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Baroness Jay of Paddington: My Lords, I wish that I could confirm to my noble friend that the concerns referred to in the Statement were isolated to the north-west and North Wales. Unfortunately, our concern, not about the structure per se but the organisation of the new structure and the way in which it has caused dislocation to the service to the people who
would perhaps be distinguished medical colleagues of the noble Lord in other regions, has been part of the evidence which suggested that all was not well. Of course, the noble Lord is right that the overall production of blood is of a very high level and that the quality of the blood products provided is also of high quality. The specific concerns about the transport of blood products between the regions has been a subject of concern as regards the transfer of processing from Liverpool to Manchester. As I said in response to the noble Earl, we shall be asking Mr. Fogden to look at it and to assess the situation carefully.There have been other suggestions, for example, that the Plymouth and Bristol centres should be merged. Partly because of those kinds of concerns about the transfer of blood products, the Government have asked the National Blood Authority not to proceed with that particular merger.
Lord Randall of St. Budeaux: My Lords, does my noble friend agree that the Secretary of State was compelled to take strong action on this matter because of the appalling failure in some of the fundamentals of the service; for example, as regards the actual deliveries of blood to consultants and other clinicians, the number of donors and missing targets significantly? Will she confirm whether the structure we have and which has been seen to have failed was related to the cuts which ensued at the time that the new structure was planned and we had the shift from the national transfusion service, because there was a significant reduction in staff levels and financing? It is important that we know whether those cuts did impact on the operation of the organisation as well as the structure.
Baroness Jay of Paddington: My Lords, I am grateful to my noble friend. The points he touches on are precisely about the lack of confidence, particularly among donors, which occurred very destructively in the Merseyside region. We were particularly alarmed when we looked at some of the figures concerning the decrease in the number of donors, who simply felt no confidence in the local service.
As regards the broader point that my noble friend makes, it is true that there was widespread rationalisation which led to disinvestment, particularly in members of staff. One of the concerns that we had when we looked in detail at the run-down of the Liverpool service, which led my right honourable friend to decide last September to confirm the move to Manchester, was precisely because there were so few skilled staff left in the Liverpool area so that it was impossible to maintain a satisfactory blood supply. One needs to be careful about judging with hindsight whether the decisions to restructure the service, which had some of the advantages I mentioned in earlier answers to questions on the Statement, were the same as those which led to the removal of skilled staff from important posts. It is not absolutely clear that that was so. But what is true is that in certain crucial areas the reduction in the numbers of skilled staff led precisely to a lack of
confidence, which my noble friend rightly describes as being the issue which caused my right honourable friend to act today.
Lord Graham of Edmonton: My Lords, the House will be appalled and distressed at the sad and dismal tale of mismanagement at the top of the National Blood Service. But will my noble friend take this opportunity to reinforce, and pay tribute to, those at the sharp end of what is a vital part of the National Health Service? I refer to those who work hard in the clinics of our hospitals and in mobile units. Will the Minister accept that the prompt and decisive action taken by the Secretary of State is much appreciated? The problem concerns not only Liverpool, because reference was made in the Statement to East Anglia and Oxford. The Minister was frank enough to indicate that there may be other areas, too.
There are those in the House who may be aware that I recently suffered a thrombosis, in part due to a long air flight for which I was badly prepared. The Minister may care to give some thought to how air travellers can be better prepared, and better prepare themselves, for long air journeys, and even consider which department has that responsibility. Will she accept from me that in Whipps Cross Hospital anti-coagulant clinic I received, and will continue to receive, excellent service, in contrast to the miserable service at the top of the National Blood Service?
Baroness Jay of Paddington: My Lords, I am grateful to my noble friend. I am delighted at the care he received at Whipps Cross Hospital. I am particularly delighted that it has been successful in bringing him back so rapidly to your Lordships' House.
Perhaps I might repeat the final paragraph of the Statement, which I believe confirms what my noble friend asked:
- "The staff of the Blood Service have worked very hard and effectively to continue to deliver a good service to the clinicians they supply with blood and blood products, during a major reorganisation of their work. They and the 2 million blood donors in England have done us proud".
I hear my noble friend's comments about the problems of long-distance air travel. Perhaps that is something I should discuss with my noble friend Lady Hayman.
Lord Monkswell: My Lords, perhaps I might also thank my noble friend for repeating the Statement. Over the past few years we have seen a major change taking place within the blood transfusion service which we now
see publicly recognised as being intensely traumatic. Can my noble friend confirm that almost from the inception of these changes the trade unions representing the professional staff involved, and in particular my own union, MSF, have identified problems that were experienced by the professionals involved and have sought to ensure that the changes taking place were mitigated to prevent the difficulties that we now see portrayed before us? Can she also confirm that we must learn a lesson from the experiences over the past few years with this service; namely, that a dictatorial, centralised management style is no way in which to run a public service? It may be that private industry, going through similar major changes, might learn lessons in the way in which the public service should be organised and run and changes instituted by taking much greater account of the workers involved, particularly the points put forward by the organised trade unions.
Baroness Jay of Paddington: My Lords, I am happy to acknowledge the constructive role that the MSF union has played in trying to maintain skills and the morale of local workforces in the blood service and in drawing to wider attention some of the problems which they experienced as workers in local blood services. I suspect that one of the problems about the way in which the management was organised was, as my noble friend suggests, that there was not adequate consultation about some of the moves and changes which affected people's lives as well as their working arrangements and that that caused the lack of confidence to which I have referred several times this afternoon.
Steel Exports
6.30 p.m.
Lord Islwyn rose to call attention to the value of sterling and its effects on steel exports; and to move for Papers.
The noble Lord said: My Lords, at the outset I welcome this opportunity to illustrate the serious problems that face British Steel as a direct result of the high value of sterling. I have had a long connection with the steel industry because for 31 years I represented Newport in the other place. Newport developed as a steel town and still has a major stake in that industry. I recall the situation about 15 years ago when the then British Steel Corporation was on the brink of collapse. It suffered from over-manning, inefficiency and lack of investment. We are all mirrors of our own experiences. I was particularly concerned about the situation in Wales because of its major stake in the steel industry. In the event, there was a number of planned closures, including the East Moors works in Cardiff and steel making in Ebbw Vale and Shotton in north Wales ended. The more modern Llanwern steel works in Newport was also in jeopardy but was saved by a last-minute reprieve, although approximately 5,000 people were made redundant.
