Select Committee on Welsh Affairs Minutes of Evidence

Examination of Witnesses (Questions 160 - 179)



  160. What you have just been asked.
  (Sir Brian Moffat) Because we were working long on various options and projections and financial implications and working that all in on an integrated basis across the total business, and the answer which came out, as you see, was not as straightforward as a lot of people thought and it was not just one plant. It was bits of plants as well as total plants. It was a very complex situation. It dealt with over three million tonnes of capacity.


  161. So complex it took you two days to sort it out?
  (Sir Brian Moffat) No. We had been working on it by that time for about two months but I was not in a situation on the Monday—if I had been I would have been announcing the answer. We were not in that situation.

Mr Edwards

  162. You said you had not made any decisions, not any announcements.
  (Sir Brian Moffat) We had not made any final decisions on the Monday.

Mr Llwyd

  163. Would it not have been better, Sir Brian, in the light of what you are now being asked, on that Monday—I was not at the meeting—to say, "We have not yet made a final decision but we expect to do so in the next 36, 48 hours", whatever it was?
  (Sir Brian Moffat) I think I said that we hoped to make the decision in a matter of days. I cannot swear to that but I think you will confirm I said something like that.

Ms Morgan

  164. The unions certainly feel that you have broken promises to them. They say that at the time of the merger you said that you would keep the present configuration and there would be no reduction in capacity and you told them they would have a bright future, so they feel betrayed and they feel that your promises were broken. What comment have you got on that?
  (Sir Brian Moffat) I personally did not make any promises to the unions. I did not meet them at the time. Any statements that were made were in the light of the situation then obtaining, which was a situation when prices were still moving up although the exchange rate was difficult. People anticipated the economic scene would be better than it transpired. In the event it became difficult very quickly and the results of the company showed this when they were announced in March of the following year.

  165. It just seems a very short timescale for you to have changed so dramatically.
  (Sir Brian Moffat) I am afraid the industry we are in is very cyclical and the worsening scene developed very quickly. The problem we have got in all our plants, as we say and we say this very consistently, is that we cannot guarantee, unfortunately, the life of any plant. The situation that helps guarantee that scene is the market and what the demand is and what the prices are and our ability to work those plants as best we can in the circumstances.


  166. Sir Brian, can I go back to the consultation issue? You were, I believe, given your knighthood by the previous Prime Minister, John Major, in 1996 for services to the steel industry. I assume, as it was a United Kingdom award, that it was for services to the British steel industry, not the Dutch steel industry or the world steel industry. I think you would be naive if you did not expect the Welsh people particularly, who are most affected by the decisions that you appear to have already taken, if you do not realistically now consult with the unions, with the Assembly, with the United Kingdom Government, who I understand have all got together and have got a package which they are going to give to you for this 90 day consultation, to be calling for your knighthood to be forfeited. There is a record of forfeiting knighthoods in these kinds of positions. You have given us some indication that you are going to listen. Do you really feel that if you get help from those government departments, from the United Kingdom Government, from the Assembly, from the unions, that you can save some of those jobs?
  (Sir Brian Moffat) I do not know what help the Government or the Welsh Assembly have in mind. I have read about it in the press. Nobody has made any proposals to my or my colleagues about it. We know always, the Government knows too, that they are very strictly limited by the state aid code and it is governed by the Treaty of Paris. It is nothing to do with the United Kingdom Government. We all have to abide by that. What we would welcome is help to start to retrain our workforce and to facilitate more investment in Wales given the dearth of it in recent years.

  Chairman: There are significant opportunities within Wales for investment in terms of getting in jobs. Objective 1 is going to be a tremendous asset over the next four or five years. If you close significant parts of your industry in Wales you are going to be importing steel from Holland at the end of the day once we have got a lot more industry in Wales. Have you not considered that kind of thing?

