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

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

Alert me about debates like this

Photo of Mr Hugh Fraser Mr Hugh Fraser , Stafford and Stone 12:00, 11 May 1978

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.