I have spoken only about what happened in Wales, but the same thing happened all over the country. Whole communities were decimated, and the scars of
dereliction together with unemployment black spots remain to this day. The present situation is altogether more complex. Plants are working flat out; order books are full; and, due to the high level of capital intensity, plants must be operated 24 hours a day. Over 50 per cent. of what the United Kingdom steel industry produces is exported. Nearly two-thirds of these exports go to European countries. Therefore, the relationship of the pound to ERM currencies, particularly the deutschmark, is critical to the competitiveness of the United Kingdom steel industry. Today, the deutschmark stands at 3.065 to the pound. The value of the pound has soared by nearly 35 per cent. over the past 18 months. Even before the post-Budget surge it was generally agreed by economists that sterling was grossly over-valued. In the financial column of the Daily Telegraph on 4th April edited by Ben Potter it was said:
- "British Steel is the classic currency casualty".
I have no wish to try to teach British Steel how to run its business. Nevertheless, to play devil's advocate for a moment the first question to ask is: why borrow in sterling? Can there not be a switch in borrowing into foreign currency using revenue that is now being received? Secondly, steel is made largely from iron ore, which must be imported. Does the high value of the pound have a beneficial effect on the price of the iron ore that is imported? No doubt these questions are being considered at this critical time. Steel is fundamental to manufacturing. Even products that are not made of steel are probably made with steel. Four million people are employed directly in manufacturing and a further 4 million are employed indirectly and provide the United Kingdom steel industry with its domestic customer base.
If we turn to the export sector that is now giving cause for concern, we find that manufacturing is responsible for nearly two-thirds of the United Kingdom's total export of goods and services. That is to be compared with just 23 per cent. for the service sector and 15 per cent. for other invisibles including oil. There can be little doubt that the high value of the pound is having a direct and detrimental effect on the export of manufactured goods generally and that steel is particularly badly hit.
From personal knowledge I am aware that British Steel is a very efficient organisation. It employs 38,000 in the United Kingdom and a further 10,000 overseas. It is modern, technologically advanced and internationally competitive both in terms of quality and productivity,
but the Monetary Committee of the Bank of England's use of the blunt instrument of successive rises in interest rates is causing that industry serious problems. The manufacturing sector as a whole bears the brunt of the anti-inflationary medicine; that is, higher interest rates are helping to bring about an over-valued pound. Ironically, the manufacturing sector shows few signs of inflationary pressures. The tragic fact is that companies in manufacturing, and steel in particular, will be forced to review their investment plans and workers may be laid off.I raise a further interesting aspect of the grossly over-valued pound. In the past 20 years or so many overseas companies have invested heavily in Britain. In the automobile sector big names like Datsun in Sunderland, Toyota in Derby, Honda in Swindon, Ford Engines in Bridgend and major motor component suppliers like Bosch of Germany have settled in this country. More recently, in electronics huge investments have been made by the Korean company LG in Newport. It is estimated that eventually it will provide about 6,000 direct jobs. Hyundai in Scotland has also made a major investment up there. Of course I appreciate that at the present time there are difficulties in regard to Korea and its distressed economy. These foreign companies have played a significant part in providing jobs in economic black spots which suffered the ravages of the Thatcherite years and the closure of the so-called smokestack industries.
Now we need to take note of a warning given by Mr. Jack Smith, chairman of that huge conglomerate General Motors. He said recently:
- "The strength of sterling has now turned the United Kingdom into a high cost economy for inward investments".
Finally, let me make it clear that my object in securing this debate was not to make a cheap attack on the Chancellor of the Exchequer, Mr. Gordon Brown, for he is a man whom I hold in the highest possible regard. He is a caring and compassionate man, as witness his Welfare to Work programme and the determined attempt to get our young people out of the dole queue and into work. What I am asking this evening is for the Minister to point out to the Chancellor of the Exchequer the serious difficulties that our highly efficient and competitive steel industry is facing, due to these currency difficulties, and to ask him to do what he can to alleviate the situation. I beg to move for papers.
6.42 p.m.
Lord Hardy of Wath: My Lords, first, I should like to offer my thanks and commendation to my noble friend Lord Islwyn for doing the House a great service in raising a matter which is obviously of very great
importance. My noble friend has a long-standing interest in steel. I recall the very long period in which he acted as chairman of our steel committee in the other place, his many contributions to debate there and his devoted interest in steel generally and also in the great steel tradition and activity in south Wales.My own concern is very similar to his, except that my remarks this evening will be particularly related to the engineering steel sector, which I know reasonably well and part of which I represented in the other place for a very long time. Because of our experience, my noble friend and I, together with many others on this side of the House, will be sensitive to the anxieties which from time to time develop in this essential industry. I have seen in my lifetime, and certainly in the years since I became a Member of Parliament in 1970, enormous change in that industry in my own area.
I recall--and noble friends who know south Yorkshire may also recall--that for a very long period between Rotherham and Sheffield there were huge steelworks which employed tens of thousands of men--steelworks which provided the sinews for economic growth and success and for the materials of conflict. If I go there now, the employment total is little more than 1,000. Most of those big plants have gone and the steel industry to a very large extent has moved to an area which is not that far away geographically, but to the north of Rotherham and away from Sheffield. Indeed, without wishing to enter into local rivalry, Rotherham rather than Sheffield could now be described as the centre of engineering steel.
That transfer has not only sacrificed many thousands of jobs but it has involved enormous investment, so that a very small number of people--perhaps less than 10 per cent. of the total once employed--are now engaged in engineering steel. But the new plants that have been built in recent years--plants like Thrybergh Bar Mill, Aldwarke and Roundwood--have productivity figures which could not have been imagined then. They have become world leaders in engineering steel. However, despite their success, the sacrifice, co-operation and involvement of the people involved in that industry, with the assistance of the community and local authorities, and despite achieving those records, they have from time to time had grounds for very serious anxiety.
Now we have another one. In the early 1980s we had what might be called almost a psychological problem when the last government appeared to dismiss and be disdainful of manufacturing industry. We had after that a very serious problem caused by, shall we say, the partisan approach to the electricity supply industry. In order to sweeten that industry for privatisation the price of electricity rose alarmingly. In the plants to which I have referred engineering steel is made by use of electric arc furnaces, and those furnaces at Aldwarke, Thrybergh Bar Mill, Roundwood and similar works consume as much electricity as a city, so that during that period the proportion of the costs of production accounted for by the electricity bill was almost as much as the labour costs of those enterprises. It brought a great deal of anxiety to people at all levels in that industry.
