Examination of Witnesses (Questions 196
- 199)
WEDNESDAY 2 MAY 2001
SIR BRIAN
MOFFAT, MR
TONY PEDDER
AND MR
DAVID JACKSON
Chairman
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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