Steel Industry

– in Westminster Hall at 12:00 am on 10 January 2001.

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Motion made, and Question proposed, That the sitting be now adjourned.--[Mr. Touhig.]

Photo of Mr Llew Smith Mr Llew Smith Labour, Blaenau Gwent 9:30, 10 January 2001

As someone who, many years ago, worked for a short time in the steelworks and who now represents a constituency that includes the major steel plant at Ebbw Vale, the debate, for me, is about jobs, about communities, about one of our great industries--steel. Linked to that, it is also about the United Kingdom's future as a manufacturing nation.

Sadly, that agenda was dismissed by Corus and its immediate predecessors. Their agenda--the only thing of interest to them--was summed up by the chairman of Corus, Brian Moffat, when he announced that he and his company were in business to make money, not steel. That philosophy was not reflected in the public statements made when Corus was first formed. On that day, I received a telephone call from one of the directors, Mr. Vickers, who wanted to assure me that the steel industry was safe in Corus's hands--which was similar to Mrs. Thatcher's statement that the health service was safe in her hands.

In retrospect--and, as always, wishing to be polite--I have to say that neither of them was telling the total truth, because since then, thousands of jobs have been lost in the UK steel industry and some plants are now threatened with closure. In that telephone conversation, Mr. Vickers also wanted to assure me that there was no threat to the Ebbw Vale steel plant and that its future was secure. I hope that I never have to accuse Mr. Vickers of lying on that matter.

Whatever criticisms I might have of the company, however, a lack of consistency would not be one. From the word go, money was its only interest. If anyone questions that, I suggest that they pause for a moment and examine the facts. When Corus was formed, the first act of the board of directors was not to announce plans for future development but to pay out £694 million to its shareholders. That transfer had nothing to do with the shareholders' contribution to the success of the company but was another example of corporate greed--of lining the pockets of the fat cats of industry who have done so much to damage British industry. Such behaviour was reflected and encouraged in the Thatcher years. Sadly, that aspect of Thatcherism is still alive and kicking; and nowhere is it more obvious than in the boardroom of Corus--as it was previously. The directors are the true inheritors of that rotten tradition.

Corus also decided to use the law to rip off its pensioners, the former steelworkers who had built the industry and the company into one of the most successful in the world. As the Iron and Steel Trades Confederation stated in its evidence to the Select Committee on Trade and Industry in November 2000, the steel bosses had appropriated unilaterally £863 million from a surplus in the British Steel Pension Fund and were using it to reduce company contributions to the fund. The most disgraceful part of that episode was that most of the money invested in the pension fund, which had been built up over many years, was paid in by the publicly owned British Steel corporation. It should not be forgotten that in the 1970s and 1980s the British taxpayer supported the corporation. In effect, the money expropriated by Corus and its predecessors was British taxpayers' money. When Corus was set up it was also decided to give massive remuneration to the former Dutch senior management. Surprise, surprise, there was no proposal to bring the wages of the British steelworkers up into line with those of their Dutch counterparts.

Another point that arises in relation to money, and one that affects the United Kingdom steel industry, is that the former British Steel was--at least when compared with Corus--a comparatively prudent organisation. It would endeavour to maintain a cash reserve in profitable times to tide it over when the inevitable downturn came in the notoriously cyclical steel market. Yet by September, Corus had accumulated debts of more than £1.86 billion. Far more worrying is the fact that its most pressing current problem is financing the debt, which is costing Corus close to £1 million daily.

Corus was warned by the trade unions that its strategy was dangerously wrong, but their advice was, as always, ignored. Why should Corus listen to working people when what they wanted was to produce steel? I assume that that is why Corus, unlike companies on the continent, refuses to consult steelworkers on the future of their industry.

Photo of Mr Richard Livsey Mr Richard Livsey Liberal Democrat, Brecon and Radnorshire

I agree entirely with the hon. Gentleman about the management of Corus. Would it be prudent to ask why the Department of Trade and Industry allowed the amalgamation of Corus and British Steel? Does the hon. Gentleman agree that the Minister needs to defend and explain the decision? The consequences, as the hon. Gentleman has said, are devastating, especially to the steel industry in Wales.

Photo of Mr Llew Smith Mr Llew Smith Labour, Blaenau Gwent

The question was directed to the Minister, who will, I am sure, if not defend, explain the decision to allow the amalgamation.

Recently, Mr. John Bryant and the other joint chief executive were sacked. They were obviously being held responsible for the problems of the company. There is something called corporate greed, and surely there is also something called corporate responsibility. The decisions taken by Bryant were not taken in isolation or in opposition to Sir Brian Moffat and the rest of the board of directors. If sackings were necessary, the whole board should have gone, because it was obviously collectively responsible for the decisions that were taken. If Bryant had to go, Moffat and other board members should have followed.

If the press speculation is to be believed, at the time of the supposed resignation--in reality, the sacking--of Bryant and the other chief executive, they shared massive payouts of between £1 million and £2 million. Failure obviously does not come cheap in Corus. It will not come cheap for steelworkers in communities like mine. Their payments will not be as generous as the one that Mr. Bryant received. For Sir Brian Moffat and his board of executioners, the price will be worth paying if it safeguards their necks and their executive share options.

The ISTC would argue that

The new approach of the company seems to be based on an intention to concentrate on the home market and to reduce export efforts to attempts to retain or capture niche areas. This would mean abandoning most markets in other European Union countries to which nearly half of Corus's production in Britain is presently exported. The ISTC also points out that Corus pays no heed to the increased vulnerability to which the company would expose itself, stemming from reliance on the declining British manufacturing sector...the opportunities for building on the hard won markets in other European Union markets which are growing relatively fast...the prospect of a massive strengthening of the competitiveness of Corus products' as a result of the appreciation of the Euro against Sterling. Indeed, the euro is strengthening, which is assisting Corus, and it is about time that Corus admitted that fact.

Also mentioned is the problem of the demoralising impact on the outstandingly productive, skilled, and loyal workforce in Corus. Although the contribution of the board of directors and the shareholders has been virtually nil to the development of the company, that cannot be said of the workers.

One of my predecessors, Aneurin Bevan, was fond of saying, "This is my truth; now tell me yours." Well, this is the truth, as far as the record of the work force is concerned, as opposed to the records of the likes of Moffat and the directors of the company. Productivity gains in the Welsh steel industry during the past 20 years rank with the best in the world. Productivity increased from 134 tonnes a man year in 1979 to 597 tonnes a man year in 1999. According to Eurostat, that compares favourably with Germany, at more than 540 tonnes a man year, and France, at 530 tonnes a man year.

Sadly, the work force have not benefited from the increased productivity, and the reason for that is obvious. The productivity, like that of other steelmaking countries in the European Union, has mainly come about because of a reduction in employment. The importance of the Welsh steel industry to the Welsh economy also needs to be stressed.