Despite that, the problems were faced and productivity continued to increase. As I have said, we have world-beating plants. I do not think there are more successful plants anywhere in the world than those; yet we then came across another problem. We encountered protectionism in Europe to a point which my noble friend may recall created a great deal of anger, because we found that we were seeking to compete with steelworks where governments were meeting the labour costs, where enormous capital write-offs were engaged in and where government subsidies for so-called research and development were put into what happened to be existing technology. All that meant that we were facing an uphill struggle. We went to the Minister and my noble friend may recall that I had a relevant Question about it the other day. We went to the Minister, to unions, to management, local authorities and the community; and the Department of Trade and Industry seemed to be taking notice. They said that they would raise the matter at the Council of Ministers. A few days after that meeting a press statement was issued proclaiming that a monitoring committee was being set up to examine the situation. My noble friend may recall that we raised this a few months later in the other place and indeed I recall asking who was monitoring the monitors, because there seemed to be no evidence of any monitoring taking place, despite the last government's claims. My noble friend, in an Answer to me the other day, appeared to confirm that there does not seem to have been very much monitoring of that.
My point is that if we continue to succeed and continue to achieve and then find structural, perhaps improper and indeed illegal activity in Europe--which is such a large part of our market, as my noble friend has said--then we are entitled to be deeply concerned. My noble friend has said that so far the high rate of exchange has not led to any dramatic change, but it has led to a great deal of anxiety. I heard anxieties expressed in South Yorkshire at the weekend. That anxiety needs to be considered. We do not suggest that there is a dramatic change in government policy. The Chancellor of the Exchequer, as my noble friend has said, is committed to maintaining a strong economy. However, I heard at the weekend, and it is an entirely relevant comment, that some people have been saying that Japan, Germany and other countries have achieved great success despite a high exchange rate; and so they have. But Japan was an extremely protected economy and Germany has certainly maintained protection in recent years, whether or not we have Common Market regulations. We must be vigilant to ensure that if we are playing the game, if we are obeying the rules, we must expect other partner countries in the EU to do likewise. If they do not, we are entitled to expect the Commission to pay particular attention to any of their backsliding.
I hope that we can continue to see that Britain benefits, and that those involved in the industry benefit, from the sacrifices and the investment that they have made. As I said, and as my noble friend pointed out, it has cost the steel areas thousands of jobs. It would be an enormous pity if the exchange rate were to prevent Britain from reaping the harvest of that investment. It would also be a great tragedy if that exchange rate in
any way deterred the inflow of investment that we need to promote the employment which is so desperately needed in those areas.6.50 p.m.
Lord Gisborough: My Lords, we hear and read that the UK manufacturing sector has failed to live with the strong pound, while its German and Japanese counterparts have in the past made great strides in world markets with a strong mark and yen. It is said that our manufacturers have failed to maintain increases in productivity similar to Germany and Japan and that wage increases in the UK have been out of line with our competitors.
Our main steel producer, British Steel, has certainly not made over-generous wage settlements and its productivity record matches the best in the world among steelmakers. It is taking vigorous management action to restore its competitiveness but this cannot be achieved overnight and certainly not in the face of a huge surge in sterling's strength versus the deutschmark--the major European currency in which British Steel trades--of over 30 per cent. in the past 15 months.
The German economy has not had to contend with this level of change in its exchange rate over such a short period. In the case of the Japanese, the rapid appreciation of the yen versus the dollar in the mid-1990s brought great pain to their exporters, but it came after a long period of exchange rate stability. These are the differences which Ministers and the Bank of England Monetary Committee need to understand.
British Steel has transformed itself over the past 10 years. It is modern, efficient, technologically advanced and internationally competitive; that is, until the pound surged by over 30 per cent. against the deutschmark (the crucial exchange rate relationship) to its grossly overvalued current level. We do not want or need a weak pound but it is doubtful whether the UK customer base can live with sterling's current parity with the deutschmark without major job losses and cutbacks in production and lower exports.
Some 50 per cent. of British Steel output is exported, much of it to other European Union markets, and we are very dependent on the wider UK manufacturing sector (a large part of its domestic customer base) which itself exports some 50 per cent. of its output. In fact, its exports account for nearly two-thirds of Britain's exports of goods and services.
British Steel has already embarked on vigorous actions to restore competitiveness. Some of these will regrettably mean progressive and significant job losses. But while it may be facing a couple of difficult years, its real concern lies with the future competitiveness of its UK customer base.
Prior to the Budget too much emphasis was, and still is, being placed on UK interest rates to combat inflation. It is the UK manufacturing sector, and within it the UK steel industry, that is bearing the brunt of the anti-inflation medicine (increased interest rates leading to the highly damaging overvalued pound).
It is widely accepted that Britain currently has a two speed economy. It is not at all clear why the authorities should persist with a policy which unnecessarily damages manufacturing, where inflation is running at under 0.5 per cent. when it is the services sector's inflation rate that is running at 4.5 per cent.
Of course British Steel supports the Government's strategic objective of long-term stability, including low inflation, but what is gained by using the single blunt instrument of interest rate increases to squeeze inflation out of the UK economy, while risking squeezing the life out of chunks of British manufacturing in the shorter term?
The Chancellor evidently rejected the option of seeking a better balance between fiscal and monetary policy in his recent Budget. A one-off fiscal tightening could have been targeted at that part of the economy subject to overheating and inflationary pressures. This would have allowed an earlier and progressive reduction of interest rates. The effect would have been to change perceptions on the part of currency dealers and to weaken sterling versus the deutschmark.
This prompts the fundamental question: does new Labour really care about manufacturing? It would indeed be ironic if one of the Government's flagship policies to reduce youth unemployment began to get the young unemployed into work just as a large and growing number of the current workforce of 4 million in UK manufacturing find their jobs disappearing.
6.55 p.m.
Lord Paul: My Lords, I thank the noble Lord, Lord Islwyn, for initiating this debate which is so important for the future of the UK steel industry. To start with, I declare an interest. I am chairman of the Caparo Group, a manufacturer of steel-based engineering products.
Last week we discussed exports and looked at the effect of sterling's appreciation on manufacturing industry. Today we are discussing the steel industry specifically.
The UK steel industry has transformed itself over the past 10 years and exemplifies the changes and improvements to UK manufacturing generally. It is the most efficient steel industry in Europe and one of the best in the world. It is modern, technologically advanced and internationally competitive. It is a dynamic, innovative and progressive employer. I take this opportunity to pay tribute to the managements and the unions for working together to make this possible, in particular, Sir Brian Moffat, chairman of British Steel, and Mr. Keith Brookman, general secretary of the Iron & Steel Trades Confederation.
It has been said that industry should make itself more innovative, competitive and productive. Here is an industry that has done all of that. Inefficient practices have been shaken out and productivity improved to world-class levels. However, the UK steel industry, which has to live in a European market, is finding it increasingly hard to compete due to the strength of the pound. Sterling has appreciated against the dollar by
8 per cent. since August 1996. Of greater concern is the 35 per cent. movement against the deutschmark over the same period.Some 50 per cent. of UK steel's output is exported, much of it to other European markets. Steel is also used in the wider UK manufacturing sector--a large part of our domestic customer base--which itself exports some 50 per cent. of its output.
Since three-quarters of the UK's steel output is dependent on exports, much of it to EU markets, it is obvious that the pound:deutschmark relationship is critical. UK steel is the most efficient steel industry in Europe and it is finding it difficult to compete in spite of being very efficient.
There are not many more costs that can be cut, and steel workers can be justifiably angry that their jobs are at risk, not for reasons of poor performance or lack of investment, but simply because of the adverse exchange rate. This is largely due to the boom in service industries which is making it necessary to increase UK interest rates. UK interest rates are far higher than in the countries with which our steel industry is competing. I would add that the UK steel industry has always been in favour of the single currency, which shows its own confidence in its competitiveness in normal circumstances.
Despite the problems caused by the exchange rate, the steel industry still managed last year to export more steel than our competitors sold here; 47 per cent. more, in fact. Although we may need to import many of our raw materials these days, our exports more than pay for these purchases.
Steel contributed £2.3 billion to the UK balance of trade in 1996. Since then, however, the over-valued pound has wiped £1.3 billion off our export earnings.
The Government have stated that they are anxious to avoid "boom and bust" and to ensure steady job creation. It seems to me that Britain is rapidly becoming a two-tier economy with a 1980s style north/south divide. In London and the south-east are the service industries, with higher wages and inflation running at 4.5 per cent. In the north and west the manufacturing industry cannot afford to pay its present wage bill, and inflation is only half a per cent. This cannot go on and should not be allowed to go on.
I am delighted to see that my friend the Chancellor, the right honourable Gordon Brown, has acknowledged the problem and I hope that he will do something soon. Perhaps he can point out to those in charge of raising interest rates that Britain exists beyond one square mile of London.
The loss of job security and career prospects has long-term effects for the industry itself. The loss of confidence in the industry as a future employer caused many of our best young people to shun the steel sector in the 1980s to the point that recovery in the 1990s was hindered by skill shortages and difficulty in recruiting technical staff. Unfortunately, it is already starting all over again.
To create a world-class workforce and to maintain its position in the future, the steel industry needs to recruit young people who will be even more adaptable and
skilled and who see that steel can offer them a really worthwhile and exciting career. We must not let them believe that there is no future in the steel industry.With my experience of the steel industry, let me assure your Lordships that there is no "whingeing". The steel industry has made itself fit to fight any competitive battle, but at the moment it is fighting the battle with one hand tied behind its back.
What would be the position today if we no longer had a steel industry? Other manufacturers would have to import their steel. The direct adverse impact on the country's balance of payments would be some £10 billion a year. Sixty thousand jobs would be lost directly and many thousands more indirectly.
We must redress the balance, otherwise the consequences will be serious not just for the steel industry but for the UK economy as a whole.
7.3 p.m.
Lord Desai: My Lords, we are all grateful to my noble friend Lord Islwyn for initiating the debate. I was not present on a previous occasion when the House debated the exchange rate. I have no practical experience of any industry, certainly not the steel industry, but I wish to call attention to the value of sterling, as the Motion states, and comment on its effect on steel exports. I shall comment more on the former and less on the latter.
Perhaps I may first comment specifically on the steel industry, especially on what was said by my noble friend Lord Hardy. I agree that in negotiations inside the European Community we must insist that the rules of the single market are followed. There is much backsliding on that in other countries because they still have a subsidised steel industry. We do not. Any agreement that we should all make equal cuts in our capacity and so forth should be firmly rejected. We must state that a single market clause must be adhered to and that subsidies given in other countries should be eliminated because they are a tariff on British steel exports. I hope that my noble friend Lord Haskel will assure us that the Government's stance on that matter will be implacable and that no concessions will be made.
As regards the value of sterling, appreciation is vis-a-vis the deutschmark. Appreciation vis-a-vis the dollar has been small. We must examine why that imbalance exists between dollar and deutschmark. It is fair to say that even prior to the present monetary framework coming into effect after the election, sterling had already begun to appreciate against the deutschmark. Before the rises in interest rates which took place before the Monetary Policy Committee was set up, sterling was rising. I believe that there had been a deliberate depreciation of the deutschmark; that the Germans steadily followed the policy of depreciating the deutschmark. They had been suffering a recession in the aftermath of the absorption into the economy of East Germany. That depreciation of the deutschmark has been a major factor in the rise of sterling against the deutschmark.
Secondly, some time ago an analysis in the Bank of England quarterly bulletin showed that even if one examines the effect of the interest rate rises which have
taken place one still cannot fully explain the appreciation of the deutschmark. Over and above the interest rate rises, there is what is called the "safe haven effect". Pending the introduction of a single currency there is a great deal of nervousness. Many people are moving into sterling because they believe that for the next five years or so it will be a safe currency; at least we know how it will behave and how it will be regulated. The result is due to a combination of Germany's deliberate policy to depreciate the deutschmark, the safe haven effect and the rises in interest rates during the past year.What can we do about that? We must strike a balance. When my right honourable friend introduced the new arrangement giving the Bank of England control over interest rates by setting an inflation objective, the long-term rate of interest fell in the UK. Whereas during many previous years we were paying 1 per cent. to 1.75 per cent. more than the Germans and Americans were paying in long-term interest rates, today those interest rates are practically identical. I checked that in the Independent today. Therefore, there has been an advantage in lower long-term interest rates. Of course, what we have been paying for is higher short-term interest rates, and that is because of the boom in the service economy which my noble friends have pointed out.
I was saying to a fellow economist that people are always surprised when the economy is unbalanced. I do not know why anybody expects the economy, which is a complex machine, to be balanced all the time. It is probably the fault of the economists. They have convinced the world that it is all equilibrium and harmony and that it is a nice round ball which rolls along. It is more often the case that the economy has its imbalances.
The services sector employs the majority of the workforce. We must remember that. The services sector employs two-thirds, if not a larger proportion, of the labour force and the manufacturing sector employs only about 18 per cent. of the labour force. I am willing to be corrected on that, but I do not think that I am wrong by more than one or two percentage points. Therefore, because there is a lot of employment and we have had various building society demutualisations and such matters, we have had a considerable boom.
It is absolutely correct that if we have a monetary framework in existence with an inflationary target, the Monetary Policy Committee which is assigned that task must ensure that that target is met. I am a purist in that regard. I should not have given the Bank of England independence, but that is another story. Once it has been given its independence, it must play according to the rules. It should not start second-guessing and adding other objectives such as what might happen to the north and the south or this or that industry. It must maintain an absolutely straight, single-objective policy.
Even the Chancellor should not do anything which would cast doubt on his own belief in the framework which he has set up. If he starts to say that he is not sure that that framework is right or that the Monetary Policy Committee should do X, Y and Z, it undermines
the independence of the Bank of England in setting interest rates and it undermines the credibility of the UK Government in maintaining an anti-inflationary stance. The effect of that will be much more harmful to the economy than anything which a strong exchange rate will do.For far too long in British economic policy-making, we have believed that a quick devaluation will solve all our problems. It did not do that for a long time. It is only since we have maintained a good monetary policy framework, first under Mr. Lamont and Mr. Clarke and since under my right honourable friend, that the UK economy in the past four or five years has achieved some credibility. Long-term interest rates are coming down. Although our short-term interest rates are high, I do not believe that one can start talking them down, partly because it does not work any more. Capital markets do not like that and they are likely to react rather perversely if the Chancellor starts to say that sterling should be lower than it is.
We are caught in this rather peculiar circumstance in which there are good parts of the monetary framework which have been established. It is essential that we stick to that framework and not disturb it in any way or undermine its credibility. That means that one cannot offer any solace to the steel industry or any other industry.
I gather--and again, I am willing to be corrected on this--that the impact of the pound on different industries is different, obviously because some export to the dollar area and some to the deutschmark area. The pharmaceutical industry has been doing quite well as has the aerospace industry. But steel has been suffering. Therefore, a balance must be struck. It is very difficult nowadays to devise an industry-specific policy without undermining the overall framework of the economy.
One used to be able to think of policy in terms of regional aid and so on, but one cannot do that nowadays. It is not possible to target specifically a particular industry. That may even be in violation of the various EC rules.
Therefore, here we are and here we shall stay. I am sorry to be the usual doom-laden economist. To confirm my reputation as a trouble-maker, I would advise the Monetary Policy Committee, unless it has already done so, to put up interest rates. The market is waiting for the second shoe to drop, as it were. It is still expecting one more increase in interest rates. The expectation has been for a long time that UK interest rates will go up. Unless we settle that question, there is no other signal which the Monetary Policy Committee can give. If it does not increase interest rates now, people will expect an interest rate increase next month because inflationary pressures within the British economy are still quite acute, regional differences notwithstanding.
Therefore, paradoxically, the best way to get the pound down is to have one more interest rate increase. That will convince everybody that we are in the serious business of maintaining an anti-inflation policy, but that further interest rate increases will not happen. People will start to get off sterling because no further interest rate rises are expected.
I should add that while I have great sympathy for the steel industry, it is better equipped than many other industries in the UK to withstand this shock, as has been made clear. There is also the problem that in the long run the UK may have to move towards exporting more sophisticated products. Therefore, we should move away from the more basic manufacturing products. But that is for the future.
7.16 p.m.
Lord Taverne: My Lords, I am delighted to follow the noble Lord, Lord Desai, who, as always, has made a most interesting contribution to the debate. Like others who have spoken, I am extremely grateful to the noble and learned Lord, Lord Islwyn, for initiating this debate. We are discussing a very important industry which is facing, as we have all agreed, an intractable and unfortunate problem caused by the rise of the pound.
The debate has gained a great deal from the speeches of those who have been involved personally and politically in the steel industry, like the noble Lords, Lord Islwyn, and Lord Hardy of Wath, and also those who have had practical experience of running steel companies like the noble Lord, Lord Paul.
In some ways, this debate is a continuation of last week's debate, when again the question of sterling was considered. Opinion then seemed to be divided. There was one school that said we could live with a higher exchange rate; it would be a spur to productivity; there was no reason why we should not be able to emulate Germany and Japan, who lived with a high exchange rate in the 1970s and 1980s and gained from the greater productivity and investment which it produced. There is quit a lot of anecdotal evidence to suggest that something of the same nature is taking place in Britain at present.
I have been concerned with the setting up of an industrial mezzanine fund and it is encouraging to find that many of the companies applying for loans from that fund want to invest new capital in order to deal with the high exchange rate so as to cut their costs and put themselves on a much better long-term basis. That is certainly happening.
The other school of thought which emerged last week was that the pound is grossly over-valued, and that it is ruining some perfectly efficient industries. Of course, here we come to what the noble Lord, Lord Islwyn, described as the "classic currency casualty"--I believe he borrowed that phrase from the Telegraph.
I agree that steel is an industry of which we can be pound because it has done everything that one can expect an industry to do. In the past 10 years, there has been a 400 per cent. increase in productivity--the same production as 10 years ago with one-quarter of the workforce. There has not been a single day during that period lost in strikes. It would be a tragedy if, because of the high pound, that industry found that it had to be severely reduced. It is not only hit by the high pound, it is also hit by the crisis in South East Asia which affects its exports and which means that there will be a flood of cheap steel imports into the EU from that area.
I find myself more in sympathy with the second school of thought than with the first. Like the noble Lord, Lord Gisborough, I am not in favour of constant devaluation. I believe that a great deal can be done if the pound is strong. But, in the first place, and as the noble Lord pointed out, Germany and France did not have to deal with such a sudden and rapid rise in their currency. It is this rapid rise, which makes it impossible to plan long term, which has hit the steel industry so hard. I am not in favour of constant devaluation; indeed, I am very much in favour of a stable currency, but a stable currency at a somewhat lower level. It seems to me that the present level of the pound overvalues it and is bound to do damage.
The leaders of the steel industry want to enter the monetary union as soon as possible. Indeed, had we entered, or had we declared our intention to do so, it is likely that we would now be facing a lower rate of currency. As soon as Gordon Brown appeared, according to press reports in the Financial Times, to plan to take us into EMU, the pound dropped. However, when all those stories were denied and we had a new version of the "wait and see" policy, the level of the pound rose.
