Select Committee on Welsh Affairs Minutes of Evidence

Examination of Witnesses (Questions 196 - 199)




  196. Order, order. Welcome back before the Committee, Sir Brian and colleagues. Thank you for coming back to continue the line of discussion we were following at our last meeting. Could you first of all give us an update on what has happened over the last two months?

  (Sir Brian Moffat) I shall go back to the beginning and give everybody an update. Following the announcement on 1 February, we talked and consulted in the localities against a background of a 14-day programme, not counted in the consultative process but in the communication process and talked in all the localities and indeed across the company about the announcement, the reasons for it, the likely impact, the methodology we had used and so forth. The formal consultative process therefore began on 15 February. On 27 March we had discussions and consultation at national level with the unions, where we outlined the methodology and the impact of what we were doing. Just to remind the Committee, the methodology was in actual fact to take the lowest tranche of business, the least profitable, highest loss business out of our order book. To take the equivalent capacity from the high cost plants out and then to reload the lower cost plants across the business, particularly the strip business in Wales, with the remaining orders. In order to ensure that there was an equal and fair-handedness to any response that management were making in the locality, it was also agreed with the national trade unions that my colleague on my left, Mr Tony Pedder, my board colleague who is responsible for the totality of the strip business on both sides of the North Sea, would take the cases one by one and respond to that scene. That he did progressively through April, starting with Ebbw Vale and finishing with Llanwern on 19 April. Unfortunately, despite a very good and professional submission from the trade unions in terms of putting up their own cases for cost reduction each was coupled with more order load on their business. The majority of those schemes, by the fact of more order load, unfortunately impacted on other plants because it was a limited order and usually, not always but usually, impacted on lower cost plants and the plants being talked about. The major exception was in the case of Llanwern where there was a proposal to keep the works operating as a million-tonne integrated works. As I am sure many Members of Parliament will be aware, an integrated works today with only a million-tonne capacity unfortunately falls well short of an economic situation, particularly when all that business has to be exported. For that reason, we had regretfully to turn all the proposals down. I may say that all the discussions which were held were held in good order, very professionally done and quite constructive. The subsequent meetings which have taken place have been to do with timing of closure, with benefits emanating for those directly affected being made redundant from that closure and they vary on a works to works basis, depending on earnings rates, employment terms, terms of service and conditions, type of working, whether shift worker, day workers and so forth. Quite a bit of progress has been made. At Ebbw Vale a closure agreement is in place, at Bryngwyn a closure agreement is in place, we are in discussions at the other works also about those agreements. We are due to meet the national trade union officers tomorrow morning to wind up the situation and basically bring them up to date with what has happened. In the meantime we have been talking with Government about how schemes or ideas may be developed to try to help people who are potentially redundant and will be made redundant in due course. At one stage earlier in the discussions the trade unions had a proposal to make an approach to the Commission to get a sanction for Government to advance monies over a period of time to make good wages shortfalls in totality while a training scheme was put in place. They have taken legal advice as to whether they could do that and were told that legally there was nothing wrong with asking for that authority. Unfortunately they were also told—and this is our understanding as well—that it would take quite a long time for any response, whether it was affirmative or negative, to be made by the Commission and in Corus's view the probability was slight. In the past as well we had entered into tripartite discussions with the Department of Trade and Industry (DTI), Department of Employment, the trade unions, ourselves to develop a retraining scheme which would involve Government and ourselves putting up money to start a retraining programme, limited in hours but start it at the end of the working life in the steel business of those affected. That is there in outline, has yet to be developed, but there is every intention, should it be capable of being developed, to do that on all sides. In the meantime and prior to the announcement in February—in fact we started early last year—the company had talked with Government, again the Department of Employment and the DTI, about trying to revive a scheme which was in existence in the 1990s for steel workers. It is known colloquially as the ISERBS scheme. It was administered out of a special office in Sheffield and this was as a result of monies which could be made available under Article 56 of the ECSC Treaty. We had discussions over a prolonged period with Government and unfortunately towards the end of last year Government came to the view that they could not support bringing that scheme into being again. It is my understanding that they are now currently reconsidering that scheme and indeed I have written today to the Secretary of State for Trade and Industry encouraging him to do so. That scheme would for a period of time make good earnings loss and this would be in addition to redundancy pay which we would pay and that pay is obviously over and above the national minimum redundancy levels. This scheme would in effect make good earnings lost between those earnings which steel workers had historically been getting and earnings they were getting in the future, be it on approved Government retraining schemes or on new jobs they took up if there was a gap, to the extent of 80 per cent of earnings. We have long thought this was a good idea, other countries practice it, it is allowed under the ECSC Treaty and equally in terms of time, based on track record, could be brought in without much delay and within the sort of timescale certainly we are talking about based on experience before. I just hope we get an affirmative view from that and I understand also that trade unions are talking to Ministers along the same lines. That brings you up to date.

  197. You included in your summary the 90-day consultation period. Would you say anything useful, apart from the items you have already mentioned, has come out of that? Have any jobs been saved at all?
  (Sir Brian Moffat) I would not say jobs have been saved. I would say though that it is a helpful period and has been a helpful period in the sense that it ensures that people, if in any doubt previously, do better understand the circumstances. That relates not only to the people affected who unfortunately will lose their jobs, but also to the people who remain in the industry. They can better understand the situation we are in and how we have to respond positively to it to try to ensure that we improve our relative situation, which is what the reconstruction of the industry we are going through at the moment is all about. It has facilitated that. Equally I have to say among a lot of disappointed people, because undoubtedly there are, one cannot deny that, there is an acceptance and a greater understanding than previously was the situation. Not that we had not tried to explain it, but when reality is with people it is a very different matter from talking about it in advance.

Mr Llwyd

  198. May I take you back to your opening statement and this discussion which took place about the ECSC approved scheme which you have described in some detail? You told us that the discussion took place early last year. Can you be more precise about that?
  (Sir Brian Moffat) The company started discussions with the DTI and the Department of Employment in June of last year. Those discussions carried on until December of last year.

  199. Could you tell us what the context was in June? What triggered the initial approach to the DTI?
  (Sir Brian Moffat) Yes, the context was, if you remember then, we were faced with having to reduce costs and we have talked about this before. Last year we announced cost reductions in terms of manpower savings across the group of over 4,000 people. Basically last year 1,500 of those jobs or thereabouts in the UK went as a result of the announcements, the balance to go after December of last year. It was very relevant to steel workers in that situation then, given a scheme which had been in existence and operating very successfully in the UK up to 1994. In our view it was instrumental in facilitating the job creation situations in many of the old traditional coal and steel community areas.

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