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Iron And Steel Subsidies (Review)

Volume 463: debated on Thursday 31 March 1949

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As the House is aware, the Government have been considering the subsidies at present being paid on iron and steel. We have come to the conclusion that the subsidies to meet the excess cost of imported finished steel and the import duties on pig iron and steel should be continued. But, as from 1st April, the remaining subsidies will cease, with an estimated saving to the Exchequer for the year 1949–50 of about £25 million. The corresponding increase in cost to the industry will necessarily be reflected in higher prices for its products. The Iron and Steel Board have for some time been making a detailed review of the price structure of the industry and recommend that certain other price adjustments should be effected at the same time. The new maximum prices resulting from this review and the withdrawal of the subsidies are embodied in the Iron and Steel, and Bolt and Nut Control Orders laid today. They are designed to provide no more than a reasonable return on capital employed to each section of the industry, and on the best calculations possible will give no increase but probably some reduction in the total profits of the iron and steel industry.

I am circulating in the OFFICIAL REPORT a list of the existing and new prices of representative products, from which it will be seen that the increases vary from 10s. 3d. per ton for foundry pig iron to 89s. per ton for tin plates, but for most of the products they are between £2–£3 per ton. The Government appreciate that these increases will add to the task of some industries in maintaining competitive prices in the export markets. But the House will realise that increases of this magnitude in the cost of the raw materials of steel-using industries, though substantial, are nevertheless small in relation to the costs of highly-engineered products worth hundreds of pounds per ton of steel. These industries will moreover still obtain their steel, in the main, as cheaply as their principal overseas competitors. The Government are therefore satisfied that the continuation of the present level of the iron and steel subsidy from the pocket of the general taxpayer would not be justified.

As we are generally in agreement that any move towards realistic prices is an advance, I need ask only two questions. Does the right hon. Gentleman not agree that the price of steel will still be competitive in this country and in many cases below the world prices even after the increase has been taken into account? Does he not think that the expression "steel subsidy," referring to arrangements designed to decrease or lower the price of imported steel so that it accords with the lower price of steel in this country, is somewhat misleading?

The answer to the first part of the question is "Yes." One has to take into account the artificially low scrap prices in this country owing to Government control. The answer to the second part of the question is that although "iron and steel subsidy" may be a misnomer, we know of no better or simpler way of expressing what it is.

Can my right hon. Friend say what the cost will be in the coming year of the subsidies that are being continued?

About £3 million in respect of finished steel, and the repayment on the duty of imported steel will be about £8 million.

Is the right hon. Gentleman aware that the new prices to which he has referred for some finished or semi-finished products have been arrived at in some cases without any reference to the trades concerned?

These new prices have been recommended by the Iron and Steel Board on which representatives of the industry sit.

Does this mean the Minister is completely satisfied that the standard of efficiency in the iron and steel industry at the present time is sufficiently high to enable him to make these changes without affecting in any way the export prices of some of the finished products? Can the Minister say whether he has discussed this with those concerned with finished products?

I should not like to go into the vexed question of the efficiency of the industry at the moment. Although this does mean some increase in prices which will be some burden on the exporting industries, I think they will be able to stand it.

May I ask what effect this will have on the imported supplies of steel? Will there be any increased amount available for British industry?

We are anticipating substantial imports this year of both finished and semi-finished steel.

Will the Minister consider adding a table to his answer in the OFFICIAL REPORT showing the price differentials for a comprehensive list of iron and steel items?

I am giving a number of the more important ones, but the hon. Member will appreciate that the total number of items affected is between 200,000 and 300,000.

In view of the growing world shortage of iron ores, is the Minister satisfied that the supplies to this country for, say, the next 10 years are safeguarded?

That is rather a different question, but I should not like to say I am satisfied at all.

Before arriving at this decision, did the Minister directly consult the industries that use

Existing Maximum Basis Price*New Maximum Basis PriceIncrease
(Per ton except for Tinplate)(Per ton except for Tinplate)
Basic Pig Iron9509176126
Hematite Pig Iron1026111661140
Foundry Pig Iron91031006103
Soft Basic Billets147617162140
Heavy and Medium Sections1716191362120
Wire Rods1810021232123
Re-rolled Bars1910022602160
Re-rolled Sections1900211602160
Hot Rolled Hoop and Strip205023102160
Black Sheets2510281603150
Tinplate (per box)11751/22164
Cold Rolled Strip2911631156240
Bright Steel Bars291303123193
Forging Ingots158017160280
Alloy Steel Billets221732569296
Colliery Arches191662303339

*The prices shown are net, after deduction in certain cases of existing "loyalty rebates." On the Iron and Steel Board's recommendation the industry have agreed to the abolition of all loyalty rebates and the new prices in the Iron and Steel Control Order are net prices.

steel for finished articles for the export trade, and if so can he report their reactions?

No, Sir. We did not do that. Practically every industry is directly or indirectly a consumer of steel. We took the advice of the Iron and Steel Board. The Government acted on that advice, and I am sure we have done right.

As a result of this announcement, will the Minister modify Clause 5 of the Iron and Steel Bill which authorises the giving of subsidies to the new Iron and Steel Corporation?

Yes, Sir. I am afraid it will increase the cost of all steel consumed by every industry.

Following is the list: