Examination of Witnesses (Questions 160
THURSDAY 1 MARCH 2001
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
(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 Mondayif I had been I would have been announcing the
answer. We were not in that situation.
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.
163. Would it not have been better, Sir Brian,
in the light of what you are now being asked, on that MondayI
was not at the meetingto 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.
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
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?
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.
169. Have you put any proposals to government
(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
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.
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
(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.