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7 July 2009 : Column 195WH—continued

10.14 am

Mr. Richard Caborn (Sheffield, Central) (Lab): Sir Nicholas, you and I have shared a great interest in manufacturing over many years in the House. As somebody who left school at 15 and served an apprenticeship in the steel industry, I can say that I have steel in my veins. That is why it is sad to be having this debate. It is particularly sad given that the steel industry in this country was probably one of the most productive and competitive in the world. The management and the work force had come together, but some irresponsible financiers around the world have brought the economy of our nation and those of many others to their knees. We are now seeing the consequences of that in the announcement by Corus.

I stress—I know that the Minister will take this back to her colleagues in the Government—how important it is that we understand the comment by my right hon. Friend the Member for Rotherham (Mr. MacShane) and my hon. Friend the Member for Sheffield, Hillsborough (Ms Smith) that the steel industry is important to this nation’s wealth-creating base. Governments now face a range of challenges, but that is particularly true of those who allowed their economies to develop into service economies, as my right hon. Friend the Member for Scunthorpe (Mr. Morley) said. We now need to reposition our economies and move them back a little in the direction of wealth creation and manufacturing, and steel is very important in that equation.

The steps that the Government have taken to stimulate the demand side of the economy are laudable and will probably mitigate the worst effects that we might have seen, as will the action taken by our Prime Minister at the G20 and the action that he will take at the G8 later this week. However, the importance of the steel industry is sometimes not understood in Whitehall. Had it not been for the steel industry, the RB211, which is probably one of the greatest aerospace engines the world, would never have got into the skies. Had it not been for the steel industry in Sheffield, Concorde would never have flown. Had it not been for the steel industry in Sheffield and the surrounding area, including Rotherham—I take a little exception to what my right hon. Friend the Member for Rotherham said about the cover at Wimbledon, because I do not think that all the steel was made in Rotherham, but we will debate that later—we would never have been able to extract oil from the North sea. The North sea is the most difficult terrain in which to extract oil, but we did it because of the brilliance of the engineers and the steel manufacturers in South Yorkshire.

We are now entering a nuclear renaissance and, as my right hon. Friend the Member for Scunthorpe said, we are moving into the green energy sector and green energy industries, which will involve not just hundreds of millions, but billions of pounds. We need to get into the supply chain as we have in the past. The British steel industry is at the start of the supply chain.

Detailed discussions are taking place with companies such as Forgemasters about investing in 15,000-tonne forging presses, which are among the largest in the world. If those discussions are successful, they will give the country a lead in the nuclear sector, which will be
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very welcome. I hope that the discussions reach a fruitful conclusion, because that would send a good message that we believe in the steel industry and in British manufacturing and that we will move our economy more toward wealth creation than toward the service sector. That is not to knock the service sector, which is important, but it is also important to get the balance right.

The skills base in the steel sector, which is probably one of the most productive and competitive in the world, must be supported in the current situation, which is not of the sector’s making. This is not the ’80s or the ’70s, when we were unproductive. We are talking about some of the most productive work forces in the world. In a few years’ time, if we are not careful, we will be saying, “What the hell were we doing? Why didn’t we keep this skills base?” You know, Sir Nicholas, that in the early ’90s we were arguing about the skills and manufacturing base of this nation. Lord Heseltine, as President of the Board of Trade, said, “Do not disband those work forces—those design engineers and development engineers,” but what did we do? We disbanded them, and we are now paying a massive price for that. Let us not do that again.

The Government have done a first-class job to date on the demand side. We must make sure that we keep the strategic work forces together and do anything that we can, as my right hon. Friend the Member for Scunthorpe says, to bring those partnerships together to see us through this difficult time. The present difficulties are not of our making.

Ms Angela C. Smith: Does my right hon. Friend agree that the now generally very good relationship between the union and community and the steel industry is a good reason to support the industry in these difficult times?

Mr. Caborn: I could not agree more. Even though it is difficult for Government, we must look at the matter strategically and ask, “Is this an investment for the nation in keeping the skills base of the sector together, whether that means Corus or other areas?” That is the question that we must ask my right hon. Friend the Minister, so that she can take it back to Whitehall and, through her persuasive powers, make sure we reach a satisfactory solution. If we allow the work force to be broken apart, it will be difficult for them to come back, and we will pay not just a human price, which is very important, but an economic price, because we shall not have the skilled work force to create the wealth that the nation wants when the upturn comes.

I hope that my right hon. Friend the Minister will take what has been said back to Whitehall and knock a few civil servants around, because sometimes they do not know a right lot about manufacturing. Occasionally it would be nice to invite them to the north to see how we operate; but we will educate them, I have no doubt, from the leafy suburbs of London. I am sure that my right hon. Friend will do a first-class job in Whitehall.

10.21 am

Lorely Burt (Solihull) (LD): I add my congratulations to those that other right hon. and hon. Members have expressed to the right hon. Member for Rotherham (Mr. MacShane) on securing this important debate.

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The picture that several hon. Members have painted of what the steel industry faces is grim. There is an approximately 50 per cent. fall in demand. It is a worldwide phenomenon, and in Europe recovery has been described as some years off. That means that there may be massive overcapacity in our steel industry for some years to come. The effects of that can be seen in the closely allied construction industry, which is on its knees, and the automotive industry, which is suffering greatly. Although several hon. Members have mentioned the scrappage scheme as a stimulus, there are still car manufacturers on the brink of disaster because promised help to the automotive industry from the Government has not yet materialised. I hope that, although it is not part of today’s debate, the Government will take that fact on board.

Steel is vital to the future of manufacturing, but, as several hon. Members have mentioned, we must not forget the supply side—the chain of smaller individual companies such as design engineers, whose predicament is just as bad as, if not worse than, that of the steel manufacturing side. It is incumbent on us to consider the plight of those businesses as well, and ensure that as much as possible is done to protect them.

Corus has already shed 2,500 jobs this year. On 26 June it made an announcement about a further 2,000 jobs, most of them in the UK. We have not talked a great deal about Teesside, but the fact that the consortium tore up the deal to take 80 per cent. of the output in Teesside is a matter of extreme worry to the workers there. In Port Talbot the picture seems somewhat better. The way in which the work force and management have worked together to make £150 million of savings is a fantastic, salutary lesson in partnership. Port Talbot would appear to be in great shape to survive the worst exigencies of the recession. Only 1,000 jobs remain in west Yorkshire, apparently, out of 6,000 10 years ago, so it is incumbent on us to make sure that we do not lose the tremendous skills that hon. Members described earlier. We must keep the core base of skill and ability.

The hon. Member for Sheffield, Hillsborough (Ms Smith) has talked movingly about the quality of the work that we do in this country in manufacturing, which is not lauded loudly enough. We do the clever stuff. Right hon. and hon. Members have talked about the oil industry and our managing to create the means of access to North sea oil from the most difficult parts of the North sea. The effect of the redundancies is felt in every part of the communities that the companies in question serve, right the way down to the sandwich shops that the hon. Lady mentioned. The right hon. Member for Scunthorpe (Mr. Morley) spoke very well about the importance of a multi-agency approach and how all agencies and everyone involved in the community, including Government agencies, quangos and local authorities, can get together to work for the most productive way of surviving in these times.

What is the solution? I gather, although he has not mentioned it this morning, that the right hon. Member for Rotherham has called for redundant staff to be paid £20,000 per annum and to be given public sector or community work. We have also talked at some length about wage subsidies. The Government have rejected those, and I tend to agree about the problems, such as
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the dead weight problem of subsidy being given to people who would have received payment anyway, and the fact that we cannot be compared with the rest of Europe, because in the UK unemployment benefits are not 60 to 70 per cent. of an individual’s wage. The cost of employment subsidy elsewhere in Europe is minor relative to what would happen in the UK. In addition, an unfair playing field is created when one company uses employment subsidy and another does not.

Ms Angela C. Smith: The call for short-time working subsidy relates not necessarily to the individuals but to a strategic argument about ensuring that workers do not walk away from an industry with an important future in UK manufacturing.

