Orders of the Day — Glass Industry

– in the House of Commons at 12:41 am on 19 March 2001.

Alert me about debates like this

Motion made, and Question proposed, That this House do now adjourn.—[Mrs. McGuire.]

Photo of Bill Rammell Bill Rammell Labour, Harlow 12:42, 19 March 2001

I am very pleased to have the opportunity of this Adjournment debate to represent the interests and real concerns of my constituents who work at United Glass in Harlow. United Glass employs more than 300 people in Harlow, and theirs are the kinds of skilled and semi—skilled manufacturing jobs that used to be the bedrock of the local economy. However, they are also the kind of jobs of which we have lost so many over the past 20–odd years.

To put that in context, as recently as 1979 more than 50 per cent. of the jobs in Harlow were in manufacturing, whereas today the figure is barely above 20 per cent. Those are important jobs, because they provide ordinary working people with a career, stable employment and good remuneration—in short, the kind of job security to which many people aspire.

Those good, high—quality jobs would be at risk if the Government were to grant regional selective assistance—which has been applied for through the Department of Trade and Industry—to Quinn Glass to build a new glass manufacturing plant on the site of the old Ince B power station that straddles the border between Chester and Ellesmere Port. That application is the nub of the case that I wish to make this evening.

In making that case, let me make it clear that I am not asking for special favours, or for preferential treatment for United Glass and my constituents. I am simply asking for a fair deal and a level playing field. Open and fair competition in the marketplace is a spur to increased competitiveness. However, United Glass—along with other glass manufacturers—is not given taxpayers' money to support its enterprise, and I do not see why Quinn Glass should be given taxpayers' money to start an operation in a market in which there is already significant overcapacity, when the granting of regional selective assistance would—a great deal of evidence suggests—lead to the provision of jobs in the north—west of England at the expense of jobs in my constituency and elsewhere in Britain.

I am speaking not just on behalf of United Glass and my constituents; every other glass manufacturer in Britain is concerned about the Quinn application. The Minister will know that my hon. Friends the Members for Barnsley, Central (Mr. Illsley), for Ochil (Mr. O'Neill), for Cunninghame, South (Mr. Donohoe) and for Normanton (Mr. O'Brien), among others, have enunciated significant concerns, and that many of us accompanied representatives of the glass manufacturing industry to see a DTI Minister before Christmas to express our anxieties. We are united in our view that taxpayers' money should not be used to support Quinn Glass at the expense of jobs in our areas.

Part of my reason for initiating the debate is that our fears are based on historical precedent. In April 1997, the Northern Ireland Office granted Quinn Glass a £13 million grant from the Norther Ireland Industrial Development Board to develop a plant at Derrylin, in County Fermanagh. As there was already overcapacity in the industry, that has led—perhaps unsurprisingly—to a loss of nearly 1,000 jobs over the past few years, and a fall in profitability of nearly 50 per cent.

The development in Northern Ireland was undoubtedly a factor in the closure of the United Glass plant in St. Helens. I have to say, however, that just as bad as the actual decision and its impact was the way in which the decision was made by the last Conservative Government. It was, by any reckoning, a hugely controversial decision, made on 17 April 1997. The contract was signed on 1 May 1997, the day of a general election that everyone—including, I believe, the Conservative party and Conservative Ministers—knew would bring a change of Government. Yet despite the knowledge that there would be a new Government with a new outlook, a new set of priorities and a new set of policies, the Conservative Government had the arrogance to press ahead with the decision, and by the time this Government came to power it was too late to reverse it.

On the basis of that precedent, my constituents have a real fear that what happened in Northern Ireland can happen again. I hope and believe that under this Labour Government things can and will be different.

Let me say something about the background to the current economic situation in the glass manufacturing industry, against which I think this application should be judged. There is undoubtedly overcapacity in the industry, and there are real problems in regard to profitability and sustainability. The UK glass manufacturing and container industries unquestionably face real problems, and have done for some time. Demand has been falling, owing to increased competition from alternative packaging materials, while supply has been increasing, owing to the industry's heavy investment in new technologies that have produced substantial productivity advances.

Across the European Union, that has led to overcapacity, currently estimated at about 10 per cent. In Britain, the results have been stark: since 1997 glass manufacturing sales have declined by 7 per cent., and there has been a dramatic decline of 48 per cent. in earnings. That loss of profitability has been translated directly into a loss of jobs: the number of people employed in the industry has fallen from 5,400 to 4,400, a drop of nearly 20 per cent. I know of no other industry in which there has been such a significant decline in such a short time.

Moreover, important elements of production have moved outside the United Kingdom because of the continuing high value of the pound outside the euro, which makes it more economical to produce goods outside the UK. That has applied to Heinz, Cadbury and Ovaltine. Let me say as an aside that the situation is a powerful antidote to the views of the Conservatives and other anti-Europeans—from whom we have just been hearing—who argue that we should never join the single currency, regardless of the consequences for British manufacturing industry.

The situation is undoubtedly full of real difficulties. That is why the Quinn Glass application concerns us so much. We are concerned that Government funds could be used to increase capacity that will cause the loss of jobs elsewhere in the industry. The Quinn Glass proposal, to put it into context, is to establish capacity in the north—west of England to produce 1.1 billion bottles a year. Based on year 2000 sales figures, such capacity equates to about 16.4 per cent. of total industry sales. On any analysis, that is a very substantial development.

ECOTEC Research and Consulting has been commissioned by both United Glass and Wrexham Glass to quantify the likely impact of the establishment of such additional production on three areas of Great Britain—on Harlow, in my constituency; on the central belt of Scotland; and on south Yorkshire. There is already significant glass production in all three areas.

ECOTEC's research and analysis is very clear that, overall, the best we can hope for is that the new facility will result in a zero-sum gain, with output from the new facility likely to displace a roughly equivalent amount of output from other United Kingdom-based producers. On a more pessimistic analysis, which is offered in the research, there is a view that for every new job that might be created at the proposed site, two existing jobs in the industry and in supporting businesses elsewhere could be lost. If Quinn Glass wants to wreak such havoc on the United Kingdom glass industry, so be it. However, I do not know why it should be aided and abetted by taxpayers' money in so doing.

I should like, finally, to deal with two red herrings that are being offered to justify and support the Quinn application. First, it is suggested that the plant will not hit production elsewhere in Britain because Quinn wants to focus on exploiting the current importation of glass from elsewhere in the European Union. Last week's Packaging Magazine had clearly bought the spin from Quinn Glass which argued that import substitution would be its main target. I believe that that reassurance is false. I say that for various reasons.

There is no evidence from Quinn Glass in Northern Ireland that it has a strategy in place to substitute for imports. We also have to understand the nature of the increase in imports—from 7 to 13 per cent. of containers—in recent years. The major driver of that increase has been the high value of sterling. The situation for any of the companies is unlikely to change until the value of sterling decreases appreciably. Moreover, when sterling's value does depreciate, not only Quinn Glass but all United Kingdom glass manufacturers are likely to benefit.

It is also very important to understand that more than two thirds of imports into Britain are substitute production—for example, to replace production lost when furnaces are being refurbished—or are more specialised glass containers, such as toiletries and cosmetics and pharmaceutical containers. The specialised containers require specialised machines and, in some cases, different glass composition. However, there is no evidence to suggest that Quinn Glass intends to invest in such equipment at the proposed mainland site. Indeed, the reverse is true, with a suggestion that the site will produce high-volume beverage containers.

As for the scale of available imports that Quinn could target, those 330 million containers are dwarfed by Quinn Glass's proposed 1.1 billion production capacity in the north-west of England. The figures just do not add up. The argument that everything will be all right and that the new plant will simply target imports lacks credibility and should be taken with a pinch of salt.

The second red herring that has to be exposed is the notion that if Quinn Glass does not go to the north-west of England, the jobs that would have been provided there will be lost to northern France, where the application will receive French Government support. There is a link between the situation France and that in Germany. In Germany, there have been moves to plastic in the soft drinks and water sectors, coupled with implementation of a deposit system that will soon be applied to currently non-returnable glass. Consequently, German glass demand is expected to decrease in the next two years by a staggering 1 million tonnes. That is such a dramatic change for the German glass industry that it has engaged consultants to work on securing German Government grants to close down glassworks.

