat, the continuous casting facilities are unanimously agreed by the Select Committee and everyone else. Therefore, I urge on my right hon. Friends and ask them to press on the BSC the importance of proceeding immediately with this matter.

8.40 p.m.

Photo of Mr Nicholas Budgen Mr Nicholas Budgen , Wolverhampton South West

I hope briefly to cover two points—the first a general one and the second a constituency one.

I derive support for my first general point from the telling speech by the hon. Member for Dearne Valley (Mr. Wainwright), who rightly said that Parliament has always had a stranglehold over the steel industry. He went on to explain how in 1973 he had been proved right because he had predicted the risk to which this country laid itself open if an oil cartel were to raise prices dramatically. That was a very good illustration of the way in which any industry held in a stranglehold by Parliament is in the grip of assumptions which may be proved wrong. It was a good illustration of how the only way in which industries may survive is by having a variety of different assumptions so that those who get their assumptions right live and those who get them wrong die.

The more one looks at the assumptions that have been and are to be forced upon the steel industry, the more one has to congratulate the Minister on his rather more modest approach towards planning for the future and to say that the last thing that we want is the clear plan that was called for by the hon. Member for Rotherham (Mr. Crowther), because the clear plan is the voice of completely unreconstructed Socialism.

We already have enough assumptions for the next three years, and in some respects at least they are bound to go wrong. Perhaps some Labour Members would agree if I said that the first assumption is: There will be a modest growth in domestic demand for steel and the recent measures introduced by the European Community to provide for orderly marketing and price stability will continue. Many Labour Members say that in perhaps three years the Community may be showing signs of disintegration.

Assumption No. 2, which the British Steel Corporation has to accept, is: Rates of inflation will not change significantly. Let me consider the rate of inflation argument against my hon. Friends. Many say that the Labour Party is now the party of sound finance. Many say that, in the event of the Labour Party being elected at the next General Election, it will squeeze out of the system even the 10 per cent. rate of inflation which we have at present. Indeed, they might argue convincingly that it will be brought down to 2 per cent. That is assumption No. 3. I do not agree with that view, but that is an assumption that they might wish to substitute in favour of assumption No. 2.

Assumption No. 4 is: Wage and salary awards will continue in line with Government assumptions. Which Government? We are bound to have a General Election within the next 18 months. That assumption is projected forward for the next three years. I do not know and I do not think that the Labour Party knows whether it will have any form of State control of wages for the next three years. It could be argued that the Tory Party does not know whether it will have State control of wages. I see the Minister nodding. I very much hope that there will be no Tory State control of wages. But it is a terrible thing for any industry to be lumbered with as bald an assumption as that.

The most mundane short-term assumption that the industry is obliged to accept—I am looking at a document which came out on 27th April—is: Interest rates will remain substantially unaltered. Recently, interest rates have gone up from 6½ per cent. to 9 per cent. That is an increase in financing costs of nearly 40 per cent.

Unhappily, as long as nationalised industries are forced to accept assumptions that are dictated to them by the Government their chance of any type of viability are limited. The best that we can hope for its that we should make short-term assumptions and that we should review their progress on at least an annual basis. I should be in favour of even quicker and more modest reviews so that we can ensure that we have none of the grand simple plans about which the right hon. Member for Rotherham spoke.

My second point is one for which I derive support from Government Members. The hon. Members for Central Ayrshire (Mr. Lambie) and Dearne Valley spoke of the need to sell sites. That is an interesting and important recommendation from Socialist Members. I am particularly concerned about the steelworks at Bilston, which is not in my constituency but at which many of my constituents work. There are many old steelworks which do not have vast capital charges hanging over them, which have old and written off plant and are thus profitable. They represent a possible good investment for private industry. They represent a chance for the future for the men who work there. The best hope that they have is that profitable private industry will be allowed to take them over.

8.47 p.m.

Photo of Mr Robert Cant Mr Robert Cant , Stoke-on-Trent Central

The constraints of time will prevent me from making another contribution to what has been referred to as the "taphouse brawl".

The financial aspect of this matter is extremely important, but the strategy which underlies it is more important. I am more pessimistic about the strategy than are many of those who have spoken today. One cannot write off what is happening in the Third world. These nations will develop virility symbols, whether they need them or not. The impact from Korea across the world to Mexico will be enormous.

What is fundamentally wrong with the strategy of the Corporation is that it has overlooked the contribution that the mini-plants can make. I should have liked to go into more detail about that.

It is interesting to note what the Federal Reserve Bank of Dallas said. The computer to work out the steel programme was in Dallas. No computer in this country was big enough. The bank paid a glowing tribute not only to mini-plants but to the contribution which the developing electric arc furnaces are making in the United States.

Reference has been made to the Industrial Commissioner of the Common Market, who said that he would allow only one addition to plant in the Common Market in the future. He said: An exception is being made in the case of electric arc steelmaking. My hon. Friend the Member for Rother Valley (Mr. Hardy) is worried about scrap. We are giving the world almost all the scrap that we have. The Spaniards are having a heyday with it. A grave mistake has been made, in mothballing the plant at Hunterston, by forgetting about the electric arc furnaces. I still think that Shelton has a future.

This morning the steel committee of the TUC met the British Steel Corporation to talk about the future of Shelton and Bilston. I do not know what happened about Bilston, but the steel committee gave 100 per cent. backing to the installation of an electric arc at Shelton. What if the British Steel Corporation turns the idea down? Will the Government intervene and honour the pledge that they gave under the Beswick review, saying that if all the unions on the steel committee want an electric arc furnace the Government will give it the go-ahead?

A further point of great interest concerns the sale of plants. There may be a bit of doubt about the identity of the buyers of plants. I asked Sir Charles Villiers and the man who really runs the BSC, Mr. Scholey, whether I could mention this point. I referred to the letter from a Tory MP—I hope that I spoke with suitable contempt—and to the reply that he had received. I told them that they were giving me an entirely different version, that they agreed that the Shelton plant was entirely clapped out but that they feared the competition it would produce if it were sold.

I want to know who has the last word on the sale of plant. I have a letter from my hon. Friend the Minister of State saying that he has the last word, while Sir Charles Villiers has told me that it is he, not the Government, who has the last word about whether plants will be bought or sold because that is what it says in the nationalisation Act.

I feel that Shelton does not have an electric arc because it is one of the winners. We at Shelton are one of the sucess stories. Shelton is an area which has an unemployment rate of only 3·7 per cent. and can therefore be written off in consideration about the location of electric arcs.

If Shelton or some part of it ever closed we would want the industrial development certificates that are always denied us because we have low unemployment. We would want them to attract any industry that wanted to come to Shelton, Stoke on Trent. I hope that the Minister who has IDCs within his grasp will give me an assurance on the matter tonight.

8.53 p.m.

Photo of Mr Timothy Renton Mr Timothy Renton , Mid Sussex

I apologise for having been unable to be here at the beginning of the debate to hear the Secretary of State and my hon. Friend the Member for Kingston upon Thames (Mr. Lamont). I am most grateful to the British Steel Corporation for supplying us all at the end of April with the document "Prospects for Steel". It has proved most useful. I believe that it is a sign that the BSC and the Government are slowly being forced by circumstances back to reality in the steel world.

I do not say that the document told me everything I wanted to know. For example, it is in some respects simplistic about the profound effect of the oil crisis on steel investment. The Japanese have been saying much more plainly that since the oil crisis the emphasis in steel investment must now be on quality rather than quantity. This was the point that some hon. Members have made. The Japanese have realised how much can be done by the increased use of continuous casting. They have raised the yield from steel ingots from 81 per cent. in 1970 to 86 per cent. in 1976, and in this manner they have obtained 7 million tonnes of increased capacity in six years simply by virtue of increasing the continuous casting installations. I should have liked to see that sort of point developed more in "Prospects for Steel".