I turn now to the issue raised by the noble Lord, Lord Desai; namely, why is the pound so high and can anything be done about it? It is most difficult to identify exactly why the pound is so high. It is not just a simple matter. I suspect that high, short-term interest rates are as important a factor as any. In particular, as the noble Lord, Lord Desai, pointed out, the fear of higher interest rates is a factor which is pushing up the level of the pound. Moreover, the depreciation of the deutschmark is undoubtedly a factor, as is the fear of a weak euro. The American mania to buy corporate equity, wherever it is more modestly priced, is also a factor. The Japanese craving for foreign bonds, which have a yield rather higher than one can get from yen-denominated paper and which yield rather less than 2 per cent., is yet another factor.
In time, all of those factors may change, except perhaps the latter. If there is a recession or a slow-down, which, fortunately, I believe is somewhat more likely than a recession, interest rates will no doubt start coming down. In time--perhaps soon, although we do not know when--it seems inevitable that American interest rates will rise. Moreover, it seems likely that, as the German and the French recovery gathers speed, there will be a rise in continental interest rates. That, again, will help us.
I believe that we are more likely to see a strong euro than a weak one. First, the European Central Bank will be determined to prove its credibility as a central bank and will tend to take a somewhat macho stance; indeed, perhaps even more macho than is desirable. But apart from that, over the course of the next 20 years, once the euro is established or, indeed, from the moment when it is announced, we are likely to see a massive transfer of international reserve holdings from dollars into euros which is bound to lead to a rise in the euro. As I said, it is much more likely that we will see a strong euro rather than a weak one. The trouble is that we have no idea how long this process of adjustment will take. It
could take a very long time before the pound comes down. In the meantime, the steel industry will suffer and may have to make very severe cuts.That brings me to the role of the Chancellor of the Exchequer. The Monetary Policy Committee is not concerned directly with the exchange rate; it is concerned with the control of inflation. Of course, it takes account of whether a high exchange rate is already having an impact on inflation, but it is not one of its jobs to target the exchange rate. The Chancellor has shown himself to be rather indifferent to the exchange rate. When he made his announcement on 27th October last about Britain's relations with EMU, I was rather surprised that he never mentioned the exchange rate. Indeed, he spoke about five different conditions that he would apply, most of which were entirely subjective and political, but he did not mention the biggest obstacle that we face which is the exchange rate.
The decision is a difficult one because a decision in the MPC is one taken in circumstances where the committee has to consider a tight labour market, a high monetary growth and a high level of consumption. However, it seems to me that the Chancellor has made a grave error in not setting the right framework within which the decisions of the MPC have to be reached. I say that because, unless there is firm fiscal action to restrain consumption by fiscal means, interest rates will have to take all the strain. The Chancellor's defence is that the July budget and the present Budget have been extremely tight and that he tightened fiscal policy by some 2 per cent. But the circumstances certainly needed tightening because the mass of money--something like £30 billion--which came on to the market through the demutualisation process was such that that has had a very strong influence on increasing consumption.
My criticism of the Chancellor is that he took the easy way out in tightening his fiscal policy. He went by way of a utilities windfall tax; he went for the pension funds; and he tightened up on corporations through the acceleration of payments of corporation tax. Indeed, he has hit companies hard, but has not hit consumption hard. He was not prepared to attack consumption, partly because of a mistaken promise not to raise taxes given before the last election and partly because it seemed to be the easy and popular way out. He won the acclaim of the multitude at the same time as claiming to tighten fiscal policy. He cannot have it both ways.
Here I would draw an unfavourable comparison between the approach of the present Chancellor and those of his two predecessors. After the devaluation in 1992, what was desperately needed in this country was a reduction in the growth of consumption below the growth of GDP. I never thought that the government of the time would do so, but they did. Indeed, Chancellor Lamont and Chancellor Clarke did it, although the latter relaxed somewhat just before the last election.
It is just possible that the Chancellor is right to follow a policy of benign neglect towards the exchange rate because, sooner or later, the matter may well be solved because of the changes in international factors. But I believe that he was wrong to take that risk in the belief that, in time, it would all come out right. His actions in
that respect have been irresponsible. He should have acted much more firmly: he should have acted directly on consumption. He could perhaps have gone for green taxes. He could have tempered the wind to the shorn lamb by various social measures to ensure that those who would be hit by green taxes would not be worse off.I believe that the increasing difficulties of the steel industry, because of the high exchange rate, are a tragedy. Here is an industry which should be an example to the rest of British industry as one which has done everything right and which has been supported in every possible way. It is an example that we should have held up for others to follow. But, instead, it finds itself in its present difficulties. I am most grateful to the noble Lord, Lord Islwyn, for initiating this debate. I hope that the Minister who is to reply will convey to his right honourable friend the Chancellor of the Exchequer the concern which some of us have about his failure to act firmly enough against consumption.
7.29 p.m.
Lord Fraser of Carmyllie: My Lords, from the moment that the noble Lord, Lord Islwyn, began the debate right through to the speech which has just been concluded, there has rightly been a clear concentration on the most impressive performance of the British steel industry in recent years. That is an accolade in which I join. Indeed, it has been a remarkable performance and one which we would wish to see sustained into the future. The purpose of this debate should be to argue that there is no reason why it should not be sustained indefinitely into the future.
However, what concerns me is the wearisome predictability about the response that we shall receive to this important debate; indeed, not only wearisome, I fear that it will also be quite without any grasp of the responsibility of government. I believe that New Labour is so concerned that it will suffer the slur of being called "interventionist" that it will regard any activity that it might contemplate introducing as being something that has to be set aside and that it will, accordingly, abdicate all responsibility. I fear that the Chancellor will tell us once again that, while it is recognised that there is a problem for exporters, including steel exporters, there is nothing the Government can do. In any event, we shall be told again that a strong pound is no bad thing, and that now the responsibility for the setting of interest rates has been passed to the monetary committee of the Bank of England nothing can be done by government to adjust those rates to influence the value of the pound. I agree with the noble Lord, Lord Desai, that if responsibility has been passed to that monetary committee there should be no sneaky suggestions by the Chancellor, or by any of his colleagues, that a degree of influence should be brought to bear on that committee. However, that is possibly a debate for another day.
