Select Committee on Welsh Affairs Minutes of Evidence

Examination of Witnesses (Questions 240 - 259)



  240. So you think you did a good job.
  (Mr Pedder) Yes, I believe I did.

  241. Were you present at all these meetings?
  (Mr Pedder) Yes.

Mr Paterson

  242. If you spent the whole of April working on this and you have all the costings and you understand the marginal costs of your plants and you are the experts at running this business, you simply must have an idea of the finance required to set up this structure and if you do not like it you must have an idea of the losses it would have generated.
  (Mr Pedder) Let me take you back to the fundamental issue, that this is not all about cost, this is about the ability to sell products into the market. The Llanwern proposal, for example, was to retain one blast furnace, producing one million tonnes and selling into export markets. First of all there was an analysis of the cost versus likely sales price and that came out with a negative number, not a huge number but a negative number. The more important issue was whether, if we could actually effect those sales, in so doing we would damage other markets and whether it was actually a viable possibility to increase those sales. The Bryngwyn proposal was to retain plant and to keep it going on a reduced shift basis. There was a cost disadvantage in doing that in terms of under recovery of the fixed cost, because we would not take all the costs of the plant out. More importantly, those sales from Bryngwyn would displace from Shotton, so we could not viably do it in the market. It was not all about cost, it was different at each location. The Tees-side proposal was about retaining a five-shift operation on the hot strip mill, which would have meant reducing shifts on the Llanwern mill. The cost difference—I have the number in my head—was £2 million per annum at the end of the day for Tees-side, for the Lackenby plant, but the issue was that we would displace those tonnes which Tees-side continued to produce from Llanwern, so we would reduce the effectiveness of Llanwern. It had to be looked at in the totality, which is where I think myself, going round and listening to all of these and being able to integrate the proposals and discuss at each location why those proposals did impact one on the other, was helpful, was open and led to the conclusion that I came to.

Mr Smith

  243. You have obviously put a lot of effort into this process of going round the plants and listening to each of the proposals. Have you produced your detailed response to those proposals and is it available to the trade unions?
  (Mr Pedder) I gave an oral response at each meeting to those people who were present. I have not produced a written record of those discussions.

  244. Do you think that would be a good idea, bearing in mind that the principal union is considering industrial action and that could well depend on the company's response?
  (Sir Brian Moffat) May I take issue? That is not the case. Last Thursday the union decided it would not take any industrial action at national or local level.

  245. Irrespective of the response to the proposals?
  (Sir Brian Moffat) They knew of the response to the proposals because the Executive Committee of the union met last Thursday and the members from the works affected reported the situation at that meeting. It would be wrong and it would be totally misleading to suggest that that is the situation the union stands in.

  246. I accept that correction. I do have a notice in front of me which briefs me slightly differently. Back to the original point, do you think it would be a good idea to provide a written response to the proposals which have been put forward?
  (Mr Pedder) I did not judge and I still do not judge that to be necessary. There were people there who heard my response, who took very copious notes about my response. I asked in each locality whether the response was clear. Yes, it was. I do not believe it was necessary to make a written record of that.

Mr Ruane

  247. You say you have talked and you have given an oral response to each one.
  (Mr Pedder) Yes.

  248. So in fact you have appreciated it in the totality but the unions have not appreciated it in the totality.
  (Mr Pedder) I believe they have because my presence there has given me the opportunity to describe the total scene which is part of the reason for me being there. I was able, for example, to say in Bryngwyn that had the proposal gone ahead, had it been both financially and from a marketplace viable, it would have impacted on Shotton and vice-versa. I was able to have that conversation in each location.

  249. If the Committee were to ask you to produce a detailed report in totality and give it to the unions, would you say yes to that?
  (Mr Pedder) No, I do not think it would be necessary.

  250. Why?
  (Sir Brian Moffat) It is self-evident that subsequent to Mr Pedder's meeting, for example in Ebbw Vale, his explanation was properly accepted and a closure agreement with the unions is in place and that progressively is taking place across the country.

Mr Edwards

  251. If this Committee asked for a report to this Committee, would you do it?
  (Sir Brian Moffat) I think we would be bound to give you a report if you asked for one, but we could only give it with limited financial information, if that is what you are looking for, because it is damaging and commercially sensitive to ourselves.

  252. I can accept that, but can you also accept that we are the public representatives of people throughout Wales who are about to lose their jobs. Their representatives have made detailed written submissions to you, which we have had copies of.
  (Sir Brian Moffat) May I also point out that we have responsibilities by law as well as employers in terms of consultation and agreement situations? We are negotiating with our trade unions. We are responsible for our employees and we have to ensure that we do not go beyond our legal obligations in that situation and certainly not exceed them. With all due respect, you are getting the report first hand from Mr Pedder at the moment.