Mr Llwyd

  167. Following on from what the Chairman has just said, are you not aware, Sir Brian, that there are levers that can be pushed and pulled in order to assist you were you of a mind to save the plant? For example, I understand, due to the Objective 1 designation, it would be quite in order for the United Kingdom Government to lower corporation tax as it applies to those plants. It is perfectly in order. It is done elsewhere in Europe. Also, you would be entitled for rate relief, which you have got, perhaps additional rate relief but, perhaps even more significantly again, you would be entitled to cuts in national insurance contributions, employers' contributions. All these are available if you are of a mind to discuss the matter in any structured and well meaning manner.
  (Sir Brian Moffat) Could I just answer the first point about lower taxation? If we were paying tax that would be helpful. Unfortunately we are making losses and are not able to relieve those losses in any way. The second thing is that I hope everybody is mindful that we are hanging on. I am saying that the business scene in the United Kingdom is difficult in the extreme and anything that can help the competitive edge of our workforce who, whether they are people under threat as a result of this restructuring or the continuing 22,000 at work, want their jobs to be as secure as possible. If anybody can help to do that we would welcome any suggestions and listen to them avidly.

  168. Why has the First Secretary of the Assembly been saying that speaking to you is like hitting his head against a brick wall?
  (Sir Brian Moffat) I have not had any proposal from government about anything.

Mr Edwards

  169. Have you put any proposals to government about anything?
  (Sir Brian Moffat) We negotiated the climate change levy down to where it is now, which is £8 million to £10 million. As I pointed out to the Trade and Industry Select Committee, that is still more than the whole of German industry pays for climate change levy.

  170. Did the Prime Minister say to you, "What can we do to help?"?
  (Sir Brian Moffat) No, he did not, but he mentioned the Trade and Industry Secretary was willing to help in any way possible.

Mr Llwyd

  171. What did you understand by that?
  (Sir Brian Moffat) I understood by that that Stephen Byers would try to help in any way he could and I would welcome that help. I have told him that consistently.

  172. Did you not put some proposal to him? I find this astonishing. Given an open invitation from government to have assistance, are you seriously sitting there and saying, "We did not put any proposals to them"?
  (Sir Brian Moffat) I asked him what he had in mind against the state aid code. I am waiting for an answer.

Mr Edwards

  173. Did they ask you what you had in mind?
  (Sir Brian Moffat) I do not know what government can do to subsidise losses. It is illegal as far as the steel industry is concerned. That is our problem. We are making a loss of £1 million a day in the United Kingdom. We need to eliminate that.

  174. Do you recall the way BMW made an announcement about Rover in Longbridge which appalled the whole country and the government? Because of some reconsideration they were able to come to the new arrangement. Why could the same thing not happen in this case?
  (Sir Brian Moffat) That was about investment. We have more investment than we know what to do with. Our problem is we are too big for the market. We have not got an adequate market in this country.

  175. Why do you not allow certain parts of the company to just float off through an employee buy-out or something like that?
  (Sir Brian Moffat) If I was as irresponsible as that, it would prejudice other plants which we hope will continue in this country. We have too much investment.

  176. You are saying that you would not do that but that would mean that the proposals people are making in order to have a buy-out must be very viable proposals. If they are that viable, why do you not adopt them for your company anyway and avoid the need for a buy-out?
  (Sir Brian Moffat) I do not know who would finance them but if somebody was able to finance them, or willing to finance them, not only would they find themselves in difficulty as a result of the scene they found themselves in; they would prejudice the existing asset base and the 22,000 people left in our industry because, in order to get into the market. They would have to further cut prices and that would be ruinous for the other 22,000 people. We are seeing that from eastern Europe and that is the situation that the whole of the EU is trying to avoid at the present time.

  177. I do not think I have ever heard a businessman so scared of competition as you seem to be. You seem to have managed decline. You seem to be totally unable to countenance any competition. You are prepared to let all those workers at Ebbw Vale lose their jobs, half of them at Llanwern. You do not know whether Bryngwyn is profitable or not profitable and that can go down the pan as well because you are scared of some competition from them.
  (Sir Brian Moffat) We are in the most competitive industry in Europe.

  178. Their proposals must be good.
  (Sir Brian Moffat) We are the third biggest, shortly to be the fourth biggest as a result of an amalgamation. We are in the most competitive industry in Europe and in the weakest market. We need government, you and others, to help us create a better market situation.

  179. Mr Jackson and Mr Pedder, do you totally agree with what Sir Brian says?
  (Mr Pedder) Totally.

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