Photo of Mr Barry Jones Mr Barry Jones Labour, Alyn and Deeside

I congratulate my hon. Friend on obtaining the debate, and on fighting hard and tenaciously for his community.

My steelworks, Shotton, once employed more than 14,000 steelworkers, but that figure is now dipping below 1,000. On Deeside, our community is terrified of losing its cold strip mill with the loss of 300 jobs. Our steelworkers have been very productive despite that, but they have never been rewarded for being productive in the face of giving up their jobs. I urge my hon. Friend to fight on.

Photo of Mr Llew Smith Mr Llew Smith Labour, Blaenau Gwent

The points made by my right hon. Friend about his constituency apply almost exactly to mine. Not many years ago, our steelworks employed 13,000 to 14,000 people, but that figure is now down to 800 to 900. The work force in Ebbw Vale, like the work force that he mentioned, have co-operated with the management on every occasion, increasing productivity, to the benefit of the company. They can be proud of that.

I should stress the importance of the Welsh steel industry to the Welsh economy. In 1999, it produced 6.8 million tonnes of crude steel out of the United Kingdom's total of 16.3 million tonnes. It accounts for about 5 per cent. of Welsh gross domestic product and 42 per cent. of all crude steel produced in the UK.

Those figures clearly show the increased importance of the Welsh sector's contribution to the UK steel economy. In 1999, Welsh steelworks delivered 6.1 million tonnes of finished steel products, of which 2.7 million were exported outside the UK. The prospects for Welsh steel are therefore closely linked to the performance of UK manufacturing and construction. The industry employs 12,000 people, and it is estimated that a further 27,000 jobs directly or indirectly depend on it. If the steel industry were to be run down, the impact on the Welsh economy and other parts of the UK economy would be almost too frightening to contemplate. During the three years up to 1999 there were 3,000 job losses in the steel industry in Wales, reducing the work force from 14,000 to 11,000. Some 1,300 jobs were lost as a result of last July's announcement.

There has been much press speculation about Llanwern. If the fears about Llanwern are proven correct, with a consequent knock-on effect on other plants in Wales, particularly the plant at Ebbw Vale in my constituency, the number of steel jobs in Wales could fall below 5,000. The Government must be aware of the catastrophe that would hit our communities if large-scale redundancies were announced. What talks have the Government had with Corus and the trade unions regarding the proposed redundancies? What role can the Government play in averting those job losses? What would be the environmental cost of cleaning up and clearing the Llanwern site, if that site were closed? Who would be responsible for that cost? What are the Government doing to develop a strategy that promotes the development of manufacturing in the UK and ensures the survival of the steel industry, especially in its current configuration?

The managing director of Corus Strip Products, Nick Craggs, seemed to recognise, in principle, the need for such a strategy, when he said:

I do not believe that the UK economy can survive and prosper on traded services alone. He went on to refer to the fact that manufacturing contributes an increasingly smaller share of UK GDP--it contributes roughly 20 per cent. at present. I would challenge Craggs. If he believes that manufacturing is so vital to our economy, he should prove it by fighting to maintain the UK steel plants' current configuration. Steel is the basis of innumerable manufactured products and demand for steel is a good indicator of business conditions. We need good manufacturing jobs, which will in turn encourage further inward investment and create high quality jobs.

Corus has shown a marked reluctance even to maintain existing UK facilities, and the lack of investment in the UK since the company's formation must result in declining competitiveness. As I said, if the recent speculation regarding the future of Llanwern is correct, it is now obvious why Corus, without any reservations, failed to commit itself to the re-lining of the plant's No. 3 blast furnace.

The failure to stand up for the steel and manufacturing industry is catastrophic for our communities. Those communities have still not recovered from job losses in years gone by in the coal and steel industries. When they get jobs, those jobs are too often low-paid, part-time, non-union and soul-destroying. They are some of the most deprived communities in the land, and they suffer all the social problems that go with poverty.

Steelworkers in my constituency are angry, as are steelworkers throughout the United Kingdom, because this is a United Kingdom problem. They are determined not to sit back; they are determined to fight these job losses. They are determined to fight for their jobs and their industry and for our communities. There is much at stake, and I am confident that any action that steelworkers may take to defend their jobs and their industry will receive the support of Labour Members and everyone else interested in those communities.

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Many hon. Members want to take part in the debate. However, it is relatively short and contributions should be brief so that we can fit in as many hon. Members as possible.

Photo of Mr David Prior Mr David Prior Chief Executive & Deputy Chair, Conservative Party 9:49, 10 January 2001

I worked for British Steel during much of the 1980s, and have that in common with Mr. Smith. I am aware of the deep emotions that run through the steel industry. Few industries in this country attract a similar degree of commitment and loyalty. Having worked in the industry for seven or eight years, I feel a commitment to it that I suspect I shall have until I leave this earth. Working in the industry has not been easy. It is like climbing a mountain: every time that one reaches a peak, there is yet another peak to climb before the summit is reached. I think that more than 10,000 people worked in Llanwern back in 1979; today there are only 3,000. It is a tragedy that that plant's future is once again in question.

This debate is not just about the steel industry; more important, it is about manufacturing as a whole, because the steel industry can survive only if this country has a competitive and thriving manufacturing industry. There was a brief time during the 1980s when it became fashionable to think that we could turn our economy into a service economy, that manufacturing did not matter, that we could rely on bankers, accountants and lawyers, and that people who got their hands dirty were less important. Sadly, in certain areas and in wine bars in Islington, that view has once again taken root. Reading a biography of Winston Churchill recently, I was struck by his description of people who hold that view. He said, I think in 1927, that they were the glittering scum which floats upon the deep river of production.

We need a strong, dynamic and competitive manufacturing base for this country's security, for employment and, more important in the long run, for economic stability. To put all our eggs in the service-sector basket would be crazy. However, I stress the word "competitive". Our industries must be competitive. There must be no return to the dark days of the 1960s and 1970s when so much of our industry became uncompetitive compared with those of other western economies.

There is, rightly, a limit to the role of Government. Government interference in the steel industry has not been a happy experience. The chops and changes that we experienced during the 1960s, 1970s and 1980s as Government policies swung from one direction to the other did not help the steel industry. That is particularly true today because world markets have become much freer and globalisation has come out of the economic textbooks and into real life. In a global economy, the Government have two overriding responsibilities. First, they must allow British industry to operate from a level playing field. If they saddle our industries with costs that our competitors do not have to carry, we will lose jobs and market share. Secondly, they must manage the economy in such a way that interest rates are as low as possible and exchange rates are, consequently, as competitive as possible.

On the level playing field argument, the climate change levy, which the Government are about to implement, will place £12.5 million a year in extra costs on Corus. Big users of electricity in this country are at a competitive disadvantage compared with other users in the European Community, which costs Corus about £40 million. In the case of gas, the cost is about £30 million. Those are just three examples of costs that the Government have allowed Corus to absorb but that its overseas competitors do not absorb. If we add to those the costs of complying with regulations and directives--whether from Westminster or Brussels--British industry as a whole is increasingly competing on a playing field that is no longer level.