  253. But we are asking for a written one. We have had written proposals from the union, you have rejected them, we should like the written rejection. It is a reasonable request.
  (Sir Brian Moffat) We could give you a written rejection; that is not a problem.[2]


  254. It would be quite useful if you could give us one as far as your commercial confidentiality would allow and we could have a report which we could keep confidential as a Committee if you felt it necessary to give more financial information.
  (Sir Brian Moffat) We would give very limited financial information, but I could give you a proper written report.

  Chairman: Thank you. We shall expect one.

Mr Caton

  255. Is not the fundamental difference between yourselves and the trade unions, at least as far as they have put it forward in their proposals, on your assessment for the future of the steel market? They are saying on the one hand that the profitability of steel is cyclical and they expect an upturn in the market and therefore you should be prepared for that. The entire drive of their proposal, which is why I think the way you have described them is a little bit disingenuous, is that they are very much interim measures. The idea is to maintain capacity for that upturn in the steel market and to retain those jobs. The other difference apart from that difference in attitude is the difference in approach. They have bent over backwards to try to come to some arrangement which includes loss of jobs, includes trying to get a package of public money to enable retraining whilst people are in work rather than whilst they are on the dole. Their case is basically, and it seems a very logical and humane one to me, that they think they are right, they think there is going to be an upturn, why do you not come along with them, maintain capacity, keep as many of these people in jobs as possible for the moment but retrain them. Then, if they are right, you are ready, you have the capacity, you have an even better trained and more productive workforce to take advantage of that change in the circumstances. If the trade union side is wrong and you are right that there is no upturn and things do not get better, then at least you have done the honourable thing as far as your workforce is concerned and you have retrained them and they will have a better chance when they go out into the market to try to seek alternative work. The difference in your intransigence and their reasonableness cries volumes to me.
  (Sir Brian Moffat) We would not be retraining 6,000 in the circumstances you outline, we would be trying to retrain our total workforce because the company would be bankrupt. It is losing over £1 million a day in the UK. That is the situation we are facing. The market is not getting better: it is getting worse at the present time. We have to face that reality and try to protect the parts of the company which are capable of protection and we owe that to the workforce affected. It is not just about costs, it is about markets. Part of the responsibility Government has is to try to create over time—and it is not an easy job, just like it is not an easy job for employers—an environment for investment in manufacturing industry and that has singularly been a failure in this country for the last ten to 15 years. I am not differentiating between Governments when I say that. It has been a very, very salutory experience to live through in an industry which has become more and more efficient. People like Mr Pedder and myself have spent most of our lives fighting to create an efficient industry, one where steel is produced as cheaply as possible and gets the benefits into the UK manufacturing base which they can take benefit from, convert into manufactured goods and export. As it is, we have to export because the fundamental fabric of the manufacturing industry of this country is being eroded, month after month, year after year and has been that way for the last ten years. That is one of the reasons why I have been seeing Secretaries of State for Trade and Industry all the time I have been back in London since 1986.

  256. There will be questions about exactly how much you are losing once you take restructuring and redundancy out of the equation a little later on. Perhaps someone else will address that. I am still concerned. You have told us today that you think the Government's legal opinion is wrong, trade unions' legal opinion is wrong.
  (Sir Brian Moffat) I have not said the Government's legal opinion is wrong.

  257. You think they will have no chance of being allowed to employ these retraining schemes, public subsidy—
  (Sir Brian Moffat) I am sorry but I have not said that. I said that under Article 56 of the Treaty, which I gather the Government are now reconsidering, there is every chance, if the Government is willing, to implement it. There is a chance.

  258. I am talking about the trade union proposals. As far as I heard what you told us, you said you believed that there was no point in going to the European Union to try to get approval for those because they did not have much chance.
  (Sir Brian Moffat) I said I thought it was doubtful under Article 95, because what has been said by the Council of Ministers in 1993, was that no more permissions would be granted under that article. That it will be a very difficult thing to undertake.

  259. Leading Counsel thinks it is worth it, the British Government think it is worth it, the National Assembly for Wales thinks it is worth it, the trade unions think it is worth it, but you do not.
  (Sir Brian Moffat) Leading Counsel did not say it was worth it. Leading Counsel said it was quite legal to ask for permission under Article 95 of the ECSC Treaty to do what the trade unions wished to do. There is nothing illegal about asking. What sort of answer? Leading Counsel did not say.

2   See page 54. Back

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