Lorely Burt: The hon. Lady makes a good point, but there are other ways to protect skills. The Government have announced £5 million to be spent on enabling skills to be retained. In the context of the thousands of jobs that we are talking about, it is something of a drop in the ocean, and I shall be grateful if the Minister will discuss how that sum will be utilised. How thinly will it need to be spread for workers throughout the UK to benefit?

A number of hon. Members spoke of the Welsh ProAct programme. The jury may still be out on its effectiveness, but I would not close the door on any sort of wage subsidy. It is worth considering, particularly if vital skills can be protected.

What can the Government do? I have already mentioned the £5 million that they have offered. Several hon. Members mentioned trade credit insurance. Having called for help to be given to companies experiencing difficulty in obtaining trade credit insurance, I was delighted recently to hear that the Government have introduced a scheme to share some of the risk with insurers. If the steel industry and its suppliers are still experiencing problems in obtaining such insurance, I would ask the Minister to consider what can be done.

Right hon. and hon. Members have mentioned energy prices. I shall be interested to hear from the Minister whether anything can be done to smooth the trends in energy prices. Their unpredictability is causing so much difficulty for steel manufacturers and others. Another factor that the Government could consider is procurement. The Olympics is a prime example; the Government could ensure that British steel is procured for construction, as it would help our aspirations.

The right hon. Member for Scunthorpe spoke of renewable energy. Wind turbines, transport infrastructure, home building, building schools for the future and many other creative ways of using steel have been suggested to the Government. To their credit, the Government have made a large number of announcements. The House would like to see those announcements materialise and become a reality. Warms words are great, but they will not create jobs unless the Government put their money where their mouth is.

The United Kingdom is a great place to do business. We have the best in innovation, we have a brilliant infrastructure, we have a flexible work force, and we have lower labour on-costs than many other countries. Steel is at the forefront. If we do not have steel, we will not be able to go forward with any of the areas of manufacturing that I have mentioned. The Government
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must support the steel industry, or the threats to steel in Sheffield and elsewhere may cause the unkindest cut of all.

10.33 am

Mr. Mark Prisk (Hertford and Stortford) (Con): It is good, Sir Nicholas, to see you in the Chair. May I add my words of commendation to the right hon. Member for Rotherham (Mr. MacShane) for securing what has been a timely debate and for his typically forthright remarks. Although our views of history may not be entirely shared, I enjoyed his line—I suspect that most here this morning will not have noticed it—of saying that the BBC was a force of conservatism. That was particularly entertaining. However, I agree with him on the question of protectionism. If it does not embarrass him too much, may I say that I think we agree on that?

The country has been producing steel for longer than almost any other nation. As the home of the industrial revolution, Britain retains a strong reputation for quality of finish, especially in the production of higher value products, as the hon. Member for Sheffield, Hillsborough (Ms Smith) rightly pointed out. However, we are far from being the largest producer, as we heard this morning. Indeed, figures show that Germany, Italy, Spain and France now produce more than the UK.

Even before the recession, there was a worrying decline in UK steel production. In 1997, output stood at 18.5 million tonnes, a level retained for much of the 1980s and 1990s. Since then, however, production has fallen. At the beginning of 2008—before the recession—output stood at 13.5 million tonnes. That was a 27 per cent. fall in steel production, but it occurred during a period of global growth. Will the Minister explain why, during those years of growth, steel production in the UK fell so far and so fast?

Allied to that fall is the fact that energy prices have badly affected heavy industry. As the right hon. Member for Rotherham pointed out, steel production is self-evidently energy-intensive. Energy prices have a tremendous impact on the competitiveness of UK steel producers and their suppliers; yet, despite that, the Government’s data show that average industrial electricity prices rose by 111 per cent. in real terms over the past five years; and, as a number of hon. Members said, average industrial gas prices rose even further—by more than 130 per cent. in real terms. Those rises have outstripped rises in most of those countries with which our steel producers must compete. Will the Minister explain why UK industrial energy prices have risen so much, especially when compared to those of many of our competitors? What does she say to those in the industry who blame the Government for failing to address the problem before it became a crisis?