I believe that there is an air of much greater realism within the Corporation and, I hope, on the Government Front Bench as well. However, there are a few points arising from the prospectus which still give me cause for serious concern.

I am concerned that in this document, and equally in the Government White Paper in reply to the Select Committee reports, no self-financing ratio of capital expenditure has been set. It is an important discipline for the Corporation that there should be some self-financing ratio, even if it is set at a fairly low limit in the earlier years.

Also there is no sanction on the Corporation's operating account, and no split within the cash limit between expenditure on current and fixed assets. All of us who have the interests of British Steel in the 1980s at heart must be concerned about the temptation for the Corporation to raid capital expenditure to pay wages and to meet current costs.

We saw this in the year just ended where the original forecast was a £50 million deficit on current costs. In the end the Corporation ended with a deficit of £265 million on current costs and this could be financed only by cutbacks in the investment programme.

It is clear that the borrowing limit that we are being asked to approve tonight is excessive if there is to be capital reconstruction in the years ahead. The overall costs of the Corporation in producing its steel melt must be reduced, and in the end this can be done only by more steel being produced at Port Talbot and no hot steel being produced at Shotton. That is a decision that the Corporation, backed by the Government, has ducked for too long. Until it is taken the overall cost of producing hot steel will be too great.

I very much regret that the recommendation of the Select Committee on targets being set for annual reductions in manning levels has not been followed. I appreciate the difficulty in doing this, but it is an important discipline for British Steel and the unions if they are to continue with the necessary capital expenditure. This can be achieved only hand in hand with the unions, and the Select Committee recommendation should have been accepted.

There is no prospect whatever of being able to remunerate all the borrowings that we are being asked to authorise, unless there is a capital reconstruction. The prospect of a £400 million loss in the year that has just begun is appalling. In the end, if the Corporation is to compete with imports and with the growing private sector—and even though there has been so much world excess production, the private sector is still forging ahead—the Corporation must have internal competition within itself. It must have divisions to compete against each other in the same products for business and orders. Until this is achieved, we shall still have a monolithic giant which will not be able to compete effectively either with the private sector or with imports.

In conclusion, I fear that the rake's progress may continue as before. In this case the rake is getting a little more world-weary and perhaps a little wiser. In view of the large sums that we are being asked to authorise for the Corporation, we should have the opportunity annually to review what it is doing.

8.58 p.m.

Photo of Mr John Ellis Mr John Ellis , Brigg and Scunthorpe

I am very grateful for the opportunity to speak, even at this late stage.

A few months ago we had a Ten-Minute Bill about the denationalisation of steel, for which a number of Conservative Members voted, including the Leader of the Opposition. We must take it that the Opposition policy, therefore, is to denationalise steel. I shall give way readily if anyone on the Conservative Front Bench wishes to intervene at this point.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

If I may adopt the phrase used the other day by the Under-Secretary of State for the Environment when he was asked about the nationalisation of land. I wish to point out that it is not a programme for the first Administration.

Photo of Mr John Ellis Mr John Ellis , Brigg and Scunthorpe

We now have it on record that it is still firmly fixed in the philosophy of the Conservative party, as enunciated by its Front Bench spokesman, that it intends to denationalise British Steel.

I was disappointed to read in the White Paper that investment would be limited to a sum of £500 million in each of the next two years. I wish the figure were higher. If we are to have a viable steel industry, there must be constant investment, and old plant and equipment must be replenished. A good deal has been said about the smaller plants. I believe that we need large and small plants.

In the few minutes at my disposal, I wish to deal with one of the larger plants—the Scunthorpe steelworks, in the area that I have the honour to represent. Massive investment has taken place in that plant. If it is not making a profit, it is due to the fact that there has not been the requisite throughput. The investment already exists at the steelmaking end of the operation. We have heard that the old blast furnaces at Scunthorpe are to be refurbished, but if that investment is to be capitalised, we need more ironmaking capacity at the other end of the process. The Select Committee recognised that the Scunthorpe steelworks can compete with steelmaking plant anywhere in the world. The Committee said that there was a case for more investment in order to take advantage of the massive investment which had already taken place.

It is ironic that although the Scunthorpe steelworks could produce another 1 million tonnes, there is no demand for good quality, low-cost steel that could compete with similar products anywhere in the world. That is the dilemma.

It has already been said that the present strategy envisages that plans will not be made known and that the process will be a steady one. I do not object to old furnaces being refurbished, but the fact remains that they are still old furnaces. There have been official visits to Scunthorpe recently, and it has been said that Scunthorpe is too far away from the various centres, and all the rest of it. But there must be some commitment to strategic thinking, because the world will not always be as it now is. I believe that at some time or other there will be an upturn. Therefore, we must make use of the massive investment that has already taken place.

It is true that developing countries, including some South American nations, will develop steel-making capacity, but because there is still a great deal of poverty in the world, there must be a future need for steel. There are people in the world who are still on the verge of starvation, and they live in countries that will require factories, hospitals and schools, all of which require steel. Could we not give development aid in the form of steel?

I am not a pessimist, and I believe that there is a future for steel. We should not constantly look over our shoulders but should look to the future. I believe that there is a need for varying kinds of plant and varying capacities of plant.

The White Paper "British Steel Corporation: the Road to Viability" makes clear that before any action is taken there will be negotiation and prior consultation with the TUC steel committee. Those who are engaged in the steel industry have much to gain because they have a great deal of knowledge of the industry. Therefore, I hope that something more than consultation will be involved, and that there will be agreement.

Those concerned in the industry will have to examine the overall picture in line with Government strategy. We all know that my right hon. Friend the Secretary of State for Industry came from the steel-making industry. We appreciate that there have been arguments in the past on these matters, but the National Coal Board and the National Union of Mineworkers in their area of operations have constantly gone back to the Government in seeking to hammer out some kind of policy.

I hope that "consultation" will not simply mean that they go back again and again, I hope that the trade unionists in the steel committee will be listened to and that the policy will be decided at that level. My hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) referred to that and asked some very pertinent questions. The BSC has not been very good at negotiating with anybody or even telling people what its strategy is at any time. I hope that it will take advice and that we can see that it is adhered to.

9.5 p.m.

Photo of Mr Martin Flannery Mr Martin Flannery , Sheffield, Hillsborough

I have only about five minutes, but I shall try to say all that I want to say in that time.

I am fascinated by the Conservative motion. If we look at it carefully we can see that it is one of those "Have your cake and eat it" motions, because it says "While welcoming steps to improve the financial position of the British Steel Corporation we shall take steps to see that its financial position is not improved." I do not know how they can think up such motions. Unfortunately, it is characteristic. It is a doctrinaire motion to attack a nationalised industry.

Many of those listening to me know that I have spent a great deal of my time in education. I listen continually to the Conservatives trying to prove that they believe in comprehensive education when they do not. Now they are trying to tell us that they believe in nationalised industries when they do not. They have engaged in a foray against a nationalised industry. They were hard put to it to formulate a motion—hence the nonsense on the Order Paper.

I turn to the question of a slump. It staggers me that people do not realise that capitalism carries within itself slump as a rain cloud carries rain. The reality is that slump comes about whether we like it or not. We do not know how to answer it. It is there, a crisis of overproduction, when all the poverty stricken masses of the world are panting for commodities made from steel. We are over-producing steel and yet we are not getting it to them. It is time we addressed ourselves to trying to solve that problem.

I hope that my right hon. and hon. Friends will devote some time to the success story of Sheffield. That is the real reason why I sought to take part in the debate although earlier I had said that I would not speak, because I had another meeting outside for an hour or so and I felt guilty about coming back having missed an hour of the debate.

I hope that my hon. Friend the Minister of State will say that the special steels industry, of which Sheffield is the very centre, is a success story. Our chemists there are trying to make a breakthrough with a very light special steel. It will revolutionise the motor industry if we can make that breakthrough.