I was struck by the figures from British steel producers, which showed that steel consumption in this country over the past few years has fallen by 10 per cent., whereas it has increased in Germany over the same period by 10 per cent. and in the United States of America by 28 per cent.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

Who was in government in that period?

Photo of Mr David Prior Mr David Prior Chief Executive & Deputy Chair, Conservative Party

In running the economy, low interest rates are important in themselves but--more important--the lower interest rates are, the more competitive our exchange rate will be. The single most important factor in explaining the problems that Corus has had over the past three years is probably the high sterling-euro exchange rate.

If Conservatives were in government now, Labour Members would be furious with them; they would have shouted from the rooftops about their failure to intervene. My contention is that, at best, the Government have stood by and done nothing and, at worst, have added costs to the British steel industry; that has made the closure of Llanwern and further redundancies and plant closures inevitable.

Photo of Paul Flynn Paul Flynn Labour, Newport West 9:55, 10 January 2001

I shall be as brief as possible. My claim for speaking today is that I worked in the steel industry for 30 years--20 of them at Llanwern. I remember being there when the first coke was pushed and when the first iron and steel was made. People who were apprentices with me are now approaching retirement age. The story of Llanwern, as told by the previous speaker, has been a rollercoaster, but the ups and downs have become closer over the past couple of years.

Local people have experienced a damaging and debilitating time. If somebody had deliberately deployed psychological warfare against those working in the steel industry and their families, they could not have done a better job. The intention, of course, was not deliberate, but those people have been assaulted by rumours, sometimes good, sometimes bad. In August, an announcement was made about the re-lining of the No. 3 blast furnace, which was greatly welcomed, but people are constantly hearing bad news, which destroys the morale of the workers and saps their resistance and their ability to fight back.

I still find it inconceivable that Llanwern is being closed. I remain optimistic, as I have been for many years. I worked in the steel industry in the 1960s and 1970s, and have seen the absolute certainty of closure during that time, followed by the great slimming down of the industry during the 1980s. The recent story is one of remarkable success and the message today is that Llanwern steelworks is sound. It is superbly efficient and its productivity has improved vastly, to world-class standards. The work force has risen to every challenge put to it by the market and has changed its skills and working practices. The work force has been reduced from a maximum of 10,000 to fewer than 3,000--and it is now approaching 2,500. According to Mr. Prior, the industry has seen a 28 per cent. increase in consumption in the United States in the period 1989 to 1999. It is regrettable that the present situation is turned into a blame game against Governments of any party, because that is not the answer.

I agree with my hon. Friend Mr. Smith, to whom we are grateful for securing the debate, but I shall not repeat what he said. There is anger at Corus's lack of willingness to talk to the Government, to the Prif Wenidog of the Welsh Assembly and to everybody else, because they have a great desire to assist. We have heard from all parts of Government that many other industries approach them, tell them what is going on, open their books to them and tell them what they are thinking. Corus, however, has been secretive, and any ability to help and to act in the British interest is blunted by its refusal to open its books.

We see increasing steel production in Europe, and I am grateful to my hon. Friend Mr. MacShane for setting out the unfairness of the present position. As hon. Members and representatives of the Government, We must make a stand for Welsh steel--for British steel--to ensure that steel, which has been the bedrock of Welsh industry in recent years, contributing, even in its present depressed state, 6 per cent. to the Welsh GDP, has a share in the future. We cannot be dazzled by industries that appear and disappear rapidly, although we must welcome high-tech industries and acknowledge their position. We have been successful, particularly in Gwent, in doing so, but we must not turn our backs on manufacturing industry. Llanwern is high tech and it is a success story. It has had massive investment--£1,000 million--over the past 10 years. The problems are price, the market and currency.

When I talk about Llanwern I do not see a steelworks; I see the faces of all those with whom I worked, who are now my constituents, and their families, who are worried about whether they will be able to pay the bills and the mortgage. They have suffered a long period of anxiety. I appeal to all those in power to see closure as a great tragedy that might happen unless we act now. Permanent damage might be done to those families, Wales, Newport and the Welsh and British steel industries because of temporary difficulties that are already being solved. That would be a terrible crime.

Photo of Mr Dafydd Wigley Mr Dafydd Wigley Plaid Cymru, Caernarfon 10:01, 10 January 2001

I echo the words of the hon. Members for Blaenau Gwent (Mr. Smith) and for Newport, West (Mr. Flynn) and of Mr. Jones. I hope that Treasury Ministers respond to their heartfelt pleas, not with soft words but with action that will help safeguard the plants that are in danger.

When I entered the House of Commons in 1974 it was after six years in manufacturing industries that were steel-using: three years with Ford in Dagenham and three years with Hoover in Merthyr Tydfil. It is sad to see the condition of those two plants, compared with the employment that they generated back in the 1970s. We now face the possible catastrophe of the closure of Llanwern and the knock-on effect that that would have on the Ebbw Vale, Trostre and Shotton plants, which process stripped steel. There is talk of mothballing. One may be able to mothball plants, but one cannot mothball workers--who are the greatest asset of any company. If the work force dissipates, it will not be possible to put it together again.

The irony is that there has been a massive improvement in productivity at Llanwern. In the early 1980s, Llanwern employed 4,700 people with an output of around 2 million tonnes. By 1997, the work force was down to 3,000 but the output was up to almost 3 million tonnes; in other words, productivity had increased from 452 tonnes per worker per year in the 1980s to 952 tonnes per worker per year now. That figure at Llanwern compares to 750 tonnes per worker per year in the Corus plants in Holland. That highlights the great irony that, despite the much greater efficiency in the UK, there is increased importing of steel. Monday's figures show that the import level of steel used in the UK last year was up to 47 per cent., compared with 44 per cent. in 1999 and only 12 per cent. back in the 1970s.

Why therefore is Corus threatening to close plants in the UK, with massive redundancies? First, there is the strength of the pound. The Treasury needs a different strategy on that because it hits not only steel but manufacturing generally, tourism, agriculture and the whole economy. Taxation needs to be used as the lever to free up Eddie George to bring down interest rates and ensure a lower parity for the pound. That is a central responsibility of the Government. The ground rules laid down for the Bank of England must be changed to make employment as important a consideration as fiscal policy.

Secondly, there are different rules relating to redundancy in Holland, where prior permission from the director of the district labour exchange is needed before dismissals or similar action can take place. Dismissals can be examined retrospectively by the courts there, which can direct compensation. As noted in European Union investigations, that undoubtedly has an effect.

Steel has to compete within the one market in the European Union. Our working people need a level playing field for the protection of redundancy law. The Government should examine that in the longer term. In the short term, action could be taken to help with uniform business rates. In crises, that can be done and I hope that the Lib-Lab Government in Cardiff will move quickly on that front.