I have no doubt we shall hear there are parallels to be drawn with Germany and Japan, which at the height of their economic expansion and success had currencies that were even stronger in relative terms than the pound is today. What we need to understand is how different matters are today, particularly in relation to the two
economies I have just mentioned. The currencies against which the pound is strongest are the European currencies. There is no such thing as a strong pound, a strong dollar or a strong deutschmark; it is a relative term. One needs to assess that relative strength.It is baffling that the Government still obtusely fail to recognise that at least one substantial reason for sterling's relative strength against the European currencies is the real doubts that exist in the capital markets over the fudge in the convergence criteria for the new euro currency. The noble Lord, Lord Desai, described it as the safe haven approach. I have no doubt that that is a strong influencing factor. As everyone knows who has participated in debates on Europe in your Lordships' House, the Maastricht requirement is that debt ratios to GDP should be no more than 60 per cent. But in spite of that, both the Italian and the Belgian economies have been allowed to move forward without interruption into the new euro currency at a time when their debt ratios are 118 per cent. Is it the least bit surprising that those who wish to put their money into a currency have chosen the British pound sterling rather than the European currencies which are about to make up the new euro?
The Government's approach troubles me. I accept that they should not interfere with the monetary committee if that is the decision that has been taken-- I shall not enter that debate--but has there been no opportunity for the Government, during the period of their presidency of the European Union, to bring about the influence and the leadership that they claimed they would effectively bring to bear, in sharp contra- distinction to the previous government? Was there no moment when they could have said, "It simply will not do to establish this new euro currency in direct and obvious breach of the criteria set at the time of Maastricht"?
I hope that even now there may yet be some opportunity for the Government to influence the way in which the euro is being established. It simply will not do to slip out of any responsibility by saying, "We may be knocked out because we could not exercise a veto in these matters and we would be knocked out by majority voting". The position is very different from the previous time when sterling was as strong as it is at present. That was at the height of the second oil shock when sterling was--for better or for worse--very much regarded as one of the important petro-currencies of the world. There was little that could be done to adjust its value then.
I wish to speak briefly about the comparison that has already been drawn in this debate--I have no doubt it will be mentioned again by the noble Lord who is to reply to the debate--with Germany and Japan. When their currencies were strong, they had low sustained inflation, low interest rates and, most important of all, their governments did nothing to damage the industries within their domestic economies by pursuing harmful domestic policies. I shall elaborate on that a little.
During the period of the previous government I was the Minister responsible for sponsorship in the north-east of England. Those who have affection for that
part of the United Kingdom will recall the enthusiasm along the Tyne and the Tees at the sound of ringing steel which had not been heard for a long time. Huge ships were being converted for use as floating production platforms in the North Sea. In Middlesbrough, when one of these huge vessels arrived, more of the men who worked there brought their wives and children to see it than were in the Middlesbrough stadium, which was situated immediately behind that yard, such was the sense of pride and renewal that was felt at the fact that those industries were again successful. All those industries were connected with developments in the North Sea and developments in prospect to the west of Shetland.There has been nothing so damaging to the steel industry than the announcement by the Chancellor of the Exchequer that he will undertake a review of North Sea oil taxation. While to date I am not aware of any major project being cancelled or postponed, the Government ought to be well aware that the uncertainty as regards a change in the tax regime over the next five or 10 years is such that there must be a real risk that those projects involving a massive tonnage of steel will be set aside. I urge the Government to pay keen regard to the views of the United Kingdom Offshore Operators Association that thousands of jobs will be lost. There must be a real risk that the damage will affect the steel industry too. Germany and Japan, at the height of their economic success--when they undoubtedly had a high mark and a high yen respectively--had no intended or unintended development of domestic taxation policy which damaged their industries. I believe it was the noble Lord, Lord Hardy, who pointed out that it is not just the direct steel input into particular projects that is at issue; all manufacturing industry has a clear dependence on steel.
As many of your Lordships know, I am a Scot and proud of it. Since Monday, 850 jobs have been lost in Scotland; some of those were shed by Mitsubishi. Those are manufacturing jobs which Scotland and the United Kingdom can ill afford to lose at the present time. I hope that the Minister will state whether there is a recognition that if we are not already in recession we are dangerously close to arriving at that undesirable state. I do not wish to hear the Chancellor of the Exchequer say yet again on the radio that he does not wish to see a return to boom or bust. I suggest that he makes that speech in Haddington at the weekend to see whether the people there believe that we have already returned to that state of boom or bust.
If I am critical of the Chancellor's endless repetition of that phrase, I believe that the Prime Minister is absolutely correct to say that the Asian crisis does not end at the shores of the Pacific. The Mitsubishi decision to shed the jobs I have mentioned must, at least in part, be influenced by its problems at home. If the Prime Minister understands that, one would anticipate that he would be particularly sensitive--his Government ought to be particularly sensitive to this--at this moment to the difficulties that presently confront manufacturing industry in the United Kingdom, and the steel industry in particular. We on this side of the House wish to see the steel industry highly efficient and effective. We see
no reason why it should not be. What we do not wish to see is a failed steel industry as a backdrop for another film, however close it comes to winning an Oscar. We do not believe that there is any need for that. We would prefer to see it continue as active and vibrant as it has been in recent years.7.40 p.m.
Lord Haskel: My Lords, this has been a wide-ranging debate, and an interesting one. The noble and learned Lord, Lord Fraser, has given my speech for me, and I am much obliged to the noble Lord. What he said indicates that he has been listening to my right honourable friend the Chancellor. My right honourable friend has already answered a number of the points made by the noble Lord. I shall repeat those answers because the truth does not become any less the truth by virtue of repetition.
It may be helpful if I start by discussing the question of the high pound and then go on to deal with the steel industry.
The Government fully appreciate the difficulties of the steel industry. Like other parts of the manufacturing sector, it is currently experiencing difficulties because of the strength of sterling. Many speakers have drawn our attention to that point. My noble friend Lord Islwyn asked me to draw it to the Chancellor's attention. I can assure him that the Chancellor is very aware of it. He has made it clear that he wants a stable and competitive pound over the medium term. The Government's policy will achieve that by creating the conditions for sustainable growth, with low inflation and a balanced budget.