The money provided by the Bill is urgently needed. The Conservatives want to curtail the funds so urgently needed. The BSC has been bureaucratic. I have criticised it as much as anybody has, but I want a successful BSC. The difference between me and the Conservatives is that they want to destroy it. They cannot get away from that. They really want to get rid of the steel industry. Methinks they protest too much. They are always saying that they do not want to get rid of it because in fact they do want to get rid of it.

No Conservative has mentioned any success. All Conservative Members want to talk only about things which have gone wrong yet they must know in their bones that the industry is here for good and that the small factories which many of us support and want to be a success, will be necessary as well. We should like to help them.

Mention was made earlier of Brymbo. I sought unsuccessfully to intervene on the subject. A short time ago I did a programme with Monty Finniston and the previous Minister, who is now in the wilderness from the Opposition Front Bench, like the right hon. Member for Sidcup (Mr. Heath). I am referring not to the right hon. Gentleman himself but to his right hon. Friend who was Minister before. I am not allowed to mention names.

The story of Brymbo was that the Government bought it from Guest Keen and Nettlefolds for about £46 million and spent £4 million to modernise it, making the cost about £50 million. Then the Conservatives flogged it back for £23 million. If they ever get their hands on the nationalised industries they will flog them all to one another. The workers in Sheffield watched them going round various factories saying 'We shall have that and that", taking the best of everything.

Those are the realities. Therefore, in the minute remaining to me I say to the Conservatives "Stop huffing and puffing about the money. We need the money. Industry needs the money. You can go on saying this as much as you want. But our job, yours and mine, is to make the Corporation a success, so let us have the money." [HON. MEMBERS: "Whose money?"] Whose money? It is our money.

If we take £23 million of our money for Brymbo, the money that the workers there have used to make it such a success, we have merely looped the common exchequer again. We want this nationalised industry to be a success. The Tories keep saying that they want it to be a success but they really want it to be a failure. I hope that my hon. Friend the Minister of State will pay tribute to the areas which are a success and prove to them that all the rest can be a matching success.

9.10 p.m.

Photo of Mr Michael Marshall Mr Michael Marshall , Arundel

This has been an interesting and largely constructive debate, until perhaps the hon. Member for Sheffield, Hillsborough (Mr. Flannery) came in at the end to try to rouse us all to a state of frenzy again. The main point about the debate is that we have had an opportunity to hear some very useful and important contributions from hon. Members representing steel constituencies on both sides of the House. It is one of the main burdens of the Opposition's case that we want to have this kind of debate more often, and it was precisely this view that moved us to draft the amendment as we did.

The fact that the debate has generally been constructive shows the need for this kind of occasion. My hon. Friend the Member for Chichester (Mr. Nelson) was a little hopeful in a sense in not recognising that, as we move very near to the General Election, there are temptations to people to mix it. But we have in this whole argument about the role of the British Steel Corporation to extract the core.

Let us face it: at this time of night the Press Gallery is practically deserted, we can let our hair down and we can talk about what we really think is going on. It would be helpful, I think, in these concluding remarks—and I hope that the Minister of State will reply in kind—to get down to our assessment of the relationship between the House, the Government and the BSC.

A number of basic issues have been touched upon. I will try not to repeat what has already been said. But I think that the first point we have to make about our amendment is that the House has had a long tradition now of being anxious, worried and concerned about its inability to debate steel regularly, and the amendment calls, in effect, for an annual review. It seeks to make sure that the provision of money is tied to coming back to the House.

As my hon. Friend the Member for Colchester rightly pointed out, it cannot by any stretch of the imagination be regarded as a total blockage. All the Government have to do is show their good will in the matter, and that they accept what is envisaged in the amendment, and we can talk seriously about the way in which sums of money should be apportioned over the next few years on an annual basis instead of on the rather more open-ended proposal before us.

Photo of Mr Mike Thomas Mr Mike Thomas , Newcastle upon Tyne East

Can the hon. Gentleman give an assurance that should we have the misfortune of the Conservative Party coming to power it will give a day every year to a debate on steel?

Photo of Mr Michael Marshall Mr Michael Marshall , Arundel

If I have anything to do with it, I shall give the hon. Gentleman that assurance. I shall have to let him know how I get on. But I must not be tempted by his blandishments.

The point about the amendment is to try to ensure that the monitoring is not only more regular but more effective. These are the points to which I want to address myself. The Government must immediately recognise that we have established a norm in these matters. The hon. Member for Newcastle upon Tyne, East (Mr. Thomas) will recall in each of the last three years—1975, 1976 and 1977—the Government coming to the House and asking for increases in borrowings which have been working, in effect, at a billion pounds a year. This, in a sense, has been gratuitous because it reflected the fact that the Government had failed in their own estimates and forecasts and that the Corporation's estimates and forecasts had been progressively inaccurate. Thus, the Government had to come back to the House sooner than expected.

I must say that when the Secretary of State made the proud claim that this time they were on target, I found it one of the most sweeping claims to fame that he has tried to put across lately, because the fact is that the borrowing requirements now put forward are at the rate of nearly half a billion a year, reflecting the cuts that are being made in the expenditure programme, and anyone cutting a billion pounds over the next two years could reasonably be expected to keep within the present ceilings.

But even having said that, the other basic question is, what is the great rush? Hon. Members seem to imply that there is a tremendous rush here. According to the figures given to us, the take-up of borrowing is just over £3 billion, which must mean that there is at least time until the autumn before the borrowing powers might be exceeded. Therefore we can look at the matter in a considered and measured a way. Indeed, on behalf of the Opposition, I say that I know that Ministers will recognise that we shall want to get down to a great deal of detail in Committee.

It would be churlish of me not to recognise that there has been a genuine attempt here to provide some additional information. Part of the burden of the argument of those who have been involved in the legislation in detail in the last two or three years has been that we wanted a prospectus when the proposals for increases in borrowings were brought before the House. With the addition of the letter "u", "The Prospects for Steel" has become a prospectus for steel.

I pay tribute to those who put the document together. It is a useful document although, as many hon. Members on each side have pointed out, there are several assumptions in it which will need to be tested carefully, and a number of claims as the pattern of investment about which many hon. Members will have reservations. We shall want to use it as a major working document as the Bill goes into Committee in, I trust, its amended form.

Having said that we appreciate the fact that we now have rather more information from British Steel, we then have to come squarely down to what information we have from the Government of the day. In effect, the answer to that lies in the way in which the Government have given us their answers to the Select Committee in the White Paper, Cmnd. 7188, to which I shall refer later. But again there is a vast panorama here—the result of over two years of study—and we shall need to look at it in much more detail in Committee.

With regard to the basic pattern of the proposal, it seems that the Bill does not guarantee any opportunity for the House to get into the guts of the matter in any real detail in much under two years. It is at that moment that it would seem that the capital reconstruction is envisaged, if BSC achieves its anticipated targets. If it does not achieve them, that capital reconstruction may be put out further and further into outer space.

As my hon. Friend the Member for Kingston upon Thames (Mr. Lamont) said in opening, it is quite unreasonable to expect the House to be happy with the notion that all we can look forward to in the next two years is one and a half hours in which to discuss £1·5 billion of borrowing.

What can we learn from the past two years? The new dawn which has been promised by Ministers in each of the last three years has, sadly, not been realised. The losses have been made perfectly plain. I am pleased to see that the losses for the current year appear to be somewhat less than we had feared. The latest figure is £440 million, but Sir Charles Villiers has made it plain on a number of occasions in the last few days that he sees no prospect of real profitability in under five years.

One hon. Member referred during the debate to semantics. This is very important, for when we talk about breaking even at the end of the next financial year—in effect, in two years' time—and when we talk about viability and about profitability, we are talking in a much longer timescale.