The impact of energy bills on industry is also important. As we move towards more renewable energy policies, we must ensure that we do not undermine industries--such as the steel industry--that have heavy energy usage. We need a strategy to minimise the effect of closures and redundancies on communities and affected individuals. What is the Department of Trade and Industry's strategy? Does DTI strategy include a rescue package for the steel plants? Have approaches been made to the European Union regarding derogation from the rules because of the crisis in the industry?

I was accused of scaremongering by DTI Ministers when I raised the dangers to Llanwern 18 months ago. My accusations reflected the culpable complacency of the DTI. I hope that today's response will provide something different because today the chickens are coming home to roost.

Photo of Denis MacShane Denis MacShane Labour, Rotherham 10:06, 10 January 2001

As always when debating the steel industry, I refer to my entry in the Register of Members' Interests and my possession of 25 Corus shares. I congratulate my hon. Friend Mr. Smith on an excellent speech, which will find echoes all over Yorkshire.

The steel industry is in crisis, partly of its own making and partly due to events beyond its control. The Government are aware of the problem and have put money into my area to help with the transition. Before Christmas, the Prime Minister met a dozen steel constituency Members of Parliament to discuss problems. The Chancellor and other Ministers have also welcomed delegations of such Members. Like Corus, however, the Government are prisoners of an inheritance left by the previous Administration. The two main reasons given by the UK steel industry and Corus for the present crisis, which threatens misery for thousands of families, are the high value of the pound against the euro and the plight of manufacturing industry generally.

Since 1996, British steel firms have posted an average loss of £60 million a month on exports to Europe because of the high value of the pound sterling. The year 1996 is important because the pound rose by nearly 30 per cent. against the deutschmark in the final year of the Tory Government. That was the last gasp of the boom-and-bust economy of the Conservatives, who refused in this era to promote any measures to ensure currency stability. That has cost steel and manufacturing dearly.

Since I entered the House in 1994, I have pleaded with British Steel, now Corus, to call publicly and clearly for Britain to get into alignment with the euro-zone currencies. But my pleas fell on deaf ears, as the company did not want to embarrass its friends in the Conservative Government and was enjoying short-term windfall profits after the 1992 devaluation. Let me make it clear again today that the UK steel industry will have no sustainable long-term future as long as our currency remains out of kilter with the rest of Europe.

Continuing ideological hostility to Europe is one legacy from the Tories that has grievously undermined steel. Even more damaging was the 20-year onslaught--not just a flicker in the middle of the 1980s--delivered on the manufacturing economy by the previous Administration. It was a deliberate policy, not chance.

It is untrue to argue, as Ministers did then, that the decline in steel reflects a worldwide change in consumption or spending patterns. On the contrary, steel consumption is increasing everywhere in the world, save Britain. During the 1990s, the United States--for many economists, the nation paving the way for the so-called post-industrial weightless economy--increased its use of steel by 28 per cent. Under the previous Administration over the same period, steel consumption in the United Kingdom decreased by 10 per cent. In Europe, sensible tax and energy-pricing policies in the 1980s encouraged the use of electric arc furnace production, which is by far the most environmentally friendly form of steel production. Since 1980 in the UK, there has been a significant decline in electric arc furnace production, which is highly relevant in South Yorkshire.

Our shopping malls, homes, and two and three-car families show that our economy is getting heavier and weightier; we buy more manufactured goods, but fewer of them are made in the United Kingdom, so less steel is needed.

Steel remains a great export earner for Britain, but until we reverse the anti-manufacturing policy deeply embedded in our policy-making culture in the past 20 years and learn from countries such as the United States of America or even Switzerland, for heaven's sake, which consumes more steel per capita than Great Britain, our industry will face great difficulties.

I support the knowledge economy. In steel plants, more workers sit behind computers than in front of furnaces. Information technology accounts for 30 per cent. of steel's investment each year. Thanks to the co-operation and the wise leadership of the Iron and Steel Trades Confederation, there has been a 10 per cent. growth in productivity year on year since 1990. That is a rate of productivity growth that the Chancellor would die for in other sectors of the economy, yet there has been a steady attrition of jobs. Shareholders have been protected; 12 months ago £800 million was paid to shareholders as a sweetener for the merger with Hoogovens to form Corus. Last year, savage job cuts were announced leading to the threat of strike action in Yorkshire, on the Humber. That is remarkable in an industry that does not contemplate strike action easily; it shows how angry the men are. As my hon. Friends said, the spectre of mass closure, which is not justified or necessary, looms.

Angry and emotional words have been exchanged, but with good will and the willingness of Corus, the Government and others with a stake in steel to compromise rather than stick to rigid positions, a future for steel can be sustained. First, Corus must move from the them-and-us attitude of the 1980s and develop a new partnership approach based on full and frank information and consultation with its work force, the unions and representatives of the steel community. That will not stop redundancies; the rate of decline in manufacturing jobs in the Netherlands has been faster than in the United Kingdom and it is wrong to pretend that there is a magical European solution that can save jobs. Corus must come into the 21st century. Sharing full and accurate information and consulting adequately and in time will not avoid painful decisions, but the culture of playing cards close to the chest and management by press release, not partnership, must stop.

Secondly, Corus must develop a clear, international, analytical capability. The huge mistakes over potential investment in Indonesia and Poland suggest that Corus lacks a global or European strategy based on a sophisticated knowledge of the international economy and political developments.

Thirdly, Corus must come out of the closet on Europe. It must understand that the days of not wanting to embarrass the wretched Tory party--the "glittering scum" of today's politics--are over. Corus must campaign openly and clearly for the interests of the steel industry in terms of European currency stability. Already, currency movements favour steel. According to Corus and the United Kingdom Steel Association, every time the pound moves by 10 pfennigs against the deutschmark--I use that example because the euro is not yet fully operational--£80 million is wiped off the bottom line of UK steel exporters. While the converse is true--

Photo of Denis MacShane Denis MacShane Labour, Rotherham

The hon. Gentleman will forgive me if I carry on, as there is a time limit.

The pound has dropped from DM3.40 in the middle of the summer to less than DM3.10 today. It is irrelevant that the deutschmark or the euro has strengthened or the pound has weakened. What it means is that £240 million in bottom-line profitability has been restored to Corus because of the highly welcome currency movement. Corus could be making another geopolitical and economic error by announcing a major loss in capacity just when currency movements are no longer penalising exporters.

The Government must do more; why are electricity prices for United Kingdom steelmakers 40 per cent. higher than for our European competitors? It is a pricing policy aimed against industry, inherited from the Conservative Government. Why are we fiscally penalising environmentally friendly electric arc furnace production? The total gain to the Treasury is £1.9 million. The Prime Minister heard about that yesterday. He has heard it from MPs. It is not much money for the Treasury but it is a big signal for steel.