As 40 per cent. of the German glass industry is owned by French companies, and as there is already overcapacity in both France and the Benelux countries, it is inconceivable that, in current circumstances, the French Government would consider grant aid for extra capacity.

I am grateful to my hon. Friend the Member for Barnsley, Central, who has informed me that the Barnsley development agency, which has established a good line of communication to the French authorities because of the sensitivity of the issue, has been unable to trace any line of inquiry from a British company. The argument that the jobs would go to France is unsustainable.

I believe that thy, arguments against the granting of regional selective Assistance are very strong. As the Minister knows, in many senses the most important criterion in deciding whether to grant such assistance is the displacement impact on jobs. If it is concluded that grant aid would simply displace jobs elsewhere, the grant should be refused—and it is clear to me and to many others within the industry that grant aid in the circumstances that I have described would lead to a displacement of jobs. I hope that that will weigh heavily in the making of the final decision, and ultimately lead to a refusal.

There are also strong grounds for believing that granting assistance would be deemed to be unfair state aid under European Union competition rules. Indeed, several glass manufacturers are considering approaching the European Commission over the issue if the Government grant aid.

This is an issue of real significance and importance to my constituents in Harlow. More than 395 people are employed in the glass and associated sectors locally—320 directly by United Glass and the remainder indirectly supported by the sector It is not only the people who are directly employed who would be affected; there is also the knock-on benefit to the local economy. ECOTEC has estimated the associated supplier expenditure at £1.64 million a year, and employee expenditure in the Harlow economy at £3.6 million a year.

This is an enormously important issue in Harlow, both for its economy and for the people whose employment depends on the plant. My constituents simply would not understand if Government money, provided by the taxpayer, were used to undermine their jobs and their local economy. I therefore strongly urge the Government to listen to our concerns. I hope and believe that they will act to protect my constituents' interests. All we are asking for is a level playing field, and I hope that we shall get it.

Photo of Patricia Hewitt Patricia Hewitt Minister of State, Department of Trade and Industry 12:57, 19 March 2001

I begin by congratulating my hon. Friend the Member for Harlow (Mr. Rammell) on securing the debate and on drawing attention so eloquently to what I know is an enormously important issue for him and for other right hon and hon. Members who have glass packaging plants in their constituencies.

My hon. Friend has certainly teen a strong and assiduous supporter of those of his constituents who work at the United Glass factory in Harlow. He has set out admirably their concerns and the issues at stake in the regional selective assistance application. I must also acknowledge, as he has done, the close interest taken by other right hon. and hon. Members in the future of other existing glass packaging plants it South Yorkshire, Scotland and elsewhere, and the reaction of others who also see threats from potential investment in new plant.

I know that my hon. Friend and several other hon. Members expressed those serious concerns on behalf of their constituents when they came with employee and management representatives from son le of the major firms to see my right hon. Friend the Minister for Trade just before Christmas.

We do not often debate the subject of glass in the House. I suspect that we have all tended to take glass packaging for granted, whether it was the humble milk bottle on the doorstep, the traditional bottle of beer, or the bottle of headache pills. Glass bottles have been with us for centuries. However, we have now come to accept that milk can also come in cartons, beer in cans and pills in foil wrapping in boxes.

The fact that we still have a sizeable glass packaging industry in Britain is a reflection of the flexibility and adaptability of the manufacturers who have innovated, designed new products and sought out new markets. At the same time, there have been very strong competitive pressures on the glass industry generally which have, unfortunately, led to real difficulties, such as at Ravenhead Glass at St. Helens. The glass packaging sector, in particular, has had to respond to its own competitive threats, not least from alternative packaging materials.

Before I turn to the specific issue raised by my hon. Friend, perhaps I could refer to the support that has been given to the British glass industry since the Government came to office—not, of course, including the previous grant to Quinn Glass. Since 1 May 1997, offers of regional selective assistance totalling some £18 million have been accepted by the United Kingdom glass industry overall, of which £1 million has gone towards the manufacture of hollow glass. In addition, my Department has been working with British Glass and Glass Technology Services Ltd. in a number of areas, including financial support for an innovation project to design safer screw threads on glass bottles and assistance with the establishment of a glass manufacturing improvement club.