A second lesson which has been learned over the last two years—one has to say it with some regret—concerns the way in which the Beswick review has been blowing hot and cold and has, in effect, been abandoned. Several plants which have been delayed have now been abandoned, and this has had an enormous impact, as we have heard from many hon. Members. We have to see this as the clear conclusion which is put before the House at the present time. The Opposition view is that this is a matter in regard to which we may need to have some degree of flexibility. I shall try to explain a little later how I view it.

The third clear understanding which has been achieved in the last two years is that, on demanning, it is totally common ground that everyone in the House understands that demanning is a vital and difficult task which has to be tackled if the BSC is to survive at all.

The problem in this country today is that we are talking about internationally competitive manufacturing industry working within the EEC. Unless we get this great industry of ours right, which is what all hon. Members want, it will not survive. Therefore, this is a key. The figures have been made plain to all concerned.

There was a row and a rumpus and the Secretary of State tried to brush the matter aside when I recently questioned him about Monty Finniston's view that 40,000 redundancies had been achieved over the first five years and that there were to be another 40,000 over seven years. But compared with the problem facing us today, that was not a particularly dramatic objective. I recognise that this is a difficult area and that the Government have an argument if they say that they want to move on a phased basis. We would be fooling ourselves and the country if we suggested that this is anything but a major task. As Sir Charles Villiers has made plain in his international comparisons, these are the sort of achievements which have to be reached if the industry is to survive.

Having said that those are the hard, critical decisions and the hard lessons that have been learned, we are saying that the House and the country have come to expect a progressive reduction in the losses made by the British Steel Corporation, in the number of smaller plants, in the numbers employed and in the total output of the Corporation. Sir Charles Villiers is talking of a 25 million tonne strategy and has described this as the end of the expansionist era. In that situation, what is the role to be played by the various partners in this framework? As regards the British Steel Corporation and the TUC steel committee, I welcome, on behalf of the Opposition, the greater sense of realism which we now have. It has been spelled out in "Prospects for Steel". It has also been made plain that the Government have had to face tough decisions, which cannot have been easy.

There have been delays, time lags and criticism from the all-party view on the Select Committee. We shall need to consider these matters as we proceed with the Committee stage of the Bill. The role of the Government and the House has to be related not only to what the British Steel Corporation is doing but to what the Government themselves have done to meet the challenge. The so-called steel row over the Select Committee and so on tended to obscure many of the valuable recommendations put forward by the Select Committee which were of direct help to the industry and which could give greater assurance to the House and to the country that there were ways in which matters could be improved. The British Steel Corporation has moved in a number of ways to take a more realistic stance but it has still to justify many of the assumptions which it has put to us today.

On the question of the role of the Government and of the House, the Government have been lacking in meeting the detailed views which have come from Members on all sides and from the Select Committee. I welcome the fact that the Secretary of State, in a moderate speech, was seeking to be helpful. I recognise that we have had before us the White Paper and have had time to consider it and to consider "Prospects for Steel" and so on. This shows a recognition of the march of events. The House has reached a stage at which it has made abundantly plain that it is not willing to give its name to substantial underwriting of sums from within the public sector borrowing requirement without proper accountability by the Government to the House. Nevertheless, I pay tribute to the Government for reacting to the pressure that we have put upon them.

On the estimates, in the forecasts and in the technical and financial competence which the Government are, or should be, demonstrating on the vetting of this programme, we have many of our gravest reservations. In this area, the Government's track record for getting matters completely wrong or confused seems to be clearest. It is in this area that the House must try to judge not only BSC's problems but the problems of the way in which the Government relate to the nationalised industries.

We have had recently a White Paper from the Government. This, too, must be relevant to further proceedings on the Bill. Let us consider some of the Government responses to what the Select Committee said in its report—Cmnd. 7188. I should like to put to them some major questions to which I hope the Minister of State will try to bend his mind tonight. There are a mass of matters to which we still need to return.

I turn to what I take to be the main lesson of the debate—the whole question of comparisons. I mean comparisons between large and small plants and between regions, plants or divisions that have better industrial relations than those in some other part of the country—in other words, the way in which each part of the Corporation can or cannot make its case for a fair share of the investment cake.

I immediately have to ask why the Government are so totally opposed to the notion of financial monitoring of individual projects. Why will they not look at rates of return within a particular project framework? Surely this is an obvious way of getting the small plant versus large plant argument in perspective, a way of assessing whether real progress is being made and a way of ensuring that a plant that is genuinely trying to improve and secure its future has some quantitative assessment as well as a qualitative assessment and is not lost within the overall results of a division or the overall loss of the Corporation.

I agree with those hon. Members who have pointed out that there are many successes. We have not heard about them from one side of the House only. We all want to take pleasure in seeing the successes, in South Yorkshire or wherever, that the country needs so badly.

Why do the Government not get to the heart of project assessment and return on capital of particular projects? In all the proceedings of the Select Committee and all the debates and arguments in recent years, the Government have fought shy of this approach. It would give us a fairer measure of what is going on at Port Talbot, Hunterstone, Llanwern and at Thrybergh or wherever.

If we could see a move in this direction, it would be an immediate way in which the provision of further public funds could be seen against a background of some sort of check or balance and the return on investment that taxpayers and hon. Members expect to see.

The 5 per cent. return on capital that is mentioned in the White Paper on the Government's relationship with nationalised industries is, we are told in the Government's latest reply to the Select Com- mittee on Nationalised Industries, a matter to be considered in relation to the British Steel Corporation. I hope that the Minister will be able to tell us more about this matter.

I turn to the question how the Government can justify their failure to pay the Corporation for its non-commercial obligations. That is recommendation No. 23 in Command 7188. The Government have fallen back on the excuse that this matter raises difficulties in relation to the EEC and that they would be laying themselves open to the charge of subsidising the industry. But the whole EEC is busy subsidising its steel industry. In France, Belgium, even in Germany, there are forms of subsidy, whether through cheap loans or through the write-off of loans. There are many examples to show that if we have to give this sort of assistance to make clear that part of the Corporation that is operating commercially and that part, particularly on the Beswick argument, that is operating at the Government's behest, we shall never have a better opportunity than at the present time.

The last and most crucial question in relation to the Bill is why the financial reconstruction is being put off. Precisely the same arguments can apply. It has been implied that if the financial reconstruction took place now, we would have difficulty with the Americans or the EEC in reaching international agreement. I should be interested to know whether the Minister can confirm that this is the reason.

There has been a certain coyness in talking about the financial reconstruction that will be undertaken when the BSC breaks even in, we hope, two years' time. If the financial reconstruction is to be undertaken, the House should know about it as soon as possible.

The whole thrust of the argument is that the Minister of State must assure us that if we have a financial reconstruction involving the write-off of capital and/or debt, we must be clear that it will mean an automatic reduction in the borrowing limit, otherwise we shall be stuck with a harrowing limit which could go on for many years if we simply continued to write off debt against it. May we have that assurance? May we also have an assurance that no part of the additional borrowing covered in the Bill will be subject to a write-off, either as principal or interest? In other words, out of the additional £1½ billion proposed under the Bill, will the Minister assure us that there will be no suggestion of write-off for these further sums?

We understand the argument about the traditional debts, but we want to be clear that the sums now being put forward are not themselves likely to be the subject of write-offs. If we are saying that, we immediately raise doubts whether these moneys are being properly and effectively used.

These are some of the basic questions with which we have all had to wrestle in trying to reach, perhaps in a series of shorthand notes, the way in which we would like to see the Bill given closer scrutiny. They are the sort of basic questions to which I hope we can have answers. Up to tonight's debate we have had two years of constant pressure by this House, the Select Committee on Nationalised Industries and the Press, radio and television for a more up-to-date and realistic view of what BSC was doing and what was happening in relation to it and the Government.