What can be done to ensure that the Chancellor's boost in public investment following the disgraceful lack of investment in our infrastructure by those wretched Conservatives is channelled into infrastructure renewal that uses British-made steel? The American Department of Defense consumes plenty of American-made steel. Can our Ministry of Defence fly the flag a bit higher for British manufacturing? What can the unions, with all their different positions in manufacturing and on Europe, do to find a common voice on Europe and on the need for a tax and regional policy that promotes manufacturing investment?

If we can accept the need for co-operation and partnership, it may be possible to save steel jobs and keep this crucial export-earning industry as a significant part of the UK economy. But if senior management, Ministers and other representatives of the steel industry all insist that it is someone else's fault and that their policy cannot be challenged or changed, that bunker mentality will see the furnaces of high-volume steel output in Britain shut down. That must not be allowed to happen.

Photo of Derek Wyatt Derek Wyatt Labour, Sittingbourne and Sheppey 10:16, 10 January 2001

I congratulate my hon. Friend Mr. MacShane on his speech. Much has changed since we last discussed steel. My steel company, Co-Steel, was then owned by Canadians. Now, I am glad to say, it is owned by some very fine Welshmen. It is a British company. Yesterday, the share price for ASW/Co-Steel was 7p. That reflects the City's nervousness about ASW's current overdraft facility; I shall return to that later.

ASW/Co-Steel in Sheerness is now a much better managed and friendlier place than when the Canadians ran Co-Steel. Graham Mackenzie, the current chief executive, overall is very approachable and hard-working and is trying to get the unions a much better deal, especially the Iron and Steel Trades Confederation, which was banned for so many years there. That is a significant and welcome change by the employers.

I have four questions. First, what talks has the DTI initiated with ASW/Co-Steel about supporting its current financial position? So often the DTI seems to come second, third or fourth to big issues. One thinks of Vauxhall, Ford, BMW and Rover. It would be nice just for a change if it could be proactive and sit alongside this industry to see what it could do, particularly with the overdraft facility of ASW.

Secondly, other hon. Members have mentioned the climate change levy, which I support, but there is not much sense if it is not to be introduced at the same time by our rivals in Europe. That seems complete madness. If it is supposed to be for the benefit of all Europeans, we should introduce it on the same day. I urge the DTI to twist the Treasury's arm on this. That little help would be just over £1 million of additional bottom-line cost for ASW/Co-Steel.

Thirdly, when was the last time that the DTI and the Treasury sat down together to look at pension funds? One of the attractions of Co-Steel when it was with the Canadians was its sizeable £19 million pension fund. However, when ASW and Co-Steel were merged, ASW, by the way that it changed the trustees of the pension funds, got access to the £19 million. Its pension fund is nowhere near as advantageous as Co-Steel's. Naturally, my constituents are nervous. I do not suggest there is anything underhand there, but I feel that one aspect of takeovers is that pension funds should be reserved and should be kept for those who have paid into them.

Fourthly, I have a suggestion, which I hope that the Minister will consider seriously. Over 50 years there have been huge redundancies in our basic steel, coal and iron industries, yet we search to find the entrepreneurs in our communities. Where are they? Instead of giving people redundancy packages, perhaps we could challenge the university for industry to come up with a steel package that would match in financial and training terms the redundancy package. We could try to encourage the entrepreneurial spirit now. When there is mass redundancy, it is much harder.

Across Government we talk about this subject, but we do not often do much about it. We say that we have joined-up government, but it would be good if the Department for Education and Employment could be challenged to create a steel package to help with the retraining of our communities.

Photo of Mr Brian Cotter Mr Brian Cotter Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson 10:19, 10 January 2001

In introducing the debate, Mr. Smith gave a clear outline of the situation, expressing strong views and a broad knowledge of the industry. I do not come from a steelmaking constituency. However, I declare an interest in that I am managing director of a manufacturing company, albeit one that has only 20 employees and is therefore somewhat smaller than the organisations that we are discussing.

The hon. Member for Blaenau Gwent made some telling points, which struck home with me. Primarily, he is concerned about the way in which Corus has dealt with the work force. That issue is key to the way in which manufacturing industry should do business. I agree with Mr. MacShane that it is deplorable that a "them and us" approach remains in this country. As the hon. Member for Blaenau Gwent said, had the work force been listened to more, they could have provided some solutions. If one does not give proper consideration to the views of the work force, one does not get the best out of their efforts.

The hon. Member for Rotherham mentioned Europe and the single currency. I share his worries about the Conservative party's head-in-the-sand attitude to Europe in general and the single currency in particular. We do not know whether the Conservatives are coming or going in terms of whether they will at some stage consider entering the single currency. That has contributed to the high value of the pound, which is discriminating against manufacturing industry. If the Government had declared firmly in autumn 1997 that they were committed to entering the single currency--provided, of course, that the conditions were right--that would have signalled a message of serious intent to the financial markets, thus helping to keep the value of the pound down to a more realistic level.

Photo of Mr Richard Livsey Mr Richard Livsey Liberal Democrat, Brecon and Radnorshire

My hon. Friend is right. Does he agree that, over the past three or four years, our manufacturing industry has rapidly become more uncompetitive in relation to the European markets; that the consequences of not embracing a coherent policy on alignment with the euro are now coming home to roost; and that, if we are not careful, the steel industry will largely disappear?

Photo of Mr Brian Cotter Mr Brian Cotter Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson

I welcome and agree with my hon. Friend's comments. Any effective assessment of the exchange rate of this country against that of the European Community, taking into account all the relevant factors, shows that the pound is at a 30 per cent. disadvantage. Steel is a basic commodity, and the overvaluation of the pound is highly significant in terms of commodity prices.

I shall not speak for any longer, because hon. Members who are more intimately concerned with the industry wish to contribute. I hope that the Minister will give a helpful response to the debate. It is not only about steel; it also concerns Britain's position in the world and the future of manufacturing. I look forward to hearing what he has to say about those points.

Photo of Mr Richard Page Mr Richard Page Conservative, South West Hertfordshire 10:24, 10 January 2001

May I congratulate Mr. Smith on introducing the subject? It is obvious, in view of the numbers in the Chamber, that we have insufficient time for debate.

The hon. Gentleman outlined his concerns for the industry. He gave--dare I say it--a partial tour d'horizon of the steel industry. I delicately point out to him that he failed to cast out the mote in his eye that blocked his view of Government responsibility and action. I speak today as someone who had the privilege of being Member of Parliament for Workington, which is a steel and coal area with a blast furnace, cast iron production and rail rolling. In that time, I learned a great deal about the steel industry, so I, too, appreciate the spirit and comradeship that runs through it, and it hurts to see it under such pressure.

Photo of Mr Richard Page Mr Richard Page Conservative, South West Hertfordshire

With due respect, we are all trying to get in. If we had a five-hour debate I would give way to the hon. Lady, but we do not have that privilege.

