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House of Lords

Tuesday, 28th March 2000.

The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.

Prayers--Read by the Lord Bishop of Bradford.

The British Steel Industry

2.36 p.m.

Lord Islwyn asked Her Majesty's Government:

    What is their most recent assessment of the future of the British steel industry.

Lord McIntosh of Haringey: My Lords, the UK steel industry has undergone substantial restructuring since the 1970s. Productivity and yield rates have increased and emissions have declined. The industry continues to take positive action to maintain its international competitiveness through such measures as greater teamworking, the introduction of new technology and the development of new products. I believe that it has excellent long-term prospects.

Lord Islwyn: My Lords, with BMW in mind and with uncertainties in other sections of the motor industry, will the Minister give an assurance that the Government will keep in the closest possible contact with Corus, formerly British Steel, in order to be fully aware of the company's future policies? Does he appreciate that steel is still the cornerstone of the Welsh economy, so that, whereas we can argue for matching funds for objective one status, nevertheless a major steel closure would make a difficult situation even worse?

Lord McIntosh of Haringey: My Lords, I entirely agree that the health of the motor industry is quite essential to the steel industry. I acknowledge the difficulties with BMW at Longbridge. However, we still have Land Rover at Solihull, the Peugeot 406 at Ryton, the R75 at Cowley and the Jaguar S-type at Castle Bromwich. There is a good deal of the motor industry over which that question does not hang.

Ministers are in almost constant contact with Corus. They had a meeting with its representatives only this morning about the issue raised in the Western Mail regarding Nedcar in the Netherlands. They were reassured to learn that Corus has good relations with both the old and new management at Nedcar. We are also entirely seized of the importance of the steel industry to the Welsh economy.

Lord Ezra: My Lords, is the Minister aware--as I am sure he must be--that 70 per cent of steel exported from this country goes to mainland Europe and that, although, as he mentioned, the steel industry here has substantially improved its productivity, in terms of sales in euros this has been totally overtaken? There has been a 10 per cent improvement in productivity

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over recent years but a 30 per cent increase in the price in euros. Is it not time that the Government seized the problem of the exchange rate and made a firm commitment on what we are going to do about the euro and avoided putting further imposts on the steel industry, such as the rerating which has apparently occurred in South Wales?

Lord McIntosh of Haringey: My Lords, the Government have consistently rejected the view that they should intervene directly in the exchange rate or set exchange rate targets to the Monetary Policy Committee, as opposed to the interest rates and price stability targets which it sets. It is of course true that the majority of British steel exports go to Europe, but it is encouraging that, with the recovery of the south-east Asian economies, there is an opportunity for increased exports there as well.

Lord Brookman: My Lords, is my noble friend aware that Corus, formerly British Steel plc, has obtained--I am pleased to say--a substantial order from the Turkish electricity industry for some 70,000 metric tonnes of steel? That is good news against a backdrop of a company which lost a quite considerable amount of money last year. In that respect, does my noble friend share my concern and that of the workers, mainly because of the strength of sterling but probably also because of the multinational nature of the company now, that orders could go abroad as easily as remain in the United Kingdom? Does he agree that there is therefore, as he indicated earlier, a need to keep in close contact with the company in that regard so that there will be tangible support such as is now being obtained with the climate change levy?

Lord McIntosh of Haringey: My Lords, I am happy to join with my noble friend in congratulating Corus on the Turkish order. I believe that I have made clear the importance which the Department of Trade and Industry attaches to close contact with Corus. I hope that I have given evidence that we are maintaining that close contact.

Lord Mackay of Ardbrecknish: My Lords, the Minister will recall that I expressed sympathy for him last Thursday when he had to come along instead of the Minister responsible at the DTI, the noble Lord, Lord Sainsbury. I express the same sympathy for him today. Is the Minister aware that I am delighted to hear his song of praise for a privatised industry? I cannot remember hearing the same song at the time it was privatised by the Conservative Government. However, the problems raised by the previous two speakers are real. I refer to the problem of Longbridge perhaps reducing its demand for steel and to the weak euro. Can the Minister promise that no more burdens, especially along the lines of emissions, will be placed upon the steel industry in this country?