Members rightly spoke of the value of steel production to the UK economy. As a passionate supporter of manufacturing, Sir Nicholas, you will know that access to working capital is vital. It is the lifeblood of major industries. That is why, last November, the Conservative party set out its plan for a single national loan guarantee scheme. Worth about £50 billion, it would be available to all sectors and to all viable businesses, irrespective of their size. By making the rules common and clear, we believe that such a scheme would ensure that businesses had access to the working capital that they clearly need.

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In contrast to that, a plethora of ideas has been announced by the Government. My worry is that, to date, they have all too often failed to deliver the actual finance. I take the automotive assistance programme as an example. Car production is a crucial consumer of steel, so helping that trade would not only help the car plants but help the steel workers of Sheffield and Rotherham.

In January, Lord Mandelson announced the automotive assistance programme, telling us that it was open for business. Since then French, German and American Governments have delivered financial aid, specifically to their car producers. The money is in their bank accounts. However, despite the promises of Lord Mandelson, not a single penny has been received by British car firms. Why not? Ministers talk about providing real help. Why, under the current Government, are our car firms the last to receive the help that they have been promised? Perhaps the Minister can tell us.

The recession has hit steel hard. The sharp falls in construction, and in automotive and allied engineering production, have led to a sharp reduction in demand for steel. Those sectors represent two thirds of the UK market for steel. In that difficult context, it is not surprising that Corus has recently been struggling to cope. Hence, the company decided in January to mothball some facilities and to cut 3,500 jobs, including 2,500 in the UK.

As we heard earlier, it is the recent announcements about compulsory jobs cuts on Teesside, and in Scunthorpe and Rotherham that are of most concern. It is clear that the company takes a rather different view to the Government. It believes that the upturn is a long way off. On 25 June, the chief executive of Corus, Kirby Adams, told the BBC that the recovery

In response to Corus’s announcement, the Government have offered £5 million to help to retain key jobs. It would help Members if the Minister could tell us what that means in practice, and who will and will not be helped. Also, what commitments has the company made in return for that £5 million of aid?

Furthermore, it would be very helpful to hear from the Minister what strategic interest the Government place in continued UK steel production. Some have said that Lord Mandelson does not consider steel to have strategic industrial importance. Is that Government policy?

Mr. Caborn: I have been in dialogue with Lord Mandelson’s Department—I cannot remember its name because it keeps changing—and know that he has taken a very deep interest in the Sheffield steel industry. Will the hon. Gentleman please tell me where his perception comes from?

Mr. Prisk: That point has been put to me in representations from the industry. It has asked me, “Is this an issue? We can’t get a commitment from Ministers.” I hope, therefore, that the Minister will make that commitment today. However, I agree with the right hon. Gentleman that we have had too many Ministers in too short a time—I am on to my eighth set of Ministers in
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my role—so I hope for some stability, and I sincerely hope that the right hon. Member for Doncaster, Central (Ms Winterton) lasts longer than her predecessors.

The redundancies in the steel industry are devastating for the workers and their families. I welcome the Government’s announcement of a taskforce to help those in danger of losing their jobs, and I hope that the Minister will set out the exact role of the taskforce, where its limits will lie and its progress to date. Furthermore, will she reconsider some of the rules on the existing retraining packages? Sometimes, retraining and support packages are not available until somebody has been out of work, and on benefits, for six months. That seems to make very little economic sense and is intensely frustrating for individuals who want to move on. They will often have good skills, but will need to retrain and will not want to wait for six months before a programme can kick in. Will she look carefully at the rules and undertake to remove any unnecessary restraints? It is vital that we reskill people so that, as Members on both sides have said, we can get them back into work as soon as possible.

This has been a timely and informed debate and has shown how steel is integral to many parts of the economy—not just manufacturing but across the different sectors. It has also highlighted the urgent need for change, both in rebalancing the economy, as hon. Members have said, and in the way in which the Government support industry. The Minister needs to answer some crucial questions. Why, even before the recession, did UK steel production fall by nearly one third? Why are Government aid programmes not delivering money to the businesses to which it was promised? How do Ministers intend to help workers, from Corus and elsewhere, to reskill and to re-enter work as soon as possible? I look forward to her answers.

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