This debate is indicative of what is happening to our manufacturing industry. Current events in the steel industry starkly illustrate that the Government have abandoned manufacturing. The steel industry has been abandoned in the sense that the Government are indifferent to its fate. That indifference contrasts sharply with their honeyed words about, "When we are in government." I find it amazing that they are treating manufacturing in this way. I do not accuse them of deliberately trying to hurt the steel industry, but I do accuse them of the indifference that typifies their work.

I am delighted that the Minister will respond to the debate, because I can give him the parallel example of the Post Office, for which he is responsible. The Government announced with great glee that they could save £430 million on social security payments through automatic credit transfers on pensions and benefits. They forgot that that £430 million supported our sub-post offices, which are now closing at a rate of nearly two a day. My concerns are shared by every hon. Member--

Photo of Mr Barry Jones Mr Barry Jones Labour, Alyn and Deeside

On a point of order, Mr. Stevenson. Sir. Winston Churchill described the hon. Gentleman as a species of gilded scum.

Photo of Mr George Stevenson Mr George Stevenson Labour, Stoke-on-Trent South

He may have done, but I am not sure.

Photo of Mr Richard Page Mr Richard Page Conservative, South West Hertfordshire

Thank you, Mr. Stevenson. That was the intellectual approach.

John Edmonds of the General, Municipal, Boilermakers and Allied Trades Union, who said that 96,000 manufacturing jobs were lost last year, shares my concerns. In 2001, 10,000 manufacturing jobs will be lost every month. That is not my view but that of John Monks, general secretary of the Trades Union Congress. I make those points because steel is one of those industries that require a critical mass to survive. Its immediate future is bleak, unless the Government adopt a more understanding attitude. The loss of British steel users such as Vauxhall and Ford are hammer blows at the core of that critical mass. The industry is alive with rumour and speculation, but Corus will inevitably be a major player in whatever happens.

Before I state my specific concerns, I wish to emphasise the importance of manufacturing. By doing so, I am expressing a view that I believe to be shared by every hon. Member in the Chamber. I know that that is not a fashionable view among all Conservative Members, but equally, I find the Government's approach to manufacturing amazing, given what was said before the 1997 general election.

Each of us in this Room must keep repeating that manufacturing is vital to the British economy. We must bear in mind that it still provides some 17 per cent. of employment and a high share--26 per cent.--of income tax revenue. It employs 4 million people and accounts for 20 per cent. of the gross domestic product. I endorse the sensible and reasoned comments of my hon. Friend Mr. Prior about the importance of the steel industry. Unfortunately, because the strength of the pound is being overlooked, investment is declining. As the Confederation of British Industry has pointed out, regulation of industries and businesses is costing some £5 billion a year.

The example of steel is symptomatic of the industry as a whole. Productivity has improved beyond all recognition, particularly when compared with the general level of manufacturing--

Photo of Mrs Helen Jackson Mrs Helen Jackson Labour, Sheffield, Hillsborough

On a point of order, Mr. Stevenson. The hon. Gentleman is reluctant to give way, but my understanding is that a Westminster Hall debate such as this is supposed to give Back Benchers the opportunity to make points relating to plants in their constituencies. Given several of the points that he has made, it is entirely relevant for me to raise the issue of the Stocksbridge plant, which is in my constituency, but he is not prepared to give way.

Photo of Mr George Stevenson Mr George Stevenson Labour, Stoke-on-Trent South

During my time in the Chair, I have called every Back-Bench Member who has shown a desire to speak, so I hope they feel that there has been sufficient opportunity to do so. If the winding-up speeches finish before 11 o'clock, I shall of course be obliged to call anyone else who wants to contribute. However, the decision whether to give way is entirely a matter for the Front-Bench Member concerned.

Photo of Mr Richard Page Mr Richard Page Conservative, South West Hertfordshire

I thank you, Mr. Stevenson, for what you have said. As the Front-Bench spokesman for the Opposition, I was under the impression that speaking for only 10 minutes would allow other Members to speak. However, as the 10-minute rule seems to have gone out of the window, I shall give way to the hon. Lady.

Photo of Mrs Helen Jackson Mrs Helen Jackson Labour, Sheffield, Hillsborough

I am grateful to the hon. Gentleman for giving way--after a little pressure. Given his time in Workington and his understanding of the steel industry and manufacturing, does he recognise--as his Government did not--that this is a core industry for the whole of the UK? I point to the example of the plant in my constituency, which has 80 per cent. of the market share of all high-temperature steel for power generation. This issue affects not just the steel industry but manufacturing as whole and the entire UK economy. The industry is suffering as a result of the previous Government's failure to recognise that crucial link.

Photo of Mr Richard Page Mr Richard Page Conservative, South West Hertfordshire

I say straight away that steel is a vital industry for the United Kingdom, and to lose that capacity would be a disaster. I agree that we could have done more for the industry at certain times, but I should say in our defence that we inherited a steel industry that was being subsidised at the rate of £500 million a year, and which was getting about the same again in investment from the taxpayer's pocket. By allowing privatisation, and thanks to the people in the steel industry, we produced one of the best and most efficient steel industries in the world.

When I was in Workington, the blast furnace produced steel at the rate of approximately 14 man hours per tonne. At that time, the Japanese were achieving 5.6 man hours per tonne. The privatised British Steel drove efficiency up and up, and that is one reason why, during the past 20 years, productivity has risen by almost 5 per cent., which is 3 per cent. better than our manufacturing industry as a whole. I did not want to be rude to Helen Jackson in not giving way, but there is a time limit, although it has been put to one side for the moment.

As I was about to say, the steel industry has invested £3.5 billion since 1990, much of it on information technology and training, and has done much to improve efficiency. Our big problem has been the change in the balance of trade resulting from the strength of sterling. The volume of steel used in imported goods now balances that produced in and for the United Kingdom . As a result of sterling's appreciation against the euro, the average price of a tonne of steel exported to the EU has fallen by a quarter since 1996. Mr. MacShane should come out of his time warp because his party has had its hands on the Government tiller since 1997--almost four years. He is trying to look over his shoulder and bring forward a four-year position as a consequence of where we are today, which is a little extravagant, although I realise that an election is coming and that we must grab every straw.

The hon. Member for Blaenau Gwent said that reserves must be kept for a rainy day. I must say that having a reserve of £1.86 billion for a rainy day is an extreme cash position for a company.

Another matter, which no one has mentioned, is the sword of Damocles hanging over every industry, and particularly the steel industry--the climate change levy. It is a typical example of the DTI failing to support industry. If the levy is introduced, our steel industry will be hit to the tune of £10 million a year--assuming that it is agreed by the EU. If it is not agreed, the charge could be considerably more.

I shall not comment on the position in Corus because other hon. Members have done so, but I look to the Minister to give us some hope. I endorse what Mr. Wigley said when he questioned the Minister at the end of his speech. I want the same questions answered and I hope that the Minister will answer them.