This framework has been put in place to avoid the very cycles of boom and bust and short-term expediency which have hampered industry and commerce in planning and executing their long-term investment policies. It is a return to those conditions that manufacturing industry really--and rightly--fears. The level of sterling is taken into account in the setting of interest rates, but it is not a targeted objective of this policy framework. It is the market's judgment on the current and future value of sterling relative to other currencies in international trade. I agree with the noble Lord, Lord Taverne, on this point. The market currently judges sterling to be strong relative to other currencies. Commentators believe that this judgment may be based on the relatively high rates of interest paid by sterling borrowers and on market reactions to the prospect of EMU. My noble friend Lord Desai judges that the strength of sterling is based on the weakness of the deutschmark. The noble Lord, Lord Taverne, also gave us his view.
It is important to put movements of currency into an international context. Sterling has been little changed against the dollar since the end of 1996. The real issue is the fall in the value of European currencies against the pound and the dollar. The deutschmark has fallen by 20 per cent. against the dollar and by 25 per cent. against the pound since the summer of 1996. This is the result of a number of factors. Divergence in economic cycles
is part of the story. The need to raise interest rates to head off inflationary pressures already emerging when the Government took office in order to get the economy back on track for sustainable growth is another factor. Uncertainty over the transition to the euro is likely to have played a part, as well. It is a very complicated matter.Whatever the reasons, the key issue for business today is to recognise that sterling exchange rates cannot be controlled by government or by companies. Two-thirds of the current rise in sterling took place under the previous government. To be competitive, business must be flexible enough to absorb cost variables which cannot be controlled. That is a fact of business life. This can be achieved in part by forward cover in the foreign exchange markets, but generally it requires business to examine margin structures and value added against a relatively wide level of sterling ranges.
Neither is a strong currency necessarily a penalty in economic terms for all businesses. Perhaps I may pray in aid comments made in the debate last week by my noble friend Lord Simpson, who has direct and wide-ranging experience of the business world. He made the point that we no longer live in an age when exports are the result of UK-owned companies selling abroad products made in the United Kingdom with parts sourced from United Kingdom suppliers. It is much more complicated than that. In our globalised economy, exports frequently result from foreign companies making products in the United Kingdom from globally-sourced components. Such companies benefit, of course, from major reductions in the price of their raw materials and intermediate products. My noble friend rightly concluded that there are no simple fixes to exchange rate problems and that the real challenge is to make the UK an attractive environment for manufacturing industry. That is precisely what our policies on skills, education, trade and industry are doing. That is my response to the point made by my noble friend Lord Islwyn regarding General Motors.
If business loses the capacity to add sufficient value to sustained sales overseas, it will have to find alternative markets or realign running costs or, more likely, capital and revenue investment. The answer is not to cut costs by reducing staff and cutting research and development, as was suggested. The answer is often more investment and higher productivity. The significant realignment of sterling values that we have experienced in recent months will not be sustained if the market sees added-value capacity severely impaired.
I would add that economic experts themselves hold sharply divergent views on the consequences of a high exchange rate. Many champion the view that it provides a valuable stimulus to investment and innovation, as it did in Germany and Japan, and other noble Lords have spoken of this. Moreover, if a currency is pushed too high by the market, trade flows will clearly reflect loss of market share over time, with a resultant correction in currency levels, and so achieve the correction sought by the noble Lord, Lord Taverne.
The noble Lord, Lord Taverne, spoke about the Monetary Policy Committee. Other noble Lords were concerned that the Monetary Policy Committee was using only interest rates. At its August 1997 meeting the Monetary Policy Committee considered a number of policy instruments which might be used in place of interest rate rises, including overfunding. The committee did not see advantage in such measures or believe that they would contribute to addressing imbalances in the economy.
In short, now is the time to stick to our long-term objectives. Not only the Government but industry and financiers, too, should take a long-term view of economic developments. We should all be long-termist now.
I turn to the question of manufacturing. The noble Lord, Lord Gisborough, asked whether new Labour had abandoned manufacturing. It certainly has not. Let me tell you what the new Labour Government have done to assist manufacturing. They have abolished advance corporation tax to encourage investment. They are cutting the main rate of corporation tax from 33 per cent. last year to 30 per cent. by April 1999 and the small business rate from 23 per cent. to 20 per cent. over the same period--in both cases the lowest ever rates--and pledging to hold both rates at or below these new levels in the lifetime of this Parliament.
They are exempting small and medium-sized companies from corporation tax payments by instalments to improve cash flow. They are extending enhanced first year capital allowances and reforming capital gains tax with a new taper to reward risk-taking and encourage long-term investments.
In short, I believe that the manufacturing sector is in an excellent position to benefit from the progress that has been made and the measures that we have taken to reverse the long years of decline since 1979--years in which our gross domestic product per head slipped further and further behind that of our competitors.
Some noble Lords spoke about the strength of sterling leading to an imbalance between the service sector, which is booming, while the manufacturing sector is on the brink of recession. The Government inherited an economy growing at an unsustainable rate and in an unbalanced way, reflecting the failure of the last government to take the necessary policy action. As a result of the actions that this Government have therefore had to take to put the economy back on track, growth is expected to slow to more sustainable rates this year with some slow down in domestic demand and services sector growth likely through the course of the year. We are not forecasting recession either in manufacturing or service. Growth will be supported by continuing growth of domestic demand and expanding export markets.
Treasury forecasts manufacturing output growth of 0 per cent. to 0.5 per cent this year and 1 per cent to 1.5 per cent. in 1999. The CBI forecast manufacturing output growth of 1.3 per cent this year and 2.5 per cent. next.
I turn to the steel industry. My noble friend Lord Paul told us how successful the steel industry has been. Indeed other noble Lords spoke about it. My noble
friend Lord Paul congratulated a number of people who had been responsible for that. Perhaps I may congratulate him. I know that he, too, has played an important part in the success of the steel industry. Much of that success has been the result of the sacrifices spoken of by my noble friends Lord Islwyn and Lord Hardy. Certainly we have one of the cleanest, most innovative and efficient steel industries in the world. In the past 20 years productivity has risen more than fourfold. That is why my noble friend Lord Hardy does not see large factories, and a large number of people employed in the industry. The productivity has improved so much. At the same time, the industry has managed to reduce the energy needed to produce a tonne of steel by about one-third.Those impressive statistics have underpinned an export performance that is again remarkable by any standards. About half of the tonnage produced by the industry is sold abroad, while in its last full trading year, British Steel alone achieved exports worth £2.7 billion, putting it in the top 10 UK exporters.
My noble friend Lord Hardy asked what the steel subsidies monitoring committee was doing. The committee published its last report in February 1996. It drew attention to the Commission's much improved monitoring of state aid and, although the committee continues to meet on an informal basis, it decided that it was no longer necessary to publish reports on its activities.
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