If there was one thing that came out of the Select Committee report it was quite simply that all was not well within the financial and managerial circles of BSC, on the one hand, and that all was not well with regard to the Government's ability effectively to monitor the BSC, on the other hand. One does not need to spell out the arguments all over again. But if one cannot persuade an all-party group of MPs, with no obvious axe to grind in reaching a decision and who bring forward criticisms of this kind, that all is not well on those two fronts, one certainly cannot convince the taxpayer that all is well.

It is this kind of background and worry which adds so much force to what we have put forward in our amendment. That is why I was mystified when the hon. Member for Rother Valley (Mr. Hardy) put the burden of his speech on the fact that on a notable occasion, which he and I well remember, he had been deprived of raising matters affecting the BSC. It is common ground among us all that this House should debate steel more regularly. I would have thought that the amendment was a useful step in moving in that direction.

I well understand that in the more giddy atmosphere which is being created as we move inexorably towards a General Election even the hon. Gentleman will leave behind some of his more prudent manners and feel that he must pitch in with the rest of us. I also understand that in the light of events over the last few days many Labour Members may feel that it is no bad thing to be seen in bed altogether once more.

Photo of Mr David Lambie Mr David Lambie , Ayrshire Central

We did not all go to English public schools.

Photo of Mr Michael Marshall Mr Michael Marshall , Arundel

The hon. Gentleman rightly chastises me for moving down dangerous tracks and I shall return to safer ground.

Ministers may be cynical when they hear a certain word of understanding from this side of the House. But anyone grappling with the problems of BSC amid the vastly different and fast-moving panorama of internaional steel competition needs some sympathy. Very difficult judgments have to be reached, and I do not pretend that anyone in this House can pretend that he has it all right. But Ministers, who do bear a responsibility, must demonstrate that they are moving to meet the mood of the House and that they are moving away from the kind of blandness and conspiracy between the Corporation and themselves in an attempt to assure the House and the country that everything was all right.

The Secretary of State in some ways has become almost a figure in Greek tragedy. Time and again he has come forward on other matters with what many of us have taken to be the right answers, only to be shot down by his hon. Friends. In this matter, he is rather more suspect. We all recall that when the 10-year strategy was put forward, he had to argue that it should be doubled and that it was only half good enough. Today, however, he is presiding over the dismantling of at least half the current programme. I recognise that in his personal terms he is something of a figure in Greek tragedy. I am tempted to go on to say that we should start a "Save the Secretary of State from his friends club".

The Minister of State is perhaps harder to see in a role in Greek tragedy. However, I pay him tribute. Over the years that we have been debating these matters on borrowing, he has tried to provide a lot of information, and it is something of a tragedy in his personal terms that his provisional information was so clearly slammed as misleading the House. I do not want to re-open all the old sores on this. I say only this of him. I hope that, in the proceedings on this Bill, as we proceed we can look to him as the compulsive provider of information as of old. He has a certain elusive quality which will well protect him when we come to these arguments in the give-and-take proceedings in Committee. He is perhaps more a figure from "Where's Charley?" with his famous Tory knock-about routine which I hope he will put aside tonight because he has some very serious questions to answer before this Bill receives a Second Reading.

I have tried to touch on a number of the key issues, and many of them have been implied by the matters that hon. Members have raised. I confess that one of the lessons of this debate for me has been the way in which the case for greater flexibility and for the smaller plant has been put forward so eloquently. The figures are telling. At present, there are some 33 arc furnaces in 13 plants up and down the country which are making money. Sadly, the situation is not the same in the so-called steel cathedrals in other parts of the country. In that situation, we should not simply set our sights on some neat and tidy package and assume that everything that has been told us by the Secretary of State is the best of all possible answers. We are in a situation where we would like to see the matter reviewed on a regular basis.

I join my hon. Friend the Member for New Forest (Mr. McNair-Wilson) in a slight feeling of optimism about the world scene. There are some signs that steel demand is beginning to move ahead again. But, having said that, I also want to echo those who feel that the game has become much more difficult and that every time the British Steel Corporation sells the know-how for a plant in, say, Iran we must recognise that we are building up major competitors for ourselves who in the long term will be very tough to fight.

We cannot be happy about the situation which has developed over the last year or so in which the steel row is one which has brought this House and many of its right hon. and hon. Members to a state where their relationship with the Corporation has not been as happy as many of us would wish. I say that as one who spent most of his working life in the industry before coming here. I have many friends who still work in the industry. Those of us who are interested in these matters sometimes find it a little hard to persuade ourselves that we should tell people working in those steelworks up and down the country that we know better than they do. A certain natural modesty in these matters goes a long way.

Having said that, the responsibility has been forced upon us more and more by the problems of the Corporation and more and more by the failure of the Government to take us fully into their confidence. When we reach a situation where the Corporation is losing £900 million over a three-year period, on present estimates, we would be failing in our duty if we did not call for regular scrutiny and for the kind of critical appraisal that we feel it is necessary to undertake.

It is in this sense that Parliament is truly the taxpayers' representative. But, equally, my disquiet stretches to the thoughts of those who are losing jobs and who are being made redundant. Those of us who worked in years past in places such as Consett, Shelton and all these famous names think it tragic when those famous names disappear from the international steel scene. It is a tragedy for the industry. It is a tragedy for those who had hoped to spend their lives in the industry and no doubt wished their children to do the same.

Above all, what we are all seeking to do is to preserve the maximum number of jobs for the longest period to build up a vigorous and profitable British Steel Corporation. It will not be achieved without the right balance, which will not be achieved unless the House takes a regular and detailed view. That is why I urge my hon. Friends to press the amendment to a Division.

9.40 p.m.

Photo of Gerald Kaufman Gerald Kaufman Minister of State (Department of Industry)

No debate on any industry can have taken place against a background of so much recently published information about that industry. Hon. Members preparing for the debate have been able to study three Select Committee reports and two White Papers, and the specially prepared BSC booklet "Prospects for Steel". I am glad that hon. Members have paid tribute to the Corporation for providing that booklet.

The difficulties of the Corporation, as seen in all the material that we have studied for this debate, are clear. While fighting a world steel slump unparalleled in recent industrial history. the Corporation has been carrying through the largest development programme in the EEC. It had hoped to pay for half of it out of revenue, but the slump in sales and prices has brought losses instead of profits.

At the same time, the Corporation has had to tackle the long-standing problem of low productivity. It has reassessed the market and is now convinced that it must deal with its capacity requirements on a step-by-step basis. This has meant bringing forward planned closures, all of which were foreshadowed in the 1973 White Paper. It has also meant deferring major projects which expand capacity. Even so—hon. Members on the Government Benches have paid tribute to this—investment over the next two years is likely to be £1 billion.

In dealing with these gigantic problems, the Corporation has had to take account of three major considerations. First, it must return to profit. Second, as my hon. Friends the Members for Consett (Mr. Watkins), Motherwell and Wishaw (Dr. Bray) and Newport (Mr. Hughes) said, the Corporation must take into account the social consequences of its actions. Third, the Corporation must maintain a viable steel industry capable of supplying a major industrial nation. Here, I certainly agree with the hon. Member for New Forest (Mr. McNair-Wilson) rather than with his hon. Friend the Member for Flint, West (Sir A. Meyer).

It is extraordinarily difficult, of course, to satisfy those three objects simultaneously. To seek to move into profit immediately would mean mass closures and redundancies of a kind that would devastate steel communities. It would also mean taking a hatchet to the industry so brutally that we should be dependent on imports to an unacceptable degree. I cannot understand why some hon. Members are so sanguine about British industry being a prisoner of imports from foreign steel manufacturers.

At the same time, however, it is out of the question to maintain plans for new capacity which would leave the country with massive over-capacity for some years, even on optimistic assmuptions about demand and exports in an economic upturn.

My hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) asked about electric arc furnaces. Of course we already have a bigger proportion of this capacity than any other country in the EEC, except Italy. In terms of particular electric arc furnaces, I refer my hon. Friend to paragraph 12 of the White Paper "British Steel Corporation: the Road to Viability". There, we say quite clearly that the BSC has proposed and the Government has agreed … the construction of electric arc plants at Shelton, Hunterston and Ravenscraig should be deferred until demand forecasts improve sufficiently to justify their construction. My hon. Friend the Member for Stoke-on-Trent, Central asked me two other important questions. Rather than answer them off the cuff, I shall study them with the care that they deserve and write to him, so that I can give him considered replies.

The Corporation has decided, taking all considerations into account, to aim at breaking even by the end of the next financial year. It has also realised, more keenly that never before, that it needs the full co-operation of the steel trade unions if it is to succeed. In their recent pay settlements the unions have accepted the need to co-operate in rationalisation and to raise the present unsatisfactory productivity levels towards those of our European competitors. As my hon. Friends the Members for Rotherham (Mr. Crowther), Sheffield, Hillsborough (Mr. Flannery) and many others have said, it can be done. In some of our plants productivity levels stand up well against most international comparisons.

The Tory Opposition are perfectly well aware of the actions that the Corporation and the unions are taking to get the business back into profit. Indeed, in their amendment they welcome the steps that are being taken. At first it is difficult to understand why they have decided to vote against the Bill. After all, that is what their amendment means. We can immediately dismiss the reason given in their amendment. To claim that Parliament does not have adequate opportunity to assess the progress of the Corporation is absurd. The Select Committee on Nationalised Industries has demonstrated just how determined it can be in investigating the Corporation's progress. The House itself is able to debate the steel industry if it so wishes. We did so two months ago on an Opposition Supply Day.

I am not sure what purpose the Opposition believe such debates serve if today is anything to go by. Only a handful of Opposition Members have been present at any one time. However, in 13 minutes they will be flocking back to vote in favour of insisting on debates that hardly any of them have the slightest intention of attending.

Under the Bill there will have to be a debate if the second tranche of the borrowing limit is needed. The Opposition may say that there will be a debate only it the borrowing limit needs to be raised. and that that may not be for some time. However, the longer that the Corporation can go without an increase in its borrowing limit the more clearly it will be seen to be coming into control of its finances.

As the hon. Member for Come Valley (Mr. Wainwright) said, the level of the borrowing limit will have to be reviewed at the time of the capital reconstruction. I give him that assurance, which is the one for which he asked. The extent of any change that is proposed to the borrowing limit will have to depend on the nature and timing of the reconstruction. We do not yet know what that will be and when.

The reason given in the Tory amendment is transparently implausible. The Tory Party's 1970 election manifesto proclaimed: We will progressively reduce the involvement of the State in the nationalised industies, for example in the steel industry, so as to improve their competitiveness". That was its policy, but what it is now seeking to do is to damage the competitiveness of the Corporation by making it subsist on a dripfeed diet. That is no way to run a great business.

The Corporation has massive problems and, as the hop. Member for Colne Valley said, the last thing that we want to do is to add a further measure of uncertainty on the question whether genuine financing needs can be met. How can the Corporation begin to plan its employment and investment strategies on such a basis?

Tory Members are pretty free with suggestions on how the Corporation should spend its money. In the middle of the crisis last November, when its full extent was known and the previous year's financial loss was expected to be £500 million or, according to the Second Select Committee's report, even £600 million, the hon. Member for Mid-Sussex (Mr. Renton) was insisting that the full Port Talbot development should go ahead at a cost of at least £850 million, together with Redcar, which would have added another £250 million

The hon. Member for Wirral (Mr. Hunt) wrote to my right hon. Friend the Secretary of State with a further suggestion: I strongly support the proposal for investment in three tandem furnaces at Shotton. The hon. Member for Flint, West wrote to my right hon. Friend on the same day with the same request. He declared that the outlay involved was the relatively small cost of £25 million. Today he described that £25 million as "surprisingly small". Yet in 10 minutes he will be voting against the Bill which will provide finance for the Corporation, including its investment projects. The hon. Gentleman wants £25 million spent. I grant him that £25 million is a surprisingly small sum compared with the demands of the Tory spokesman for Scot-and, the hon. Member for Gasgow, Cathcart (Mr. Taylor). [HON. MEMBERS: "Where is he?"] We have not seen him today, just as we have not seen any other Tory Members from Scottish constituencies.

The hon. Member for Cathcart came to see me in February, with two of his colleagues. He told me that he was very worried that, as he described it, Scotland's 15 per cent. share of steel capacity might be reduced. Today, when he could have expressed that worry, he has been absent. If he were present, he would be voting against the money to provide the Scottish 15 per cent. share of steel capacity.

Photo of Gerald Kaufman Gerald Kaufman Minister of State (Department of Industry)

Not to the hon. Gentleman. He should have taken his opportunity when I referred to him. I have now referred to his hon. Friend the Member for Cathcart. That 15 per cent. share involves spending large sums of money. But I was able to point out to the hon. Member for Cathcart when he came to see me that in the previous financial year 21 per cent. of the British Steel Corporation's investment went to Scotland. The BSC's document "Prospects for Steel" makes clear that Scotland can expect a steady 15 per cent. of capital expenditure from 1978 to 1980.

The Tories demand the expenditure of vast sums on particular projects in particular areas. But tonight they will vote to cut off the money completely. [HON. MEMBERS: "No".] That is what their amendment means. They decline to give a Second Reading to the Bill.

The fact is that the Tories have a vendetta against the British Steel Corporation. They also have a vendetta against its workers. They show that by their constant demand for an annual target of redundancies each year for the next five years regardless of market needs and productivity objectives.

On 22nd March the right hon. Member for Leeds, North-East (Sir K. Joseph) demanded an agreed and specified programme of demanning."—[Official Report, 22nd March 1978; Vol. 946, c. 1515.] In the debate on 9th March the right hon. Gentleman gave the game away completely when he declared: We believe that there should be no further capital without a specified rate of demanning".—[Official Report, 9th March 1978; Vol. 945, c. 1635.] Some prejudiced observers, including my hon. Friend the Member for Rotherham—

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

Will the Minister of State acknowledge that I was specifically quoting the recommendations of the Select Committee on both subjects?

Photo of Gerald Kaufman Gerald Kaufman Minister of State (Department of Industry)

Yes, I will. But the House voted by a majority of 48 not to approve those recommendations.

Some observers, including my hon. Friend the Member for Rotherham, claim that the Tories have no industrial policy. My hon. Friend and others are wrong. In the past four years the Tories have increasingly demonstrated what their industrial policy is. Their industrial policy is "No". No jobs. When the House is asked to vote money for employment projects, the Tories vote "No" by reflex. They voted "No" to financial assistance for industry orders in 1975, 1976 and 1977. We shall have another order shortly and no doubt they will vote against that.

They vote "No" to British Leyland. They have been doing that since 1975, and they did it most recently last month. They vote "No" to money for Chrysler. They vote "No" to State investment in the motor industry as a whole. The continuation of that approach would scupper motor industry projects not only in assisted areas but in the whole country. They vote "No" to money for Norton Villiers Triumph.

Opposition Members are cheering. But that involves jobs in the West Midlands. Hon. Members have been demanding that we do something about the problems of the West Midlands, but when I remind them that they have voted against jobs in the West Midlands they cheer.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

Will the Minister of State confirm that the British Steel Corporation now has £1,000 million, which will last it for one year? Will he also confirm that I specifically said, when opening the debate, that we accept that the Corporation needs more money. We said that it should not be advanced for three years. We deplore the Minister's attitude, which seems to be "Fork up and do not ask any questions".

Photo of Gerald Kaufman Gerald Kaufman Minister of State (Department of Industry)

If the Opposition amendment is carried the Bill will fall and that money will not be available.