Despite job closures and company difficulties, I am amazed how well British industry has done during the past three years in its battle against the huge differential between the pound and the euro arising from Government policies. Unless there is a change, goods that were primarily made in this country will be made abroad. The outcome will be that emissions abroad will rise, contrary to what we are trying to achieve with the climate change levy. Pollution abroad will rise more than if that manufacturing had remained in the United Kingdom and, more important, employment abroad will rise more than in the United Kingdom.

I am sorry to tell the Minister that, unless there is action, the situation will worsen, and that will be exacerbated by the world situation. We have a Chancellor who says that he will do away with boom and bust. He is halfway there in the steel industry. He is doing away with the boom, but he is keeping the bust.

Photo of Alan Johnson Alan Johnson Parliamentary Under-Secretary (Department of Trade and Industry) 10:39, 10 January 2001

I congratulate my hon. Friend Mr. Smith on securing this crucial debate. It is important to those who represent Welsh constituencies--hence the presence of so many hon. Members in the Chamber, such as my hon. Friend Mr. Hanson, the Under-Secretary of State for Wales. Even the Whip is Welsh. Furthermore, the number of other Members of Parliament present this morning shows the importance to their constituents of the steel industry. Its future is crucial to the strategic, economic and social well-being of this country.

The Government fully accept the worth of a successful steel industry and the significant contribution that it makes to the economy and employment. Although the debate is about its future, my hon. Friend the Member for Blaenau Gwent focused most of his remarks on Corus, which is understandable as it accounts for 90 per cent. of the United Kingdom's steel production. It is an employer of major importance in the constituencies of many in the Chamber today.

I am acutely aware that the industry faces difficult international trading conditions. There are no simple solutions to that problem, but the contributions to the debate, particularly of my hon. Friend the Member for Blaenau Gwent and other Labour Members, have shown its complexity. One of the issues faced by Corus is globalisation, which means more in the steel industry than in most other industries. In recent years, the industry has been faced with worldwide overcapacity and weak prices.

The European steel industry has been going through a period of consolidation. It has been under continued pressure to reduce costs to remain competitive and secure high-value business, and that has led to the level of restructuring that we are now seeing in the United Kingdom. While restructuring is a commercial decision for individual companies, the Government's primary role is to provide economic stability. The underlying strengths of the economy are clear: annual economic growth has averaged 2.7 per cent. since the general election, inflation is under control and employment has risen by more than 1 million. Incidentally, the industry has the only trade union movement in Europe that is gaining members, and the United Kingdom has overtaken France to become the world's fourth largest economy.

It is important to put our economic record in perspective, especially given some of the remarks of Opposition Members. I re-emphasise that we do not regard the steel industry as part of some old economy. I was grateful to Mr. Prior for his devastating criticism of the previous Government. Let me assure him that, whatever they are saying in the wine bars of Islington, at No. 1 Victoria street over our still mineral water and all the way up Whitehall we are clear that there are not two types of economy in this country.

As my hon. Friend Mr. MacShane said, the knowledge-driven economy is about manufacturing, principally embracing technological developments and using them to great advantage. Indeed, anyone who has visited a steel plant recently will know that steel production is a high-tech business, using leading-edge technology. It has an excellent record in research and development. The United Kingdom steel industry is among the most productive in the world. Each steelworker is four times more productive than he or she was 20 years ago. Furthermore, 70 per cent. of steel qualities that are available now have been developed over the past 10 years, which is also indicative of the industry's being integral to the knowledge-driven economy of the 21st century.

The Government were deeply concerned about the redundancies announced by Corus last year. Job losses are distressing for those personally involved, for their family and the communities in which they live. We are also worried about Corus's announcement of 5 December. It informed us that the company's two chief executives had resigned and that the company would announce further restructuring this year. It was an extremely worrying development, particularly given the background of the company's trading results over the past two years, which have not been good.

We are fully aware of the problems facing Corus and others in the steel industry. Department of Trade and Industry Ministers and representatives from the National Assembly for Wales have held discussions with Corus at the highest level, and will continue to do so. There is a further meeting tomorrow. It is important, however, to concentrate our efforts on those areas where we can give practical help.

I will take this opportunity to make a point about manufacturing. The future of the steel industry is obviously bound up with manufacturing industry, which has reduced as a proportion of gross domestic product in every G7 country over the past 10 or 20 years. However, manufacturing is a key part of our economy. It makes up one fifth of our national income, it directly employs 4 million people and it is crucial to our economic success. Although there are serious difficulties--those faced by the steel industry are the same as those faced in other sectors of manufacturing--some sectors in manufacturing are doing extremely well.

To put into context the comments made by Mr. Page, who used to be the hon. Member for Workington--perhaps it is his own Government's record on manufacturing that has led to his now being the Member for South-West Hertfordshire--manufacturing output is up by almost 1 per cent. over the past year. Last year, we produced more cars in this country than at any time since 1974, and we exported more cars than at any time in our history. Manufacturing output fell by almost 20 per cent. in the 1980s recession, and then fell by a further 7 per cent. in the early 1990s.

In addition to manufacturing productivity rising by around 4 per cent., exports of manufactured goods are up by more than 8.5 per cent. on last year. It is, therefore, a difficult but not impossible climate. Whether we call it a weak euro or over-valued sterling--I think it is the former rather than the latter--we should remember that the German manufacturing industry survived well for many years on an over-valued deutschmark. We must look at such issues on the basis of many factors, and not use only one as a catch-all to explain problems in the manufacturing industry.

Let me set out the practical ways in which we are assisting the steel industry. Incidentally, the Opposition have said that in their plans to save money, they would raid the tills in the DTI and remove every single initiative that we are taking on behalf of manufacturing industry. We have introduced the metals industry competitiveness enterprise--the gloriously named MICE--which is a project suggested to us by the industry. It is based on the industry forum model, which has been so successful in improving productivity in the automotive sector, and aims to improve shop-floor process techniques in up to 130 companies over the next five years.

We have also invested a great deal of effort in looking at how the steel industry can take advantage of e-commerce and other such developments. At the request of the steel industry, we have supported initiatives such as the establishment of a metals centre of excellence. On 23 November, I held a tripartite meeting where the industry, its work force and the Government sat down to look at other ways in which we could give practical help. At that meeting, and at the one mentioned by my hon. Friend the Member for Rotherham, between Back Benchers and the Prime Minister on 22 December, three key issues were mentioned. I do not want to duck those issues. They are crucial not only to the steel industry but to manufacturing in general. The three key issues are the exchange rate with the euro, or single currency argument, the climate change levy and energy prices. I am not trying to suggest that the other initiatives that we are pursuing devalue the importance of those points.