Lord McIntosh of Haringey: My Lords, when the noble Lord finally asked a question as opposed to expressing sympathy, he asked me to promise that no

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more burdens should be placed upon the steel industry. Burdens have not been placed upon the steel industry. Within the limit of our abilities we have done everything we can to support the steel industry in this country.

Lord Stoddart of Swindon: My Lords, does my noble friend deplore those on the Liberal Benches and elsewhere for wanting to talk the pound down? Is it not a fact--I asked this question before and I shall ask it again--that the pound has been extremely reasonable and steady against the major currencies of the world? It is the euro which has declined, not only against the pound but against all other major currencies in the world. Therefore, it is not sterling that needs to be dealt with but the euro. That will be done when the rest of the world has more confidence in Europe than it has in this country and others.

Lord McIntosh of Haringey: My Lords, my noble friend has asked this question before and I have answered it. I agreed with him that the strength of the pound has increased in relation to the euro very much more than it has in relation to the dollar and the yen. However, if he is suggesting that we should do something about the weakness of the euro, he is slightly outside the realms of possibility of government policy.

Baroness Hogg: My Lords, can the Minister confirm that the budget forecasts of the economy are based on a decline in sterling and that, as the Red Book states, if it does not occur there will be further losses in market share?

Lord McIntosh of Haringey: Yes, my Lords. We believe that the position of sterling is over-valued in the long term. Our budget forecasts are based on that assumption.

Lord Shore of Stepney: My Lords, if my noble friend believes that it is over-valued in the long term, why does he not do something in the short term?

Lord McIntosh of Haringey: My Lords, my noble friend and others always seem to think that there is something which the Government can do about exchange rates. We believe that the best we can do for exchange rates and for the economic future of this country is what we have been doing; that is, to ensure economic stability consistent with high levels of growth and employment.

Higher Education: Funding

2.45 p.m.

Baroness Young asked Her Majesty's Government:

    Whether they consider that universities will be able to recruit and retain staff following the estimated 1 per cent fall in the value of government grants for the "unit of resource".

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The Minister of State, Department for Education and Employment (Baroness Blackstone): My Lords, the recruitment and retention of staff is a matter for higher education institutions. Our spending plans made substantial extra funds available for higher education: a real terms increase of 11 per cent over four years. We are clear that, unlike the previous government, which dealt harshly with university funding, we are giving universities and colleges the chance to improve the quality of their teaching and research. The 1 per cent efficiency saving reflects a recommendation made by the Dearing Report on the funding of higher education.

Baroness Young: My Lords, I thank the Minister for that reply. However, is she aware that Sir Brian Fender commented that the recent funding is less than satisfactory, particularly in recruiting and rewarding staff? Is she further aware that, unless universities recruit and retain the very best staff, they will cease to be very good universities and that young people will go abroad? There is already evidence that the best are going to the United States. This is a serious issue which I hope the Government will address.

Baroness Blackstone: My Lords, I am aware of the remarks made by Sir Brian Fender. It is always very nice when we can provide more funding. I have no doubt that many people in universities have expectations of more in future. However, as I stated in my initial reply, the Government have put a substantially increased amount of funds into our universities, which compares with substantial cuts under the former government.

Between 1989 and 1997 there was a 36 per cent decline in the unit funding of our universities and a 6.5 per cent projected efficiency saving for the first two years. In comparison, this Government are being immensely generous. I am aware of the importance of recruiting good staff for our universities. I believe that the profession still attracts many able young people. I am aware of the report of the Bett Committee and proposals from that committee for improvements. We are considering the whole question in the next spending review, but I cannot anticipate the outcome.

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