The Conservatives voted "No" to money for Herbert Machine Tools. They even voted "No" to money for the Lindsey oil refinery, in which 1,500 jobs were involved. No matter how small the number of jobs involved, they vote "No". They voted "No" to the Polish shipbuilding deal, with 37,000 involved lobs. Without that deal workers all over Scotland and in other shipbuilding industry areas would be out of work today.

Now, tonight, they are to vote "No" to finance for the British Steel Corporation.

Photo of Mr Stanley Crowther Mr Stanley Crowther , Rotherham

I hope that my hon. Friend does not wish to misquote me. I did not say that the Conservatives had no policy on steel. Their policy is to shut most of the industry down.

Photo of Gerald Kaufman Gerald Kaufman Minister of State (Department of Industry)

I apologise to my hon. Friend. As occurs so often, he is right and I am wrong. If the Conservatives succeeded in their objective tonight they would close down the British Steel Corporation.

I have been doing some sums. I reckon that at 10 o'clock tonight, in three minutes' time, when the Opposition divide the House against the Bill, the grand total of workers whose livelihood the Tories will have voted to destroy in this Parliament will be 1½ million, at least.

That is without taking into account the other jobs that have been provided

by the accelerated projects scheme, the selective assistance scheme and all the Government schemes which one cannot quantify in that way. The Conservatives are also voting against jobs in small businesses. The investment programme of the BSC goes through the metallurgical plant manufacturers, who beg the Government for billions of pounds of investment in the Corporation, down to small firms who also provide for the British Steel Corporation.

This week on the Finance Bill, and again tonight, we have been shown more than ever before the true face of Toryism and the contrast between attitudes. The Opposition's attitude can be summed up clearly. It is tax cuts for the well off and job cuts for the rest. That is what their policy amounts to. That is what their votes amount to. Whatever they say about their intentions, their votes are the test. Their votes are what would throw workers in Leyland out of work and what would throw nearly 200,000 workers at the British Steel Corporation out of work. I call on the House to give the Bill a Second Reading and secure a future for a modern, competitive and profitable steel industry.

Question put, That the amendment be made:—

The House divided: Ayes 203, Noes 252.