We held discussions last year with British Glass, the trade association for the sector, about other projects, including a competitiveness analysis I regret that those discussions have not progressed s we had hoped. However, I stress that if the glass industry wishes to take these or other issues forward, the door remains open. I strongly urge them to consider working with the Department on a competitiveness analysis. I hope that my hon. Friend will make that point to his constituents and to British Glass. A competitiveness analysis can lead to the identification of further areas in which the Department and the sector could work to best advantage.

On my hon. Friend's central concern, Quinn Glass has confirmed publicly that it is seeking UK Government support towards the establishment of a new manufacturing facility in the north-west region. I can therefore also confirm that the Department is currently considering and appraising an application for regional selective assistance from the company. However, as with any RSA application, all the information contained in it is commercially confidential. I know that my hon. Friend understands that, and I hope that he will also understand when I say that I am not able to discuss the company's application in detail.

In potentially sensitive cases such as this, I have heard it suggested that the Government should not even consider an application for regional selective assistance. However, I stress that providing an application meets the qualifying criteria for regional selective assistance; we cannot refuse to consider it. Each application is rigorously assessed against a number of detailed criteria which are published. The application is then considered by the Industrial Development Advisory Board—an external adviser—which makes a recommendation to Ministers on each case.

I am afraid, for the reasons that I have given, that I am not able to discuss progress on the Quinn Glass application for RSA, nor can I say when the case might reach the final stages of consideration. However, I can assure my hon. Friend and his constituents that the specific issue of job displacement is one of the key criteria that has to be considered on any RSA application and will therefore be considered on this application.

I have one final point on Quinn Glass; my hon. Friend has also referred to it. The Government would be powerless to prevent any investment by Quinn Glass if the plant were to be constructed without support—assuming, of course, that it met planning and other appropriate requirements. Nor could we stop imports to this country if that plant were to be constructed on an alternative site elsewhere. I am sure that my hon. Friend and his constituents understand that.

I referred earlier to the meeting with my right hon. Friend the Minister for Trade in December, when he indicated that he was reviewing the glass packaging sector. That work has progressed on two fronts. First, as part of the appraisal for this application, against the published criteria, we are considering a number of economic areas, including job displacement. That work of appraisal is in hand but, like the Quinn Glass RSA application, the information will have to remain commercially confidential.

We have also commissioned Key Note Ltd. to update an earlier market research report on the glass packaging sector published in 1999. That earlier report has been extensively quoted in other papers on the glass packaging sector which I have seen. The new report from Key Note Ltd. has just been received by the Department. It will form part of the information used in appraising the Quinn Glass RSA application. I am therefore pleased to announce that the Department can now make copies of the new Key Note market research available to the glass packaging industry.

We are also maintaining close contact with the sector, and officials are scheduled to meet representatives from a number of manufacturers, including United Glass, next week. I am sure that my hon. Friend will appreciate that in all our dealings with the glass packaging sector, Ministers and officials have tried to provide as much information as possible while respecting the requirements of commercial confidentiality.

I must also mention letters from right hon. and hon. Members and information about the glass packaging industry which we have received from other parties in recent months. We have received a report commissioned by Barnsley development agency from ECOTEC Research and Consulting Ltd., which considered the economic impact of the Quinn Glass proposal on Barnsley, South Yorkshire and the wider regional economy. We have had a briefing paper on the UK glass packaging industry structure dated November 2000 and a paper from British Glass entitled "The UK Glass Container Industry Review", dated spring 2001. All those reports are being considered during the appraisal of the Quinn Glass RSA application.

My hon. Friend mentioned overcapacity, which is an important issue in the sector. I was interested to read in the latest paper from British Glass that the estimate of overcapacity in the glass packaging sector is now only 5 per cent. compared with the figure of up to 20 per cent. which was quoted it the meeting in December. I also noted that imports into the United Kingdom in 1999 took some 19 per cent. of the market, although of course part of that total may have come from UK firms importing from their associate plants on the continent.

I end by saying how much I appreciate the enormous anxiety that will be felt during this period of uncertainty by the constituents whom my hon. Friend represents. Once again, I assure him and his constituents that we fully understand the importance of the issue and that we will take all the relevant factors, including job displacement, into account when the decision is made on the basis of the published criteria.

Question put and agreed to.

Adjourned accordingly at seven minutes past One o'clock.