The strength of the pound and the weak euro have caused problems for manufacturing industry, and especially for steel. The steel industry exports 50 per cent. of its products, and 70 per cent. of its exports go to euroland. In an Anglo-Dutch company, that has, obviously, presented problems, although there have been job losses at Corus in the Netherlands as well as in the UK.

My hon. Friend the Member for Rotherham makes an important point. The recent strengthening of the euro will have provided some relief. Wherever one stands on the issue--it is fascinating to observe our two Opposition parties suggesting different ways around the problem--we certainly cannot offer a short-term solution in this respect. Hon. Members will remember that last summer we did intervene to try to bolster up the value of the euro. The only way to boost the value of the euro--I do not believe that anyone is suggesting that we should enter the realms of devaluing the currency, not even some of the more weird and wonderful Opposition Members--is in co-operation and co-ordination with all G7 countries. That is what we tried to do last summer with, admittedly, very little success, but it was an indication that the problem is being taken seriously.

We are determined to adopt a long-term strategy in ensuring steady growth and investment and job creation. In that respect, we do not intend to intervene in the problem of the strong currency. The Confederation of British Industry report on manufacturing, which came out a couple of weeks ago, recognised that there is no short-term solution to the problem.

The climate change levy is a crucial part of the Government's response to the threats posed by climate change. I am all too aware of the industry's anxieties, but the levy is a key element in our national climate change programme. It has an important role to play in helping the UK to meet its Kyoto target for reducing emissions of six greenhouse gases and in moving towards our domestic goal of reducing emissions of carbon dioxide, the most dangerous greenhouse gas. In designing the levy, we tried to protect the competitiveness of the steel industry. The original proposal for a climate change levy has been dramatically changed.

One hon. Member asked what is happening in the rest of Europe. Countries in the rest of Europe signed up to the climate change levy but chose different ways to implement it. We are dealing with producers; other European countries place the emphasis on consumers, which opens up another set of problems.

We have worked closely with the steel industry, in which the return on national insurance contributions, which offsets the cost of the climate change levy, is obviously not as relevant as in some other industries. We tried to protect the competitiveness of the steel industry, alongside other energy-intensive sectors. They will receive an 80 per cent. levy discount in return for commitments to energy-saving targets that meet Government criteria, and we expect that discount to last up to and including the Kyoto target period of 2008 to 2012. The Department of the Environment, Transport and the Regions is developing negotiated agreements with those sectors.

I hope that we shall reflect further on the important points made in the debate, to the Prime Minister in a discussion on 22 November and to me in our tripartite forum--the first time, incidentally, that the steel industry, the unions and the Government have ever sat down together. We are absolutely clear that our overall objective is achieving an agreement that has challenging energy targets while safeguarding competitiveness and allowing the principal steel producers to respond to increased demand for steel without a levy penalty.

Energy prices are a difficult aspect that has a profound impact on the steel industry. We are aware of the effect of high gas prices on the industry. The wholesale price of gas has been reduced, but the industry is still paying twice what it was paying this time last year. It might be helpful if I were to outline the reasons behind the increase and describe the actions taken by Government and the regulator to try to address the problem.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

The biggest energy source for electric arc-furnace production is electricity. I have led delegations on the matter, and, for three years, we have been promised a reduction. I have arranged a meeting with my right hon. Friend the Minister for Energy and Competitiveness in Europe. When the Minister returns to his office on Victoria street, will he say to his right hon. Friend that no hope can be offered on the climate change levy? The currency remains where it is. There is one area, however, where a positive signal can be sent to steel--a reduction in industrial electricity prices should not be just pushed into the future; it should happen now.

Photo of Alan Johnson Alan Johnson Parliamentary Under-Secretary (Department of Trade and Industry)

If I had had time to address all hon. Members' contributions, I was going to say that my hon. Friend, with the full authority of his 25 shares in Corus, made an important point on electric arc-furnace production. I shall respond to that point as he suggested.

The immediate cause of the problem is oil-related gas contracts in Europe--the price of gas is tied to the oil price, which has brought about a sharp rise in north-west European gas prices. In turn, that has set the benchmark for UK prices through trade across the interconnector. That has been made worse by the absence of genuine competition and liberalisation in the European market and the consequent lack of real gas-to-gas competition. How can we best address that problem? The Government consider that the key lies in ensuring that there is increased liberalisation and competition in Europe. We can expect support in that aim from the Commission and the Swedes, who currently hold the European Union presidency. The conclusions of the Madrid regulators' meeting in October also recognised the need for gas-to-gas competition. At the same time, we are working with the Commission on the new gas directive, which will lay the groundwork for a single energy market. Many initiatives are being taken, which I do not have enough time to address fully.

Although UK electricity prices are generally low by EU standards--prices to industrial consumers have been falling in real terms in recent years--there are indications that the largest UK users are paying higher prices than in some other EU member states. For example, in November 2000, prices in France and Germany for the largest users were more than 11 per cent. lower than in the UK, although, incidentally, the price in Italy was 42 per cent. higher. We also recognise that some large consumers have poor price-related contracts and will have been hit by fluctuations in those prices such as the spike in September and October.

Photo of Mr Llew Smith Mr Llew Smith Labour, Blaenau Gwent

Can the Minister provide me with information on who would be responsible for the environmental clean-up and removal of the plant, should Llanwern close? Does he have an idea of how much it would cost? If he cannot give me that information today, will he write to me?

Photo of Alan Johnson Alan Johnson Parliamentary Under-Secretary (Department of Trade and Industry)

I shall certainly address that point at the end of my remarks.

I want to acknowledge that the industry is not crying wolf about the problems with energy prices--those problems need to be addressed. The implementation of the new electricity trading arrangements in relation to Europe has been delayed, but that should not detract from the significant progress being made during the past year, not least the development of the legal framework for NETA in the form of the balancing and settlement code that has been introduced.

We are taking action on the three key issues of the European exchange rate, the climate change levy and energy prices. There is no simple solution, but we are trying to address the needs of the industry while avoiding a return to the problems of the late 1980s and early 1990s. Not only was there a 20 per cent. reduction in output in the 1980s and a 7 per cent. reduction in the early 1990s, but millions and millions of manufacturing jobs were lost in the industry. I therefore do not think that the two Conservative Members, especially the hon. Member for South-West Hertfordshire, have any lessons to give us in that respect. Every initiative supported by the industry, whether in relation to shipbuilding, the automotive industry, chemicals or steel would be abandoned by a Conservative Government, according to the proposals that the party has recently published explaining how they would finance their tax cuts.

In conclusion, and in answer to the points made by my hon. Friend the Member for Blaenau Gwent, I can tell hon. Members that we have no further information on Corus's intentions, but Ministers and officials will stay in close contact with the company. We hope that they will reflect long and hard before reaching any further decisions on rationalisation. As for the obligation on the company to clear up sites, we hope that there are no sites to clear up.

Photo of Mr George Stevenson Mr George Stevenson Labour, Stoke-on-Trent South

Order. We move on to the next debate.