Division No. 207]AYES[10.00 p.m.
Adley, RobertCarlisle, MarkFry, Peter
Aitken, JonathanChalker, Mrs LyndaGardiner, George (Reigate)
Alison, MichaelChannon, PaulGardner, Edward (S Fylde)
Amery, Rt Hon JulianChurchill, W. S.Glyn, Dr Alan
Arnold, TomClark, Alan (Plymouth, Sutton)Godber, Rt Hon Joseph
Atkins, Rt Hon H. (Spelthorne)Clark, William (Croydon S)Goodhart, Philip
Atkinson, David (Bournemouth, East)Clarke, Kenneth (Rushcliffe)Goodhew, Victor
Awdry, DanielClegg, WalterGoodlad, Alastair
Baker, KennethCookcroft, JohnGorst, John
Banks, RobertCooke, Robert (Bristol W)Gow, Ian (Eastbourne)
Bendall, Vivian (Ilford North)Cope, JohnGrant, Anthony (Harrow C)
Bennett, Sir Frederic (Torbay)Cormack, PatrickGriffiths, Eldon
Bennett, Dr Reginald (Fareham)Costain, A. P.Grist, Ian
Benyon, W.Critchley, JulianGrylls, Michael
Berry, Hon AnthonyCrouch, DavidHall-Davis, A. G. F.
Biffen, JohnCrowder F. P.Hamilton, Archibald (Epsom & Ewell)
Biggs-Davison, JohnDodsworth, GeoffreyHamilton, Michael (Salisbury)
Blaker, PeterDrayson, BurnabyHampson, Dr Keith
Body, Richarddu Cann, Rt Hon EdwardHannam, John
Boscawen, Hon RobertDurant, TonyHaselhurst, Alan
Bottomley, PeterDykes, HughHastings, Stephen
Bowden, A. (Brighton, Kemptown)Eden, Rt Hon Sir JohnHawkins, Paul
Boyson, Dr Rhodes (Brent)Emery, PeterHayhoe, Barney
Braine, Sir BernardEyre, ReginaldHicks, Robert
Brocklebank-Fowler, C.Farr, JohnHiggins, Terence L.
Brooke, PeterFinsberg, GeoffreyHodgson, Robin
Brotherton, MichaelFisher, Sir NigelHolland, Philip
Bryan, Sir PaulFookes, Miss JanetHordern, Peter
Buck, AntonyForman, NigelHowell, David (Guildford)
Budgen, NickFowler, Norman (Sutton C'f'd)Hunt, John (Ravensbourne)
Bulmer, EsmondFox, MarcusHurd, Douglas
Butler, Adam (Bosworth)Fraser, Rt Hon H. (Stafford & st)James, David
Jenkin, Rt Hon P. (Wanst'd & W'df d)Morrison, Charles (Devizes)Sinclair, Sir George
Jessel, TobyMorrison, Hon Peter (Chester)Skeet, T. H. H.
Johnson Smith, G. (E Grinstead)Mudd, DavidSmith, Dudley (Warwick)
Joseph, Rt Hon Sir KeithNeave, AireySmith, Timothy John (Ashfield)
Kershaw, AnthonyNelson, AnthonySpeed, Keith
Kimball, MarcusNeubert, MichaelSpence, John
King, Evelyn (South Dorset)Newton, TonySproat, Iain
Knight, Mrs JillNott, JohnStainton, Keith
Knox, DavidOnslow, CranleyStanbrook, Ivor
Lamont, NormanOppenheim, Mrs SallySteen, Anthony (Wavertree)
Langford-Holt, Sir JohnPage, John (Harrow West)Stewart, Ian (Hitchin)
Lawrence, IvanPage, Rt Hon R. Graham (Crosby)Stokes, John
Lawson, NigelParkinson, CecilStradling Thomas, J.
Le Marchant, SpencerPattie, GeoffreyTapsell, Peter
Lewis, Kenneth (Rutland)Percival, IanTebbit, Norman
Lloyd, IanPink, R. BonnerTemple-Morris, Peter
Luce, RichardPowell, Rt Hon J. EnochThomas, Rt Hon P. (Hendon S)
McCrindle, RobertPrice, David (Eastleigh)Townsend, Cyril D.
Macfarlane, NeilPrior, Rt Hon JamesTrotter, Neville
MacKay, Andrew (Stechford)Raison, Timothyvan Straubenzee, W. R.
McNair-Wilson, P. (New Forest)Rathbone, TimVaughan, Dr Gerard
Madel, DavidRees, Peter (Dover & Deal)Viggers, Peter
Marshall, Michael (Arundel)Renton, Rt Hon Sir D. (Hunts)Walder, David (Clitheroe)
Marten, NeilRenton, Tim (Mid-Sussex)Wall, Patrick
Mates, MichaelRhodes, James R.Walters, Dennis
Mather, CarolRidley, Hon NicholasWarren, Kenneth
Mawby, RayRidsdale, JulianWeatherill, Bernard
Maxwell-Hyslop, RobinRoberts, Wyn (Conway)Wells, John
Mayhew, PatrickRodgers, Sir John (Sevenoaks)Whitney, Raymond (Wycombe)
Meyer, Sir AnthonyRossi, Hugh (Hornsey)Wiggin, Jerry
Miller, Hal (Bromsgrove)Rost, Peter (SE Derbyshire)Winterton, Nicholas
Mills, PeterSainsbury, TimWood, Rt Hon Richard
Mitchell, David (Basingstoke)Shaw, Giles (Pudsey)Young, Sir G. (Ealing, Acton)
Moate, RogerShelton, William (Streatham)
Molyneaux, JamesShepherd, ColinTELLERS FOR THE AYES:
Morgan-Giles, Rear-AdmiralShersby, MichaelMr. Jim Lester and
Morris, Michael (Northampton S)Sims, RogerMr. John MacGregor.
NOES
Abse, LeoCrawshaw, RichardGraham, Ted
Allaun, FrankCrowther, Stan (Rotherham)Grant, George (Morpeth)
Anderson, DonaldCryer, BobGrocott, Bruce
Archer, Rt Hon PeterDavidson, ArthurHamilton, James (Bothwell)
Ashton, JoeDavies, Bryan (Enfield N)Hamilton, W. W. (Central Fife)
Atkinson, NormanDavies, Rt Hon DenzilHardy, Peter
Bagier, Gordon A. T.Davies, Ifor (Gower)Harper, Joseph
Bain, Mrs MargaretDavis, Clinton (Hackney C)Harrison, Rt Hon Walter
Barnett, Guy (Greenwich)Deakins, EricHart, Rt Hon Judith
Barnett, Rt Hon Joel (Heywood)Dean, Joseph (Leeds West)Hattersley, Rt Hon Roy
Bates, AlfDell, Rt Hon EdmundHayman, Mrs Helene
Bean, R. E.Dempsey, JamesHealey, Rt Hon Denis
Beith, A. J.Dewar, DonaldHeffer, Eric S.
Benn, Rt Hon Anthony WedgwoodDoig, PeterHenderson, Douglas
Bennett, Andrew (Stockport N)Dormand, J. D.Hooley, Frank
Bidwell, SydneyDouglas-Mann, BruceHoram, John
Bishop, Rt Hon EdwardDuffy, A. E. P.Howell, Rt Hon Denis (B'ham, Sm H)
Blenkinsop, ArthurDunnett, JackHuckfield, Les
Boardman, H.Eadie, AlexHughes, Robert (Aberdeen N)
Booth, Rt Hon AlbertEdge, GeoffHughes, Roy (Newport)
Boothroyd, Miss BettyEllis, John (Brigg & Scun)Hunter, Adam
Bottomley, Rt Hon ArthurEnnals, Rt Hon DavidIrvine, Rt Hon Sir A. (Edge Hill)
Boyden, James (Bish Auck)Evans, Fred (Caerphilly)Irving, Rt Hon S. (Dartford)
Bradley, TomEvans, Ioan (Aberdare)Jackson, Colin (Brighouse)
Bray, Dr JeremyEvans, John (Newton)Jackson, Miss Margaret (Lincoln)
Brown, Hugh D. Provan)Ewing, Harry (Stirling)Janner, Greville
Brown, Robert C. (Newcastle W)Faulds, AndrewJenkins, Hugh (Putney)
Buchan, NormanFernyhough, Rt Hon E.Johnson, James (Hull West)
Butler, Mrs Joyce (Wood Green)Flannery, MartinJones, Alec (Rhondda)
Callaghan, Jim (Middleton & P)Fletcher, L. R. (Ilkeston)Jones, Barry (East Flint)
Canavan, DennisFletcher, Ted (Darlington)Jones, Dan (Burnley)
Carmichael, NeilFoot, Rt Hon MichaelKaufman, Gerald
Carter, RayForrester, JohnKerr, Russell
Carter-Jones, LewisFowler, Gerald (The Wrekin)Kilroy-Silk, Robert
Cartwright, JohnFraser, John (Lambeth, N'w'd)Kinnock, Neil
Clemitson, IvorFreeson, Rt Hon ReginaldLambie, David
Cocks, Rt Hon Michael (Bristol S)Freud, ClementLamborn, Harry
Colquhoun, Ms MaureenGarrett, John (Norwich S)Lamond, James
Conlan, BernardGarrett, w. E. (Wallsend)Latham, Arthur (Paddington)
Cook, Robin F. (Edin C)George, BruceLeadbitter, Ted
Corbett, RobinGilbert, Rt Hon Dr JohnLee, John
Cowans, HarryGinsburg, DavidLestor, Miss Joan (Eton & Slough)
Cox, Thomas (Tooting)Golding, JohnLever, Rt Hon Harold
Craigen, Jim (Maryhill)Gould, BryanLewis, Arthur (Newham N)
Crawford, DouglasGourlay, HarryLitterick, Tom
Loyden, EddiePendry, TomTaylor, Mrs Ann (Bolton W)
Luard, EvanPenhaligon, DavidThomas, Dafydd (Merioneth)
McCartney, HughPhipps, Dr ColinThomas, Jeffrey (Abertillery)
McDonald, Dr OonaghPrice, C. (Lewisham W)Thomas, Mike (Newcastle E)
McElhone, FrankPrice, William (Rugby)Thomas, Ron (Bristol NW)
MacFarquhar, RoderickReid, GeorgeThorne, Stan (Preston S)
McGuire, Michael (Ince)Richardson, Miss JoTilley, John (Lambeth, Central)
MacKenzie, Rt Hon GregorRoberts, Albert (Normanton)Tomlinson, John
Maclennan, RobertRoberts, Gwilym (Cannock)Torney, Tom
McMillan, Tom (Glasgow C)Robinson, GeoffreyUrwin, T. W.
McNamara, KevinRoderick, CaerwynVarley, Rt Hon Eric G.
Madden, MaxRodgers, George (Chorley)Wainwright, Edwin (Dearne V)
Magee, BryanRodgers, Rt Hon William (Stockton)Wainwright, Richard (Colne V)
Marshall, Dr Edmund (Goole)Rooker, J. W.Walker, Harold (Doncaster)
Marshall, Jim (Leicester S)Roper, JohnWalker, Terry (Kingswood)
Meacher, MichaelRose, Paul B.Ward, Michael
Mellish, Rt Hon RobertRoss, Stephen (Isle of Wight)Watkins, David
Mendelson, JohnRoss, Rt Hon W. (Kilmarnock)Watkinson, John
Mikardo, IanRowlands, TedWatr, Hamish
Millan, Rt Hon BruceRyman, JohnWeitzman, David
Miller, Dr M. S. (E Kilbride)Sandelson, NevilleWellbeloved, James
Mitchell, AustinSedgemore, BrianWhite, Frank R. (Bury)
Molloy, WilliamSever, JohnWhite, James (Pollock)
Moonman, EricShaw, Arnold (Ilford South)Whitehead, Philip
Morris, Rt Hon J. (Aberavon)Sheldon, Rt Hon RobertWhitlock, William
Moyle, RolandShore, Rt Hon PeterWillams, Rt Hon Alan (Swansea W)
Murray, Rt Hon Ronald KingShort, Mrs Renée (Wolv NE)Williams, Alan Lee (Hornch'ch)
Newens, StanleySilkin, Rt Hon S. C. (Dulwich)Williams, Rt Hon Shirley (Hertford)
Noble, MikeSilverman, JuliusWilliams, Sir Thomas (Warrington)
Ogden, EricSkinner, DennisWilson, Gordon (Dundee E)
O'Halloran, MichaelSmith, John (N Lanarkshire)Wilson, William (Coventry SE)
Orbach, MauriceSnape, PeterWise, Mrs Audrey
Orme, Rt Hon StanleySpearing, NigelWoodall, Alec
Ovenden, JohnStallard, A. W.Woof, Robert
Owen, Rt Hon Dr DavidSteel, Rt Hon DavidWrigglesworth, Ian
Padley, WalterStewart, Rt Hon DonaldYoung, David (Bolton E)
Palmer, ArthurStewart, Rt Hon M. (Fulham)
Park, GeorgeStoddart, DavidTELLERS FOR THE NOES:
Parker, JohnSummerskill, Hon Dr ShirleyMr. James Tinn and
Parry, RobertSwain, ThomasMr. Donald Coleman.
Pavitt, Laurie

Question accordingly negatived.

Main Question put forthwith pursuant to Standing Order No. 39 (Amendment on second or third reading), and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).